Landmark Cases in Equity 9781474200790, 9781849461542

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Preface Readers of our previous volumes of Landmark Cases essays—on the law of restitution, contract and tort—will notice something different about Landmark Cases in Equity. It is twice the length of its predecessors. This expansion is not meant to suggest that equity is somehow more important than the other topics, or that there are twice as many landmark cases in equity as there are in restitution, contract or tort. The reason is rather that we were fortunate enough to obtain funding from the Society of Legal Scholars to hold a significantly larger event than the workshops out of which the earlier volumes were born: a two-day conference at the Faculty of Laws, University College London, at which earlier versions of the essays in this volume were presented to a large audience of equity scholars, legal historians, judges, legal practitioners and students. We are most grateful to the Society of Legal Scholars, and also to Richard Hart of Hart Publishing, for their financial support, without which staging the event would not have been possible. We are also grateful to Lisa Penfold, the UCL Faculty of Laws events manager, for her expert professional assistance in making the occasion a rewarding experience for all who attended. Although it is longer than its predecessors, readers of our earlier volumes will recognise many features of Landmark Cases in Equity. The authors were given a free choice of topic and methodological approach, and a wide range of equitable doctrines is investigated in this volume. Some authors have chosen to examine their cases within the framework of their contemporary settings, others to take a longer view and to consider the impact which their cases have had on the thinking of subsequent generations. Some have focused their attention on purely doctrinal developments, while others have looked at the social, economic or political background to their case. A variety of topics is addressed, including the nature of the courts’ equitable jurisdiction (The Earl of Oxford’s Case; Penn v Lord Baltimore; Re Earl of Sefton), the development (or non-development) of property rights in equity (Burgess v Wheate; Tulk v Moxhay; Ramsden v Dyson; National Provincial Bank Ltd v Ainsworth), constraints on the powers of settlors to create charitable trusts (Morice v Bishop of Durham; National Anti-Vivisection Soc v IRC), the duties of trustees and other fiduciaries (North-West Transportation Co Ltd v Beatty; Regal (Hastings) Ltd v Gulliver; Boardman v Phipps), remedies for breach of trust and breach of fiduciary duty (Re Hallett’s Estate; Nocton v Lord Ashburton; Paragon Finance plc v DB Thakerar & Co (a firm)), and the evolution of constructive and resulting trusts (Coke v Fountaine; Lord Grey v Lady Grey;

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Gissing v Gissing). Recurring themes include a concern with classification, the dominance of particular individuals in the development of equitable principles, equity’s relevance to political questions (both domestically and abroad), and the interpenetration of equity and common law. Since this is likely to be the last of the Landmark Cases series that we edit together, we should like to take this opportunity to express our thanks to all of the authors of essays in the volumes on restitution, contract, tort and equity. We hope that these volumes show that the study of individual cases, as pioneered by the late Brian Simpson, is a flourishing and fruitful form of academic literature. There is much to be gained from reassessing what we know about the cases by which we habitually orientate ourselves. Charles Mitchell and Paul Mitchell University College London

Contributors Lionel Bently is Herchel Smith Professor of Intellectual Property, and Director of the Centre of Intellectual Property and Information Law, at the University of Cambridge, and a Professorial Fellow of Emmanuel College, Cambridge. Michael Bryan is an Emeritus Professor of Law at the University of Melbourne. Christian Daly is a Lecturer in Law at BPP Law School. Alison Dunn is a Senior Lecturer in Law at Newcastle University. The Hon Justice James Edelman is a Justice of the Supreme Court of Western Australia. Jonathan Garton is an Associate Professor (Reader) in Law at the University of Warwick. Joshua Getzler is a Fellow and Tutor in Law at St Hugh’s College, Oxford, Professor of Law and Legal History at the University of Oxford, and Conjoint Professor of Law at the University of New South Wales. Jamie Glister is a Senior Lecturer in Law at the University of Sydney. David Ibbetson is Regius Professor of Civil Law in the University of Cambridge, and a Fellow of Corpus Christi College, Cambridge. Ying Khai Liew is a Lecturer in Law at King’s College London. Catharine MacMillan is a Reader in Legal History at Queen Mary, University of London. Mike Macnair is Ann Smart Fellow and Tutor in Law at St Hugh’s College, Oxford. Paul Matthews is a Visiting Professor of Law at King’s College London, a consultant solicitor with Withers LLP, a deputy chancery master, a recorder in the specialist civil jurisdiction and coroner for the City of London. Ben McFarlane is a Fellow and Tutor in Law at Trinity College, Oxford, and a Reader in Property Law at the University of Oxford. John Mee is a Professor of Law at University College Cork. Charles Mitchell is a Professor of Law at University College London.

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Paul Mitchell is a Professor of Laws at University College London. Richard Nolan is a Fellow and Tutor in Law at St John’s College, Cambridge, a Reader in Corporate and Trust Law at the University of Cambridge, and a barrister at Erskine Chambers, Lincoln’s Inn. Nick Piška is a Lecturer in Law at the University of Kent. Charlotte Smith is a Senior Lecturer in Law, and Co-Director of the Forum for Legal and Historical Research, at the University of Reading. Lionel Smith is James McGill Professor of Law, and Director of the Paul-André Crépeau Centre for Private and Comparative Law, at McGill University. Chantal Stebbings is Professor of Law and Legal History, and Director of the Centre for Legal History Research, at the University of Exeter. Graham Virgo is a Fellow and Senior Tutor of Downing College, Cambridge, Professor of English Private Law at the University of Cambridge, and a Bencher of Lincoln’s Inn.

Table of Cases Aas v Benham [1891] Ch 244 (CA) ............................................................ 593, 597 Abbey National Building Society v Cann [1991] 1 AC 56 (HL) ......................... 431 Abbot v Burton (1708) 2 Salk 590, 91 ER 494 .................................................. 134 Abernethy v Hutchinson (1824–25) 1 H & Tw 28, 47 ER 1313, (1825) LJ Ch (OS) 209 ..................................... 241, 247, 248, 254, 255, 256, 261 Ackroyds (London) Ltd v Islington Plastics Ltd [1962] RPC 97 ......................... 259 Adamson, ex parte (1878) 8 Ch App 807........................................................... 490 A-G v Bishop of Oxford (1786) ......................................................................... 185 A-G v Doyley (1735) 4 Vin 485, 2 Eq Cas Ab 194, 22 ER 167 .................. 190, 194 A-G v Duke of Leeds (1833) 2 My & K 343, 39 ER 974 ........................... 117, 146 A-G v Guardian (No 2) [1990] AC 109 (HL) ............................. 260, 262, 266, 671 A-G v Ironmongers’ Company (1834) 2 My & K 576, 39 ER 1064 .................................................................................................... 189 A-G v Jonathan Cape [1976] QB 752 .......................................................... 260–61 A-G v Lady Downing (1767) Wilmot 1, 97 ER 1 ......................................... 183–86 A-G v Marquis of Ailesbury (1887) 12 App Cas 672 ......................................... 467 A-G v Mayor etc of Coventry (1700) 3 Madd 353, 56 ER 535 ............................ 60 A-G v Whorwood (1750) 1 Ves Sen 534, 27 ER 1188 ................................. 181–82 A-G (ex rel Elisha & Ors) v Holy Apostolic and Catholic Church of the East (Assyrian) Australia NSW Parish Association (1989) 98 ALR 327........................................................... 306 A-G for Hong Kong v Reid [1994] 1 AC 324 (PC)............................. 603, 671, 672 A-G of Ontario v Mercer (1883) 8 App Cas 767.......................................... 116–17 A-G of Victoria (ex rel Archbishop Harkianakis) v St John the Prodromos Greek Orthodox Community Inc [2000] VSC 12 ................... 306 Agip (Africa) Ltd v Jackson [1990] Ch 265, [1991] Ch 547 (CA) ................................................................. 381–82, 387, 665 AIB Group (UK) Plc v Mark Redler & Co (a firm) [2012] EWHC 35 (Ch)............................................................................................... 645 AID/Watch Inc v Commissioner of Taxation [2010] HCA 42, (2010) 241 CLR 539 ........................................................................ 199, 554–55 Alec Lobb v Total Oil [1985] 1 WLR 173 (CA) ................................................. 354 Allen v Rea Brothers Trustees Ltd [2002] EWCA Civ 85, (2002) 4 ITELR 627 ....................................................................................... 665 Allen v Snyder [1977] 2 NSWLR 685 ................................................................ 666 Amalgamated Investment Ltd v Texas Commerce Bank Ltd [1982] QB 84 (CA) ......................................................................... 578 Ambrose v Ambrose (1716) 1 P Wms 321, 24 ER 407......................................... 60 Anchor Line (Henderson Brothers) Ltd, In re [1937] Ch 483 (Ch D) ................. 111 Anderson v McPherson [No 2] [2012] WASC 19 ................................................. 83

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Andrew v Wrigley (1792) 4 Bro CC 125, 29 ER 812 ......................................... 659 Anglia Roman Catholic Trustee v Milthorn Engineering Ltd, 18 Trust Law International, 160 ..................................................................... 153 Angus v Angus (1737) West Temp Hardwicke 23, 25 ER 800............................ 102 Anon (1683) 2 Ventris 361, 86 ER 486 ................................................................ 60 Anon (1692) 2 Freem 123, 22 ER 1100 ............................................................... 60 Anon 2 P Wms 75, 24 ER 646 ............................................................................. 99 Appleton v Appleton [1965] 1 WLR 25 (CA)................................... .563, 574, 615, 620, 624 Apsley and Ruswell’s Case 1 Rolle 192, 81 ER 424, 1 Rolle 218, 81 ER 443 .................................................................................... 28 Archbold v Scully (1861) 9 HLC 360, 11 ER 769 .............................................. 651 Argyll (Duchess of) v Argyll (Duke of) see Duchess of Argyll v Duke of Argyll Arklow Investments Ltd v Maclean [2000] 1 WLR 594 (PC) ............................. 489 Armitage v Nurse [1998] Ch 241 (CA) ...................................................... 354, 491 Armstrong DLW GmbH v Winnington Networks Ltd [2012] EWHC 10 (Ch) ....................................................................................... 672 Ashburn Anstalt v Arnold [1989] Ch 1 (CA)...................................................... 564 Astor’s Settlement Trusts, Re [1952] Ch 534 (Ch D) .................................. 159, 199 Atkinson v Leonard (1791) 3 Bro CC 218, 29 ER 499....................................... 104 Australian Elizabethan Theatre Trust, Re (1991) 30 FCR 491 ........................... 666 Baden (No 2), Re [1972] 2 All ER 1304 (CA) .................................................... 228 Bagus Investments Ltd v Kastening 2010 JRC 144, 2010 JLR 355..................... 664 Bailiff of Burford v Lenthall (1743) 2 Atk 553, 26 ER 731 ................................ 189 Bairstow v Queens Moat Houses plc [2001] EWCA Civ 712, [2001] 2 BCLC 531 ........................................................................................ 663 Baker v Read (1854) 18 Beav 398, 52 ER 157 ........................................... 650, 651 Baker v Sutton (1836) 1 Keen 224, 48 ER 292................................................... 195 Balfour v Balfour [1919] 2 KB 571 (CA) ............................................................ 623 Bank of Credit & Commerce International (Overseas) Ltd (in liq) v Jan unreported 17 November 1999 (Ch D) ...................................... 670 Bank of Credit & Commerce International SA v Saadi [2005] EWHC 2256 (QB) .......................................................................................... 670 Bank of Ireland v Pexxnet Ltd [2010] EWHC 1872 (Comm) ............................. 672 Bank of Montreal v Stuart [1911] AC 120 (PC) ................................................. 484 Banner Homes Holdings Ltd v Luff Developments Ltd (No 2) [2000] Ch 372 (CA) ....................................................................... 663, 666, 667 Bannister v Bannister [1948] 2 All ER 133 (CA) .................. 439, 446, 447–48, 451 Banque Belge pour l’Etranger v Hambrouck [1921] 1 KB 321 (CA).................................................................................. 386–87, 665 Barclay v Russell (1793) 3 Ves Jun 424, 30 ER 1087 ......................................... 147 Barclay’s Bank plc v O’Brien [1994] 1 AC 180 (HL) ............................ 354, 568–69 Barclays Bank Ltd v Bird [1954] 2 WLR 319 (Ch D) ......................... 561, 562, 567 Barker v Stickney [1919] 1 KB 121 (CA)............................................ 220, 226, 229 Barlow Clowes International Ltd v Vaughan [1992] 4 All ER 22 (CA) ............................................................................................ 385

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Barnes v Addy (1874) LR 9 Ch App 244............................................................ 665 Barney, Re [1892] 2 Ch 265 (Ch D) ................................................................... 665 Barnhart v Greenshields (1853) 9 Moo PC 18, 14 ER 204 ................................. 565 Barron v Martin (1815) 19 Ves Jun 327, 34 ER 539 .......................... 653, 655, 657 Barron v Potter [1914] 1 Ch 895 (Ch D) ............................................................ 527 Barrow v Wadkin (1857) 24 Beav 1, 53 ER 257 ................................................ 147 Barrow’s Case (1880) 14 Ch D 432 (CA) ............................................................. 77 Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] 1 Ch 539 (Ch D) .............. 490 Bartlett v Pickersgill (1760) 1 Cox 15, 29 ER 1041...................................... 435–36 Bates’ Case (1606) Lane 22, 145 ER 267 ............................................................. 24 Bath v Standard Land Co Ltd [1911] 1 Ch 618 (CA) ......................................... 668 Bathurst CC v PWC Properties Pty Ltd (1998) 195 CLR 566 ............................ 666 Baugh v Price (1752) 1 Wil K B 320, 95 ER 640 ................................................ 333 Bax, ex parte (1751) 2 Ves Sen 388, 28 ER 248 ................................................. 490 BCE Inc v 1976 Debentureholders [2008] SCC 69, [2008] 3 SCR 560............... 411 Beale v Symonds (1853) 16 Beav 406, 51 ER 835 .............................................. 146 Beall v Smith (1873) LR 9 Ch App 85 ................................................................ 460 Beaney (dec’d), Re [1978] 1 WLR 770 (Ch D) ..................................................... 79 Beatty v Neelon (1885) 9 OR 385 (Ch D) 387, (1885) 12 OAR 50 (CA), (1886) 13 SCR 1 (SCC) .............................. 401–2, 406 Beatty v North–West Transportation Co (1884) 6 OR 300 (Ch D), (1885) 11 OAR 205 (CA), (1886) 12 SCR 598 (SCC) .................................................... 404, 406–8, 413–14 Beatty v Oille (1886) 12 SCR 706 ...................................................................... 404 Beaumont v Oliveira (1868–69) LR 6 Eq 53, LR 4 Ch 31 .................................. 199 Beckford v Wade (1805) 17 Ves Jun 87, 34 ER 34 ............................................. 659 Beckley v Newland (1723) 2 P Wms 182, 24 ER 691................................... 60, 333 Beemer v Brownridge [1934] 1 WWR 545 (Sask CA) ........................................ 432 Bell Group v Westpac (No 9) [2008] WASC 239 ................................................ 664 Belmont Finance Corp Ltd v Williams Furniture Ltd [1979] Ch 250 (CA) ................................................................................................... 645 Bendall v McWhirter [1952] 2 QB 466 (CA)................................. 559–61, 564–65, 573, 577 Benjamin, Re [1902] 1 Ch 723 (Ch D) ............................................................... 145 Bennet v Davis (1725) 2 P Wms 316, 24 ER 746 ............................................... 575 Bennett, ex parte (1805) 10 Ves Jun 381, 32 ER 893 ......................................... 668 Beridge, Re (1884) 50 LT 653 ............................................................................ 466 Berney v Pitt (1686) 2 Vern CC 14, 23 ER 620, (1686) 2 Ch Rep 396, 21 ER 697 .............................................................................. 332 Bertie v Falkland (1697) 3 Ch Cas 129, 1 Salk 231, 91 ER 205 ......................... 130 Berty v Falkland 12 Mod 182, 88 ER 1248.......................................................... 60 Beverley’s Case (1603) 4 Co Rep 123b, 76 ER 1118 .......................................... 461 Beynon v Cook (1875) LR 10 Ch App 389 ........................................................ 354 Binions v Evans [1972] Ch 359 (CA) ................................................. 564, 572, 578 Birt v Burt (1879) 11 Ch D 773n ....................................................................... 371 Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 ........................................................................................ 593

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Bishop of Cape Town v Bishop of Natal (1869) 6 Moo PC NS 203, 16 ER 702 ............................................................... 311, 326 Bishop of Cloyne v Young (1750) 2 Ves Sen 91, 28 ER 60 ......................... 187, 190 Bishop of Natal v Gladstone (1866) LR 3 Eq 1 ............................................ 305–28 Bishop of Natal v Green (1868) 18 LT 112 ................................................ 311, 326 Bishop of Natal, Re (1864) 3 Moo PC (NS) 115, 16 ER 43 (PC) .................................................................. 311–15, 318, 321, 324 Biss, Re [1903] 2 Ch 40 (CA) ..................................................................... 596, 670 Blake, Re (1889) 60 LT 663 ............................................................................... 655 Blake, Re [1932] 1 Ch 54 (Ch D) ....................................................................... 659 Blomley v Ryan (1956) 99 CLR 362 (HCA) ....................................................... 354 Bloye’s WT, Re (1849) 1 Mac & G 488, 41 ER 1354 ......................................... 668 Blyth v Fladgate [1891] 1 Ch 237 (Ch D)........................................................... 665 Boardman v Phipps [1967] 2 AC 46, [1966] 3 WLR 1009, [1966] 3 All ER 721 (HL)........................................................ 499, 517–18, 522, 580, 581–610 Bofinger v Kingsway Group Ltd [2009] HCA 44, (2009) 239 CLR 269 ...................................................................................... 497 Bolkiah v KPMG [1999] 2 AC 222 (HL)............................................................ 592 Bonanza Creek Gold Mining Co v R [1916] 1 AC 566 (PC) .............................. 412 Bonar Law Memorial Trust v Inland Revenue Commissioners (1933) 17 TC 508 .................................................................. 541 Bond, Re [1901] 1 Ch 15 (Ch D) ............................................................... 147, 148 Bonney v Ridgard (1784) 1 Cox 145, 29 ER 1101 ..................................... 652, 659 Boscawen v Bajwa [1996] 1 WLR 328 (CA) .............................................. 383, 387 Bostitch Inc v McGarry & Cole Ltd [1964] RPC 173 ........................................ 259 Boston Deep Sea Fishing & Ice Co v Ansell (1888) 39 Ch D 389 ............... 480, 514 Boswell v Coaks (No 1) (1886) LR 11 App Cas 232 .......................................... 668 Boumediene v Bush 553 US 723 (2008) ............................................................... 66 Bowling v Bank of New Haven 219 Ky 731 (1927) ........................................... 388 Bowman v Secular Society [1917] AC 406 (HL)........................... 199, 539, 541–43 Box v Barclays Bank plc [1998] Lloyd’s Rep Bank 185 (Ch D) .......................... 672 Bradley-Hole v Cusen [1953] 1 All ER 87 (CA) ......................................... 560, 561 Bramwell v Bramwell [1942] 1 KB 370 (CA) ..................................................... 561 Brandon v Robinson (1811) 18 Ves 429, 34 ER 379 .......................................... 576 Bray v Ford [1896] AC 44 (HL) ......................................................................... 514 Brazilian Rubber Plantations & Estates Ltd, Re [1911] 1 Ch 425 (Ch D) ............................................................................ 504 Bree v Holbech (1781) 2 Doug 654, 99 ER 415 ................................................. 478 Breen v Williams (1996) 186 CLR 71 ................................................................ 497 Brian Collins (Engineers) Ltd v Charles Roberts & Co Ltd [1965] RPC 429 ............................................................................................. 259 Bridgeman v Green (1755) 2 Ves Sen 627, 28 ER 399 .................................. 49, 177 Briggs v Penny (1849) 3 De G & Sm 525, 64 ER 590 ........................................ 199 Briggs v Penny (1851) 3 Mac & G 546, 42 ER 371 ............................................. 36 Bright v Legerton (1860) 29 Beav 60, 54 ER 548, (1861) 2 De G F & J 606, 45 ER 755 ..................................................... 656, 657

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Bristol & West Building Society v Mothew [1998] Ch 1 (CA) ............ 497, 644, 645 British Mutual Investment Co v Cobbold (1875) LR 19 Eq 627 ........................ 493 British Red Cross Balkan Fund, Re [1914] 2 Ch 419 (Ch D).............................. 385 British South Africa Co v Companhia de Moçambique [1893] AC 602 (HL) .................................................................................................... 88 Brittlebank v Goodwin (1868) LR 5 Eq 545 .............................................. 655, 656 Bromley v Smith (1859) 26 Beav 644, 53 ER 1047 ............................................ 331 Brooks v Muckleston [1909] 2 Ch 519 (Ch D)................................................... 651 Brown v Adams (1869) LR 4 Ch 764 ................................................. 366, 371, 373 Brown v Brown [1993] NSWCA 38, (1993) 31 NSWLR 582 .................. 79–80, 82 Brown v Higgs (1803) 8 Ves Jun 573, 32 ER 473 .............................................. 190 Brown v Inland Revenue Commissioners [1965] AC 244 (HL) .......................... 520 Brown v Savage (1674) 73 SS 103 ........................................................................ 45 Brown v Yeall unreported, noted in Moggridge v Thackwell ...................... 181, 195 Brownlie v Campbell (1880) LR 5 App Cas 925 ................................................ 487 Bulmer, Re [1937] Ch 499 (CA) ......................................................................... 668 Burdick v Garrick (1870) LR 5 Ch App CA (Ch) 233 ................................ 433, 495 Burge, Re (1887) 57 LT 364 ............................................................................... 655 Burgess v Wheate (1759) 1 Wm Bl 123, 96 ER 67, 1 Eden 177, 28 ER 652 ............................................................................ 115–55 Burland v Earle (1900) 27 OAC 540 (CA), [1902] AC 83 (PC) ................................................................................. 409, 414 Burns v Burns [1984] Ch 317 (CA) ............................................ 575, 580, 629, 636 Burrowes v Locke (1805) 10 Ves 470, 32 ER 927 .............................. 480, 486, 487 Byrnes v Kendle [2011] HCA 26 ........................................................................ 191 Cadd v Cadd (1909) 9 CLR 171 (HCA)....................................................... 79, 433 Cadogan Petroleum plc v Tolley [2011] EWHC 2286 (Ch), [2012] 1 P. & C.R. DG5 ................................................................................ 670 Caffrey v Darby (1801) 6 Ves Sen 489, 31 ER 1159 .......................................... 596 Caird v Sime (1887) 12 App Cas 326 (HL) .................................................. 257–58 Calvin v Smith (1608) 7 Co Rep 1a, 77 ER 399 ................................................. 311 Campbell v Mirror Group Newspapers [2004] UKHL 22, [2004] 2 AC 457 ...................................................................................... 264–66 Campbell Discount Co Ltd v Bridge [1961] 2 WLR 596 (CA) ........................... 561 Campden Hill Ltd v Chakrani [2005] EWHC 911 (Ch) ..................................... 382 Canadian Oil Works Corp, Re (1875) LR 10 Ch App 593 ................................. 668 Candler v Crane, Christmas & Co [1951] 2 KB 164 (CA) ................................. 496 Cann v Wilson (1888) 39 Ch D 39..................................................................... 479 Cartwright v Pettus (1675) 2 Ch Ca 214, 22 ER 916 ......................................... 100 Casborne v Scarfe (1737) 1 Atk 603, 26 ER 377................................................ 429 Case of Tanistry (1608) Dav 28, 80 ER 516 ......................................................... 25 Catt v Tourle (1869) LR 4 Ch App 654.............................................................. 219 Cattley v Pollard [2006] EWHC 3130 (Ch), [2007] Ch 353............................... 647 Caudrey’s Case (1591) 5 Co Rep 1a, 77 ER 1 .................................................... 320 Cave v Mackenzie (1877) 46 LJ Ch 564 (Ch)..................................... 434, 435, 436 Cedric Slack & Partners Ltd (in liq) v Slack [2010] EWCA Civ 204............................................................................................... 670

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Central Bank of Nigeria v Williams [2012] EWCA Civ 415 ....................... 647, 664 Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 228 CLR 168 ........................................................... 549 Central London Property Trust Co Ltd v High Trees House Ltd [1947] KB 130 .............................................................................. 222 Chalmer v Bradley (1819) 1 J & W 51, 37 ER 294 ............................................ 655 Chameleon Mining NL v Murchison Metals Ltd [2012] FCAFC 6 ........................................................................................................ 605 Chan v Zacharia (1984) 154 CLR 178....................................... 520, 596, 610, 669 Chapman, Re [1896] 2 Ch 763 (CA).................................................................. 490 Charitable Corp v Sutton (1742) 2 Atk 400, 26 ER 642, 9 Mod 349, 88 ER 500........................................................................... 165, 492 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 (HCA) ........................ 79 Chase Manhattan Bank v Israel-British Bank (London) Ltd [1981] Ch 105 (Ch D) ............................................................................ 606, 672 Cheung v Worldcup Investments Inc [2008] HKCFA 78 ................................ 71, 84 Chichester Diocesan Fund v Simpson [1944] AC 341 (HL) ................................ 199 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 ..................................... 609 Cholmondeley v Clinton (1820) 2 J & W 1, 37 ER 527 .............. 648, 650–51, 652, 654–55, 656 Christ’s Hospital v Grainger (1849) 1 M & G 460, 41 ER 1343 ................ 655, 656 Christian Revival Crusade Inc v Milne & Ors [2007] SADC 125....................... 306 Chudleigh’s Case (1595) 1 Co Rep 113b, 76 ER 261 ......................................... 229 Church of England BS v Piskor [1954] Ch 553 (CA) .......................................... 431 Churcher v Street [1959] 1 All ER 23 (Ch D) ............................................. 560, 577 City Equitable Fire Insurance Co, Re [1925] Ch 407 (CA) ................................. 504 Clare v Joseph [1907] 2 KB 369 ......................................................................... 668 Clark v Browne (1854) 2 Sm & Giff 524, 65 ER 510 .......................................... 36 Clark v Cutland [2003] EWCA Civ 810, [2004] 1 WLR 783 ............................. 665 Clarkson v Davies [1923] AC 100 (HL) ............................................................. 649 Clarkson v Hanway (1723) 2 P Wms 203, 24 ER 700 ......................................... 60 Clayton’s Case see Devaynes v Noble Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147 (CA) ............................................................................................... 139 Clore v Theatrical Properties [1936] 3 All ER 483 ............................................. 564 Cobb v Cobb [1955] 1 WLR 731 (CA) ...................................... 562, 563, 620, 641 Coco v Clark [1968] FSR 415 (Ch D) ................................................................ 259 Coke v Fountain (1686) 1 Vern 413, 23 ER 554 .................................................. 55 Coke v Fountaine (1676) 73 and 79 SS, 77 SS 362, 3 Swanst 585, 36 ER 984 ............................................................. 33–61, 82, 130 Colburn v Simms (1843) 2 Hare 543, 67 ER 224............................................... 608 Colchester v Law (1873) LR 16 Eq 253 ............................................................. 147 Cole v Gibbons, Martin v Cole (1734) 3 P W 290, 24 ER 1070......................... 333 Coleman Taymar Ltd v Oakes [2001] 2 BCLC 749 (Ch D) ................................ 517 Colin Gwyer & Associates Ltd v London Wharf (Limehouse) Ltd [2003] 2 BCLC 153 (Ch D).......................................... 526, 527 Collard v Hare (1831) 2 Russ & M 675, 39 ER 552.......................................... 659

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Collins v Plumb (1810) 16 Ves Jr 454, 33 ER 1057 ........................................... 212 Colonial Bishoprics Fund 1841, Re [1935] Ch 148 (Ch D) ................ 307, 311, 326 Colonial Trusts Corp, ex p Bradshaw, Re (1879) 15 Ch D 465 .......................... 229 Colt v Woollaston (1723) 2 P Wms 154, 24 ER 679 .......................................... 480 Comes Arglasse v Muschamp (1682) 1 Vern 75, 23 ER 322 .............................. 100 Commerzbank AG v IMB Morgan plc [2004] EWHC 2771 (Ch), [2005] 1 Lloyd’s Rep 298 ......................................... 385, 672 Commissioners of Inland Revenue v G Angus & Co (1889) 23 QBD 579.......................................................................................... 87 Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531 (HL) ...................................................................... 192, 199, 534, 537–38, 541 Commissioner of Stamp Duties v Byrnes [1911] AC 386 (PC) ....................... 80–81 Committee for Privileges v The Aylesford Peerage (1886) LR 11 App Cas 1 ...... 353 Communities Economic Development Fund v Canadian Pickles Corp [1991] 3 SCR 388 ...................................................................... 412 Companhia de Moçambique v British South Africa Co [1892] 2 QB 358 (CA) ...................................................................................... 88 Connolly Bros (No 2), Re [1912] 2 Ch 25 (CA) ................................................ .431 Cook v Duckenfield (1743) 2 Atk 562, 26 ER 737............................................. 186 Cooke v Chilcott (1876) 3 Ch D 694 ................................................................. 221 Cooke v Fountain (1680) 1 Ventris 347, 86 ER 224 ............................................ 44 Cooke, ex parte (1876) 4 Ch D 123 ........................................................... 371, 373 Cooper v MacDonald (1877) 7 Ch D 288 .......................................................... 575 Cooper v PRG Powerhouse Ltd [2008] EWHC 498 (Ch), [2008] 2 All ER (Comm) 964 ......................................................................... 200 Coote v Jecks (1872) 13 LR Eq 597 ................................................................... 111 Corbett v Brown (1831) 8 Bing 33, 131 ER 312 ................................................ 478 Corbyn v French (1799) 4 Ves Jun 418, 31 ER 213 ................................... 182, 185 Cornfoot v Fowke (1840) 6 M & W 358 ........................................................... 479 Corporation of Gloucester v Osborn (1846–7) 1 HLC 272, 9 ER 760 ................. 36 Countess of Bristol v Hungerford (1709) 2 Vern 645, 23 ER 1021 ...................... 47 Courtney, ex parte Pollard, In re (1840) Mont & Ch 239 .............. 110–11, 113–14 Coventry Permanent Economic Building Society v Jones [1951] 1 All ER 901 (Ch D) ........................................................................... 431 Cowcher v Cowcher [1972] 1 WLR 425 (Fam D) .............................................. 572 Cox v Jones [2004] EWHC 1486 (Ch), [2004] 2 FLR 1010 ............................... 667 Cox v Parker (1856) 23 Beav 168, 52 ER 1072 ................................................. 146 Cradock v Owen (1854) 2 Sm & Giff 241, 65 ER 382 Cranston, Re [1898] 1 IR 446 (CA Ireland) ....................................................... 535 Crédit Lyonnais Bank v Burch [1997] CLC 95 ................................................... 354 Cresswell v Potter [1978] 1 WLR 255 (Ch D) .................................................... 354 Crop v Norton (1740) 2 Atk 74, 26 ER 445, Barn CC 179, 27 ER 603, 9 Mod 233, 88 ER 418 ................................................................ 631 Cross, Re (1882) 20 Ch D 109 ........................................................................... 657 Crossco No 4 Unlimited v Jolan Ltd [2011] EWCA Civ 1619, (2011) 4 ITELR 615 ....................................................................................... 663

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Crowley’s Case (1818) 2 Swanst 1, 36 ER 514..................................................... 35 Cullen v Lowndes (1771) unreported ................................................................. 245 Cullum, Re [1924] 1 Ch 540 (Ch D) .................................................................. 147 Cunnack v Edwards [1896] 2 Ch 679 ................................................................ 147 D&C Builders Ltd v Rees [1966] 2 QB 617 (CA)............................................... 212 D’Jan of London Ltd, Re, Copp v D’Jan [1994] 1 BCLC 561 (Ch D) ................ 504 Da Costa v De Paz (1754) Dick 249, 21 ER 268, Amb 228, 27 ER 150, 2 Swanst 532, 36 ER 715 .............................. 185–86, 197 Dale v Inland Revenue Commissioners [1954] AC 11 (HL) ............................... 515 Dale, ex parte (1879) 11 Ch D 722 ........................................ 367–69, 376, 378–80 Damberg v Damberg [2001] NSWCA 87, (2001) 52 NSWLR 492 ...................... 83 Dann v Spurrier (1802) 7 Ves Jun 231, 32 ER 94 ................................. 284–86, 297 Daraydan Holdings Ltd v Solland International Ltd [2004] EWHC 622 (Ch), [2005] Ch 119 ........................................................ 671 Dart Industries Inc v Décor Corp Pty Ltd [1993] HCA 54, (1993) 179 CLR 101 ...................................................................................... 608 Davall v New River Co (1849) 3 De G & Sm 394, 64 ER 531........................... 146 Davis v Duke of Marlborough (1819) 2 Swan 108, 36 ER 555 .......... 331, 332, 333 Davis Contractors Ltd v Fareham UDC [1956] AC 696 (HL) ............................ 624 Davy v Garrett (1878) 7 Ch D 473 .................................................................... 645 De Bussche v Alt (1878) 8 Ch D 286.................................................................. 514 de Mattos v Gibson (1849) 4 De G & J 276, 45 ER 108...................... 218–21, 226 De Themmines v De Bonneval (1828) 5 Russ 288, 38 ER 1035 ......................... 541 DEG-Deutsche Investitions- und Entwicklungsgesellschaft mbH v Koshy (No 2) [2002] 1 BCLC 478 (Ch D) .......................................... 664 Denley’s Trust Deed, Re [1969] 1 Ch 373 (Ch D) .............................................. 200 Derry v Peek (1889) 14 App Cas 337 (HL) ............................ 481–88, 493, 495–97 Deschamps v Miller [1908] 1 Ch 856 (Ch D) ............................................... 112–14 Devaynes v Noble, Clayton’s Case (1816) 1 Mer 572 ........... 358, 366–69, 372–73, 384–85, 391 Dewdney, ex parte (1809) 15 Ves Jun 479, 33 ER 836 ....................................... 657 Dexter Motors Ltd v Mitcalfe [1938] NZLR 804 .............................................. 388 DHN Food Distributors Ltd v Tower Hamlets [1976] 1 WLR 852 (CA)............ 578 Dick v Alston [1913] SC (HL) 57 ....................................................................... 484 Dickens v Hawksley [1934] 1 Ch 267 (CA) ....................................................... 251 Dillwyn v Llewelyn (1862) 4 De GF & J 517, 45 ER 1285 .................. 77, 605, 662 Diplock’s Estate, Re [1948] Ch 465 (CA) ............................ 357, 366, 381, 384–85, 387, 665 Dixon v Wilkinson (1859) 4 De G & J 508, 45 ER 198 ..................................... 484 Docker v Somes (1834) 2 My & Keen 655, 39 ER 1095 .................................... 489 Doctor Bonham’s Case (1610) 8 Co Rep 113, 77 ER 646 .................................... 30 Dodsworth v Dodsworth (1973) 228 EG 1115 (CA).......................................... 604 Doe d Leicester v Biggs (1809) 2 Taunt 109, 127 ER 1016 ................................ 151 Doe d Toone v Copestake 6 East 328, 102 ER 1313 .......................................... 198 Donaldson v Beckett (1774) 2 Bro PC 145, 1 ER 837 (HL) ............... 239, 247, 251 Donoghue v Stevenson [1932] 1 AC 562 (HL) ................................................... 496 Douglas v Hello! Ltd (No 3) [2005] EWCA Civ 595, [2006] QB 125 .......... 264–66

Table of Cases

xix

Douglas v Hello! Ltd (No 5) [2003] EMLR 30 .................................................. 265 Douglas, In re (1887) LR 35 Ch D 472 (CA) ....................................... 199, 534–35 Downes v Grazebrook (1817) 3 Mer 200, 36 ER 77 .......................................... 668 Drummond, Re (1836) 1 My & Cr 627, 40 ER 516 .......................................... 466 Drury v Smith (1716) 1 P Wms 404, 24 ER 446 .................................................. 60 Du Boulay v Raggett (1989) 58 P & CR 138 (Ch D) ......................................... 435 Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48, [2003] 2 AC 366 ................................................................................................ 663, 664 Duchess of Argyll v Duke of Argyll [1967] Ch 302 (Ch D) .................. 261–62, 264 Duckwari plc (No 2), Re [1999] Ch 253 (CA) ................................................... 663 Duder v Amsterdamsch Trustees Kantoor [1902] 2 Ch 132 (Ch D) ................... 111 Duke of Bedford v Trustees of the British Museum (1822) 2 My & K 552, 39 ER 1055 ................................................................... 211, 213 Duke of Marlborough, Re [1894] 2 Ch 133 (Ch D) ........................................... 449 Duke of Norfolk v Howard (1681) 2 Ch Cas 14, 22 ER 939, (1683) 1 Vern 163, 23 ER 388 ....................................................................... 130 Duke of Queensberry v Shebbeare (1758) 2 Eden 329, 28 ER 924............. 241, 247 Duke of Rutland v Duchess of Rutland (1723) 2 P Wms 210, 24 ER 703 ........................................................................................................ 60 Dumas, ex parte (1754) 1 Atk 232, 26 ER 149 .................................. 367, 370, 389 Dutton v Howell (1693) Show 24, 1 ER 17 ......................................................... 99 Dyer v Dyer (1788) 2 Cox Eq Cas 92, 30 ER 42 .................................... 76–78, 630 Dyke v Walford (1846) 5 Moo PC 434, 13 ER 557 ........................................... 147 Dyson Holdings v Fox [1976] QB 503 (CA) ...................................................... 577 Dyson Technology Ltd v Curtis [2010] EWHC 3289 (Ch) ......................... 603, 671 Eales v England (1702) Precedents in Chancery 200, 24 ER 96.......................... 190 Earl of Aldborough v Trye (1840) 7 Cl & F 436, 7 ER 1136 ............................. 334 Earl of Anglesey v Annesley (1741) 1 Bro HL 289, 1 ER 573 .............................. 95 Earl of Arglasse v Muschamp (1684) 1 Vern CC 237, 23 ER 438 ...................... 332 Earl of Aylesford v Morris (1873) LR 8 Ch App 484 ................................... 329–55 Earl of Aylesford, In re, Machell v Poulett, The Times, 20 April 1886, 4 ............................................................................................. 353 Earl of Aylesford’s Family Settlement, In re Poulett v Finch, The Times, 7 May 1885, 11 ........................................................................... 353 Earl Cadogan v Sportelli [2007] 1 EGLR 253 ...................................................... 10 Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125, 28 ER 82 .......................................................................... 330–32, 334, 341, 344 Earl of Kildare v Eustace (1686) 1 Vern 419, 23 ER 559 ............................... 100–1 Earl of Oxford’s Case (1615) Ch Rep 1, 21 ER 485 ........................... 1–32, 284–87 Earl of Pembroke’s Case (1379) Rot Parl 60–61 ................................................. 194 Earl of Plymouth v Hickman (1690) 2 Vern 167, 23 ER 712 ............................... 60 Earl of Portmore v Taylor (1831) 4 Sim 182, 58 ER 69 ..................................... 333 Earl of Sefton, Re [1898] 2 Ch 378 (CA) ..................................................... 453–72 Earl of Suffolk v Greenvill (1641) 3 Ch Rep 89, 21 ER 738 ............................... 130 Early v Garrett (1829) 9 B & C 928, 109 ER 345 .............................................. 478 East-India Co v Vincent (1740) 2 Atk 83, 26 ER 451......................................... 297 Edgeware Highway Board v Harrow Gas Co (1874) LR 10 QB 92.................... 437

xx

Table of Cases

Edwards v Burt (1852) 2 De G M & G 55, 42 ER 791 ...................................... 334 El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717 (Ch D)............... 387, 672 Elibank v Montolieu (1801) 5 Ves 737, 31 ER 832 ............................................ 576 Elkington & Co v Hurter [1892] 2 Ch 452 (Ch D) ............................................ 482 Ellenborough, Re [1903] 1 Ch 697 (Ch D) ................................................ 436, 441 Elliot v Cordell (1820) 5 Madd 149, 56 ER 852 ................................................ 575 Elliot v Elliot (1677) 2 Chan Cas 231, 22 ER 922.................................... 75–77, 82 Ellis v Selby (1836) 1 My & Cr 286, 40 ER 384 ................................................ 199 Ellison v Ellison (1802) 6 Ves Jun 656, 31 ER 1243........................................... 437 Equitable Life v Bowley [2003] EWHC 2263 (Comm), [2004] 1 BCLC 180 ........................................................................................ 504 Erlanger v New Sombrero Phosphate Co (1878) LR 3 App Cas 1218 .......................................................................... 608, 651–52 Errington v Errington & Woods [1952] 1 KB 290 (CA) ..................................... 564 Evans v Bicknell (1801) 6 Ves Jun 174, 31 ER 998 .................... 478, 479, 480, 482 Evans v Chesshire (1806) Ves Sen Supp 300, 28 ER 532 .................................... 331 Evans v Llewellyn (1787) 12 Bro CC 150, 29 ER 86.......................................... 331 Eves v Eves [1975] 1 WLR 1338 (CA) ....................................................... 572, 579 Ewing v Orr Ewing (1883) 9 App Cas 34............................................................. 88 Exchange Banking Co, Re (1882) 21 Ch D 519 ................................................. 658 Exchange Telegraph v Central News [1897] 2 Ch 48 (Ch D) ............................. 257 Exchange Telegraph v Gregory [1896] 1 QB 147 (CA)....................................... 257 Eyre v Countess of Shaftesbury (1722) 2 P Wm 103 .......................................... 579 Eyre v Hughes (1876) LR 2 Ch D 148 ............................................................... 354 Eyre-Williams, Re [1923] 2 Ch 533 (Ch D) ........................................................ 659 F & C Alternative Investments (Holdings) Ltd v Barthelemy [2011] EWHC 1731 (Ch) ............................................................................... 497 Fane v Fane (1681) 1 Vern 30, 23 ER 284 ......................................................... 187 Farepak Food and Gifts Ltd, Re [2006] EWHC 3272 (Ch), [2007] 2 BCLC 1, [2009] EWHC 2580 (Ch), [2010] 1 BCLC 444 ................ 672 Farrow Finance Co Ltd (in liq) v Farrow Properties Ltd (in liq) [1999] 1 VR 584 ................................................................................. 666 Fattal v Walbrook Trustees (Jersey) Ltd [2010] EWHC 2767 (Ch), [2012] Bus LR D7 ........................................................................ 644 Fawcett v Whitehouse (1829) 1 Russ & M 132, 39 ER 51................................. 668 Feilden v Slater (1869) LR 7 Eq 523 .................................................................. 221 Ferris v Weaven [1952] 2 All ER 233 ................................................................. 560 FHR European Ventures LLP v Mankarious [2011] EWHC 2999 (Ch)........................................................................................... 670 Finch v Throckmorton (1597) BL MS Harl 6686 f 222v ............................ 2, 31, 32 Fisher v Brooker [2009] UKHL 41, [2009] Bus LR 1334 ................................... 651 Floyd v Nangle (1747) 3 Atk 567, 26 ER 1127 .................................................. 484 Foley v Hill (1844) 1 Ph 399, 41 ER 683 ........................................................... 654 Formby v Barker [1903] 2 Ch 539 (CA)............................................. 220, 223, 226 Forrester v Waller (1741) unreported ......................................................... 245, 247 Foskett v McKeown [1997] 3 All ER 392 (CA), [2001] 1 AC 102 (HL) ......................................................... 383, 387, 388–90, 580, 665

Table of Cases

xxi

Foster v Charles (1830) 6 Bing 396, 130 ER 1333 ............................................. 478 Foster v Vassall (1747) 3 Atk 587, 26 ER 1138 ......................................... 103, 109 Fountain v Coke (1674) 1 Mod 107, 86 ER 768 .................................................. 43 Fountain v Gnales (1687) Comberbach 59, 90 ER 343 ........................................ 44 Fountain v Guavers (1683) 2 Shower KB 333, 89 ER 971 ................................... 44 Fountain v Guavers (1683) Skinner 146, 90 ER 68 .............................................. 44 Foveaux, Re [1895] 2 Ch 501 (Ch D) .......................................................... 534–39 Franks v Bollans (1868) LR 3 Ch App 717 ........................................................ 668 Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd 1 (QSC) ................. 609 Fribance v Fribance [1957] 1 WLR 384 (CA)..................................................... 620 Friend v Brooker [2009] HCA 21, (2009) 239 CLR 129 .................................... 497 Frith v Cartland (1865) 2 Hem & M 417, 71 ER 525................................ 366, 371 Fry v Lane (1889) LR 40 Ch D 312 ................................................................... 354 Furnis v Leicester (1619) Cro Jac 474, 79 ER 404 ............................................. 478 Furs Ltd v Tomkies (1936) 54 CLR 583 ............................................................. 668 Futter v Futter [2010] EWHC 449 (Ch), [2010] STC 982 .......................... 146, 666 Galambos v Perez [2009] SCC 48, [2009] 3 SCR 247 ........................................ 497 Gallard v Hawkins (1884) 27 Ch D 298 ............................................................ 148 Gallard, Re [1897] 2 QB 8 ................................................................................. 659 Gambrell v Nivens 275 SW 3d 529 (2008)......................................................... 203 Gardner v Hart (1676) 73 SS 329 ........................................................................ 45 Garmonsway v Raglan Developments Ltd [2009] NZHC 488 ........................... 664 Garrett v Wilkinson (1848) 2 De G & Sm 244, 64 ER 110 .................................. 78 Gartside v Outram (1856) 3 Ju (NS) 39 ..................................................... 254, 261 Gascoigne v Thwing (1685) 1 Vern 366, 23 ER 526 ............................................ 60 Gawton v Lord Dacres (1590) 1 Leo 220, 74 ER 201 ........................................ 588 Gee v Pritchard, (1818) 2 Swanst 402, 36 ER 670 ..................................... 245, 252 Gibbons v Wright (1954) 91 CLR 423 (HCA) ..................................................... 79 Gibbs v Rumsey (1813) 2 Ves & Bea 294, 35 ER 331 ................................ 187, 198 Gilchester Properties Ltd v Comm [1948] 1 All ER 493 ..................................... 482 Gillies v Keogh [1989] 2 NZLR 327 .................................................................. 636 Gilmour v Coats [1949] AC 426 (HL) ............................................... 199, 541, 548 Gissing v Gissing [1971] AC 886 (HL) ......................................... 572, 574, 611–42 Giumelli v Giumelli [1999] HCA 10, (1999) 196 CLR 101................ 604, 662, 664 Glamorganshire Iron & Coal Co v Irvine (1866) 4 F & F 947, 176 ER 861 ...... 478 Glanvill’s Case, see Glanville v Courtney Glanville v Courtney 2 Bulst 301, 80 ER 1139, Cro Jac 343, 79 ER 294, 1 Rolle 111, 81 ER 365, 1 Rolle 219, 81 ER 444, Moo 838, 72 ER 839, 118 SS 440 ............................................. 3, 28 Godbold v Freestone (1694) 3 Lev 406, 83 ER 753 ........................................... 134 Goldie v Getley (No 3) [2011] WASC 132 ......................................................... 664 Goode v Martin [2001] EWCA Civ 1899, [2002] 1 WLR 1828 ......................... 644 Googe and Smith’s Case (1615) 1 Rolle 278, 81 ER 487, 3 Bulst 115, 81 ER 98 ............................................................................ 2, 20, 31 Gordon v Gordon (1821) 3 Swanst 400, 36 ER 910 .......................................... 146 Gore v Gore (1722) 10 Mod 501, 88 ER 827 .................................................... 130 Gorringe v Taylor (1596) C 33/91 f 424, 117 SS 210 no 235, 224 no 332 ........... 28

xxii Table of Cases Gosman, Re (1880) 15 Ch D 67......................................................... 145, 146, 147 Gowland v De Faria (1810) 17 Ves Jun 20, 34 ER 8 .......................................... 331 Grand Junction Canal Co v Dimes (1850) 2 H & T 92, 47 ER 1610 .................................................................................................... 668 Grant v Edwards [1986] Ch 638 (CA) ....................................... 575, 636, 639, 642 Gray v Johnston (1868) LR 3 HL 1.................................................................... 665 Green v Bridgeman (1757) Wilmot 58, 97 ER 22 ................................................. 49 Green’s WT, Re [1985] 3 All ER 455 (Ch D) ...................................................... 145 Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286 (CA) ................................... 410 Greenwood v Bennett [1973] 1 QB 195 (CA)..................................................... 598 Gregory v Gregory (1815) G Coop 201, 35 ER 530........................................... 652 Grey v Grey (1677) 1 Chan Cas 296, 22 ER 809, Rep Temp Finch 338, 23 ER 185, 2 Freem 6 .............................................. 63–85 Griggs (R) Group Ltd v Evans [2004] EWHC 1088 (Ch), [2005] Ch 153 .................................................................................. 100, 112–13 Grimstone, ex parte (1771) 2 Ves 74, 30 ER 527 ............................................... 466 Grove-Grady, Re [1929] 1 Ch 557 (CA)......................................... 535–36, 540–41 Guavers v Fountain (1687) 2 Freeman 99, 22 ER 1083 ....................................... 47 Guinness plc v Saunders (1987) 3 BCC 271 (Ch D), [1990] 2 AC 663 (HL) ............................................................................ 523, 668 Gwembe Valley Development Co Ltd v Koshy (No 3) [2002] 1 BCLC 478 (Ch D), [2003] EWCA Civ 1048, [2004] 1 BCLC 131 .................. 669 Gwynne v Heaton (1778) 1 Bro CC 1, 28 ER 949 ..................................... 331, 344 Gwynne, Re (1912) 5 DLR 713 (CA Ont).......................................................... 535 H v H (1947) 63 TLR 645 ......................................................................... 560, 563 H v S [2002] EWCA Civ 79, [2003] QB 965...................................................... 667 H’s Settlement, Re [1909] 2 Ch 260 (Ch D) ....................................................... 579 Hall v Ewin (1888) LR 37 Ch D 74 ................................................................... 203 Hallett’s Estate, Re; Knatchbull v Hallett; Cotterill v Hallett (1879–80) 13 Ch D 696 (CA) ................................................................... 357–92 Halton International Inc v Guernroy Ltd [2006] EWCA Civ 801, [2006] WTLR 1241 ........................................................................................ 670 Hancock v Smith (1889) 41 Ch D 456 (CA) ...................................................... 384 Harcourt v White (1860) 28 Beav 303, 54 ER 382 .................................... 650, 651 Harding v Glyn (1739) 1 Atk 469, 26 ER 299 ................................................... 190 Hardwicke v Johnson [1978] 1 WLR 683 (CA) ................................................. 636 Harford v Lloyd (1855) 20 Beav 310, 52 ER 622 .............................................. 371 Harris v Horwell (1708) Gilb Rep 11, 25 ER 8 .................................................... 60 Harris v Truman (1881) 7 QBD 340, affd (1882) 9 QBD 264 (CA) ........... 377, 378 Harrison v Gurney (1821) 2 Jac & W 563, 37 ER 743 ...................................... 108 Hartley v Cummings (1847) 5 CB 247, 136 ER 871 .......................................... 438 Harwood v Tooke (1812) 2 Sim 192, 57 ER 76 ................................................. 333 Hastings, Re (1887) 35 Ch D 94 ................................................................ 653, 655 Hastings Bass, Re [1975] Ch 25 (CA) ................................................................ 225 Haycraft v Creasy (1801) 2 East 92, 102 ER 303............................................... 479 Haywood v Brunswick Permanent Building Society (1881) 8 QBD 403 (CA) ...................................................................................... 221–23

Table of Cases

xxiii

Heard v Pilley (1869) 4 Ch App 548 (CA) ......................................... 434, 435, 436 Heath v Pugh (1881) 6 QBD 345 (CA) 428, affd (1882) LR 7 App Cas 235 (HL) .......................................................................................... 428 Heaven v Pender (1882) LR 11 QBD 503 .......................................................... 496 Hedley Byrne and Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL) .......................................................................................... 495, 496 Henchman v A-G (1826) 2 Sim & St 498, 57 ER 436 ........................................ 117 Henchman v A-G (1834) 3 My & K 485, 40 ER 185......................................... 148 Henderson v Merrett Syndicates Ltd (No 1) [1995] 2 AC 145 (HL)........... 497, 669 Heningbrook v Steel (1676) 73 SS 301 ................................................................. 45 Hercy v Dinwoody (1793) 2 Ves Jun 87, 30 ER 536 .................................. 650, 651 Heseltine v Heseltine [1971] 1 WLR 342 (CA)................................................... 579 Heskell v Continental Express Ltd [1950] 1 All ER 1033................................... 496 Hicks v Powell (1869) LR 4 Ch App 741 ........................................................... 113 Hicks v Sallitt (1854) 3 De G M & G 782, 43 ER 307....................................... 654 Hilton v Barker Booth and Eastwood (a firm) [2005] UKHL 8, [2005] 1 WLR 567 ......................................................................................... 497 Hine v Hine [1962] 1 WLR 1124 (CA) .............................................. 563, 616, 620 Hitchcock v Giddings (1817) 4 Price 135 ........................................................... 481 Hoburn Aero Components Ltd’s Air-Raid Distress Fund, Re [1946] Ch 86 (Ch D) ................................................................................. 385 Hodgson v Marks [1971] Ch 892 (CA) .............................................................. 449 Hodle v Healey (1819) 6 Madd 181, 56 ER 1062 ...................................... 652, 653 Holland v Holland (1869) LR 4 Ch 449 ............................................................ 655 Holmes, Re (1827) 4 Russ 182, 38 ER 774 ........................................................ 579 Holroyd v Marshall (1862) 10 HL Cas 191, 11 ER 999 ............................ 436, 437 Holthausen, ex parte (1874) LR 9 Ch App 722.................................................. 111 Hood, Re [1931] 1 Ch 240 (CA) ........................................................................ 542 Hope v Hope (1854) De GM & G 328, 43 ER 534 ........................................... 579 Hopkinson, Re [1948] 1 All ER 346 .................................................................. 545 Hopper v Conyers (1866) 2 LR Eq 549...................................................... 389, 390 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41............................................................................................ 593, 669 Hovenden v Lord Annesley (1806) 2 Sch & Lef 607 ...................... 648–50, 654–57 How v Stile (1675) 2 Levinz 126, 83 ER 481 ....................................................... 43 How v Stile (1675) 3 Keble 430, 84 ER 805 ........................................................ 43 How v Stiles (1674) 3 Keble 283, 84 ER 722 ....................................................... 43 How v Style (1674) 1 Freeman 384, 89 ER 286 ................................................... 43 Howard E Perry & Co Ltd v British Railways Board [1980] 1 WLR 1375 (Ch D) ....................................................................................... 605 HR v JAPT [1997] OPLR 123............................................................................ 668 Hughes v La Baia Ltd [2011] UKPC 9, [2011] 2 P & CR DG7 .......................... 651 Hughes v Lloyd [2007] EWHC 3133 (Ch), [2008] WTLR 473 .................. 667, 668 Huguenin v Baseley (1807) 14 Ves Jun 275, 33 ER 526 ..................................... 177 Hummeltenberg, Re [1923] 1 Ch 237 (Ch D) .................................................... 540 Hunt v Luck [1901] 1 Ch 45 (Ch D) .................................................................. 567 Hunt v Severs [1994] 2 AC 350 (HL) ................................................................. 667

xxiv

Table of Cases

Hunter, In re, Hunter v Attorney–General [1899] AC 309 (HL)......................... 199 Hurst v Picture Theatres Ltd [1915] 1 KB 1 (CA) .............................................. 564 Hussey v Palmer [1972] 1 WLR 1286 (CA) ............................................... 578, 579 Iliffe v Trafford [2001] All ER (D) 306 (Dec) ..................................................... 491 Indata Equipment Supplies Ltd v ACL Ltd [1998] FSR 248 (CA) ...................... 489 Independent Trustee Services Ltd v GP Noble Trustees Ltd [2009] EWHC 161 (Ch), [2012] EWCA Civ 195 ..................................... 665–66 Inland Revenue Commissioners v Baddeley [1955] AC 572 (HL)............... 192, 199 Inland Revenue Commissioners v Temperance Council of Christian Churches of England and Wales (1926) 136 LT 27 ..................... 542 International Corona Resources Ltd v LAC Minerals Ltd (1987) 25 DLR (4th) 504, affd [1989] 2 SCR 574 .......................................... 669 Isaac v Gompertz (1786) unreported .................................................................. 186 Jackson v Cator (1800) 5 Ves Jun 688, 31 ER 806............................................. 297 Jackson v Hobhouse (1817) 2 Mer 483, 35 ER 1025 ......................................... 576 Jackson v Petrie (1804) 10 Ves Jun 164, 32 ER 807 ........................................... 107 Jacobus Estates Ltd v Marler (1913) 114 LT 640n (HL) .................................... 500 James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62 (Ch D) ..................... 383, 607 James v Allen (1817) 3 Mer 17, 36 ER 7...................................................... 198–99 James v Smith [1891] 1 Ch 384 (Ch D) .............................................................. 435 James v Williams [2000] Ch 1 (CA) ................................................................... 667 James, ex parte (1803) 8 Ves 337, 32 ER 385 ............................................ 514, 522 Jansen v Jansen [1965] 3 All ER 363 (CA) ......................................................... 563 Jasmine Trustees Ltd v Wells & Hind (a firm) [2007] EWHC 38 (Ch), [2008] Ch 194.............................................................. 663, 666 JD Wetherspoon plc v Van de Berg & Co Ltd [2009] EWHC 639 (Ch)..................................................................................... 664, 670 Jefferys v Boosey (1854) 4 HLC 814, 10 ER 681 (HL)................................. 248–53 Jenkin’s and Randall’s Contract, Re [1903] 2 Ch 362 (Ch D)............................. 599 Jenks’ Case (1676) 6 St Tr 1189 ........................................................................... 35 Jennings v Rice [2002] EWCA Civ 159, [2003] 1 P & CR 8 .............................. 640 Jermy v Best (1819) 1 Sim 373, 57 ER 617 ........................................................ 650 Jess B Woodcock & Sons v Hobbs [1955] 1 WLR 152 (CA) ...................... 559, 560 Jesse v Bennett (1856) 6 De G M & G 609, 43 ER 1370 ................................... 665 JJ Harrison (Properties) Ltd v Harrison [2001] EWCA Civ 1467, [2002] 1 BCLC 162........................................................................ 670 John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19, (2010) 241 CLR 1................................................ 497, 605, 607 John v Dodwell & Co Ltd [1918] AC 563 (PC) ................................................. 665 Johnson v Gallagher (1861) 3 D F & J 494, 45 ER 969 ..................................... 653 Johnstone v Beattie (1843) 10 Cl & F 42, 8 ER 657 .......................................... 579 Jones v Kernott [2009] EWHC 1713 (Ch), [2010] WLR 2401, [2010] EWCA Civ 578, [2010] WLR 2401, [2011] UKSC 53, [2011] 3 WLR 1121 .................................................................. 612–14, 617–19, 621–22, 626–28, 632–34, 636–38, 641–42 Jones v Nabbs (1718) Gilb Rep 146, 25 ER 102 .................................................. 60

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xxv

Jones v Smith [1954] 1 WLR 1089 (Ch D) ......................................................... 565 Jones v Tuberville (1792) 2 Ves Jun 11, 30 ER 498 .................................... 651, 654 Jones, Re (1929) 45 TLR 259 ............................................................................ 541 Jyske Bank (Gibraltar) Ltd v Spjeldnaes [1999] 2 BCLC 101 (Ch D) ................. 666 Kauter v Hilton (1953) 90 CLR 86 (HCA)........................................................... 79 Kaye v Robertson [1991] FSR 62 (CA) .............................................................. 264 Keech v Sandford (1726) Sel Cas Ch 61, 25 ER 223 .................. 187, 292, 604, 670 Keene, Re [1922] 2 Ch 475 (CA) ....................................................................... 595 Kelly & Co, ex parte (1879) 11 Ch D 306 ......................................................... 490 Kelly v Cooper [1993] AC 205 (PC)................................................................... 593 Kemp v Kemp (1801) 5 Ves Jun 849, 31 ER 891 ............................................... 188 Kendar v Milward (1702) 2 Vern 440, 23 ER 882 ............................................... 60 Kennedy v Earl of Cassillis (1818) 2 Swan 313, 36 ER 635 ............................... 108 Keppell v Bailey (1834) 2 My & K 517, 39 ER 1042 .................... 210–10, 212–13, 219–20, 227, 232, 299 Kernott v Jones see Jones v Kernott Kerr v Baranow 2011 SCC 10, [2011] 1 SCR 269 ..................................... 611, 630 Kerr, Re [1927] NZLR 177 ................................................................................ 388 Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd [2004] EWHC 2547 (Ch), [2005] 2 P & CR 8 affd [2005] EWCA Civ 1355, [2006] 1 P & CR DG20 ................................................................. 663 Kinder v Miller (1701) Prec Ch 171, 24 ER 83 .................................................... 60 King v David Allen & Sons [1916] 2 AC 54 (HL) ...................................... 226, 564 King v Hamlet (1835) 3 Cl & F 218, 6 ER 1419........................................ 333, 346 Kirk v Webb (1698) 2 Freem 229, 22 ER 1177, Prec Ch 84, 24 ER 41 ................ 60 Kirkby Ravensworth Hospital, ex parte (1808) 15 Ves Jun 305, 33 ER 770 ...................................................................................................... 189 Kirkham v Peel (1880) 28 WR 941, affd (1880) 44 LT 195 (CA) ................. 378–79 Kitechnology BV & Ors v Unicor GmbH Plastmaschinen & Ors [1995] FSR 765 (CA)...................................................................................... 262 Knight v Knight (1840) 3 Beav 148, 49 ER 58 ........................................... 159, 427 Knight, Re (1937) 2 DLR 285 (Ont SC) ............................................................. 548 Knox v Gye (1872) LR 5 HL 656............................................... 653, 654, 655, 657 LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 (SCC) .......................................................................... 605, 671 Minera Aquiline Argentina SA v IMA Exploration Inc (2007) 10 WWR 648 ................................................................................................. 671 Lady Astley v Fountaine (1673) Rep t Finch 4, 23 ER 3................................. 48, 59 Lady Bellasis v Compton (1693) 2 Vern 294, 23 ER 790 ..................................... 60 Lady Gorge’s Case (1634) unreported, cited in Crisp v Pratt (1634/5) Cro Car 549, 79 ER 1072, Prolegomena, ch 13, s 10 ............. 73, 74, 75 Lake v Gibson (1729) 1 Eq Ca Abr 290 ............................................................. 631 Lamb v Evans [1893] 1 Ch 218 (CA) ......................................................... 244, 254 Lamplugh v Lamplugh (1709) 1 P Wms 111, 24 ER 316 ..................................... 77 Lancaster v Handle Artists Management Ltd unreported, 15 September 2007, [2008] EWCA Civ 1111 ................................................. 670

xxvi

Table of Cases

Lands Allotment Co, Re [1894] 1 Ch 616 (CA) ................................................. 658 Lane v Dighton (1762) Amb 409, 22 ER 274..................................................... 389 Lashmar, Re, Moody v Penfold [1891] 1 Ch 258 (CA)......................... 115, 150–52 Last v Rosenfeld [1972] 2 NSWLR 923 (NSW SC) ............................................ 432 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liquidation) (1965) 113 CLR 265 (HCA)........................................................................... 566 Latimer v Commissioners of Inland Revenue [2004] UKPC 13, [2004] 1 WLR 1466 ....................................................................................... 645 Lavelle v Lavelle [2004] EWCA Civ 223, [2004] 2 FCR 418 ............................... 73 Law Society v Habitable Concepts Ltd [2010] EWHC 1449 (Ch) ...................... 645 Law Society v Isaac & Isaac International Holdings Ltd [2010] EWHC 1670 (Ch), [2011] WTLR 425 ........................................................... 645 Le Cren Clarke, Re [1996] 1 WLR 288 (Ch D) .................................................. 541 Leahy v A–G for New South Wales [1959] AC 457 (PC).................................... 199 Leakins v Clissel (1663) 1 Sid 146, 82 ER 1022 ................................................. 478 Lee v Lee [1952] 2 QB 489n .............................................................................. 563 Lehman Brothers International (Europe), Re [2009] EWHC 3228 (Ch), [2010] 2 BCLC 301 ...................................................................... 357 Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd [1986] AC 785 (HL) ............ 231 Leslie Engineers Ltd [1976] 1 WLR 292 (Ch D) ................................................. 357 Lewis v Madocks (1810) 17 Ves 48, 34 ER 19 ................................................... 389 Lincoln v Wright (1859) 4 De G & J 16, 45 ER 6 ................................................ 79 Lind, Re [1915] 2 Ch 345 (CA).......................................................................... 437 Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 ........................................... 651 Lindsley v Woodfull [2004] EWCA Civ 165, [2004] 2 BCLC 131...................... 669 Lister v Pickford (1865) 34 Beav 576, 55 ER 757 .............................................. 655 Lister and Co v Stubbs (1890) 45 Ch D 1 .................................................. 380, 671 Lloyd’s Bank Ltd v Bundy [1975] QB 326 (CA) ................................................. 354 Lloyd’s Bank Ltd v Oliver’s Trustee [1953] 1 WLR 1460 (Ch D) ....................... 562 Lloyds Bank Plc v Rosset [1991] 1 AC 107 (HL) ............................... 575, 619, 636 Lloyds TSB Bank Plc v Markandan & Uddin (a firm) [2012] EWCA Civ 65................................................................................................. 645 Lockey v Lockey (1719) Prec Ch 518, 24 ER 232 ...................................... 653, 657 Lomax v Ripley (1855) 3 Sm & G 48, 65 ER 558.............................................. 191 London & South Western Rwy Co v Gomm (1881) 20 Ch D 562 ....... 222–24, 231 London Borough of Hounslow v Twickenham Garden Development Ltd [1971] Ch 233 (Ch D) ........................................................ 564 Long v Bishop of Cape Town (1863) 1 Moo PC NS 411, 15 ER 756 ........................................................................................ 311–16, 321 Lonrho plc v Fayed (No 2) [1992] 1 WLR 1 (Ch D) .......................................... 662 Loosemore v Tiverton and North Devon Railway Co (1883) LT 162 ................. 376 Lord Ashburton v Pape [1913] 2 Ch 469 (CA)................................................... 476 Lord Chedworth v Edwards (1802) 8 Ves June 46, 32 ER 268........................... 370 Lord Compton’s Case (1587) 3 Leo 197, 74 ER 629.......................................... 229 Lord Cranstown v Johnston (1796) 3 Ves Jun 170, 30 ER 952 ...... 110–11, 113–14 Lord Dacre of the South, Re (1535) ................................................................... 194 Lord Falkland v Bertie (1696) 2 Vern 333, 23 ER 814 ......................................... 60

Table of Cases

xxvii

Lord Mohun v Lady Mohun (1671) Prolegomena 242......................................... 58 Lord North & Lord Dacres v Millett (1593) 117 SS 197 No [10] ........................ 45 Lord Pawlet’s Case (1685) 2 Vent 366, 86 ER 489 ............................................. 135 Lord Portarlington v Soulby (1834) 3 My & K 104, 40 ER 40 .......................... 108 Lord Provost, Magistrates and Town Council of Edinburgh v The Lord Advocate (1879) 4 App Cas 823 ..................................................... 390 Lord Winsor’s Case (1611) Ley 31, 80 ER 608 .................................................... 13 Love v Baker (1665) 1 Ch Ca 67, 22 ER 698 ..................................................... 108 Love v L’Estrange (1727) 5 Bro PC 59, 2 ER 532............................................... 135 Low v Bouverie [1891] 3 Ch 82 (CA)................................................................. 482 Luker v Dennis (1877) 7 Ch D 227 .............................................................. 219–20 Lumley v Gye (1853) 2 El & Bl 216, 118 ER 749 .............................................. 219 Lumley v Wagner (1852) 1 De GM & G 604, 42 ER 687 .................................. 219 Luxor (Eastbourne) Ltd v Cooper [1939] 1 All ER 623 (KBD), [1939] 4 All ER 411 (CA), [1941] AC 108 (HL) ........................... 500, 501, 502, 508, 515 Lyde v Barnard (1836) 1 M & W 101, 150 ER 363 ........................................... 479 Lyell v Kennedy (1889) 14 App Cas 437 ...................................... 378–79, 588, 661 Lysaght v Edwards (1876) LR 2 Ch 499 (Ch) .................................................... 434 Macduff, In re [1896] 2 Ch 451 (CA) ................................................................ 199 Macklin v Richardson (1770) Amb 694, 27 ER 491 .......................................... 247 Macmillan v Dent [1907] 1 Ch 107 (CA) ........................................................... 251 Magdalen College Case, Warren v Smith (1615) 1 Rolle 151, 81 ER 394, 11 Co Rep 66, 77 ER 1235, Cro Jac 364, 79 ER 312 ...................................................................... 2, 11, 12, 13, 16, 20, 27 Maguire v Makaronis (1997) 188 CLR 449 ....................................................... 669 Mainstream Properties Ltd v Young [2007] UKHL 21, [2008] AC 1.................. 266 Manby v Scott (1659) 1 Sid 109, 82 ER 1000 .................................................... 560 Manisty’s Settlement [1974] Ch 17 (Ch D) ......................................................... 200 Mann v Stephens (1846) 15 Sim 377, 60 ER 665 ................................. 213–14, 224 Mansell v Mansell (1732) 2 P Wms 678............................................................. 665 Mansell v Valley Printing Co [1908] 1 Ch 567 (Ch D) ....................................... 251 Marquess of Northampton v Pollock (1890) 45 Ch D 190 (CA) ........................ 429 Marriott, Re (1808) 2 Molloy 516 ..................................................................... 467 Mars UK Ltd v Teknowledge Ltd [1999] EWHC 226 (Pat), [2000] FSR 138 .............................................................................................. 595 Martin v Strachan (1742) 2 Stra 1179, 93 ER 1111, Rolle, Abr, vol 2, fo 780 ........................................................................................... 134 Mason, Re [1928] 1 Ch 385............................................................................... 659 Masters of Bedford Charity, In re (1819) 2 Swanst 470, 36 ER 696 ................... 186 Matthias v Yetts (1882) 46 LT (NS) 497 ............................................................ 479 Mayer v Townsend (1841) 3 Beav 443, 49 ER 174 .............................................. 36 Mayor Aldermen and Burgesses of Gloucester v Wood (1843) 3 Hare 131, 67 ER 326 .................................................................................... 36 MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675 (CA)............................................................................... 229 McCormick v Grogan (1869) LR 4 HL 82 ......................................................... 663

xxviii Table of Cases McGovern v A-G [1982] Ch 321 (Ch D).................................................... 540, 544 McLaughlin v Duffill [2008] EWCA Civ 1627, [2010] Ch 1 .............................. 434 McPhail v Doulton [1971] AC 424 (HL)............................................ 200, 228, 580 McPherson v Watt (1877) 3 App Cas 254 .......................................................... 668 Mercer and Moore, Re (1880) 14 Ch D 287 ...................................................... 118 Meredith v Heneage (1824) 1 Simons 542, 57 ER 681....................................... 191 Merrick v Harvey (1649) Nels 48, 21 ER 786...................................................... 45 Merriman v Ward (1860) 1 J & H 371, 70 ER 790 ........................................... 373 Merriman v Williams (1882) LR 7 App Cas 484 ........................................ 307, 311 Merryweather v Moore [1892] 2 Ch 518 (Ch D) ............................................... 254 Metall und Rohstoff AG v Donaldson Lufkin and Jenrette Inc [1990] 1 QB 391 (CA) .................................................................................... 666 Metropolitan Bank v Heiron (1880) 5 Ex D 319................................ 380, 480, 658 Metropolitan Petar v Mitreski [2003] NSWSC 262............................................ 306 Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 (Ch D) .................... 200 Meux v Smith (1843) 11 Sim 410, 59 ER 931.................................................... 431 Middleton v Baldock [1950] 1 All ER 708 ................................................. 565, 577 Middleton v Pollock (1876) 4 Ch D 49 .............................................................. 378 Middleton v Spicer (1783) 1 Bro CC 201, 28 ER 1083 ...................................... 146 Midland Bank v Cooke [1995] 4 All ER 562 (CA) ..................... 574, 580, 630, 637 Midland Bank Trust Co Ltd v Green [1981] AC 513 (HL)................................. 446 Millar v Taylor (1769) 4 Burr 2303, 98 ER 201 ......................................... 240, 247 Miller v Bain [2002] 1 BCLC 266 (Ch D) .......................................................... 670 Mills v Drewitt (1855) 20 Beav 632, 52 ER 748 ................................................ 657 Moens v Heyworth (1842) 10 M & W 147, 152 ER 418................................... 479 Moggridge v Thackwell (1802) 7 Ves Jun 36, 32 ER 15...................... 163, 181–83, 186, 194, 198 Montagu’s Settlement, Re [1987] Ch 264 (Ch D) ............................................... 665 Morgan v Stephens (1861) 3 Giff 226, 66 ER 392 ............................................. 665 Morice v Bishop of Durham (1804) 9 Ves Jun 399, 32 ER 65 (MR), (1805) 10 Ves Jun522, 32 ER 947 (LC) ....................... 157–201 Morison v Moat (1851) 9 Hare 241, 68 ER 492 ....................... 254, 255, 257, 259, 260, 261, 262 Morland v Cook (1868) LR 6 Eq 252 ................................................................ 221 Morris v Whiting (1913) 15 DLR 254 (Manitoba KB) ....................................... 432 Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710 (BCCA) ....................... 354 Mortlock v Buller (1804) 10 Ves Jun 292, 32 ER 857 ........................................ 435 Mouat, Re [1899] 1 Ch 831 (Ch D) ................................................................... 380 Mountain v Styak [1922] NZLR 131 ................................................................. 448 Movitex Ltd v Bulfield [1988] BCLC 104 (Ch D)............................................... 526 Moxhay v Inderwick (1847) 1 De G & Sm 708, 63 ER 1261 ........................ 208–9 Muggeridge v Stanton (1859) 1 De G, F & J 107, 45 ER 300 .............................. 36 Mumford v Gething (1859) 7 CB (NS) 305, 141 ER 834 ................................... 438 Murad v Al-Saraj [2005] EWCA Civ 959, [2005] WTLR 1573 ................. 523, 597 Murray v Heath (1831) 1 B & Ald 804, 109 ER 985 ......................................... 254 Mutton v Peat [1899] 2 Ch 556 (Ch D) ............................................................. 384 Nab v Nab 10 Mod 404, 88 ER 783 .................................................................... 60

Table of Cases

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Nabb Brothers Ltd v Lloyds Bank International (Guernsey) Ltd [2005] EWHC 405 (Ch) ......................................................... 664 Nabob of Arcot v East India Co (1791) 3 Bro CC 292, 29 ER 544, (1792) 4 Bro CC 180, 29 ER 841 .................................................. 96 National Anti–Vivisection Society v Inland Revenue Commissioners [1946] KB 185 (CA), [1948] AC 31 (HL) ........................ 529–55 National Discount Co of Ireland v Burr, The Times, 23 January 1885, 3 ........... 353 National Provincial Bank Ltd v Ainsworth [1965] AC 1175 (HL) ............................................................... 557–80, 616, 635 National Provincial Bank Ltd v Hastings Car Mart Ltd [1964] Ch 9 (Ch D), [1964] Ch 665 (CA) ....................................... 559 National Westminster Bank v Morgan [1985] AC 686 (HL) .............................. 354 Navy Health Ltd v Federal Commissioner of Taxation (2007) 163 FCR 1 ......... 547 Nelan v Downes (1919) 23 CLR 546 (HCA) ..................................................... 548 Nelson v Nelson [1995] HCA 25, (1995) 184 CLR 538 ................................ 76, 84 Ness v O’Neil [1916] 1 KB 706 (CA) ................................................................. 428 Neste Oy v Lloyd’s Bank Plc [1983] 2 Lloyds Rep 658 ...................................... 672 Nevil v Saunders (1686) 1 Vern 415, 23 ER 555, 1 Eq Cas Abr 383 .................. 150 Nevill v Snelling (1880) LR 15 Ch D 679........................................................... 354 Neville Estates v Madden [1962] Ch 832 (Ch D) ............................................... 548 New Zealand Netherlands Society ‘Oranje’ Inc Ltd v Kuys [1973] 1 WLR 1126 (PC) ............................................................... 523, 593, 669 New, Re [1901] 2 Ch 534 (Ch D)....................................................................... 600 Newbery v James (1817) 2 Mer 446, 35 ER 1011.............................................. 255 Newgrosh v Newgrosh (1950) 210 LT Jo 108 .................................................... 562 Newton v Preston (1699) Prec Ch 103, 24 ER 50 ................................................ 60 Nichrotherm Electrical Co Ltd v Percy [1956] RPC 272, [1957] RPC 207 (CA) ..................................................................................... 259 Nightingale v Goulbourn (1848) 2 Ph 594, 41 ER 1072 .................................... 199 Niru Battery Manufacturing Co v Milestone Trading Ltd (No 1) [2002] EWHC 1425 (Comm), [2002] 2 All ER (Comm) 705 .............. 672 Nisbet & Potts’ Contract, Re [1905] 1 Ch 391 (Ch D), [1906] 1 Ch 386 (CA) .................................................... 224, 227, 229, 231, 656 Nocton v Lord Ashburton [1914] AC 932 (HL)................................... 473–98, 500 Nolan v Nolan [2004] VSCA 109 ...................................................................... 667 Norman v Theodore Goddard [1991] BCLC 1028 (Ch D) ................................. 504 Norris v Chambres (1861) 29 Beav 246, 54 ER 621, (1861) 3 De GF & J 583, 45 ER 1004 ...................................................... 112–14 North v Crompton (1671) 1 Ch Cas 176, 22 ER 759 .................................. 52, 187 North-West Transportation Co Ltd v Beatty (1887) 12 App Cas 589 (PC).............................................................................. 393–422 Norton v Florence Land and Public Works Co (1877) 7 Ch D 332 .................... 114 Nott v Hill (1682) 1 Vern 167, 23 ER 391 ......................................................... 331 O’Connor v Hart [1985] 1 NZLR 159 (JCPC)................................................... 354 O’Hanlon v Logue [1906] 1 IR 247 ........................................................... 548, 549 O’Rorke v Bolingbroke (1877) LR 2 App Cas 814............................................. 354 Oatway, Re [1903] 2 Ch 356 (Ch D)............................................................ 382–83

xxx Table of Cases Obee v Bishop (1859) 1 De G F & J 137, 45 ER 311 ......................................... 655 OBG v Allan [2008] 1 AC 1 (HL) ...................................................................... 262 Okeover v Lady Pettus, Reports, case 347............................................................ 82 Old Colony Trust Co v Welch (1938) 25 F Supp 45 (DC Mass) ......................... 535 Old Gate Estates Ltd v Alexander [1949] 2 All ER 822 (CA) ............................. 565 Oldham v Litchford (1705) 2 Freem 284, 22 ER 1214......................................... 60 Ommanney v Butcher (1823) Turn & R 260, 37 ER 1098 ................................. 191 Onslow v Wallis (1849) 1 Mac & G 506, 41 ER 1361 ................................. 149–52 Organ v Sandwell [1921] VLR 622 (SC Vic) 630 ............................................... 432 Ormrod v Huth (1845) 14 M & W 401 ............................................................. 478 Orr, Re (1917) 40 OLR 567 ............................................................................... 548 Osbond v Morgan (1851) 9 Hare 43.................................................................. 576 Oxenden v Lord Compton (1793) 2 Ves Jun 69, 30 ER 527 ...................... 461, 466 Oxley v Hiscock [2004] EWCA Civ 546, [2005] Fam 211 ............................................................................. 575, 614–15, 637–39 P & O Nedlloyd BV v Arab Metals Co (The UB Tiger) (No 2) [2006] EWCA Civ 1717, [2007] 1 WLR 2288 .................... 651, 656, 657 Page v Hewetts Solicitors (a firm) [2011] EWHC 2449 (Ch), [2012] 1 P & CR DG3 ................................................................................... 670 Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 ................................................ 437 Palin v Gathercole (1844) 1 Coll 565, 63 ER 545 .............................................. 245 Pallant v Morgan [1953] Ch 43 (Ch D)........................................ 439–40, 663, 667 Panama, New Zealand and Australian Royal Mail Co (1870) 5 Ch App 318 ..................................................................................... 229 Panweld Trading Pte Ltd v Yong Kheng Leong [2012] SGHC 57 ........................................................................................ 648, 664, 670 Papamichael v National Westminster Bank plc (No 2) [2003] EWHC 164 (Comm), [2003] 1 Lloyd’s Rep 341 ................................. 672 Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400 (CA) .................................................................... 377, 450, 643–72 Pares, Re (1879) 12 Ch D 333 ........................................................................... 459 Parker v Brooke (1804) 9 Ves 583, 32 ER 729 ................................................... 575 Parsons v Spooner (1846) 5 Hare 102, 67 ER 845 ............................................. 591 Partington v Reynolds (1858) 4 Drew 253, 62 ER 98 ........................................ 490 Pascoe v Turner [1979] 1 WLR 431 (CA) .......................................................... 605 Pasley v Freeman (1789) 3 TR 51, 100 ER 450............................................ 478–81 Patman v Harland (1881) LR 17 Ch D 353 ....................................................... 221 Paul (Printing Machinery) Ltd v Southern Instruments [1964] RPC 118 ......................................................................................................... 259 Pavesich v New England Life Insurance Co 50 SE 68 (1905) (Georgia SC) ............................................................................................. 263–64 Peachy v Duke of Somerset (1721) 1 Stra 447, 93 ER 626 ................................. 140 Peacock v Evans (1809) 16 Ves Jun 512, 33 ER 1079 ................................ 331, 333 Pearne v Lisle (1749) Amb 75, 27 ER 47 ........................................................... 104 Pechar (deceased), Re [1969] NZLR 574 ........................................................... 671 Peconic Industrial Development Ltd v Chio Ho Cheong [2009] HKFCA 16, [2009] WTLR 999 ...................................................................... 648

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Pecore v Pecore [2007] SCC 17, [2007] 1 SCR 795 (SCC) ............................. 73, 84 Peek v Derry (1887) 37 Ch D 541 ...................................................................... 479 Peek v Gurney (1873) LR 6 HL 377 (HL) .................................................. 486, 491 Peffer v Rigg [1977] 1 WLR 285 (Ch D) ............................................................ 666 Penn v Lord Baltimore (No 1) (1745) Ridgeway Cases temp Hardwicke 332, 27 ER 847 ...................................................... 88, 91, 93–95, 98 Penn v Lord Baltimore (1755) Dick 273, 21 ER 273 ............................................ 98 Penn v Lord Baltimore (No 2) (1750) 1 Ves Sen 444, 27 ER 1132 ............... 87–114 Pennell v Deffell (1853) 4 De G M & G 372, 43 ER 551 ............... 366–68, 371–73 Perceval v Phipps (1813) 2 V&B 19, 35 ER 225 ................................................ 247 Permanent Building Society v Wheeler (1994) 14 ACSR 109 ............................. 497 Permanent Trustee Co v Scales (1930) 30 SR (NSW) 391 Eq ............................. 432 Peso Silver Mines Ltd v Cropper (1965) 56 DLR (2d) 117 (BCCA), [1966] SCR 673, (1966) 58 DLR (2d) 1 (SCC)........................................................ 500, 505, 523, 526–27 Peter Pan Manufacturing Corp v Corsets Silhouette Ltd [1964] 1 WLR 96 (Ch D) ........................................................................................... 259 Peterson v Parrys and Hickman (1597) C 33/93 f 125, 117 SS 263 no 248 ........................................................................................... 29 Pettitt v Pettitt [1968] 1 WLR 443 (CA), [1970] AC 777 (HL) ................. 562, 563, 572, 574, 577, 611–42 Phillips v Phillips (1862) 4 De G F & J 208, 45 ER 1164 ................................... 565 Phipps v Boardman [1964] 1 WLR 993, [1964] 2 All ER 187 (Ch D), [1965] Ch 992, [1965] 2 WLR 839 (CA), affd sub nom Boardman v Phipps......................................................................... 581–610 Pickering v Stamford (1795) 2 Ves Jun 581, 30 ER 787 ..................................... 651 Pierson v Garnet (1786–87) 2 Bro CC 38, 29 ER 20 .......................... 190, 193, 197 Pike v Hoare (1763) 2 Eden 182, 28 ER 867, Amb 428, 27 ER 286 .................. 109 Pilmer v Duke Group Ltd (in liq) [2001] HCA 31, 207 CLR 165 .............. 497, 593 Pinkett v Wright (1843) 2 Hare 120, 67 ER 50, affd (1846) 12 Cl & Fin 764 (HL) .................................................................................... 372 Pitt v Holt [2011] EWCA Civ 197, [2011] 3 WLR 19........................ 225, 497, 665 Pitt v Pelham (1670) 1 Ch Rep 149, 21 ER 574, 1 Ch Cas 176, 22 ER 750, 2 Freem 134, 22 ER 1110 ........................................................ 36, 58 Plunkett v Barclays Bank Ltd [1936] 2 KB 107 .................................................. 377 Pole v Pole (1747/8) Ves Sen Supp 54, 28 ER 454 ................................................ 77 Pollard v Photographic Co (1888) 40 Ch D 345 ........................................ 254, 255 Pope v Curl 2 Atk 342, 26 ER 608..................................................... 245, 247, 252 Port Line Ltd v Ben Line Steamers Ltd [1958] 2 QB 146.................................... 220 Porter’s Case (1592) 1 Co Rep 22b, 76 ER 50 ................................................... 163 Portman Building Society v Hamlyn Taylor Neck (a firm) [1998] 4 All ER 202 (CA) .......................................................................................... 646 Powell v Merrett (1853) 1 Sm & Giff 381, 65 ER 167 ....................................... 147 Practice Statement (Judicial Precedent) [1966] 1 WLR 1234 (HL) ..................... 542 Preston v Dania (1872) LR 8 Ex 19 ................................................... 342, 344, 355 Price v Blakemore (1843) 6 Beav 507, 49 ER 922 .............................................. 389

xxxii Table of Cases Primeau v Granfield 184 F 480 (1911) ....................................................... 383, 388 Prince Albert v Strange (1849) 2 De G & Sm 652, 64 ER 293, (1850) 13 Jurist (OS) 45, 1 Mac & G 25, 45 ER 1171, 1 H & Tw 1, 47 ER 1302, (1850) 13 Jurist (OS) 109 (LC) ....................... 235–67 Public Trustee v A-G (1997) 42 NSWLR 600..................................................... 555 Pullan v Koe [1913] 1 Ch 9 (Ch D) .................................................................... 135 Pulvers (a firm) v Chan [2007] EWHC 2406 (Ch), [2008] PNLR 9.................... 645 Pybus v Smith (1790) 1 Ves 189, 30 ER 294 ...................................................... 490 Pype v Spinola (after 1558) c3/143/81.................................................................... 7 Quennell v Maltby [1979] 1 WLR 318 .............................................................. 578 R v Coggan (1805) 6 East 431, 102 ER 1352 ............................................ 117, 148 R v Eton College (1857) 8 El & Bl 610, 120 ER 228 ................................. 310–311 R v Fletcher (1862) Le & Ca 180, 169 ER 1353 .................................................. 36 R v Inhabitants of North Nibley (1792) 5 Term Reports 21, 101 ER 12 ............ 160 Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 ......................................... 306 Ramsden v Dyson (1866) LR 1 HL 129 (HL) .............................. 27, 269–304, 640 Ramshire v Bolton (1869) 8 LR Eq 294 ..................................................... 481, 491 Rasmanis v Jurewitsch (1969) 70 SR (NSW) 407 ............................................... 671 Read’s Case (1605) 5 Co Rep 33b, 77 ER 103 ........................................... 490, 588 Redgrave v Hurd (1881) 20 Ch D 1 ........................................................... 386, 481 Reese River Silver Mining Co v Smith (1869) LR 4 HL 64................................. 481 Reeves v Pope [1914] 2 KB 284 (CA) ................................................................. 565 Regal (Hastings) v Gulliver [1967] 2 AC 134, [1942] 1 All ER 378 (HL) .......................................................................... 499–528, 668 Regentcrest plc v Cohen [2001] 2 BCLC 81 (Ch D) ........................................... 514 Rhodes v Bate (1865) LR 1 Ch 252.................................................................... 484 Rhone v Stephens [1994] 2 AC 310 (HL) ........................................................... 222 Richardson v Hamilton (1733) unreported .................................................. 95, 106 Richardson, Re [1920] 1 Ch 423 (CA) ............................................................... 650 Riddle v Emerson (1682) 1 Vern 108, 23 ER 348 ................................................ 60 Riddle v Riddle (1952) 85 CLR 202................................................................... 600 Rimmer v Rimmer [1953] 1 QB 63 (CA) ................................................... 562, 574 Rither v Tempest (1581) Ch C Ch 145, 21 ER 186, 117 SS 370 No [10] .......................................................................................... 45 Robb v Green [1895] 2 QB 1 ....................................................................... 254–55 Roberdeau v Rous (1738) 1 Atk 543, 26 ER 342 ........................................... 102–3 Robertson v Wilkie (1753) Amb 177, 27 ER 119............................................... 104 Robins v Incentive Dynamics Pty Ltd (2003) 45 ACSR 244 ............................... 666 Robinson v National Bank of Scotland Ltd [1916] SC (HL) 154.................. 493–94 Robinson, Re [1911] 1 Ch 502 (Ch D)............................................................... 659 Rochefoucauld v Boustead (1896) 65 LJ Ch 794 (Ch D), [1897] 1 Ch 196 (CA) ........................................................ 79, 423–52, 657, 663 Rock Permanent Benefit Building Society v Kettlewell [1956] EGD 315............. 561 Rogers v Hosegood [1900] 2 Ch 388 (CA)................................................... 223–24 Rolfe v Gregory (1865) 4 De G J & S 576, 46 ER 1042..................................... 665 Roper v Radcliffe (1712) 9 Mod 181, 88 ER 387 ................................................ 47 Roper v Williams (1822) Turn & R 18, 37 ER 999 ............................................ 211

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xxxiii

Rosenfeldt v Olson [1985] 2 WWR 502............................................................. 671 Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773 ................................................................... 354, 569 Royal Brunei Airlines v Tan [1995] 2 AC 378 (PC) ............................................ 564 Royal North Shore Hospital of Sydney v A–G (1928) 60 CLR 396............................................................................................ 554, 555 Rushworth’s Case (1676) 2 Freem Chy 13, 22 ER 1026 .................................... 520 Russell-Cooke Trust Co v Prentis [2002] EWHC 2227 (Ch), [2003] 2 All ER 478 ....................................................................................... 385 Ryall v Rolle (1749) 1 Atk 165, 26 ER 107 ............................................... 367, 370 Ryall v Rowles (1750) 1 Ves Snr 348, 27 ER 1074............................................. 130 Salmon, Re (1889) 42 Ch D 351 ........................................................................ 492 Salomon v A Salomon and Co Ltd [1897] AC 22 (HL) ...................................... 400 Salt v Cooper (1880) 16 Ch D 544............................................................. 363, 386 Saltman v Campbell (1948) 65 RPC 203 (HC, CA) ............................. 258–59, 262 Samuel v Newbold [1906] AC 461 (HL) ............................................................ 355 Saunders v Vautier (1841) 4 Beav 115, 49 ER 282 (MR), Cr & Ph 240, 41 ER 482 (LC)........................................................ 135, 188, 586 Saunders and Benning v Smith and Maxwell (1838) 3 My & Cr 710, 40 ER 1100 ......................................................................... 235 Savage v Hubble [1953] EGD 150 ..................................................................... 560 Sayers, ex parte (1800) 5 Ves Jun 169, 31 ER 528 ............................................. 367 Scales v Baker (1859) 28 Beav 91, 54 ER 300 .................................................... 390 Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 (PC)....................................... 200 Schobelt v Barber (1966) 60 DLR (2d) 519 ........................................................ 671 Schroeder v Mendl (1877) 37 LT 452................................................................. 491 Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793 (Ch D) ................................................................................. 118 Scott v Scott (1963) 109 CLR 649 ..................................................... 388, 389, 668 Scott v Surman (1742) Willes 400, 125 ER 1235 ............................................... 367 Scowcroft, Re [1898] 2 Ch 638 (Ch D) .............................................................. 541 Scroope v Scroope (1663) 1 Ch Cas 27, 22 ER 677, 2 Freem Ch 171, 22 ER 1138, Prolegomena, ch 13, s 2 ........................ 73, 75, 83 Security Trust Co v Royal Bank of Canada [1976] AC 503 (PC)........................ 431 Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073 (Ch D) ......................................................................... 664 Sempra Metals Ltd v IRC [2007] UKHL 34, [2008] AC 561 ............................. 391 Shales v Shales (1701) 2 Freem 252, 22 ER 1191 ........................................... 60, 77 Shallcross v Oldham (1862) 2 J & H 609, 70 ER 1202...................................... 433 Shalson v Russo [2003] EWHC 1637 (Ch), [2005] Ch 281................ 383, 387, 672 Shapland v Smith (1780) 1 Bro CC 75, 28 ER 994 ............................................ 128 Sharp v Jackson [1899] AC 419 (HL) ................................................................ 359 Sharpe, Re [1892] 1 Ch 154 (CA) ...................................................................... 658 Sharpe (A Bankrupt), Re [1980] 1 WLR 219 (Ch D).......................................... 567 Shaw v Foster (1872) LR 5 HL 321 ................................................................... 434 Shell UK Ltd v Total UK Ltd [2011] QB 86 (CA) .............................................. .231 Shelly v Nash (1818) 3 Madd 232, 56 ER 494 ........................................... 331, 346

xxxiv Table of Cases Shephard v Cartwright [1953] Ch 728 (CA), revd on different point [1955] AC 431 (HL) ..................................... 73, 649–50, 660–62 Short v Short [1960] 3 All ER 6 ......................................................................... 577 Shrewsbury v Blount (1841) 2 Man & G 475, 133 ER 836 ............................... 479 Silverstone v Silverstone [1953] 1 All ER 556 (PDAD) ............................... 560, 577 Sinclair v Brougham [1914] AC 398 (HL) ................................. 357, 376, 380, 381, 382, 387, 485, 564 Sinclair Investment Holdings SA v Versailles Trade Finance Ltd (in admin recship) [2007] EWHC 915 (Ch), (2007) 10 ITELR 58 ....................................................................................... 664 Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2010] EWHC 1614 (Ch), [2011] WTLR 839, affd [2011] EWCA Civ 347, [2011] Bus LR 1126 ............ 380, 603, 663, 670–72 Singh v Anand [2007] EWHC 3346 (Ch) ........................................................... 451 Sir George Sands’ Case (1676) Hard 405, 145 ER 520, (1679) Hard 488, 145 ER 561, (1667) 1 Sid 403, 82 ER 1182, 2 Freem 129, (1669) 3 Ch Rep 33, 21 ER 720, (1670) Nelson 130, 21 ER 808 ............................ 137, 139, 140, 143 Sir John Fryar v Vernon (1724) 9 Mod 124, 88 ER 355, Select Cases Temp King 5, 25 ER 191 ............................................................ 101 Sir John Fryer v Bernard (1724) 2 P Wms 261, 24 ER 722 ................................ 101 Skett v Whitmore (1705) 2 Freem 280, 22 ER 1211 ............................................ 60 Sleight v Lawson (1857) 3 K & J 292, 69 ER 1119............................................ 490 Slim v Croucher (1860) 1 De G F & J 518, 45 ER 462 ................ 480–83, 488, 491 Smethurst v Hastings (1884) 30 Ch D 490 ......................................................... 492 Smith v Baker (1737) 1 Atk 385, 26 ER 246 .................................................. 77–78 Smith v Chadwick (1882) 20 Ch D 27, overturned on different grounds (1884) LR 9 App Cas 187 (HL) .......................................... 479 Smith v Clay (1767) 3 Bro CC 646n, 29 ER 743.................................. 650, 652–53 Smith v Kay (1859) 7 HLC 750, 11 ER 299n..................................................... 346 Smith v Matthews (1861) 3 De G F & J 139, 45 ER 831 ................................... 432 Smith v Pococke (1854) 2 Drew 197, 61 ER 694 ............................................... 656 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 (HL) ............................................... 644 Smith’s Will Trusts, Re [1962] 1 WLR 763 (CA) ................................................ 552 Smout v Ilbery (1842) 10 M & W 1, 152 ER 357 .............................................. 479 Soar v Ashwell [1893] 2 QB 390 (CA) ....................................................... 659, 661 Solowij & Ors v The Parish of St Michael & Ors [2002] SASC 408 .................. 306 South Australia Asset Management Corp v York Montague Ltd [1997] AC 191 (HL) ................................................................................ 644 Southwood v A-G [2000] WTLR 1199 (CA)...................................................... 547 Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072 (PC) ....................... 357 Springette v Defoe [1992] 2 FLR 388 (CA) ........................................................ 634 Spycatcher see A-G v Guardian (No 2) Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432 .......... 572, 575, 580, 612–15, 618–21, 626–27, 636–37, 639, 641–42

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Stackhouse v Barnston (1805) 10 Ves Jun 453, 32 ER 921 ................ 650, 652, 654 Stamford’s Case (1574) 2 Leo 223, 74 ER 496................................................... 588 State of South Australia v State of Victoria [1914] AC 283 (PC) .......................... 96 Statek Corp v Alford [2008] EWHC 32 (Ch), [2008] WTLR 108 .............. 647, 670 Stenning, Re [1895] 2 Ch 433 (Ch D) .......................................................... 384–85 Stewart v Stewart [1948] 1 KB 507 (CA) ........................................................... 560 Stiles v Cowper (1748) 3 Atk 692, 26 ER 1198 ................................................. 297 Stokes v Anderson [1991] 1 FLR 391 (CA) ................................................ 637, 639 Stone v Stone (1869) LR 5 Ch 74 ....................................................................... 656 Strachan, Re (1876) 4 Ch D 123 ........................................................................ 665 Strathmore v Bowes (1788) 2 Cox Eq Cas 28, 30 ER 14.................................... 575 Street v Denham [1954] 1 WLR 624 .......................................... 559, 560, 561, 578 Strode v Strode (1672) 2 Ch Cas 196, 22 ER 908, Reports, case 211, Prolegomena, ch 13, s 13 .................................................... 74 Sturgis v Champneys (1839) 5 My & Cr 97, 41 ER 308 .................................... 576 Suhner & Co AG v Transradio Ltd [1967] RPC 329.......................................... 259 Sutton, Re, Stone v A–G (1885) LR 28 Ch D 464 .............................................. 187 Swift v Hawkins (1768) 1 Dallas 17................................................................... 105 Swiss Bank v Lloyd’s Bank [1979] Ch 548 (Ch D) ............................................. 220 Syndicat Northcrest v Amselem [2004] SCC 47, [2004] 2 SCR 551 ................... 548 Taddy & Co v Sterious & Co [1904] 1 Ch 354 (Ch D) .............................. 226, 229 Tailby v Official Receiver (1888) 13 App Cas 523 (HL) ..................................... 437 Talbot v Jevers [1917] 2 Ch 363 (CA) ................................................................ 148 Tanfield v Davenport (1638) Tothill 114 ............................................................ 576 Tapp v Lee (1803) 3 Bos & P 367, 127 ER 200 ................................................. 478 Target Holdings Ltd v Priestley (1999) 79 P & CR 305 (Ch D).......................... 434 Target Holdings Ltd v Redferns (a firm) [1996] AC 421 (HL) ............................ 645 Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133 (Ch D).................................................................................... 574 Taylor v Davies [1920] AC 636 (PC) .......................................................... 649, 668 Taylor v Haygarth (1844) 14 Sim 8, 60 ER 259 ................................. 146, 147, 148 Taylor v McHale [1948] EGD 299 ..................................................................... 565 Taylor v Plumer (1815) 3 M & S 562, 105 ER 721 ............................ 367, 371, 386 Taylor, Re (1900) 81 LT 812 .............................................................................. 657 Tchenguiz v Imerman [2011] EWCA Civ, [2011] Fam 116 .................. 244, 265–66 Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd [1967] RPC 375, [1960] RPC 12, (CA)...................................................................... 259 Thompson v Earthy [1951] 2 All ER 235 ................................................... 560, 565 Thompson v Stanhope (1774) Amb 737, 27 ER 476 .................................. 245, 247 Thompson’s Trusts (1856) 22 Beav 506, 52 ER 1203 ........................................ 148 Thomson v Shakespeare (1859) Johnson 612, 70 ER 564, affd (1860) 1 De GF & J 399, 45 ER 413....................................................... 199 Thorner v Major [2009] UKHL 18, [2009] 1 WLR 776..................................... 605 Thornton v Howe (1862) 31 Beav 14, 54 ER 1042 ...................................... 548–49 Tilley’s Will Trusts, Re [1967] Ch 1179 (Ch D) .......................................... 382, 388 Tilt, Re (1896) 40 Sol Jo 224 (Ch D).................................................................. 436 Tipping v Clarke (1843) 2 Hare 383, 67 ER 157 ....................... 241, 254, 255, 261 Tito v Waddell (No 2) [1977] Ch 106 (Ch D) .................................................... 668

xxxvi Table of Cases Tollemache, Re [1903] 1 Ch 457 (Ch D) ............................................................ 600 Toller v Carteret (1705) 2 Vern 494, 23 ER 916 ................................................ 102 Tonson v Collins (1761) 1 Bl W 321, 96 ER 180 ............................................... 247 Topp v Roberts (1636) Toth 27, 21 ER 113 ......................................................... 45 Townley v Bedwell (1801) 6 Ves Jun 194, 31 ER 1008 ...................................... 182 Transvaal Lands Co v New Belgium (Transvaal) Land and Development Co [1914] 2 Ch 488 (CA) ......................................................... 668 Trustees of the Property of Jones and Sons v Jones [1997] Ch 159 (CA) ............ 387 Tulk v Metropolitan Board of Works (1867) LR 3 QB 94 .................................. 216 Tulk v Metropolitan Board of Works (1868) LR 3 QB 682 (Exchq)................... 216 Tulk v Moxhay (1848) 2 Ph 774, 41 ER 1143, (1848) 1 Ha & Tw 105, 47 ER 1435, (1848) 18 LJ Ch 83 .................................. 203–33 Tullett v Armstrong (1839) 1 Beav 1, 48 ER 838 ............................................... 576 Turner v Jacob [2006] EWHC 1317 (Ch), [2008] WTLR 307............................ 383 Turner v Robinson (1860) 10 Ir Ch R 121 (MR), 510 (CA in Ch) ............. 248, 251 Twedell v Twedell (1822) TR 1, 37 ER 992 ....................................................... 333 Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 ........... 200, 645, 672 Twyne’s Case 3 Co Rep 80b, 76 ER 809 .............................................................. 58 UB Tiger, The see P & O Nedlloyd BV v Arab Metals Co UCB Home Loans Corp Ltd v Carr [2000] Lloyd’s Rep PN 754 ................ 645, 670 UCB Home Loans Corp Ltd v Grace unreported, 15 December 2010 (Ch D).............................................................................. 645 Ulrich v Ulrich [1968] 1 WLR 180 (CA) ............................................................ 635 Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch), [2006] FSR 17 ................................................................................................ 603 United Australia Ltd v Barclays Bank Ltd [1941] AC 1 (HL) ............................. 661 United Dominions Ltd v Brian Pty Ltd (1985) 157 CLR 1 ................................. 589 United Pan-Europe Communications NV v Deutsche Bank AG [2000] 2 BCLC 461 (CA)..................................................................... 669, 671 University of London v Yarrow (1857) 1 De G & J 72, 44 ER 649 .................... 534 Vaughan v Vaughan [1953] 1 All ER 209 (CA) .................................................. 561 Venables v Hornby [2002] EWCA Civ 1277, [2002] STC 148 ........................... 665 Verge v Somerville [1924] AC 496 (HL) ............................................................. 543 Vezey v Jamson (1822) 1 Simons & Stuart 69, 57 ER 27 ................................... 198 Wainwright v Home Office [2004] 2 AC 406 (HL) ............................................ 264 Walker v Denne (1793) 2 Ves Jun 170, 30 ER 577 ............................................. 148 Walsh v Deloitte & Touche Inc [2001] UKPC 58, [2002] 4 LRC 454 ................ 669 Walsh v Lonsdale (1882) 21 Ch D 9 .................................................................. 386 Ward, Re (1862) 31 Beav 1, 54 ER 1037 ........................................................... 481 Warman International Ltd v Dwyer (1995) 182 CLR 544 .......................... 520, 609 Warman v Seaman (1674) 1 Freeman 306, 22 ER 1227 ....................................... 59 Warren v Smith see Magdalen College Case Wassell v Leggatt [1896] 1 Ch 554 ............................................................. 575, 659 Watchel v Watchel [1973] Fam 72 (CA) ............................................................. 577 Watson, Re [1973] 1 WLR 1472 (Ch D) ............................................................ 541 Webb v Mansell, The Times, 1 February 1877, 11 ............................................. 355 Webb v Rose (1732) unreported................................................................. 245, 247

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Webb v Stenton (1881) 11 QBD 518.................................................................. 490 Wedgwood, Re [1915] 1 Ch 113 (CA) ......................................................... 535–36 Weir v Bell (1878) 3 Ex D 238 ........................................................................... 478 Wellesley v Duke of Beaufort (1827) 2 Russ 1, 38 ER 236 ......................... 460, 579 Wellesley v Wellesley (1828) 2 Bli NS 124, 4 ER 1078 ....................................... 460 Wells, Re [1933] Ch 29 (CA) ..................................................................... 128, 147 Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 (HL) .................................................. 78, 144–45, 375, 380, 387, 391, 605, 665, 672 Westfield v Davidson (1887) 3 TLR 362 ............................................................ 478 Westminster Bank Ltd v Lee [1955] 2 All ER 883 (Ch D) ............ 560, 565, 567–68 Wethered v Wethered (1828) 2 Sim 183, 57 ER 757 .......................................... 333 Whatman v Gibson (1838) 9 Sim 196, 59 ER 333 ...................... 213–14, 218, 223, 224, 227–28 Whicker v Hume (1851) 14 Beav 509, 51 ER 381 ............................................. 199 Whitecomb v Jacob (1710) 1 Salk 160, 91 ER 149 .................................... 367, 370 Widdowson v Harrington (1820) 1 J & W 533, 37 ER 471 ............................... 650 Wilder v Pigott (1882) 22 Ch D 263 .................................................................. 466 Williams v Bishop of Salisbury; Wilson v Fendall (1863) 2 Moo PC NS 375, 15 ER 943 ....................................................................... 325 Williams v Commissioners of Inland Revenue [1965] NZLR 395 ...................... 436 Williams v Lord Lonsdale (1798) 3 Ves Jun 752, 30 ER 1255.............. 117, 146–48 Williams v Williams (1817) 3 Mer 157, 36 ER 61.............................................. 255 Williams and Glyn’s Bank v Boland [1981] AC 487 (HL) .................................. 569 Willoughby, Re (1885) 30 Ch D 324 .................................................................. 579 Wilson v Hart (1817) 7 Taunt 295, 129 ER 118 ................................................ 434 Wilson v Hart (1866) 1 Ch App 463 ............................................................ 220–21 Wilson v Moore (1834) 1 My & K 126, 39 ER 629........................................... 665 Windham v Windham (1668/9) 2 Freem Ch 127, 22 ER 1103, 3 Chan Rep 22, 21 ER 717, Prolegomena, ch 13, s 5 ................................. 52, 73 Winter Garden Theatre (London) Ltd v Millennium Productions Ltd [1948] AC 173 (HL) ............................................................. 564 Wintle v Nye [1959] 1 All ER 552 (HL)............................................................... 47 Wiseman v Beake (1690) 2 Vern 121, 23 ER 688 ............................................... 331 Wood, Re [1896] 2 Ch 596 (Ch D) .................................................................... 153 Wratten v Hunter [1978] 2 NSWLR 367 (NSW SC) .......................................... 432 Wray v Steele (1814) 2 V & B 388, 35 ER 366 .................................................. 631 Wylde v A-G (NSW) [1948] HCA 49, (1948) 78 CLR 224 ................................ 306 Yovatt v Winyard (1820) 1 Jac & W 394, 37 ER 425 ....................... 254, 255, 256, 261, 262 Zong, The, Gregson v Gilbert (1783) 3 Doug 232, 99 ER 629........................... 170

Table of Legislation National Legislation (alphabetical) Act for the Encouragement of Learning, etc 1710 .............................. 239, 247, 251 Administration of Estates Act 1925 s 45(1)(d) ........................................................................................................ 118 s 46(1)(vi) ....................................................................................................... 118 Administration of Justice (Miscellaneous Provisions) Act 1938 s 12 ................................................................................................................ 118 Agricultural Holdings Act 1975 ......................................................................... 294 Animals (Scientific Procedures) Act 1986 ........................................................... 534 Bankruptcy Act 1861 ......................................................................................... 346 Bankruptcy Act 1869 s 23 ................................................................................................................ 118 Business Corporations Act 1985 (Can)......................................................... 415–17 Pt XX ............................................................................................................. 417 s 2(1) .............................................................................................................. 416 s 6(4) .............................................................................................................. 417 s 106(3) .......................................................................................................... 417 s 109(1) .......................................................................................................... 417 s 120 ........................................................................................................ 415–16 (7) ......................................................................................................... 415–17 (c) ............................................................................................................ 416 (8) ............................................................................................................... 416 s 173 .............................................................................................................. 417 s 183 .............................................................................................................. 417 s 188(5) .......................................................................................................... 417 s 189 .............................................................................................................. 417 s 238 .............................................................................................................. 421 ss 239–40 ....................................................................................................... 417 s 241 ...................................................................................................... 417, 421 s 242 ...................................................................................................... 417, 422 Business Corporations Act [2011] (Quebec) ss 122–33 ....................................................................................................... 416 s 132 ........................................................................................................ 416–17 s 133 .............................................................................................................. 417 Business Corporations Act 1978 (Sask) s 115(8.1) ....................................................................................................... 416 Business Corporations Act 2002 (BC) s 149 .............................................................................................................. 416 Chantries Act 1545 ............................................................................................ 164 Chantries Act 1547 ............................................................................................ 164

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Charitable Uses Act 1601 .................................................. 160, 162, 189, 195, 197 preamble ........................................................................................................ 543 Charitable Uses Act 1736 ....................................................... 165–66, 182–84, 190 Charitable Uses Act 1891 ................................................................................... 165 Charities Act 2006 ss 1–3 ............................................................................................................. 160 s 2 .................................................................................................................. 554 s 3(2) .............................................................................................................. 541 s 4 .................................................................................................................. 160 Charities Act 2011 Pt 6................................................................................................................. 549 s 3(2)(i) ........................................................................................................... 551 (l) ................................................................................................................ 551 s 4(2) .............................................................................................................. 541 Church Discipline Act 1840 s 16 ................................................................................................................ 324 Civil Partnership Act 2004 ................................................................................. 574 s 65 ................................................................................................................ 615 Civil Procedure Acts Repeal Act 1879 ................................................................ 118 Civil Procedure Rules 1998 (SI 1998/3132) r 5(2) .............................................................................................................. 644 (5) ............................................................................................................... 644 r 17.4 ............................................................................................................. 644 Pt 64 PD para 64A.1A ........................................................................... 524, 601 Common Law Procedure Act 1852 s 24 ................................................................................................................ 118 Common Law Procedure Act 1854 s 78 ................................................................................................................ 605 Common Law Procedure Act 1860 .................................................................... 344 Companies Act 1929 s 152 .............................................................................................................. 526 s 372 ...................................................................................................... 513, 517 Companies Act 1948 .......................................................................................... 587 s 205 .............................................................................................................. 526 Companies Act 1985 ss 309A–309C ................................................................................................ 526 Companies Act 2006 Pt 10 ch 2 ....................................................................................................... 524 s 170(4) .......................................................................................................... 524 s 174 .............................................................................................................. 504 s 175 ..............................................................................................524, 525, 526 (4)–(6) ......................................................................................................... 524 s 176 ........................................................................................................ 524–25 (4) .......................................................................................520, 521, 525, 528 s 180(4) .......................................................................................................... 524 (a)............................................................................................................ 525 (b) ........................................................................................................... 525

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s 232 .............................................................................................................. 526 (4) ...............................................................................................524, 525, 526 s 239(3) .......................................................................................................... 416 Companies (Table A) Regulations 1929 ............................................................. 527 reg 72 ............................................................................................................. 526 Companies (Table A) Regulations 1948 reg 84 ............................................................................................................. 526 Companies (Tables A to F) Regulations 1985 (SI 1985/805) reg 70 ............................................................................................................. 526 reg 85 ............................................................................................................. 526 Constitutional Reform Act 2005 Pt 2................................................................................................................. 120 Copyright Act 1911 ........................................................................... 245, 253, 261 s 31 ................................................................................................253, 257, 262 Copyright Act 1956 s 46(4) ............................................................................................................ 262 Copyright, Designs and Patents Act 1988 s 171(1)(e) ...................................................................................................... 262 Court of Chancery Act 1852 .............................................................................. 460 Court of Chancery Procedure Act 1852 s 61 ................................................................................................................ 129 Cruel Treatment of Cattle Act 1822 ................................................................... 531 s 1 .................................................................................................................. 531 Cruelty to Animals Act 1835.............................................................................. 531 Cruelty to Animals Act 1849.............................................................................. 531 Cruelty to Animals Act 1854.............................................................................. 531 s 3 .................................................................................................................. 531 Cruelty to Animals Act 1876.............................................532–34, 536–37, 539–40 s 2 .................................................................................................................. 533 s 3(1) ...................................................................................................... 533, 534 (2) ............................................................................................................... 533 (3) ............................................................................................................... 533 (4) ............................................................................................................... 533 (6) ............................................................................................................... 533 s 5 .................................................................................................................. 533 s 12 ................................................................................................................ 533 s 22 ................................................................................................................ 533 De Prerogativa Regis see Land of Lunatics Act 1324 Directors Liability Act 1890 ............................................................................... 483 Divorce Reform Act 1969 .................................................................................. 578 Earl Aylesford’s Estate (Amendment) Act 1882 .................................................. 353 Family Law Act 1996 ss 30–33 ......................................................................................................... 573 Felony Act 1870 s 1 .................................................................................................................. 139 Forfeiture Act 1870 s 1 .................................................................................................................. 118

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Table of Legislation

Forfeiture Act 1982 ............................................................................................ 139 Habeas Corpus Act 1679 ..................................................................................... 66 Huddersfield Improvement Act 1848 ......................................................... 272, 282 Human Rights Act 1998 .............................................................................. 264–66 Income Tax Act 1918 s 37 ................................................................................................................ 535 Infants’ Property Act 1830 s 28 ................................................................................................................ 462 Infants’ Relief Act 1874 ..................................................................................... 355 Inheritance Act 1833 .................................................................................. 134, 155 Insolvency Act 1986 s 178 .............................................................................................................. 118 Intestates Estates Act 1884 s 4 ..................................................................................................118, 150, 153 Irish Land Act 1870 ........................................................................................... 296 Joint Stock Companies Letters Patent Act 1869 (Can) ....................................... 400 Knackers Act 1844 ............................................................................................. 531 Land Charges Act 1972...................................................................................... 573 s 2 .................................................................................................................. 573 s 4 .......................................................................................................... 569, 573 Land of Idiots Act 1324 ..................................................................................... 462 Land of Lunatics Act 1324 (De Prerogativa Regis) ................ 461–62, 464–66, 579 Land Registration Act 1925 ............................................................................... 573 s 70(1)(g) .......................................................................................... 559, 569–70 Land Registration Act 2002 ............................................................................... 154 s 29 .................................................................................................................... 573 s 34 ................................................................................................................ 573 s 79(1) ............................................................................................................ 154 (2) ............................................................................................................... 154 sch 1(2) .......................................................................................................... 569 sch 3(2) .......................................................................................................... 569 Larceny Act 1901 ............................................................................................... 361 Law of Property Act 1925 s 40 ................................................................................................................ 434 s 53(1)(b) ............................................423, 426, 432, 434, 436, 442–49, 451–52 (2) ...............................................................................436, 442, 443, 447, 450 s 62 ................................................................................................................ 570 s 148 .............................................................................................................. 118 s 199 .............................................................................................................. 567 Law of Property Amendment Act 1859 ...................................................... 134, 155 Law of Property (Miscellaneous Provisions) Act 1989 s 2 .................................................................................................................. 434 Law Reform (Husband and Wife) Act 1962 ....................................................... 561 Law Reform (Married Women and Tortfeasors) Act 1935 s 2 .................................................................................................................. 576 Law Reform (Miscellaneous Provisions) Act 1949 ............................................. 579 Law Reform (Miscellaneous Provisions) Act 1970 s 2(1) .............................................................................................................. 615

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xliii

Laws relating to Usury and to the Enrolment of Annuities Act 1854.................. 334 Limitation Act 1623 s 1 .......................................................................................................... 650, 654 s 3 .................................................................................................................. 650 Limitation Act 1939 ........................................................................................... 662 s 26(6) ............................................................................................................ 661 s 19 .......................................................................................................... 649–50 Limitation Act 1980 s 2 .................................................................................................................. 647 s 21 .......................................................................................................... 647–49 (1)........................................................................................................... 645, 648 (a) ....................................................................................................... 646, 647 s 32 ................................................................................................................ 646 (1)(b)........................................................................................................... 661 s 35 ................................................................................................................ 644 Lord Aylesford’s Estate Act 1882 ....................................................................... 352 Lord Aylesford’s Estate (Amendment) Act 1884 s 4 .................................................................................................................. 352 Lord Tenterden’s Act see Statute of Frauds Amendment Act 1828 Lunacy Act 1842 ................................................................................................ 457 Lunacy Act 1890 ........................................................................................ 465, 471 ss 90–107 ....................................................................................................... 457 s 108(2) .......................................................................................................... 463 s 117 .............................................................................................................. 463 s 120 .............................................................................................................. 463 s 124 ...................................................................................................... 463, 467 s 128 .............................................................................................................. 467 Lunacy Regulation Act 1853 ........................................................................ 462–63 s 26 ................................................................................................................ 459 s 42 ................................................................................................................ 457 s 116 .............................................................................................................. 463 Magna Carta 1215 s 32 ................................................................................................................ 118 Married Women’s Property Act 1882 s 17 .......................................................................................... 560–63, 616, 641 Married Women’s Property Acts 1870–93 .......................................................... 576 Married Women’s (Restraint on Anticipation) Act 1949 s 1 .................................................................................................................. 576 Matrimonial Causes Act 1973............................................................................ 611 Matrimonial Causes (Property and Maintenance) Act 1958 s 2 .................................................................................................................. 559 Matrimonial Homes Act 1967 ..................................................................... 575–76 s 2 .................................................................................................................. 573 Matrimonial Proceedings and Property Act 1970 ............................................... 611 s 37 ........................................................................................................ 611, 615 Mental Health Act 1959 .................................................................................... 468 Misrepresentation Act 1967 s 2(1) .............................................................................................................. 496

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Money-lenders Act 1900 .................................................................................... 355 Parry Sound Town Act 1950 (Ont) s 1 .................................................................................................................. 395 Poisoned Flesh Prohibition Act 1864.................................................................. 531 Praemunire Statute 1353 ................................................................................ 21, 31 Praemunire Statute 1402 ............................................................................ 3, 21, 31 Property of Lunatics Act 1852 s 1 .................................................................................................................. 462 Property (Relationships) Act (NZ) s 4 .................................................................................................................... 84 Ramsden Estate Act 1867 .............................................................................. 302–3 Ramsden’s Estate (Leasing) Act 1859 ....................................... 279, 283–84, 302–3 Registration Act 1864 (Ind)................................................................................ 113 Sales of Reversions amending Act 1867 ..................................................... 334, 341 Settled Land Act 1882 ........................................................................................ 352 Solicitors Act 1888 ............................................................................................. 361 Stamp Duties Act 1898 (NSW)............................................................................. 81 s 49(2)(A)(e) ..................................................................................................... 81 Statute of Anne, see Act for the Encouragement of Learning, etc 1710 Statute of Elizabeth, see Charitable Uses Act 1601 Statute of Frauds 1677 ................................................................................... 37, 75 s 4 ..................................................................................................434, 435, 436 s 6 .................................................................................................................. 479 s 7 ................................................................. 423, 426, 435, 439, 443, 444, 451 ss 7–9 ............................................................................................................... 59 s 8 ......................................................................................58, 60, 436, 442, 442 Statute of Frauds Amendment Act 1828............................................................. 479 Statute of Tenures 1660 ..................................................................................... 118 Statute of Uses 1536............................................................. 26, 119, 137, 150, 151 Statute of Wills 1540.......................................................................................... 163 Supreme Court of Judicature Act 1873 ................................................ 362–63, 375 s 25(11) .......................................................................................................... 386 Supreme Court of Judicature Acts 1873–75 ....................................................... 571 Torts (Interference with Goods) Act 1977 s 3(1)(a) .......................................................................................................... 605 (b) ............................................................................................................... 605 Town and Country Planning Act 1947 ................................................................. 84 Town Gardens Protection Act 1863 s 1 .................................................................................................................. 215 Trustee Act 1888 s 1(3) .............................................................................................................. 649 s 8 .................................................................................................................. 649 Trustee Act 1925 ........................................................................................ 583, 600 s 1 .................................................................................................................. 583 s 57 ................................................................................................................ 601 (1) ............................................................................................................... 600 s 61 ................................................................................................146, 601, 646 s 68(17) .................................................................................................. 646, 649

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xlv

Variation of Trusts Act 1958 .............................................................................. 600

National Legislation (Regnal Year) 27 Edw III c 1 (1353) ........................................................................................... 31 17 Ric II c 6 (1393) ............................................................................................ 491 4 Hen IV c 23 (1402) ........................................................................................... 31 4 Hen VII c 4 (1488) ............................................................................................ 12 32 Hen VIII c 46 (1540) ..................................................................................... 460 13 Eliz c 5 (1571) ................................................................................................. 77 13 Eliz c 10 (1571) ......................................................................................... 16–17 s 2 ...................................................................................................................... 5 14 Eliz c 11 (1572) ............................................................................................... 16 s 5 .................................................................................................................... 16 18 Eliz c 2 (1576) ..................................................................................... 12, 16–17 12 Car II c 24 (1660) ......................................................................................... 460 2 & 3 An c 12 (1703)........................................................................................... 67 3 Geo II c 30 (1729) ........................................................................................... 124 59 Geo III c 60 (1819)........................................................................................ 315 7 & 8 Vic c 21 (1844) .................................................................. 272–73, 285, 289 11 & 12 Vic c 14 (1848) .................................................................................... 272 14 & 15 Vic c 83 (1851) .................................................................................... 460

International Treaties and Conventions Convention on Consent to Marriage, Minimum Age for Marriage and Registration of Marriages 1962 .......................................................................................... 578 Convention on the Nationality of Married Women 1957 ................................... 578 Convention on the Political Rights of Women 1952 ........................................... 578 European Human Rights Convention 1950 Art 8 ............................................................................................................... 265

1 The Earl of Oxford’s Case (1615) DAVID IBBETSON*

A. INTRODUCTION

I

T IS THE fate of cases, over time, to be classified and pigeon-holed to the extent that their original sense, or senses, are eroded out of view. The Earl of Oxford’s Case1 is no exception to this. It appears in White and Tudor’s Leading Cases in Equity2 as the principal case dealing with relations between Chancery and the Common Law, reflecting the very sharp focus on this issue in the reported judgment; and recent legal historians have placed it firmly in the context of the dispute over jurisdiction between Sir Edward Coke and Thomas Egerton, Lord Ellesmere.3 This was, undoubtedly, one of the issues in the case. As with most Equity cases in the

* I am grateful to Steven Churches, David Hoyle, Richard Hoyle, Neil Jones, Colin Lizieri, Mike Macnair, Richard Nolan and Graham Virgo for assistance and comments; they bear no responsibility for errors or misinterpretations that remain. Particular thanks are due to the Master, Fellows and Scholars of Magdalene College, Cambridge, for permission to consult and quote from their archives. Unless otherwise stated, manuscript references are to sources in The National Archives, London. Other conventional abbreviations used are: MCC—Magdalene College Cambridge; HLS—Harvard Law School; BL—British Library; CUL—Cambridge University Library; HMC—Historical Manuscripts Commission. Many of the archival documents are transcribed and translated by Nina Green at . When referring to State Papers I have added references to the volume and page of the relevant calendars: Letters and Papers Foreign and Domestic, Henry VIII (‘L & P’), Calendar of State Papers, Domestic, Elizabeth (‘CSPD’). The dating of the documents by the editors of the calendars is very unreliable. Spelling has been modernised throughout. 1 (1615) Chan Rep 1, 21 ER 485. The very brief report at Tot 126, 28 ER 143 sub nom Comes Oxon’ v Neeth, is of no value. 2 EP Hewitt and JB Richardson (eds), White and Tudor’s Leading Cases in Equity, 9th edn (London, Sweet & Maxwell, 1928) 1.615. 3 JP Dawson, ‘Coke and Ellesmere Disinterred: The Attack on the Chancery in 1616’ (1941) 36 Illinois Law Review 127; JH Baker, ‘The Common Lawyers and the Chancery: 1616’ (1969) 4 Irish Jurist 368; LA Knafla, Law and Politics in Jacobean England (Cambridge, CUP, 1977) 171–73; M Fortier, The Culture of Equity in Early Modern England (Aldershot, Ashgate, 2005) 76–81 (cf ‘Coke, Ellesmere, and James I’ (1998) 51 Renaissance Quarterly 1255). See too CW Brooks, Law Politics and Society in Early Modern England (Cambridge, CUP, 2008) 142–52.

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period, it existed in relation to an actual or a potential decision at Common Law, in this case the decision of the Court of King’s Bench in the Magdalen College Case, Warren v Smith.4 The Magdalen College Case had held for one party in the complex of litigation, Magdalene College Cambridge, acting through its Master Barnaby Goche and its Bursar John Smith, while the Earl of Oxford’s Case in Chancery found for the other party, Henry, the Earl of Oxford. It was unavoidable, therefore, that the issue of the proper relationship between Common Law and Equity should have been raised. Moreover, alongside the Magdalen College Case and the Earl of Oxford’s Case there was a reported habeas corpus action, Googe and Smith’s Case,5 in which the King’s Bench was asked to rule on the legitimacy of imprisonment by order of the Chancery when there had already been a judgment at Common Law. But careful reading of the records suggests that it was only one issue in the case, and a relatively minor one at that. Ellesmere’s speech, as reported, was directed at this point alone; but there is some room for doubt whether it was ever actually delivered, and it should not be allowed to mask the broader issues in the litigation. It is as well to sketch in this background at the start.6 The question whether Chancery had a power to act after judgment had been given at Common Law had been rumbling since the early years of the sixteenth century.7 The matter had been formally discussed by the Common Law judges in Finch v Throckmorton in 1597,8 and had there been resolved against Chancery intervention. Egerton, then Lord Keeper and not yet created Lord Ellesmere and elevated to the office of Lord Chancellor, may for the time being have accepted this. However, a contemporary poem to him by the poet Samuel Daniel, whose patron Egerton was, portrays him as holding the balance between the excessive rigour of the law and the rule of unbridled conscience;9 and it may be that this reflects Egerton’s own perception of his role. In any event, from the beginning of the reign of James I he began to award injunctions against the enforcement of Common Law judgments, to the disapproval of the Common Law judges. Thomas Fleming, Chief Justice of the King’s Bench from 1607, oversaw the use of legal means against these Chancery injunctions: habeas corpus applications to release those imprisoned by the Chancery for refusing to obey such 4

(1615) 1 Rolle 151, 81 ER 394; 11 Co Rep 66, 77 ER 1235; Cro Jac 364, 79 ER 312. (1615) 1 Rolle 278, 81 ER 487. 6 Dawson (n 3); Baker (n 3); Knafla (n 3) 155–81. 7 JH Baker, Oxford History of the Laws of England, VI (Oxford, OUP, 2003) 173–79. 8 Finch v Throckmorton (1597) BL MS Harl 6686 f 222v (Coke’s MS report), 118 S[elden] S[ociety] 441; Coke, Third Institute, 124; Fourth Institute, 86. Dawson (n 3) 134–35. 9 S Daniel, A panegyrike congratulatorie deliuered to the Kings most excellent Maiestie at Burleigh Harrington in Rutlandshire (1603), sig C, ‘To Sir Tho: Egerton Knight, Lord Keeper of the Great Seale of England’. For Daniel and his relation to Egerton, see J Pitcher, ‘Samuel Daniel’s Gift of Books to Lord Chancellor Egerton’ (2005) 17 Medieval and Renaissance Drama in England 216. 5

The Earl of Oxford’s Case 3 injunctions, and threats of indictments under the Statute of Praemunire (1402) for acting contrary to Common Law judgments. The situation was exacerbated when Fleming was succeeded by Coke in 1613. In Glanville v Courtney (1614–15)10 the friction between the two courts—and between the two men—came to a head with the Chancery re-imprisoning a man who had been released on habeas corpus by the King’s Bench; and an attempt to resolve the problem in Parliament came to nothing. At this point the Earl of Oxford’s Case arose, its report focusing on the legitimacy of the Chancery decree. The whole question was then referred to the Privy Council, and in June 1616 the King himself gave a speech in the Star Chamber affirming the legitimacy of Chancery intervention.11 Yet behind the litigation were the parties, the facts and the eventual result. Neither the college nor the Earl of Oxford would have been particularly interested in the legal niceties or the fight between the Chief Justice and the Lord Chancellor; they simply wanted to win. We can reconstruct the facts behind the dispute in some detail, and in doing so we may cast some doubt on the story which has been told by biographers and by historians of Magdalene College and the University of Cambridge, who have not always appreciated the significance of the legal devices which were used or the subtleties of the parties’ tactics in the litigation and in their attempts to get the conflict resolved in their own interests. This chapter will examine in turn the land transactions which constitute the factual background to the litigation, the litigation itself and its contextual significance, and lastly the issue for which the Earl of Oxford’s Case has, for better or worse, become famous.

B. THE LAND TRANSACTIONS

Travel north by punt from the centre of Cambridge, and within a few minutes you reach Magdalene College. There, on a modern building, is a gargoyle of a sixteenth-century Genoese moneylender, Benedict Spinola. Spinola is vilified in college tradition as the man who in 1575 cheated the college out of a potentially very valuable plot of land in London, began to build on it, and in a few years sold it on to the Earl of Oxford at a great profit. It is these transactions that we must examine carefully. The land which was to be the subject of the dispute was originally the property of the Priory of Holy Trinity, Christchurch. It had been surrendered to the Crown in 1532 as a result of unpaid debts, and had been granted

10 Glanville v Courtney 2 Bulst 301, 80 ER 1139; Cro Jac 343, 79 ER 294; 1 Rolle 111, 81 ER 365; 1 Rolle 219, 81 ER 444; Moo 838, 72 ER 839; 118 SS 440. 11 JP Sommerville (ed), King James VI and I: Political Writings (Cambridge, CUP, 1995) 204, esp at 215.

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to Thomas, Lord Audley in 1534.12 Audley died in 1544, and it came to the newly-founded Magdalene College under his will, together with the rectory of the church of St Catherine Cree.13 Just outside the city walls, the land was known as the ‘Great’ or ‘Convent’ (or ‘Covent’) garden, and was approximately seven acres in extent. It lay between Bishopsgate to the west and Aldgate to the east, and was bounded to the south by Houndsditch and to the north by Hog Lane, later known as Petticoat Lane.14 For the time being it was little more than low-grade land, leased to one Thomas Casye at a rent of £9 per year;15 the Chancery litigation of the early seventeenth century was to describe it as having been a laystall, or rubbish tip, for the city of London.16 Almost immediately the land and rectory were leased for 50 years to Laurence Owen, a gunfounder whose property was contiguous to the college’s land, at a rent of £20 per year.17 According to the report of the commissioners enquiring into the affairs of the University in 1546, the rent was divided into two parts, £11 for the rectory and £9 for the land.18 This was a significant part of the college’s total annual income of £44.9s.6d.19 There was nothing unlawful in the college’s making a lease for 50 years, but Audley’s executors clearly thought that it was unwise. Exercising the power to make statutes for the college granted to them under Audley’s will, they therefore took steps to provide that the college might in future make leases for at the most 10 years.20 They were, however, very slow, and it was not until 1555 that the statutes were in fact given to the college.21 Already, in 1547, the then Master Richard Carr and the fellows had made a lease of the reversion of the land for a further 21 years, from 1595 to 1616, to one Richard Noke, point-maker of Cambridge, at the same rent of £20 per year.22

12

Victoria County History, London, vol 1, 471. PCC will dated 19 April 1544, proved 18 Feb 1545: PROB 11/31 f 3. 14 P Cunich and R Hyam, ‘Lost Inheritance: the College’s City of London Property at Aldgate’ (1991–92) 36 Magdalene College Magazine and Record (New Series) 42, 43–44. 15 PROB 11/31 f 3, at f 5. 16 C 78/291 no 18 m 2. 17 Lease referred to in C66/1128 m 6. 18 E 315/440 f 33v. To the same effect, Earl of Oxford’s Case 1 Chan Rep 1, 21 ER 485 erroneously printed as £40 and £9 (for variants between print and manuscript reports of the case, see below text after n 167); the same figure is given in SP 1/196 f 73 (L & P 19.2 477). The statement in SP 12/103 f 11 (CSPD 1547-80 493) that the division was £12.10s for the rectory and £7.10s for the land is inaccurate, but suggests that in reality it might have been treated as a lump sum payment of £20. 19 E 315/440 ff 32–33v; P Cunich, D Hoyle, E Duffy and R Hyam, A History of Magdalene College Cambridge, 1428–1988 (Cambridge, CUP, 1994) 47. 20 SP 12/103 f 3 (CSPD 1547–80 493); SP 15/39 f 141 (CSPD Addenda 1580–1625 520); SP 1/196 f 73 (L & P 19.2 477). 21 Cunich et al (n 19) 55. 22 SP 12/103 f 11 (CSPD 1547–80 493); date from patent making grant to Spinola. For Noke, who had been irregularly appointed university stationer some years previously, see D McKitterick, History of Cambridge University Press, vol 1 (Cambridge, CUP, 1992) 46–47. 13

The Earl of Oxford’s Case 5 Magdalene was not at all a wealthy college, ‘by far the poorest of the colleges in Cambridge’ at this time.23 By the early 1570s, under the mastership of Roger Kelke, matters had become so bad that tradesmen were refusing to deal with the college, and only provided necessaries on the credit of the President, William Bulkeley.24 It was in this context that it turned to its land in London to see if it was possible to increase the revenue from it. Contact was made between Kelke and Benedict Spinola, a Genoese merchant, moneylender to the Queen and one of the wealthiest men in London,25 who was by then renting part of the Covent garden.26 The proposal was that the land should be conveyed in fee farm to Spinola at a rent of £15 per year (perhaps originally £30), substantially more than what the college was then receiving.27 Not all the Fellows were in favour of this, and one, John Bell, petitioned Lord Burghley to intervene to prevent the transfer.28 But Bell’s voice was clearly unable to prevail in the college, since in December 1574 it moved to grant the land to Spinola, together with the rectory. This was not altogether simple. Leaving aside the limitation of leases to 10 years in the college’s own statutes,29 any grant to Spinola would come up against a parliamentary statute of 1571 which, inter alia, rendered void any feoffment or lease for more than 21 years or three lives made by a college to any person or persons, bodies politic or corporate.30 In an attempt to get round this restriction, the college and Spinola undertook some rather complex manoeuvres: instead of conveying the property directly to Spinola, it was agreed to use the Queen as an intermediary. The essence of

23

Cunich et al (n 19) 47. Ibid, 75–76, quoting SP 12/127 f 28 (dated 12 December 1578). 25 For Spinola, see GD Ramsay, ‘The Undoing of the Italian Mercantile Colony in Sixteenth Century London’ in NB Harte and KG Ponting (eds), Textile History and Economic History (Manchester, Manchester University Press, 1973) 22, 41–43. 26 Spinola’s name appears on a list of those renting land at this time (clearly as sub-tenants from the college: SP 12/288 f 63 (CSPD 1601–03 313) (undated)). See too SP 1/196 f 73 (L & P 19.2, 477), where John Bell, a fellow of the college, refers to ‘one Benedict Spinola, having obtained part of the said former term in parcel of the said gardens’. The editors’ dating of this document to 1544 is impossible, since Bell could not have held his fellowship until c1570 (JA Venn, Alumni Cantabrigienses (Cambridge, CUP, 1922), sub nom). 27 SP 12/288 f 63 (CSPD 1601–03 313) refers to ‘one of the college tenants so that he may have the gardens only, in fee farm, will presently pay to the college by year’ £30; but the first use of the word ‘college’ is interlined as an addition, so it may well be that this refers to Spinola, who was the college’s sub-tenant. If so, it suggests that he might originally have been offering to pay the larger sum to the college. 28 SP 1/196 f 73 (L & P 19.2 477). 29 Above, n 20. 30 Stat 13 Eliz c 10 s 2 (Statutes of the Realm, 4 544). For the statute and the colleges’ response, see S Bendall, C Brooke and P Collinson, History of Emmanuel College, Cambridge (Woodbridge, Boydell Press, 1999) 129–31. The Queen was not above ignoring the statute: in 1579 she granted Merton College’s manor of Malden to the Earl of Arundel for 2,000 years at a rent of £40 per year: GH Martin and JRL Highfield, History of Merton College, Oxford (Oxford, OUP, 1997) 169. 24

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the agreement was encapsulated in the five provisions of an indenture of 10 December 1574:31 a)

the college covenanted to grant to the Queen the rectory and the Covent garden, receiving £25 per year for the rectory and £15 per year for the garden; b) in exchange, Spinola covenanted to obtain from the Queen the rectory and the garden, provided that the college had duly made the conveyance to her; c) provided all this occurred, the college undertook to use its best endeavours to obtain parliamentary confirmation of the grant of the garden to Spinola; d) Spinola covenanted to convey the rectory to the college’s nominee, free of any incumbrances imposed on it by him; and e) Spinola covenanted to make a further deed to the college giving a right to distrain for unpaid rent, with a backstop right of re-entry should the rent be still unpaid after a year. In pursuance of this agreement, three days later the college by separate indentures granted the garden and the rectory to the Queen, at rents of £15 per year and £25 per year respectively, with a proviso that if she did not convey them to Spinola by 1 April 1575 the college’s grants to her would be void and the college would have a right of re-entry. The indentures were duly acknowledged in the Chancery on 26 January 1575 by the college’s attorneys: that of the land by Roland Broughton of the Inner Temple and that of the rectory by Thomas Walter of Gray’s Inn.32 Three days later, by separate letters patent under the great seal, the Queen granted the garden and the rectory to Spinola in fee.33 The traditional analysis of this transaction sees Spinola as the villain of the piece, laying his hands on valuable property for far less than its true value; Burghley is portrayed as Spinola’s willing accomplice, serving his royal mistress by obtaining such favourable terms for the royal moneylender; and Kelke is treated as cravenly following Burghley’s will however much this was to the disadvantage of the college.34 There is, for sure, evidence to support this analysis. John Bell’s petition to Burghley, cited above, points to Spinola as the moving force behind the transaction; a letter from Kelke to Burghley dated 26 January 1575 speaks of him and the fellows having ‘satisfied your request 31

MCC A/27/5. MCC A/27/6; A/27/7. It is not clear why separate attorneys should have been used. In the recognisance relating to the rectory, Walter is expressly vouched for by Broughton. 33 C 66/1128 m 6, m 13 Calendar of Patent Rolls 1572–75, nos 2841, 2851. 34 EK Purnell, Magdalene College (London, Robinson, 1904) 65–77, vi (‘fraud, at which the highest in the land connived’); Cunich et al (n 19) 77–79; V Morgan, A History of the University of Cambridge, II, 1546–1750 (Cambridge, CUP, 2004) 175–76; D Pearson, Edward de Vere (1550–1604) (Aldershot, Ashgate, 2005) 46–47. 32

The Earl of Oxford’s Case 7 touching Mr Spinola with all diligence and dutiful obedience accordingly, though not without evil report of some evil disposed persons’;35 and there is no doubt that Kelke, like many others in Cambridge and elsewhere in England, had sought Burghley’s assistance in getting preferment. None the less, there is real room for doubt whether things were quite so underhand. It is abundantly clear from Kelke’s letter to Burghley that the latter had been putting pressure on the college in some way and for some reason, but it does not follow that his purpose was to despoil the college to the advantage of Spinola. The principal content of the letter was the reform of the college’s statutes, requesting that Burghley should first cause them to be sealed by the Queen with the great seal before ‘sending them home’, so that they should have as much authority as the founder’s statutes, which had themselves been made under the great seal. The number of fellowships was a matter for the statutes—it had been fixed at six in the reformed statutes of 156536—and although there are no accurate lists of Fellows at this time, it is known that there was a speedy turnover and not infrequent vacancies.37 It would be little wonder that this was a matter of concern when the statutes were being amended, and that pressure might be put on the college to raise its income in order to support its statutory number of Fellows. Such an interpretation is consistent with an undated document commenting on changes which might be made to the college’s statutes, which ends apparently inconsequentially with a reference to the sum of £20, ‘which yearly shall grow by the grant in fee farm to Mr Benedict Spinola’, which would provide an income of £6.13s.4d for each of two Fellows to be appointed, with the balance of £6.13s.4d to remain for the general purposes of the college.38 Further evidence points against Burghley’s close involvement in the transaction between Spinola and the college. On 21 January 1575, one Thomas Wattes wrote to him to say that following Burghley’s instructions he had approached the Solicitor-General, Thomas Bromley, who had told him that Mr Hurleston of the Inner Temple was acquainted with the details of the college’s conveyance to Spinola; we know from other sources that Hurleston acted as Spinola’s lawyer.39 Wattes then passed on to Burghley the details which he had obtained from Hurleston.40 If Burghley was 35

SP 12/103 f 14 (CSPD 1547–80 494). Cunich et al (n 19) 55. 37 Ibid, 69. 38 SP 1/244 f 238, 239v (L & P Addenda 1.2 558). There is no apparent warrant for the editors’ attribution of this document to 1544. 39 REQ 2/178/60/2, Spinola’s answer to a petition in the Court of Requests from Julio Borgarucci in 1580, signed by Hurleston as his counsel. For this action, see below, n 61. Bromley himself had acted for Spinola in a Chancery case: Pype v Spinola (after 1558) C3/143/81. 40 SP 12/103 f 11 (CSPD 1547–80 493), dated 21 January 1575. It may be no coincidence that the College’s attorney and the draftsman of the indenture of 10 December between the college and Spinola was another Inner Templar, Rowland Broughton. 36

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attempting to discover exactly what the college was doing as late as this, it is highly unlikely that he was collaborating with Spinola in a plot to further the latter’s interests at the expense of the college. A more plausible reading of the evidence is that Burghley had been alerted to the concerns whether the transaction was in the college’s interests by the petition of John Bell and a further one to the same effect, dated 8 January 1575, from Thomas Barber, one of Audley’s executors,41 and that he was taking steps to discover exactly what it was that the college was doing. The nub of the matter, surely, is that by the time of Kelke’s mastership, Magdalene was abjectly poor. In the absence of another benefactor—a hoped-for benefaction from the Duke of Norfolk in 1564 had never materialised, and the first major gift since the college’s foundation, a donation from Sir Christopher Wray, was not to arrive until 158942—if the college was to survive it had no obvious alternative but to increase the income from its existing assets; and the only exploitable asset which it had was its Aldgate property.43 The real problem was not that the college was being hoodwinked by an Italian moneylender, blind to the potential value of the land which was said by Bell to be then producing a rental income (by subleases, evidently) of over £60 per year and which would be expected to produce double that when the leases ended and it finally returned into the hands of the college.44 It was that the leases granted in the 1540s still had more than 40 years left to run. It seems clear that Spinola was intending to break the existing leases of the land and rectory. Exactly how this was to occur is not clear. It may be that he was going to buy out the existing lessees, it may be that he was going to bully them out, it may be that he was going to use a combination of these. It is possible, even, that he had a legal right to do this because of the peculiarity of the grant to him via the Queen: the contemporary law books suggest that a grant of land in fee by the Crown without express reservations of any lesser rights would normally pass a full, unencumbered title to the grantee.45 In any event, it is known that at about this time he was harrying John Casye (the successor of Richard Casye, who was farming the Aldgate land in 1544) with threats to dispossess him,46 and in a 41

SP 12/103 f 3 (CSPD 1547–80 493). Cunich et al (n 19) 76, 88–90. 43 Its other main asset was a rentcharge of £20 per year on the manor of Purleigh, Essex; but this had been fixed by Parliament in 1543 and was not able to be changed: ibid, 43–44. 44 SP 12/288 f 63 (CSPD 1601–03 313), probably dating from this time, lists 22 tenants paying a total of £39.17s.8d to Casye for lands in half of the Great Garden and a further nine paying £16.15s.6d to one Gibson for lands in the other half of the Great Garden, with Gibson receiving also £13 for the parsonage. 45 Brooke Abridgement, Patentes, 3, 39. This would not mean that the sub-lessees were without remedy, but it would only have been a remedy in damages; Spinola would still have been able to get control of the land in order to develop it. 46 SP 12/146 f 213 (CSPD 1547–80 701). 42

The Earl of Oxford’s Case 9 memorandum to Burghley in 1577, Richard Howland, Kelke’s successor as Master of Magdalene, stated that, ‘as Mr Spinola can better certify you’, the leases were by then utterly void.47 It is only the destruction of the lease that explains the otherwise incomprehensible transaction relating to the rectory: the transfer from the college to the Crown and from the Crown to Spinola, with a condition that Spinola should reconvey it to the college or its nominee. The whole purpose of this, according to Lord Ellesmere in the later litigation, was that the college should have the rectory free of the lease.48 To assess the transactions of 1574/75, and Spinola’s behaviour, we should begin with the grant of the rectory. Pulling the pieces together, before the college parted with it, it was receiving a rent of £11 per year, and according to the rental of c1574 its tenant had sub-leased it for £13 per year.49 The actual income from it was probably little in excess of the £25 per year which Spinola had agreed to pay for it: Howland’s memorandum to Burghley in 1577 says that the college was trying to find someone else to whom it could be assigned, but the only person who was willing to take it at a rate the same as or greater than Spinola was currently paying was of dubious financial credit,50 and when a lease of it was made in 1578 the agreed rent was £28 per year.51 In effect, Spinola was guaranteeing the college something like the full commercial rent until a better lessee should have been found, and taking upon himself the responsibility of breaking the existing lease. Small wonder that when the rectory was leased to Ralph Parys of Dullingham, near Cambridge, in 1578, Spinola is described—by the college—as having been acting as its ‘trustee’.52 The land, though, was a different matter. It was later to be said in Chancery that it was Spinola’s intention to turn the waste ground into garden plots and to build houses on these, and that he cleared and fenced the land, creating 50 plots which he leased out to individuals who built houses on them and himself building a house on part of the land which he retained.53 When he attempted to sell it on to his countryman Julio Borgarucci in 1579, it was said that its rental value by then was £180 per year, its capital value something in excess of £2,000;54 and when it was in fact sold later that year the purchase price was £2,500. Spinola had obvi47

HMC 13 Salisbury, no 509. C 78/291 no 18 m 3, m 5. 49 SP 12/288 f 63 (CSPD 1601–03 313). 50 HMC 13 Salisbury no 509. 51 MCC A/27/10. 52 MCC A/27/10, college’s annotation; Purnell (n 34) 72–73. 53 C 78/291 no 18. Although this was an ex parte statement, taken to be true simply because it was formally unchallenged, there is no reason to doubt its fundamental veracity; if anything, it would have been in the petitioners’ interest to have downplayed the extent of Spinola’s development. 54 REQ 2/178/60/1. The figures may not be wholly accurate, since they appear in Borgarucci’s ex parte petition in the Court of Requests; but he would have had no reason to 48

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ously made a very substantial profit. We do, however, have to be careful not to exaggerate this, since we do not know how much he had had to pay out to break the pre-existing leases or to develop the land, nor what his liabilities were to his own lessees against which he was to guarantee the Earl of Oxford.55 That Spinola should have made a profit is hardly a cause for surprise: he was a shrewd businessman with a very large amount of capital which could be invested in the improvement of the land. The real question is how far the college had made a bad bargain. Taking together the transactions relating to the land and the rectory, as was clearly the parties’ intention, the college was in effect conveying its freehold reversion in the land to Spinola in exchange for an immediate doubling of its rentcharge from £20 to £40.56 The calculation of the value of freehold reversions is fraught with difficulty even today;57 still less was it a science in the sixteenth century. However, making a number of assumptions which would have looked reasonable in 1575, and ignoring completely the college’s impecuniosity (and hence the risk that it would have to sell at an inopportune moment), the capital value of the freehold reversion on the land would have been little more than £200.58 If anything, even this is an exaggeration of the value on sixteenth-century approaches, for reversionary interests tended then to be

misrepresent them significantly. Spinola’s reply is at REQ 2/178/60/2. See Pearson (n 34) 47 (erroneously stating that the rental value was £1,900 per year). 55

C 54/1080 no 6. In fact this underestimates the college’s gain, since the income from the rectory would increase if the value of the rectory increased as the college could call for its retransfer to it at any time; it was only the charge on the land that was fixed. 57 For the calculation and its difficulties, see Earl Cadogan v Sportelli [2007] 1 EGLR 253. I am grateful to Professor Colin Lizieri for explaining the theory behind the valuation of reversionary interests; errors in its application are mine alone. 58 The reversion is calculated as MVO/(1+d)t, where MVO is the current market value, d the ‘deferment rate’, and t the number of years until the reversion; the deferment rate is defined as RRFR + RP—RG, where RRFR is the ‘real risk free rate’ (ie the risk-free rate of interest), RP the ‘risk premium’ (ie the risk that the property might have to be sold at an inopportune time), and RG the rate of growth (ie the real growth in value). In making the calculation I have made the following assumptions: – MVO = £1200, calculated as 20 times the rental value obtained from SP 12/288 f 63 (CSPD 1601–03 313) (a factor of 20 is that normally used in calculating the relation between capital and rental at this time, though it is probably a slight overestimate); this is broadly in line with the estimate of John Bell in SP 1/196 f 73 (L & P 19.2 477). – RRFR = 6% (from G Clark, ‘The Cost of Capital and Medieval Agricultural Technique,’ (1988) 26 Explorations in Economic History 265, 273, Table 3 (treating the nominal rate as the real rate, as would have been normal at this time: see Clark, ibid, 268). – RP = 0 (see text). – RG = 1.71 (based on the estimate of John Bell that the rental income from the land would have doubled by the time the leases had ended). – t = 41 (the number of years remaining under the leases). Applying these assumptions, the value of the reversion is estimated at £214. 56

The Earl of Oxford’s Case 11 undervalued.59 Set against this is the value to the college of the increase in the rentcharge by £20 per year. This can be approximately capitalised by multiplying by 20, producing a value of £400. There is therefore no solid justification for the criticism of Spinola or those members of college who supported the sale. Of course, with hindsight, it would soon have been evident that the increase in the value of the land was far greater and far more rapid than would have been predicted; but that was only because of the sale to Spinola, followed by his breaking of the existing leases and investing in the development of the land; and we cannot take hindsight into account in evaluating the transaction. After 1579 Spinola drops out of the picture. As noted above, the sale to Borgarucci did not take place, and instead agreement was made with the Earl of Oxford that the land would be sold to three of his servants (presumably acting as nominees for the Earl) for £2,500, payable by instalments,60 with Borgarucci seemingly to receive a commission of £100.61 It is easy to conjecture why the land was not put into Oxford’s own name: apart from the fact that his personal finances were in a disastrous state, he had a few days previously challenged Sir Philip Sidney to a duel and might reasonably have feared for his life.62 In the event, this transaction ran into difficulties too. According to Spinola’s account, the first instalment of £500 was paid but not the balance, and as a result the sale may in theory have been avoided,63 though Oxford’s nominees none the less granted leases over parts of the land.64 By this stage the precise whereabouts of title to the land was thoroughly confused.65 In the early summer of 1580 steps were taken to clear it up. On 14 June, Oxford’s nominees made an indenture conveying the land to

59

I am grateful to Professor Richard Hoyle for this information. The indenture, dated 27 August 1579, is referred to in the later indenture to Oxford, C 54/1080 no 6. Spinola had had many previous dealings with Oxford; in particular, while Oxford was travelling in Continental Europe after 1575 Spinola had been a channel for communication—and more importantly cash—between him and his father-in-law, Lord Burghley. 61 This was to be the subject of a claim by Borgarucci in the Court of Requests in 1580: REQ 2/178/60. The outcome of this is not known (the entry book of the Court of Requests for this year does not survive), but it is likely that the claim came to nought as a result of Spinola’s death. An endorsement on the petition shows that process issued against Spinola on 15 June 1580, within a few weeks he had fallen ill and was making his will (PROB 11/62 f 294, dated 6 July 1580), and he was buried in St Gabriel Fenchurch on 15 August 1580 (so recorded in Parish Register). 62 Pearson (n 34) especially ch 3; AH Nelson, Monstrous Adversary: The Life of Edward de Vere, 17th Earl of Oxford (Liverpool, Liverpool University Press, 2003) 195–200. 63 REQ 2/178/60/2. 64 C 54/1080 no 5. 65 In 1608 an inquisition post mortem on the death of Oxford derived title from the servants, while the special verdict in the Magdalen College Case derived it from Spinola: C142/305/103; KB 27/1426 m 288. 60

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Oxford himself,66 and one day later Spinola did the same.67 The first of these preserved the rights of the two men to whom leases had been made, presumably with Oxford’s consent, but in the second Spinola covenanted to save Oxford harmless against claims which might in the future be made by anyone tracing their rights through him. As well, it seems that there may have been doubts whether the college might not still have had rights, presumably on the basis that the conveyance of 1574/75 was of questionable validity. It had clearly been seen in 1574 that there might be difficulties— hence the term in the indenture between the college and Spinola that the college would seek parliamentary confirmation of the grant—and in 1576 a statute had been passed ratifying grants which had been made to or by the Queen.68 However, there may still have been questions; justifiably so, since in the event the King’s Bench was to hold in the Magdalen College Case that this statute had not made this grant good.69 If there was uncertainty, this might have been brought to the surface through the Lincoln’s Inn reading of Lent 1582 on the effects of the 1576 statute on grants by the Queen’s letters patent, by Thomas Egerton.70 Very shortly after this, no doubt to strengthen Oxford’s position, Roland Broughton, the draftsman of that conveyance and the college’s attorney, himself made a fine of all the lands to Oxford in consideration of £200.71 It is not clear why the fine should have been made by Broughton rather than the college, but since a fine was conclusive against third parties after five years72 it may simply have been a matter of convenience for Broughton to have done it, though it is perhaps more likely that it was an attempt to avoid the effects of the 1571 statute by making it appear that the grant was not in law made by the college.73 In any event, the intended effect must have been that the college’s potential rights were being bought out for £200. This in effect marks the end of the property transactions giving rise to the Earl of Oxford’s Case. Oxford was to convey the land away in 1591 for the benefit of his second wife, Elizabeth Trentham, part of a complex marriage settlement, but an inquisition post mortem taken after his death 66

C 54/1080 no 5. C 54/1080 no 6. 68 Stat 18 Eliz c 2 (Statutes of the Realm 4 608). 69 Below, 15–18. 70 CUL MS Dd 11.87 f 152, BL MS Harl 5265 ff 136–37; BL MS Harg 207 ff 58, 64, 65v. The surviving notes on the reading do not reveal this point to have been dealt with specifically, though it did deal with the requirement that grants to the Queen required good consideration: below, text at n 105. 71 CP 25/2/170/2949 no 5. 72 Stat 4 Hen VII c 4; Co Litt 262. For the operation of fines, which had changed little in its fundamentals since the twelfth century, see GJ Turner, Calendar of the Feet of Fines relating to the County of Huntingdon (Cambridge, CUP, 1913) cxxiv–cli. A contemporary description of the practice of making fines is Thomas Powell, The Attourneys Academy (London, B Fisher, 1623) 125–29. 73 See below, text at n 108. 67

The Earl of Oxford’s Case 13 in 1604 shows that he died seised of the land, which therefore descended to his heir.74 It was against the heir that the college was to take action in an attempt to recover the property.

C. THE LITIGATION

Oxford died on 24 June 1604. An inquisition post mortem on his Essex lands, taken in the September of that year, makes no mention of the London property, but since it was out of the county we should not necessarily expect it to do so.75 There is no doubt, though, that it was still in the hands of the Oxford family, and at Michaelmas 1606 Barnaby Goche,76 now Master of Magdalene, accepted the rent of £15 from one of the tenants of the Covent Garden, Edward Hamond, giving him an unsealed receipt to this effect.77 However, the college soon began to move to question the position. On 5 February 1607, Goche, acting on behalf of the college, formally ejected Sir Francis Castillion, the lessee of one of the houses on the land, and made a lease for six years to John Smith, the Bursar of the college. This was not a pure fiction—the document making the lease was presented in evidence in the King’s Bench in the Magdalen College Case—but there is no doubt that the lease was made with a view to an action of ejectment being subsequently brought.78 Castillion re-entered immediately and continued to occupy the land,79 but nothing further happened for a while. Matters seem to have been brought to a head when the next year’s payment fell due to the college: at Michaelmas 1607, Castillion was once again ejected, but this time the college remained in possession.80 The intention was no doubt to precipitate an action of ejectment at Common Law, but the new Earl was still a minor in wardship, and he—or more likely his representatives—brought suit in the Court of Wards against the college for its intrusion into the land. The case was first heard in June 1608, when the plantiff’s claim and the defendants’ defence were brought before the court.81 The court, however, at first declined jurisdiction. The inquisition of 1604 had made no reference 74

C 142/305/103. C 142/286/165. HE Bell, Court of Wards and Liveries (Cambridge, CUP, 1953) 69–76, esp at 73–74, citing Lord Winsor’s Case (1611) Ley 31, 80 ER 608. 76 For Goche, see A Thrush and JP Ferris (eds), History of Parliament, House of Commons 1604–1629, vol 4 (Cambridge, CUP, 2010) 405, sub nom Barnaby Gooch. I adopt the spelling used by Goche himself. 77 The receipt, transcribed in full in KB 27/1426 m 288, does not say on whose behalf Hamond was acting. Except where noted otherwise, the information which follows in this paragraph is derived from the special verdict in Warren v Smith, the Magdalene College Case, KB 27/1426 m 288, substantially reproduced in 11 Co Rep 66, 67–68; 77 ER 1235, 1236–39. 78 WARD 9/530 f 337, describing this as an entry for trial of the title. 79 Ibid. 80 Ibid. 81 WARD 9/530 f 185. 75

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to lands outside Essex, and in the absence of an inquisition post mortem to the effect that the former Earl had died seised of these lands there could be no issue touching the wardship. It was therefore ordered that a further inquisition be taken as a matter of urgency, and that the parties should agree on the names of ‘indifferent commissioners’ to do this. John Smith, the college’s Bursar, was subsequently to complain that the college had not had any part in the appointment of the commissioners and had not been able to bring witnesses before them;82 but be that as it may, the inquisition was duly made on 17 August 1608.83 Three findings of the inquisition are pertinent: first, that the Earl had died seised of the Covent Garden in fee; secondly, that the lands were worth £5 per year; and, thirdly, that the commissioners did not know who had been receiving the profits since the death of the former Earl. The first of these was something which the college had wanted to question before the inquisition was made, on the basis that the land had been conveyed away in 1591;84 though it is not clear why it should have mattered to the college specifically that it was the alienees rather than the Earl who were seised. The second point, that the land was worth only £5 per year, causes more of an eyebrow to be raised, given that it was already said to have been worth more than £2,000 in 1580 and even then producing rents of £180 per year. The explanation seems to be that the Earl’s sub-leases, or at least many of them, had been made in exchange for capital payments and only a nominal peppercorn rent.85 This too perhaps explains the third point: if the rents really were that minimal, it is understandable that there might have been doubt as to who—if anybody—had received them. Once the inquisition had been taken, the new Earl’s claim in the Court of Wards could proceed. On 19 October it was argued by Attorney-General Henry Hobart, the Recorder of London Henry Montagu and Lawrence Hyde on the part of the Earl; and Serjeant Augustine Nicholls and John Manningham86 on the part of the college, where it was said that the college was seeking to traverse the inquisition, ie to have it overturned. In the light of this the case was adjourned, the college to retain possession of the land provided it gave a bond to keep the house in repair and to account for mesne profits should it eventually lose the action.87 In time, the college

82

WARD 9/530 f 253. C142/305/103. 84 WARD 9/530 f 253; above, text at n 74. 85 This was said to be the case with the land in question in the Court of Wards, which Castillion was holding at a peppercorn rent (WARD 9/530 f 337), and in the later Chancery proceedings it was stated that the Earl of Oxford had made leases for great sums of money which he had taken as fines (C 78/291 no 18). 86 Manningham was a former student of Magdalene, and it is tempting to guess that it was he who had seen the possibility of reversing the effects of the 1575 transaction. 87 WARD 9/530 f 271v, amended f 337, continued f 436v. 83

The Earl of Oxford’s Case 15 formulated its traverse, and in February 1609 the case re-emerged, this time with the college as plaintiff.88 It proceeded slowly. By the end of May the parties had agreed that there need be no examination of witnesses,89 but it took another year for the court to resolve, after receiving advice from the judges, that the right should be decided at Common Law on a special verdict agreeing all the relevant facts.90 Pursuant to this, Sir Francis Castillion re-entered the land. On 20 December 1610 he made a formal lease for two years to one John Warren, and on 23 December Warren was ejected by John Smith, the college’s Bursar and lessee.91 All was set now for the bringing of an action of ejectment, by this time the normal method of trying title to land.92 The action was brought in the Hilary Term of 1611, and pleaded to issue in the Easter Term of that year.93 The jury found a lengthy special verdict detailing the circumstances set out above and focusing on the legality of the grant of 1574/75; since it refers also to the Acts of Parliament of 1571 and 1576, we may well suspect that the verdict was in truth an agreed statement of facts and issues produced by the parties’ lawyers, on the basis of the issues previously identified in the Court of Wards. The case was argued several times between Hilary Term 1613 and Hilary Term 1615.94 No conclusion was reached. At first it seems that Fleming CJ was inclined to uphold the grant and find against the college,95 but Coke, who had succeeded him as Chief Justice of the King’s Bench in October 1613, seems from the start to have favoured the college’s case.96 Perhaps because of this, while the argument in the King’s Bench was still depending, an attempt was made on the part of the Earl to protect his position by presenting a bill in Parliament to confirm the grant of 1574/75, but this was

88 WARD 9/530 f 504v. SP 15/39 f 141 (CSPD Addenda 1580–1625 520) looks to be a draft of the college’s grounds for the traverse, but the document is badly mutilated so we cannot be sure. 89 WARD 9/531 f 108. 90 WARD 9/532 f 109 (16 May 1610). It was later said that there was a further decree made in Trinity Term 1610 which formulated the special verdict to be found (C 78/291 no 18, m 4); I have not been able to discover this. For the use of the judges in making decisions in the Court of Wards, see Bell (n 75) 98–100. 91 KB 27/1426 m 288. 92 JH Baker, Introduction to English Legal History, 4th edn (London, Butterworths, 2002) 301–03. 93 KB 27/1426 m 288. 94 According to the report in 1 Rolle 151 it was argued in Easter and Michaelmas Terms 1613 and Hilary Term 1614. There are manuscript reports from Hilary 1613 (HLS MS 109 f 23, CUL MS Ii 5.26 f 38v) and Michaelmas 1613 (HLS 109 ff 25, 27) and also Hilary Term 1615 (HLS 109 f 27v). 95 HLS 109 f 23. 96 HLS 109 f 27v.

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abortive.97 The issues were finally brought to a head in the Court of King’s Bench in the Easter Term of 1615 and judgment given for the college.98 The arguments in the King’s Bench in the Magdalen College Case need not be analysed in detail. All the reports show that they were structured in the same way, with four principal points. Most important was that the initial grant from the college to the Queen was avoided by the statute of 1571. It had already been resolved by the judges that the statute did apply to grants of this type,99 and the arguments on both sides were effectively a reprise of those which had arisen earlier. They revolved largely around the question whether the statute bound the Queen, an aspect of the larger and constitutionally more interesting question of when statutes bound the Crown and when they did not. On its proper construction, however, the 1571 statute disabled the college (and other ecclesiastical corporations) from making grants rather than disabling others from receiving property, so the question of the applicability of the statute to the Queen did not directly arise. This point was made by Coke CJ in Hilary Term 1615,100 and unanimously so held by the court giving judgment the following term.101 Given this, it had to be decided whether the grant to the Queen had been subsequently validated. The first possibility was that this had been done by a later statute. An act of 1572,102 excluding from the operation of the 1571 Act grants of houses (with less than 10 acres of land appurtenant to them) in cities, boroughs and suburbs, was at first relied upon, but this was eventually abandoned on the grounds that it had not been expressly referred to in the special verdict of the jury.103 Alternatively, it might have been affected by the statute of 1576.104 This rendered good grants which had been made to the Queen on good consideration,105 but on the facts of 97 Commons Journals, 13 May 1614. A draft of the bill is in BL MS Harl 6806 art 78, transcribed (somewhat inaccurately) in Purnell (n 34) 76–77. 98 (1615) 1 Rolle 151, 81 ER 394; 11 Co Rep 67, 77 ER 1235; Cro Jac 364, 79 ER 312. 99 The Case of Ecclesiastical Persons (1601) 5 Co Rep 14, 77 ER 69. The point is referred to in the reading of Lewis Prowd in Lincoln’s Inn in 1606, noting that his original opinion had been that such grants were good since they could not be supposed to have been fraudulent (CUL MS Dd 5.50 f 38v at 39v); the fifth volume of Coke’s Reports, containing this case, had been published in 1605. 100 HLS 109 f 27v at f 28 (not in the brief report of the argument that term in 1 Rolle 151, 163; 81 ER 394, 402–03). It had been conceded by the Earl’s counsel from the start that if this was the proper construction of the statute then the conveyance would have been void: HLS 109 f 23, per Hyde. 101 1 Rolle 151, 163; 81 ER 394, 402–03. 102 Stat 14 Eliz c 11 s 5 (Statutes of the Realm 4 601). 103 HLS 109 f 27v at f 28, per Mountague KS. The argument had formerly been put forward strongly by Hobart A-G (1 Rolle 151, 158; HLS 109 f 25 at f 25v) and Hyde (HLS 109 f 23, CUL MS Ii 5.26 f 38v). 104 Stat 18 Eliz c 2 (Statutes of the Realm 4 608). 105 More accurately, the statute read ‘for any sum or sums of Money or other Considerations’; it was argued in the Exchequer Chamber that this had a wider meaning than the consideration

The Earl of Oxford’s Case 17 this case the college was to receive no consideration from the Queen, since her conveyance to Spinola was to take effect before the annual rent next fell due.106 Consequently the initial grant to the Queen was void. The second part of the statute validated grants made by the Queen, but it was said by Croke J that the statute served only to give effect to voidable grants, not those which were absolutely void;107 and since the 1571 act was quite clear that the grant by the college was void and this had not been cured by the first part of the 1576 act, it followed that the grant by the Queen to Spinola was also ineffective. A second possibility was that the fine levied by Rowland Broughton in 1582108 was conclusive against the college. The normal rule was that a fine was effective even against third parties after five years had elapsed from the proclamation of the fine in the Common Pleas.109 However, the court held that the 1571 statute was sufficiently broadly worded to catch fines, even those levied by third parties: it referred to grants ‘made had done or suffered’, and the non-claim constituted a ‘sufferance’.110 Were the law otherwise, it was said by Haughton J, the 1571 statute would have been a dead letter, since any college could allow a stranger to enter onto its land and levy a fine, and then sit back for five years until the transferee’s title had fully ripened. We may suspect that this may have been exactly what the college had attempted to do. Lastly, it was argued that Goche’s receipt of the rent from Hamond in 1606 precluded the college from making its claim. But there was nothing formally to suggest that he was acting with the authority of the college, and the receipt was not under seal (presumably the college’s seal111 is meant), and the court was therefore clearly of the opinion that the college was not barred by this either. Indeed, according to Dodderidge J, Haughton J had thought the point so obvious that it was not even worth arguing.112 Throughout, the reasoning of both counsel and judges is markedly formalist. Although an abundance of case law was cited, it was in effect largely an exercise in statutory interpretation; and as such it has to be said that the analysis was impeccable. Thomas Egerton, Lord Ellesmere, was that would have been sufficient to raise a use, and that the requirement was therefore satisfied since the grant from the college to the Queen had recited that it was made ‘for divers considerations ... thereunto moving’ the Master and fellows: HLS 1081 f 48v, 52v. 106 1 Rolle 151, 169; 81 ER 394, 407. In his reading on the statute in 1582, Egerton had examined the question of what constituted value: BL MS Harg 207 f 58, BL MS Harl 5265 f 136v. 107 1 Rolle 151, 170–71; 81 ER 394, 408. 108 Above, n 71. 109 Above, n 72. 110 1 Rolle 151, 171; 81 ER 394, 408–09. 111 Somewhat piquantly, this had been a gift to the college from none other than Benedict Spinola. 112 1 Rolle 151, 172; 81 ER 394, 409.

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later to observe that the court had overturned an understanding of the law which had continued for many years,113 but this fails to do justice either to the length of the arguments or to the care with which they were crafted. What is noteworthy is this very formalism. Nowhere was it ever suggested that it might have been remotely relevant that Spinola, the Earls of Oxford and their tenants had spent a great deal of money developing the land, and that the college might have been attempting to make a wholly unjustified windfall profit. The Earl of Oxford—still a minor—was no doubt understandably aggrieved by the decision. Apparently immediately he brought a writ of error to remove the case to the Exchequer Chamber.114 No less speedily, he went to Chancery, this time joining as co-plaintiff one Thomas Wood, another tenant who had been dispossessed by the college and whose land had been leased to John Smith, the bursar.115 The first entry of the case in the Chancery Decree Books is on 26 June 1615, a matter of weeks after the decision of the King’s Bench.116 The Earl’s bill has not been discovered in the Chancery records, but its gist may be reconstructed from the decree roll, checked against the report of the Earl of Oxford’s Case in the Chancery Reports and the proceedings noted in the Chancery decree books and the Masters’ report. After giving the facts at length, it picked out the following points: since the grant by the college in 1574/75, Spinola, the late Earl of Oxford and his tenants had expended a very considerable sum of money—£10,000 it was said—on the development of the land; the Earl and his tenants had given penal bonds for quiet possession to those to whom they had made leases, which bonds would be forfeit if the college was able to reclaim the property; those who had purchased leases had relied on the fact that the land had originally been granted to Spinola by the Queen’s letters patent, the strongest guarantee of a good title; and that the purpose of the grant had been to improve to the greatest extent possible the college’s financial position, a purpose which had been fulfilled:117 It being her Majesty’s Intent, That the college should be advanced greatly in Profit, by having the Rectory to them and their Successors discharged of the Lease

113

C 78/291 no 17, m 7. Noted in the margin of KB 27/1426 m 288 as having been received on 12 May 1615. There are reports of arguments in the Exchequer Chamber in HLS 1081 f 48v and HLS 2068 f 1. Coke’s report of the decision of the King’s Bench was already in print, and was expressly addressed by Serjeant Moore: HLS 1081 f 48v at ff 51, 52v. Process on the writ of error was subsequently discontinued. 115 MCC A/27/14, dated 20 December 1607. 116 C 33/128 f 1234; the entry in the decree rolls gives 9 June as the date of the petition (C 78/291 no 18). At 1 Chan Rep 1, 3; 21 ER 485, 485 it is said that the bill in Chancery was preferred before the judgment of the King’s Bench had been entered on the roll. 117 1 Chan Rep 1, 1–2; 21 ER 485, 485, the first paragraph significantly corrected by comparison with the manuscripts. The gain to the college is marked with a cross in the margin of the decree roll. 114

The Earl of Oxford’s Case 19 for Years … And that Spinola and his heirs should have only the garden paying £15 per annum being the uttermost rent … Note; the college is hereby advanced £1700 more than they should have been if the former Lease had continued, which is not yet expired.

The petition would have raised matters which the college might have wished to dispute: the amount of money spent on the development of the land, the amount at risk from penal bonds, whether the college had made any profit and, if so, how much. The defendants Goche and Smith, though, refused to answer, but instead demurred to the bill and entered a plea which in effect restated the Common Law finding that the grant of 1574/75 was void. The basis for the demurrer, again reconstructed from the decree roll, was—significantly—not that the claim had already been adjudged at Common Law, but rather that the matters raised by the petitioners were appropriate to be determined at Common Law and not in Chancery, together with a denial that the erection of a ‘colony’ of buildings could affect the Common-Law rights of the owner of the land.118 The matter was immediately referred to two of the Masters in Chancery, and in the light of their report that the demurrer was insufficient, dated the following day,119 it was ordered that the defendants should answer the substance of the petition.120 They refused to do so on the grounds that the matter was not within the jurisdiction of the Chancery, Smith saying that he was acting on the advice of Goche and Goche saying that he was acting on the advice of his counsel, and on 21 October 1615 the two men were committed to the Fleet prison for contempt.121 One can only speculate as to the conversation at dinner in Magdalene when the news arrived that the Master and Bursar had been sent to gaol. Three weeks later the Chancery turned the screw tighter, requiring an answer to have been made within one week on pain of

118 C78/291 no 18 m 3: ‘[T]he matters in the said bill contained were aptly determinable and to be determined by the common laws of this realm and not in this honourable court, neither did the same contain sufficient cause to draw into examination and question in this court matter of title and the validity and invalidity of estates derived from the said college which if they were ineffectual in law to debar the said college as of the complainants own showing they appeared to be as the defendant alleged then were not the same by colony of buildings upon any other persons loud and unjust pretence of recompense of the same things which was not warrantable by law of any sort to take away the right of the college neither were such unreasonable estates tending to the disherison of the said college and not warranted by law to be questioned in equity.’ 119 C38/22 (unfoliated). The report was based on three grounds: that the college had received full consideration for the land; that a large amount of money had been spent on the development of it; and that at the time of the original grant it was generally thought that a conveyance via the Queen would take the grant outside the statutory restrictions. 120 C 33/128 f 1259v. 121 C 33/130 f 39 (deleted), 53.

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forfeiting £200.122 Meanwhile, the two men had brought a writ of habeas corpus to the King’s Bench. The intransigence of Goche and Smith and the bringing of habeas corpus brought into focus the whole question of the relationship between Common Law and Chancery, and it is for this that the case has become a landmark in the eyes of posterity. This context will be examined in due course,123 but it was, of course, only peripherally relevant to the parties, for whom the real question was—as it always had been—whether the college could recover back the land which it had conveyed away in 1574/75. The spotlight was only briefly on the habeas corpus case.124 The King’s Bench was divided over the question whether the Chancery suit could be said to have been brought in respect of the same cause of action as the Magdalen College Case at Common Law, for the co-plaintiffs with the Earl were different in the two cases, and hence presumptively the actions were being brought for different plots of land in the Covent Garden.125 Dodderidge J was inclined to overlook this, since the reality of the situation was that both the Common-Law and Chancery claims were concerned with the underlying freehold of the Earl of Oxford. Coke CJ, however, stressed the technical point, and the court ordered that the Earl’s bill and the associated documentation in the Chancery suit be brought into the King’s Bench so that it could be verified whether or not the actions were being brought for the same matter.126 When the bill was produced the court seems to have leaned in favour of the applicants, but in the event, the Chancery backed off. On 30 November, Lord Ellesmere ordered that Goche and Smith be released from the Fleet, but should be required to give sureties that they would attend the Chancery every day until given leave to depart.127 Their attendance in the Chancery was duly noted every sitting day of the court in Hilary Term 1616, at the end of which their sureties were released, though Goche and Smith were again required to attend day to day in the Easter Term.128 After two weeks of formal attendance, it seems that argument in the case was heard on 2 May.129 Again, Lord Ellesmere LC demonstrated a marked 122 C 33/129 f 134v. It is to this point that the reported Earl of Oxford’s Case probably belongs: below n 170. 123 Below, 27–32. 124 For the growth of habeas corpus at this time, see P Halliday, Habeas Corpus (Cambridge, Mass, Belknap, 2010). 125 Googe and Smith’s Case (1615) 1 Rolle 277, 81 ER 487; 3 Bulst 115, 81 ER 98; HLS 109 f 102v. 126 It is worthy of note that Coke was generally unsympathetic to habeas corpus actions aiming to overrule Chancery orders to imprison: Halliday (n 124) 91. 127 C 33/130 f 232v, noted at 1 Rolle 277, 278; 81 ER 487, 487. 128 C 33/130 f 462. 129 C 33/129 f 728. The first half of the entry is deleted (and marked as vacated), but the continuation at f 728v is not; the parallel entry in C 33/130 f 620 says merely that the defendants appeared. Though it may not have been relevant as part of the legal record, there is no good reason to reject the factual accuracy of the deleted entry.

The Earl of Oxford’s Case 21 reluctance to rush to judgment. The bill contained ‘divers matters of great equity … meet to be received in this court’,130 and nothing in it brought into question the proceedings in the Court of Wards or in the King’s Bench. The implication of this was that the defendants’ demurrer was not wellfounded, and Ellesmere said that he would proceed to give judgment to that effect in one week’s time unless Goche had by then waived the demurrer and answered to the bill. Ellesmere’s judgment was given on 6 May 1616.131 Right to the end he was urging the defendants to waive their demurrer and answer the points made in the petition, but Goche refused to do so despite the advice of his counsel that he should. Instead he insisted on the finality of the judgment at Common Law, making reference to the Statutes of Praemunire132 and referring to a recent case in Chancery on the application of the 1571 statute. Goche, a Doctor of Laws, was by this time making the arguments himself— his counsel is recorded as having agreed that the arguments were irrelevant and having said that he had tried to convince Goche of this—but Ellesmere none the less dealt with them carefully. Judgment was therefore decreed for the plaintiffs, the defendants having been taken to have confessed by their demurrer all the facts alleged in the petition, and an injunction was issued that the Earl and his tenants have quiet enjoyment of the lands and that all suits at Common Law be stayed. This, one might have thought, would be the end of the matter, but Goche did not give up. Towards the end of 1616 the case took another turn. At Michaelmas, one Thomas Mosse, no doubt acting as the Earl’s representative, arrived with witnesses at Magdalene to tender the £15 annual rent and the arrears which had accrued over the previous nine years. They said that they had waited in the college hall from 3.00 in the afternoon until sunset, but nobody from the college would come to accept the money from them. A further petition was brought, this time requiring the college to accept the rent, and on the college’s refusal to do so it was ordered that the money be paid into court and that depositions be taken from witnesses to the tender which could be used in any future proceedings, protecting the Earl from the risk that the witnesses might have died in the meantime.133 Still Goche remained intransigent, refusing to accept the rent as it fell due, and thereby creating the impression that the Earl’s title was not secure so that he could not deal with it freely. In 1619 he petitioned the King for confirmation of the decree of 1616.134 James referred the matter to Francis Bacon, now

130

C 33/129 f 728 (deleted). C 78/291 no 17. Curiously, the decree book makes no mention of this, noting simply the defendants’ routine appearance: C 33/130 f 626. 132 Below, text at n 186. 133 C 33/132 ff 342v, 600v. 134 Details from C 78/291 no 17. 131

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Lord Chancellor, the two Chief Justices, Montagu of the King’s Bench and Hobart of the Common Pleas, and the Chief Baron, Tanfield, requiring them to certify their opinions in the matter.135 The case was yet again argued by counsel, though unfortunately no report of this has been discovered. It was only now, after more than 10 years in the courts, that the substance of the Earl’s case was subjected to judicial consideration. The basis of his position, as expressed in the original Chancery petition, was in effect that the college should be estopped from reclaiming the land, at least without paying compensation for the improvements:136 those holding it had spent a good deal of money on the improvements and had put far more at risk through the giving of penal bonds, all of which they had done in good faith and in the apparently reasonable belief that the Queen’s letters patent had given an irrefrangible title; and the college had in no sense been cheated by the transaction or even taken advantage of, but on the contrary had made a considerable profit out of it. The Lord Chancellor, Chief Justices and Chief Baron largely accepted this. Whatever the true interpretation of the statute of 1576, ever since it had been enacted the view of lawyers had been that grants made by letters patent were good in law; as a consequence, very large sums of money had been expended by individuals in the belief that their estates were good, and no fault could be imputed to them for having been mistaken in this belief. In sum, it was not appropriate to dispossess bona fide purchasers who had remained in possession for many decades.137 On receipt of this certification, the King instructed Lord Chancellor Bacon to affirm Ellesmere’s earlier decree, saying that it was properly part of the King’s function ‘to take care and provide that the rigour of the law might be so tempered with equity as that his majesty’s subiects might not by colour of law be pressed with any hard and avoidable extremities.’138 John Manningham, still counsel for Goche and the college, argued that in refusing the rent they were not in any way impugning Ellesmere’s decree, but Bacon rejected this since the refusal could not be interpreted in any other way than as implying that they still had a claim over the land.139 In the light of this, a final decree was made requiring the college to accept the rent as it fell due and give acquittance under

135 Montagu and Hobart had argued the Earl’s case as counsel, but it would be wrong to conclude from that that they must have been biased in favour of him when sitting in a judicial capacity. 136 It is clear from the college’s demurrer (above, n 118) that the Earl would have been satisfied with this. The situation would therefore have been exactly the same as in Roman law if a vindicatio had been brought and the defendant raised an exceptio doli. 137 Summarised in C 78/291 no 17. 138 Ibid, m 8. 139 C 33/314 f 921v.

The Earl of Oxford’s Case 23 seal for it and ordering that no further litigation over the original decree be permitted.140 An injunction to this effect was served on the college.141 Goche then turned to Parliament, having been elected as MP for Cambridge University in 1621.142 He first attempted to proceed by way of petition, but it was resolved that he should instead proceed by bill.143 Although as yet the only issue was whether Goche should be allowed to speak since the matter might have been thought to be his own cause, Sir Edward Coke’s recorded remarks show that the point of substance might still have been a matter in dispute:144 It is a great grievance that the parliament shall say, be it enacted that all such Leases shall be void, and the Chancellor, be it decreed that it shall be good; for it was done in Magdalen College Case, whereof Gouch spoke. The writ of error after that one judge had argued for the judgment was discontinued. The chancellor that made the decree held a lease from a college upon the same title. This particular involves a general; it toucheth every man in his inheritance.

The bill to avoid the Chancery decree against the college was duly presented, justified on the grounds that the Chancery should not decide matters of inheritance,145 but lack of time meant that it was not fully debated or enacted. Re-elected to the 1624 Parliament, Goche again introduced a bill to overturn the decree, at the same time as the Earl of Oxford introduced a bill into the House of Lords to confirm it.146 Although Oxford’s bill made better progress, both bills stalled in committee and neither was enacted. This, finally, put an end to the matter, at least for a while: on several occasions since the college has investigated the re-opening of the question.147

D. THE ISSUES IN THE LITIGATION

It is impossible to capture in any simple way what this complex of litigation was ‘really’ about. For Goche and the college, no doubt, it was seen as a

140 141 142

C 78/291 no 17, m 8. MCC A/27/16. Thrush and Ferris (n 76) 408. He had unsuccessfully stood for election in 1614: ibid,

407. 143 W Notestein et al, Commons Debates 1621 (New Haven, Conn, Yale University Press, 1935) vol 3, 158; vol 4, 299; vol 5, 139, 366. For procedure by petition, appropriate to the redress of a private grievance, see Coke, Fourth Institute, 10–11. The 1621 parliamentary proceedings are concisely described in Thrush and Ferris (n 76), 408. 144 Notestein et al (n 143) vol 5, 139. For all his rhetoric, it is noteworthy that in 1613 Coke himself had intended to buy the lease of the manor of Cressingham, Norfolk, which had been conveyed to the Queen by the Dean and Chapter of Norwich: JP Collier (ed), The Egerton Papers (London, Camden Society, 1840) 462; I owe this reference to Dr Steven Churches. 145 Notestein et al (n 143) vol 3, 197; noted also vol 2, 353; vol 4, 317. 146 For the 1624 proceedings, Thrush and Ferris (n 76) 412. 147 Cunich et al (n 19) 82–83.

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matter of attempting to recover valuable land out of which they believed that they had been in some sense cheated in the 1570s. For the Earl of Oxford, no doubt, it was seen as a matter of retaining valuable land which he had always thought to be his, and where he was at risk of losing many thousands of pounds if his tenants were evicted from property which they had developed at considerable expense and in the belief that their rights were well-grounded. Both sides surely thought they were right, both were willing to exploit the potentials of the English legal and political system to press their own claims, and probably both were frustrated by the ability and willingness of the other side to do so. For the historian, the most important feature is the jurisdictional plurality which characterised the early-modern legal system: the dispute was located in turn before the Court of Wards, the King’s Bench, the Exchequer Chamber, the Chancery, the Chief Justices and Chief Baron acting on commission from the King, and finally in Parliament. In such a world, finality was a goal which could hardly be achieved where both parties were tenacious and determined to succeed. As well, we cannot help pausing in an attempt to understand how Parliament in 1571 might have legislated to outlaw transactions whereby colleges parted with their lands for lengthy terms of years or in perpetuity, only for the Queen to be used as an instrument to avoid the statute, with Parliament then unable effectively to deal with the problems created thereby. For the lawyers, the issue at the heart of the dispute was the inviolability of Common-Law property rights. This was the basis of Goche’s and Smith’s demurrer in the Chancery—that the determination of property rights was a matter purely for the Common Law and not for the emergent equity of the Court of Chancery—and it lay behind Goche’s bill in the 1621 Parliament, that the Chancery should not meddle in matters of inheritance.148 This whole issue of the inviolability of property rights was a dominant theme in the political discourse of the reign of James I, intimately connected with arguments about the protection of individual liberty.149 Its principal focus was the legitimacy or illegitimacy of extra-parliamentary taxation. It had been held by the Court of Exchequer in Bates’ Case in 1606150 that the King had a general power to levy taxes—in this case a levy on the importation of currants—for the public good. This decision, and the way in which it was being implemented, was a matter for sustained criticism in the Parliament of 1610: taxation at the will of the King was tantamount to the taking of

148

Above, n 118, n 145. JP Sommerville, Politics and Ideology in England, 1603–1640 (London, Longman, 1986) 145–63. 150 Bates’ Case (1606) Lane 22, 145 ER 267. 149

The Earl of Oxford’s Case 25 property without consent, something which was improper.151 For William Hakewill, certainty was the hallmark of the Common Law;152 the Common Law could be seen as the guarantor of the stability of property rights. Similar concerns lay behind the discussion of the Irish custom of tanistry, according to which land descended not according to some predetermined and certain rule, but to the kinsman who was deemed the most worthy. A statute of 1570153 had made it possible for the current tanist to convert his interest into a Common Law estate by surrender to the Crown and regrant, but tanistry had not itself been abolished. In the early seventeenth century a move was made to do this, led by Sir John Davies, the Attorney-General in Ireland.154 One aspect of this attack on tanistry was the argument that it was a custom which should not be admitted as valid by the Common Law. It did not satisfy the basic minimal criterion of reasonableness, argued Davies in the Irish King’s Bench.155 If the line of descent was not certain, the occupant for the time being would have no incentive to develop or improve the land; it encouraged crime, since men could have no confidence that their wives or children would be provided for after their death; and it went against the maxim of the Common Law that there could be no abeyance of the freehold. In sum, ‘A commonwealth cannot survive without certain ownership of land.’156 The Case of Tanistry might not at first have been familiar to lawyers in England, but the publication of Davies’s report of it in 1615, in a volume dedicated to Ellesmere, would have ensured its entry into the legal consciousness. That established property rights should be afforded strong protection by the law is no doubt something on which Magdalene and the Earl of Oxford would have agreed. The difference between them was that the college was arguing that property rights were to be identified solely by reference to the Common Law, whereas the Earl was placing greater weight on the fact that he and his tenants had been in occupation of the land for several decades and had in good faith spent a great deal of money in the development of it. This was the truly contested territory in the case, and the decision in favour of the Earl reflected two important points. First was that Common Law

151 See, eg, the speech of Thomas Hedley in the debate over impositions in 1610: ER Foster (ed), Proceedings in Parliament 1610 (New Haven, Conn, Yale University Press, 1966) 188–89; Sommerville (n 149) 153–54. 152 W Hakewill The Libertie of the Subject: Against the Pretended Power of Impositions. Maintained by an Argument in Parliament Anno 7o Jacobi Regis (London, 1641) 10: ‘That the Common-Law of England (as also all other wise Laws in the World) delight in certainty, and abandon incertainty, as the mother of all debate and confusion, than which nothing is more odious in Law.’ 153 Stat 12 Eliz c 4. 154 HS Pawlisch, Sir John Davies and the Conquest of Ireland (Cambridge, CUP, 1985) 55–81. 155 Case of Tanistry (1608) Dav 28, 80 ER 516. 156 Ibid, 33–34; 522–23.

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did not have a monopoly over the determination of rights of real property, second that—in modern terms—the Court of Chancery had the power to manipulate property rights based on the working of what we would see as a broad principle of estoppel. With hindsight, the first of these looks as if it could hardly have been controversial, and the speed with which the Masters in Chancery reported that Goche’s demurrer was ill-founded157 suggests that this is how they saw the matter too. However, it might not have been quite so clear-cut at the time. Sixteenth-century Chancellors had rather vacillated over the question of the extent to which they could or should interfere with property, commonly preferring to do so indirectly rather than directly,158 and what we think of today as Chancery’s property institutions were not yet established. Since 1536 the Statute of Uses had operated to convert most uses into legal estates, except where the feoffees had active duties to perform.159 The passive trust, based on the use upon a use, was only just beginning to emerge, and the uncertainty which it introduced was a matter for criticism by Common Lawyers;160 it was not until the time of Lord Nottingham later in the seventeenth century that it was to be truly established, and even then it was arguable that the beneficiary’s interest was a purely personal right.161 The equity of redemption was still in the process of gestation;162 and equitable rights such as restrictive covenants were still centuries away. While for the modern lawyer the proprietary consequences of equitable rights are absolutely fundamental (though no longer centred on interests in real property), matters could have turned out very differently indeed. It is no exaggeration to say that had the Earl of Oxford’s Case upheld Goche’s demurrer, the subsequent history of the English law of property could have been unrecognisably different. The second point, the operation of a broad principle of estoppel, is more technical. The Chancery decree roll shows that an idea of this sort was the basis of the Chancery judgment: Spinola, the Earl of Oxford and their tenants had expended very considerable sums on buildings; they had acted in 157

A single day: above, n 119. E Henderson, ‘Legal Rights to Land in the Early Chancery’ (1982) 26 American Journal of Legal History 97. 159 Such active uses did not compromise the dominance of the Common Law, since they were not concerned with the whereabouts of what we would today regard as beneficial ownership, only with how the undoubted holders of the fee simple should exercise their property rights. 160 NG Jones, ‘Trusts in England after the Statute of Uses: A View from the 16th Century’ in R Helmholz and R Zimmermann (eds), Itinera Fiduciae (Berlin, Duncker & Humblot, 1998) 173. Baker (n 92) 309. See in particular the Reading of Henry Sherfield on the Statute of Wills (Lincoln’s Inn, 1623), in JH Baker and SFC Milsom, Sources of English Legal History (2nd edn by Sir John Baker, Oxford, OUP, 2010) 149. 161 M Macnair, ‘The Conceptual Basis of Trusts in the Later 17th and Early 18th Centuries’ in Helmholz and Zimmermann (eds) (n 160) 207. 162 GJ Turner, The Equity of Redemption (Cambridge, CUP, 1931) 27–28, 37–38. 158

The Earl of Oxford’s Case 27 good faith throughout, and in the reasonable belief that they had good title; the college had not been overreached but had itself made a considerable profit.163 The last of these points may have been particularly important, for it is marked with a cross in the margin of the decree roll. Estoppels had long been recognised as a matter of Common Law, but only where there had been a positive act or representation by the person estopped.164 Here there had been no such positive conduct, and it was presumably for this reason that the issue was not raised in the Common Law proceedings in the Magdalen College Case. Indeed, the word ‘estoppel’ was nowhere used in the Chancery proceedings in the Earl of Oxford’s Case, and the printed report of the case focuses on the issue of the relationship between Chancery and the Common Law courts rather than the substantive ground of the decree in Equity. Equitable estoppel, as a basis of proprietary claims, hardly existed in the eighteenth century—the section devoted to it in Viner’s Abridgment165 is exiguous, for example—and it was not until the middle of the nineteenth century that this aspect of the Earl of Oxford’s Case was to be resurrected, as one of the foundational authorities for the formulation of the idea of estoppel by acquiescence in Ramsden v Dyson.166 But this could not be expressed as the formal basis of the decision in the Earl of Oxford’s Case, for as yet the conceptual vocabulary was not there to do so.

E. ‘THE EARL OF OXFORD’S CASE’

The heading of the Earl of Oxford’s Case167 in the Chancery Reports reads: ‘The Earl of Oxford’s Case in Chancery. With the Lord Chancellor’s Arguments, touching the Jurisdiction of the said Court. Mich. 13 Jac. I.’ The most noteworthy thing about this is the date, Michaelmas Term 1615, for the Chancery record has no trace of any judgment being given in the case in that term. It was, it is true, a busy term, with the Chancery much concerned with the contumacy of Goche and Smith;168 but the first

163

C 78/291 no 18. See, eg, J Rastell, Exposition of Certaine Difficult and Obscure Words, and Termes of the Lawes of this Realme (Assignee of Charles Yetsweirt, decd, 1595), f 84 and Co Litt 352, both of which are expressed in terms of a person being estopped by his own acts or writings. 165 Viner, Abridgement, Estoppel, F (a). 166 Ramsden v Dyson (1866) LR 1 HL 129, 134. On this case, see the essay by N Piška in ch 9 of this volume. 167 (1615) 1 Chan Rep 1, 21 ER 485. I have compared the printed text to a selection of manuscript versions (CUL MS Gg 2.31 f 211v, CUL MS Mm 1.43 p 466, BL MS Harl 1767 f 29v, BL MS Harl 4265 f 67, BL MS Harg 227 f 279v, BL MS Harg 249 f 148v, BL MS Harg 269 f 25v, BL MS Lansd 613 f 31v, BL MS Stowe 296 f 65). All are substantially similar; points where the manuscripts vary from the printed text in some significant way are noted where appropriate. 168 C 33/130 ff 39, 53, 235, 232v. 164

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substantive decree in the case was on 6 May 1616, approximately six months later.169 The date therefore gives the context for the report: it is concerned solely with the propriety of imprisoning the defendants for their contempt in refusing to answer the Earl’s bill.170 The way in which this issue is formulated reflects contemporary concerns. It need not have done so: Goche and Smith might have argued that it was their right to demur to the Earl’s petition, taking the risk that the demurrer would be decided against them, and that consequently the Chancellor’s requirement that they waive their demurrer and answer the petition was illegal. However, in 1615 the whole question whether the Chancery had a power to require a successful party to release a judgment at Common Law and to commit him to prison when he refused to do so was very much centre-stage. Matters had come to a head in Trinity Term, in Glanvill’s Case.171 Contrary to Ellesmere’s insistence on the legitimacy of doing so, Coke had led the Common Law judges to the opposite conclusion and had ordered Glanvill’s release on habeas corpus. At the legal heart of Glanvill’s Case, and of Apsley and Ruswell’s Case172 at the same time, was whether a return to habeas corpus that the applicant was imprisoned by the order of the Chancery was good in itself, or whether the cause for which the imprisonment had been ordered had to be shown so that the King’s Bench could evaluate its sufficiency. Ellesmere’s reasoning suggests that Goche and Smith were trying to place themselves within the Common-Law principle of Glanvill’s Case, and his careful analysis looks to be directed at taking the case outside it. The first point established by Ellesmere was that the Earl had a good claim in Equity or conscience.173 In the absence of any answer by the defendants, it was said to be legitimate for the court to proceed on the basis of the facts alleged in the bill: Gorringe v Taylor.174 This settled, the position in Equity could be considered on its merits. Here the Earl and his tenants had expended very considerable sums of money on the development of the land, and it was not conscionable for the defendants to insist on their strict legal rights without compensating the plaintiffs. Chancery

169

Above, text at n 131. Above, text at n 124. 171 Glanvill’s Case 1 Rolle 111, 81 ER 365; 2 Bulst 301, 80 ER 1139; Moo 838, 72 ER 939; Cro Jac 343, 79 ER 294. This paragraph largely summarises JH Baker, ‘The Common Lawyers and the Chancery: 1616’ (1969) 4 Irish Jurist 368, 374–76. 172 Apsley and Ruswell’s Case 1 Rolle 192, 81 ER 424; 1 Rolle 218, 81 ER 443. 173 1 Chan Rep 1, 1–7; 21 ER 485, 485–86. For the role of conscience at this time, see D Klinck, Conscience, Equity and the Court of Chancery in Early Modern England (Aldershot, Ashgate, 2010) esp at 157–58. 174 Gorringe v Taylor (1596) C 33/91 f 424; 117 SS 210 no 235, 224 no 332 (not on this point). The reference to the case is omitted from the printed version. 170

The Earl of Oxford’s Case 29 authority was cited for this too: Peterson v Parrys and Hickman.175 In that case land had been held by a husband and wife jointly; the husband made a lease, the lessee expended considerable sums in developing the land, and after the husband’s death the wife initiated an action of ejectment to recover the land from the lessee. The Chancery refused to order a staying of the Common-Law action, but only on the basis that the lessee would be compensated in full for the value of the improvements. The situation in the Earl of Oxford’s Case was exactly the same, said Lord Ellesmere: ‘The Plaintiff in this Case only desires to be satisfied of the true Value of the new Building and Planting since the Conveyance, and convenient Allowance for the Purchase.’176 This was sufficient to set down an independent basis for the Chancery action. It should be noted that there is here a mismatch between the report of the case and the Chancery record. The report gives the reasons why the Earl’s claim should succeed, but the record shows emphatically that this was not decided in Michaelmas Term 1615 but continued to be at issue until May 1616. We might strongly suspect that the report of the case does not represent Ellesmere’s actual decision in 1615 but is a formalised version of his argument prepared for independent circulation. However, since it is this argument which is being examined, we may gloss over this mismatch. Ellesmere’s reasoning to justify the intervention was subtle. The first limb was to show that Chancery might legitimately intervene after a judgment at law, provided that the grounds of the judgment were not themselves questioned.177 Hence it was possible to have recourse to Chancery where an action was brought at Common Law to enforce a bond, where it was asserted that the money due under the bond had already been paid (this not being a defence at Common Law). At this point (at the bottom of page 8 of the printed report) there is a small but important linguistic shift: instead of speaking of the intervention of Chancery, he moves to referring to the intervention of Equity after judgment at Common Law. The first example of this, relief against penal bonds, was indeed a case of Chancery involvement; but immediately thereafter the focus shifts to Common-Law intervention by the writ of audita querela, a remedy available to reverse the effect of a judgment at law on the basis of material extraneous to the initial claim,178 described by Ellesmere as a ‘Latin Bill in Equity’. Hence, there was room for Equity to neutralise the effect of Common-Law judgments, both through the Court of Chancery and in the Common Law courts themselves.

175 Peterson v Parrys and Hickman (1597) C 33/93 f 125; 117 SS 263 no 248 (not on this point). 176 1 Chan Rep 1, 6; 21 ER 485, 486. 177 1 Chan Rep 1, 7–11; 21 ER 485, 486–87. The words ‘And for the Judgment’, marking the beginning of the section, form a header in the manuscripts. 178 TFT Plucknett, Legislation of Edward I (Oxford, OUP, 1949) 145–46.

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Where the enforcement of the judgment was unconscionable, it was for the Chancellor to frustrate it by operating on the conscience of the party; and ‘in such cases the Judges also play the Chancellors’.179 The boldness, and importance, of the linguistic shift from ‘Chancery’ to ‘Equity’ becomes clear at this point: if Equity in truth fell within the jurisdiction of the Common Law judges then the objection to the Chancellor’s intervening collapsed from being a point of high constitutional principle into a relatively insignificant squabble about which court had jurisdiction. The second limb of Ellesmere’s argument, dealing with the question whether judgments based on statutes were subject to different rules,180 similarly built on the use of Equity by Common Lawyers. Coke himself had reported Doctor Bonham’s Case,181 in which it had been said that the equitable underpinning of statutes was open to examination. More generally, the judges regularly construed statutes according to the ‘equity’ of them, interpreting them more widely where this was desirable in the public interest.182 ‘Equity’ in the latter context meant something very different from ‘fairness’, but Ellesmere glossed over this: the use of the same word served to knit the two ideas together. And just as the Common Lawyers used ideas of Equity to interpret or disapply statutes, so too should the Court of Chancery do so. In these two parts of his argument, Ellesmere had united together the two principal approaches to Equity which are found in the late sixteenth and early seventeenth centuries. On the one hand, it was something which underpinned the law; as he described it, it was something applied by both the Chancery and the Courts of Common Law. On the other, it existed outside the Common Law, functioning to correct its excessive rigour. A decade or so before the Earl of Oxford’s Case, Edward Hake had made a similar point,183 though he went on to differentiate between the Equity of the Common Law and the Equity of the Chancery, whereas Ellesmere was concerned to downplay these differences. In doing so Ellesmere was able to demonstrate that the Common Lawyers and the Chancery were doing

179 1 Chan Rep 1, 10–11; 21 ER 485, 487. The final part of this section of Ellesmere’s arguments appears rather differently ordered in the manuscripts, but is the same in substance as the print. 180 1 Chan Rep 1, 11–14; 21 ER 485, 487–88. In the manuscripts the opening words, ‘This is a Judgment upon a Statute-Law’ form the header of the section. 181 Doctor Bonham’s Case (1610) 8 Co Rep 113, 77 ER 646. See IS Williams, ‘Dr Bonham’s Case and “Void” Statutes’ (2006) 27 Journal of Legal History 111, with further references. 182 SE Thorne, ‘The Equity of a Statute and Heydon’s Case’ (1936) 31 Illinois Law Review 202; S Vogenauer, Die Auslegung von Gesetzen in England und auf dem Kontinent (Tubingen, Mohr Siebeck 2001) 685–91. 183 DEC Yale (ed), Epieikeia: A Dialogue on Equity in Three Parts (New Haven, Conn, Yale University Press, 1953). For the various forms of the idea of equity in the sixteenth century, see M Fortier, The Culture of Equity in Early Modern England (Aldershot, Ashgate, 2005) 59–76.

The Earl of Oxford’s Case 31 the same thing: giving effect to the moral ideas underpinning the law and mitigating the effects of a too rigid application of the Common Law. This led on to the third limb of the argument in the Earl of Oxford’s Case, whether there was anything in English law which precluded the Chancery from acting in this way.184 This final section of Ellesmere’s reasoning is markedly less polished than the first two sections; it is noteworthy that the manuscripts tend to peter out towards the end, reflecting this relative scrappiness. It is not difficult to surmise why he appears to have taken less care over the argument here: by the Michaelmas Term of 1615 he had already dealt with the point at issue at some length in his A Breviate or Discourse for the Kinges learned Councell, which is dated in the September of that year.185 The question was whether there was any statute that prevented the Chancery from acting contrary to an antecedent judgment at Common Law. In particular, it was by this time being argued principally that the Statutes of Praemunire of 1353 and 1402, which prohibited the bringing into question of decisions of the King’s courts and imposed criminal penalties for doing so, were broad enough to apply to the bringing of Chancery suits after a Common-Law judgment.186 This had been the judges’ main reason for denying the power of Chancery in Finch v Throckmorton in 1597,187 and Coke was to suggest in Googe and Smith’s Case188 that this was correct and that the statutes did apply to the Chancery. Ellesmere, in his Breviate and more sketchily in the Earl of Oxford’s Case, argued— probably correctly, as a matter of history—that they did not do so but were concerned with references to the papal courts after judgment had been given in England. Whether they should be applied was ultimately a political question, which was to be decided by the King in favour of the Chancery in his Star Chamber speech in 1616.189 It has already been argued that the characterisation of the Earl of Oxford’s Case as a leading case in Equity is somewhat misleading, a consequence of the concentration on Ellesmere’s reported speech rather than on the substance of the case, though if the substantial point in issue had been reported, no doubt it would have become a leading case on the question of estoppel by silence. The characterisation, though, is misleading in another

184 1 Chan Rep 1, 14–end; 21 ER 485, 488–89. The opening words, ‘The Law of the Land speaks not against this’, are marked as a header in the manuscripts. 185 Edited in LA Knafla, Law and Politics in Jacobean England (Cambridge, CUP, 1977) 319. 186 Stat 27 Edw III stat 1, c 1 (Statutes of the Realm 1 329); Stat 4 Hen IV c 23 (Statutes of the Realm 2 142). Coke, Third Institute, 119–27. 187 Finch v Throckmorton BL MS Harl 6686 f 222v; the section of the report dealing with this point is heavily annotated by Coke. 188 Googe and Smith’s Case (1615) 1 Rolle 277, 81 ER 487; 3 Bulst 115, 81 ER 98. 189 Above, n 11.

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way, too, the consequence of the English lawyer’s near monofocal obsession with case law. ‘The Earl of Oxford’s Case’, as reported, gave only one side of a highly disputed question—the other side might be thought to have been given in the unreported decision in Finch v Throckmorton190—and in no sense decided the issue. The credit for that lies outside the cases, the courts and the law; it was a product of politics and the exercise of the King’s will. But in a world in which historians’ sense of constitutional propriety was shaped by the deposition of a King and the dual authority of the legislature and the courts, there was little room for this to hold its place as the legal basis of the relationship between the Chancery and the Courts of Common Law.

190

Above, n 187.

2 Coke v Fountaine (1676) MIKE MACNAIR

A. INTRODUCTION

C

OKE V FOUNTAINE is an odd sort of landmark—perhaps one which was initially missed. Lord Nottingham’s decision has been frequently cited in modern times on the classification of trusts, and on the nature and limits of equity. It was heard by Lord Nottingham together with the two Chief Justices, which would prima facie imply that the case would be a leading one. Other aspects of the litigation were reported and subsequently cited. But this particular stage of a litigation which ran between 1672 and 1690 was not printed, and not cited from manuscript; it was only in the nineteenth century that it began to be cited. In this chapter I examine the reception of the case, its background and the nature of Lord Nottingham’s reasoning. I suggest that the reason for the original non-reporting of the decision is that it appeared to be merely one on the facts.

B. THE LANDMARK

The landmark is the judgment of Lord Nottingham, given at a hearing in May 1676 before himself, North CJ and Rainsford CJ.1 Though the plaintiff had made more general claims in the original bill, the judgments discuss specifically claims to two leases, and a rentcharge of £1,000 pa, which the plaintiff at this stage claimed were either in trust, or granted by way of security. The Chief Justices advised and Lord Nottingham decided that the leases were in trust to attend the inheritance, but the rentcharge was a gift to the defendant by the grantor.

1 DEC Yale (ed), Lord Nottingham’s Chancery Cases, 2 vols (London, Bernard Quaritch for the Selden Society) vol 73 (1957) and vol 79 (1961), cited hereafter as 73 and 79 SS; 73 SS 362, 3 Swanst 585, 36 ER 984.

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In the course of giving judgment Lord Nottingham made some very general statements, both about trusts and about the nature of equity, which became in modern times landmark statements. In particular:2 All trusts are either, first, express trusts, which are raised and created by act of the parties, or implied trusts, which are raised or created by act or construction of law; again, express trusts are declared either by word or writing; and these declarations appear either by direct and manifest proof, or violent and necessary presumption. These last are commonly called presumptive trusts; and that is, when the Court, upon consideration of all circumstances presumes there was a declaration, either by word or writing, though the plain and direct proof thereof be not extant.… There is one good, general, and infallible rule that goes to both these kinds of trusts; it is such a general rule as never deceives; a general rule to which there is no exception, and that is this; the law never implies, the Court never presumes a trust, but in case of absolute necessity. The reason of this rule is sacred; for if the Chancery do once take liberty to construe a trust by implication of law, or to presume a trust, unnecessarily, a way is opened to the Lord Chancellor to construe or presume any man in England out of his estate; and so at last every case in court will become casus pro amico.

And, after reviewing the evidence and circumstances,3 If after all this a man will still suppose that there was a secret trust, security, or agreement between the parties to re-purchase this rent, which no bill charges, no proof can make out, and the defendant denies upon oath, then it must be such a trust, security, or agreement as is only between a man and his confessor. With such a conscience as is only naturalis et interna this Court has nothing to do; the conscience by which I am to proceed is merely civilis et politica and tied to certain measures; and it is infinitely better for the public that a trust, security, or agreement, which is wholly secret, should miscarry, than that men should lose their estates by the mere fancy and imagination of a chancellor. The rule of nullus recedat a cancellaria sine remedio, was never meant of English proceedings, but only of original writs, when the case would bear one; and so the Chancellor in 5 Hen 7, understood it, for otherwise says he, no man need to be confessed.

In modern equity textbooks these passages are used for two purposes. The first is the use of the first paragraph of the first passage quoted, as introducing the classification of trusts into express or implied trusts. The second is the use of the second passage in ‘history sections’ as representing a historical moment at which Chancellors rejected earlier conceptions of equity and

2 3

73 SS 365, 3 Swanst 591–92, 36 ER 987. 73 SS 371, 3 Swanst 600–01, 36 ER 990.

Coke v Fountaine 35 conscience which were more linked to the forum internum.4 The latter use is shared by historical works.5

C. ITS RECEPTION

What is remarkable about this landmark is that it was not observed until so much later. This was a hearing before the Lord Chancellor and two of the three Chief Justices, with very striking general statements from Lord Nottingham—the sort of case which commonly was reported and later cited. There were reporters active in Chancery at this time—Freeman, and the reporters whose work was printed in 3 Reports in Chancery and 1 and 2 Cases in Chancery. Other aspects of the litigation were reported. Yet, apart from Lord Nottingham’s own report, this judgment went unreported. Neither was it cited from manuscript reports, or from the records, in the printed reports and treatises in the ensuing century and a half. It was only when Swanston printed Lord Nottingham’s report in 1827 in his own reports of cases in Chancery that it began to be cited. The immediate background is that in Crowley’s Case,6 Lord Eldon was pressed with an argument from Jenks’ Case (1676) as to the jurisdiction of the Court of Chancery to grant habeas corpus in vacation. Lord Eldon then cited Jenks’ case from Lord Nottingham’s manuscript. At some date between the completion of Swanston’s first volume in 1820 and the publication of the second in 1822, Lord Eldon gave Swanston a copy of Lord Nottingham’s manuscript, and Swanston thereafter included cases from Lord Nottingham in the notes.7 The larger context is therefore a particular authority conferred on Lord Nottingham’s views by Lord Eldon.

4 Eg HM Hanbury and J Martin, Modern Equity, 17th edn (London, Sweet & Maxwell, 2005) 13 (classification of trusts), 95 (against implying trusts from precatory words); AJ Oakley (ed), Parker & Mellows, The Modern Law of Trusts, 8th edn (London, Sweet & Maxwell, 2005) 37 (classification of trusts); EH Burn and GJ Virgo, Maudsley & Burn’s Trusts and Trustees: Cases and Materials, 6th edn (London, Butterworth, 2002) 57 (classification of trusts); A Hudson, Equity and Trusts, 6th edn (Abingdon, Routledge, 2010) 35, 36 (conscience). 5 Eg JH Baker, An Introduction to English Legal History, 4th edn (London, Butterworth, 2002) 110. DR Klinck, Conscience, Equity and the Court of Chancery in Early Modern England (Farnham, Ashgate, 2010) ch 8, attempts to contextualise Lord Nottingham’s statements about conscience in relation to contemporary casuistry and Nottingham’s practice in other cases, and properly plays down (as Spence did, below n 9) the extent to which they represented a watershed. In ‘Equity and Conscience’ (2007) 27 OJLS 659, 680, I represent the case as displaying the end of an older concept of ‘conscience’ which could be separated from moral reasoning and given operative legal effects. 6 Crowley’s Case (1818) 2 Swanst 1, 36 ER 514. 7 Ibid, 5–10, 516–18 (counsel); 11ff, 518ff (Lord Eldon); 83, 539 (Swanston’s note of Lord Eldon’s giving him the manuscript copy). Jenks’ case is reported as Jenkes’ Case 6 St Tr 1189, but as Francis Jenks in Lord Nottingham’s reports, 73 SS 423, 425.

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Thereafter, attempts were made in court to use Lord Nottingham’s argument that implied or presumptive trusts should only be imposed in cases of ‘absolute necessity’, but these attempts had no success.8 The case was more popular with the treatise writers: the first passage was used, as it still is, as a reference point on the classification of trusts,9 and the second was used, as it still is, to distinguish equity from private conscience and rebut Selden’s ‘chancellor’s foot’ tag.10 It was also used (by way of Lord Nottingham’s citation of Pitt v Pelham) as authority that a disposition with a direction to pay debts amounted to a trust for payment of debts,11 for the proposition that parol evidence is admissible to rebut the presumption of

8 Mayer v Townsend (1841) 3 Beav 443, 445; 49 ER 174, 175 (counsel for defendant; rejected); Mayor Aldermen and Burgesses of Gloucester v Wood (1843) 3 Hare 131, 135; 67 ER 326, 328 (counsel for plaintiffs) 142, 330 (Wigram VC; distinguished); on appeal, Corporation of Gloucester v Osborn (1846–7) 1 HLC 272, 278; 9 ER 760, 763 (counsel for plaintiffs; the appeal was dismissed, the Law Lords not finding it necessary to refer to the point); Briggs v Penny (1851) 3 Mac & G 546, 553; 42 ER 371, 374 (cited by counsel for defendants; decree for plaintiff); Clark v Browne (1854) 2 Sm & Giff 524, 528; 65 ER 510, 513 (counsel for plaintiff; rejected); Muggeridge v Stanton (1859) 1 De G, F & J 107, 116; 45 ER 300, 303 (counsel for defendant; rejected). In R v Fletcher (1862) Le & Ca 180, 169 ER 1353, counsel for the Crown used Lord Nottingham’s statement on the classification of trusts in argument at 198, 1363, but this use appears to be merely introductory to the point at issue (the statute under which defendant was convicted of misappropriating trust funds required an express trust declared in writing; the question was whether the rules of a savings bank fell within this provision). 9 The references in this note and down to n 14 derive from a search for ‘Cook v Fountain’ and dates 1827–1914 in full text on the Making of Modern Law database, and therefore have a slightly random character. I have set on one side references purely to the competence of executors as witnesses and a number of other minor uses of the case. H Jickling, A Practical Treatise on the Analogy between Legal and Equitable Estates (London, Stevens & Sons, Sweet & Maxwell, 1829) ii, 27–28, fn (a); J Hill, A Practical Treatise on the Law Relating to Trustees (London, Stevens & Norton, 1845) 55, fn (a); GW Spence, The Equitable Jurisdiction of the Court of Chancery (Philadelphia, Pa, Lea & Blanchard, 1846) ii, 3; J Story, Commentaries on Equity Jurisprudence as administered in England and America, 4th edn (Boston, Little, Brown, 1846) ii, 602; JJS Wharton, The Principles of Conveyancing (Philadelphia, Pa, T&W Johnson, 1851) 395; JN Pomeroy, A Treatise of Equity Jurisprudence, as administered in the USA (San Francisco, CA, AL Barratt & Co, 1881) i, 134, fn1; J Barbee Miner, Institutes of Common and Statute Law, 3rd edn (Richmond, VA, np, 1892) ii, 218; W Gray Hart, A Digest of the Law Relating to Private Trusts and Trustees (London, Law Notes Publishing Co, 1909) 13. 10 Hill (n 9) 80; Spence (n 9) i, 416–17; Pomeroy (n 9) 47; TE Holland, The Elements of Jurisprudence, 10th edn (New York, OUP, 1906) 71; G Spencer Bower, The Law Relating to Actionable Misrepresentation (London, Butterworth, 1911), 417. 11 Pitt v Pelham (1670) 1 Ch Rep 149, 21 ER 574, 1 Ch Cas 176, 22 ER 750, 2 Freem 134, 22 ER 1110; DEC Yale (ed), Lord Nottingham’s ‘Manual of Chancery Practice’ and ‘Prolegomena of Chancery and Equity’ (Cambridge, CUP, 1965) 240. The ruling is actually that an express trust to trustees to pay debts imposes an implied trust to cooperate on the heir, but the general point is a legitimate inference from it. EB Sugden, A Practical Treatise on Powers, 6th edn (London, Sweet, 1836) 135, fn (p); Spence (n 9) i, 508–09; T Lewin, A Practical Treatise of the Law of Trusts, 6th edn (London, Maxwell, 1863) 123, fn (e); JW Perry, A Treatise on the Law of Trusts and Trustees, 5th edn (Boston, Mass, Little, Brown, 1899) 150, fn 2.

Coke v Fountaine 37 resulting trust,12 for the principle of parsimony in implied trusts13 and for the proposition—controversial in modern times—that a voluntary conveyance does not give rise to a presumption of resulting trust.14 There was a range of treatise writers, however, who did not use it at all.15 Why was there this delay in recognising Coke v Fountaine as an important case? Part of the story, I suggest, is the background of the case and the limited significance of this particular decision either in the course of the litigation between the parties, or in the law stated by Lord Nottingham. The other part is the greater legal significance in the field of an event a little less than a year later:16 the passage of the Statute of Frauds 1677.

D. THE BACKGROUND

The plaintiff Robert Coke was cousin and heres factus of John Coke of Holkham the younger, whose transactions with the defendant Andrew Fountaine formed the subject of the litigation. John Coke the younger was the son and heir of John Coke of Holkham the elder, who was second surviving son of Sir Edward Coke, the former Chief Justice. John the elder in 1612 married Merriel, daughter and heiress of Anthony Wheatley of Holkham.17 John the younger was his youngest

12 Spence (n 9) ii, 214, fn (c). R Storry Deans, The Student’s Legal History, 2nd edn (London, Stevens, 1905) 124, rather remarkably attributes the doctrine of presumption of advancement to Coke v Fountaine. 13 J Lord Campbell, Lives of the Lord Chancellors, 2nd edn (London, John Murray, 1846) iii, 419; TH Haddan, Outlines of the Administrative Jurisdiction of the Court of Chancery (London, Maxwell, 1862) 212–13 (misattributed to North CJ); S Warren, A Popular and Practical Introduction to Law Studies, 3rd edn (London, Maxwell, 1863) i, 625; Perry (n 11) i, 232 (rejecting the requirement of necessity). 14 Hill (n 9) 72–73; Spence (n 9) ii, 198; Haddan (n 13) 213, fn (a); Perry (n 11) i, 220, fn 4; JA Strahan, Strahan’s Leading Cases in Equity (London, Butterworth, 1909) 193. 15 G Jeremy, A Treatise on the Equitable Jurisdiction of the Court of Chancery (London, J & WT Clarke, 1828) was perhaps written before Swanston published the case; and Joseph Parkes’s A History of the Court of Chancery of the same year (London, Longman et al, 1828) uses only historical sources. But the case is not cited in any 19th-century edition of Snell available on The Making of Modern Law database (Principles of Equity, 1st edn (London, Stevens & Haynes, 1868) to the 12th edn by Archibald Brown, 1898), and I have not found more than an (erroneous) table of cases reference to it in any edition of White & Tudor’s Leading Cases on Equity before the 7th edition by Thomas Snow (London, Sweet & Maxwell, 1897), which uses it for the classification of trusts (ii, 694) and for the presumption of advancement (ii, 817, fn (d)). The information in this note is the product of a search in The Making of Modern Law database for ‘equity’ in title and dates between 1827 and 1900, followed by consultation of the Tables of Cases where the books had them; I have not thought it worth reporting in this footnote the silence of a large number of other less significant books. 16 Royal Assent 16 April 1677. Journals of the House of Lords (London, 1767–1830) (cited hereafter by the conventional abbreviation LJ) xiii, 118–21. Available at , accessed 14 March 2011. 17 CW James, Chief Justice Coke: his family and descendants at Holkham (London, Country Life, 1929) 93.

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son but the only one to survive him. He was baptised 8 September 1635, a year after his grandfather’s death.18 John the elder took the Parliamentary side in the civil war. He inherited the ‘grand estate’, ie the main body of Sir Edward’s very large estate (valued at £8,200 a year in the 1650s), on the death without surviving issue of his brother Sir Robert Coke of Huntingfield in 1652. John the younger was not sent to either of the Universities, but entered the Inner Temple at the age of 17 in 1652.19 There he met Andrew Fountaine, who was slightly his junior. Fountaine was born about 1637, the son of Brigg Fountaine, an Inner Temple barrister of possible Royalist leanings from a Norfolk gentry family. Andrew entered the Inner Temple in 1655 at the age of 18.20 After overlapping as students at the Inn for two years (1655–57), Coke and Fountaine left the Inner Temple in 1657 without passing the bar, to travel together on the Continent. It is perhaps possible that they were implicated in the fringes of the Royalist plotting of the period, since Coke was proposed as a Knight of the Royal Oak, the projected order of knighthood for staunch Royalists which was proposed in 1660–61 but in fact abandoned.21 Certainly, Coke was for some reason estranged from his father at this time and down to the latter’s death.22 Defence depositions in the Chancery cause suggest that John the younger and Andrew returned in 1660 and stayed, down to the death of John Coke the elder in 1661, with Brigg Fountaine; but John Coke the younger was still travelling in 1664, and the depositions suggest that Andrew Fountaine continued to accompany him.23 Whatever its nature, it seems clear that

18 BD Henning (ed) The House of Commons 1660–1690 (London, Secker & Warburg for the History of Parliament Trust, 1983) (cited hereafter as Hist Parl Commons 1660–1690), sub nom. Sir Edward Coke died 3 September 1634. 19 Ibid. J & JA Venn, Alumni Cantabrigienses, sub nom., confuses this John with his elder brother of the same name, born 1614, matriculated at Trinity College 1631, who died in 1633: , consulted 15 March 2011. 20 Hist Parl Commons 1660–1690, sub nom. 21 Ibid, snn. James (n 17), followed by Hist Parl, supposes that the nominee was John Coke the elder, in which case his estate was ‘grossly undervalued’ at £1,000 pa, but given James’s evidence (ch 14) of John the elder’s parliamentarism, and (at 102) his anticipated interest in ‘Socinian pieces’, and the complete absence of any evidence of his being suspect by the Cromwellian government (unlike his brother Henry: James, ch 16) or in any way ‘suffering’ for the King, it seems far more likely that John the younger was contemplated. 22 The bill (printed in AKR Kiralfy, A Source Book of English Law (London, Sweet & Maxwell, 1957) 271) blamed Fountaine’s machinations. Either political differences, or if the relationship between Coke and Fountaine was suspected of being sexual, would be equally possible explanations. But the point that Coke was estranged from his father and, as a result, short of money until his father died, was common ground of both sides in the litigation. 23 Hist Parl Commons 1660–1690, sub nom, has him meeting Philip Skippon in Florence in 1664, John Coke then being en route to Constantinople. Depositions in Kiralfy (n 22) 273–77.

Coke v Fountaine 39 the relationship between the two was an affective one rather than a purely business one. On his father’s death John the younger succeeded as tenant in tail in possession to the whole ‘grand estate’; the Middle Templar William Gwavas, who was ruled by the Court of Exchequer in 1678 to have been Coke’s receiver of rents from 1662 on, estimated Coke’s income at £10,000 a year—around £15.3m a year using average earnings to approximate modern values.24 The estate was, however, heavily encumbered. The Chief Justice had paid £32,000 of his sons’ debts, and John Coke the elder’s son Edward died in 1655 in debt to the tune of £40,000.25 In December 1661, soon after succeeding his father, John Coke the younger granted Andrew Fountaine a rentcharge of £1,000 a year, charged on the manors of Flitcham, Amner, Appleton and Minster Lovell.26 In the next few years he also entered into a series of transactions with him which substantially enriched Fountaine. In 1663 Coke barred the outstanding settlements by common recovery, and in the same year he granted a lease to Fountaine of Farnham Royal (Bucks) for 100 years at £35 pa rent, and in October 1665 leased lands in Mileham (Burghwood Manor, Mileham, Norfolk) to Fountaine for 40 years at £100 pa rent.27 In November 1665, he resettled the freehold by lease and release to the use of himself for life, with the usual powers, remainder to Andrew Fountaine and his brother James Fountaine to preserve contingent remainders, with remainders over including the ones which took effect: to his cousin Robert Coke of Thorington (grandson of John the elder’s younger brother Henry Coke) for 99 years determinable on death, remainder to Robert Coke’s eldest son in tail male. The two Fountaines also served as the ‘feoffees’ (strictly lessees and releasees) through whom the estate passed

24 WC Borlase, ‘Autobiographical Notice of William Gwavas, extracted from his Common Place Book, 1710’ (1878–81) 6 Journal of the Royal Institution of Cornwall 176, 178. Modern value from , consulted 24 March 2011. The ruling is in the June 1678 decree, PRO E126/13 fo 75r at fo 77v; Fountaine continued to dispute it in the House of Lords (Historical Manuscripts Commission, 11th Report, appendix Part II, HL MSS 1678–88, 115) and in the House of Commons in 1694 (Journals of the House of Commons (London, 1760) (hereafter CJ), vol x, 138), alleging that Gwavas acted down to 1668 as solicitor for both Coke and himself. 25 James (n 17) 80, 104. 26 4 December. This date is in the bill: Kiralfy (n 22) 271. The date was not disputed in the litigation. See James (n 17) 106 for the manors charged. 27 The bill and answer as summarised in the 1676 decree, TNA PRO C33/247 fo 606v at 606v, 607r. Farnham Royal is near Sir Edward Coke CJ’s country residence at Stoke Poges; he had bought it in 1630 (‘Parishes: Farnham Royal with Seer Green’, A History of the County of Buckingham: Volume 3 (1925), 225–31; available at , accessed 15 March 2011).

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by virtue of the Statute of Uses. During this period Coke’s will also made Fountaine an executor.28 Meanwhile, Fountaine was permitted to receive substantial rents and entry fines on the re-letting of various properties, and invested a substantial part of the money received in his own name. Between the early 1660s and December 1668 Coke gave Fountaine a series of nine releases of all demands in law and equity. In the Exchequer pleadings and decree a difference is made between the ‘general releases’ down to 1664, and ‘special releases’ between 1664 and 1668, but the distinction appears to be an artificial one driven by the limits of the plaintiffs’ evidence.29 The most plausible explanation of these transactions is one which was actually suggested by the plaintiffs’ bills in Exchequer and Chancery, and discussed in modified form, but then immediately discarded, in Lord Nottingham’s judgment. That is, that Coke did in fact intend to make large money gifts, of £20,000 or thereabouts, to Fountaine, out of income; but that he thought that he might die before the intended gifts were completed, that the gifts would be challenged after his death and that they might be hard to defend; and that he therefore gave Fountaine legal interests intended as securities to protect Fountaine, after Coke’s death, from the claims of Coke’s heirs and representatives. By his answer in the Exchequer, Fountaine said that Coke had promised him £20,000, though what was proved by witnesses in Chancery was merely a general intention on John Coke’s part that ‘as Andrew had shared the sour, so he should share the sweets’. Fountaine at some point shortly before 1670 married a widow, Theophila Wells, who was a distant relative of Coke,30 and in a 1670 letter Coke said that he was glad to see him settled.31 In 1669–70 Coke’s relations with Fountaine seem to have cooled. In 1669 they were negotiating, seemingly at arm’s length, for Coke to buy out the 1661 rentcharge.32 In the 1670 letter cited above, Coke asked Fountaine to send him title deeds which were in his 28 The will making Fountaine executor is dated c 1663 by William Synstead in his deposition; Kiralfy, (n 22) 275 at No 7. 29 TNA PRO E126/13 fo 75r at fo 75v. 30 Historical Manuscripts Commission 11th Report, appendix Part II, HL MSS 1678–88, 115. The relationship is that Ann Coke, sister of the Chief Justice, married Francis Stubbe (); their grandson Edmund Stubbe, DD, Fellow of Trinity College Cambridge and Rector of Huntingfield, Norfolk (CH Cooper, Athenae Cantabrigienses (Cambridge, Deighton, Bell, 1858–1913, 3vv, ii, 112), was the father of Theophila Stubbe, who married (1) William Wells or Welles of Halvergate, Norfolk (2) Andrew Fountaine; Hist Parl Commons 1660–1690, sub nom. Fountaine, Andrew. 31 Hist Parl Commons 1660–1690, sub nom., does not give a date. Anthony Cubitt’s deposition, Kiralfy (n 22) 276, gives the marriage as the end of the intimacy between Cook and Fountaine. For the 1670 letter, see James (n 17) 107. 32 Fountaine’s answer in the Chancery proceedings, TNA PRO C10/133/22 (also recited in Lord Nottingham’s decree, PRO C33/247 fo 606v at 607r–v).

Coke v Fountaine 41 possession, since Coke was himself entering into negotiations with a view to marriage. Fountaine’s response was abrupt if not rude, and he certainly failed to produce some of the deeds. But Coke did not commence litigation against him, and Lord Nottingham in his judgment said that ‘there did remain a kindness between them even after the letter’.33 In late July 1671, while visiting his cousin Captain Robert Coke of Nonsuch (1623–81, son of the Chief Justice’s youngest son Clement), apparently with Gwavas, Coke was struck down by an ‘appopleticall distemper’ (ie, a sudden and disabling illness producing initial loss of consciousness)34 of which he died aged 36, still unmarried, on 1 August. Gwavas drafted for Coke a will, executed 28 July, a trust lease of the same date, and a codicil executed 31 July.35 The will and codicil gave Coke’s copyholds (as the facts fell out) to Robert Coke of Thorington for life, remainder to his heirs male; £1,000 each to the seven children of his sisters, charged on Holkham; £500 each to the children of Robert Coke of Nonsuch; and various other minor legacies, chiefly to servants.36 It gave the whole of Coke’s personalty to Robert Coke of Nonsuch, John Coke’s sister Elizabeth Cobb and Gwavas, by name, and in the final clause appointed the same three as executors.37 The trust lease of 28 July 1671 gave Robert Coke of Nonsuch and Gwavas a 500year lease of the Holkham estates, in trust to pay debts and legacies, and after four years after debts and legacies paid, to attend the inheritance.38 The freehold estate passed under the 1665 resettlement to Robert Coke of Thorington, who thus became Robert Coke of Holkham. Theophila Fountaine died in 1671–72 in or shortly after giving birth to a daughter, also called Theophila, who died aged six months on 19 March 1671/72.39 Fountaine on 29 April 1672 married Sarah Chicheley; the marriage was not a happy one due to his drinking, but her connections provided Fountaine with a seat in the Exclusion Parliaments—where, though listed as

33

James (n 17) 107–08; Lord Nottingham, 73 SS 370. I am indebted to Prof John Morris for his explanation of the 17th-century meaning of this phrase (personal communication). 35 Coke v Gwavas, Coke & Cobb, plaintiff’s bill recited in the decree (1682) TNA PRO E126/14 fo 39v (not contradicted in defendants Coke and Gwavas’s joint answer, and the court (unusually) comments on the evidence that the will was all in Gwavas’s handwriting at fo 41r). The probate sentence, TNA PRO PROB11/337, gives the place of death as Nonsuch. 36 Coke v Cobb in the HL, Historical Manuscripts Commission, 12th Report, appendix Part V, HL MSS 1689–90, 253, at 253–54. 37 The probate of the will at TNA PRO PROB11/337 fo 128. 38 Information from the Exchequer decree in Coke v Gwavas above n 35. 9 Mod 187, 88 ER 390, misreports the date of the lease as 23 July. 39 See . Fountaine had bought Brookmans, North Mimms, Herts, in 1666: ‘Parishes: North Mimms’, A History of the County of Hertford: volume 2 (1908), 251–61, available at , accessed 16 September 2011; the purchase was attacked in Lady Astley v Fountaine (below nn 59-61 and text there). 34

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a court supporter, he voted for the first Exclusion Bill.40 He lived till 1707, and his son, also called Andrew (1676–1753), was knighted by William III and became famous as a ‘virtuoso’ and amateur architect.41 Robert Coke of Holkham in 1674 married Lady Anne Osborne, daughter of Thomas Osborne, Earl of Danby (later Marquess of Carmarthen and Duke of Leeds). He ran himself heavily into debt in 1675 campaigning in the court interest for the King’s Lynn parliamentary constituency vice Francis North AG who had been appointed Chief Justice of the Common Pleas, and was bailed out by Danby, who as a result took over Robert’s financial affairs. Robert died of smallpox in January 1678/79, leaving his infant son and heir Edward (born 1676) in the legal guardianship of his mother and the de facto guardianship of his grandfather Danby.42 The effect of this marriage is that from c 1674–75 the litigation may have been affected by the fortunes of Danby, and hence by high politics. Danby was Lord Treasurer and what would later be called Prime Minister (1673–79). In this period, though unsuccessful at law, Coke and the executors had partial successes both in Chancery and in the equity side of the Exchequer. Danby fell from office in March 1679 and was sent to the Tower pending impeachment and Bill of Attainder proceedings in April of that year, remaining in the Tower until February 1684. He was fully cleared and reintegrated in politics as one of the central Tory leaders on the accession of James II; but as a leader of the Anglican party, he moved into opposition in 1687, signed the invitation to William III to invade, and was again a minister in 1690–95.43 In the latter period the Coke family had considerable success as various aspects of the litigation reached the House of Lords.

E. THE LITIGATION

Efforts to claw back what the various plaintiffs saw as Fountaine’s ill-gotten gains began rapidly after John Coke the younger’s death. The attack was fourpronged. The first element was self-help by Robert Coke of Holkham, leading to litigation in King’s Bench in which Fountaine was largely successful. 40 Hist Parl Commons 1660–1690, sn. Fountaine’s counsel at several stages of the Chancery proceedings in the 1670s included the later Whigs Serjeant Maynard and Anthony Keck, while Robert Coke could be found represented by the Attorney-General, Solicitor-General, Sir William Montagu A-G to the Queen, and the later Tory Sir John Churchill; eg TNA PRO C 33/239 fos 51v, 60r, C33/243 fo 74r, 247r, 270v; for the lawyers’ political affiliations, see Hist Parl Commons 1660–1690, sub nominibus. This suggests a little more political involvement than Hist Parl recognises. 41 HCG Matthew, BH Harrison & L Goldman (eds) The Oxford Dictionary of National Biography Online (Oxford, OUP, 2004), sub nom. 42 Hist Parl Commons 1660–1690, sub nom.; James (n 17) 135–36. 43 Oxford Dictionary of National Biography, sub nom.

Coke v Fountaine 43 The second was litigation by the executors in the equity side of the Exchequer, in which they claimed that several investments in Fountaine’s name were, in fact, made with John Coke the younger’s money and in trust for him, and attacked the releases. The third was Chancery litigation by John Coke the younger’s sisters, his heirs general, making similar claims. The fourth was the Chancery litigation brought by Robert Coke of Holkham, in the course of which Lord Nottingham’s judgment was delivered. All four began at around the same time, though the Chancery litigation was first; it is most convenient to treat it last, however, because our main concern is with Lord Nottingham’s judgment in Robert Coke’s Chancery proceedings.

(1) At Law Robert Coke of Holkham took possession by self-help of some of the property leased to Fountaine, forcing Fountaine to bring an ejectment against him in King’s Bench. This case, How d Fountaine v Style d Coke (1674–75), was quite widely reported.44 A jury found a special verdict that John Coke the younger, having leased to Fountaine for 99 years,45 two years later made a settlement by conveyance by lease and release to Fountaine and another, to the use of Coke for life with various remainders over. The defendant’s argument was that Fountaine’s acceptance of the lease stage of the lease and release amounted to a surrender of the prior lease. The King’s Bench, led by Hale CJ, rejected this argument, preferring the argument of Francis Pemberton (later Chief Justice) to that of Richard Weston (later Baron of the Exchequer): the lease and release to uses was a single conveyance of the freehold under the Statute of Uses, which therefore left the prior lease intact. This was an important decision on the operation of the Statute of Uses, and frequently cited. As we have already seen, in Robert Coke’s Chancery proceedings, to which we shall return later in more detail, the outcome as of 1676 was that the leases were held to be in trust, but that the rentcharge of £1,000 pa was held not to be—though in the course of reaching this conclusion, Lord Nottingham remarked that, having not enforced payment during the life of John Coke the younger, Fountaine would now be at some difficulty in enforcing payment at law, because he was not seised of the rent.46

44 Fountain v Coke (1674) 1 Modern 107, 86 ER 768; How v Style (1674) 1 Freeman 384, 89 ER 286, (Howe) (1675) 1 Freeman 392, 89 ER 291; How v Stile (1675) 2 Levinz 126, 83 ER 481; How v Stiles (1674) 3 Keble 283, 84 ER 722, (v Stile) (1675) 3 Keble 430, 84 ER 805. 45 James (n 17) 106, has 49 years. The recital in the decree, above n 27 and text there (100 years of Farnham Royal, 40 years of Mileham) seems most likely to be correct. 46 73 SS 370–71, 3 Swanst 600, 36 ER 990.

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Robert Coke did indeed withhold payment, and this gave rise to litigation between Fountaine, Coke and the executors, in King’s Bench, reported by several reporters under dates between 1680 and 1687.47 The first step was an ejectment against Robert Coke, Fountaine claiming under a right of entry for non-payment contained in the rentcharge deed. The point reported in 1680 was simply that Gwavas was offered as a witness for the defence, but rejected on the ground of interest.48 Fountaine then proceeded to sue Gwavas as surviving executor (Robert Coke of Nonsuch having died in 1681) in covenant for arrears of the rentcharge under John Coke’s covenant for payment in the rentcharge deed. Gwavas pleaded in bar of the action Fountaine’s entry under the right of entry, claiming (in modern terms) that taking possession, and an action on the covenant to pay, were alternative and not cumulative remedies. The case was argued in both 1683 and 1687 without being reported as coming to a conclusion, though the judicial statements are largely against Gwavas’s counsel’s arguments.49

(2) In the Exchequer The second prong of the attack was proceedings by the executors against Fountaine in the equity side of the Exchequer. The bill in this suit was filed in Easter Term 1672.50 It charged that Fountaine, being aware of Coke’s expectations, had set out to exploit him by prevailing on him to travel to France against the will of Coke’s father, and to give him a bond of £5,000 by way of gift; that the rentcharge of £1,000 was merely security for this gift. Coke, it alleged, arranged that Fountaine ‘as his friend should undertake the general management of his affairs especially in the letting of his estate’, but that Gwavas was nonetheless appointed receiver of Coke’s ‘ffynes, rents and other moneyes’ in 1662 and remained in post until Coke’s death. Fountaine, it should be said, claimed that Gwavas acted for both him and Coke down to 1668; the matter was highly significant in relation to Gwavas’s competence as a witness, and the admissibility and credibility of accounts prepared by Gwavas which were at the centre of the executors’ claim. Fountaine, the bill claimed, received £8,000 of Coke’s money which was released to him by releases down to 1664, in discharge of the £5,000 bond and ‘as a further bounty’. The releases between 1664 and 1668 were, it alleged, obtained by ‘surprise’ (vitiated by non-disclosure) and used 47 Cooke v Fountain [recte Fountain v Cooke] (1680) 1 Ventris 347, 86 ER 224; Fountain v Guavers (1683) 2 Shower KB 333, 89 ER 971; Fountain v Guavers (1683) Skinner 146, 90 ER 68; Fountain v Gnales (1687) Comberbach 59, 90 ER 343. 48 (1680) 1 Ventris 347, 86 ER 224. 49 None of the reports (above n 47) is particularly satisfactory. 50 What follows is derived from the decree, PRO E126/13 fo 75r, which recites the pleadings and some of the prior orders in extenso.

Coke v Fountaine 45 over-general words, being intended to release only sums actually received from Coke and accounted for by Fountaine. It then went on to particularise moneys and securities which had been taken in Fountaine’s name or that of nominees, or which were in Fountaine’s hands, which, it claimed, were actually investments of John Coke’s money for which Fountaine should account. It is unnecessary to particularise these claims further for present purposes except for one—£5,000 lent to Sir Robert Holte of Aston, Warwickshire, on the security of an assignment of a prior mortgage to James Perrott, which became the subject of specific proceedings in the 1680s and 90s.51 The claim thus involved three equities. The first—not particularised in the recitals of the decree—is the form of fraud which would in more modern times be called ‘undue influence’. There is more on this in the Chancery proceedings and it will be discussed there. The second is ‘surprise’ (nondisclosure as a vitiating factor), to attack the releases between 1664 and 1668. The third is ‘general words’ to attack the same releases; this was an established head of the mistake jurisdiction of courts of equity in relation to general releases.52 Fountaine disclaimed any interest in the £5,000 bond; pleaded in bar the releases; and offered to account for all transactions after the date of the last release, 29 December 1668; otherwise traversing all the allegations of the bill. In June 1672 the court allowed the plea as to the releases down to 1664 but rejected it as to those between 1664 and 1668, while reserving the benefit of the plea to the hearing. At some date between 1671 and 1676, Robert Coke of Nonsuch and Gwavas bought Elizabeth Cobbe’s interest in the executorship for £1,200. In 1676 they contracted in writing with Robert Coke of Holkham for the sale of the assets of the executorship and the trust lease for £3,600 to be

51 For Holte see Hist Parl Commons 1660–90, sub nom. The proceedings are discussed below n 55 and text there, and at nn 91–95 and text there. 52 Relief against unintended effects of general words in conveyances was available in equity by the 1580s: Rither v Tempest (1581) Ch C Ch 145, 21 ER 186, 117 SS 370 No [10]; Lord North & Lord Dacres v Millett (1593) 117 SS 197 No [144] per Egerton AG arg. The first reported application of the idea to a release appears to be Topp v Roberts (1636) Toth 27, 21 ER 113, slightly more clearly stated in W Sheppard, The Faithful Councellor: or the Marrow of the Law in English (London, 1651) ‘625–26’ (pagination is inconsistent); cf also Merrick v Harvey (1649) Nels 48, 21 ER 786. Sheppard (at ‘625’) states the basis of the relief to be the general mistake jurisdiction. The absence of earlier reports is probably due to the deficiencies of the early Chancery reports. There are several cases in Lord Nottingham’s reports: eg Brown v Savage (1674) 73 SS 103; Heningbrook v Steel (1676) 73 SS 301; Gardner v Hart (1676) 73 SS 329. The common law position evolved from an initial view in the mid–late 16th century that intentions were irrelevant, since releases were to be construed strictly against the grantor, to willingness by the later 17th century to take into account at least those more limited purposes recited in the same document as a general release: [M Bacon et al], The New Abridgment, 6th edn by H Gwillim (London, 1807), tit Release, v, 680, & sub-tit (K), 710–12, has an outline of the history using most of the relevant cases.

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paid to Coke of Nonsuch, £3,500 to Gwavas and £1,200 still owing to be paid to Cobbe.53 These transactions (besides being a clear breach of trust on the part of Gwavas and Coke of Nonsuch) strongly imply either that the executors at the date of the sale of Elizabeth Cobbe’s interest had no honest belief in the success of the claims against Fountaine, or that Elizabeth Cobbe was cheated. The case came to be decreed in the Exchequer 10 June 1678. One group of securities was decreed to be Coke’s, and Fountaine to account to the executors for these. A second group of claims—the Holte mortgage and £1,000, part of money lent to Alderman Backwell—was sent for trial at law, both on the issue whether the money was Coke’s, but the Holte mortgage also on the issue whether Coke had given the money, or the mortgage, to Fountaine. In relation to a third group of securities the court held that they were proved to belong to Fountaine beneficially, and dismissed the bill. Though the decree does not state the relevant law applied, it must be clear that it is not grounded either on undue influence (which would have affected the releases down to 1664 as well as those down to 1668) or on surprise (which would have prima facie affected the 1664–68 transactions uniformly); it must be based on the ‘general words’ doctrine. Fountaine, on 5 April 1679 (promptly after the fall of Danby), appealed to the House of Lords, but the parliaments between that date and 1681 were dominated by the Exclusion question and repeatedly prorogued, and the appeal got no further until 1685. Edward Coke (or, rather, his guardians) then cross-appealed; but the only order then made was discovery against Gwavas.54 Parliament not sitting continuously, the Exchequer did not regard the appeal as staying the proceedings. Substantive arguments continued into 1682 on exceptions to the Auditor’s report on the account, and since Fountaine had not been prepared to proceed to trial under the handicap of being required to admit that Gwavas was Coke’s receiver of rents, the Holte mortgage came back to be heard in court and was decreed for the executors in 1682.55 In 1687, Gwavas applied in the Exchequer for a sequestration against Fountaine by way of execution of the prior decree. This case was reported, the question argued being whether sequestration was available to

53 Gwavas’s answer, recited in the decree in Coke v Gwavas PRO E126/14 fo 39v at 40v, recites the agreement with Robert Coke of Nonsuch, which itself recited the agreement with Cobbe. 54 Historical Manuscripts Commission 11th Report, appendix Part II, HL MSS 1678–88, 115–18. LJ xiv, 55, 23/06/1685; he had not complied by November, ibid. xiv 79 12/11/1685, when Edward Coke was also given permission to cross-appeal. 55 TNA PRO E126/13 fos 315v, 323r–324r, 342r, 363r, 386r–387r.

Coke v Fountaine 47 enforce a claim in personam: it was agreed by 3:1 that it was, Montagu CB dissenting.56 Edward Coke’s guardians had, meanwhile, succeeded in January 1683 in obtaining a decree in the Exchequer against the executors and Gwavas as surviving trustee, that the personalty was to be applied in ease of the realty and that the four-year gap after payment of debts and legacies in the trusts of the trust lease was to be taken to attend the inheritance. This decision is not in contemporary printed reports, but was cited from memory, manuscript or the record in 1709 and 1712.57 The result was that Gwavas was liable to account to Edward Coke, and hence he remained in the proceedings as a mere trustee and became a competent witness, though perhaps not a very credible one.58

(3) In Chancery: John Coke’s Heirs General John Coke’s sisters surviving at his death and the children of his deceased sisters exhibited their bill in Chancery on 18 April 1673. It claimed straightforwardly that John Coke had contracted in 1666 to buy the Manor of Brookmans and other lands in Hertfordshire; the purchase money was raised out of John Coke’s estate, but the conveyance was taken in Fountaine’s name in trust for Coke; and that as Coke’s heirs general they succeeded to his beneficial interest (which, if it existed, had not been disposed of either by the 1665 settlement or by Coke’s will). Fountaine by answer denied the trust or any antecedent knowledge of the purchase by Coke; and as to the purchase money pleaded Coke’s release of all actions and demands on 29 December 1668, and demurred on two grounds: (a) that the executors were necessary parties; and (b) that he was not obliged to make discovery of the financing of the purchase until the plaintiffs had proved the trust.59

56

Guavers v Fountain (1687) 2 Freeman 99, 22 ER 1083. TNA PRO E126/14 fo. 39v-41v. The emphasis in the decree on Gwavas’s drafting the will suggests that its legal ground is close to the rule in Wintle v Nye [1959] 1 All ER 552. The order did, however, provide for the Auditor taking the account to settle compensation for Gwavas’s work as executor. Cited briefly in Countess of Bristol v Hungerford (1709) 2 Vern 645, 23 ER 1021; more fully by Parker CJ in Roper v Radcliffe (1712) 9 Mod 181, 187; 88 ER 387, 390. 58 His son, the Cornish antiquary William Gwavas (1676–1741), commented that his father ‘succeeding in [sic] an Incumbered Estate, and also engaged in a Law Suite with the Duke of Leeds, by being Executor to Mr John Coke, Left ye Estate much further in Debt, and my Mother with Eleven Infant Children liveing, and 13 Several Law Suites depending at his death’: Borlase (n 24) 178. 59 TNA PRO C10/183/4, also summarised in the entry of the hearing of the plea and demurrer C33/241 fos 84v–85r. 57

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On 4 November 1673 the court (probably Grimston MR) reserved the benefit of the plea to hearing (as was standard practice); disallowed the demurrer for want of proper parties, without giving reasons; and allowed the demurrer to discovery, with the proviso that if the plaintiffs proved the trust, Fountaine should then be examined on interrogatories as to the finances. This decision was not reported at the time but was extracted by William Nelson in his collection of ‘reports’ taken from the decree and order books of the time of Lord Nottingham.60 The effect of the decision was to cripple the plaintiffs’ claim. After a series of delays for them to examine witnesses and an attempt on their part to introduce the evidence in the Exchequer cause, on 6 June 1676 they failed to appear at hearing and Lord Nottingham dismissed their bill with costs.61

(4) In Chancery: Robert Coke Robert Coke’s Chancery proceedings started very quickly after John Coke’s death.62 His bill charged that Fountaine had deliberately set out from the start to exploit Coke by setting him at odds with his father, inducing him to borrow money on his expectations on the (common) basis that bonds were given for two or three times the sum actually lent,63 and persuading him to go overseas. It alleged that Fountaine procured Coke to promise him a gift of £5,000 by penalty bond, and then, finding after John the elder’s death that John the younger was merely tenant in tail under Sir Edward’s settlement, so that the penalty bond would be of doubtful value in the event of John the younger’s death, procured the rentcharge by representing it to be a security for the £5,000. It went on to charge that in July 1663,

60 TNA PRO C 33/241 fo 84v. Lady Astley v Fountaine (1673) Rep t Finch 4, 23 ER 3. Despite the case being reported in W Nelson (ed), Reports of cases decreed in the High Court of Chancery, during the time Sir Heneage Finch, … was Lord Chancellor (London, R Gosling, W Mears, and J Hooke, 1725), the decision reported is not, in fact, by Lord Nottingham. It was made five days before Nottingham’s appointment, probably by Grimston MR rather than Shaftesbury C, since the draftsmen of orders at this period commonly identify as such those orders on matters of substance actually made by the Lord Chancellor or Lord Keeper and this decision is not so identified. 61 TNA PRO C33/241 fo 663v, C33/245 fos 157r, 244r, 265v, 300r, the final decision at 793r. 62 The first order in the cause was made 29 November 1671: TNA PRO C33/237 fo 61r (for special service of process at the defendant’s lodgings in Bloomsbury). That said, the bill, TNA PRO C10/113/22, is dated as filed in Easter Term 1672. 63 JL Barton, ‘The Enforcement of Hard Bargains’ (1987) 103 LQR 118 discusses the equity doctrine in this area: the lender to an expectant heir was considered to be entitled to a significant risk premium in the light of the risk that the heir-presumptive in question would predecease his ancestor, so that inequality of value on its own was rarely enough to interfere with the transaction.

Coke v Fountaine 49 Fountain let several premises to tenants in Coke’s name and received part of the fines in cash; the total amounting to more than the (alleged) original gift of £5,000, for which the rentcharge was merely a security. Fountaine, it claimed, had received nearly £30,000 of Coke’s money. But though paid any real demand, Fountaine was now litigating and levying distresses to enforce the rentcharge.64 The substantial equities charged by the bill were thus two. The first was fraud, of the form that would later be called ‘undue influence’.65 The second was that the rentcharge was merely security for the prior legal demand of £5,000, and that Fountaine had received this through the leasehold transactions or otherwise. Fountaine by answer denied the fraud, asserting that the influence in 1657 was of Coke on him and not the other way round, denied that the rentcharge and leases were a security or trust, pleaded the releases, and asserted that the rentcharge was satisfied down to the last release in December 1668 by the money Coke had released to him and that he had demanded payment under the rentcharge on 10 May 1669 but then entered into negotiations with Coke to sell it back to him.66 After extensive procedural manoeuvrings, the parties reached issue in 1674 and witnesses were examined on commission in January 1674/75.67

64 The bill also claimed discovery and delivery up of the 1665 settlement and other title deeds relating to the estate (which were in Fountaine’s hands as trustee to preserve contingent remainders), and alleged the rentcharge and leases were invalidated by subsequent transactions between the parties. Fountaine demurred to the invalidation claim as merely at law and the plaintiff struck this claim out of the bill. The delivery up claim gave rise to considerable argument, since the full extent of the plaintiff’s claim on this front would avoid Fountaine’s legal title before hearing of the principal cause, ending with an order by Grimston MR (7 November 1672) that Fountaine was to produce to a Master deeds not concerned with the rentcharge and leases, varied to make it more favourable to the plaintiffs by Shaftesbury C on 21 November. Shaftesbury’s order was so seriously wrong that Finch A-G (later Lord Nottingham) and Francis North S-G (later CJCP and Lord Keeper), who had before appeared for the plaintiff, appeared for the defendant to have it reversed. PRO C33/237 fos 255r, 454v, 504r, 718r, 741r–v, C33/239 fos 51v–52r, 60r, 68v, 85r. 65 Eg Bridgman v Green (1755) 2 Vesey Senior 627, 28 ER 399, Green v Bridgeman (1757) Wilmot 58, 97 ER 22, a case which has some similarities to the alleged facts of the Coke v Fountain litigation though (a) it was brought by the person allegedly influenced, and (b) the social distance between the gentleman Bridgman and the menial servant Green was far greater than that between John Coke the younger and Andrew Fountaine, both gentry and law students merely differing dramatically in their inheritance expectations. In modern terms the claim would clearly have to be of actual, not presumed, undue influence. 66 The answer as recited in the entry of the 1676 hearing, TNA PRO C33/241 at fos 607r–v. 67 Kiralfy (n 22) 273. 29 January 26 Car 2 is (just) 1674/75, not 1673/74, Charles I having been executed 30 January 1648/49. (The dating problem involved is that court records were dated by regnal year and law term, and Anno Domini dates were at this period given on the basis that the new year started on 25 March, so that it is easy to get the chronology wrong by a year in relation to events dated in January–March. More generally, the dates given are as they appear in the records or reports, hence Old Style (Julian calendar) not New Style (Gregorian calendar).)

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The defendant’s interrogatories reflect the focus of the case, going entirely to the fraud question and to John Coke the younger’s actual intention to confer substantial benefits on Andrew Fountaine. It came to hearing in July 1675, when the only issue Lord Nottingham thought worth noting was Gwavas’s competence as a witness (on the basis of complete non-recognition of the scope of Gwavas’s claims to beneficial interests under the will and trust deed, he took it that the interest was too minor to lead to bias).68 Lord Nottingham did not then make a decree, since ‘there were once some hopes of a composure’.69 The case was brought to rehearing in 1676 before the Lord Chancellor and the two Chief Justices; judgment was evidently reserved, and Lord Nottingham reports only the judgments delivered in May. Danby will have had good reasons to expect a positive result, since all three judges were political colleagues in the ‘church/court party’ he had been constructing, and Nottingham and North had at earlier stages of the proceedings appeared for Robert Coke.70 The decree was perhaps more ambiguous than he might have hoped, but probably about as adverse to Fountaine as was possible on the evidence, given the interplay between these proceedings and the claims in the Exchequer. It is clear from the judgments that the plaintiff’s core fraud case could not be made out. This left behind two issues. The first was the claim that the rentcharge was a security. As Lord Nottingham pointed out,71 if this was the real intention, it must have been a security for intended gifts of around £20,000 (which Fountaine said in his answer in the Exchequer Coke had promised him), not for £5,000 (otherwise it would have enormously oversecured the claim). This interpretation would, as I have said above, probably be consistent with John Coke’s conduct towards Fountaine in the 1660s and with the other transactions in that period under which Fountaine received very substantial sums of money. But for the Court of Chancery to make this finding would substantially weaken the executors’ claim in the litigation in the Exchequer, still pending, where investments in Fountaine’s name were attacked as made with Coke’s money and Coke’s release of Fountaine’s accounts attacked as not intending to give him the money he 68

73 SS 185. 73 SS 363; 3 Swanst 588, 36 ER 986, reads ‘compromise’. In the absence of a decree there is no entry in the records. 70 Hist Parl Commons 1660–1690, sub nominibus. Pace Yale’s account in Oxford Dictionary of National Biography, sub nom., and in his introduction to 73 SS, Nottingham was certainly an independent political actor and is identified in the short biography of Danby in Oxford Dictionary of National Biography, sub nom., as a leader of one of the parliamentary groups that coalesced to form the Danby ‘court party’. As a result, North and Rainsford, who were promoted to Chief Justice in 1675 and 1676 respectively, should prima facie be seen as in debt to Nottingham, rather than to Danby, for their promotions. Nottingham and North appeared for Coke, above n 40. 71 73 SS 369, 3 Swanst 598, 36 ER 989. 69

Coke v Fountaine 51 had actually received. If the rentcharge was a security, these transactions were probably gifts. Finding the rentcharge to be a gift gave Fountaine little, because of the limits on his ability to enforce it at law and the fact that as a volunteer he was not entitled to the aid of equity to enforce it.72 It conversely implied that the subsequent transactions were probably not gifts, strengthening the executors’ case in the Exchequer and Coke’s argument on the leases in the instant hearing (below). The remaining issue was whether the leases of Farnham Royal and Mileham were gifts to Fountaine, or in trust to attend the inheritance. This was a case not made in the plaintiff’s bill, which asserted fraud or security, and not argued in 1675.73 The fact that it was in these circumstances permitted to be argued was a violation of the Chancery’s basic procedural norms and of natural justice. The normal rule was that once issue had been joined, and a fortiori once the depositions had been published, there could be no amendment of the plaintiff’s bill except in very exceptional cases. The reason for the rule was, in fact, given by Lord Nottingham in his Prolegomena, written around the time that he took up the seals.74 The risk of late amendments was that the defendant would be ‘ambushed’ by a new case after the interrogatories on which the defendant’s witnesses would be examined had been settled. After publication of the depositions was a fortiori because there could be no new examinations after publication. The defendant might, therefore, have possible testimonial evidence to disprove the new case, which he was absolutely barred from using by the Chancery’s procedural rules. The operation of these rules could be avoided in early Chancery practice by examining witnesses ad informandam conscientiam iudicis, or in the later practice by ordering a trial at law on the new issue; more generally available was to dismiss the plaintiff’s bill without prejudice to a new bill based on the new argument.75 In this case none of these options was taken; and the case provides a beautiful example of the ambush problem. The case made down to the 1675 hearing was entirely one of fraud (in modern terms actual undue influence). Even the allegation that the rentcharge was a security was subordinated to this charge, by virtue of the claim that it was a security for a bond which was itself fraudulently obtained. The defendant’s interrogatories and the testimony they elicited were entirely addressed to disproving the allegation of fraud and proving that John Coke the younger had a free intention to make gifts to Andrew Fountaine. Lord Nottingham, in fact,

72

Lord Nottingham, cited above n 46. Lord Nottingham at 73 SS 369, 3 Swanst 598, 36 ER 989. 74 Yale (ed) (n 11) 301. 75 M Macnair, Law of Proof in Early Modern Equity (Berlin, Duncker & Humblot, 1999) 51–54. 73

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says that this evidence was irrelevant to the issue of trust or no trust (of the leases) which had been raised at the second hearing.76 But the court decreed for the plaintiff without giving the defendant an opportunity to lead evidence to rebut the plaintiff’s new case advanced at the second hearing. No explanation for this severe procedural irregularity is given; the point is merely not addressed. The problems do not stop there but continue in Lord Nottingham’s analysis of the evidence on trust or no trust of the leases. If we suppose that the plaintiff in the case had been a creditor of John Coke the younger or a subsequent purchaser of the land in question, this evidence would be open and shut for the plaintiff: Coke and Fountaine certainly both continued after the grant of the leases to act as if the title was in Coke, and this would be enough to establish a trust to defraud creditors even without the Fraudulent Conveyances Acts of 1571 and 1584, which would avoid the effect of the leases at law.77 But Robert Coke of Holkham was not a creditor or purchaser but a volunteer—claiming, as he did, under John Coke the younger’s voluntary 1665 settlement. As between two volunteers, any presumption of trust could certainly be rebutted by evidence of intention to give to the transferee.78 The purpose of Lord Nottingham’s discussion of the classification of trusts, quoted at the beginning of this chapter, is precisely to avoid this line of reasoning: this trust, he says, is not an implied trust (as a resulting use was implied on a voluntary conveyance) but an express trust proved by ‘violent presumptions’, meaning here strong circumstantial evidence as opposed to any presumption of law, that there was an express declaration of trust, now lost, to hold the leases as terms attendant on the inheritance. It has to be said that if so, they were very odd terms attendant: unusually short, with a single trustee only, and created only to attend the inheritance rather than in the first place to raise portions, etc.79 Lord Nottingham’s claim that Fountaine’s evidence of Coke’s animus donandi was irrelevant because it applied to both the leases and the rentcharge was evidently artificial. Fountaine no more took seisin of the rent in Coke’s life than he took possession under the leases; and North CJ said that his failure to take seisin under the rentcharge could be explained by

76

73 SS 364–65, 3 Swanst 590–91, 36 ER 986. W Roberts, A Treatise on the Construction of the Statutes 13 Eliz. c. 5 and 27 Eliz. c. 4 relating to voluntary and fraudulent conveyances (London, J Butterworth, 1800), though late, is a convenient treatment of this branch of the law. 78 Lord Nottingham in fact cites (73 SS 365–66, 3 Swanst 592, 36 ER 987) two of the relevant cases, North v Crompton (1671) 1 Ch Cas 176, 22 ER 759 (express evidence of intention to give) and Yale (ed) (n 11) 241 No 4, and Windham v Windham (1669) Yale (ed) (n 11) 241 No 5 (on the presumption of advancement). 79 Yale discusses the doctrine of terms attendant on the inheritance in his ‘Introduction’ to 79 SS, at 150–60. 77

Coke v Fountaine 53 deference to his benefactor (though North later contradicted himself on the point).80 The failure to take possession under the leases is the core of both North’s and Nottingham’s arguments for a trust;81 and it could be perfectly well explained in the same way. As I have said above, the most probable real explanation is that all the transactions were intended to give Fountaine investable money immediately, and protection from Coke’s heirs and representatives in case Coke died. It could thus be legitimately argued that the rentcharge and leases were no more than securities, and Fountaine should therefore account as mortgagee and, if found to have been satisfied, reconvey. But, as Lord Nottingham said, to make this case would certainly require that the executors be made real parties to the Chancery litigation, ie that the Chancery and Exchequer bills both be dismissed and the whole litigation—including Coke’s claim that Gwavas was a pure trustee—consolidated in one of the two courts. In this case, since Gwavas and Robert Coke of Nonsuch claimed a beneficial interest in the whole of John Coke’s personalty, unless Gwavas was found to be a pure trustee, he would quite clearly be an incompetent witness, contrary to Lord Nottingham’s 1675 decision. Paradoxical as it seems, we are now in a position to explain Lord Nottingham’s famous dicta—as irony: [I]f the Chancery do once take liberty to construe a trust by implication of law, or to presume a trust, unnecessarily, a way is opened to the Lord Chancellor to construe or presume any man in England out of his estate; and so at last every case in court will become casus pro amico.

But this case was precisely casus pro amico. Not perhaps in its usual sense of a case the outcome of which was so evenly balanced that the judge could properly decide either way,82 but in the underlying sense of the Latin. Nottingham, North and Rainsford were helping out a friend—Danby—by more than somewhat arbitrary reasoning out of line with normal Chancery procedure and with Lord Nottingham’s usual approach to ‘trust or gift’ cases. Lord Nottingham’s rhetoric about parsimony in implied, presumed or construed trusts, and about the nature of conscience in equity, ‘protests too much’: his actual decision is, in fact, dubiously consistent with principle or precedent. This is not in itself a sufficient explanation of the failure to report the decision. For judges to do favours in litigation for their friends and political colleagues was commonplace in this period: so much so, that Roger North

80

73 SS 362, 363, 3 Swanst 587, 36 ER 985. North 73 SS 362–63, 3 Swanst 587–88, 36 ER 985; Nottingham 73 SS 366, 3 Swanst 593, 36 ER 987. 82 Cf U Falk, ‘In dubio pro amico: Zur Gutachtenpraxis im gemeinen Recht’ (2000) Forum historiae iuris, at , consulted March 21 2011. 81

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reports one Whig litigant being markedly surprised by Francis North as Lord Keeper not displaying bias against him.83 Doing favours was not the same thing as overt corruption, and hence would not be a good reason for not reporting a case which decided a significant point of law. However, when the May 1676 judgments are ‘unpacked’, there is, in fact, very little law in them. Beyond Lord Nottingham’s opening and closing flourishes on implied trusts and on equity, quoted at the beginning of this chapter, the bulk of his judgment is analysis of the circumstantial evidence, to reach the conclusion that a trust was actually intended. It is, in other words, not clear how much reportable law there is in the May 1676 judgments. I shall return to this point in the final part of the chapter. The 1676 decree was not the end of the Chancery proceedings. After Nottingham’s death, Edward Coke’s guardians re-opened the claim, responding to North LK’s more or less open invitation to litigants disappointed by Lord Nottingham to re-open their cases.84 It appears from the plaintiff’s bill that the 1676 decree had not been executed at the time of Robert Coke’s death in 1679 and the suit had thereby abated.85 The new bill therefore claimed relief against the leases as well as the rentcharge. Fountaine pleaded the prior proceedings, but North LK on 30 October 1684 overruled this plea (rather than saving the benefit to hearing) on the ground that as remainderman, Edward Coke was not bound at all by the proceedings of his father as tenant for life.86 In November 1686 the counsel for the plaintiff applied ex parte to Jeffreys C for an order to allow them to use the depositions in the former cause and obtained an order nisi. The defendants showed cause, on the ground that the plaintiffs having asserted that they were not bound by the prior proceedings due to lack of privity and had this accepted by North LK overruling Fountaine’s plea, they could not claim the benefit of the proceedings either. Jeffreys agreed and revoked the order nisi. This decision

83 M Chan (ed), The Life of Lord Keeper North by Roger North (Lampeter, Edwin Mellen, 1995) 107–08. 84 GW Keeton, Lord Chancellor Jeffreys and the Stuart Cause (London, Macdonald, 1965) ch 18, discusses the effects on Jeffreys’ work as Chancellor. The invitation is reflected in the contemporary indexes at TNA PRO IND1/1640–1652 in the reappearance of cases which had disappeared from them due to reaching decree in years between 1674 and 1681, and in the decree and order books themselves increasing in length quite sharply, by around 30–50%, from C33/261 (1683–4). 85 As recited in P’s application 18 November 1686, TNA PRO C33/267 fo 442r-v. The plaintiff had put in a bill of revivor of the former proceedings in Easter Term 1683 but had been advised he could not safely proceed on it, and therefore dismissed it 16 November of that year: TNA PRO C33/259 fo 532r, 261 fo 49v. Process to compel answer to the new bill grounded on P’s title as remainderman was issued on 8 April 1684: ibid, fo 330r. 86 TNA PRO C33/263 fo 41v.

Coke v Fountaine 55 was inaccurately reported by Thomas Vernon as a decision on whether Fountaine could use the depositions.87 Jeffreys’ ruling sent the plaintiff’s lawyers on a desperate hunt for either some evidence, or some other legal argument for using the evidence from the prior proceedings. They now began to resist an early hearing and Fountaine’s counsel to seek one.88 In this way the proceedings were overtaken by the revolution of 1688. The cause finally came to hearing on 20 November 1689 before the Lords Commissioners of the Great Seal, Maynard, Keck and Rawlinson. The lack of success of the plaintiff’s later attempts to get round Jeffreys’ order on the depositions would make it relatively unsurprising that the plaintiff would not succeed, even if it were not also true that two of the three Lords Commissioners (Maynard and Keck) had acted for Fountaine in much of the preceding litigation. The court ‘saw no cause in equity to relieve the plaintiff’ and dismissed the bill.89 It does not appear that the plaintiff tried an appeal to the House of Lords, or that Edward Coke attempted to reopen the cause in Chancery when he came of age in 1697.90

(5) In Parliament On 9 January 1690, Fountaine’s appeal from the 1678 Exchequer decree reached decision in the House of Lords, which ordered a trial at law of two issues in relation to the Holte mortgage: (a) whether the money was John Coke’s money; and (b) whether, if so, John Coke ever gave it to Fountaine.91 Counsel were then heard in relation to other loans, and on 24 January Fountaine’s appeal from the Exchequer decree was dismissed in relation to these. On 4 April 1690, Coke’s cross-appeal was heard. Coke’s counsel were able in the House of Lords to re-open the fraud/undue influence claim which had been rejected on the facts by both the Exchequer in 1672 and

87 TNA PRO C33/267 fos. 442r (18 Nov), 169r (25 Nov); Coke v Fountain (1686) 1 Vern 413, 23 ER 554 (1 Eq Ca Ab 227, 21 ER 1008, merely abridges Vernon). 88 TNA PRO C33/269 fos 381v–382r (20 Feb 1688, Jeffreys confirms the former order), 647r (14 June 1688, Jeffreys refuses to extend time to examine witnesses further), 866v, 868r (14 and 18 July 1688, orders for the production of the 1669 correspondence between Coke and Fountaine), 1006v (order for the production of Gwavas’s accounts used in the Exchequer cause). 89 TNA PRO C33/271 fo 478v. 90 For the first point the absence of any entry in LJ xiv–xv, which volumes cover the period; for the second, similar absence from TNA PRO IND1/1670 for 1697–98. 91 LJ xiv 406 09/01/1690.

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the Chancery in 1676.92 Presumably on this basis the appeal was allowed in relation to the £1,000 lent to Alderman Backwell, and on 12 April in relation to other loans. At this time the words ‘by any means other than general releases’ were added to the order for trial at law.93 Since Gwavas was a mere trustee, in effect, Edward Coke (or rather his grandfather Carmarthen acting on his behalf) had now swept the board in the Exchequer litigation. Fountaine kept fighting, though—and not completely unsuccessfully. Though the House of Lords’ decree prevented John Coke’s releases being given in evidence at the trial at law in relation to the Holte mortgage, with the result that Fountaine boycotted the trial and Edward Coke’s guardians obtained a verdict by default, the judges advised that the legal title could be divested out of Fountaine only by act of parliament. An estate bill was brought in for this purpose, passed and sent to the Commons—where it was, rather unusually, defeated on second reading.94 Holte tried again by petitioning the Commons in January 1694. The petition was referred to a committee which recommended bringing in a bill to the same effect as the Lords’ bill. Both Fountaine and Gwavas’s widow petitioned against this bill on the ground that the decisions in equity and in the House of Lords were wrong. The Committee reported that the proposed bill would not prejudice the legal rights (if any) of either; but the House again rejected the bill.95 These decisions are not reported by the parliamentary diarists, so that it is not clear whether they were simply intended to disoblige Carmarthen, or reflected real doubts about the justice of the Lords’ judicial decisions in the case.

F. DOCTRINAL CONTENT

Lord Nottingham’s 1676 judgment in Coke v Fountaine states three points of law for which it has since been cited. In order of appearance, the first is the classification of trusts as either express or implied, with constructive trusts being implied from the face of the documents, and presumed trusts express. The second is the doctrine of parsimony in the use of implied or presumptive trusts. The third is the proposition that the Chancellor cannot enforce ‘such a trust, security, or agreement as is only between a man and his confessor’ and that ‘With such a conscience as is only naturalis et interna this Court has nothing to do; the conscience by which I am to proceed is 92 Historical Manuscripts Commission 11th Report, Appendix II, House of Lords MSS 1678–88, 115 at 117 (K). 93 LJ xiv 449, 4/04/1690, 462, 12/04/1690, 464, 14/04/1690. 94 LJ xiv 697–99, 22/12/1691, xv, 6–8, 30/12/1691, 16–18 5/1/1692, 23–24, 11/1/1692, 26–28, 13/01/1692; CJ x, 627–28, 14/01/1692, 657, 08/02/1692. 95 CJ xi, 53, 11/01/1694, 60, 16/01/1694, 74, 01/02/1694, 76, 02/02/1694, 137–38, 24/03/1694.

Coke v Fountaine 57 merely civilis et politica and tied to certain measures.’ The question is why these points were not reported at the time or cited before Swanston printed Lord Nottingham’s report. It will be most convenient to dispose of the ‘conscience’ point first, before proceeding to the issues of the classification of trusts and the doctrine of parsimony in implied or presumptive trusts.

(1) Conscience This issue has been studied in more detail elsewhere. Spence was, I think, the first to make the point that the distinction between the availability of remedies in Chancery on the one hand, and being ‘bound in conscience’ in the sense of the forum internum on the other, was not new with Nottingham but went back to Archbishop Morton LC in 1489 and to St German’s Doctor and Student.96 Nottingham’s distinction between ‘political’ conscience and ‘internal’ conscience in this context goes back at least to the pseudo-Egertonian Certaine Observations (1651).97 David Yale reasserted the point in his ‘Introduction’ to the first volume of Lord Nottingham’s Reports.98 Most recently, Dennis Klinck’s thorough study Conscience, Equity and the Court of Chancery in Early Modern England, moving to and fro between English religious conscience casuistry and the Chancellors, makes the point yet again.99 Nottingham appears to moderns to be a turning point in a transition from unregulated to regulated conscience, because we have had since 1725 the pseudo-reports collected by William Nelson as Rep t Finch and since Swanston some of Lord Nottingham’s own reports, which allows us to compare him as an individual Chancellor with the later Chancellors in ways which are not possible for Egerton, Coventry, the Interregnum Commissioners or Clarendon. But regularity, reporting and precedent in Chancery pretty clearly go back to Egerton, and the doctrine that a decree for the plaintiff requires that the plaintiff’s claim be in some way pleaded and proved probably dates to the same period.100 It would be better if the writers of modern equity textbooks were to cite some of the literature

96 Spence (n 9) i, 416–17, citing ‘4 Hen 7 Ellesmere 48’ = YB Hil 4 Hen VII fo 4, 5 pl 8, as cited in [Thomas Egerton, Lord Ellesmere pseud] Certaine Observations concerning the Office of Lord Chancellor (London, Henry Twyford & John Place, 1651) 48, and C St German, Doctor & Student c 18 (97 SS 107–111). 97 Egerton (n 96) 48–49. 98 73 SS xlvi–xlvii. 99 Klinck (n 5) ch 8. 100 M Macnair, ‘The nature and function of the early Chancery Reports’ in C Stebbings (ed), Law Reporting in Britain (London, Hambledon, 1995) 123; Macnair (n 75) are relatively recent arguments for these points.

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rather than citing Coke v Fountaine.101 The present point, however, is that a hypothetical contemporary reporter would not have seen Nottingham doing more, in this passage, than stating established and stable doctrine.

(2) Classification of Trusts Lord Nottingham’s classification of trusts looks odd to modern eyes: we generally distinguish between express trusts on the one hand, and implied, resulting or constructive trusts on the other. In Nottingham’s Coke v Fountaine classification, in contrast, implied trusts ‘by act or construction of law’ arise either by the operation of rules of law, as in the case of transfers in fraud of creditors, or by construction of the terms of an instrument, as in the examples he gives, where a trust is implied in order to give effect to an express disposition which would otherwise be invalid or ineffective.102 Other trusts—resulting trusts included—are express trusts established by ‘proof, or violent and necessary presumption’. As has been noticed, the application of this classification would give a very much narrower operation to section 8 of the Statute of Frauds than it was in fact given. The ‘express trust’ which is ‘declared either by word or writing’ and the declaration of which appears by presumption, looks particularly odd. Its explanation is a change in the meaning of ‘presumption’ which at the date of Coke v Fountaine and for some time before and afterwards meant not simply a legal rule which shifts the burden of proof, but also an item of (more or less strong) circumstantial evidence to be weighed in a calculus of proofs whose centre is the requirement of two witnesses or the equivalent to prove any matter.103 However, the classification in Coke v Fountaine does not in the least represent a view consistently held by Lord Nottingham. His Prolegomena does not draw these distinctions in this way; and he heard a significant number of cases which raised the issue, and both before and after Coke v Fountaine used the expressions ‘implied trust’, ‘presumptive trust’ and ‘constructive trust’ to a considerable extent interchangeably.104

101 An extreme example is Hudson (n 4), for whom Coke v Fountaine stands in for any reference to the literature—even Yale’s discussion of Nottingham and precedent in his introduction to 73 SS (xxxvii–cxxiv) in the very same volume as the report of the case. 102 Fraud: Yale (ed) (n 11) 239, citing Twyne’s Case 3 Co Rep 80b, 81b–82a; 76 ER 809, 814–15, and cf Roberts (n 77). Otherwise ineffective: Lord Nottingham 73 SS 365 cites Pitt v Pelham (1670) 1 Ch Rep 149, 21 ER 574, 1 Ch Cas 176, 22 ER 750, 2 Freem 134, 22 ER 1110, Prolegomena 240, and Lord Mohun v Lady Mohun (1671) Prolegomena 242, (323 not SP). 103 Macnair (n 75) 267–72. 104 Yale, 79 SS ‘Introduction’, 101–35 is the most convenient review.

Coke v Fountaine 59 The particular features of the case in a sense impose the shape of the classification. In the first place, it is hard to analyse any lease as a purely voluntary transaction so as to generate a presumption of resulting trust—if nothing else, there will be covenants binding on the lessee; and both the leases in question were at a rent.105 The second is that a resulting trust of these leases would not produce the result that they were attendant on the inheritance (as decreed), but that they were in John Coke the younger in fee simple. They would then descend not on Robert Coke, but on John Coke the younger’s surviving sisters in equal shares and the children of his deceased sisters per stirpes—the claim which was made and failed in Lady Astley v Fountaine. The decree only makes sense if the finding is, indeed, one of express trust proved by circumstantial evidence—and Nottingham’s classification of trusts is fitted to these particular circumstances. I have also given reasons above for supposing that classification in this way was instrumental, as allowing Lord Nottingham to ‘throw … quite out of the case’ the defendant’s substantial evidence of Coke’s animus donandi.106

(3) Parsimony in the Use of Implied and Presumptive Trusts Lord Nottingham says that ‘the law never implies, the Court never presumes a trust, but in case of absolute necessity’. Unlike the classification of trusts, this—at least in a general sense that the court should be parsimonious in relation to implied, presumptive or constructive trusts—was Lord Nottingham’s settled view. It is possible that in immediate terms this told against reporting the case: there were other reported cases in which Nottingham had made the same point, which lacked the ambiguities of Coke v Fountaine.107 Here the problem is that, though late seventeenthand early eighteenth-century lawyers shared the view that the court should be parsimonious in relation to implied, presumptive or constructive trusts, Lord Nottingham—and, in particular, Coke v Fountaine—is not given as authority for it. The probable explanation is the effect of sections 7–9 of the Statute of Frauds 1677. The Statute had been in gestation for some time when

105 Warman v Seaman (1674) 1 Freeman 306, 308; 22 ER 1227, 1228: ‘[I]f a lease for years be made without any consideration, there will be a resulting trust to the lessor; but if there be any consideration, there can be no resulting trust.’ Lord Nottingham’s report, 73 SS 197, 217, 248, at 218 appears to correspond to the hearing reported by Freeman, but Lord Nottingham’s note is more limited. The rent in the lease of Farnham Royal was clearly nominal, being slightly less than the rent due from Coke to the Crown (Lord Nottingham, 73 SS 185), but since Burghwood in Mileham was not a large manor (in medieval times half a knight’s fee), £100 pa might possibly be a market rent for the property. 106 Above, text after n 76; the passage quoted is at 73 SS 365, 3 Swanst 591, 36 ER 986. 107 Yale, passage cited above n 104, is again the most convenient review of the evidence.

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Coke v Fountaine was decided. Heneage Finch A-G (as he then was) had made the proposal in the February 1671 Commons debate on land registration.108 His 1673 first draft bill (which would have required declaration of trust of land by deed) contained the exception ‘where any Conveyance shall be made of any lands or tenements, by which a trust or confidence shall or may arise or result by the implication or construction of law’; this was only lightly amended in Francis North’s 1675 second bill, and ended as section 8 of the 1677 Act.109 It must, therefore, have been clear to the profession, first, that the rules of proof of express trusts of land were going to be changed by statute in the near future, and, secondly, that there would be some exemption for imputed trusts which would require reconsideration of the scope of these. After the Act was passed, the question of the interpretation of section 8 and the relationship to imputed trusts was inevitably posed. The courts did not go down the possible road suggested by Lord Nottingham’s classification comments in Coke v Fountaine, of holding that the presumed resulting trust was a presumed express trust and therefore caught by the statute and abolished.110 They did, however, use the Statute as grounds for a markedly parsimonious approach to imputed trusts, almost reaching the point of abolition by this route.111 The same approach was argued for parol evidence of trusts dehors a will of land or otherwise offered to vary the effect of the will.112

108

79 SS 966 at 978. W Holdsworth, A History of English Law (London, Methuen & Co Ltd, 1924) VI, App I. 110 Riddle v Emerson (1682) 1 Vern 108, 23 ER 348; Anon (1683) 2 Ventris 361, 86 ER 486; Gascoigne v Thwing (1685) 1 Vern 366, 23 ER 526; Earl of Plymouth v Hickman (1690) 2 Vern 167, 23 ER 712; Anon (1692) 2 Freem 123, 22 ER 1100; Lady Bellasis v Compton (1693) 2 Vern 294, 23 ER 790. 111 Kirk v Webb (1698) 2 Freem 229, 22 ER 1177, Prec Ch 84, 24 ER 41, Somers C, Powell J, Trevor MR concurring in the decree but dissenting on the reasoning, aff’d HL (Prec Ch 88, 24 ER 42); Newton v Preston (1699) Prec Ch 103, 24 ER 50; AG v Mayor etc of Coventry (1700) 3 Madd 353, 365; 56 ER 535, 539 per Holt CJ; Shales v Shales (1701) 2 Freem 252, 22 ER 1191, though admitting there can be resulting trusts in some cases; Kinder v Miller (1701) Prec Ch 171, 24 ER 83, Kendar v Milward (1702) 2 Vern 440, 23 ER 882, Wright LK rvsg Trevor MR); Skett v Whitmore (1705) 2 Freem 280, 22 ER 1211; Ambrose v Ambrose (1716) 1 P Wms 321, 24 ER 407; Beckley v Newland (1723) 2 P Wms (1723) 182, 185; 24 ER 691, 692 per Lord Macclesfield C, though the observation may be silently influenced by the presumption of advancement; Clarkson v Hanway (1723) 2 P Wms 203, 205; 24 ER 700, 701 per Jekyll MR. 112 Oldham v Litchford (1705) 2 Freem 284, 22 ER 1214; Lord Falkland v Bertie (1696) 2 Vern 333, 337; 23 ER 814, 816 per Treby CJ (Berty v Falkland) 12 Mod 182, 183; 88 ER 1248, 1249 per Holt CJ; Sir Jeffrey Gilbert, The History & Practice of the High Court of Chancery ([early 1720s] Dublin 1756) 105–06. But not consistently; on the other side are Harris v Horwell (1708) Gilb Rep 11, 25 ER 8; Drury v Smith (1716) 1 P Wms 404, 24 ER 446 (donatio mortis causa); Jones v Nabbs (1718) Gilb Rep 146, 25 ER 102 (Nab v Nab) 10 Modern 404, 88 ER 783; Duke of Rutland v Duchess of Rutland (1723) 2 P Wms 210, 24 ER 703. 109

Coke v Fountaine 61 It is, then, unsurprising that Coke v Fountaine should not be cited on this issue. The statements of an eminent Chancellor are, no doubt, good authority; but they are not as good authority as the policy of a statute.

G. CONCLUSION

I did not set out, when I agreed to write on Coke v Fountaine, to create a ‘debunking’ piece. I thought that the case would have noteworthy things to say to us about the early evolution of implied, resulting and constructive trusts. What I have found instead is a passing decision in the course of a larger litigation, which ‘rests on its particular facts’ in quite a strong sense and was not influential in its own time, but which was resurrected in the nineteenth century and then applied to the purposes of some, but not all, treatise writers on equity and its history. Its modern citation seems to be principally a result of the tendency of textbooks to copy uncritically from older textbooks.

3 Grey v Grey (1677) JAMIE GLISTER*

A. INTRODUCTION

G

REY V GREY concerned the ownership of Gosfield Hall, a small manor house between Halstead and Braintree in Essex.1 It had been purchased by a father in the name of his son, but there was doubt over whether the son was supposed to take the house absolutely or be his father’s trustee. Although the case turned on the ownership of the house, that question was important only because of various debts that had been charged upon it by later owners, and neither plaintiff nor defendant regularly lived there. Even then the dispute was not a particularly valuable one, and it nearly settled out of court. The case was by far the most trivial of many legal troubles that the unsuccessful plaintiff, Ford Grey, would encounter during his lifetime. Yet it is a landmark in equity for two reasons: because it was the first to articulate what we now know as the presumption of advancement, and because of the effect (unintended, I will argue) that Lord Nottingham’s judgment in Grey v Grey has since had on the law and theory of resulting trusts.2

* I should like to thank Jim Davis of the Halstead Heritage Museum for his help in relation to the story of Gosfield Hall, and Neil Jones and Mike Macnair for their comments at the seminar. Dates are old style but where appropriate are given as, eg, 1671/2. References below to ‘Reports’ are to those compiled in DEC Yale (ed), Lord Nottingham’s Chancery Cases Vols I and II (London, Selden Society, 1957 and 1961). References to the ‘Prolegomena’ are to DEC Yale (ed), Lord Nottingham’s ‘Manual of Chancery Practice’ and ‘Prolegomena of Chancery and Equity’ (Cambridge, CUP, 1965). 1 This 1677 case is reported in several places: 1 Chan Cas 296, 22 ER 809; Rep Temp Finch 338, 23 ER 185; 2 Freem 6. In the appendix to the second volume of his reports, Swanston called these accounts ‘extremely imperfect’ and reproduced a report from Lord Nottingham’s MS: 2 Swanst 594, 36 ER 742. The best account, which is also taken from Lord Nottingham’s MS, is found in Lord Nottingham’s Reports, where the first hearing of Grey v Grey appears as case 526, the full hearing as case 643, and a later hearing (essentially an appeal against the master’s calculations) as case 833. Interestingly, the evidence that the case turned on was actually adduced in an earlier action: see section D below. 2 Sir Heneage Finch was made Lord Keeper in November 1673. Two months later he was created Baron Finch of Daventry. On 19 December 1675 he was promoted to Lord Chancellor, and in 1681 he was elevated in the peerage as the Earl of Nottingham: see E Foss, Biographica Juridica (London, John Murray, 1870) 252–53. For convenience he is referred to throughout as Lord Nottingham.

64

Jamie Glister B. GOSFIELD HALL

Although small, Gosfield Hall was built to be defended. It had four wings enclosing a central courtyard, with no external windows on the ground floor and only heavily barricaded windows above. Perhaps the builder wanted to avoid Henry VIII’s tax on castles, or perhaps that tax had led to such designs becoming fashionable. Either way, the original Gosfield Hall was built by Sir John Wentworth between 1539 and 1561,3 and on his death in 1567 the house passed to his daughter Anne. Elizabeth I visited Anne there twice, and the Queen’s Gallery above the west wing’s archway is named in her honour.4 On Anne’s death the house passed to her cousin, and in 1613 it was inherited by another Sir John Wentworth.5 This Wentworth has been described as extravagant and Gosfield’s black sheep,6 and he was eventually forced to sell the house to Sir John Garrard. In the meantime Wentworth’s eldest daughter, Cecilia Wentworth,7 had been born and brought up at Gosfield. In June 1619 she married William Grey there, and a few years later William was created the 1st Baron Grey of Wark.8 From Sir John Garrard the house passed through several hands before ending up with Lord Dacre who held in right of his wife Elizabeth. On 16 January 1653/4 they sold Gosfield for £13,000 to Thomas Grey, the eldest living son of William Grey and Cecelia Wentworth. Although the case of Grey v Grey was not heard for nearly a quarter of a century, it was this purchase on which the case turned. It being accepted that William provided the purchase money, was the purchase an advancement for Thomas or was

3 Wentworth is named as the builder in J Norden, Speculi Britanniae Pars: An Historical and Chorographical Description of the County of Essex (1594, repr London, Camden Society, 1840) 37, and he inherited the manor in 1539. Elizabeth I visited the house in 1561. 4 The gallery is now called Queen Charlotte’s Gallery, presumably to fit in with the marketing of Gosfield as a Georgian manor. However, there seems little doubt that the relevant queen was actually Elizabeth I: see, eg, A Mee (ed), The King’s England—Essex (London, Hodder and Stoughton, 1942) 150. 5 Anne’s cousin was John Wentworth (b 1540). On his death in 1588 it passed to his own son John (b 1564), who died in 1613 and passed it to his son John (b 1583). This last John Wentworth was created a baronet in 1611 and died in 1631. He married Catherine Finch, daughter of Sir Moyle Finch and Elizabeth Heneage, and aunt of the Heneage Finch who was to become Lord Nottingham. So close were the families of Wentworth and Finch that two brothers and sisters married each other: Sir John Wentworth married Catherine Finch, and Cecily Wentworth married Thomas Finch, 2nd Earl of Winchilsea. Lord Nottingham and Ford Grey were therefore first cousins twice removed: Nottingham’s grandparents were Grey’s great-great-grandparents. See the family tree at the end of this chapter. 6 LM Bates and P Gorton, The Story of Gosfield Hall (London, Country Houses Association, 1988). 7 Cecilia is also variously called Cecily, Priscilla and Anne. 8 S Bolton, The Extinct Peerage of England (London, J & F Rivington, 1769) 133; P Morant, The History and Antiquities of the County of Essex (1763–68; repr Wakefield, EP Publishing, 1978) vol ii, 382. Wark was a castle in Northumberland that was also owned by the Grey family. ‘Grey’ and ‘Wark’ are used in this chapter, but various sources give spellings of ‘Gray’, ‘Werk’, ‘Werke’ and ‘Warke’.

Grey v Grey 65 Thomas a trustee for William? As we will see, Lord Nottingham held that the purchase was an advancement. But regardless of his intentions in respect of property ownership, it is pleasant to note that William bought Gosfield because it was his wife’s childhood home. There might even have been some nagging involved: William is reported as saying that ‘Gosfield was the inheritance of my son’s mother, else had better have bought Hatton Garden’.9 The son Thomas predeceased the father William, and Thomas left Gosfield to William in his will. There is some uncertainty about when Thomas died: some sources have 1654,10 whereas others have 16 February 1671/2.11 The confusion probably arises because Thomas’s will, by which he gave Gosfield to William, was dated 1654.12 However, Thomas executed a codicil of legacies on 11 February 1671/2, and his will was proved on 22 February 1671/2,13 so we can safely assume that he died between those dates. Clearly unconcerned with certainty of subject-matter, Thomas directed his trustees to hold his ‘best necklace of pearls’ for his sister, to hold his ‘fairest diamond ring’ for Sir Ellis Leighton,14 and to divide his clothes equally between his two footmen. Thomas also left a gold tankard to his nephew Ford Grey. On William’s death Gosfield passed to his other son Ralph, the 2nd Baron Grey of Wark, who died less than a year after his father. On Ralph’s death in 1675 it was inherited by his own son Ford, who as the 3rd Baron is the ‘Lord Grey’ in the case of Grey v Grey.

C. FORD GREY

Ford Grey, who died in 1701, is one of the most interesting characters of his age. Although he died as the Earl of Tankerville and Lord Privy Seal, he has been described as cowardly and perfidious,15 the basest of traitors.16 Recent assessments have tended to be kinder.17 Born in either July or December

9

Reports, case 643. WL Rutton, Three Branches of the Family of Wentworth (London, Mitchell and Hughes, 1891) 177; Morant (n 8) vol ii, 382; Bates and Gorton (n 6). 11 Morant (n 8) vol i, 47; V Gibbs in The Complete Peerage (London, St Catherine Press, 1926) vol vi, 169; Notes and Queries, 22 December 1951, 553. Morant actually gives 1671/2, while the later two sources simply give 1672. The two dates are the same: 16 February 1671 came before 25 March, so fell in the calendar year 1672. The official year was changed to 1 January–31 December by the Calendar (New Style) Act 1750 (24 Geo 2 c 23). 12 In fact 11 January 1654/5. 13 TNA Prob/11/338 image 1216. 14 Son of Dr Alexander Leighton, the Scottish puritan who in the reign of Charles I had his nose slit and his ears cut off for criticising the church prelacy. 15 Dartmouth et al, Bishop Burnet’s History of the Reign of King James The Second (Oxford, OUP, 1852) 56. 16 J Pollock, The Popish Plot (London, Duckworth & Co, 1903) 239. 17 RL Greaves, biography in Oxford Dictionary of National Biography (Online) (2004), available at , accessed 28 June 2011; C Price, 10

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1655,18 he married Mary Berkeley in summer 1674, and their daughter, also Mary, was born in May 1675. Later that year he succeeded his father Ralph as the 3rd Lord Grey of Wark, and he took his seat in the House of Lords in February 1677/8. He is famously reported as being responsible for the passing of the Habeas Corpus Act 1679, when, as one of the tellers, he deliberately miscounted the number of peers who had divided in favour of the bill. The other teller was apparently drunk and did not notice:19 Lord Grey and Lord Norris were named to be the tellers: Lord Norris, being a man subject to vapours, was not at all times attentive to what he was doing: so a very fat Lord coming in, Lord Grey counted him for ten as a jest at first: but seeing Lord Norris had not observed it, he went on with this misreckoning of ten: so it was reported to the House, and declared that they who were for the bill were the majority, though it indeed went on the other side.

As a Protestant Whig, Grey was concerned at the prospect of James, Duke of York, succeeding his brother Charles II. A member of the Green Ribbon Club, Grey plotted with the Duke of Monmouth and the Earl of Shaftesbury. In an attempt to prevent Tories being elected as sheriffs of the Corporation of London,20 Grey instigated a riot in the Guildhall in June 1682 and was fined 1,000 marks. This is particularly notable because Grey’s alibi was that he had been negotiating a sale of Gosfield Hall and so could not have been at the Guildhall at the relevant time.21 He later took part in the failed Rye House plot of 1683 to assassinate Charles and the Duke of York. Grey was captured and sent to the Tower, but he escaped and fled to the Continent when the sergeant charged with escorting him fell asleep—possibly because Grey had got him drunk.22 In June 1683 the

Cold Caleb—The Scandalous Life of Ford Grey First Earl of Tankerville (London, Andrew Melrose, 1956) 13: ‘certainly a scamp [but not] a villain’. 18 Price notes that the East Harting church register records one Ford Grey dying on 20 July 1655, and the St Paul’s, Covent Garden, register records another being born on 6 December 1655: Price (n 17) 20. Other sources have 20 July 1655 as the date of Ford’s christening: Gibbs (n 11) 169; Greaves (n 17). The hearing of Grey v Grey was delayed from June 1676 because Ford was not yet 21. Although this does not decide in favour of either date, we are told that Lord Nottingham delayed the case until November, ‘at which time he will be of age’, which suggests that Ford was born earlier than December: Reports, case 526. 19 G Burnet, Bishop Burnet’s History of his Own Time, vol ii (Oxford, Clarendon Press 1823) 250–51, quoted in WD Christie, Life of the First Earl of Shaftesbury, vol ii (London, Macmillan & Co, 1871) 335–36. Christie confirms that the story is probably true, since the number of voting peers exceeded the number of peers recorded as present in the House that day. How far the 1679 Act extended the prerogative writ of habeas corpus recently assumed great importance in the Guantanamo Bay detainee case of Boumediene v Bush 553 US 723 (2008); see T Bingham, The Rule of Law (London, Penguin, 2010) 22–23. 20 To the chagrin of Charles II, Lord Shaftesbury had earlier been acquitted of treason because the Whig sheriffs had chosen a favourable jury: Price (n 17) 72. 21 The Dictionary of National Biography (Oxford, OUP, 1973 ed) vol viii, 625. 22 G Roberts, Life of James, Duke of Monmouth (London, Longman et al, 1844) 148; compare Price (n 17) 132. Grey had an earlier escape when muskets, bandoliers, bullet moulds

Grey v Grey 67 King issued a general proclamation for the arrest of the Rye House plotters, offering a reward of £500 each. Grey did not take his wife Mary with him into hiding, but he did take her sister Harriet. The two had been conducting a scandalous affair for some time (at one point Grey spent two days locked in Harriet’s closet),23 and Grey had even been convicted of ‘debauching’ her.24 Undaunted, the two continued their liaison, and Harriet eventually joined Grey in Holland and gave birth to a child there. After two years on the Continent, and following the succession of James II, Grey returned to England as second in command of the Monmouth Rebellion. The invaders landed at Lyme Regis on 11 June 1685 but were soon defeated at the Battle of Sedgemoor on 6 July. Grey and Monmouth were captured a few days later and were taken to London. Monmouth was executed on 15 July, but Grey was temporarily—or so it seemed at the time—spared the axe. James II wrote that ‘his execution cannot be so soone by reason of some forms, wch are requisite to be complyed with’.25 The reason is not clear, but it might be that Charles II’s failure to call another Parliament after March 1681 meant that Grey’s attainder had not been properly passed.26 Other correspondence quoted by Price points to a possible defect in the original writ of outlawry,27 which may be a reference to the same thing. Ralph suggests that Grey was eventually spared at the behest of the Earl of Rochester so that the Earl could continue to enjoy the profits of Grey’s entailed estate. These had been promised to Rochester by Charles II when Grey fled.28 Grey was formally pardoned on 12 November 1685 and his title was restored in June 1686. Under William and Mary he became a Privy

and armour were found at his London house. Grey’s defence was that they were for use on his estates. Unconvinced, the Privy Council bound him over to keep the peace: Price (n 17) 128. 23 Price (n 17) 61. The relationship was utterly sensational and was even the subject of a roman à clef by Aphra Behn, Love-Letters Between a Nobleman and His Sister (London, 1684–87). Interestingly, Grey had originally been famous for being cuckolded by his friend Monmouth. 24 He was convicted in November 1682 but never punished because the Attorney General entered a nolle prosequi: The Trial of Ford Lord Grey of Werk (London, 1716) 94; State Trials vol ix, 127. 25 Letter from James II to the Prince of Orange, quoted in Price (n 17) 195. 26 Monmouth’s attainder was passed only after the invasion: 1 Ja II c 2. Entries from the Treasury Entry Book suggest that Grey was attainted in April 1684, but this could not have been by Act of Parliament: see Entry Book 11 Dec 1683 and 16 May 1684 in W Shaw (ed), Calendar of Treasury Books, Vol 8 1685–1689 (London, 1923). 27 Price (n 17) 197. 28 J Ralph, History of England (London, Cogan and Waller, 1744). In fact Grey was also required to give up most of his unentailed estate to Rochester as the price of his pardon. This was eventually restored to him by the Committee on Privileges in 1692, but that decision was then effectively reversed by 2&3 An c 12, a private Act passed after Ford had died and when Ralph, his younger brother and heir, was overseas as the Governor of Barbados.

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Counsellor and in 1695 he was created Earl of Tankerville.29 In later years Grey was First Lord of the Treasury, a Lord Justice of the Realm, and the Lord Privy Seal. He died on 24 June 1701 and was buried in East Harting in Sussex.

D. HISTORY OF GREY V GREY

The history and facts of Grey v Grey are quite complicated because they involve two separate actions by different members of the Grey family. That said, the essential question was simply whether William’s purchase of Gosfield in Thomas’s name had been an advancement or a trust. The answer to this question determined whether later gifts to junior members of the Grey family had been properly charged on Gosfield. On his death in February 1671/2, Thomas left Gosfield to his father William. However, the devise was not made to William and his heirs. Assuming an initial advancement and not a trust, this could only have operated as a life interest for William and the remainder would have automatically descended to Thomas’s younger brother Ralph. On the other hand, if Gosfield had always been held on trust then Thomas’s death would simply have meant the death of William’s trustee. In the summer of 1672, William resettled Gosfield to trustees on trust for himself for life, thereafter to raise £12,000 for his younger grandsons, Ralph Jr and Charles, and also to provide an amount for his daughter Catharine. Ralph Jr and Charles were Ford’s younger brothers and Catharine was Ford’s aunt. If Thomas had not initially held Gosfield on trust then these charges would fail as to Gosfield and would need to be transferred to William’s other estates (which already had many encumbrances). In that case Ralph Sr would have been entitled to Gosfield by descent from Thomas, William would have only ever held a life interest, and William’s settlement of 1672 would relevantly have failed. In short, the 1672 settlement required the initial purchase to have been made on trust. William, the head of the family for over 50 years, died in the summer of 1674 and the feuding began. Ralph Sr declared that his father had never been seised in fee of Gosfield and he was immediately sued by his sister Catharine and her husband Charles North, the 1st Baron Grey of Rolleston, in an attempt to protect Catharine’s interest under William’s settlement.30 29 Tankerville, or Tancarville, is a village in Normandy. Ford Grey’s ancestor John Grey was created Earl Tankerville in 1418 by Henry V for service during the Hundred Years War. That creation became extinct when the 3rd Earl was attainted in the reign of Henry VI. Ford Grey was the only holder of the title during its second creation. Charles Bennet, Ford Grey’s son-in-law, was created Earl Tankerville in its third creation in 1714. The current Earl, Peter Grey Bennet, is the 10th Earl in its third creation. 30 TNA C6/62/54.

Grey v Grey 69 This bill of complaint is where we learn that William paid the purchase money and treated Gosfield as his own even when Thomas was still alive. William would, for example, treat about its sale and collect rents in his own name. According to Catharine and Charles, Thomas was of the same mind as his father. Their bill rhetorically asked if Thomas ‘did more concern himself upon the account of any interest he had in [Gosfield] in the receipt of the rents issues and profits thereof than he did in the rents issues and profits of his father’s northern estate’.31 Ralph did not reply to the bill until January 1674/5, by which time he had already conveyed Gosfield to trustees to pay the debts and legacies in his own will. In his reply, Ralph said that he believed the Gosfield purchase money was a free gift to Thomas:32 [Ralph] verily believed the said money was a free gift of the said William Lord Grey to the said Mr Thomas Grey by way of advancement of the said Mr Grey who at the time of the said purchase was his son and heir apparent and will not … make it liable to any trust for the said William Lord Grey but the same ought to be taken and looked upon as a purchase for Mr Grey by the father to the son and not as a trust.

It is this slightly earlier Grey v Grey that really deserves a place in legal history, but it was never decided because Ralph himself died in June 1675. Ralph’s will included legacies of £2,000 for each of his younger children, Catherine, Ralph Jr and Charles; and a further amount of £4,000 initially left to Catherine by William but later a debt of Ralph as William’s executor. Under Ralph’s settlement of 1674/5 these bequests were to be charged on Gosfield. Of course, Ralph’s settlement was the opposite of William’s because it could only have worked if the initial purchase for Thomas had been an advancement. If the purchase had been a trust then Ralph’s settlement would have failed because on William’s death the most that Ralph would have received was a life interest.33 Ralph’s settlement would only have been effective if Ralph had been entitled to Gosfield by virtue of it going fully to Thomas on purchase, then on Thomas’s death by descent to Ralph, albeit subject to William for life. Soon after Ralph’s death, Ford brought a bill against his mother Lady Katherine and his father’s trustees to decide how and by whom Ralph’s debts would be paid.34 Ford wanted the initial purchase of Gosfield to

31

Ibid. TNA C6/62/53. 33 In fact the 1672 settlement was to William for life, then on trust for 99 years to raise money for William’s grandchildren and daughter Catharine, then to Ralph for life. 34 TNA C6/76/84. George, Earl of Berkeley, Ford’s father-in-law, was his next friend. At one point the two sides were close to an agreement, with Ford offering to pay £18,000 of the legacies for his younger siblings. But Ford was not of age when the case first came before Lord Nottingham, so no decree by consent could be made: Reports, case 526. When the case 32

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have been on trust because then Ralph’s settlement would have failed as to Gosfield and the £10,000 charged to the children (plus Ralph’s other debts)35 would have been payable out of Ralph’s personal estate, which he had left to Lady Katherine. Lady Katherine, on the other hand, wanted the initial purchase to be an advancement because then the amounts charged by Ralph on Gosfield would be valid and although the £12,000 charged by William would fail as to Gosfield it would still be chargeable on other lands. Importantly, Lady Katherine further argued that Ralph’s personal estate was immune from his debts and that they should only be taken from Gosfield. Indeed, this was the real point of the second Grey v Grey and all the pleadings are concerned with whether Ralph somehow attempted by the 1674/5 settlement to insulate his personal estate from his debts.36 Lord Nottingham eventually decided that William’s original purchase for Thomas was an advancement, meaning that Ralph’s settlement was valid and that on this point Lady Katherine won. However, he also decided that nothing in Ralph’s settlement precluded Ford from proceeding against the personal estate. On this point Nottingham held that Lady Katherine lost and Ford won:37 in the case of an heir, ’tis clear that he is concerned that no more of the land be sold than is necessary, and hath right in equity to demand that the personal estate may ease him, as far as it will go; from which right no implication can exclude him.

It is clear that Ford exercised this right because a year later his mother unsuccessfully asked to be allowed to keep her jewels and chamber plate.38 In contesting these items Ford might look rather petty, since Ralph’s personal estate was so small that it would not have gone far in satisfying his debts. That said, Lady Katherine also had the separate personal estates of William and Thomas Grey to support her.

returned, Ford increased the offer to £19,000 and Lady Katherine agreed to pay the remaining £3,000, but for unknown reasons the agreement fell apart: Reports, case 643. 35 These were assessed in August 1675 and included a £2,000 judgment debt, £5,020 in bonds, and £850 in smaller debts including £43 to his lawyer and £17 to the fishmonger: TNA C6/76/84. 36 TNA C6/76/62 contains the answers of Ralph’s trustees to Ford’s bill. Each denied any knowledge of any arrangement with respect to Ralph’s personal estate coming in aid of his debts. 37 Reports, case 643. Lord Nottingham thought that, in respect of heirs, an express settlement clause could exempt a personal estate from being applied to ease the land. But a clause to that effect would not be implied, and even an express clause could not exclude the rights of creditors to go against the personal estate. 38 Reports, case 833. The reasoning given is rather at odds with that in the main case. Instead of noting the absence of an express clause in Ralph’s settlement, Lord Nottingham held that Ford ought to prevail ‘because in consequence it concerns all the creditors, whose security is weakened if the assets be diminished’.

Grey v Grey 71 At the very start of the case, Lord Nottingham said that he would be ‘glad to avoid the delivery of any opinion, because I foresee that a victory on either side can never produce the peace of it, but will rather occasion great and perhaps endless breaches’.39 This proved a prescient comment as Ford’s aunt Catharine and her husband Charles, by now the 5th Baron North of Kirtling, repeatedly tried to get a share of Gosfield. They were unsuccessful in 1679,40 and gave up only when even Charles North’s younger brother, Sir Francis North LK, who succeeded Lord Nottingham, found against them in 1682/3.41

E. REASONING IN GREY V GREY

Although a few cases were mentioned in Lord Nottingham’s judgment, the decision in Grey v Grey was reached by the application of general principle rather than specific authority. The first question was whether William Grey’s payment of the purchase price meant that a trust resulted to him. If not, perhaps a trust for William could still be established separately. In modern terminology, the first question concerns the application of a presumption of advancement or a presumption of resulting trust, whereas the second question concerns the rebuttal of a presumption of advancement. This was not the language used by Lord Nottingham, and the judgment does not address the questions quite so discretely,42 but it is clear that the same issues were identified. It is worth setting out the main part of the judgment in full:43 Upon these facts the law will best appear by these steps. 1. Generally and prima facie, as they say, a purchase in the name of a stranger is a trust, for want of a consideration, but a purchase in the name of a son is no trust, for the consideration is apparent. 2. But yet it may be a trust, if it be so declared antecedently or subsequently, under the hand and seal of both parties. 3. Nay, it may be a trust, if it be so declared by parol, and both parties uniformly concur in that declaration. 4. The parol declarations in this case are both ways; the father and son sometimes declaring for, and sometimes against, themselves. 5. Therefore, there being no certain proof to rest on as to parol declarations, the matter is left to construction and interpretation of law. 6. And herein the great question is, whether the law will

39

Reports, case 643. TNA C6/35/100. 41 TNA C6/294/74. Sir Francis North was made Lord Keeper on Lord Nottingham’s death in December 1682. He was created the 1st Baron Guilford in 1683: Foss (n 2) 485. 42 Modern judges often conflate the two questions too: see, eg, Cheung v Worldcup Investments Inc [2008] HKCFA 78 [8] (Litton NPJ) [44] (Lord Scott NPJ), discussed in J Glister, ‘The Presumption of Advancement’ in C Mitchell (ed), Constructive and Resulting Trusts (Oxford, Hart Publishing, 2010) 290–91. 43 Reports, case 643. Also see the Prolegomena, ch 14, s 5, which makes it clear that resulting uses and resulting trusts are to be analysed in the same way. 40

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admit of any constructive trust at all between father and son. For if it will, the evidences of a trust must arise from the acts done by Lord William and submitted to by the son [and these] are incomparably greater and more valuable than the evidence against the trust can be, which stand chiefly upon words.44 But I am of the opinion that the law will never admit any implication of a trust between father and son: 1. For the natural consideration of blood and affection is so apparently predominant that those acts which would imply a trust in a stranger will not do so in a son. And therefore the father who would check and control the operation of nature ought to provide for himself by some instrument or some clear proof of a declaration of trust, and not depend upon any implications of law; for there is no necessity to give way to constructive trusts, but great justice and conscience in restraining such constructions. 2. The wisdom of the common law did so; for all the books are agreed on this point, that a feoffment to a stranger without a consideration raised an use to the feoffor, but a feoffment to the son without other consideration raised no use by implication to the father, for the consideration of blood settled the use in the son, and made it an advancement. How can this Court justify itself to the world, if it should be so arbitrary as to make the law of trusts to differ from the law of uses in the same case?

The extract makes clear that no trust is presumed when property is purchased by a father in the name of his son. That does not mean the son cannot be a trustee, but this would require ‘some instrument or some clear proof of a declaration of trust’. These are what Ford Grey needed, but none could be found in Grey v Grey. There being no relevant instrument, the only evidence concerned the deeds and words of the parties. On one hand William had taken profits, made leases, developed the property at his expense, instructed lawyers to draw up a settlement and treated about its sale. All of these suggest that the purchase was a trust. On the other hand William had said that Gosfield was his son’s property and, later, that he had no title but by Thomas’s will. As we have seen, Lord Nottingham found the ‘parol declarations’ evidence inconclusive. Then, turning to the evidence of William’s deeds, Nottingham said that even though such evidence certainly pointed towards a trust rather than an advancement, the evidence would not be considered. This needs careful explanation. Although the language has changed, it is submitted that Lord Nottingham was saying that the ‘presumption’ of advancement, as we now call it, cannot be rebutted merely by evidence

44 The section ‘For if it will … chiefly upon words’ was not included by Swanston. It was therefore essentially lost until Mr Yale published Lord Nottingham’s Reports with the Selden Society in 1961. This is a particularly important point, given that the passage makes it very clear that the presumption of advancement ought not to be rebutted merely by evidence that the donor did not have that intention.

Grey v Grey 73 of intention.45 A father may make his son a trustee with an instrument, and parol evidence may also be used to establish that the son took as a trustee,46 but deeds cannot be used as evidence to establish a trust. That is, the presumption of advancement is not a presumption of intention that can be rebutted by evidence inconsistent with that intention; instead it is a default position that can be departed from only on proof of a declared trust. In other words, the presumption of advancement is the absence of a presumption of resulting trust, not a counterpart of it.47

(1) Case References Lord Nottingham also referred to four cases, each of which he had earlier noted in chapter 13 of his Prolegomena.48 None of these was directly on point in relation to Grey v Grey, but part of the value of the case is that—at least at first—it distilled a coherent principle from the existing case law. The earliest, Lady Gorge’s case, does not appear to have been reported.49 However, from references in later authority it appears to decide that a resulting trust will not be found when a father purchases property in the sole name of his infant child.50 In the next, Scroope v Scroope,51 Hide CJ held that a trust would not result when the father purchased property in the joint names of himself and his son. Bridgeman LK expanded this in Windham v Windham to hold that a father’s sole receipt of rents in a father–son joint names case would not be evidence of a trust as it would be in the case of property held in joint names by strangers.52 The fourth case, 45 The evidence mentioned in Grey v Grey happened after the purchase of Gosfield. Lord Nottingham did not see this as important in Grey, but compare the rule in Shephard v Cartwright [1955] AC 431 (HL). However, that rule has been strongly criticised as failing to distinguish between later evidence that goes to pre-purchase intention (which ought to be admissible) and later evidence that goes to post-purchase intention (which ought not): E Fung, ‘The scope of the rule in Shephard v Cartwright’ (2006) 122 LQR 651. Lord Phillips MR refused to apply the strict rule in Lavelle v Lavelle [2004] EWCA Civ 223, [2004] 2 FCR 418, and the Supreme Court of Canada rejected it in Pecore v Pecore [2007] SCC 17, [2007] 1 SCR 795 [56]–[59]. 46 Although see the discussion in n 61 below. 47 See J Glister ‘Is There a Presumption of Advancement?’ (2011) 33 Sydney Law Review 39. 48 Chapter 13 of the Prolegomena is entitled ‘Where trust shall be raised by construction and implication of law, and where not’. 49 This 1634 decision is not reported but is cited in Crisp v Pratt (1634/5) Cro Car 549, 550; 79 ER 1072, 1074; Prolegomena, ch 13, s 10. It is also referred to, as Sir Sidney Mountague’s Case, in one report of Scroope v Scroope (1663) 1 Ch Cas 27, 28; 22 ER 677, 677. Mountague bought land from the Earl of Lincoln, who had bought it in the name of his daughter Lady Gorge. 50 Prolegomena, ch 13, s 10. 51 Scroope v Scroope (1663) 1 Ch Cas 27, 22 ER 677; 2 Freem Ch 171, 22 ER 1138; Prolegomena, ch 13, s 2. The report of Grey provides that after Scroope was decided a concealed deed was found, which showed that the trust had indeed been declared. 52 Windham v Windham (1668/9) 2 Freem Ch 127, 22 ER 1103; 3 Chan Rep 22, 21 ER 717; Prolegomena, ch 13, s 5.

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Strode v Strode,53 was also a joint tenant case, and in the report of Grey v Grey it is cited alongside the other two. However, an interesting comment from Bridgeman LK in Strode v Strode appears in the Prolegomena:54 But if the purchase be made in the name of the son alone, and not in the name of the father also as joint purchaser, and the father paid all the money, received all the profits, made all the leases &c, there a trust shall arise to the father by implication, and no advancement shall be intended.

Given that Strode v Strode was actually a joint tenant case, this is obiter. Nevertheless, it is interesting because if applied to Grey v Grey it would have led to a different outcome. And Bridgeman LK clearly considered the issue because he distinguished Lady Gorge’s case by noting that there the father had received profits on behalf of his infant daughter. In Grey v Grey, Lord Nottingham quickly rejected infancy or guardianship as the determining factor,55 and similarly rejected any distinction between a father taking profits in a joint tenant case and one taking profits when land was held solely by his son: 56 Plainly this difference could not be the reason of these resolutions; for had the father been joint purchaser with a stranger, and received all the profits without contradiction or suit in equity, the perceptions of profits would have been evidence of a trust, yet there it might be said still one joint tenant may by law receive all. Therefore it was the sonship, not the joint tenancy, which ruled those cases.

This all suggests that, for Lord Nottingham, the crucial factor was sonship and not joint tenancy or age. And at this point in the judgment Grey v Grey looks like a convincing and important decision: it rationalises previous case law, does so consistently with the law on resulting uses, and creates a straightforward rule that depends simply on the recipient being a child of the donor. Unfortunately, and instead of leaving it there, Lord Nottingham proceeded to create an exception that was unnecessary to decide the case, was inconsistent with the law of uses, was itself soon abandoned, and which has arguably confused the general law of resulting trusts ever since.

(2) Existing Provision There is nothing in Lord Nottingham’s Prolegomena, and nothing in the earlier cases referred to in Grey v Grey, that mentions the concept of existing

53 Strode v Strode (1672) 2 Ch Cas 196, 22 ER 908; Reports, case 211; Prolegomena, ch 13, s 13. The English Reports give the date as 1674 but the Prolegomena gives it as 1672, which must be correct as Bridgeman LK decided the case. 54 Prolegomena, ch 13, s 13. 55 ‘For a purchase in the name of an infant stranger with perception of profits &c will be evidence of a trust’: Reports, case 643. 56 Reports, case 643.

Grey v Grey 75 provision. That is, there is nothing to suggest that a distinction ought to be drawn according to whether recipient sons were already advanced when the property was purchased in their names. Lady Gorge’s case had dealt with infancy rather than unadvanced adults,57 and the reports of the other three cases do not suggest that existing provision was a consideration. Although it is perfectly possible that such cases occurred but were not reported, or were reported but those reports have not survived, I have been unable to find any case before Grey v Grey that hints at existing provision being an issue. Nonetheless, towards the end of his judgment in Grey v Grey, Lord Nottingham said:58 Lastly, the difference I rely upon is this: where the son is not at all or but in part advanced as here; there if he suffer the father, who purchased in his name, to receive the profits &c, this act of reverence and good manners will not contradict the nature of things and turn a presumptive advancement into a trust … But if the son be married in his father’s lifetime, and by his father’s consent, and a settlement be thereupon made whereby the son appears to be fully advanced and in a manner emancipated, there a subsequent purchase by the father in the name of such a son, with perception of profits &c by the father, will be evidence of a trust; for all presumption of an advancement ceases.

As we will see, the great problem with this passage is that it undermines the rest of the reasoning. Having said, in modern terms, that the law does not apply a presumption of resulting trust in a father–son case, Lord Nottingham then appears to say that sonship is simply relevant to the father’s intention. This is only a subtle difference, but it is a theoretically important one. A few months after Grey v Grey, Lord Nottingham decided the case of Elliot v Elliot.59 This was another advancement case, with the difference being that the son in whose name property was purchased was already ‘emancipated’. He had been married for 25 years and already had much property of his own. After referring to the general position, where no trust was implied between father and son, Nottingham said: 60 But on the other side to say that in no case any trust shall be implied between father and son, and that a father can never trust a son unless there be an express declaration of that trust in writing,61 seems very hard, for though the common

57

The recipient in Scroope (n 51) may also have been an infant at the relevant time. Reports, case 643. 59 Elliot v Elliot (1677) 2 Chan Cas 231, 22 ER 922; Reports, cases 690 and 751. The case was initially heard on 14 July 1677, with a fuller hearing on 22 November 1677. 60 Reports, case 751. 61 An interesting comment, which suggests that trusts of land arising on rebuttal of a presumption of advancement in fact do require writing under the Statute of Frauds. And Lord Nottingham was one of the main authors of that legislation: see GP Costigan, ‘The Date and Authorship of the Statute of Frauds’ (1912–13) 26 Harvard Law Review 329. This would only strengthen the argument that no presumption of resulting trust exists in advancement cases. 58

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law went so far in the case of uses, it was not necessary equity should do so in case of trusts. What then are the true bounds to these constructive or implied trusts between father and son? … [W]here the son hath been long married and fully advanced already … and is himself become the head of a new family, which is this present case, there whatever circumstance would prove a trust between strangers the same do also prove a trust between such a father and such a son.

The use of ‘prove’ in the last sentence is slightly confusing because it suggests that the actions of the parties are relevant at this point in the analysis. But I suggest that the passage as a whole be read as saying that the law will imply a trust over purchases made in the names of advanced children. (Indeed, in the first hearing of Elliot v Elliot Nottingham uses ‘imply’ instead of ‘prove’ when making exactly the same point.)62 Given that Lord Nottingham still saw unadvanced cases as being analogous to the law of uses, and given that Elliot v Elliot was decided on the basis of legal presumption rather than factual analysis,63 the position is rather confusing. At the very least it can be said that Nottingham thought the two should be treated differently, even though they both involve fathers and sons. Yet this difference in treatment undermined the main point: rather than see the recipient as fully entitled by virtue of his relationship with the donor, instead the law viewed that relationship as merely evidence that the father probably intended to make a gift. The disparity was highlighted by Eyre CB a century later in Dyer v Dyer:64 It is the established doctrine of a court of equity, that this resulting trust may be rebutted by circumstances in evidence. The cases go one step further, and prove that the circumstance of one or more of the nominees, being a child or children of the purchaser, is to operate by rebutting the resulting trust; and it has been determined in so many cases that the nominee being a child shall have such operation as a circumstance of evidence, that we should be disturbing land-marks if we suffered either of these propositions to be called in question, namely, that such circumstance shall rebut the resulting trust, and that it shall do so as a circumstance of evidence.

But compare AW Scott and WL, Fratcher The Law of Trusts, 4th edn (Boston, Little, Brown, 1989) para [443], quoted with approval by Deane and Gummow JJ in Nelson v Nelson [1995] HCA 25, (1995) 184 CLR 538, 548: ‘This reasoning is somewhat artificial; but trusts arising where the evidence shows an intention to create a trust when land is purchased in the name of a relative were considered to be resulting trusts before the enactment of the Statute of Frauds, and that statute expressly excepts resulting trusts from its operation.’ Either way, in the modern law it is indubitably the case that trusts of land found on rebuttal of a presumption of advancement do not require written evidence. 62

Reports, case 690. Unlike many of the cases, Elliot v Elliot did not involve a father receiving rents and treating the property as his own for a considerable time. There being few relevant facts, the case was essentially decided on the basis of which presumption applied: see Reports, case 751, ‘it being not a question of fact, but a question of law how far a trust was implied in this case’. 64 Dyer v Dyer (1788) 2 Cox 91, 93–94; 30 ER 42, 43 (original emphasis). 63

Grey v Grey 77 By 1788, sonship was being seen merely as evidence that a gift was probably intended (rather than as a factor precluding a presumption of resulting trust). The Lord Chief Baron went on: 65 I think it would have been a more simple doctrine, if the children had been considered as purchasers for a valuable consideration. Natural love and affection raised a use at common law; surely then it will rebut a trust resulting to the father. This way of considering it would have shut out all the circumstances of evidence which have found their way into many of the cases, and would have prevented some very nice distinctions, and not very easy to be understood. Considering it as a circumstance of evidence, there must be of course evidence admitted on the other side. Thus it was resolved into a question of intent, which was getting into a very wide sea, without very certain guides.

Of course, the point is that in Grey v Grey children were seen as providing consideration, or at least they were supposed to be. If in that case Lord Nottingham had not commented on the advanced/unadvanced distinction then this would have been very clear. Unfortunately the distinction was drawn, and Elliot v Elliot quickly followed.66 Sonship was now relevant as a mere ‘circumstance of evidence’. This distinction between advanced and unadvanced children was initially important. It was decisive in Elliot v Elliot, the reports of subsequent cases specifically mention children ‘unprovided for’,67 and in Lamplugh v Lamplugh it appears that argument was heard on whether or not the son was already advanced.68 That all said, the distinction lasted for only a century or so. In Smith v Baker the Lord Chancellor refused to examine whether a wife was already advanced, reasoning that the husband might

65 Ibid, 94, 44. The reference to ‘valuable’ consideration should not be taken too literally, especially since it is immediately followed by a reference to natural love and affection. The distinction is important: valuable consideration would mean that a trust interest could be defeated by a trustee father simply transferring legal title to his ignorant son (even if the father could not himself then take free title from the son: Barrow’s Case (1880) 14 Ch D 432 (CA) 445). The maxim that equity will not assist a volunteer would also have no application to family situations, meaning that Dillwyn v Llewelyn (1862) 4 De GF & J 517, 45 ER 1285 could have been decided on much simpler grounds. Only valuable consideration, which included marriage consideration but not natural love and affection, allowed the grantee to come within the exception in 13 Eliz 1 c 5 (1571) in relation to assignments made with intent to defraud creditors: see K Ryan, ‘Equity and the Doctrine of Consideration’ (1963–66) 2 Adelaide Law Review 189, 192–94; J Getzler, ‘Assignment of Future Property and Preferences’ in J Glister and P Ridge (eds), Fault Lines in Equity (Oxford, Hart Publishing, 2012). 66 It is possible that Lord Nottingham had the coming case of Elliot v Elliot in his mind when deciding Grey v Grey, although there was a gap between them. The main judgment in Grey was delivered on 26 March 1677 and the record of the first hearing of Elliot is dated 14 July 1677. The last Grey hearing, which came a few months after Elliot was decided, relied on a distinction between sons provided and unprovided for: Reports, case 833. 67 Shales v Shales (1701) 2 Freem 252, 22 ER 1191; Pole v Pole (1747/8) Ves Sen Supp 54, 28 ER 454. 68 Lamplugh v Lamplugh (1709) 1 P Wms 111, 24 ER 316.

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not think that any existing provision was sufficient.69 The same reasoning, that the court cannot accurately judge whether someone is provided for or not, was also applied in Dyer v Dyer, where Eyre CB also rejected the distinction.70 Since that case the distinction has simply been forgotten.71 This ‘clear difference’,72 which was not necessary to decide Grey v Grey, which did not exist in the old law of uses, which was not relevant to any of the cases mentioned in Grey v Grey, and which is not referred to in the Prolegomena or in earlier cases that I can find, was abolished. Unfortunately, its legacy—of the presumption of advancement being merely a presumption of intention—has remained. F. PRACTICAL DIFFERENCES73

In the modern law we speak of the presumption of resulting trust and the presumption of advancement. The exact content of the presumption of resulting trust is a matter of debate: Swadling has argued that it is a presumption that the donor declared a trust for himself;74 Birks and Chambers that the donor lacked the intention to pass beneficial title to the recipient;75 Penner that it remedies the failure of the donor to make his intention sufficiently explicit.76 The point will not be in issue in cases where the evidence is sufficient to make any presumption redundant, but in hard cases it can be important because the exact content of the presumption informs the way that evidence is used to rebut it.77 Ought the recipient to establish that the donor did intend to pass beneficial title, or is it enough to show evidence inconsistent with a declaration of trust? It is similarly important to identify the exact content of the presumption of advancement. Is it a presumption of intention to make a gift, which, on rebuttal of that

69

Smith v Baker (1737) 1 Atk 385, 386; 26 ER 246, 247. Dyer (n 64) 94, 44: ‘not very solidly taken or uniformly adhered to’. 71 While it is not surprising that the concepts of ‘a provision’ or ‘being advanced’ are not discussed in recent cases, even cases from the 19th century do not distinguish between advanced and unadvanced recipients: see, eg, Garrett v Wilkinson (1848) 2 De G & Sm 244, 64 ER 110, where the fact that the son was the parent’s solicitor was important, but not that he was clearly an emancipated adult. 72 Reports, case 643. 73 The arguments in this section are explained more fully in Glister (n 47). 74 W Swadling, ‘A New Role for Resulting Trusts?’ (1996) 16 Legal Studies 110, and, by the same author, ‘Explaining Resulting Trusts’ (2008) 124 LQR 72. 75 P Birks, ‘Restitution and Resulting Trusts’ in S Goldstein (ed), Equity and Contemporary Legal Developments (Jerusalem, Hamaccabi Press, 1992) 335; R Chambers, Resulting Trusts (Oxford, Clarendon Press, 1997). 76 J Penner, ‘Resulting Trusts and Unjust Enrichment: Three Controversies’ in Mitchell (ed) (n 42) 249–57. 77 The classic example of this is Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 (HL). 70

Grey v Grey 79 presumption of intention, leaves an underlying resulting trust? Or is it in fact a description of a default position—the legal result—with no operative presumption at all?78 There are two scenarios where this distinction might be practically important in the sense that it would determine the outcome of a case. First, where the donor’s intention is impossible to effectuate; second, where the donor has simply failed to form any view as to what should happen to the property. Consider a donor who lacks the intention to make a gift but who also lacks the intention to do anything else. Such evidence would be enough to rebut a presumption of positive intention to give because an evidential lack of such intention is inconsistent with a presumption that such intention exists. But it would not rebut under the second model because there would be no evidence that the donor intended a result different from that which the legal title indicated. Similarly if the donor intended something ineffective: the evidence of this intention would rebut under the first model, but the ineffective intention would not affect the full legal title under the second. Having said that the distinction will be practically important in such cases, I concede that those cases will rarely arise. In terms of ineffective intention, equity already classifies rather undefined or uncertain intentions into the categories of trust, gift, conditional gift, etc. Even the more problematic constructions, like revocable gifts, can be accommodated.79 In short, it is unlikely that a donor’s intention will be incapable of being translated into legal terms. Furthermore, if the problem is a failure to comply with formalities in declaring a trust of land then the doctrine in Rochefoucauld v Boustead can apply.80 It will also be rare to find that a donor had no intention whatsoever in respect of property but that they did possess capacity to transfer it.81 Chambers has identified a case where this appeared to occur: Brown v Brown,82 a decision of the New South Wales Court of Appeal. In that case

78 A presumption of intention may be called a ‘true’ presumption and a description of a default position a ‘false’ presumption: P Murphy, Murphy on Evidence, 11th edn (Oxford, OUP, 2009) 679–81. See also, to the same effect, JD Heydon, Cross on Evidence, 8th Aus edn (Chatswood, LexisNexis, 2010) para [7240]. 79 Eg Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 (HCA). See also Kauter v Hilton (1953) 90 CLR 86 (HCA) (revocable trust). 80 Rochefoucauld v Boustead [1897] 1 Ch 196 (CA), discussed further by Y Liew in ch 14 of this volume. See also Lincoln v Wright (1859) 4 De G & J 16, 22; 45 ER 6, 9; Cadd v Cadd (1909) 9 CLR 171 (HCA) 187. It is true that this doctrine will (at least probably) not protect a third party intended beneficiary, only the donor: see TG Youdan, ‘Formalities for trusts of land and the doctrine in Rochefoucauld v Boustead’ (1984) 43 CLJ 306; JD Feltham, ‘Informal trusts and third parties’ [1987] Conv 246; TG Youdan, ‘Informal trusts and third parties: a response’ [1988] Conv 267. 81 A transfer made to a volunteer when the donor lacked capacity is void, so legal title will not pass: Gibbons v Wright (1954) 91 CLR 423 (HCA) 437–38; Re Beaney (dec’d) [1978] 1 WLR 770 (ChD). I leave aside the question of stolen property. 82 Brown v Brown [1993] NSWCA 38; (1993) 31 NSWLR 582.

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Mrs Brown contributed money towards property that was put in the names of her two sons. A presumption of advancement applied but the outcome was a trust for Mrs Brown. This means that the presumption of advancement was rebutted, but Gleeson CJ apparently found it to be rebutted by evidence of a lack of intention: he noted that none of the parties ‘thought through the consequences of their transaction, or made any agreement about title to the land that was being purchased’.83 Gleeson CJ also quoted the finding of the trial judge that the mother ‘did not intend that the beneficial ownership of the property should be otherwise than in proportion to contributions made by her and the defendants to the purchase price’.84 These remarks suggest that evidential proof of a lack of intention to give was enough to rebut the presumption of advancement. That said, it might be that Brown v Brown cannot support the weight that Chambers ascribes to it.85 Although Bryson J at trial did conclude that Mrs Brown ‘did not intend that the beneficial ownership of the property should be otherwise than in proportion’, which is a negative construction, earlier he had found that Mrs Brown ‘contributed her money in the contemplation which ordinary reasonable people would have that, without giving any legal definition to their rights, the people who contributed the purchase money would have corresponding interests in the property’.86 This finding is framed in positive terms. Moreover, there is a very good reason why Bryson J concluded his judgment with a negative construction of intention: at trial the defendant sons had not raised the presumption of advancement in their favour, so the judge had treated the case as involving a presumption of resulting trust. That is, the evidence was assessed against whether a presumption of resulting trust would be rebutted. So it is hardly surprising that Bryson J concluded negatively that Mrs Brown ‘did not intend that the beneficial ownership of the property should be otherwise than in proportion’, even though he had actually found that Mrs Brown positively intended to retain an interest. There is also some authority for the position that a mere lack of intention to give is not sufficient to rebut the presumption of advancement, and interestingly the judge in that case relied on Grey v Grey. In Commissioner of Stamp Duties v Byrnes,87 an Australian case before the Privy Council,

83

Ibid, 586. Cripps JA agreed with Gleeson CJ. Brown v Brown (Bryson J, unreported, 29 October 1990) 21; cited in Brown (n 82) 587. Gleeson CJ took this to mean that Mrs Brown had formed no intention in respect of the beneficial ownership, not that Mrs Brown had positively intended the proportions to be the same. 85 Chambers (n 75) 26; R Chambers, ‘Is There a Presumption of Resulting Trust?’ in Mitchell (ed) (n 42) 283–84. Extrajudicially, Lord Millett has also said that the presumption of advancement in Brown v Brown was rebutted on the basis that the mother had not formed any intention at all: PJ Millett, ‘Restitution and Constructive Trusts’ (1998) 114 LQR 399, 401. 86 Brown (NSWSC) (n 84) 17. 87 Commissioner of Stamp Duties v Byrnes [1911] AC 386 (PC). 84

Grey v Grey 81 a wealthy father purchased several properties in the name of his sons. The father received the rents and paid for the rates and repairs. The Commissioner argued that, for the purposes of the Stamp Duties Act 1898 (NSW), the father owned the properties at the time of his death and his estate was therefore liable to tax. Argument proceeded on the basis that if an implied reservation to the father could be shown then tax would be payable under section 49(2) (A)(e). So the question was whether the father had impliedly reserved an interest in the properties within the meaning of the Act. This is a different question from whether a presumption of advancement had been rebutted, but Lord Macnaghten relied on Grey v Grey in finding that a benefit had not been reserved to the father. It was held that the father’s receipt of rents was not evidence of a retained benefit, in the same way that such evidence would not rebut a presumption of advancement. Interestingly, there was also evidence that the father had formed no view as to the ownership of the properties:88 [The son] Charles stated positively that there was no arrangement or understanding whatever on the occasion of any one of the three purchases as to what should be done with the property or the rents coming from it.

The opinion is very short, and it appears that rebuttal of the presumption of advancement was not argued by the Commissioner, so the case should be treated with caution. However, it does seem that the father’s lack of intention to give—which was freely admitted by the son—did not mean that a benefit had been retained by the father. Yet if it is proved by evidence or admission that a donor lacks an intention to benefit, and if the presumption of advancement is a presumption that such an intention exists, then the outcome in Byrnes should have been different.

G. THEORETICAL CONSIDERATIONS

The section above argued that the practical effect of the distinction between the two competing models might be small, or at least rarely seen. But it does have implications for academic theory. If the presumption of advancement is analysed as Grey v Grey suggests it ought to be, then Chambers’ recent argument about a resulting trust simply being a default position must be

88

Ibid, 390.

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wrong.89 I think it is clear from Grey v Grey,90 and from comments in Elliot v Elliot,91 that Lord Nottingham conceived of the presumption of advancement as being a description of when the presumption of resulting trust did not apply. That the presumption of advancement was then seen as a presumption of intention is something of an accident; the result of an attempt to distinguish between advanced and unadvanced children. Yet that distinction could successfully have been drawn by employing the concept of an informally-expressed express trust, which is what I suggest Lord Nottingham is referring to in the following passage from Cook v Fountain:92 All trusts are either, first, express trusts, which are raised and created by act of the party, or implied trusts, which are raised or created by act or construction of law. Again, express trusts are declared either by word or writing; and these declarations appear either by direct and manifest proof, or violent and necessary presumption. These last are commonly called presumptive trusts; and that is when the Court, upon consideration of all circumstances, presumes there was a declaration, either by word or writing, though the plain and direct proof thereof be not extant. In the case in question there is no pretence of any proof that there was a trust declared either by word or in writing; so the trust, if there be any, must either be implied by the law or presumed by the Court.

Again the terminology is confusing because we now take the words to mean different things, but it is suggested that these ‘presumptive’ trusts are informally-expressed express trusts, which concern the actual conduct of the parties, whereas implied trusts are those where the law implies a trust.93 Elliot v Elliot makes clear that resulting trusts in cases of children already provided for are implied by law, but perhaps the problem of existing provision could have been addressed under the head of ‘violent and necessary presumption’.94 Then it would have been a species of express trust, dependent upon the actions of the parties. It would not affect the default position that the law itself did not imply a trust in father–child cases.

89 That is, the idea that a resulting trust is a default position (a ‘false’ presumption), and the presumption of advancement is a ‘true’ presumption: see Chambers, ‘Presumption’ (n 85). Note also that Chambers also argues in Resulting Trusts that the trust in Brown v Brown did not depend on a presumption of resulting trust but was autonomously established by evidence of a lack of intention to benefit: (n 75) 33. 90 It is made particularly clear by the short passage that was not included in Mr Swanston’s reports: see n 44 above. 91 See n 61. 92 Reports, case 500. See further ch 2 by M Macnair in this volume. 93 See P Matthews, ‘The Words Which Are Not There: A Partial History of the Constructive Trust’ in Mitchell (ed) (n 42) 7–17. 94 See also Okeover v Lady Pettus, Reports, case 347: ‘[I] did presume that a trust had been so declared by word or writing, though the same could not now be made to appear. … [S]ome presumptions are so manifest and so violent that it is impossible to resist the evidence and conviction of them.’

Grey v Grey 83 It should be admitted that one problem with this analysis is that the long passage in Grey v Grey quoted at the start of section E above does not leave much room for these informal express trusts. Instead it talks only of manifestly-proved express trusts and of implied-by-law trusts. I argued above that this passage shows that the presumption of advancement cannot be rebutted by deeds that go to evidence of intention. Of course, the reason for that is that evidence of intention is only partially relevant to the question of whether a trust was actually declared (and this is the relevant question if the starting point is the legal result). But perhaps that passage can be read as allowing evidence of deeds that would necessarily indicate that an express trust had actually been declared. Either way, it remains true that the presumption of advancement was afterwards seen as a simple presumption of intention. This shift was accidental and unnecessary, but it has had implications for the theoretical arguments surrounding resulting trusts. The notion that a presumption of advancement can be rebutted purely by showing a lack of intention to benefit strengthens the general case that resulting trusts arise because the provider of property did not intend to benefit the recipient. But if that turns out to be untrue—ie, if a lack of intention to benefit does not by itself produce a resulting trust in advancement cases—then that theory is undermined to at least some extent.95 That, in short, is the argument advanced here.

H. CONCLUSION

Ford Grey had several brushes with the law. He was convicted of debauching his sister-in-law, was fined for causing a riot, was caught with weaponry that he probably intended to use against the heir to the throne, and was nearly hanged for treason. He would be surprised, and probably a little disappointed, to learn that lawyers remember him for a comparatively trivial dispute over a house that he never lived in. Nonetheless, the quarrel over Gosfield Hall is still mentioned today: as recently as 2001, Heydon JA referred to Lord Nottingham’s ‘celebrated judgment on the presumption of advancement in Grey v Grey’.96 Indeed, Grey v Grey was the first case to use the phrase ‘presumption of advancement’,97 and even if the future of

95 It could not be stated generally that ‘the resulting trust fulfils the very important function of ensuring that unintended benefits are returned’: Chambers, ‘Presumption’ (n 85) 286. 96 Damberg v Damberg [2001] NSWCA 87, (2001) 52 NSWLR 492 [3]. See also Anderson v McPherson [No 2] [2012] WASC 19 (Edelman J). 97 Albeit that similar constructions already existed; eg, the Prolegomena, ch 13, s 2, records that in Scroope v Scroope ‘the law shall not imply a trust … but rather an advancement’.

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that doctrine is uncertain, it cannot be denied that it remains a part of the modern law.98 Grey v Grey is therefore a landmark for two contradictory reasons: first, because it rationalised the previous case law and presented a coherent principle; second, because Lord Nottingham immediately undermined that principle by introducing a distinction that was not necessary to decide the case. Although that distinction was itself soon abandoned, its initial existence caused the operation of the presumption of advancement to differ from what it would otherwise have been.

I. GOSFIELD HALL TODAY

Gosfield Hall eventually left the Grey family in March 1691 when it was sold to Sir Thomas Millington. In 1715 it was bought by John Knight, who reportedly ‘rebuilt it in a nondescript manner untrammelled by architectural precedent’.99 Luckily for Gosfield, Knight’s successor Earl Nugent made more sympathetic alterations to the house. On the Earl’s death in 1788 the House passed to his son-in-law, the Marquis of Buckingham. During Buckingham’s tenure the exiled Louis XVIII stayed at Gosfield between 1807 and 1809, and the King’s Room is named for him. The house was later owned by Samuel Courtauld (son of the founder of the fabric business), and it housed American troops during the Second World War. After the war the dilapidated Gosfield Hall was reluctantly bought by Essex County Council before being quickly sold to the Country Houses Association, who converted it into retirement flats.100 Since that body’s liquidation in 2003 the house has been refurbished and is now managed by Country Weddings Ltd. Gosfield Hall won Wedding Ideas magazine’s ‘Best Wedding Venue’ prize for 2011, and at the time of writing it can be hired for £4,000 plus VAT.

98 The presumption of advancement has been legislatively abolished in respect of married couples in New Zealand: Property (Relationships) Act 1976, s 4. Legislation exists in England and Wales and Northern Ireland that would abolish the presumption only in respect of future property dealings, but at the time of writing it has not been brought into force: see J Glister, ‘Section 199 of the Equality Act 2010: How Not to Abolish the Presumption of Advancement’ (2010) 73 MLR 807. Other countries have tended to extend the presumption relationships, rather than abolish the presumption completely: eg Nelson (n 61); Cheung (n 42). Pecore (n 45), which is the most recent decision of an ultimate appellate court, confirms that the presumption of advancement continues to exist. 99 Rutton (n 10) 178. 100 The Council had been forced to buy Gosfield because it had been made subject to a Building Preservation Order under the Town and Country Planning Act 1947.

Grey v Grey 85 APPENDIX: THE FAMILIES OF GREY, WENTWORTH AND FINCH John Wentworth

Moyle Finch =

Elizabeth Heneage

1564 – 1613

1550? – 1614

1556 – 1632/3

Cecily Wentworth = Thomas Finch John Wentworth = Catherine Finch Heneage Finch = Frances Bell d 1642

1575? – 1634

1583 – 1631

William Grey

Ralph Grey

1622? – 1671/2 ‘Purchaser’ of Gosfield

1630 – 1675 2nd B Grey

1595 – 1631

= Cecelia Wentworth

1593 – 1674 1st B Grey of Wark

Thomas Grey

1588 – 1639

1601 – 1666/7

=

Heneage Finch 1621 – 1682 1st E No
ngham

Katherine Ford

Catharine Grey = Charles North

1634 – 1682?

d 1694

Ford Grey

Ralph Grey

1655 – 1701 3rd B Grey

1661 – 1706 4th B Grey

Charles Grey

1635 – 1690/1 1st B Grey of Rolleston

Catherine Grey

4 Penn v Lord Baltimore (1750) PAUL MITCHELL*

A. INTRODUCTION

E

QUITY ACTS IN personam. It has to. If it acted in rem, it would create a system of titles rivalling—and conflicting with—titles at common law. The result would be chaos. Thus, to take a simple example, when a court grants specific performance against a defaulting vendor of land, the decree does not transfer title to the land; it orders the vendor to do what is required to make such a transfer occur. At the same time, equity offers the vendor a powerful incentive to comply: failure to perform exposes him to fines or imprisonment for contempt of court. The rule that equity acts in personam is a restriction necessary for legal coherence. But restrictions can be surprisingly liberating. Since equity is not concerned with the property itself, only with the person who has an obligation as regards that property, it does not matter if the property lies outside the court’s jurisdiction. So long as the defendant is within the jurisdiction, an order can be made against him that requires him to deal with the property in a particular way. As Lindley LJ put it, in Commissioners of Inland Revenue v G Angus & Co,1 a judgment for specific performance does not transfer the property to the purchaser. This is obvious enough if we consider the jurisdiction of the Court to decree the specific performance of an agreement for the purchase of land situate in a foreign country. Ever since Penn v Lord Baltimore the Court of Chancery has exercised that jurisdiction. But why? Because it did not affect or profess to affect by its decree the property itself; it acted only in personam and compelled the vendor to do whatever was necessary to be done, either in this country or abroad, to transfer the property to the purchaser.

In treating Penn v Lord Baltimore2 as the foundation of equity’s jurisdiction over foreign land, Lindley LJ was following established opinion. The case * I would like to thank Joshua Getzler and CGJ Morse for their comments on an earlier draft. 1 Commissioners of Inland Revenue v G Angus & Co (1889) 23 QBD 579, 596. 2 Penn v Lord Baltimore (1750) 1 Ves Sen 444, 27 ER 1132.

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had been (and continued to be) used to support that proposition in successive editions of White and Tudor’s Leading Cases in Equity,3 and six years earlier, in Ewing v Orr Ewing,4 it had been cited by the House of Lords as an illustration of ‘elementary principles’.5 The case continues to be good law, although it has been subject to trenchant criticism. In particular, both judges and commentators have noted that the principle from Penn v Lord Baltimore has an uneasy relationship with the general principle of private international law that the courts will not determine title to foreign land.6 As Lord Esher MR explained, for equity to order a defendant to effect a transfer of title to land abroad, was ‘open to the strong objection, that the Court is doing indirectly what it dare not do directly’.7 ‘It seems to me,’ he continued, that [Penn v Lord Baltimore] breaks the comity of national consent, because such a contract [concerning land abroad] deals with rights resulting from the ownership of land … by the consent of nations … a dispute as to such rights is among nations to be treated as a local action to be tried in the forum rei sitae.8

This essay shows that, whilst Penn v Lord Baltimore9 undoubtedly does support the proposition that equity has jurisdiction affecting foreign land in certain circumstances, it is not a matter of ‘elementary’ principle. On the contrary, both the jurisdiction itself and the role of Penn v Lord Baltimore in establishing it are complex and controversial. The case we know as Penn v Lord Baltimore, decided in 1750, should really be known as Penn v Lord Baltimore (No 2). Penn v Lord Baltimore (No 1), decided five years earlier and reported by Ridgeway,10 covers some of the same ground as the later case (including the jurisdiction point). In addition, there is a wealth of case law on equity’s ability to affect foreign land (and foreign litigation), stretching back to the mid-seventeenth century. This case law offers a variety of reasons in support of the jurisdiction, and highlights the imperial political context in which the decisions were being made. The imperial context is in fact a strong theme in Penn v Lord Baltimore (Nos 1 and 2), but lawyers’ traditional habit of summarising and extracting pithy principles from complex texts has meant that, over time, the political nuance has been lost.

3 See, eg, F White and O Tudor, A Selection of Leading Cases in Equity, 2nd edn (London, Maxwell, 1858) 2.767; E Hewitt and J Richardson (eds), White and Tudor’s Leading Cases in Equity, 9th edn (London, Maxwell, 1928) 1.638. 4 Ewing v Orr Ewing (1883) 9 App Cas 34. 5 Ibid, at 40 (Earl of Selborne LC). 6 British South Africa Company v Companhia de Moçambique [1893] AC 602. 7 Companhia de Moçambique v British South Africa Company [1892] 2 QB 358 (CA) 404–05. 8 Ibid, 405. See further L Collins (ed), Dicey, Morris and Collins on the Conflict of Laws, 14th edn (London, Sweet & Maxwell, 2006) vol 2, 23R-021 ff, particularly 23-050. 9 Penn (n 2). 10 Pen v Lord Baltimore (1745) Ridgeway Cases temp Hardwicke 332, 27 ER 847.

Penn v Lord Baltimore 89 In short, this chapter argues that the principle for which Penn v Lord Baltimore (No 2) stands was shaped by the empire. It is a principle about the relationship between Britain and its colonies. Furthermore, the way in which the application of the principle developed was, similarly, responsive to imperial commercial needs. The imperial context also explains why the criticisms made of Penn v Lord Baltimore today did not feature in the eighteenth-century cases: there was, quite simply, no comity of nations issue in a question between Britain and one of her overseas possessions.

B. THE EVENTS

Lord Hardwicke LC’s decision in Penn v Lord Baltimore (No 2) in 1750 was merely one stage of an ongoing dispute that had been simmering since the 1680s.11 Lord Baltimore was the proprietor of Maryland, a colony created by a charter granted to the first Lord Baltimore in 1632. The colony’s territory was extensive, but was limited in two ways that would later become troublesome. First, its northern boundary was 40°N latitude; second, it contained only ‘hactenus terra inculta’, that is to say, land not cultivated by other Europeans. In 1680 William Penn petitioned Charles II for territory for a colony, and in 1681 Charles granted him a large area north of 40°N latitude. For the most part, the boundary with Maryland was to run along the line of 40°N; however, one section of the boundary was to take the form of part of a circle, radius 12 miles, drawn from the centre of the town of Newcastle. This unique boundary shape was dictated by the Duke of York, who had territory in Delaware. It probably looked quite neat on a map but, as we shall see, it proved challenging to mark out. Penn seems initially to have been satisfied with the territory granted to him, but in 1682 he was dismayed to discover that the line of 40°N had been marked inaccurately. The true line was in fact further north. This was a problem, not so much on account of the reduction in area of the territory (which was still vast) but because it potentially deprived Penn’s colony of access to the Delaware River. Penn’s solution was to obtain territory with direct sea access from the Duke of York. The Duke had been granted land on the Delaware peninsula, and in New Amsterdam, following his military successes against the Dutch in 1674. In 1682 Penn prevailed on the Duke to grant him those Delaware

11 This section draws on the accounts in J Latrobe, The History of Mason and Dixon’s Line (Philadelphia, Pa, Historical Society of Pennsylvania, 1855) and J Veech, Mason and Dixon’s Line: A History (Pittsburgh, Pa, Haven, 1857), and on the chronology of events prepared by the Penns’ counsel, William Murray, for the proceedings between the parties before the King in Council and later published in S Hazard (ed), The Register of Pennsylvania (Philadelphia, Pa, Geddes, 1828) vol 2, 200–03, 209–16.

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possessions. At this point, however, Lord Baltimore made his own claim to the Duke of York’s territories in Delaware. The Dutch settlements there, he argued, had been seized by the Dutch in 1655 from a group of Swedes and Finns, who had established themselves only in 1638. In 1632, when the Maryland charter was granted, that land had been uncultivated by Europeans, and was, therefore, part of Maryland. Penn set to work in the hope of finding evidence of some European settlement prior to 1632 in the area. His agents managed to track down several elderly settlers, whose testimony showed a Dutch settlement as early as 1624, and a Dutch purchase of the area (from native Americans) in 1629. Baltimore, realising that his position was weakening, went to London to press for a hearing before the Lords of Trade and Plantations, before things got any worse. Penn followed him, but in such a panic that he left behind the crucial depositions.12 Their Lordships deferred the hearing. Once the documents had arrived, the case was heard. In November 1685 the Lords made their report, in which they rejected Baltimore’s claim to the entirety of the Delaware peninsula and ruled that, for the avoidance of further dispute, the peninsula should be split down the middle—the western half going go Baltimore, the eastern half remaining with the Crown.13 This result effectively confirmed Penn’s position, for the Crown had granted the land to the Duke of York, who had, in turn, granted it to Penn. Baltimore had lost the battle, but he was not about to concede the war. Charles II had died shortly before the Lords’ decision, and had been succeeded by his brother, the Duke of York. Baltimore must have realised that he was unlikely to have much success through legal channels until there was a new monarch, and changed his strategy accordingly. Now he would simply use force to assert his claims on the ground, terrorising those settlers who refused to acknowledge his position. At the same time, he and his faction would adopt the most obstructive, unco-operative approach to litigation that they possibly could. The aim was to force a compromise on more generous terms than his strict charter rights allowed. The Baltimore faction pursued this strategy successfully for nearly 50 years, combining legal time-wasting with strong-arm tactics. In the 1730s a new phase began, with the Baltimores showing some signs of wanting to negotiate final boundaries. Eventually, in 1732, an agreement was reached with the Penns. For our purposes, it had three key provisions.

12 N Wainwright, ‘The Missing Evidence; Penn v Baltimore’ (1956) 80 Pennsylvania Magazine of History and Biography 227; A Dunlap and C Weslager, ‘More Missing Evidence: Two Depositions By Early Swedish Settlers’ (1967) 91 Pennsylvania Magazine of History and Biography 35. 13 The text of the Lords’ decision is reproduced in ‘Wm Penn and Lord Baltimore’, Hazard (ed) (n 11) vol 2, 227.

Penn v Lord Baltimore 91 First, the Delaware peninsula would be divided as provided by the Lords in 1685. Second, the northern boundary of Maryland would no longer be 40°N latitude; instead, a line would be drawn by reference to various landmarks. Third, part of the boundary would still consist of a circle drawn 12 miles from Newcastle. If the Penns thought that the 1732 agreement signified a fundamental change of approach by the Baltimores, they were quickly disappointed. The agreement had provided for both sides to appoint commissioners, who would work together to mark out the boundaries. The Baltimore commissioners promptly started taking unmeritorious technical points, claiming, for instance, that the provision for a circle 12 miles from the centre of Newcastle meant that the circumference of such a circle should be 12 miles. A circle of that circumference would have a radius of about four miles. Progress stalled. Meanwhile, Marylanders, led by Thomas Cressap, were coercing and terrorising settlers into renouncing their allegiance to Pennsylvania. The Baltimores then opened a further line of attack, petitioning the King in Council in August 1734 for a confirmatory grant of all the lands in Maryland’s original charter, without restriction as to prior cultivation. The Penns counter-petitioned. In May 1735 the King ordered that the matter should be adjourned until the end of Michaelmas Term, so as to give the Penns ‘an opportunity to proceed in a Court of Equity, to obtain relief upon the said articles so insisted upon by them’.14 Once that time had elapsed, either party was to be at liberty to apply to the Committee for Plantation Affairs. The Penns promptly brought a bill in Chancery for specific performance of the 1732 agreement. The Baltimore faction continued to force matters on the ground, leading the Penns to apply to the Lords for orders restraining violent disturbances. In 1737 the Lords agreed, and also prohibited the governors of either colony from granting land in the disputed area. A further order of 1738 reflected the terms of an agreed ceasefire, under which grants of vacant lands were to be permitted.

C. THE CHANCERY LITIGATION

The Penns’ bill for specific performance of the 1732 agreement made its first appearance in the law reports in relation to a hearing in 1745.15 The defendant raised three points against it. First, the claimant lacked title to sue. Second, the court lacked jurisdiction. Third, the proper parties were not before the court. The first two points failed, but the third succeeded. 14 Hazard (ed) (n 11) vol 2, 211 (taken from the chronology prepared by the Penns’ counsel, William Murray). 15 Pen (n 10).

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Dealing with the jurisdiction issue first, Lord Hardwicke LC held that the position of the parties as colonial proprietors was akin to that of feudatory lords, such as lords marchers, within England. A dispute between lords marchers was actionable in the Court of King’s Bench, since that was where a writ of error lay from the court of the marches. A writ of error lay to the King in Council from courts in ‘the provinces’,16 so it appeared at first sight that the claim should be determined by the King in Council. However, he continued, ‘a court of equity-jurisdiction is in personam, and therefore can extend it wherever the parties persons are within its jurisdiction’.17 Lord Hardwicke LC disposed of the title to sue issue briefly, and then addressed the defendant’s argument that the Attorney-General should have been made a party. He analysed the position as follows:18 [T]he most material ground for making him a party is, that this agreement which is said to concern the proprietors of the said provinces only, will and must in the course and nature of it determine and affect the private properties of the subjects of those several provinces: For here are powers of government, jurisdiction, legislation, raising subsidies, together with all kinds of military powers granted by these deeds: If, in such case, proprietory Lords are to alter the bounds of their provinces, without the privity and consent of the crown, by whom alone such powers are vested, directed and disposed, consider the inconveniences that must follow; this is no less than transferring lands into different jurisdictions, legislations, &c you subject the people to different government, different assemblies, laws, courts, taxes, to which they never assented by their delegates.

The claimants were given liberty to amend their bill. Five years later the same case was back before the same judge. In Penn v Lord Baltimore (No 2)19 the defendants now took four main points: (a)

the court had no jurisdiction—the jurisdiction was solely in the King in Council; (b) the parties had no power to settle boundaries through their own acts— such an agreement amounted to an alienation, which was beyond the proprietors’ powers; (c) the Court should not put the agreement into effect without the consent of the planters and tenants who would be affected by it; (d) the agreement was not a proper one to enforce. The fourth point had eight sub-headings: (i) the agreement was merely voluntary; (ii) the time for performance had lapsed;

16 17 18 19

Ibid, 334, 847. Ibid, 335, 847. Ibid, 336–37, 848. Penn (n 2).

Penn v Lord Baltimore 93 (iii)

the agreement effectively provided for a submission of differences to arbitration, which could not be supplied by the Court; (iv) the defendant had been imposed on, or surprised, by the terms of the agreement; (v) the defendant had ‘grossly’20 mistaken his original rights; (vi) the terms of the agreement were too uncertain; (vii) the claimant could not perform any covenant to convey territory on the Delaware peninsula, since that territory was the property of the Crown; (viii) the Court could not make an effective decree. Lord Hardwicke began his judgment with the observation that the case was ‘of a nature worthy the judicature of a Roman senate rather than of a single judge’.21 However, he continued, the relief sought was ‘the common and ordinary equity dispensed by this court’, in the form of specific performance. The immediate effect of this opening passage was one of ambiguity: the case was both suitable and unsuitable for the Court of Chancery. This was a theme to which Lord Hardwicke would return at the conclusion of his judgment. He then moved on to deal with the defendant’s first point. As in Pen v Lord Baltimore (No 1), Lord Hardwicke LC agreed that the original jurisdiction over colonial boundaries was with the King in Council. However, rather than asserting (as he had done in the earlier case) that equity’s in personam jurisdiction allowed it to intervene when the defendant was within the jurisdiction, he took a more sophisticated approach. In this case, he explained, no original jurisdiction was necessary, because the court was being asked to enforce a contractual agreement made in England. The court could not have decreed the boundaries, but it could enforce the parties’ agreement as to what those boundaries were. Rather than equity jurisdiction cutting across the jurisdiction of the King in Council, equity was now portrayed as assisting and complementing that jurisdiction. The second point was disposed of on two alternative bases. On the first alternative, the settlement of boundaries by agreement did not amount to alienation at all, for ‘the boundaries so settled are presumed to be the true and ancient limits’.22 On the second alternative, assuming that there was alienation, such alienation was permissible under the colonial charters, provided that the colonies were not ‘dismembered’. This was because the grants were in common socage, not in capite of the Crown. The defendant’s third objection also failed. The tenure of the planters would not be altered by the parties’ agreement. In that sense, the situation

20 21 22

Ibid, 445, 1133. Ibid, 446, 1134. Ibid, 448, 1135.

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was analogous to disputes between lords over the boundaries of a manor; in such cases the boundaries ‘may be settled in suits between the lords of these manors without making the tenants parties’.23 An additional reason why the planters did not need to be parties was that ‘if there is no fraud or collusion, it must be presumed to be the true limits being made between parties in an adversary interest’.24 Pausing here before we examine the defendant’s multi-part fourth objection, three themes may be highlighted in the judge’s analysis. First, the presumption that the parties’ agreement was merely ascertaining the ancient boundaries was, on the facts of this case, unreal. The Baltimores’ strategy over the course of the previous 70 years had been to force a compromise on terms more favourable to them than the original grant. Second, the legal concepts employed were strikingly feudal: tenure in socage, tenure in capite, disputes between lords of the manor. There is no sense that the colonial context was a new problem, to which such concepts were inapplicable. Third, the application of feudal analogies to the issue whether the planters should be parties concealed a deeper question. As Lord Hardwicke LC himself had highlighted, in Pen v Lord Baltimore (No 1),25 the interests of planters could not simply be disregarded. In the earlier case, those interests were protected by seeking the Attorney-General’s approval, but the terms in which Lord Hardwicke LC analysed the position—particularly his reference to settlers being subjected to taxation without the agreement of their representatives—had more radical implications. Hardwicke’s feudal analysis in the later case eliminated those revolutionary overtones, but, as with his suggestion that the agreement defined ancient boundaries, the law was closing its eyes to the political reality. The defendant’s fourth objection was also rejected. The agreement was not purely voluntary—consideration was provided by ‘the settling boundaries, and peace and quiet’.26 Lapse of time was not a problem either, particularly since the delay had not been caused by the party seeking specific performance. The agreement was not like an agreement to arbitrate, because it contained ‘distinct, independent covenants’,27 and there was no evidence of imposition. The mistake issue required closer analysis. Baltimore’s charter had specified the northern boundary of Maryland at 40°N latitude. In theory, that should have been a fixed line, but advances in mathematics and surveying over the course of the previous century had revealed inaccuracies in earlier maps and geographical calculations. Over the course of time the correct

23 24 25 26 27

Ibid, 449, 1136. Ibid, 450, 1136. Pen (n 10), text at n 18. Penn (n 2) 450, 1136. Ibid.

Penn v Lord Baltimore 95 40°N line was shown to be significantly further north than previously thought, but in 1750 it was still impossible to eliminate errors of two to three miles. The parties had, therefore, clearly been mistaken about the original location of Maryland’s northern boundary—such a mistake was unavoidable—but, as Lord Hardwicke LC pointed out, such a mistake affected only the original boundaries, by making them doubtful. The newlyagreed boundaries were not defined by 40°N. In modern terms, we would say that the mistake as to the original boundaries was not fundamental. The uncertainty issue, which had been much relied on by Lord Baltimore’s commissioners, concerned the circular section of the boundary. The circle was to be drawn from the centre of Newcastle. But where, exactly, was that? A note of impatience can be detected in Lord Hardwicke’s response: ‘[T]he middle of Newcastle, as near as can be computed must be found …’28 Carrying out this terse instruction would not prove straightforward. The defendant’s penultimate point was that the claimant lacked the ability to perform his side of the agreement in relation to ‘the lower counties’. This was the territory acquired from the Duke of York in 1682. In fact, the agreement did not call for the conveyance of any part of the lower counties, but Lord Hardwicke LC took the opportunity to assert that ‘full and actual possession is sufficient title to maintain a suit for settling boundaries’.29 ‘In cases of this kind,’ he continued,30 of two great territories held of the crown, I will say once for all, that long possession and enjoyment, peopling and cultivating countries, is one of the best evidence of title to lands or districts of lands in America, that can be … for the great beneficial advantages, arising to the crown from settling, &c, is, that the navigation and the commerce of this country is thereby improved.

Finally, we reach the point for which Penn v Lord Baltimore is remembered today—that a decree concerning foreign land can be made. Lord Hardwicke LC set out the principle crisply: ‘[T]he court cannot inforce their own decree in rem, in the present case: but that is not an objection against making a decree in the cause; for the strict primary decree in this court as a court of equity is in personam…’31 This was very much the same approach he had taken in Pen v Lord Baltimore (No 1), but he now also referred to authorities supporting his position: Richardson v Hamilton, concerning a house in Philadelphia, and the case of Lord Anglesey, which concerned Irish estates.32

28

Ibid, 453, 1138. Ibid. 30 Ibid, 454, 1138. 31 Ibid, 454, 1139. 32 No report of the judgment in either case seems to have survived. Lord Anglesey’s case in the Court of Chancery was probably ancillary to the House of Lords’ decision in Earl of Anglesey v Annesley (1741) 1 Bro HL 289, 1 ER 573. 29

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Each of the defendant’s 11 objections had failed. But, despite this, the conclusion of Lord Hardwicke LC’s judgment was rather ambivalent. The most that could be done against the defendant was to enforce the decree ‘by process of contempt and sequestration’.33 If the claimant wanted more, he would have to ‘resort to another jurisdiction’,34 that is, the King in Council. Lord Hardwicke concluded by noting that the order of the Lords of Trade and Plantations, which had sent the case to Chancery in the first place, had envisaged such further proceedings. This classic equity case was not, it seems, really suitable for the Court of Chancery after all. When Penn v Lord Baltimore (No 2) is seen in its entirety, and in the context of both the earlier proceedings and the factual basis of the dispute, the case can be seen to be far more complex and sophisticated than previously appreciated. At its most fundamental level, Penn v Lord Baltimore (No 2) was about English law’s ability to regulate a very specific kind of colonisation, which was characterised by the private enterprise of colonial proprietors exploiting territory distributed to them in London. The private status of those proprietors brought them within the jurisdiction of the ordinary courts, despite the fact that their powers and operations made them more akin to sovereigns.35 The London-based distribution of territory, using maps, rulers and compasses, was bound to cause difficulty whenever the proprietors sought to delineate their territory.36 The law’s response, as seen in Penn v Lord Baltimore (No 2), involved a sophisticated combination of analytical techniques. Some of those techniques involved analogies with existing categories. For instance, to the extent that an agreement to settle boundaries could be compared to a compromise agreement between private parties more generally, it was subject to orthodox contractual doctrines like consideration, certainty of terms, mistake, etc. To the extent that a dispute between colonial proprietors resembled a dispute between lords of manors, the colonists themselves needed to play no part. In other ways, however, Lord Hardwicke LC acknowledged that the situation was novel, and called for legal solutions driven by policy—thus, for instance, his assertion that ‘long possession and enjoyment, peopling and cultivating countries, is one of the best evidence of title to lands or districts of lands in America’. The use of equity’s in personam jurisdiction to affect foreign land lay somewhere between orthodoxy and outright novelty. The Court of Chancery had always needed to be mindful of trespassing into common law domains—hence its emphasis on the person—and equitable decrees

33

Penn (n 2) 454, 1139. Ibid. 35 Cf the treatment of the East India Company in Nabob of Arcot v East India Company (1791) 3 Bro CC 292, 29 ER 544; (1792) 4 Bro CC 180, 29 ER 841. 36 For a similar problem, concerning longitude, see State of South Australia v State of Victoria [1914] AC 283. 34

Penn v Lord Baltimore 97 concerning foreign land were not without precedent. On the other hand, as Lord Hardwicke LC realised, the decree in personam was a less than ideal remedy, since it could only provide a strong incentive to the defendant to perform his obligations. Furthermore, once the defendant was outside the jurisdiction, the equitable decree in personam could not reach him. This was particularly unsatisfactory where the security and prosperity of a large number of colonists depended on the defendant’s compliance with the court’s order. The facts of Penn v Lord Baltimore (No 2) provided a vivid illustration of the problem: the Baltimores’ track record hardly suggested that they would be chastened by a judge 2,000 miles away delivering strictures about acting according to conscience.

D. PENN V LORD BALTIMORE 1750–62

The Baltimores responded to Lord Hardwicke’s decree against them in their traditional fashion. Commissioners from Maryland and Pennsylvania were appointed to lay out the boundary together, and the Maryland commissioners were quickly taking technical points about both the radius and the centre of the circular section. They argued that the 12-mile radius had to be measured on the surface—that is, by laying the measuring chains flat on the ground. Where the terrain was undulating this would, of course, mean that the horizontal distance from the centre of the circle to its circumference was less than 12 miles. The Maryland commissioners claimed that several such surface measurements should be made, in different directions, and that an average should then be taken of the distances, measured horizontally, between the centre of the circle and the ends of those lines. That average figure should form the radius of the circle. The Pennsylvania commissioners’ response to this nonsense was a model of dignity: ‘[T]he Words [of the decree are] so clear that in Our Opinions any endeavour to explain will rather serve to obscure than illustrate them.’37 Nevertheless, the Maryland commissioners insisted, bringing the surveying work to a halt. Apparently the matter had to be referred back to Lord Hardwicke, who clarified that horizontal measurements were required.38 The dispute over the centre of Newcastle had elements of farce. John Watson, the Assistant Surveyor to the Pennsylvania Commissioners, reported in his diary for 17 September 1750 that ‘after some Debate’ it was agreed that the court house should be taken as the centre of Newcastle.39 This uncharacteristically

37 J Jordan, ‘Penn versus Baltimore. Journal of John Watson, Assistant Surveyor to the Commissioners of the Province of Pennsylvania, 1750’ (1914) 38 Pennsylvania Magazine of History and Biography 385, 399. 38 Latrobe (n 11) 25. 39 Jordan (n 37) 390.

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sensible solution was soon shown to have been based on a misunderstanding. The Maryland commissioners had handed the Pennsylvania commissioners a map with a pin-hole in it, which Watson had (naively) assumed marked the court house. In fact, Watson later reported, it was40 since discovered to be intended for the Center of Gravity of the Town of New Castle, which it seems the Maryland Surveyors and Mathematicians attempted to find in this rediculous (sic) Manner Viz—having made an exact plan of the Survey of the Town; upon a Piece of Paper, they carefully pared away the Edges by the Draught, untill no more than the Draught was left, when sticking a Pin thro it, they suspended it—thereby in different places untill they found a place whereby it might be suspended horizontally, wch Point or place they accepted as the Center of Gravity.

The death of Lord Baltimore prompted further litigation, with his son denying that he was bound by his father’s agreement with the Penns. A very shortly-reported hearing in 1755 showed that the Baltimores were still trying to drag things out,41 and there were further negotiations between the parties, which culminated in a new agreement in May 1761. It is tempting to infer some real feeling behind the formal language of the preamble to the agreement, which stated that the indenture ‘witnesseth that for putting a final and perpetual end forever to all Disputes and Differences between the Parties’, the boundaries had been agreed as set out.42 Nearly 80 years after it had begun, the dispute was finally settled. The parties appointed two surveyors, Charles Mason and Jeremiah Dixon, to lay out what would later become known as the Mason-Dixon Line. They completed their work in 1762.

E. THE LAW OF THE COLONIES

By the time of the decisions in Penn v Lord Baltimore (Nos 1 and 2), Britain was rich in colonial possessions, which had been acquired through a variety of methods, ranging from conquest to commerce. The acquisition of such possessions created (at least) two obvious legal problems, on which Penn v Lord Baltimore could shed light. First, what was the law governing those colonial possessions? Second, what role should English courts play in enforcing that law (whatever it was)? Neither question was new when Penn v Lord Baltimore was decided. Unlike other colonial powers, such as Spain, the British governments of the seventeenth and eighteenth centuries did not systematically impose their

40 41 42

Ibid, 401–02. Penn v Lord Baltimore (1755) Dick 273, 21 ER 273. C 12/17/2, 22 May 1761 (National Archive).

Penn v Lord Baltimore 99 own national law on the colonies.43 The problem was left to the courts, and by 1750 the position seemed to be reasonably clear. In a crucial anonymous case from 1722, the Privy Council was reported as having set out three propositions:44 1st, That if there be a new and uninhabited country found out by English subjects, as the law is the birthright of every subject, so, wherever they go, they carry their laws with them, and therefore such new found country is to be governed by the laws of England; … 2dly, Where the King of England conquers a country … the conqueror, by saving the lives of the people conquered, gains a right and property in such people; in consequence of which he may impose upon them what laws he pleases. But, 3dly, Until such laws given by the conquering prince, the laws and customs of the conquered country shall hold place.

These carefully delineated categories drew a sharp distinction between newly-settled territory (where English law applied) and conquered territory (governed by the royal prerogative). Colonists strongly preferred to be governed by English law, not for merely patriotic reasons but because it offered some individual liberties and protection against abuse of power, which government by royal prerogative did not. In other words, the application of English law was not something resented by colonists, it was positively desired.45 The application of English law in the colonies, however, did not necessarily entail the jurisdiction of English courts over colonial disputes. A complex body of rules developed, with the position of equity being particularly problematic. One view, encapsulated in the submissions of counsel to the House of Lords in Dutton v Howell, was that the jurisdiction was extensive:46 These Plantations are Parcel of the Realm, as Counties Palatine are: Their Rights and Interests are Every Day determined in Chancery here, only that for Necessity and Encouragement of Trade and Commerce, they make Plantation Lands as Assets in certain Cases to pay Debts; in all other Things they make Rules for them according to the common Course of English Equity: The Distance or the Contiguity of the Thing, makes no Alteration in the Case.

This passage would be reproduced in contemporary works of reference,47 and may well have been a common assumption. Counsel also regarded jurisdiction over Irish matters as straightforward, observing that under the 43 See generally B McPherson, ‘The Mystery of Anonymous (1722)’ (2001) 75 Australian Law Journal 169. 44 Anonymous 2 P Wms 75, 75–76; 24 ER 646, 646. 45 McPherson (n 43) 179; B McPherson, ‘How Equity Reached the Colonies’ (2005) 5 Queensland University of Technology Law and Justice Journal 102, 102–03. 46 Dutton v Howell (1693) Show 24, 33; 1 ER 17, 23. 47 T Cunningham, A New and Complete Law-Dictionary, 3rd edn (London, JF & C Rivington, 1783) vol 1, 724 (under ‘Foreign plantations’); C Viner, A General Abridgment of Law and Equity, 2nd edn (London, Robinson, Payne and Brook, 1793) vol 13, 411–12.

100 Paul Mitchell common law, a writ of error issued from Irish courts to England. Since Lord Hardwicke would rely on the Irish position in Penn v Lord Baltimore, it is important to investigate whether this assertion was correct.

(1) Ireland An examination of the equity cases concerning land in Ireland demonstrates that the position was nowhere near as clear as counsel in Dutton v Howell had suggested. Thus, in Cartwright v Pettus,48 a bill against joint tenants of lands in Ireland, asking for an account of profits and partition of the lands, was allowed as to the account but disallowed as to the partition. Lord Nottingham LC observed that the partition procedure would require the award of a commission into Ireland, which was beyond his powers. In Comes Arglasse v Muschamp,49 by contrast, a bill for relief against an annuity charged on Irish lands, which was alleged to have been obtained by fraud, was allowed. Lord Nottingham LC was clearly persuaded by counsel’s emphasis on the role of the court being ‘to relieve against frauds and cheats’,50 as he commented that ‘[t]his is surely only a jest put upon the jurisdiction of this court by the common lawyers’.51 Lord Nottingham LC also referred to Archer and Preston, where, apparently, the Court of Chancery had assumed jurisdiction in a case concerning a contract for the sale of land in Ireland. The report of Comes Arglasse v Muschamp suggested that the doctrine later relied on in Penn v Lord Baltimore was beginning to take shape. Counsel also highlighted an issue that the Lord Chancellor did not address but which highlighted a fundamental difficulty: if Irish law permitted the behaviour alleged to be fraudulent, he argued, ‘this court had then the greater reason to retain this cause, and see justice done’.52 As we shall see, the potential for equity’s in personam jurisdiction to interpose obligations on claimants which would not be imposed by the law of the place where the property was situated, has continued to trouble the courts into the present century.53 Four years after Comes Arglasse v Muschamp, in Earl of Kildare v Eustace,54 a very different approach to jurisdiction over Irish land was being espoused. Responding to a submission that Ireland was a conquered 48

Cartwright v Pettus (1675) 2 Ch Ca 214, 22 ER 916. Comes Arglasse v Muschamp (1682) 1 Vern 75, 23 ER 322. 50 Ibid, 76, 322. 51 Ibid, 77, 322. 52 Ibid, 76, 322. 53 R Griggs Group Ltd v Evans [2004] EWHC 1088 (Ch), [2005] Ch 153. See further section F(2) below. 54 Earl of Kildare v Eustace (1686) 1 Vern 419, 23 ER 559. 49

Penn v Lord Baltimore 101 country, ‘and a decree of this court may as well bind land in Ireland, as by every day’s practice it doth lands that lie in foreign plantations’,55 and a further argument that ‘the courts in England were proper expositors of the Irish laws; nay their judgment is to controul the opinion of the judges in Ireland, as upon writs of error’,56 the court assumed jurisdiction. The Lord Chancellor, Lord Beddingfield CJ and Lord Atkins CB held that ‘the judges in England were proper expositors of the Irish laws’.57 This was a jurisdiction based on political submission, not on the niceties of equitable principles. The uneasy relationship between political reality and equitable doctrine was highlighted in Sir John Fryer v Bernard.58 Here there was a motion for sequestration of the defendant’s estate in Ireland for contempt of court. The Master of the Rolls, Sir Joseph Jekyll, refused the motion, holding that ‘the process of this court could not affect any lands in Ireland’.59 A more detailed report reveals that the claimant sought to rely on a case concerning sequestration in North Carolina, where the Chancellor had said that that remedy might be available. Jekyll MR doubted that this could be correct: he recalled a bill having been brought in Parliament to extend judgments to the plantations, and that bill being rejected. The implication (it seems) was that judgments could not extend to the plantations under current law. He also hinted that such an extension would be politically problematic: ‘[A]s to the plantations, it is particularly odd as it affects the King’s sovereignty in council over them…’60 This point—that the true jurisdiction was in the King in Council—would resurface in Penn v Lord Baltimore. On appeal, Lord Macclesfield LC reversed the decision. A sequestration could be granted affecting land in Ireland, because English courts ‘have a superintendent power over those in Ireland, and therefore writs of error lie in BR [Banco Regis—ie, the Court of King’s Bench] in England to reverse judgments in BR in Ireland’.61 For other plantations, such as North Carolina, the position was different: such sequestration ‘should … be directed by the King in Council, where alone an appeal lies from decrees in the plantations’.62 As in Earl of Kildare v Eustace, the focus was on political superiority, not equitable doctrine. Thus it can be seen that when, in Penn v Lord Baltimore (No 2), Lord Hardwicke LC invoked one of his own (unreported) decisions concerning

55

Ibid, 419, 559. Ibid, 421, 560. 57 Ibid, 422, 561. 58 Sir John Fryar v Vernon (1724) 9 Mod 124, 88 ER 355; Select Cases Temp King 5, 25 ER 191; Sir John Fryer v Bernard (1724) 2 P Wms 261, 24 ER 722. 59 Sir John Fryar v Vernon (1724) 9 Mod 124, 124; 88 ER 355, 355. 60 Sir John Fryar v Vernon (1724) Select Cases Temp King 5, 6; 25 ER 191, 191. 61 Sir John Fryer v Bernard (1724) 2 P Wms 261, 262; 24 ER 722, 723. 62 Ibid, 262, 723. 56

102 Paul Mitchell estates in Ireland, it did not necessarily follow that a similar jurisdiction must exist for Pennsylvanian land. The most recent authority treated Ireland as a special case, with courts that were subject to writs of error in the King’s Bench in London. Lord Hardwicke LC could hardly have been unaware of Ireland’s unusual position, since one of his most important political speeches had argued that Ireland, as a conquered country, was automatically bound by Parliamentary legislation.63 No one had ever suggested that writs of error to the King’s Bench in London lay from all colonial courts, so any general equitable power relating to land abroad could only be found in an elaboration of general principle derived from non-Irish situations.

(2) General Principles of Jurisdiction One significant, early development in the formulation of principles governing equity’s jurisdiction over foreign land (outside Ireland) occurred in 1705, where the Court of Chancery assumed jurisdiction in a case brought by the mortgagee of the island of Sark against its owner.64 ‘The Court of Chancery,’ it was said, ‘had … a jurisdiction, the defendant being served with the process here, et aequitas agit in personam…’65 This seems to have been the first time that equity’s focus on the person (rather than the property) was expressly used to expand its jurisdiction. It was a powerful point, the full importance of which would only be fully developed by Lord Hardwicke in three cases that he decided before Penn v Lord Baltimore (No 2). In Angus v Angus,66 a bill was brought for possession of land in Scotland, for discovery of rents and deeds, and for fraud in obtaining the deeds. The defendant pleaded that the court had no jurisdiction over lands in Scotland. Lord Hardwicke LC overruled the plea in relation to the fraud and discovery, since the court would ‘act upon the person’.67 As he explained, this principle had international implications—it would apply just as well to land in France as it did to land in Scotland. The part of the bill claiming possession, however, was more problematic: all that the court could do was to order the defendant to transfer possession. A year later, in Roberdeau v Rous,68 Lord Hardwicke LC was developing similar ideas in a case concerning possession of land at St Christopher’s. Possession could not be granted because69

63 P Thomas, ‘Yorke, Philip’, Oxford Dictionary of National Biography (online edition, 2011). 64 Toller v Carteret (1705) 2 Vern 494, 23 ER 916. 65 Ibid, 495, 917. 66 Angus v Angus (1737) West Temp Hardwicke 23, 25 ER 800. 67 Ibid, 23, 801. 68 Roberdeau v Rous (1738) 1 Atk 543, 26 ER 342. 69 Ibid, 544, 342.

Penn v Lord Baltimore 103 this court has no jurisdiction so as to put persons into possession, in a place, where they have their own methods on such occasions, to which the party may have recourse; the present bill, therefore, is carrying the jurisdiction of this court further than it ever was before … Lands in the plantations are no more under the jurisdiction of this court, than lands in Scotland, for it only agit in personam.

However, that was not to say that the court was powerless: an injunction could be granted ordering the delivery of possession, just as the court could order specific performance of a sale of plantation estates.70 The final case, Foster v Vassall,71 developed the ideas a stage further. The bill was brought against executors, by the testator’s son, praying for an account and payment. The defendant pleaded that both parties resided in Jamaica; the claimant had already sued him in the Jamaica Court of Chancery in 1745, where the defendant had put in an answer and account; furthermore, all relevant matters lay in Jamaica. Lord Hardwicke LC overruled the plea on the ground that it was technically defective, and acknowledged that, had the pleading been formally sound, it would have raised a ‘considerable question’.72 His description of the problem hinted at how he would have resolved it:73 The different courts of equity are held under the same crown, though, in different dominions, and therefore, considering this [ie the Court of Chancery in Jamaica] as a court abroad, the point of jurisdiction is the same as if in Ireland; and it is certain where the provision is in England, let the cause of suit arise in Ireland, or the plantations, if the bill be brought in England, as the defendant is here, the courts do agere in personam, and may, by compulsion of the person, and process of the court, compel him to do justice.

Such an approach, he acknowledged, might well result in the ‘inconvenience’74 of two suits concerning the same matter. Lord Hardwicke LC did not elaborate further, but it is perhaps implicit in the passage quoted above that he did not envisage the two suits causing anything more than ‘inconvenience’: since both courts were applying the same equity, both should reach the same result. Lurking in the background was the question of what should happen if the laws of the country where the land was situated reached a conclusion different from English equity. Some indication of how Lord Hardwicke LC would have answered this question may be gleaned from his decisions on the use of the writ ne exeat regno against foreigners. The writ prevented the defendant from leaving the jurisdiction of the court so as to evade Chancery process and deprive the

70 71 72 73 74

Ibid, 544, 342. Foster v Vassall (1747) 3 Atk 587, 26 ER 1138. Ibid, 589, 1139. Ibid. Ibid, 589, 1140.

104 Paul Mitchell claimant of his remedy.75 In Pearne v Lisle,76 the defendant was being sued for rent due for the hire of 14 slaves at Antigua, and for redelivery of the slaves. In discharging a previous order granting the writ, Lord Hardwicke LC commented that:77 The person of the defendant is amenable, for he is a native of Antigua; he is going to Antigua: his effects, and likewise the Negroes, are there … It is a colony subject to England, and the plaintiff may have justice done him in the Courts there.

He elaborated on this further in Robertson v Wilkie:78 It is a reason that generally prevails with me not to grant such writ, where one of the parties corresponding or dealing lives out of the kingdom, and the transactions are on the faith of having justice in the place where the parties respectively reside. And so it has been held where one lived in England, and the other in one of the plantations or settlements belonging to England, which are governed by the same laws, except some few peculiar to the place.

However, he continued, these reasons did not hold good where an action between two merchants would be held either at Gibraltar or Minorca if the defendant was allowed to leave England. In Gibraltar, ‘the jurisdiction is not adapted to determining property and accounts between merchants’. In Minorca, the ‘Spanish method of justice prevails’.79 Lord Hardwicke’s reasoning in Robertson v Wilkie was later doubted by Lord Thurlow LC: ‘justice,’ he observed, ‘would be equally certain’,80 whether at Gibraltar or Minorca. That criticism, however, seems to miss Lord Hardwicke’s point. For Hardwicke, the certainty of justice somewhere, under some legal system or other, was not sufficient for the Court of Chancery to relinquish its hold over the defendant. What was needed, as in Pearne v Lisle, was ready access to justice according to English law. If that was not available, the Court of Chancery would step in.

(3) Pennsylvania As it happened, Lord Hardwicke had recently acted on the understanding that the Court of Chancery would intervene if justice according to English law was unavailable, when, in Penn v Lord Baltimore, he ordered specific performance that had to take place in Pennsylvania. At that time Pennsylvania had 75 See generally J Beames, A Brief View of the Writ Ne Exeat Regno, as an Equitable Process, 2nd edn (London, Pheney, Sweet, Maxwell & Stevens, 1824); on the application of the writ to foreigners, see 64–68. 76 Pearne v Lisle (1749) Amb 75, 27 ER 47. 77 Ibid, 77, 48. 78 Robertson v Wilkie (1753) Amb 177, 177; 27 ER 119, 119. 79 Ibid, 177, 119. 80 Atkinson v Leonard (1791) 3 Bro CC 218, 223; 29 ER 499, 502.

Penn v Lord Baltimore 105 no courts of equity, it only had courts of common law.81 Those common law courts would later incorporate various aspects of equity, but the first reported case to begin that process of incorporation did not occur until 1768.82 Even when large parts of equity had been accepted by the Pennsylvania courts, they were still unable to devise a common law replicant of specific performance: the closest equivalent was an award of conditional damages, which overvalued the property in question in the hope that the defendant would be persuaded to return the property rather than overpay for it.83 It is important to emphasise that Pennsylvania’s lack of an equity court was not an accident, nor an oversight. Penn’s charter had granted him the right to set up such a court, but he had decided not to, apparently being struck by the happy position of the native Americans, who were not ‘perplexed by Chancery suits’.84 Penn’s decision was also probably influenced by Chancery’s reputation for arbitrariness. Lord Nottingham’s attempts to place equity on a more principled basis would improve its reputation in time, but in the early 1680s, when Penn’s decision was being made, Nottingham’s judgments had hardly been reported at all.85 The General Assembly of Pennsylvania seems to have taken a more optimistic view of equity, and made several attempts to create equity jurisdictions. All of these attempts, however, were repealed by the British Parliament, until, in 1720, a Court of Equity was finally created. The Court sat for 16 years, but was then effectively abolished by the colonists. The reasons for the abolition are striking: the objection was not to the content of equity doctrine in itself but to the method of administering it. As was typical of equity in the colonies,86 it was not administered by specialist Chancery judges, steeped in equity principles; it was administered by the Governor, either alone or in Council. The governors claimed this right on the basis that, like the Lord Chancellor in England, they held the great seal for their respective provinces.87 Whilst that might make the Governor’s

81 See generally S Fisher, ‘The Administration of Equity Through Common Law Forms’ (1885) 1 LQR 455; S Liverant and W Hitchler, ‘A History of Equity in Pennsylvania’ (1932– 1933) 37 Dickinson Law Review 156. 82 Swift v Hawkins (1768) 1 Dallas 17. 83 Fisher (n 81) 461–62. The conditional damages technique closely resembles the classical Roman solution to the same problem: B Nicholas, An Introduction to Roman Law (Oxford, Clarendon Press, 1975) 101–02; D Johnston, Roman Law in Context (Cambridge, CUP, 1999) 117–18. 84 Fisher (n 81) 455; Liverant and Hitchler (n 81) 158. Penn also envied their freedom from bills of lading. 85 B McPherson, ‘How Equity Reached the Colonies’ (2005) 5 Queensland University of Technology Law and Justice Journal 102 at 105; D Yale, ‘Finch, Heneage’, Oxford Dictionary of National Biography (n 63). 86 McPherson (n 85) 106–09. 87 Ibid, 106. See further J Smith and L Hershkowitz, ‘Courts of Equity in the Province of New York: The Cosby Controversy, 1732–1736’ (1972) 16 American Journal of Legal History 1 at 9–11.

106 Paul Mitchell administration of equity technically defensible, the reality of the King’s representative sitting as a judge with special responsibility for property was unacceptable to many colonists. It was exactly the kind of arbitrary royal power that they had travelled halfway round the world to escape. The pressure began to build in Pennsylvania from 1726, with the colonists arguing that the Court of Chancery was contrary to the guarantee in Pennsylvania’s Charter of Privileges that no one could be required to answer a complaint relating to property before the Governor or Council.88 Meanwhile, events in the neighbouring province of New York highlighted the potential for abuse of the Governor’s Chancery powers,89 which seem to have spurred on the Pennsylvania Assembly, in 1735, to pass a resolution that the Court of Equity was, indeed, contrary to the Charter of Privileges. The Attorney-General and Solicitor-General in England were asked for their view, and replied that the Court was not contrary to the Charter. The Assembly responded by introducing a bill to remove all Chancery powers from the Governor, but in the meantime the Governor had died, and his successor made no attempt to exercise any Chancery powers. The history of equity in eighteenth-century Pennsylvania casts light on Penn v Lord Baltimore in two ways. First, it shows that the authority which Lord Hardwicke referred to in support of equity’s jurisdiction over land in Pennsylvania—Richardson v Hamilton (1733)—was decided under conditions very different from those in Penn v Lord Baltimore. In Richardson specific performance was theoretically available from the Pennsylvania Court of Equity; by the time of the decision in Penn it was not. So, whilst Richardson could be interpreted as an English court applying the same equity that applied in Pennsylvania, Penn could not be justified on that basis. However, although no record of a judgment in Richardson v Hamilton has survived, it seems to have been a more complicated case than Lord Hardwicke’s brief reference to it suggested. The case was concerned with confiscation of property under a private act of the Pennsylvania Assembly, which had subsequently been disallowed by an Order in Council.90 The claimants failed to regain possession in Pennsylvania, but were granted an order for delivery of possession in the Court of Chancery in England. It is not entirely clear why the claimants had not previously applied to the Court of Equity in Pennsylvania, especially since the Governor (who would have sat in the case) had some sympathy with the

88

Liverant and Hitchler (n 81) 163–64. Smith and Hershkowitz (n 87). 90 J Smith, Appeals to the Privy Council from the American Plantations (New York, Columbia University Press, 1950) at 628–31. Additional background on the case may be found in P Wilson Coldham, ‘Clarke, Curtis, and Richardson, of Barbados, Delaware and Philadelphia’ (1973) 61 National Genealogical Society Quarterly 3. 89

Penn v Lord Baltimore 107 claimants’ complaints. Part of the explanation may well have been that the Richardsons realised that any equity suit in Pennsylvania was likely to be ineffective. By 1733 the Governor’s Chancery powers were being questioned, and for him (effectively) to overrule the Pennsylvania Assembly would have almost certainly precipitated a crisis. Certainly the Richardsons’ adversary, Alexander Hamilton, could have been relied upon to make political capital out of any such decree by the Governor, and indeed to have made a point of disobeying it: his republican sympathies were well known, and he would soon be demonstrating his formidable combination of political and legal abilities in New York, in the trial of the radical printer, Peter Zenger.91 The Richardsons may well have chosen London as the venue for their Chancery claim in an attempt to exert pressure on Hamilton, whilst simultaneously limiting his opportunity to score political points. Unfortunately there seems to be no record of the judgment of Lord King LC, so we have no way of knowing whether he gave any consideration to the fact that the claimants were not availing themselves of a theoretically available, but practically unattractive, local equitable remedy. The second way in which the Pennsylvania position casts light on Penn v Lord Baltimore is by showing the strikingly political dimension of the court’s decision to grant specific performance. The Pennsylvania colonists had decided to do away with their court of equity, because it smacked of remote royal interference; yet here was a judge, thousands of miles away, giving orders for the demarcation of their territory. Chancery doctrines were being invoked to justify central control over colonial land, despite the colonists’ emphatic local rejection of those doctrines. The irony may not have been lost on William Penn’s descendants, that they were having to rely on an institution that Penn himself had decided they were better off without.

F. THE APPLICATION OF PENN V LORD BALTIMORE

(1) Expansion In the 50 years or so after the decision in Penn v Lord Baltimore, the doctrine that equity acted in personam and could, therefore, affect property outside the jurisdiction, took root to such an extent that Lord Eldon LC, in 1804, could assert that ‘[t]here is no doubt of the jurisdiction upon contracts as to land in the West Indies, if the persons are here’.92 As in Penn v Lord Baltimore itself, the primary focus was on colonial land; as the

91 92

Smith and Hershkowitz (n 87) at 41. Jackson v Petrie (1804) 10 Ves Jun 164, 165; 32 ER 807, 807.

108 Paul Mitchell colonies expanded, so did the practical importance of the principle itself. Colonial expansion also brought the principle to bear on legal regimes where it was not quite so easy to distinguish between in rem and in personam effect. Thus, for instance, six eminent counsels’ advice was sought by the East India Company as to whether Lord Clive could sue in Chancery to enforce a jaghire of Indian land.93 Lord Hardwicke’s son, Charles Yorke, emphasised the in personam principle, but seems to have been in a minority in concluding that the jaghire was like a claim for rent, which raised no issue of title.94 Thurlow, who gave the most elaborate opinion the other way, took the view that95 if the contract were concerning a real subject, always extant in a foreign independant [sic] country, always in the actual disposition of their justice, I should think the English court of chancery ought not to interpose in it … [T]he court of chancery here cannot strip a rent of that relation which in point of title it bears to the land, so far as to decree upon it, any more than an action could be maintained here for the use and occupation of lands in France.

The in personam principle also opened the way for injunctions restraining proceedings in other jurisdictions.96 The possibility of such injunctions had initially been denied, despite the bar’s opinion to the contrary,97 but by the early nineteenth century there were signs that judicial attitudes were changing. Thus, in Harrison v Gurney98 Lord Eldon LC granted an injunction restraining proceedings by trustees in Ireland, although the precise basis for doing so was not discussed. Three years earlier, in Kennedy v Earl of Cassillis,99 the same judge had refused an injunction sought against the Court of Session, on the basis that such an injunction could never be enforced100—clearly an injunction addressed to the court itself was not the solution. The principled basis for an injunction restraining proceedings elsewhere was finally articulated by Lord Brougham LC in Lord Portarlington v Soulby.101 There, relying expressly on Penn v Lord Baltimore, Lord Brougham LC explained that the jurisdiction was102 grounded, like all other jurisdiction of the Court, not upon any pretension to the exercise of judicial and administrative rights abroad, but on the circumstance of

93 A jaghire was (typically) a short-term grant of land by an Indian ruler to a successful military commander, made in recognition of military service. 94 F Hargrave, Collectanea Juridica (London, W Clarke, 1810) vol 1, 247–48. 95 Ibid, 254–55. Cf St Pierre v South American Stores (Gath and Chaves) Limited [1936] 1 KB 382. 96 D Altaras, ‘The anti-suit injunction: historical overview’ (2009) 75(3) Arbitration 327. 97 Love v Baker (1665) 1 Ch Ca 67, 22 ER 698. 98 Harrison v Gurney (1821) 2 Jac & W 563, 37 ER 743. 99 Kennedy v Earl of Cassillis (1818) 2 Swan 313, 36 ER 635. 100 Ibid, 322, 638. 101 Lord Portarlington v Soulby (1834) 3 My & K 104, 40 ER 40. 102 Ibid, 108, 41–42.

Penn v Lord Baltimore 109 the person of the party on whom this order is being made being within the power of this Court.

The most significant application of Penn v Lord Baltimore concerned situations where the law of the place where the land was situated was different from English law. As we have seen in the previous section, the decision in Penn v Lord Baltimore itself could only be justified on the assumption that the Court of Chancery in London could give a remedy despite no similar remedy being available in the place where the land was situated. However, the point had not been expressly considered, and in Pike v Hoare,103 decided 13 years after Penn v Lord Baltimore, a very different approach was taken. The claim was, essentially, a challenge to the validity of a will made by the claimant’s brother; all the land affected by the will lay in Pennsylvania. Lord Northington LC regarded the latter fact as crucial:104 I build my opinion materially on the fact of the lands lying in Pennsylvania, for a will of lands lying in any of the colonies is not triable in Westminster Hall; if it were, it would be introductive of great confusion, and be very detrimental to the colonies. We have colonies and factories in the four quarters of the world, and each colony and factory have distinct laws of their own. Judges in Westminster Hall are not acquainted with the laws of the several colonies and factories; they are local. In Penn v Lord Baltimore, Lord Hardwicke made the distinction, and said, it was the contract that gave the court jurisdiction in that case; the principles of equity being the same in all places.

The bill was refused. Although Lord Northington LC claimed to be acting on the principles set out in Penn v Lord Baltimore, his reasoning could not be supported by that case. The principles of equity were not the same in Pennsylvania and England—Pennsylvania provided no specific remedies, England did. But Lord Northington LC was not mistaken in attributing the idea that equity was the same in all places to Lord Hardwicke: Hardwicke had said almost exactly that in Foster v Vassall.105 Lord Northington LC was, perhaps, trying to return the law to the narrower position that Hardwicke had espoused before Penn v Lord Baltimore. That earlier position certainly had the advantage of eliminating clashes between the courts of different jurisdictions, but it would have effectively limited the Penn v Lord Baltimore principle to British colonies where equity had not been modified. Had Lord Northington LC’s view prevailed, we would hear little of Penn v Lord Baltimore today.

103 104 105

Pike v Hoare (1763) 2 Eden 182, 28 ER 867; Amb 428, 27 ER 286. (1763) 2 Eden 183–84, 28 ER 867. (1747) 3 Atk 587, 26 ER 1138. Discussed above, text at n 73.

110 Paul Mitchell However, Lord Northington’s view did not prevail. In Lord Cranstown v Johnston,106 Arden MR explicitly established the crucial principle that even if the law of the place where the land was situated would refuse a remedy, equity could intervene—relying on the in personam jurisdiction—to prevent fraud. Thus, where a creditor had forced a judicial sale of the debtor’s estate in St Christopher’s (in the West Indies), and had acquired that estate at an under-value, an equitable remedy was available, despite the fact that, under the statute law of St Christopher’s, the sale was unimpeachable. Arden MR’s analysis was forthright:107 [W]ith regard to any contract made or equity in this country respecting lands in a foreign country, particularly the British dominions, this Court will hold the same jurisdiction, as if they were situated in England … [The creditor] has gained an advantage, which neither the law of this country nor of any other country would permit. I will lay down the rule as broad as this: this Court will not permit him to avail himself of the law of any other country to do what would be gross injustice.

This emphasis on English law concepts of fraud and contract would be reaffirmed by Cottenham LC in In re Courtney, ex parte Pollard,108 with a significant caveat:109 If indeed the law of the country where the land is situate should not permit or not enable the defendant to do what the court might otherwise think it right to decree, it would be useless and unjust to direct him to do the act; but when there is no such impediment, the courts of this country, in the exercise of their jurisdiction over contracts made here, or in administering equities between parties residing here, act upon their own rules, and are not influenced by any consideration of what the effect of such contracts might be in the country where the lands are situate, or of the manner in which the courts of such countries might deal with such equities.

As the editors of Dicey, Morris and Collins point out, it is not entirely clear how stringent a prohibition is needed,110 but from the facts of Lord Cranstown v Johnston (which Lord Cottenham LC cited), it is clearly insufficient to prevent a Chancery decree to show that the foreign law makes no provision for fraud. Similarly, the facts of In re Courtney, ex parte Pollard concerned an equitable mortgage of land in Scotland; Scots law did not recognise equitable mortgages, but that did not prevent the English Court of Chancery making an in personam order to enforce one.

106

Lord Cranstown v Johnston (1796) 3 Ves Jun 170, 30 ER 952. Ibid, 182–83, 959. 108 In re Courtney, ex parte Pollard (1840) Mont & Ch 239. 109 Ibid, 250–51. 110 L Collins (ed), Dicey, Morris and Collins on the Conflict of Laws, 14th edn (London, Sweet & Maxwell, 2006) vol 2, 23-045. 107

Penn v Lord Baltimore 111 The disregard for foreign law shown in Lord Cranstown v Johnston and In re Courtney, ex parte Pollard troubled Joseph Story, who observed that111 the doctrine of the English Courts of Chancery, on this head of jurisdiction, seems carried to an extent, which may perhaps, in some cases, not find a perfect warrant in the general principles of international public law; and, therefore, it must have a very uncertain basis, as to its recognition in foreign countries, so far as it may be supposed to be founded on the comity of nations.

The Lord Cranstown case, he felt, could only be justified by the fact that all the parties were British subjects, and the original judgment was on a British island.112 Such caution, however, did not prevail, and during the course of the nineteenth and twentieth centuries, the doctrine from Penn v Lord Baltimore was applied to property all over the world, from Scottish cottages,113 to Shanghai houses114 and Brazilian sugar plantations.115 As Francis Palmer was quick to recognise, and the courts later acknowledged,116 the in personam principle had a valuable commercial aspect: it allowed owners of land abroad to raise finance, without having to go to the trouble and expense of having to satisfy local legal requirements; and it also made loans secured on foreign land more attractive to lenders, who were not obliged to enforce their rights in foreign courts. Thus, in the fourth edition of his Company Precedents, Palmer stated that117 land situate abroad, but belonging to a company registered here, can in most cases be effectually charged in favour of debenture holders or their trustees, without regard to the formalities required by the local law in relation to transfers or mortgages. For it was settled long since that the Court of Chancery, by virtue of its jurisdiction in personam, would, as between persons resident here, enforce equities in regard to foreign land. Penn v Lord Baltimore …

Palmer also recognised that the equitable interest of the creditor was not perfectly protected, in the sense that it might be displaced by other charges satisfying the relevant foreign law. ‘But,’ he continued, ‘this is a risk which in may cases the parties are contented to run; the principal object being to give the debenture holders a preference over general creditors of the company, and

111 J Story, Commentaries on the Conflict of Laws, 5th edn (Boston, Mass, Little, Brown and Company, 1857) at 888. 112 Ibid, 889. 113 Coote v Jecks (1872) 13 LR Eq 597. 114 Ex parte Holthausen (1874) LR 9 Ch App 722. 115 Duder v Amsterdamsch Trustees Kantoor [1902] 2 Ch 132. 116 In re The Anchor Line (Henderson Brothers) Limited [1937] 1 Ch 483. 117 F Palmer, Company Precedents, 4th edn (London, Stevens & Sons, 1888) 378.

112 Paul Mitchell not to fetter the company in dealing with its property.’118 Palmer obviously had in mind British companies raising finance from British lenders, secured against overseas assets. For such companies, the Penn v Lord Baltimore principle meant that commerce and conscience walked hand in hand.

(2) Third Parties Although the dominant theme in the development of the principle from Penn v Lord Baltimore was one of broadening and generalising, one significant limitation emerged relating to third parties. Whilst equity would intervene to enforce contracts, and to prevent fraud as between the perpetrator and victim, it would not protect equitable rights against third parties. Thus, for instance, in the leading case of Norris v Chambres,119 the director of a company had advanced £40,000 of his own funds for the purchase by the company of a mine in Prussia. The purchase fell through, but the vendor retained the part-payment. The mine was later sold to another (related) company, with the vendor giving credit for £40,000 already received. The court held that no declaration of lien over the mine in favour of the director’s estate could be made. Sir John Romilly MR made it clear that he had reservations about the Penn v Lord Baltimore principle generally, and was certainly not prepared to extend it.120 The decision was affirmed by Lord Campbell LC, who observed that the principle from Penn v Lord Baltimore ‘was founded on any contract or privity’ between the parties.121 A similar approach was taken later in Deschamps v Miller.122 This limitation on the principle has troubled judges and commentators. As Peter Prescott QC pointed out in R Griggs Group Ltd v Evans,123 third party purchasers of land with notice of the claimant’s interest would, prima facie, be regarded as fraudulent, using that word in its broad equitable sense. It therefore seems to be a contradiction in terms to state that the Penn v Lord Baltimore principle is used to restrain fraud, but does not apply to third party purchasers with notice. Peter Prescott QC took the view that Norris v Chambres124 and Deschamps v Miller125 have now been overtaken by more modern developments in private international law. 118 Ibid, 379. Cf the more cautious approach taken by Palmer’s later editors: eg, A Topham (ed), Palmer’s Company Law: A Practical Handbook for Lawyers and Business Men, 10th edn (London, Stevens, 1916) 274. 119 Norris v Chambres (1861) 29 Beav 246, 54 ER 621; (1861) 3 De GF & J 583, 45 ER 1004. 120 (1861) 29 Beav 246, 253–55; 54 ER 621, 624–25. 121 (1861) 3 De GF & J 583, 584; 45 ER 1004, 1005. 122 Deschamps v Miller [1908] 1 Ch 856. 123 R Griggs Group Ltd v Evans [2004] EWHC 1088 (Ch), [2005] Ch 153. 124 Norris v Chambres (n 119). 125 Deschamps v Miller (n 122).

Penn v Lord Baltimore 113 Today, he explained, such cases would not be seen as raising a question of jurisdiction, but as raising a question of choice of law.126 Assuming that the approach of Peter Prescott QC is adopted by the appellate courts, the third party issue no longer causes practical difficulties today. However, the reasons why the courts found the issue so difficult illustrate a fundamental feature of the Penn v Lord Baltimore principle. At a broad level, the theme running through the speeches in Norris v Chambres127 and Deschamps v Miller128 was that it could not be right simply to apply English equitable rules without reference to foreign law. Unfortunately there was strong authority—in the form of the decisions in Lord Cranstown v Johnston129 and In re Courtney, ex parte Pollard130—that no such reference could be made. Rather than proceeding in a manner that they were convinced would be incorrect, the courts chose to limit the application of the Penn v Lord Baltimore principle so as to exclude third party cases. In fact, what cases like Norris v Chambres and Deschamps v Miller illustrated was that the assessment of fraud without reference to foreign law was fundamentally flawed. The point was demonstrated by Hicks v Powell,131 a decision of Lord Hatherley LC. There, a house in Madras had been conveyed to the claimant by the vendor, but the conveyance had not been registered. A year later, the vendor purported to mortgage the same house to the defendant, who had notice of the earlier conveyance but relied on the fact that the prior conveyance was not registered. The mortgage deed was registered. Under the Indian Registration Act 1864, all deeds of conveyance were required to be registered within 12 months of conveyance taking place; any deeds not so registered could not be produced in evidence. Lord Hatherley LC refused the claimant’s application for a declaration of priority, commenting:132 There is great difficulty in understanding how, in the case of a covenant which could not be enforced if the parties were in India, a right to sue can arise from the circumstance of the person sought to be charged changing his residence before the institution of the suit.

‘It would be very strange…’ he added, ‘if the claimant could obtain rights over land in India through an action in England, which could not have been obtained in the Indian courts…’.133

126 127 128 129 130 131 132 133

Griggs (n 123) at [90]–[110]. Norris v Chambres (n 119). Deschamps v Miller (n 122). Lord Cranstown (n 106). Courtney (n 108). Hicks v Powell (1869) LR 4 Ch App 741. Ibid, 745. Ibid, 746.

114 Paul Mitchell Although he did not quite put it in this way, the problem that Lord Hatherley LC had identified was that equitable fraud was relative, not absolute. What might be fraud in one system need not be fraud in another. Thus where, as in India, the system of registration provided that unregistered transfers were to be of no effect, it was not fraudulent for a third party with notice of such a transaction to rely on his strict legal rights; where no registration scheme was in place, the third party with notice was likely to be fraudulent. The real problem in Norris v Chambres and Deschamps v Miller was not that the defendants were third parties with notice; it was that the courts could not make any sensible decision about fraud without information about the foreign legal system.134 In essence, the problem went back to the unqualified assertions in Lord Cranstown v Johnston and In re Courtney, ex parte Pollard that foreign law should be disregarded.

G. CONCLUSION

Penn v Lord Baltimore is a landmark case for more reasons than are traditionally recognised. It provides an invaluable insight into the legal machinery of colonialism, demonstrating how a wide range of legal concepts from sources as diverse as feudalism and compromise agreements could be harnessed to solve essentially novel problems. It also highlights the peculiar, private-enterprise nature of early colonial ventures, and the way that the law responded by resolving disputes within a private law framework. At the level of general equity doctrine, its landmark status derives not from having created the in personam doctrine, but from having facilitated a particular approach to it, whereby English courts were given licence to supplement foreign law. As this essay has shown, this licence to give remedies where they were not available abroad gave English courts extensive powers over colonial land, and allowed land abroad to be readily used as security for loans. In short, Penn v Lord Baltimore had both political and commercial significance, in addition to its undoubted importance as a landmark case in equity.

134 This point is perhaps hinted at by Jessel MR in Norton v Florence Land and Public Works Company (1877) 7 Ch D 332 at 336.

5 Burgess v Wheate (1759) PAUL MATTHEWS

In this case a controversy has arisen as to which of two trustees is to keep certain property which was not intended for either of them. Mr Penfold is in the happy position of having got it, and the question is whether … Mr Moody is entitled to take it away from him. (Lindley LJ in Re Lashmar1)

A. INTRODUCTION

U

NLIKE THE WARRING trustees in the quotation set out above, this chapter has something for everyone. It tries to cover a number of different issues all arising out of one case, a Jane Austen saga of its day. This is the story of an inheritance claim that goes wrong. The pedigree is long, the legal transactions complex. Eventually there is a death, and no will. The heir on the mother’s side comes forward, and fails. The Crown steps in to make a claim, because there is no other heir, and equally fails. And the result is that the trustee, who all along has sat on the property as trustee, scoops the pool. Consternation. My story begins with a few words about the feudal doctrine of escheat, a necessary introduction to what follows. For the Crown’s claim, which looms large, is based on it. Then we look briefly at the political context in which the case was decided, before examining the facts, the judges, and the arguments and decision. Then we look at subsequent developments. What we see is the law of trusts emerging from the grip of the medieval land law system, to make its own way forward. The case of Burgess v Wheate2 is a three-way fight between heir, Crown and trustee. The elephant in the room, unmentioned by any of the protagonists but at the forefront of all of their minds, is the notion of conscience, by which trusts take effect, and without which they bind in honour only.

1 2

Re Lashmar, Moody v Penfold [1891] 1 Ch 258, 266. Burgess v Wheate (1759) 1 Wm Bl 123, 96 ER 67; 1 Eden 177, 28 ER 652.

116 Paul Matthews B. ESCHEAT

What follows focuses heavily on the doctrine of escheat, and so we must explain it. The word escheat is interesting from both an etymological and a legal point of view. It is a word of Norman rather than Anglo-Saxon origin. Escheat is derived from the Norman verb eschier, or escheir or eschoir.3 Like many words in Norman and in modern French, the initial ‘es’ (or ‘é’) indicates an ‘s’ in other languages derived from Latin, such as Italian or even English. Thus échelle for scalo or scale, estomac for stomaco or stomach, école for scuola or school, and so on. So the natural etymology of escheat is from scadere, to fall down, to run out. The past participle of eschier was eschet4 or eschete.5 The infinitive of the verb also occurs in the form chier6 (compare the Latin cadere, to fall). The idea is that a (property) right has come to an end, has fallen in.7 It has reached its natural limit. At the same time, it is clearly related to other words, such as the late Norman escheance,8 or the modern French échéance or (more remotely) the English ‘chance’. This has the idea of the happening of an event, the time that a thing is to happen. Certainly the modern French échéance (expiry, maturity date) gives us the idea of a payment or other action becoming due (‘à l’échéance’). As Coke puts it: ‘“Escheat” is a word of art, and signifieth properly when by accident the lands fall to the lord of whom they are holden, in which case we say the fee is escheated’.9 In English law escheat refers to the idea that a property right comes to an end, or perhaps ‘reverts’ to another. The technically correct meaning is the former, but the popular meaning is the latter, thus misusing the word ‘revert’.10 However, escheat is a part of the doctrine of tenures, and not of the doctrine of estates. And it applied only to estates in fee simple. Thus at common law such an estate escheated on the failure of the heirs of the tenant (called propter defectum tenentis, or sometimes propter defectum sanguinis), or on his committing a gross breach of the feudal bond, originally called felony (propter delictum tenentis). Unlike, say, a life estate or an estate tail, it was no part of the limitation of the fee simple estate that it should come to an end. Indeed, the basic idea of a fee simple was a grant to

3 There are other variants too. See W Rothwell et al (eds), Anglo-Norman Dictionary, 2nd edn (London, Maney, 2005) vol 2, 991. 4 Ibid. 5 See J Baker, Manual of Law French, 2nd edn (Aldershot, Scolar, 1990) 105. 6 Ibid, 70 (chier), 105 (eschier). 7 Cyprian Williams (1931) 75 SJ 843: ‘[I]t simply means the falling-in of the land to the lord.’ 8 See eg G Terrien, Commentaires du Droict Civil, 2nd edn (Paris, Iacques Du Puys, 1578) Liv VI, Ch 1, 193–94, discussing escheance as a means of acquiring property. 9 Co Litt 13a. See also ibid at 92b, referring to escheat as a ‘casual profit’ happening to the lord by ‘chance and unlooked for.’ 10 A-G of Ontario v Mercer (1883) 8 App Cas 767, 772, per Lord Selborne LC.

Burgess v Wheate 117 A and his heirs forever. It was instead a consequence of the fact that—by accident rather than design—there was either no longer a tenant at all or the feudal relationship had been irreparably broken by the tenant’s act. But a life estate did not ‘escheat’ to the lord on the death of, or the commission of felony by, the life tenant, although it certainly came to an end. Nor did an estate tail ‘escheat’ to the lord on the death of the tenant in tail without heirs of the body of the original grantee, or on his committing felony at a time when there was no such heir. Again, of course, it too came to an end. But—in either case—at that point a further limitation took effect, and another estate, in remainder or reversion, as the case might be, fell into possession. The escheat being the consequence of tenure, the beneficiary of the escheat was always the immediate lord in the feudal pyramid. However, despite what Glanvill said,11 the lord did not take as ultimate heir of the former tenant. This was not a doctrine of inheritance, whereby the lord succeeded to the rights of the tenant. Instead the tenant’s rights ended, and the lord’s own pre-existing right came back into possession.12 If the land was held directly of the Crown then the lord to whom the land escheated was the Crown, but not if it was held of some mesne lord.13 But every escheat eliminated a mesne lord from the feudal ladder, and the statute Quia Emptores14 prohibited adding any new ones. Escheat was made commoner by limits on inter vivos alienation, and the lack of a power of testation, of land, and also by restrictive rules about who could inherit it. One such rule prohibited inheritance through the half-blood. Another prevented inheritance by ascendants. A third—relevant in Burgess v Wheate itself—would not allow lands that had descended to an heir of the previous owner on his father’s side to pass to the heir of the later deceased on the mother’s. So by Tudor times most of the intermediate links in the feudal structure had vanished,15 and English land—including that concerned in Burgess v Wheate—was mostly held directly of the Crown.16 Even where it was not, and the land escheated to a mesne lord, the Crown nevertheless had a limited, direct right in cases of felony to enjoy the land for a year and a day, and to subject it to ‘waste’. In the case of high treason the Crown

11 GDG Hall (ed and tr), The Treatise on the Laws and Customs of the Realm of England commonly called Glanvill (Oxford, Clarendon Press, 1993) VII, 17, ‘De ultimis heredibus’. 12 A-G of Ontario (n 10) 772, per Lord Selborne LC. 13 Ibid, per Lord Selborne LC. 14 18 Edw 1 (1290), c 1. 15 AWB Simpson, An Introduction to the History of the Land Law (Oxford, OUP, 1961) 22. 16 Copyhold land was an exception. Hence cases such as Williams v Lord Lonsdale (1798) 3 Ves Jr 752, 30 ER 1255; R v Coggan (1805) 6 East 431, 102 ER 1352; Henchman v A-G (1826) 2 Sim & St 498, 57 ER 436; A-G v Duke of Leeds (1833) 2 My & K 343, 39 ER 974.

118 Paul Matthews had an even larger right at common law,17 to take the land itself (so-called ‘forfeiture’), and in the face of that any mesne lord’s right to escheat could not prevail.18 These royal rights were known as ‘prerogatives’, just like that to treasure trove, bona vacantia19 and so on. The doctrine of escheat was unaffected by the reduction in the number of tenures in 1660.20 However both forfeiture and escheat for felony were abolished by statute in 1870.21 This statute did not affect escheat for outlawry,22 although outlawry itself was progressively abolished in English law in 185223 and 187924 in civil cases, and in 1938 in criminal cases.25 Escheat for want of heirs was actually extended in 1884,26 for the first time to cover equitable estates and interests,27 and also incorporeal hereditaments (eg rentcharges, rights of common, markets, etc) which, not being held of a lord, could not previously have been the subject of escheat. But escheat for want of heirs (as extended) was abolished in 1925. It was replaced by extending the right of the Crown to bona vacantia, as part of the assimilation of the rules of inheritance to realty to those applying to the inheritance of personalty.28 Henceforward the Crown always took, and not only when it was the immediate feudal lord. A further kind of escheat was actually invented by the bankruptcy legislation of the nineteenth century, as a result of the provision that the trustee in bankruptcy of a bankrupt could disclaim his onerous property, which would then revert to the person entitled on the determination of the estate or interest of the bankrupt.29 This rule still applies today, even in the context of corporate insolvency.30

17

Confirmed by statute 25 Edw III, st 5, c 2. This may go back at least to the seizure by King John of the terrae Normanorum in England after the split between Normandy and England in 1204: F Pollock and FW Maitland, The History of English Law before the Time of Edward I, 2nd edn (Cambridge, CUP, 1911) vol 1, 332. In Magna Carta 1215, s 32, the Crown specifically renounced any claim to forfeiture for felony. 19 That is, chattels with no owner. It did not extend to real property until 1926. 20 By the Statute of Tenures, 12 Car II, c 24. 21 33 & 34 Vict c 23, s 1. 22 Bracton, f 130a; 3 Co Inst 212. 23 Common Law Procedure Act 1852, s 24 (‘outlawry on mesne process’: a method of enforcing appearance in an action). 24 Civil Procedure Acts Repeal Act 1879 (‘outlawry after judgment’: a means of enforcing judgment). 25 Administration of Justice (Miscellaneous Provisions) Act 1938, s 12. 26 Intestates Estates Act 1884, 47 & 48 Vict c 71, s 4. 27 To anticipate, this reversed the effect of the main part of the decision in Burgess v Wheate. 28 Law of Property Act 1922, s 148; Administration of Estates Act 1925, ss 45(1)(d), 46(1)(vi). 29 Bankruptcy Act 1869, s 23; Re Mercer and Moore (1880) 14 Ch D 287. 30 Insolvency Act 1986, s 178; Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995] BCC 793. 18

Burgess v Wheate 119 During the modern era, following the Restoration in 1660 and the development of the trust and the strict settlement, the big problem with the doctrine of escheat was its impact on trusts. In relation to uses before the Statute of Uses the position had been simple: the right of escheat attached only to the legal estate, and the use was not affected. So there could be no escheat or forfeiture of the use on the death without heirs, or on the felony or treason of the cestui que use. On the other hand, if the estate of a sole feoffee to uses escheated or was forfeited, the lord or the Crown—who took by title paramount and had no privity with the cestui que use—was not bound by the use. One of the issues in Burgess v Wheate was whether the same answers were to be given after the Statute of Uses in relation to trusts.

C. THE POLITICAL SITUATION IN 1757–59

Whatever judges—and, for that matter, politicians—may say, judicial decision-making does not take place uninfluenced by political events. Even if judges in the English tradition do not consciously bend their decisions to suit political masters, they are still made in a particular socio-political context. So it is useful to have in mind the political situation at the time that the case of Burgess v Wheate was argued and decided. King George II had succeeded his father, the Hanoverian George I, in 1727. He did not get on with his own son Frederick, Prince of Wales, whose political group was known as the Leicester House Party, after Frederick’s house in what is now Leicester Square, London. It was a time of political instability, even though the King’s party, the Whigs, were the dominant political party in Parliament. In 1745 the Stuart Young Pretender ‘Bonnie Prince Charlie’ had raised an army in Scotland and advanced on London, getting as far as Derby before retreating and being beaten at Culloden. In Continental Europe the War of the Austrian Succession raged from 1740 to 1748, pitting Austria, Britain and The Netherlands against France and Prussia. Even after that was over, France and Britain continued to rival each other in India and in America. In 1751 the Prince of Wales died, leaving his eldest son George as the heir apparent to George II. In 1754 the Prime Minister Henry Pelham died, and his brother the Duke of Newcastle succeeded him. War broke out between France and Britain in America over the colonies there, and spilled over into Europe in 1756, the start of the so-called Seven Years’ War. The French invaded Minorca, a British possession, and Admiral John Byng was sent, with an inadequate force, to counter them, but failed to do so, with the well-known consequences. The Government collapsed, and the Duke of Devonshire took over as Prime Minister. But war continued, and went from bad to worse.

120 Paul Matthews In April 1757, George II dismissed the Government, and after a hiatus Newcastle resumed as Prime Minister, with Pitt the Younger as Secretary of State. Pitt’s efforts turned the tide and the British defeated the French in North America, after Wolfe took Quebec in 1759, and British ships conquered the West Indies. In October 1760 George II died, to be succeeded by his grandson George III, who had the tory views of his late father, rather than the whig views of his grandfather. It was a turbulent time. And the problems with American colonies were only just beginning. It is important to notice, too, that judges at this time were not divorced from politics. Most of the Chief Justices and Lord Chancellors, and some of the puisne judges too, had previously been Members of Parliament (MPs) and law officers. All three judges in our case had been MPs, and two of them law officers. Indeed, being Attorney-General gave a kind of moral claim to one of the important judicial offices—usually the Chief Justice of the Court of King’s Bench—well into the twentieth century.31 And the Chief Justice and the Lord Chancellor usually were members of the Government, with a seat in the Cabinet.32 Indeed, Lord Hardwicke sat in the Cabinet even after he resigned as Lord Chancellor in 1756.33

D. THE FACTS OF THE CASE

Now we must turn to the facts of the case. As often happens with landed families, the story starts further back than you might expect. In 1668 Lawrence Bathurst owned the legal estate in fee simple absolute in possession in a certain manor and advowson in Gloucestershire. In order to raise money on the security of the land but still remain the legal owner of it, he granted a lease for 1,000 years of a part of the manor containing a mill (referred to hereafter as ‘the mill’) to trustees for himself, and then

31 The last Attorney-General to move directly to become Lord Chief Justice was Sir Gordon Hewart (Viscount Hewart CJ) in 1922. The last Lord Chief Justice to have previously held ministerial office was Viscount Caldecote, who was Lord Chief Justice 1940–46, and who had previously (successively) been Attorney-General, Minister for Co-ordination of Defence, Secretary of State for Dominion Affairs and Lord Chancellor. More recently Attorneys-General have gone on to become Lords Chancellor, such as Sir Reginald Manningham-Buller (Viscount Dilhorne), Sir Elwyn Jones (Lord Elwyn-Jones) and Sir Michael Havers (Lord Havers). And some recent Solicitors-General have obtained judicial office too: eg Sir Jocelyn Simon (Simon P, Lord Simon of Glaisdale), Sir Lynn Ungoed-Thomas (Ungoed-Thomas J) and Sir Ross Cranston (Cranston J). 32 The last Lord Chief Justice to sit in the Cabinet was Lord Ellenborough, in 1806. The last Lord Chancellor to sit as a judge in the House of Lords was Lord Irvine of Lairg, in 2001. His successor, Lord Falconer, elected not to do so. The Lord Chancellor is now no longer a judge at all: Constitutional Reform Act 2005, Pt 2. 33 Conversely a lawyer might come under pressure not to take a political post, such as Lord Hardwicke’s second son Philip Yorke, who succumbed to pressure to be appointed Lord Chancellor in 1770 but then thought better of it and committed suicide.

Burgess v Wheate 121 appointed that the trustees assign the lease for 500 years to a lender as security for a loan. It is important in what follows to keep firmly in mind the distinction between the mill (which was mortgaged) and the remainder of the manor (which was not). Lawrence died, appointing his widow Susannah as executrix of his will, and leaving his son, Edward, and two daughters, Ann and Mary. Thus the fee simple in the whole manor descended directly to Edward as heir at law, and the remainder of the 1,000-year term of the mill (subject to the part mortgaged) to his widow Susannah as personal representative. In 1672 Susannah assigned the remainder of the 1,000-year term by way of security for a further loan. Both security interests later became vested in John Chandler. When the son Edward died, an infant and without issue, the fee simple of the manor (subject to the mortgage terms of the mill) devolved directly upon his sisters, Ann and Mary, as coparceners, that is, in effect, legal tenants in common for one half each. Later Ann married John Greening, and Mary married George Coxeter. The effect of each marriage at common law was that each of Ann and Mary could no longer deal with her half share of the manor without the concurrence of her husband. In 1686 Ann and John made a common law settlement of her half, essentially for themselves, with remainder as they should appoint, but with a gift over to the right heirs of the survivor after the deaths of both of them without having made an appointment. In 1689 Mary, as owner of the other one half share, and George her husband, sought a partition of most of the land, and ultimately it was divided up physically between the two couples, though no conveyances were made to perfect the title on the ground. In 1693 Ann died, and in 1694 her husband John died, without having made any appointment and without issue. So their one half share of the manor descended to the heir of John, as the survivor of them. This was John’s heir on his father’s side,34 his niece Elizabeth, the daughter of his brother Thomas. In 1695 Elizabeth married Nicholas Harding, but before her marriage she entered into a common law settlement of the half share. In broad terms this conferred successive life estates on the couple and then created a tail male, but with an ultimate remainder to Elizabeth’s right heirs. In 1695 Elizabeth and Nicholas brought proceedings to perfect the partition which had been left outstanding, and to divide other lands not physically divided earlier. This led to a decree for mutual conveyances and a commission for division of the rest. In 1698 the necessary mutual conveyances were executed. The only part left outstanding was the mill, still mortgaged. George died, leaving Mary as survivor solely entitled to the other half share of the manor, and once again able to deal with it on her own. By

34 If there was both an heir on the father’s side and one on the mother’s side, the former had preference.

122 Paul Matthews this time the mortgage debt in favour of John Chandler (which affected the mill and was secured by the mortgage terms) was significant. Mary therefore conveyed her one half share in the equity of redemption of the mill to trustees for John Chandler, in substance releasing her interest in the mill to the mortgagee. In 1713 Elizabeth and Nicholas agreed to make a similar conveyance of their half of the same equity of redemption, but on terms that the trustees for the mortgagee should reconvey the whole of the mill (including Mary’s half and the mortgage terms) to them or the survivor on payment of £500.35 In 1715 Elizabeth and Nicholas made the agreed conveyance and paid the money36 (though by now John Chandler was dead and it was for the benefit of his son James Chandler). But the trustees for the mortgagee did not make the agreed reconveyances, although they had covenanted that until they did, Nicholas and Elizabeth should stand seised to the same uses and continue in possession. In 1718 Elizabeth and Nicholas made a further settlement of the land. This was to take effect subject to the settlement of 1695 and therefore to the outstanding life estates of Elizabeth and Nicholas, but this time by way of a trust, and there was a conveyance to trustees. The trustees were Sir Francis Page37 and Robert Simmons. In the events that happened, the trusts were as Elizabeth might appoint, but in default of appointment for Elizabeth absolutely. Nicholas died first, and then Elizabeth. Elizabeth and Nicholas had no children. The limitation in tail male from the settlement of 1695 therefore failed, and the life estates had run out, leaving the remainder for the right heirs of Elizabeth.38 However, that was now subject to the deed of 1718 and to the trust created by it. As to the trust estate, Elizabeth had made no appointment, so that at her death it was held for her absolutely. She left no heir on her father’s side, though the plaintiff Richard Burgess was her heir on her mother’s side. In 1738, after Elizabeth’s death, and before Burgess could make any claim, the surviving trustee Sir Francis Page39 managed to get into possession of the estate. So Burgess brought this claim against him. As maternal heir to Elizabeth’s equitable estate, his claim could be brought against the legal owner only in a court of equity.

35 This is the amount stated by Sir Thomas Clarke MR in his opinion at (1759) 1 Wm Bl 125, 96 ER 68. In the statement of facts at the beginning of the report in Eden, it is given as £150 (at 179). But nothing appears to turn on this discrepancy. 36 This fact does not appear from the statement of facts at the beginning of the report in Eden, but in the opinion of the Master of the Rolls in Blackstone’s report, at 125. 37 A barrister and former Whig MP, now King’s Sergeant, who a few months later was appointed to the bench as a Baron of the Court of Exchequer. He went on to be appointed to the Court of Common Pleas in 1726, and then in 1727 to the Court of King’s Bench, where he sat until his death in 1741. 38 The limitation to her right heirs was in effect her own estate. 39 By then in his late seventies, but still a sitting judge.

Burgess v Wheate 123 E. THE LEGAL PROCEEDINGS

As was unfortunately all too common in the Court of Chancery at this time, the proceedings were long and drawn out. The original bill by Burgess against Page was filed in July 1739. It claimed that if Page had any legal interest in the estate, he should convey it to Burgess, deliver up possession, and account for the rents and profits. Page replied that he was lawfully seised of the estate and entitled to the rents and profits. In July 1741 the case came on to be heard before the then Lord Chancellor, Lord Hardwicke. But he objected that the case could not be decided unless the Attorney-General became a party, to represent any interest of the Crown by way of escheat, or else he disclaimed any interest on behalf of the Crown. The case was stood over, and in the event the Attorney-General was made a party. In September 1741 Sir Francis Page died, and as he had no children by either of his two marriages the bill was revived against his personal and real representatives, relatives of his second wife, Frances Wheate. In February 1744, the case came back before Lord Hardwicke, who ordered that a case should be settled for the consideration of the Court of King’s Bench. The case was elaborately argued before the common law court,40 and in May 1754 the judges of that court returned the certificate of their opinions to the Lord Chancellor. They certified three matters: a)

By virtue of the deed of 1718 and the fine levied, the trustees Page and Simmons took a legal estate, namely the reversion in fee simple expectant on the deaths of Nicholas and Elizabeth without male issue. b) Even if no estate had passed to Page and Simmons, Burgess as Elizabeth’s heir at law on her mother’s side could not at common law inherit this land on her death. c) If the deed of 1718 had not been executed, or the fine levied, then similarly Burgess as Elizabeth’s heir at law on her mother’s side could not at common law inherit this land on her death. But if on the other hand the trustees for the mortgagee had conveyed the mill to Nicholas and Elizabeth, as covenanted in the release of 1713, then Burgess as Elizabeth’s heir at law on her mother’s side would inherit that on her death. Thereafter the Attorney-General filed an information on behalf of the Crown, claiming that Page had no beneficial interest of his own but was merely a trustee for Elizabeth, her appointee or heir, and that in default of such appointee or heir he was a trustee for the King, and that the land was escheated and should be conveyed by Page’s representatives to the use of the

40

The arguments are to be found in the Hargrave MSS, No 85, p 95.

124 Paul Matthews King. This information was a means for the Crown in separate proceedings to make a claim to the land. It was, as the Master of the Rolls observed, in the nature of a cross-bill. Page’s representatives filed an answer, and issue was joined. Both the original bill as revived and the new information were heard by the Court of Chancery at the same time, on 13, 14 and 15 December 1757. The arguments were complex, but only a brief note of them is given in the report by Eden (none at all in Blackstone’s report). Eden justified this course by stating that the Lord Keeper’s note book recorded the arguments, and that a less exact report of them is found in Ambler’s manuscripts.41 Judgment was then reserved (for more than a year), probably because of the complexity of the matter, and also because the three judges were not all agreed, and eventually given on 24 January 1759, nearly 20 years after the proceedings had been originally started.

F. THE JUDGES

(1) The Master of the Rolls Now we must say something about the three judges involved. The first of them was Sir Thomas Clarke, Master of the Rolls. Originally, the Lord Chancellor or Lord Keeper was the only judge of the Court of Chancery who could try suits. The Master of the Rolls was originally simply one of the several masters in chancery who dealt with administrative matters, and like them had no explicit judicial function. In particular, the Master of the Rolls was responsible for looking after the court rolls. But over time it became accepted that he could hear cases and make orders in the absence of the Lord Chancellor or Lord Keeper.42 By the eighteenth century the business of the court was such that it certainly needed a second judge.43 The matter was settled by statute in 1729.44 This provided that orders made by the Master of the Rolls should be valid subject to appeal to the Lord Chancellor, and that no order should be enrolled until the Lord Chancellor had also signed it. In effect the Master of the Rolls had become the general deputy of the Lord Chancellor, to whom there was an unfettered right of appeal.

41 (1759) 1 Eden 177, 183; 28 ER 652, 655. Another, elaborate statement of the arguments is found among Sergeant Cox’s manuscripts in Lincoln’s Inn Library, written by Fazakerley. 42 See 4 Co Inst 97; DEC Yale (ed), Lord Nottingham’s ‘Manual of Chancery Practice’ and ‘Prolegomena of Chancery and Equity’ (Cambridge, CUP, 1965) ch II, s 6. 43 The third judge came only in 1813, with the institution of the Vice-Chancellor of England. 44 3 Geo II, c 30.

Burgess v Wheate 125 Sir Thomas Clarke was born in 1703, the son of a carpenter father and a pawnbroker mother of the parish of St Giles in the Fields, in central London. From this humble beginning he was helped to go to Westminster School by an alumnus, the son made good of another local resident, Zachary Pearce, later a bishop. In 1721 he went to Trinity College Cambridge (as Pearce had done) and became a fellow there in 1727 (as Pearce had also done). He also followed Pearce in being elected a Fellow of the Royal Society. He was called to the bar, took silk in 1740 and became a Member of Parliament in 1747. Then, in 1754, he was appointed Master of the Rolls and knighted, after William Murray (later Lord Mansfield) had turned down the position. It is said that he was offered and refused the Lord Chancellorship on the resignation of Lord Hardwicke in 1756.45 He died still in office in 1764, and was buried in the Rolls Chapel (now part of the library of King’s College).

(2) The Lord Chief Justice Next there is Lord Mansfield, the Chief Justice of the Court of King’s Bench. The office needs little introduction. William Murray was the son of Scottish nobility who was educated at Westminster School and Christ Church Oxford. He was called to the bar in 1730, elected to Parliament in 1742 and appointed Solicitor-General. In 1754, when the then AttorneyGeneral Sir Dudley Ryder was appointed Lord Chief Justice of the King’s Bench, he was promoted to Attorney-General. The Master of the Rolls, Sir John Strange, then died a few months later. His position was offered to Murray, but he declined. When Ryder died in 1756, Murray succeeded him in that post too, having been created Lord Mansfield. His sister married the Marquess of Rockingham, and he himself married the grand-daughter of the first Lord Nottingham. He resigned as Lord Chief Justice in 1788, and died in 1793. He is best known for his strong development of English commercial law during his tenure as Lord Chief Justice.

(3) The Lord Keeper The third judge was the Lord Keeper of the Great Seal. The Lord Keeper was a State official with exactly the same functions as, but a lower status than, the Lord Chancellor. This was originally the title of the person who temporarily held the Great Seal of England in the gaps between successive 45 W Holdsworth, A History of English Law (London, Methuen & Co Ltd, 1938) vol 12, 246; Oxford Dictionary of National Biography (Oxford University Press 2004, online edition January 2008 www.oxforddnb.com/view/article/5533).

126 Paul Matthews Lord Chancellors.46 But from an early date it was clear that, in functional terms, the Lord Keeper had the same authority, powers, rights and duties as the Lord Chancellor.47 There could not be a Lord Chancellor and a Lord Keeper at the same time.48 They were alternatives. So the Lord Keeper would both preside in the Court of Chancery and act as Speaker of the House of Lords. Unlike the Lord Chancellor, the Lord Keeper was usually a commoner,49 even though he sat on the Woolsack (technically outside the precincts of the House of Lords), and was usually granted a peerage at a later stage. Sir Robert Henley was in fact the last person to be appointed Lord Keeper. Normally, and as happened as in Sir Robert’s case, the Lord Keeper went on to become Lord Chancellor. Henley was born in 1708 into a family of well-off landowners, descended from a former master of the Court of King’s Bench who had amassed a fortune and employed Inigo Jones to build a large country house in Hampshire. He attended Westminster School and then Oxford University. He was called to the bar in 1732, was elected a Member of Parliament (for Bath) in 1747, was appointed recorder of Bath in 1751 and Attorney-General in 1756, and knighted. The following year he was appointed Lord Keeper. Sir Robert Henley was appointed Lord Keeper in unusual circumstances. The previous Lord Chancellor, Lord Hardwicke, had resigned in 1756, and it was not clear who would succeed him. As already noted, it is said that Sir Thomas Clarke, the Master of the Rolls, was offered and refused the position. Lord Mansfield, recently appointed Lord Chief Justice of the King’s Bench, was a candidate, but did not want to move.50 Sir John Willes, the Chief Justice of the Common Pleas, was also a candidate. In the meantime the Great Seal was put into commission, that is, Lords Commissioners were appointed to hold the seal and carry out the Lord Chancellor’s functions temporarily.51 One of the Commissioners in fact was Sir John Willes. King George II was ultimately prepared to appoint him Lord Chancellor but not to grant him a peerage, apparently on the grounds of his dissolute and immoral

46 J Baker, An Introduction to English Legal History, 4th edn (London, Butterworths, 2002) 99. 47 W Holdsworth, A History of English Law, 7th edn (London, Methuen & Co Ltd, 1956) vol 1, 410; Stat 5 Eliz 1, c 18 (1562). 48 (1768) 3 Bl Comm 47; pace Cecil, Tipping the Scales (London, Hutchinson, 1964) 82. 49 Eg Sir John Somers, 1693; Sir Nathan Wright, 1700; Sir William Cowper, 1705; Sir Simon Harcourt, 1710. Lord Finch (later Lord Nottingham), 1673, and Lord Guilford, 1683, were exceptions. 50 Had he done so, it is very probable that the result in Burgess v Wheate would have been the opposite of what it in fact was. 51 This does not nowadays happen to the Lord Chancellor’s office, but it is still the position for the office of Lord Treasurer (the Prime Minister is ‘First Lord of the Treasury’) and was the position until 1964 for that of the Lord High Admiral (Churchill, for example, was appointed First Lord of the Admiralty in 1911 and again in 1939).

Burgess v Wheate 127 private life.52 Strictly speaking it was not legally necessary for the Lord Chancellor to be a peer,53 but at this date the person appointed was nearly always granted a peerage if he did not already have one. Sir John Willes, therefore, thinking his claim a strong one, stuck out for a peerage. But the King would not budge, and Willes was passed over. Instead, in 1757 Sir Robert Henley, the Attorney-General, was appointed Lord Keeper, but, in the usual way for a Lord Keeper, without a peerage. George II was prepared to appoint him to the lower status position, but was not prepared to appoint him Lord Chancellor, or a peer, for he had adhered to the Leicester House Party of the King’s late son Frederick, Prince of Wales.54 This meant that he presided over the House of Lords even in its judicial capacity, and apparently it greatly annoyed him not to be able to intervene when his own judgments in the Court of Chancery were under appeal.55 In 1760, however, the King had to grant him a peerage (as Lord Henley) in order for him to preside, as Lord Steward, at the trial of Earl Ferrers by his peers for murder. After the death of George II later that year, his successor and grandson George III immediately promoted Henley to Lord Chancellor, and in 1764 made him Earl of Northington. He resigned as Lord Chancellor in 1766, and was appointed Lord President of the Council, until ill-health compelled retirement in 1767. He died in 1772, aged about 64.56

(4) Why Three Judges? Having discussed the judges involved, an important procedural question arises. Why were there three of them involved in this case? Unlike in the courts of common law, where the four judges in each court usually sat simultaneously, in the Court of Chancery, as is well known, the rule was that a single judge sat to try cases. This single judge was originally the Lord Chancellor or the Lord Keeper, as the case might be.57 Later, as already noted, the Master of the Rolls could deputise for either, subject to an appeal by way of rehearing before the holder of the Great Seal.58 On other, rare occasions, a single judge might be commissioned to sit for the Lord

52

See Holdsworth (n 47) vol 12, 133. See eg R Megarry, A New Miscellany at Law (Oxford, Hart Publishing, 2005) 1–3. 54 See Holdsworth (n 47) vol 12, 298–99. 55 EB Sugden, A Treatise of the Law of Property as Administered by the House of Lords (London, S Sweet, 1849) 38; A Lincoln and R McEwen (eds), Lord Eldon’s Anecdote Book (London, Stevens, 1960) 154. 56 Holdsworth (n 47). 57 3 Co Inst 84. 58 3 Bl Comm 40; J Newland, The Practice of the High Court of Chancery (London, J Butterworth, 1813) ch IX, s II, 186–91. 53

128 Paul Matthews Chancellor.59 The only exception to the rule of the single Chancery judge occurred when the Great Seal was in commission. Then there would usually be three Commissioners sitting together. But when Burgess v Wheate came to be argued before the Court of Chancery in December 1757, the Great Seal was no longer in commission. It had last been in commission some months earlier, from the resignation of Lord Hardwicke in November 1756 until the appointment of Henley as Lord Keeper in July 1757. Lord Keeper Henley was the obvious person to sit and to decide the cause, just as Lord Hardwicke LC had originally sat to hear it when it came on in 1741 but was ultimately adjourned. It was an important matter for the Court of Chancery, raising questions about the Crown’s rights to land, and the Lord Keeper was the senior judge of the court. It is true that Sir Thomas Clarke could have decided the case as Master of the Rolls, as deputy for the Lord Keeper. He did this all the time in the absence of the Lord Keeper. The only problem is that on this occasion the Lord Keeper was present and sitting as well. And it was clear that the presence of the senior judge excluded the jurisdiction of the junior. But whatever the position with the Chancery judges, why should the Lord Chief Justice of the Court of King’s Bench have been taking part? What authority did he have in the Court of Chancery? The reports of the case do not assign any explicit functions to the three judges. This may be because—as mentioned later—the reports are not contemporaneous and the reporters were not present. They simply give the judges’ opinions one after the other, the Master of the Rolls first, the Lord Chief Justice second, and the Lord Keeper third. Modern judges persist in treating the three judges as being equal members of the court and as having rendered three separate judgments, which by a majority of two to one resulted in judgment being given for the defendant Wheate.60 But there is an alternative view. There is a clue in the language used by two of the judges. First of all, Sir Thomas Clarke refers at the beginning of his opinion to the fact that the Court of King’s Bench had certified its opinion on a stated case ‘to the Lord Keeper, and he seems inclined to confirm that certificate; and that cause is now set down for further directions’.61 He says it again a little further into his opinion, after having stated the facts: ‘This claim [ie of Burgess as heir on the mother’s side] I see no ground for, considering the certificate of the judges, which Lord Keeper proposes to confirm.’62 This suggests that the Master of the Rolls is not making the decision, and that the main role in what is about to happen is reserved for

59 See eg Shapland v Smith (1780) 1 Bro CC 75, 28 ER 994, where Eyre B sat with two masters for the Lord Chancellor. 60 See eg Romer LJ in Re Wells [1933] Ch 29, 57. 61 (1759) 1 Wm Bl 123, 96 ER 67. 62 (1759) 1 Wm Bl 128, 96 ER 70; 1 Eden 177, 186; 28 ER 652, 656.

Burgess v Wheate 129 the Lord Keeper. Then, at the very end of his (lengthy and detailed) opinion, the Master of the Rolls says this: ‘These are my sentiments, my lord, and, as such, they are submitted to your lordship’s judgment.’63 This is a telling phrase. One of a bench of three judges who are not giving a joint judgment would give his own, or simply agree with one or more of the others. But, instead of giving his own judgment as an independent judge, or just agreeing, he seems to be giving advice to the judge (the Lord Keeper) who is going to give ‘judgment’. There is nothing similar in the opinion of Lord Mansfield. The reader may of course note in passing that he never refers to his ‘judgment’, only to his ‘opinion’. However, this is also the case for the Lord Keeper, and so little or nothing can be read into it. Finally, the Lord Keeper at the outset of his own opinion says this:64 There is one objection and two claims upon which I am now to deliver my opinion. I agree entirely with the Lord Chief Justice, and his Honour, as to the objection. As to the other points, I think myself very much obliged to the Lord Chief Justice, and his Honour, and return them many thanks for their learned assistance; and their free and unreserved communication of their sentiments to me, during all the time that this matter has been under consideration.

A presiding judge sitting en banc did not thank the other judges for their assistance, or for giving their opinions to him. This is the language of a judge who has to give the judgment, and has sought advice before doing so. Now, it is clear that at that time the Court of Chancery could send a case off to law, for the Court of King’s Bench to consider and determine an issue of fact or a point of law.65 Indeed, that had already happened in this case. But in addition it appears from the early seventeenth-century Coke’s Institutes that ‘in cases of weight or difficulty’ the Lord Chancellor or Lord Keeper ‘doth assist himself with some of the judges of the realm, and no greater objection can be taken hereunto then in case of the lord steward of England being the sole judge in trial of the nobility, who also is assisted with some of the judges’.66 Lord Nottingham made exactly the same point in his Prolegomena of Chancery and Equity.67

63

(1759) 1 Wm Bl 153, 96 ER 80; 1 Eden 214, 28 ER 667. (1759) 1 Eden 239, 28 ER 675. 65 3 Bl Comm 452–53. This power was abolished by the Court of Chancery Procedure Act 1852, 15 & 16 Vict c 86, s 61. 66 3 Co Inst 84. The Institutes were published between 1628 and 1644. Coke died in 1634. 67 DEC Yale (ed), Lord Nottingham’s ‘Manual of Chancery Practice’ and ‘Prolegomena of Chancery and Equity’ (Cambridge: CUP, 1965) ch II, s 10. The Prolegomena was probably written in the early years of Lord Nottingham’s Lord Keepership, from 1673. 64

130 Paul Matthews There are a number of cases in the books where this happened.68 The Lord Chancellor or Lord Keeper was assisted by the attendance for the argument of the senior common law judges. They gave their opinions first, and then the Lord Chancellor gave judgment. Often—as in Burgess v Wheate—he thanked them for that assistance.69 Even if the other judges disagreed with the Lord Chancellor, he could still make the order as he saw fit.70 The difference between this procedure and the procedure for obtaining a certificate from the common law judges arose in a case in 1722,71 where counsel sought to challenge the reasoning in the certificate of the common law judges. Lord Macclesfield LC said72 that he thought he must be concluded by the opinion of the judges. He admitted, that in case he had sent for the Judges to have assisted him in the hearing of the cause, the reason of the Judges had not convinced him, he must have acted according to his own understanding, for it was to be his decree, not theirs (and this Lord Nottingham did in the case of The Duke of Norfolk), but that here he was not at that liberty; having not heard the arguments at law before the Judges, nor been acquainted with the grounds on which their opinion was founded; and that he looked upon the Judges here in the nature of referees.

The likely explanation, therefore, for the fact that three judges were present in the Court of Chancery in Burgess v Wheate is that the Lord Keeper was alone going to make—and did make—the decision, but that he wished before doing so to have the advice of two other judges, one of common law, the other of equity. This was a difficult case, involving the Crown’s rights, in circumstances where the Lord Keeper, an erstwhile supporter of the late Prince of Wales and therefore a political opponent of the Establishment, did not feel totally secure vis-à-vis the King and the Government, at a time of some political instability. At the time of the oral arguments, the Lord Keeper had been in post for only about five months. Nothing could be more natural than wishing to try to spread the responsibility, by taking the opinion of other judges. And the two judges concerned were well known to him, having been his contemporaries at Westminster School. This would also explain why the Master of the Rolls, the junior judge, gave his opinion first, and the Lord Keeper—on any view the presiding judge—gave his opinion last. The usual practice in the common law courts at this period, with a plurality of judges, in cases where there were separate 68 See eg Earl of Suffolk v Greenvill (1641) 3 Ch Rep 89, 21 ER 738; Cook v Fountain (1676) 3 Sw 585, 36 ER 984 (discussed by Mike Macnair in ch 2 of this book); Duke of Norfolk v Howard (1681) 2 Ch Cas 14, 22 ER 939, (1683) 1 Vern 163, 23 ER 388; Bertie v Falkland (1697) 3 Ch Cas 129, 1 Salk 231, 91 ER 205; Ryall v Rowles (1750) 1 Ves Snr 348, 27 ER 1074. 69 See eg Ryall (n 68). 70 See eg Duke of Norfolk (n 68). 71 Gore v Gore (1722) 10 Mod 501, 88 ER 827. 72 Ibid, 502, 828.

Burgess v Wheate 131 judgments delivered, was for the Chief Justice (or Chief Baron) to give judgment first, followed by the others in order of seniority. That did not happen here. But where, for example, the common law judges were called to advise the House of Lords, the judges gave their opinions before the members of the House gave theirs. That was the model for Burgess v Wheate.

G. LAW REPORTS

Before we proceed to examine the arguments and the decision, we should say a word about the available law reports. The case of Burgess v Wheate is reported in a number of sources. But the judgments themselves are found in both Sir William Blackstone’s reports, published posthumously in 1780 or 1781,73 and in those by Robert Eden, who was Lord Keeper Henley’s grandson, published in 1818.74 Neither source is therefore contemporaneous, in the sense that practitioners would have had easy access to them shortly after the decision. Indeed, Eden was not born for some 30 years after the decision. So Burgess v Wheate is one of those ghostly cases that for more than 20 years must have floated about Lincoln’s Inn in manuscript note form, in the way that, in the twentieth century before the use of computers became widespread, important but unreported Chancery cases did. Blackstone’s reports are generally of (common law) cases in the Court of King’s Bench. Presumably, therefore, the reason for the inclusion of Burgess v Wheate was the participation of Lord Mansfield. But it is not clear how Blackstone would have been able to report the case in any conventional sense. Although he had been called to the bar in 1746, and had started practice in London, his career there was slow to take off, and in 1753 he had decided ‘no longer to attend the Courts at Westminster’. Instead he devoted himself to Oxford affairs, where he was a fellow of All Souls College. Amongst other things, he gave his new course of lectures on English law, became an assessor (chief legal officer) of the vice-chancellor’s court and the first Vinerian Professor of English Law, and remodelled the board of delegates who controlled the university press. He resumed his London practice only in the latter part of 1759, after Burgess v Wheate had been decided.75 The form of his report, in effect just the three judicial opinions,

73 See JS Waterman, ‘Mansfield and Blackstone’s Commentaries’ (1934) 1 University of Chicago Law Review 549, 555. The reports were revised and reprinted in 1828, and this is the version which appears in the English Reports. 74 In 1830 Robert Eden became the 2nd Lord Henley on the death of his father, a diplomat who had married Lord Northington’s daughter and been ennobled in 1799, taking as his title the patronymic of his father-in-law. Robert Eden, himself a barrister, became a Master in Chancery from 1826 to 1840. He married the sister of Sir Robert Peel, and died in 1841, suffering from insanity. 75 See W Prest, William Blackstone (Oxford, OUP, 2008) chs 7, 8.

132 Paul Matthews printed seriatim without facts or arguments reported, suggests that he was not present at the hearing but merely received and included in his papers the texts of those opinions. His biographer, Wilfrid Prest, says that76 although his published reports include a lengthy account of judgments delivered in Chancery on 24 January 1759,77 this was evidently compiled by the veteran Tory lawyer Nicholas Fazakerly, and provided by Bamber Gasgoigne, another Lincoln’s Inn barrister.

Eden’s reports were of the decisions on the Court of Chancery during the time of Lord Northington, both as Lord Keeper and Lord Chancellor. But Eden was not born until 1789, and again, therefore, Eden was not present in court during the hearing of Burgess v Wheate. The texts of the judicial opinions of the Master of the Rolls and Lord Mansfield are virtually identical in both series of reports.78 Either Eden just copied what was already in Blackstone, or they both copied the same manuscript source. The opinion of the Lord Keeper, however, is slightly longer and more elaborate in Eden, though not significantly different. This difference may be due to the fact that Eden had access to his grandfather’s manuscripts, supplemented by references to the manuscripts of other lawyers. Moreover, the facts of the case and the arguments of counsel are not stated in Blackstone, but they are, albeit briefly, in Eden.

H. THE ARGUMENTS

Let us now turn to the arguments put forward. In point of procedure, time and logic, the first argument to be considered was that of Richard Burgess, the heir on Elizabeth’s mother’s side. On his behalf, Serjeant Hewitt and Mr Caldecot appear to have accepted that normally such an heir could not take when the land had descended to Elizabeth on her father’s side. The common law rule was that descent to land was to be traced from the last purchaser with seisin. For this purpose ‘purchaser’ included a person who took a conveyance even for no consideration (such as a donee, whether holding beneficially or as a trustee). It did not include a person who had inherited the land, as Elizabeth had. The common law rule was explicitly confirmed by the certificate of the judges to whom the case had been sent at an earlier stage. Equity followed the law in this respect, so that inheritance of trust interests would be governed by the same restrictive rule. Hence it

76

Ibid, 194. The date of the delivery of judgment in Burgess v Wheate. 78 Though Eden omits (at 186, 28 ER 656) a statement of the case in the opinion of the Master of the Rolls, which Blackstone sets out in full (at 124–28, 96 ER 68–69). 77

Burgess v Wheate 133 was not possible for Elizabeth’s heir on her mother’s side to take, because he was not an heir at all to Elizabeth’s ancestor on her father’s side. But Burgess by his counsel said that the present case was different. First, it was said that the deed of 1718 created a use for Elizabeth, which could descend to him as the heir on her mother’s side. This did not in terms conflict with the certificate of the common law judges, who had not been asked to consider the case of a use, much less that of a trust. Secondly, in any event, Elizabeth was to be considered as if she had taken a new legal estate by purchase from the trustees, and hence, in default of heirs on the father’s side, he as the heir on the mother’s side could take. The reason for so considering her as having taken a fresh estate was that Elizabeth, being in effect the sole beneficiary of the trust, could have called for a conveyance from the trustees, and if she had done this the trustees would have been obliged to make it to her. Hence, ran the argument, the maxim applied that equity regarded as done that which ought to be done, and in equity the position was as if the conveyance had in fact been made. If they had made the conveyance, Elizabeth would have been a purchaser, and the heir on her mother’s side could take in default of heirs on the father’s side. There was also a subsidiary point, which—to judge from its absence in the summary of the argument—Burgess’s counsel evidently did not run too hard because it cut across the main argument. This was that the trustees of the mortgaged mill had covenanted to convey it to Elizabeth in fee, but had not done so by the time of her death. Even if the main lands were not to be treated as having been conveyed to Elizabeth (because there was no covenant to do so), the mill at least should be. In relation to the information filed on behalf of the Crown, there appeared the Attorney-General,79 the Solicitor-General80 and three other counsel.81 Their case assumed that no other heir could take. There were a number of technical procedural points, but, in broad terms, their argument was that the equitable estate in the lands enjoyed by Elizabeth Harding escheated to the Crown on her death intestate and without heirs. Although the simplest argument to state, it engendered the most debate, and the greater part of each of the three judges’ opinions was devoted to dealing with it. Counsel for the personal and real representatives of the surviving trustee82 made no positive case for beneficial ownership of the land. They said that the deed of 1718 made no difference to the maternal heir’s claim, and that 79 Sir Charles Pratt, later Chief Justice of the Court of Common Pleas and thereafter (as Earl Camden) Lord Chancellor. He and the Solicitor-General were professional rivals throughout their careers. 80 Charles Yorke, second son of Lord Hardwicke, who later himself was appointed Lord Chancellor in succession to Lord Camden, and created Lord Morden, but committed suicide before taking up office. 81 Messrs Sewell, Hoskins and Coxe. 82 Messrs Willes, Perrot, Wilbraham and Aston.

134 Paul Matthews the Crown’s claim would materially alter the existing law of escheat. In essence, they simply rested on the twin facts of being owners at law and of being in possession of the land concerned, and said that showing that the trustee had no beneficial right was not sufficient to take the land away from them. The heir or the Crown had to show a better right, and this neither of them could do.

I. THE JUDGES’ OPINIONS

(1) The Claim of the Heir on the Mother’s Side The three judges were unanimous in their view on the claim by the heir on the mother’s side. It failed in large part, and succeeded only as to the mill. The problem was that the effect of the law83 was that an heir on the mother’s side could only succeed to an estate in tracing descent from a ‘purchaser’, and Elizabeth at first sight was not (at common law) a purchaser of any of the land. She had inherited the land from her paternal uncle, John Greening. Elizabeth’s maternal heir was not an heir of John Greening. However, he argued that the deed of 1718 conveying the fee simple reversion to the trustees made all the difference, and turned Elizabeth into a purchaser, from whom he could trace descent. Lord Mansfield84 and the Lord Keeper85 looked at the question in more or less the same way. First they considered what would have been the position if the conveyance to the trustees in 1718 had been to the use of Elizabeth. They reasoned that a use, whether express or resulting, for Elizabeth could not have descended to the maternal heir because it followed the nature of the land,86 and the land itself (as certified by the common law judges) could not have so descended. Then they held that a trust was essentially the same as a use, and so its treatment for inheritance could not be different. Hence the deed of 1718 did not turn Elizabeth into a purchaser. A small difference between them was that Lord Mansfield took the view that if the deed of 1718 (contrary to his dissenting view on the main point for the Crown) barred the escheat to the Crown, it gave the right to the maternal heir. But

83 At this date descent was traced from the last ‘purchaser’ who had seisin, though in practice this was the last person who took possession without having inherited. The rules of descent were changed by the Inheritance Act 1833 (3 & 4 Will IV, c 106), and also by the Law of Property Amendment Act 1859 (22 & 23 Vict c 35). 84 1 Eden 215, 28 ER 667. 85 1 Eden 257, 28 ER 682. 86 Relying on Abbot v Burton (1708) 2 Salk 590, 91 ER 494; Godbold v Freestone (1694) 3 Lev 406, 83 ER 753; Martin v Strachan (1742) 2 Stra 1179, 93 ER 1111; Rolle, Abr, vol 2, fo 780.

Burgess v Wheate 135 the Lord Keeper could not see how this could be.87 The deed of 1718 made no difference in the trust. In his opinion the Master of the Rolls went into more detail on the maternal heir’s claim, dealing with a specific argument raised by his counsel. The heir had additionally argued that whether or not the deed of 1718 turned Elizabeth into a purchaser for the purposes of the common law, she was at least to be treated as a purchaser in equity. This was on the basis that ‘equity regards as done that which ought to be done’ and that (after the death of her husband) she was absolutely entitled to the legal estate which they held and could have called for a conveyance of it from the trustees.88 But, as Sir Thomas Clarke MR said,89 nothing is looked on in equity as done, but what ought to have been done, not what might have been done. Nor will equity consider things in that light in favour of every body; but only of those who had a right to pray it might be done. The rule is, that it shall be either between the parties who stipulate what is to be done, or those who stand in their place. Here Mrs Harding never prayed a conveyance, and one cannot tell whether she ever would;90 and the maternal heir is not to be considered as a privy in blood, but a mere stranger.91

So this specific argument raised two separate problems for the maternal heir. First, there was no contract or covenant to transfer the fee; it was simply that Elizabeth had the right to ask for it (but never did). Secondly, even if there were (or were to be treated as being) a contract to transfer, the maternal heir, not being a party to the contract or a child of the marriage who (in the case of a covenant contained in a marriage settlement) could be treated as having given ‘marriage consideration’, was a mere volunteer and not entitled to enforce the supposed contract.92 As Sir Thomas Clarke went on to say,93 these points were reinforced by the situation regarding the mill. Unlike the greater part of the land, there was a contract or covenant by the mortgagee’s trustees to transfer the mill to Elizabeth, and the consideration had been fully paid. But the conveyance at law was never made. So in that case equity did treat the position as if the conveyance had been made. Hence Elizabeth was to that extent to be regarded in equity as a ‘purchaser’, and therefore the maternal heir could, in default of paternal heirs, inherit her (equitable) interest in the mill. Lord

87

1 Eden 257–58, 28 ER 682. This is known today as the rule in Saunders v Vautier (1841) 4 Beav 115, 49 ER 282, Cr & Ph 240, 41 ER 482, but it existed long before that case: see eg Lord Pawlet’s case (1685) 2 Vent 366, 86 ER 489; Love v L’Estrange (1727) 5 Bro PC 59, 2 ER 532. 89 1 Eden 186–87, 28 ER 656. 90 She had no need to, having her own legal life estate under the common law settlement of 1695 and her power of appointment under the settlement of 1718. 91 1 Eden 186–87, 28 ER 656. 92 Cf Pullan v Koe [ 1913] 1 Ch 9 (children within the marriage consideration). 93 1 Eden 187, 28 ER 656. 88

136 Paul Matthews Mansfield did not mention the mill in his opinion, but Lord Keeper Henley did, as shortly as possible: ‘… and therefore [the maternal heir’s] bill must be dismissed, except as to the mill, &c.’94

(2) The Claim of the Crown The claim of the Crown was to an escheat of the lands in respect of which Elizabeth had had an equitable interest or estate at the time of her death without heirs entitled to inherit, and notwithstanding that there was then a trustee who owned the legal title and constituted the feudal tenant. It was at once more complex and simpler than the claim of the maternal heir. It was more complex because it depended on an analysis of the relationship between the feudal lord and his tenant, and an extension of that relationship to the person who in equity was entitled to enjoy the property. It was simpler because there was only a single strand to the argument. Should the position with respect to tenants of the legal estate apply also to the persons entitled in equity? The three judges were split on this question. The two Chancery judges, the Master of the Rolls and the Lord Keeper, said ‘No’. The single common law judge, the Lord Chief Justice, said ‘Yes’. (a) The Master of the Rolls Sir Thomas Clarke MR called it ‘the great Question’. He approached it in three stages: a) in relation to legal estates before the invention of uses; b) in relation to uses before the Statute of Uses; c) in relation to trusts since the Statute of Uses. As to the first stage, he held that an escheat was in its nature feudal, being a right of the lord to have the land back from the tenant in certain circumstances. This was not where the estate granted expired naturally (when a reverter occurred) but when there was an accidental determination of it. Over time changes took place in the feudal relationship, such as permitting the tenant to alienate his estate, first only with the lord’s permission and then without, and then also to encumber the land, and to subject it to dower. These changes made escheat for want of heirs both less likely and less valuable to the lord. As to the second stage, he held that the cestui que use was not the tenant, and the legal estate in the land was not to be subject to encumbrances created by him, and nor to his debts. Neither was it subject to escheat on

94

1 Eden 257, 28 ER 682 (emphasis added).

Burgess v Wheate 137 the death of the cestui que use without heirs. Statute intervened to remedy some of the inconveniences of the distinction between the legal estate and the use, such as enabling the creditors of the cestui to execute against the land and the lord to have the fruits of tenure, such as wardship and heriots, against the cestui. But there was no statutory extension of the lord’s right of escheat. As to the third stage, he held that a trust was simply the same idea as a use before the statute: ‘[T]here was one use which the statute did execute, and another which it did not; so trusts succeeded uses. Aliusque et item nascitur. And as a use could not be on a use, it took the name of a trust …’95 The Master of the Rolls referred to two precedents which he regarded as in point. In relation to one, the case of a use before the Statute of Uses, and referred to only as ‘5 Ed 4, pl 18, fo 7b’, he commented:96 If the lord is at law entitled to escheat on death without heirs, or attainder of feoffee to uses, and not on the death, &c, of cestuy qui use, it strengthens the authority of the case; that if it had been determined otherwise, it would have given him a double chance for his escheat.

According to the judge, each of Brooke and Bacon commented favourably on this case in his Abridgement, though they differed as to whether the feoffee to uses could keep the property for himself (Brooke) or could not, ie had to hold it for pios usus or for the feoffor (Bacon).97 The other case was Sir George Sands’ case,98 a case of escheat for felony, involving a trust after the Statute of Uses. Ralph acquired a 99-year lease of certain lands in the manor of East Greenwich in his own name, and later bought the landlord’s interest (ie the fee simple reversion) in the same lands in the name of his son-in-law George, as trustee for himself. It is important to notice that the fee simple was held directly from the Crown,99 and not from an intermediate lord. By his will, Ralph directed that George and another person (whom he appointed his executor) convey a particular part of the estate to each of the two sons then living of George, his grandchildren, Freeman and George Junior, and the remainder to all of George’s sons by his wife Jane (Ralph’s daughter) who should be living at George’s death.

95

1 Eden 194, 28 ER 659. 1 Eden 198, 28 ER 660. 97 The judge gives no sufficient references in his judgment to enable the identification of the passages in the Abridgments of Brooke and Bacon (or even the editions) which he has in mind. 98 (1676) Hard 405, 145 ER 520; (1679) Hard 488, 145 ER 561; (1667) 1 Sid 403, 82 ER 1182; 2 Freem 129; (1669) 3 Ch Rep 33, 21 ER 720; (1670) Nelson 130, 21 ER 808. The first and third of these reports are very short. It is also summarised in Sir Matthew Hale’s posthumous Historia Placitorum Coronae: History of the Pleas of the Crown (London, Nutt and Gosling, 1736) vol 1, 249–51. 99 See Hard 405, 145 ER 520; Hale (n 98) 1, 250. 96

138 Paul Matthews After Ralph’s death in 1633, the executor renounced, and George the trustee obtained a grant of administration of the estate, thus becoming legal owner of the long lease. However, George never executed any conveyance to any of his sons. In 1635 Freeman died without issue. After Freeman’s death, George had had another son, also (confusingly) called Freeman. In 1655 George Junior was killed by Freeman the second, who being his brother was also his heir at law.100 Freeman was convicted of murder, sentenced to death and executed. This left George without any sons but still holding the legal estates (the lease and the fee simple). He also took out administration to the estate of George Junior. The Attorney-General brought an action in the Court of Exchequer against George, claiming that the trusts had been attainted by felony. The case was before the court for several years, with judgment being finally given in Easter101 Term 1669. It will be recalled that the Court of Exchequer was the only one of the common law courts to exercise an equity jurisdiction,102 so its judges had to be versed in the doctrines of equity and trusts. Only two judges, Hale CB103 and Turnor B,104 are mentioned in the reports as having decided the case, the other two judges being said to be unavailable.105 Their decision was that the equitable interest in neither the fee simple nor the lease went to the Crown. Unfortunately, even in relation to the fee simple, the language of the reports is largely of forfeiture (as of for treason) rather than escheat (for felony),106 although since the fee simple was held of the Crown any escheat would also be to the Crown, and the language makes clear that the word ‘forfeiture’ was being used in a 100 A father could not be the heir at law to his son (inheritance could go to descendants or to collaterals, but not to ascendants) until the Inheritance Act 1833. 101 The reports that give a date say that judgment was given in Easter Term, though Hale’s History of the Pleas of the Crown (n 100) vol 1, 249, says it was Michaelmas Term (in which case it must have been very early on, as Atkyns B died on 9 October 1669). 102 It was abolished in 1841. 103 Sir Matthew Hale was appointed Chief Baron of the Court of Exchequer in 1660, and in 1671 was appointed Chief Justice of the Court of King’s Bench. 104 Sir Christopher Turnor was appointed a Baron of the Court of Exchequer in 1660, and died in 1675. In Burgess v Wheate the Master of the Rolls calls him Trevor, but this must be a slip. Turnor should not be confused with Sir Edward Turnor, appointed Chief Baron in 1671, who appears to have been no relation. 105 Rainsford B had been transferred to the Court of King’s Bench in February 1669, and his successor, Littleton B, was not appointed until February 1670. In 1669 Atkyns B was then over 80 years old (the reports say he was ‘Disabled by Age’), and died in October that year, being replaced by Wyndham B only in June 1670. In addition to great age, Atkyns B may have been reluctant to take an active part in the case as his son Robert was counsel for the defendant. In Burgess v Wheate the Master of the Rolls said, however (at 1 Eden 200–201, 28 ER 661): ‘It is said that only two judges gave opinions; but no one can suppose that there were but two judges during four years in that court. If they differed, Hale would never have given his opinion without mentioning it. In his Pleas of the Crown (Vol 1 p 249), he says it was una voce resolved, so no doubt but all the judges of the court concurred.’ 106 Though Sir Matthew Hale’s own History of the Pleas of the Crown, vol 1, 250, correctly says ‘yet the trust escheted not to the crown, but Sir George held it discharged of the trust’.

Burgess v Wheate 139 loose sense: ‘And if the inheritance be forfeited for felony, it must be to the lord by escheat, which cannot be, because he hath cestui que estate for his tenant …’107 As to the fee simple, therefore, there was still a tenant (George) and so there could be no escheat. This raised the question: If the King did not take the equitable interest in the fee simple estate in the land then who did? The answer was:108 The feoffee Sir George Sands shall now hold the lands discharged of it, as in case of the grantee of a rent in fee simple, who dies without heirs, the tenant of the land shall hold it discharged of the rent because there is no other that has any title to it …

As to the lease, that was a chattel, and therefore would be forfeit to the Crown on conviction for felony.109 But this lease was never in the person attainted. Instead it was in the lessee (Ralph), or after his death in his personal representative (George). Nor was it ever intended to go to Freeman the second. And George had obtained it en autre droit (ie as personal representative) compared with the fee simple, so that it did not merge with the latter estate. As a result the Crown could not claim it, even though Freeman the second might be George Junior’s heir, because being his killer he could not inherit from him.110 Sir Thomas Clarke next considered some criticisms of Sir George Sands’ case, all of which he dismissed. The most important was the argument based on the converse situation, ie where the legal tenant died without heirs but the legal estate had been subject to a trust for third parties. This argument was that111 Hale supposes the land will, on the trustee’s attainder, or death sans heir, escheat to the crown, discharged of the trust; whereas in equity it will be liable to the trust. And then it is said, if the lord takes the estate subject to the trust, he ought to have in return a reciprocal benefit on the death of cestuy que trust without heir. I think this position and inference not warranted by any judicial determination.

He supports this view by considering the authorities in some detail. His conclusion was that, whereas the Crown took a forfeiture subject to equitable

107

2 Freem 131–32. Hard 497, 145 ER 567; cf Nelson 133, 21 ER 809; 3 Ch Rep 36, 21 ER 722 (to similar effect). 109 A rule abolished by the Felony Act 1870, s 1. 110 A rule which survived the Felony Act 1870 (see Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147), and the effect of which was mitigated by the Forfeiture Act 1982: see eg P Matthews, ‘Property, pensions and double punishment: the Forfeiture Act 1982’ [1983] Journal of Social Welfare Law 141. 111 1 Eden 201, 28 ER 661. 108

140 Paul Matthews claims, the lord took an escheat free from them.112 It seems that this was because a forfeiture was a transmission of the estate to the Crown, but the escheat came in as a matter of tenure; the estate of the tenant had simply come to an end, and the trust could not be greater than the legal estate. The trust was of a flawed asset, so to speak. But even if it had been true that the lord had taken the escheat subject to any trust, the Master of the Rolls saw no reason for the lord therefore to have ‘a reciprocal equity’113 on the death of the beneficiary without heirs, as opposed to the case where the tenant was attainted for felony. Moreover, he saw equitable escheat as giving the lord a double chance at common law, ie both on the death of the beneficiary without heirs and also on the death of the trustee, unless the court of equity would intervene, and he considered that cases of escheat should not be brought into equity. Clarke also considered and rejected the argument that the Crown (as lord) was within the trusts of the deed of 1718 as Elizabeth’s heir or appointee. This would make the lord’s claim one through the tenant (‘in the per’) rather than superior to him (‘in the post’). His conclusion was:114 I am for following the analogy of the legal escheat as well as of the legal descent, and for pursuing legal principles; because the law gives the escheat only for want of a tenant, equity must do the same. If it did not, it would be making law, instead of administering equity.

If the Crown and the maternal heir both failed, what was the position of the trustee (here, his real representatives, he having died)? Unlike Hale CB in Sir George Sands’ case, Clarke was more circumspect:115 I give no opinion of the right of the trustee. I give my opinion that neither the maternal heir nor the crown has any right. If the trustee came into a court of equity,116 I might be of opinion that he had no right … but have no occasion at present to enter into the merits of the defendant’s defence … If plaintiff has no right, defendant may hold till a better right appears; the possibility of that happening, shows the impropriety of entering into consideration of the right of the trustee. I am clearly of opinion that the invidiousness imputed to his defence, ought not to give the plaintiff a better right.

112 Lord Macclesfield had taken the same view, obiter, in Peachy v Duke of Somerset (1721) 1 Stra 447, 454; 93 ER 626, 630. 113 1 Eden 203–04, 28 ER 662. 114 1 Eden 212, 82 ER 666. 115 1 Eden 212–13, 82 ER 666. 116 It will be recalled that the surviving trustee had got into possession after Elizabeth’s death, and that it was the maternal heir and the Crown that were seeking the assistance of the Court of Chancery, rather than the trustee.

Burgess v Wheate 141 (b) The Lord Chief Justice Lord Mansfield at the outset put the trustee’s position in the litigation as follows:117 The trustee objects to the heir’s claim, because he says the deed of 1718 has made no alteration as to the beneficial estate, of which Mrs Harding died seised ex parte paterna, and opposes the king’s right, because it has changed the right of escheat, both at law and in equity; and upon a general objection, that the plaintiffs must recover upon their own strength to entitle them to relief: for it is not enough for the Plaintiffs to shew that the defendant has no right, but that they have a better, upon equitable grounds; and, in the case of a trust, must shew a better right within the terms of the creation of the trusts.

Again, therefore, it was clear that the trustee did not claim rights but asked only that the claimants show a better right than the possessor. The Lord Chief Justice divided up his opinion into four parts as follows:118 First, the nature of trusts of land, and the rules which govern them. Secondly, the nature of that right, by which the king claims in the present case. Thirdly, whether, if the trustee had died sans heir, the king must not, in that case, have taken the land in a court of equity, subject to the trust. Fourthly, I shall apply the result of this inquiry as between the king and the trustee, to the particular point immediately in judgment.

As to the first part, Lord Mansfield began by accepting that a use and a trust were essentially ‘two names for the same thing’.119 However, he considered that the practice of the Court of Chancery had changed, so that uses relating to land before the Statute of Uses were purely choses in action, ie personal, whereas trusts now were real estates. The jurisdiction in respect of uses had been narrow, but that in respect of trusts was wide. The only difference now between trusts and legal estates was ‘the forum where they are adjudged’.120 Thus, ‘the trust is the estate at law in this court [ie the Court of Chancery]’.121 And therefore,122 on clear law and reason, cestuy que trust is actually and absolutely seised of the freehold in consideration of this court; and therefore that the legal consequences of an actual seisin of a freehold, shall, in this court, follow for the benefit of one in the post.

117 118 119 120 121 122

1 Eden Ibid. 1 Eden 1 Eden 1 Eden 1 Eden

216, 82 ER 667. 217, 223, 224, 226,

82 82 82 82

ER ER ER ER

667. 670. 670. 671.

142 Paul Matthews As a result, for Lord Mansfield, the reasons why escheat did not apply to uses were not relevant to the question whether it should apply to trusts. Secondly, he considered the nature of the right of escheat. For him, escheat was originally a strict reversion in the sense that death without an heir determined the estate granted. But once the tenant could alienate without the lord’s consent, the nature of the right changed to ‘a sort of caducary123 succession’.124 And ‘therefore the lord by escheat is, in Co Litt 215 b, with accuracy considered as assign in law’.125 It was like the succession to personal estate—‘the king is last heir where no kin’.126 Thirdly, Lord Mansfield turned to the question whether on the death of the trustee without heirs the Crown took the land subject to the trust. His view was that ‘land escheated should be subject to the trust’, as ‘most consistent with the lord’s right’.127 Fourthly, the Lord Chief Justice applied these principles to the facts of the case. If the trust were the land, the lord should have an escheat. If the lord took an escheat as assignee in law then he was within the grant in the deed of 1718, being Elizabeth’s ‘assignee’. His conclusion was that128 [u]pon the whole, I think the king is entitled to a decree; but if I am wrong in the principles I go upon, or (as is possible) in the application of them, if the deed of 1718 has conveyed a new fee, and changed the line of heirs, upon which the escheat was to arise in this court as well as at law; then as between the heir ex parte materna and the trustee, I think the heir is entitled to a preference and a decree.

So Lord Mansfield would have found for the Crown. If not, he would have found for the maternal heir. (c) The Lord Keeper But Lord Mansfield’s views did not prevail. The Lord Keeper’s views on this part of the case were similar to those of the Master of the Rolls. Whether he was giving the sole judgment, with the advice of the other two judges, or was giving only one of three judgments, the result is the same. Sir Robert Henley agreed that escheat arose under the rules of tenure, and that as long as there was a tenant seised of the land there could be no escheat. It made no difference if the tenant had granted a use (before the Statute of Uses) to a cestui que use who then died without heirs. The Lord Keeper explained

123 124 125 126 127 128

Simply meaning by lapse or forfeiture. 1 Eden 228, 82 ER 672. Ibid. 1 Eden 229, 82 ER 672. Ibid. 1 Eden 237, 82 ER 675.

Burgess v Wheate 143 this as the result of the termination of the use granted, and therefore equity would not intervene and issue a subpoena directed to the feoffee to uses. Next he dismissed the argument that the Crown was an ‘assign’ within the deed of 1718. But Henley said this was meant for express assigns, and did not cover the lord on the failure of Elizabeth’s heirs. Thirdly, he dealt with the argument based on reciprocity. He expressed it as129 that the lord must have the escheat, either on the death of cestuy que trust without heirs, or on the death of the trustee without heirs, discharged of the trust; but if he cannot have the escheat in equity, while the trustee stands tenant, it would be monstrous and absurd that the cestuy que trust should be prejudiced in putting the estate in trust for the convenience of his family.

This argument too failed. There was nothing ‘absurd or injurious’ in it. The law was known, and ‘the creator of the trust determines to take the convenience of a trust, with its inconveniencies’.130 And the authorities were clear that where the tenant was seised to a use before the Statute of Uses, the death of the cestui que use without heirs did not give rise to an escheat. So, unless trusts could be distinguished from uses, that was that. Henley then discussed alleged differences between them, and concluded that he could not distinguish them to any extent relevant to this case:131 It appearing therefore to me certain, that at law there can be no escheat while there is a tenant de jure, that in equity there was none while trusts were called uses, and that trusts and uses are essentially the same, can I possibly think that I have authority to say, that every lord in England shall lose his legal right of escheat in all cases where any man for his own convenience has put his land in trust. It strikes me that this would be jus dare, not jus dicere.

He then examined Sir George Sands’ case in some detail, and held it rightly decided. In the course of this part of his opinion, he stated his view as to the policy by which the Crown cannot take the interest of the cestui que trust on the latter’s death without heirs:132 But how came the law not to devolve it on the crown quasi ultimus hœres? Because confiscations are repugnant to the genius of a free country, and the law of England seems to have confined them to the single case of a vacant possession (where they do not operate as penal forfeitures), and that not so much for the sake of the crown, as to prevent disturbances of the public peace in society.

It may be that this was an attempt to justify his decision antithetical to the Crown in a way that might find political favour. It is notable, that, like the

129 130 131 132

1 Eden 246, 82 ER 678. Ibid. 1 Eden 251–52, 82 ER 680. 1 Eden 253–54, 82 ER 681.

144 Paul Matthews Master of the Rolls, Henley made no statement as to the right of the trustee. It was all about the inability of the claimants to take the land away from him.

J. THE EFFECT OF THE DECISION

So the decision did not give the trustee or his representatives a beneficial title. It merely held that neither of the claimants was entitled to take the land away from him (except the maternal heir in relation to the mill, where there was a specifically enforceable agreement). Nothing in the decision deals with the converse case, where the maternal heir or the Crown was in possession, and the trustee sought to take the land away by force of the mere legal title. Other decisions thereafter would have to deal with that situation. On the one hand, the court accepted the ‘propertification’ of the equitable rights of the beneficiary. As Lord Mansfield had said, whereas the use had originally been seen as a personal right against the feoffee, the trust was now seen, some 400 years later, as a property right, good against the trustee and many (if not in practice most) third parties. (Where Lord Mansfield went wrong was to think that the change in attitude happened much later than it did. In particular, it did not happen at the time of the change from uses to trusts.) On the other hand, the court was refusing to extend the common law right of the lord to escheat to equitable interests arising under trusts. That right was a part of the doctrine of tenure, and the doctrine of tenure and the need for feudal services could be satisfied with the trustee as tenant at common law. If the common law courts would not look beyond the (common law) tenant/trustee, there was no need for courts of equity to extend the effect of the common law feudal system any further than that. Burgess v Wheate is a pivotal case, looking back at that old system and treating it as a thing of the past, whilst at the same time emphasising that the trust is an institution based on the conscience of the trustee being affected. If the conscience is not affected then in effect the trustee is free to deal with the property as he wishes. The case was actually all about who could do this, rather than the consequence of there being no such person. It decided that in the circumstances neither the maternal heir nor the Crown could affect the conscience of the trustee. But it also declined to say that the trustee was therefore the beneficial owner. So Burgess v Wheate depends upon the idea of conscience. This is as true today in the law of trusts as it was then. In Westdeutsche Landesbank v Islington LBC,133 for example, it was argued that the court could award compound interest where money had been paid by mistake to another who was then ordered to repay it. The majority of the House of Lords held that

133

Westdeutsche Landesbank v Islington BC [1996] AC 669.

Burgess v Wheate 145 in order for the court to have power to award compound interest there would (in this case) have to be established that there was a trust for the plaintiff. They held that there was no trust, not least because there was no relevant property in the hands of the defendant at any time when it knew of the circumstances giving rise to the obligation to repay. Lord BrowneWilkinson said:134 Equity operates on the conscience of the owner of the legal interest. In the case of a trust, the conscience of the legal owner requires him to carry out the purposes for which the property was vested in him (express or implied trust) or which the law imposes on him by reason of his unconscionable conduct (constructive trust).

On the other hand, as shown by Burgess v Wheate, where there once was a person who could affect the conscience of the trustee, but that person has now vanished and (unusually) there is no one who can claim to succeed to the rights of that person, the trust obligation in effect disappears, either particularly or generally, as the case may be. I say ‘in effect’ because, as so often happens in trust law, we may in fact not know at first (indeed, in some cases, not for a long time) whether there is any such person or not. Hence the mechanism of the so-called Benjamin order,135 to deal with the case where a beneficiary disappears and cannot (or cannot yet) be presumed or proved to be dead. Another example is where a trustee distributes to persons he believes to be the true beneficiaries entitled what he thinks is the remaining trust property. If he is right on both counts, the trust has probably136 come to an end. But if either belief is wrong (even without fault on his part), and there are beneficiaries entitled to trust property, then the trust continues.137 It is just that he is not aware of the continuing claim on his conscience. This would have been the case, for example, if, unknown to all the parties in Burgess v Wheate, there had been a paternal heir of Elizabeth Harding waiting in the wings, to spring out, like the dénouement of a bad whodunnit, after the case was over.138 Of course, if a trustee in such a case, before learning of his error, deals with the trust property to his prejudice, this does not mean that he must be personally liable in such a case. For example, he may have

134

Ibid, 705. Re Benjamin [1902] 1 Ch 723; Re Green’s WT [1985] 3 All ER 455. 136 A weasel word to cope with problems arising from, amongst other things, the inherent possibility of setting aside the exercise of powers, etc. 137 If the trustee has in breach of trust dissipated the property, or allowed it to be destroyed, his account will be falsified, and he will be unable to say that he does not still have the property; so he cannot deny the continuing existence of trust property. Even if he could, he would still have to make equitable compensation from his own resources to replace it. 138 Cf Re Gosman (1880) 15 Ch D 67, where the next of kin only came forward six years after it had been decided that there were none. 135

146 Paul Matthews a restitutionary defence such as change of position,139 or the court may relieve him of liability under the Trustee Act 1925, s 61. Some may wonder at the morality of the trustee’s position in such a case, where there is no other claimant in equity. How can a person who takes as trustee, knowing that he is not intended to enjoy beneficially, retain the property for himself? Here the importance of the pragmatic relativism of the common law shows itself. The question being asked is not an abstract or an absolute one, ie can the trustee enjoy the property at all? Instead it is a concrete and a relative one, ie can the trustee enjoy the property of which he is the legal owner when there is no one to benefit under the terms of the trust, and no one to stand in the shoes of the settlor? The trustee’s conscience is, after all, affected only in favour of the beneficiaries and their successors in title. Thus and no further.

K. SUBSEQUENT DEVELOPMENTS IN THE LAW

(1) Case Law The decision in Burgess v Wheate was followed in a number of cases of trusts of freehold estates.140 It was also applied where the mortgagor of an estate died intestate without heirs, and the equity of redemption could not pass to anyone (including the feudal lord, by escheat), so that the mortgagee simply kept the property.141 But the law did not stand still. There were case law developments and refinements. Moreover, Burgess v Wheate did not deal with all the fact situations which might arise. Neither was it universally popular in the years after its decision. Indeed, the profession seems to have been split. Thus, in Middleton v Spicer,142 just over 20 years later,143 where property was given by will to an executor for a purpose which failed, Lord Thurlow LC initially considered that Burgess v Wheate applied. However in argument on the same occasion he said of that case that144

139 As Norris J suggested at first instance in Futter v Futter [2010] EWHC 449 (Ch), [33], reversed on other grounds, [2011] EWCA Civ 197. 140 See eg Taylor v Haygarth (1844) 14 Sim 8, 60 ER 259; Davall v New River Company (1849) 3 De G & Sm 394, 64 ER 531; Cox v Parker (1856) 23 Beav 168, 52 ER 1072; Re Gosman (1880) 15 Ch D 67. 141 Gordon v Gordon (1821) 3 Swanst 400, 36 ER 910; Att-Gen v Duke of Leeds (1833) 2 My & K 343, 39 ER 974; Beale v Symonds (1853) 16 Beav 406, 51 ER 835. 142 Middleton v Spicer (1783) 1 Bro CC 201, 28 ER 1083. 143 Note that at this date neither of Blackstone’s nor Eden’s reports of the case had yet been published, though Blackstone’s appeared shortly afterwards. 144 (1783) 1 Bro CC 201, 204–05; 28 ER 1083, 1085. More generally, see the note (2) in Eden’s report at 259–61, 82 ER 683, and 1 Belt’s Supp 368, which show the state of professional opinion at that time. In Williams v Lord Lonsdale (1798) 3 Ves Jun 752, 757;

Burgess v Wheate 147 Burgess v Wheate was determined upon divided opinions, and opinions which continue to be divided, of very learned men. The argument of the defect of a tenant seems to be a scanty one. Whether that case is such a one as binds only when it occurs speciatim, or affords a general principle, is a nice question.

But when the matter came to judgment, the Lord Chancellor had changed his mind, and the decision went on a different point. The property in that case comprised (i) copyholds subject to an existing contract to sell, and (ii) leaseholds which were given to the executors to sell and pay the proceeds to a charity falling within the mortmain legislation. The executor also received a beneficial legacy. The lands were sold and the proceeds treated as part of the personalty of the deceased.145 Hence Burgess v Wheate was irrelevant. The gift to the charity failed for mortmain. Because of their beneficial legacies, the executors were held to be trustees of the residue for the next of kin rather than beneficial owners. The problem was that there were no next of kin to be found. The Crown claimed as part of its prerogative right to bona vacantia, and succeeded. Bona vacantia extended to equitable interests. So where trustees held personalty on trust for beneficiaries who died without next-of-kin, Burgess v Wheate had no part to play. The law allowed the Crown, in right of its prerogative, to step into the shoes of the beneficiaries, and the trustees’ consciences continued to be affected. This reasoning was followed in a number of later decisions.146 The rule extended even to the equity of redemption in mortgaged leaseholds.147 A second Crown prerogative was rarer in practice, and different in scope, but produced much the same effect in practice. This was the prerogative of taking the property of aliens, who could take but not hold real property. It applied not only to direct ownership, but also to indirect ownership through trusts. Thus where trustees held real property for the benefit of aliens, the Crown could enforce the trust for its own benefit.148

30 ER 1255, 1257, Lord Eldon rather archly said ‘Burgess v Wheate, supposing it to be well decided, establishes …’ (emphasis added). And in Taylor v Haygarth (1844) 14 Sim 8, 16; 60 ER 259, 262, Shadwell V-C alluded to the poor reception of the decision in saying: ‘Whatever opinion might have been originally entertained about Burgess v Wheate, it has remained unreversed for more than eighty years …’ (emphasis added). 145 The copyholds because of the contract to sell entered into by the testator during his life, and the leaseholds because (i) they were chattels real, and (ii) they were also made subject to a trust for sale by the will. 146 Barclay v Russell (1793) 3 Ves Jun 424, 30 ER 1087; Taylor v Haygarth (1844) 14 Sim 8, 60 ER 259; Dyke v Walford (1846) 5 Moo PC 434, 13 ER 557; Powell v Merrett (1853) 1 Sm & Giff 381, 65 ER 167; Cradock v Owen (1854) 2 Sm & Giff 241, 65 ER 382; Re Gosman (1880) 15 Ch D 67; Cunnack v Edwards [1896] 2 Ch 679; Re Bond [1901] 1 Ch 15; Re Cullum [1924] 1 Ch 540; see also Colchester v Law (1873) LR 16 Eq 253. 147 Re Wells [1933] Ch 29. 148 Barrow v Wadkin (1857) 24 Beav 1, 53 ER 257.

148 Paul Matthews So far we have considered rules which applied only to one kind of property, real or personal, but not both. The question then to be asked is how far, if at all, these rules were affected by the equitable doctrine of conversion, by which realty could be regarded as personalty, and personalty as realty, because it was subject to a binding equitable obligation to turn it from one to the other. Could personalty subject to conversion be escheated to the lord as if it were realty? Could realty subject to conversion be forfeited to the Crown as if it were personalty? In relation to the rights of the Crown at least, whether by escheat, forfeiture or bona vacantia, the answer was ‘No’. Conversion was ignored in considering the Crown’s rights. It neither enlarged nor diminished them. This was held first in relation to escheat,149 then bona vacantia150 and then in relation to a forfeiture for felony.151 The point was said to be that there was no equity in the Crown to call for a conversion to be able to take property which otherwise it would not be able to take, and the court later considered that, if that was right, then so was the converse.152 The decision in Burgess v Wheate was also followed in relation to copyhold land,153 though the formalities involved in the transmission of such land complicated matters. A new copyhold tenant, whether by purchase or inheritance, had to be admitted by the lord in his manorial court, in order to try his title. It was held in 1798 that the Court of Chancery would not order the lord of the manor to admit the heir of a trustee whose beneficiaries had died intestate and without heirs, as he had no equity. Lord Eldon said: ‘How do you give me jurisdiction? Have you found any case where a person having the legal estate, and only the legal estate, can come into this court for any purpose?’154 Seven years later the same heir (or his advisers) saw the light, and crossed to the other side of Westminster Hall. The Court of King’s Bench thereupon made a common law order of mandamus against the same lord on the same facts, the court considering that, since the legal estate was in the heir, ‘that is sufficient for us to act upon in giving him all opportunity of trying his title, which is all that the admission will enable him to do’.155 All these procedural problems have now gone, of course. Copyhold land was all turned into freehold under the property reforms of 1925.

149

Walker v Denne (1793) 2 Ves Jun 170, 30 ER 577. Henchman v A-G (1834) 3 My & K 485, 40 ER 185; Taylor v Haygarth (1844) 14 Sim 8, 60 ER 259; Re Bond [1901] 1 Ch 15. 151 Re Thompson’s Trusts (1856) 22 Beav 506, 52 ER 1203; Talbot v Jevers [1917] 2 Ch 363. 152 Talbot v Jevers [1917] 2 Ch 363. 153 Henchman (n 150); Gallard v Hawkins (1884) 27 Ch D 298. 154 Williams v Lonsdale (1798) 3 Ves Jun 752, 757; 30 ER 1255, 1258. 155 R v Coggan (1805) 6 East 431, 432; 102 ER 1352, 1354. 150

Burgess v Wheate 149 The last—and potentially the most difficult—question to consider from the case law is this. Burgess v Wheate is a case where the purported heir and the Crown claimed against the trustee in possession. What would happen if the trustee was out of possession and brought his claim against the possessor? Would the claim succeed then? There are two main cases to consider. The first of these cases is Onslow v Wallis.156 A trustee (A) held a freehold property on trust for a beneficiary (B) absolutely. B made a will leaving the freehold (necessarily equitable so far as she was concerned) to the trustees of the will (C and D) on trust to sell the property, and out of the proceeds to pay her debts and some ‘legacies’ to be set out in a certain document. After B’s death, a widow and apparently without heirs, this document, however, could not be found. So the ‘legacies’ failed. But the debts survived. The first trustee (A) offered to pay B’s debts and claimed to be entitled to retain the freehold for his own benefit. The will trustees (C and D) were out of possession of the freehold, and brought these proceedings against A for a conveyance to themselves. C and D argued that they had ‘positive trusts to perform under the will’, obviously referring to the trust to pay debts, and therefore needed the legal estate from A. A argued that the court would not assist C and D, except to pay these debts (which A would pay), and therefore would not help them in these circumstances. Lord Cottenham LC in argument distinguished Burgess v Wheate, as a case which157 differs from the present. The heir at law claims in his own right, but trustees do not: they claim only because no other party is entitled. The difficulty in the way of the Defendant [ie A] is this, that, under the authority of Burgess v Wheate, he must be taken as holding, not as a party entitled, but because there is no one else to claim. The question, therefore, is whether the will has not given the Plaintiffs [ie C and D] a title against him.

So the issue was whether C and D had a title to take the legal estate in the freehold away from the first trustee. The Lord Chancellor held that they had. In Burgess v Wheate there was no one who could take the property away from the trustee in possession. Here the will trustees could do so. He proceeded on the ground158 that there are persons appointed by the owner of the property, to whom the property is to be conveyed. They are the only parties having right to it; whether or not they have power afterwards to dispose of all the beneficial interest, is a

156 157 158

Onslow v Wallis (1849) 1 Mac & G 506, 41 ER 1361. Ibid, 513, 1364. Ibid, 515, 1365.

150 Paul Matthews matter with which the Defendant Wallis, as mere owner of the legal estate, has nothing whatever to do.

The other case was Re Lashmar, Moody v Penfold.159 Factually it resembled Onslow v Wallis, though it was even more complex. Under the will of A, who died in 1859, Penfold and others held a freehold property on trust for certain life tenants, with remainder over to B absolutely. B died in 1868, long before the life tenants did. By his will, B left all his estate to Moody and another on trust for B’s widow for her life, with remainder over to B’s illegitimate son H absolutely. H, however, died in 1880, intestate and without heirs or creditors, in the lifetime of B’s widow, who died in 1886. The surviving life tenants under A’s will did not die until 1889. It was therefore only in 1889 that the question arose as to what should happen to the freehold property still vested in Penfold, by now the sole surviving trustee of A’s will. Moody (the surviving trustee of B’s will), claimed that Penfold should convey to him, even though all the beneficiaries of B’s will trust were now dead, and H had died without will, heirs or creditors who could make a claim to or upon his equitable estate.160 Hence the quotation at the head of this chapter. The Court of Appeal tested the question whether the trustee of B’s will (Moody) had any equity to take the property from Penfold, by considering what would have happened if (contrary to the facts) B at the time of his death had had a legal rather than an equitable estate in the land. What would have happened to such a legal estate under the will? Here the Statute of Uses was relevant. It will be recalled that, until it was repealed in 1925, the Statute would execute a use or trust of a legal estate in freehold land by vesting that estate in the beneficiary of the trust rather than leaving it in the trustee. Here, of course, there were two beneficiaries: B’s widow (who took a life interest) and H (who took an absolute interest in remainder). So it could vest in each for the appropriate legal estate. But it was settled law that the Statute of Uses would not execute a use or trust of land if the trustee had a duty to perform, eg to receive rents and profits from the land and pay them over to beneficiaries, or to keep a married woman’s property separate so that it did not, by vesting in her, pass under the control of her husband.161 In Onslow v Wallis, B gave the property to the trustees of her will, on trust to sell it and out of the proceeds pay debts. So the Statute had no application.

159

[1891] 1 Ch 258. He had also died before the Intestates Estates Act 1884, s 4, which extended escheat to equitable estates (and is discussed below). So the Crown or other mesne lord had no claim to stand in his shoes as such beneficiary. 161 Nevil v Saunders (1686) 1 Vern 415, 23 ER 555; 1 Eq Cas Abr 383, and cases there cited. 160

Burgess v Wheate 151 In Re Lashmar, the important factual difference from Onslow v Wallis lay in the wording of B’s will. B gave the property to the trustees of his will ‘upon trust, to pay to [B’s widow], or to permit her to receive during her life or widowhood [the income], and from and after her decease or second marriage, whichever shall first happen, upon trust for [H]’. Although that looks like a duty to pay the income to the widow, a line of authority culminating in Doe d Leicester v Biggs162 held that in a devise in trust to pay to or permit X to receive the income of property, the word ‘permit’ prevailed over the words ‘pay to’ (because it was in a will, where later words trump earlier ones), and hence it was no duty at all. Accordingly, the Statute of Uses applied to vest a legal life estate in the income beneficiary. In Re Lashmar, the Court of Appeal was unhappy about this doctrine. Lindley LJ said:163 I do not think it is a sensible decision. I do not think that case could possibly be so decided now if the question arose for the first time; and I am not disposed to extend it. On the other hand, I do not wish to shake titles, and I shall do precisely what our predecessors have always done—leave the case where it is. It is a rock ahead that everybody knows.

Indeed, Lindley LJ went on to say:164 I am not prepared to extend that case, and, in that spirit, I am not at all prepared to say that these trustees did not take165 the legal estate during the life of the testator’s widow. I think they did,166 notwithstanding Doe v Biggs.

But, as the Lord Justice expressly said, this would only mean that the trustees (Moody) took a legal estate for the life of the widow, an estate pur auter vie. What about the legal estate in remainder? It seems that that would have vested immediately on B’s death (or at any rate when the executors concluded the administration of the estate) in H. So on the death of B’s widow in 1886, the trustees’ own legal estate would have expired, leaving them with nothing. Having done this exercise, the Court of Appeal then applied the position at law by analogy to the case before them, as one of a merely equitable estate. The judges considered that, whatever might have been the position if B’s widow had died after the last life tenant under A’s will, once she had 162

(1809) 2 Taunt 109, 127 ER 1016. [1891] 1 Ch 258, 267. 164 Ibid. 165 Strictly speaking, it should have been ‘would not have taken’, because the court was considering the case hypothetically, as if B had died owning the legal freehold estate, whereas in fact he died with only an equitable estate in remainder. But this was an ex tempore judgment, after all (see also the additional comment made by Lindley LJ at the end of the judgment of Fry LJ, to repair his omission to deal with Onslow v Wallis in his own judgment). 166 ‘Would have’, for the reasons given above. 163

152 Paul Matthews died and the last life tenant survived, the trustees of B’s will could have no further claim to obtain the outstanding legal estate from Penfold on the subsequent death of that last life tenant, which occurred in 1889. Fry LJ put it in this way:167 It appears to me that the construction of the will shewed that either the [equitable interest in real estate which was vested in B] passed immediately on his death to his widow and to his son in remainder, or that, in any event, it passed on the death of the widow when the remainder took effect in possession.

And again:168 I think, therefore, that no estate remained in the trustee. The whole equitable estate vested by force of this will in the testator’s son; and John Moody has no title to claim the conveyance from the trustee of Charles’s will.

If that is right, then H had the equitable interest in remainder at the time of his death, intestate and without heirs in 1880, which meant that no one could claim in his right, so as to make any claim on the conscience of the trustee. That left Penfold in the fortunate position of being trustee of a fee simple only for a series of life tenants, who would sooner or later die out. Lindley LJ summarised the position pithily:169 It appears to me that the true way to regard this will is to look through Moody as nobody. So it comes to this. The property is in Penfold on trust for nobody at all. Therefore, he keeps it; and accordingly the appeal must be allowed.

Unlike Lord Cottenham LC in Onslow v Wallis, the Court of Appeal in Re Lashmar stated that the question whether the trustee had duties (or active duties) to perform was crucial. Indeed it was the reason why the court did not follow Onslow v Wallis. Lindley LJ said170 that [in Onslow v Wallis] the trustee had duties to perform, and if this gentleman had any duties to perform our decision would have been the other way. It is because he has none that we decide as we have done.

But from our own modern perspective, we must also notice that the significance of the idea of duties to perform was simply that it prevented the Statute of Uses from executing the trust and passing the legal estate directly to the beneficiary. In Onslow v Wallis the Statute had no effect because the trustees had clear duties to perform. After 1925, of course, all this ancient learning is irrelevant (except for enabling us to understand cases such as Re Lashmar). Where a trustee without a beneficiary for whose benefit to hold claims is not in possession of the

167 168 169 170

[1891] 1 Ch 258, 269. Ibid. [1891] 1 Ch 258, 268. [1891] 1 Ch 258, 270.

Burgess v Wheate 153 trust property, and claims it from the person who is, the question after 1925 must be, not whether he has active duties to perform, but rather whether such a trustee has been given the right to obtain the outstanding legal estate which his (equitable) settlor or testator previously had.171

(2) Legislation In considering the subsequent development of the doctrine of Burgess v Wheate, we need also to take account of legislation. As already mentioned above, the actual result in Burgess v Wheate in relation to the Crown was reversed by the Intestate Estates Act 1884, s 4, which provided that where a person dies without an heir and intestate in respect of any real estate consisting of any estate or interest whether legal or equitable in any incorporeal hereditament, or of any equitable estate or interest in any corporeal hereditament, whether devised or not devised to trustees by the will of such person, the law of escheat shall apply in the same manner as if the estate or interest above mentioned were a legal estate in corporeal hereditaments.

This extended the law of escheat in two ways. First, it extended it to incorporeal hereditaments such as easements and profits, rentcharges, rights of common and so on, which had never been subject to escheat before, because they were not the subject of feudal grant. Previously escheat had been confined to corporeal hereditaments, ie land. Secondly, it extended it to equitable estates and interests in land.172 This is a typical example of how pragmatic common law thinking makes piecemeal amendment and adapts an old institution to a new purpose. In medieval times escheat was an incident of lordship of land in the feudal system, potentially working to the advantage of everyone in that system except the tenant in possession. It had no especial function for which it had been created: instead it was the inevitable consequence of the doctrines of tenure. But in nineteenth-century England, when tenure had in effect disappeared and virtually all land was held directly of the Crown, so that there were no intermediate lords, it became a means of sweeping up ownerless realty, legal or equitable, corporeal or incorporeal, and tipping it into the State’s coffers, like the ultimus haeres of the Roman law. It was easier to amend the old feudal rules in a way which their originators would never have understood than to scrap those rules entirely and start again. Indeed, this is exactly the technique which Lord Mansfield sought to use in Burgess v Wheate. Here as elsewhere he was simply ahead of his time. And in 1925 the legislators

171 In a different context, compare East Anglia Roman Catholic Trustee v Milthorn Engineering Ltd, 18 Trust Law International, 160 at 170. 172 See eg Re Wood [1896] 2 Ch 596.

154 Paul Matthews turned from the rules of real property succession to those of succession to personalty, and simply applied the rules of bona vacantia—another Crown prerogative—to solve the same problem. Although it has nothing to do with Burgess v Wheate, I cannot forebear to mention a recent example of this phenomenon. The Land Registration Act 2002 was passed in order, amongst other things, to extend the registration of land as far as possible in England and Wales. One important category of land that had remained unregistered under the 1925 and earlier legislation was that of demesne land of the Crown. This is land owned by the Crown since the Norman Conquest, and never granted away to any subject. Even today there is a lot of it. It could not be registered, because the old system of land registration could not register the ownership of land itself (and, of course, only the Crown actually owns land), only of estates in the land. But estates are a creature—indeed, you may say, a vestige—of the old feudal system. You might have thought that, with brand-new registration legislation, it was time for a rethink. Perhaps it would be going too far in such legislation to change tack and to get rid of estates in land altogether. But why not register the ownership of land in addition to the ownership of estates in the land? That would solve the problem of the demesne land. No, that was going too far as well. The Land Registry wanted to go on registering only estates in the land. How, then, to deal with demesne land? Perhaps the Crown could grant estates in the land, which could then be registered. Yes, but it would have to be to a Crown body, not to the private sector. So the Act could have created a statutory body, controlled by the Crown, to receive and hold fee simple estates in the demesne land. For some reason this also was considered too difficult. Instead the policy adopted was to have grants made by the Crown to itself, which could then be registered in the land register. But some clever lawyer must have pointed out that, under the feudal system, which despite all assurances to the contrary was alive and kicking in the twenty-first century, a lord (including the Crown) could not grant an estate to himself. It is a bilateral relationship. Put bluntly, it takes two to tango. But to solve such a footling problem is the work of a moment for a deft legislator. Never mind the fundamentally symbiotic nature of the feudal system, retained deliberately by successive governments rather than abolishing it. Let us just solve the immediate problem. So now we have s 79(1) of the 2002 Act: Her Majesty may grant an estate in fee simple absolute in possession out of demesne land to Herself.

And s 79(2) provides that such a grant can be made only if an application is made within two months thereafter to register the estate so granted. This presses all the buttons. It allows for estates to be granted and kept under the control of the Crown, but also requires them to be registered. That it also blows

Burgess v Wheate 155 wide apart the whole idea of the feudal relationship between lord and tenant is, frankly, unimportant. This is how law is made. Welcome to the real world. Coming back to Burgess v Wheate, there was also the problem of the maternal heir. The rule that you trace the heir from the last purchaser with seisin, and not the last owner, also did not survive. The need to show seisin was removed in 1833,173 and the possibility of an heir’s tracing descent from the last owner (even if not a ‘purchaser’) was introduced in 1859.174 So if the facts of Burgess v Wheate had reoccurred after 1884, in fact the Crown still would not have succeeded, despite the 1884 Act, because since 1859 the maternal heir would have been able to come in and take.

L. CONCLUSION

The decision in Burgess v Wheate is like a salutary shock to the system. We are brought up to think that the last thing a trustee can do is to keep the property for himself. What that case shows is that, indeed, as a last resort, and only when there is no one else to affect his conscience, it really is the last thing he can do. The trustee is a true owner, and has the owner’s rights, subject only to the effect on his conscience. If and when that effect runs out, he nevertheless remains the owner, untrammelled by any equity. Of course the law has moved on since Burgess v Wheate, and the range of persons who may affect the conscience of the trustee is—quite rightly—larger than it was then. So the chances of a trustee finding himself able lawfully to enjoy the property by virtue of the disappearance of all those who might affect his conscience are correspondingly smaller. But the true principle is there, and in analysing the nature of the trust, and in explaining it to those from outside the common law tradition, we ignore it at our peril.

173 174

Inheritance Act 1833 (3 & 4 Will IV, c 106). Law of Property Amendment Act 1859 (22 & 23 Vict c 35).

6 Morice v Bishop of Durham (1805) JOSHUA GETZLER

The Three Crosses, Rembrandt van Rijn, 1653*

* From the Cracherode collection, No AN83408, British Museum. The residue of the Cracherode estate was the subject of the litigation in Morice v Bishop of Durham. For help in preparing this chapter I thank Paul Brand, Emeric Monfront, Mike Macnair, Paul Mitchell, James Oldham, and the staff of the Georgetown Law Center Special Collections.

158 Joshua Getzler A. INTRODUCTION

M

ORICE V BISHOP of Durham1 stands for the principle that the objects of an express trust must be defined with some minimal certainty. The principle operates to determine the validity and operation of fixed express trusts, precatory trusts, charitable trusts, discretionary trusts and powers, private purpose trusts and trusts of imperfect obligation. It has a special role in crafting the duties and powers of administrators and executors. It forms an important strand in the complex of ideas that make up resulting trusts. It is worth understanding a little more about the circumstances that led to this seminal case, and the constellation of reasons that led Sir William Grant MR and Lord Eldon C to decide for Mr William Morice and his sister Mary against the Lord Bishop Shute Barrington. The holding of the case was that a ‘bequest in trust for such objects of benevolence and liberality as the trustee in his own discretion shall most approve’ was void for uncertainty.2 The bequest comprised the residual personal estate of a wealthy London spinster named Ann Cracherode, who had inherited a large estate in 1799 from her brother Clayton, a clergyman renowned as a collector of art and books. After inheriting from Clayton, Ann had arranged her own testamentary affairs on the advice of the Bishop of Durham, whom she appointed her sole executor prior to her death in 1802 at the ripe age of (probably) 84 years. The Court of Chancery decreed that the failure of Ann’s trust bequest meant that the residue should pass on a resulting trust to the next of kin, Ann’s cousins William and Mary Morice, who had brought the suit against the Bishop. Sir William Grant MR held that the bequest fell outside the class of valid charitable gifts; neither could the residue vest in the Bishop as an absolute ownership interest subject to precatory instructions to pursue beneficent purposes, for Ann had overtly used the mandatory language of trust in effecting the transfer to the executor, and moreover the Bishop had abjured any personal interest at all stages of the making of the will and the executorship that followed. Lord Eldon affirmed on appeal. The case crystallised two major points of law. First, every private (that is, non-charitable) express trust must have sufficiently ascertained beneficiaries so that a court of equity can decree performance in their favour. A trust constituted with indeterminate objects, yet with some guiding

1 Morice v Bishop of Durham (1804) 9 Ves Jun 399, 32 ER 65 (MR); (1805) 10 Ves Jun 522, 32 ER 947 (LC). 2 The Vesey reports of Morice are usefully expanded by the voluminous surviving pleadings in the National Archives, London, C 13/602/15—Bill in Chancery of William and Mary Morice; Answers of Shute Barrington, the Lord Bishop of Durham, the Reverend Richard Bullock, and four others.

Morice v Bishop of Durham 159 principles addressed to the trustee to guide the distribution, cannot be rescued by re-characterisation as a power granted to a trustee to select beneficiaries or to pursue purposes at large.3 A court would find it impossible to control such a trusteeship; and if the court withdrew and left all distribution to depend on precatory intentions then this would bestow a general power tantamount to ownership which would be inconsistent with the language of entrustment. Later cases in the sphere of testamentary trusts reinterpreted this ruling as going against an uncontrollable delegation of will-making power.4 The second limb of the decision in Morice is equally important, and was probably the dominant issue in the minds of the lawyers who argued and decided the case. This was the holding that a purported public trust that gives the trustee the widest discretionary power to choose persons and purposes to benefit, and therefore exceeds the recognised heads of charity, cannot be reformed by the court to fall within the confines of charity, is not divisible into good and bad parts, and must be void. Both the first and second limbs of the case unite around the idea that the court must be able to enforce the trust, and therefore must be able to test whether a trustee has properly executed the trust in favour of its objects. Morice now appears as a key source of the modern ‘beneficiary principle’,5 the twin rule6 that every valid non-charitable trust must have identifiable beneficiaries being legal (generally human) persons with an interest in the trust assets, and that only such beneficiaries have standing to sue. Lord Eldon’s judgment also sets out an early, if cryptic, statement of the ‘three certainties’, of dispositive trust intention, object and subject, necessary for the creation of an express trust: ‘[T]he question was, whether precatory, not mandatory, words imposed a trust upon that person; and the Court has said, before those words of request or accommodation create a trust, it must be shewn, that the object and the subject are certain …’7 But the decision is equally significant for its stipulation of the validity conditions of charitable trusts, or public purpose trusts enforceable by the Court of Chancery or by the Crown via the Attorney-General or the Charity Commissioners. Morice states that charity is an inherently legal category, the boundaries of which

3 It is an interesting lacuna in the case that powers of appointment were never really argued. 4 The past operation of this rule and its modern dissolution are discussed in CD Baker, ‘Delegation of Testamentary Power after McPhail v Doulton’ (1975) 5 Adelaide Law Review 103; JD Heydon, ‘Does Statutory Reform Stultify Trusts Law Analysis?’ (2008) 6(3) Trusts Quarterly Review §2. 5 Perhaps most clearly enunciated by Roxburgh J in Re Astor’s Settlement Trusts [1952] Ch 534. 6 P Matthews, ‘From Obligation to Property, and Back Again? The Future of the NonCharitable Purpose Trusts’ in DJ Hayton (ed), Extending the Boundaries of Trusts and Similar Ring Fenced Funds (The Hague, London, Kluwer, 2002) 203. 7 (1805) 10 Ves Jun 522, 536; 32 ER 947, 952. Cf Knight v Knight (1840) 3 Beav 148, 160; 49 ER 58, 63.

160 Joshua Getzler are tested by the court through analogy from past cases and the preamble to the 1601 Charitable Uses Act, commonly referred to as ‘the Statute of Elizabeth’. Charitable purposes cannot be defined by abstract criteria such as ‘public benefit’ or ‘benevolence’ because, in Lord Eldon’s phrase, ‘there is no magic in words’,8 only the artificial reason of the law building on its own past materials. The Attorney-General had intervened in the case of Morice to argue that the Cracherode trust of residue should be perfected into a general charitable disposition under the supervision of Court or Crown, applying either the rules of cy-près or the old privilege allowing completion of an imperfect charitable disposition; but these arguments were expressly rejected. By fastening on the preamble to the 1601 Statute as a boundary to the heads of charity, Lord Eldon and Sir William Grant acted to curb charitable dispositions, and by so imposing a numerus clausus on the types of charitable giving they restrained the fancies of testators in order to keep inheritances within normal family descents. Legal restrictions on charitable giving before 1805 had focused largely (not entirely) on the manner of giving, with mortmain and deathbed constraints being imposed by legislation and extended by the interpretatio of the courts. After Morice, legal debate over the permissible extent of charitable giving focused increasingly on the content of the charitable purpose. Morice thus started a debate over proper charitable objects that continues to the present day.9 By encompassing so many bedrock principles and touching on so many practical aspects of trusts, Morice certainly appears at two centuries’ distance as a landmark case in equity; but this was not the way that contemporaries viewed it. Morice was not cited as authority for any ‘beneficiary principle’ or ‘certainty of objects’ rule until well toward the middle of the nineteenth century. Its real celebrity as a leading decision dates to the early and mid-twentieth century, as lawyers grappled with the challenge of amorphous beneficial objects in the new environments of family and corporate tax planning, corporate finance, pensions and offshore jurisdictions. The urgent problems facing lawyers at the time of Morice were rather different, and harked back to two linked issues that had troubled the legal system since before the Reformation—controlling the deathbed disherison of heirs, and restraining the putting of testamentary property into mortmain, that is 8 (1805) 10 Ves Jun 522, 542; 32 ER 947, 955; cf Rex v Inhabitants of North Nibley (1792) 5 Term Reports 21, 24; 101 ER 12, 14, per Lord Kenyon CJ. 9 The recent expansion of the classes of charity by the Charities Act 2006, ss 1–3 may have lessened the legal definitional debate but has not dispelled it. However, the debate will likely not be now conducted primarily in the courts. The Charity Commission, using its power of policy implementation under s 4 of the Act, has interpreted the public benefit requirement of s 3 to mean that proof of actual ‘public benefit’ is an added test that should be superimposed on charities clearly pursuing obviously educational, religious or other prima facie charitable purposes. To paraphrase Jeffrey Hackney’s quip (‘The Politics of the Chancery’ [1981] Current Legal Problems 113, 119), the charitable trust has become a public law wolf in public law sheep’s clothing.

Morice v Bishop of Durham 161 perpetual or ‘deadhand’ control of property by ecclesiastical bodies or other corporations. This explains why Morice was early picked up by cases and texts on mortmain and charitable uses, but remained rather invisible in the key literatures on trusts.10 The beneficiary principle had to become controversial before it could be noticed properly as a foundational doctrine. Lord Eldon avowed that the issues raised in Morice were novel.11 This claim may be glossed: the case really raised some very old problems regarding clerical execution and control of testamentary powers and charitable donation, but gave those problems a new answer. The decision awarding the residue of Ann’s estate to Morice rather than the Bishop of Durham may be seen as a curb on the ancient role of the Church in administering charitable uses and forming social and political projects alongside and in tension with secular society. It is a very late case on mortmain, as well as an early case on certainty of intention in the constitution of trusts. To understand the full significance of the case, we need to uncover the past role of the Church as a charitable and welfare organisation, then examine Anglican political philanthropy at the time of the Napoleonic wars, and finally unpick the tangled relationships of the protagonists as revealed in the litigation of 1804–05. With this historical knowledge in place, the famous judgments of Grant and Eldon take on a new hue. We shall conclude with a brief look at how Morice became a leading case, and whether its logic is still compelling in the modern law of trusts.

B. THE PAST OF CHARITABLE BEQUESTS

The practice of charity and its legal definitions have constantly mutated across English history.12 Charitable giving was long tied to testamentary 10 Morice is glancingly noted in A Highmore, A Succinct View of the History of Mortmain: and the statutes relative to Charitable Uses, 2nd edn (London, Butterworth, 1809) 132, 282; in T Lewin, A Practical Treatise on the Law of Trusts and Trustees, 1st edn (London, Maxwell, 1837) 79, 175; and in G Spence, The Equitable Jurisdiction of the Court of Chancery, 1st edn (London, Stevens and Norton, 1846–49) I, 591; II, 65, 72, 81, 223. There is nothing direct in J Fonblanque, A Treatise of Equity, 5th edn (London, Clarke, 1820), neither does it appear in EB Sugden, A Practical Treatise of Powers, 2nd edn (London, Reed and Hunter, 1815). It does not rate a mention in FT White and OD Tudor, Leading Cases in Equity, 1st edn (London, Maxwell, 1849–50), though it makes a brief appearance in later editions in the commentary on Harding v Glyn (1739) 1 Atk 469, 26 ER 299. Likewise Morice does not appear in American texts until the 1850s; tellingly, it is not cited in J Story, Commentaries on Equity Jurisprudence, 1st edn (Boston, Hilliard, Gray 1836). 11 Lord Eldon’s judgment commences with the statement: ‘This, with the single exception of Brown v Yeall (7 Ves 50, ii) is a new case’: 10 Ves Jun 535, 32 ER 952. 12 M Rubin, Charity and Community in Medieval Cambridge (Cambridge, CUP, 1987); WK Jordan, Philanthropy in England, 1480–1660 (London, Allen & Unwin, 1959); WK Jordan, The Charities of London (London, Allen & Unwin, 1960); WK Jordan, The Charities of Rural England (London, Allen & Unwin, 1961); G Jones, History of the Law of Charity 1532–1827 (Cambridge, CUP, 1969); D Owen, English Philanthropy 1660–1960

162 Joshua Getzler causes as administered by the Church. The medieval concept of charity was bound up with good works—piae causae, pious causes—that would promote redemption of the soul. To make a will invoking the assistance of the Church in making charitable donations became a normal part of a meritorious religious life. Sometimes the testator would elaborately spell out the bequests and legacies to be made, whether to benefit the local community or to contribute to wider causes including the Church itself. One common form of charitable giving was more orientated to the self of the giver than the welfare of the community: in pre-Reformation England the endowment of chantries to say masses for the departed, and so speed the progress of the soul to redemption, was a widespread and popular practice.13 Often the bequest of personalty to charitable causes would simply involve a general gift into the Church for the clergy to decide how best to apply; the Church was thus simultaneously itself an object of charity and a pathway for the execution of charitable giving to wider objects. It was also possible to justify general Church control over probate by classifying the orderly distribution of a congregant’s personal wealth at death to identified kin and friends—that is, to non-charitable objects—as itself a pious act. The regular control of probate by the Church was in England a key part of the ‘ordinary’ powers of the diocesan bishop in enforcing the law of the Church. Richard Helmholz has studied the English ecclesiastical jurisdiction over testamentary causes and probate, and he concludes that the wide extent of the Church monopoly here was anomalous. The European ius commune traced general testamentary law back to secular Roman roots, and outside charitable bequests the ecclesiastical power over testation on the Continent was marginal.14 Over time the range of piae causae or charitable purposes that were administered by the Church was expanded into new areas of social entrepreneurship. We find early fifteenth-century examples of the Church regulating bequests for the repair of roads and other such infrastructural investments, justified as pious contributions to the public weal. This public dimension of charity law thus pre-dates the 1601 Charitable Uses Act, the ‘Statute of (Cambridge, Mass, Harvard University Press, 1965); M Daunton (ed), Charity, Self-Interest and Welfare in the English Past (London, UCL Press, 1996); M Chesterman, Charities, Trusts and Social Welfare (London, Weidenfeld & Nicholson, 1979) 1–191; M Chesterman, ‘Foundations of Charity Law in the New Welfare State’ (1999) 62 MLR 333; C Mitchell and SR Moody (eds), Foundations of Charity (Oxford, Hart Publishing, 2000); G Moffat, Trusts Law, 5th edn (Cambridge, CUP, 2009) 913–1080. 13 MGA Vale, Piety, Charity and Literacy among the Yorkshire Gentry, 1370–1480 (York, St Antony’s Press, 1976); J Kreider, English Chantries: Road to Dissolution (Cambridge, Mass, Harvard University Press 1979); JH Baker, The Oxford History of the Laws of England, Volume VI, 1483–1558 (Oxford, OUP, 2003) 715–17. 14 RH Helmholz, The Canon Law and Ecclesiastical Jurisdiction from 597 to the 1640s, Volume I of The Oxford History of the Laws of England (Oxford, OUP, 2004) 387–432 (‘Testamentary Law and Probate Jurisdiction’).

Morice v Bishop of Durham 163 Elizabeth’, by some two centuries. A key element of the ecclesiastical law of charity, which was engrafted into England from general canon law, was the idea that a charitable gift administered by the Church would not fail for want of certainty. Once the quality of charity attached to a bequest, the Church had powers to apply the gift to piae causae as was expedient. This rule allowing latitude to Church executors in selection of objects was later to enter the secular jurisdiction of the Court of Chancery as the doctrine of cy-près; the Court (or the Crown) could take over a charitable but vague bequest and allocate the gift to more definite charitable objects. Lord Eldon came to review this doctrine in the 1802 case of Moggridge v Thackwell,15 decided just two years before the case of Morice: In what the doctrine originated, whether, as supposed by Lord Thurlow in White v White, in the principles of the Civil Law, as applied to charities, or in the religious notions entertained formerly in this country, I know not: but we all know, there was a period, when in this country a portion of the residue of every man’s estate was applied to charity; and the Ordinary thought himself obliged so to apply it; upon the ground, that there was a general principle of piety in the testator. … [I]f the testator has manifested a general intention to give to charity, the failure of the particular mode, in which the charity is to be effectuated, shall not destroy the charity: but, if the substantial intention is charity, the law will substitute another mode of devoting the property to charitable purposes, though the formal intention as for the mode cannot be accomplished.

However so broad the Church’s powers over charitable and general bequests might be, there was one structural limit. The Church was not supposed to interfere with the descent of land titles, which always lay outside the probate jurisdiction and was a supposed monopoly of the common law courts. One could not give land by legal will prior to the Statute of Wills of 1540. Moreover, mortmain statutes early were instituted to restrain the devise of lands into the Church as a perpetual corporation outside the feudal hierarchy of estates.16 The Church did stray into the estates system through its involvement with the enforcement of early uses. These devices, by subjecting feoffees to informal obligations of conscience, could create powers of testation over land as well as personalty, and the use as a duty of conscience could attract Church jurisdiction. Such uses were a constant source of friction with the secular authorities and provoked legislative attack.17 The Reformation brought a more fundamental assault on Church power, with the repression of the monasteries and convents reversing centuries of mortmain accumulation by vesting Church lands in secular hands. The new landowners who were enriched by Henry VIII’s confiscations soon discovered 15

Moggridge v Thackwell (1802) 7 Ves Jun 36, 68–69; 32 ER 15, 26. Porter’s Case (1592) 1 Co Rep 22b, 76 ER 50. 17 RH Helmholz, ‘The Early Enforcement of Uses’ (1979) 79 Columbia Law Review 1503. 16

164 Joshua Getzler that the Crown’s practice of handing out the land under chivalrous tenures put a fresh noose around their necks, in the form of steeply-increased feudal dues exacted by the Crown against all their estates. Perhaps the most significant Reformation reforms redefining charity and testamentary causes were the Chantries Acts of Henry VIII (1545) and Edward VI (1547). The 1547 statute dissolved the religious houses dedicated to the saying of masses for the dead as ‘superstitious uses’, for if the doctrine of purgatory was false and inimical to true religion then it was unacceptable for the law to allow testators to tie up their property in the Church in order to help their souls through the stages of a mythical redemption. The 1547 statute required that the wealth of the chantries be reallocated after confiscation by the Crown to ‘charitable’ purposes and ‘the public good’, and some of it was indeed used to found the royally-constituted grammar schools, though the bulk of the wealth was moved into Crown or private control. It is perhaps the 1547 reform with its overt condemnation of ‘superstitious’ Catholic religious practice that welds into English trust law an hostility to non-Protestant forms of worship.18 The weakening of Church powers over charities and testamentary causes continued with a shift of jurisdiction to the Court of Chancery on the one hand and the Crown on the other.19 Chancery increasingly supervised executorships and probate to the exclusion of the Church courts, especially where trusts for payment of debt were concerned, and Chancery also increasingly claimed a power to regulate charitable trustees. Alongside this the Crown built up the power of the Elizabethan charity commissioners as an executive control mechanism.20 Tudor legislation also instituted the system of poor relief as a secular reformation of parish welfare; the Poor Laws were the coeval twin of the new secularised charity regulation.21 The start of the eighteenth century brought further innovations to the charity world. Charitable funds on a large scale might be constructed as pools of capital allowing extensions of ‘micro-credit’ to help targeted groups overcome shortfalls; they performed smoothing functions alongside the unfunded welfare transfers of the Poor Law system. An important example was the Queen Anne’s Bounty founded in 1704, which channelled wealth from Crown estates and raised bequests and legacies in order to

18

Cf P Ridge, ‘The Legal Regulation of Religious Giving’ (2006) 157 Law and Justice 17. On Chancery wresting of jurisdiction over testamentary legacies and debts from the church courts, see Jones (n 12) passim; SJ Whittaker, ‘An Historical Perspective to the “Special Equitable Action” in Re Diplock’ (1983) 4 Journal of Legal History 3; RH Helmholz, ‘Debt Claims and Probate Jurisdiction in Historical Perspective’ (1979) 23 American Journal of Legal History 68; A Hofri-Winogradow, ‘Protection of Family Property from Creditors in the Enlightenment-Era Court of Chancery’ (2008) Hebrew University Research Paper, , accessed 8 September 2011. 20 Jones (n 12) 22–56. 21 P Slack, Poverty and Policy in Tudor and Stuart England (London, Longman, 1988). 19

Morice v Bishop of Durham 165 augment the income of the poorer clergy and so strengthen the established Church. The Bounty was immediately controversial as a Crown encouragement of mortmain accumulations at the expense of the landed families, traders and manufacturers of the realm. Another important charity of that time was ‘The Charitable Corporation for Relief of the Industrious Poor, by Assisting them with Small Sums upon Pledges at Legal Interest’, chartered by the Crown in 1707. Its capital was massively enlarged to reach £600,000 by 1730, derived in effect from public revenues. The Charitable Corporation lost a vast amount of capital through defalcations, in the form of fraudulently written loans by a circle of crooked corporate servants who were not in any way monitored by the larger court of directors. It may be seen as an analogue of the South Sea Bubble that burst with such disastrous effect in 1720. Lord Hardwicke in 1742 declared the directors of the Charitable Corporation to be personally accountable for the losses, and his judgment is a foundation of the modern law of directors’ duties, and also a distant source of judicial control of executive powers in public law.22 These large charities of the earlier eighteenth century were in effect pursuing functions of welfare, industrial policy and social investment outside the remit of the parish-based relief system, in an era before centralised State bureaucracies had been invented. They were a development of the earlier Tudor models, involving Crown targeting of certain social needs. It has been argued that the unpopularity of these charities, and their tendency to funnel wealth away from family inheritances, led Parliament to respond with the 1736 Charitable Uses Act.23 This prevented any land or income immediately derived from realty being granted by will to any charity, including the Church or any religious house, but excepting certain favoured corporations, namely the colleges at Oxford, Cambridge, Eton, Winchester and Westminster. Donors could make charitable gifts of realty only if they sealed a deed of transfer before two witnesses at least 12 months before death and registered the deed at least six months prior to death. Bequests of personalty used to buy land for charity were subject to a limit of six months before death. The policy of the statute was to restrict profligate charitable giving by requiring donors to sacrifice their living wealth and do so publicly. This would restrain the subtraction of land from the estates of their heirs and prevent too much wealth going into mortmain. The 1736 statute caused continuing controversy and was subject to amendment (and countless parliamentary debates) all the way down to the Mortmain and Charitable Uses Act 1891, a sweeping reform that narrowed the statutory prohibitions to vanishing point. An early amendment to the initial Act 22

Charitable Corporation v Sutton (1742) 2 Atk 400, 26 ER 642; 9 Mod 349, 88 ER

500. 23 Jones (n 12) 105–33; C Stebbings, ‘Charity Land: A Mortmain Confusion’ (1991) 12 Journal of Legal History 7.

166 Joshua Getzler importantly relaxed the prohibition to allow testators to give or help the purchase of land for direct Church usage, for example to provide a field for a church building to be built upon; the main prohibition left in place was to stop land going to charity as capital for income. The courts took a lot of business interpreting the 1736 statute, and tended to be hawkish in its enforcement. This created a conundrum—in order to prevent land being devised to a charity, the courts strained to define charitable giving very broadly as any gift tending to public benefit. But this meant that on the personalty side, the slightest indication of a public benefit to a gift would involve the courts clamping a testamentary trust on the gift and ensuring it was taken out of the family inheritance and devoted to charitable causes, by operation of cy-près if necessary. So the 1736 Act perversely operated to keep land out of and sweep personalty into charitable uses. For donors who wished to leave their real property by will to charity, and who therefore needed to evade the 1736 Act, one solution was to leave a bequest absolutely to favoured clerics as individuals, subject to precations that they should apply the wealth to vaguely good objects, such as ‘liberal’ or ‘benevolent’ purposes. By giving the wealth to the churchman and not the Church, and by substituting broad precatory language rather than the mandatory language of trust, a gift of realty or personalty ad piam causam could be effected in evasion of the statute. The evasion tactic in effect revived testamentary practices of the pre-Reformation medieval Church. We can see the bequest in issue in Morice as just such a tactic gone askew, with the old evasion device of a precatory bequest to an individual being misapplied to personalty, and then mixed up with trust instructions that wrecked all chance of an absolute interest taking effect outside charitable regulation. Such legal tangles in recording charitable intentions were very common as the legal controls of charitable wealth were so complex. By the early nineteenth century the social charities had mutated yet again; they were more decentralised, launched by private rather than Crown initiative, and often with strong Church participation adding a more religious tinge. The Church charities, now driven by evangelical fervour, might promote individual and communal self-reliance and moral improvement rather than seeking directly to alleviate distress or maintain incomes. Richard Tawney described the new mood as follows: that the greatest of evils is idleness, that the poor are the victims not of circumstances but of their own ‘idle, irregular and wicked courses’, that the truest charity is not to enervate them by relief, but so to reform their character that relief may be unnecessary.24

24

RH Tawney, Religion and the Rise of Capitalism (London, Murray, 1926) 238.

Morice v Bishop of Durham 167 We shall next see how the evolution of charitable law and practice, and the new evangelical forms of disciplinary and redemptive charity, impacted on the litigation in Morice v Bishop of Durham.

C. DECIDING MORICE IN THE MIDST OF CRISIS: WAR, DISTRESS AND THE ABOLITION DEBATE

The decade up to 1804–05 was a time of insecurity in Britain. The population had grown by 50 per cent in the preceding half-century, wages had declined by 15 per cent and urbanisation of the population had doubled to 25 per cent in that same period, and there was great privation and unrest.25 War with France which had started in 1793 flared again, and the threat of invasion was only finally dispelled with Nelson’s naval victory at Trafalgar in October 1805; meanwhile, in that year Napoleon’s land armies soundly defeated Britain’s Continental allies. Increasingly embittered and partisan politics at home engrossed the ruling classes, including Lord Eldon, an unusually powerful and active Lord Chancellor who took the side of reaction against growing radical demands for democratisation and reform. William Pitt the Younger had to battle to keep his government alive in the teeth of corruption scandals and messy coalition plots, all the while preoccupied by stark military and diplomatic responsibilities. On top of this, the campaign for the abolition of the transatlantic slave trade was reaching its apogee, with William Wilberforce cajoling his friend Pitt to lead Parliament forward in this great moral cause, but with little success. Wilberforce’s amiable personality and charisma was an important factor in the long political campaign for abolition. His gift for friendship embraced Sir John Scott, then Solicitor-General and later Lord Eldon, who out of loyalty to Wilberforce uncharacteristically supported his move to set up an inquiry into the slave trade in May 1789.26 Wilberforce was also close to Shute Barrington, the foremost Anglican cleric of that time, a man of noble birth with extensive connections and influence.27 In 1791 Barrington was translated to the see of Durham, and hence sat as Prince Bishop of the County Palatine, the semi-independent dual diocese and lordship of the North that had once rivalled the Crown in wealth and power. Barrington together with Wilberforce founded and ran many charities

25 RC Allen, ‘Progress and Poverty in Early Modern Europe’ (2004) 56 Economic History Review 403. The population of the United Kingdom in 1750 stood at approximately 10 million; by 1800 it was 15–16 million; there was a population peak in 1841 of some 27 million prior to the period of famine and emigration that followed. 26 RA Melikan, John Scott, Lord Eldon 1751–1838: The Duty of Loyalty (Cambridge, CUP, 1999) 61. 27 EA Varley, ‘Shute Barrington (1734–1826)’, Oxford Dictionary of National Biography (Oxford, OUP, 2004) online edn accessed 12 July 2010.

168 Joshua Getzler across the land.28 By widespread acts of charity Barrington believed that the Anglican Church could embrace and capture the moral fervour of the evangelical movement, and help create a national consensus around Church, Crown and Parliament. He deemed it necessary for the Church to offer social improvement and political leadership in order to counter Jacobin republicanism and political Catholicism, both of which he vehemently opposed, and sometimes mixed up as a conjoined enemy, claiming that the excesses of the old clerisy had provoked atheistic rebellion in France. A characteristic mixture of evangelical and political purpose was revealed in the activities of the chief charity created by Barrington and Wilberforce together with Thomas Bernard in 1798, which was known as the ‘Society for Bettering the Condition of the Poor’. Its major goal was to boost the selfrespect and independence of the poor so they could look after themselves, through spiritual education and the encouragement of decent family households embedded in God-fearing communities. Bernard made quite clear that he opposed any distribution of money to the indigent, as provided by the unreformed Poor Laws of the time which provided family maintenance payments. These payments, he held, would undermine incentives and moral fibre, and in an open letter published in 1802 and addressed to the Bishop of Durham as the Society’s President, Bernard made his views clear:29 The Poor Laws of England have held out a false and deceitful encouragement to the population. They promise that unqualified support, that unrestricted maintenance, to the cottager’s family, which it is not possible for them to supply; thereby inducing the young labourer to marry, before he has made any provision for the married state; and, in consequence, extinguishing all prospective prudence, and all consideration for the future … Whatever encourages and promotes habits of INDUSTRY, PRUDENCE, FORESIGHT, VIRTUE, and CLEANLINESS among the poor, is beneficial to them, and to the country; whatever removes, or diminishes, the incitement to any of these qualities, is detrimental to the STATE, and pernicious to the INDIVIDUAL. This is the POLAR STAR of our benevolent affections; directing them to their true end.

The Bishop’s charitable endeavours conformed to this ideal of encouraging self-help. In a characteristic move, he once had his second wife, Jane, distribute beehives to every household in a Durham village so that the yeomen could cultivate their own honey, even as he racked their rents. Indeed it was in these years that a new consensus grew between the Evangelicals of the Church and the evangelicals of political economy that the out-door relief or income support provided by the old parish Poor Law system was no charity but a harm to the populace, leading eventually to the disciplinary 28 B Hilton, The Age of Atonement: The Influence of Evangelicalism on Social and Economic Thought 1785–1865 (Oxford, OUP, 1986) 98 ff. 29 T Bernard, Introductory Letter to the Reports of the SBCP, vol 3 (1802) at 10–11, 20–21, quoted in Hilton (n 28) 99.

Morice v Bishop of Durham 169 New Poor Law of 1834.30 It is interesting that William Wilberforce thought differently, supporting in Parliament Samuel Whitbread’s radical 1807 proposals for increased financial support to needy families. The Commons roundly rejected such a character-destroying measure.31 Wilberforce also supported Whitbread’s proposal of free and compulsory education for a two-year minimum between the ages of 7 and 14; surprisingly this measure passed the Commons, only to face defeat in the Lords, yet it is counted the legislative harbinger of the modern State educational system that emerged in 1870.32 So Wilberforce may well have taken a more radical view than Barrington and his other charitable colleagues on the proper role of charitable and State welfare provision in the conditions of his time. Whatever their respective social and theological views, Barrington and Wilberforce were certainly united in their commitment to the great cause of abolition of the slave trade. Barrington collected vast sums for charities that he controlled, exploiting his position as a fashionable cleric to launch charity events that attracted the prominent and wealthy to his table and their subscriptions to his causes; and it is likely that some of these means were spent to promote Wilberforce’s abolitionist campaign. What united these men was an evangelical belief that charitable and moral activism was essential to bind society together and bring redemption to all stations of society. Abolitionism entirely fitted into both men’s vision. The Chancery case of Morice v Bishop of Durham took place during the slave trade abolition controversy then being battled out in Parliament. It may be that partisan motives entered into the case, reflecting the political turmoil of that year. Sir William Grant MR decided Morice on 26 March 1804, a few weeks before a major show-down in the Commons over a Wilberforce abolition bill in May and June.33 Lord Eldon gave his judgment on the Morice appeal almost exactly one year later on 20 March 1805, just as the Government was tottering following revelations of corruption by Lord Melville, the First Lord of the Admiralty. The appeal case also followed on a division in the House of Commons three weeks earlier

30 Debate over the nature and impact of the reformed Poor Laws has continued against a backdrop of political conflict over the modern Welfare State, as shown by M Blaug, ‘The Myth of the Old Poor Law and the Making of the New’ (1963) 23 Journal of Economic History 151. Important recent contributions include: LH Lees, The Solidarities of Strangers: The English Poor Laws and the People, 1770–1948 (Cambridge, CUP, 1998); J Innes, ‘The Distinctiveness of the English Poor Laws, 1750–1850’ and J Harris, ‘From poor law to welfare state? A European perspective’, both in D Winch and PK O’Brien (eds), The Political Economy of British Historical Experience, 1688–1914 (Oxford, OUP, 2002); L Charlesworth, Welfare’s Forgotten Past: A Socio-Legal History of the Poor Law (London, Routledge, 2009). 31 W Hague, William Wilberforce: The Life of the Great Anti-Slave Trade Campaigner (London, Harper, 2007) 360. 32 R Fulford, Samuel Whitbread, 1764–1815: A Study in Opposition (London, Macmillan, 1967) 176–80. 33 Hague (n 31) 315–26.

170 Joshua Getzler on 28 February 1805, when another Wilberforce bill for the abolition of the slave trade was lost, followed by a further defeat on 3 March when the reintroduced bill was lost by only seven votes, reversals that demoralised Wilberforce and nearly derailed his campaign.34 Hostilities over the abolition of slavery may have played some part in the atmosphere of the case, for the Bishop of Durham, who had supported abolition with the other Bishops in the Lords, found his liberal stance brought him opposition from many parts of the Tory interest, which most definitely included John Scott, Lord Eldon. Indeed Eldon himself gave speeches from 1804 through to 1807 as Lord Chancellor from the floor of the House of Lords urging against rapid abolition.35 On 3 July 1804, on the second reading of a slave trade abolition bill in the Lords, Eldon’s biographer Twiss reports that [t]he Lord Chancellor said he did not recollect to have ever given a vote on this subject. But he thought it fair to those whose property would be ruinously affected by the Bill, to take time for deliberation, and asked of their Lordships to exercise their humanity and justice, not on partial, but upon comprehensive principles.

In those debates of 1804 Eldon insisted ‘[t]here was no man more inclined to the abolition of the slave trade than himself’, but he also held it would be a dangerous act of moral self-indulgence and injustice to force the present generation of slave-owners and traders to pay with their fortunes for this moral cause.36 Slave trading and slave holding were therefore to be tolerated and continued on the impartial principle of protecting vested rights. This was not the first time that judges reached for formal justice principles to preserve the rights of slave-owners to enjoy their human property, neither would it be the last.37 We can only speculate what might have happened had the case of Morice been decided the other way and the money gone to Wilberforce’s friend Bishop Barrington to spend as he ‘in his own discretion shall most approve of’, in the midst of that most crucial debate over the legality of slave trading. In the event, the abolition of the slave trade passed with sizeable majorities two years later, on 16 May 1807, though the transatlantic institutions of slavery took much longer to die. In the light of this controversy that so absorbed the elites in 1804–05, the repression of public charities for objects of ‘benevolence and liberality’ in the case of Morice takes on new possible meanings. The medieval bishops 34

HC Deb 28 February 1805, vol 3, cols 641–47; Hague (n 31) 293–356. H Twiss, The Public and Private Life of Chancellor Eldon (London, Murray, 1844) I, 459; II, 21–23; see also W Hazlitt, ‘Lord Eldon and Mr Wilberforce’ in The Spirit of the Age (London, Colburn, 1825) Essay 15, II, 313. 36 Melikan (n 26) 254. 37 See, eg, the discussions of The Zong, Gregson v Gilbert (1783) 3 Doug 232, 99 ER 629, in (2007) 27 Journal of Legal History 285 ff; C Mitchell and L Turano, ‘Buron v Denman (1848)’ in C Mitchell and P Mitchell (eds), Landmark Cases in the Law of Tort (Oxford, Hart Publishing, 2010) 33–68. 35

Morice v Bishop of Durham 171 had commonly taken control of personal estates of the deceased and administered them for pious causes; Cracherode’s bequest to Barrington could be fitted into that ancient pattern. The decision in Morice headed off the direction of a sizeable bequest into the hands of a high official of the Church by a testatrix happy to see that cleric had the widest latitude in the spending of such wealth on good causes, including political causes that clearly fell outside conventional charity. Not only a desire to clarify the nature and enforceability of a private trust, not only mortmain concerns, but also a desire to reduce the clout of the Church in its control of testamentary and charitable wealth may have been engaged in this episode. A closer examination of the facts of the case shows that the court was indeed addressing issues of the role of clerics in administering succession, and attendant problems of undue influence and the fiduciary status of executors. To the facts of the case we now turn.

D. THE CRACHERODE WILLS AND THE BISHOP OF DURHAM

Ann Cracherode’s philanthropic impulses were made possible by two accidents of family: that she never married, and that her childless brother, Clayton Mordaunt Cracherode, himself a wealthy landowner and philanthropist, had failed to exhaust his estate with charitable bequests and legacies, thus leaving Ann a sizeable remnant of the Cracherode family estate.38 That Clayton Cracherode did not manage to spend his entire fortune was not through want of trying. He came from old gentry stock but took no interest in harbouring the family estate or continuing the family line, spending his entire life as a sheltered Oxford don and London cleric and cognoscente. Such were the habits of his introverted private life that he never once visited his lands at Great Wymondley in Hertfordshire, being content to draw the income as a very absent landlord. Clayton was born in 1730, the son of a British army general, who sent him to be educated at Westminster School. He went up to Christ Church, Oxford, to read classics and divinity, going on to take a Masters of Arts degree and a studentship (that is, fellowship) of the College. His duties in the College seem to have been undemanding, and he maintained his position there until his death. He also entered the Anglican priesthood and took a small living at Binsey, an ancient church on the edge of Port Meadow in Oxford. He never married,

38 Unsigned obituary, (1799) 69 Gentleman’s Magazine I, 354–56; GH Martin, ‘Cracherode, Clayton Mordaunt (1730–1799)’, Oxford Dictionary of National Biography (Oxford, OUP, 2004), online edn accessed 4 August 2010; A Griffiths, ‘The Reverend Clayton Mordaunt Cracherode (1730–99)’ in A Griffiths (ed), Landmarks in Print Collecting: Connoisseurs and Donors at the British Museum since 1753 (London, British Museum Press, 1996) 43.

172 Joshua Getzler and it was said that his whole life he never travelled except to oscillate by coach between his homes in Westminster and Oxford, being too timid to ride a horse. In 1773, at age 43, he inherited a considerable fortune, and over the next quarter of a century he spent much of his wealth on rare books, prints, coins and gems, as well as on a marvellous collection of prints by old masters. By all accounts he was learned and discriminating in his book-buying, and had refined taste and considerable enterprise as an art collector. He died in 1799, and in his will he gave almost the entire collection to the British Museum, of which he was a trustee. As a great public benefactor, he was buried in Westminster Abbey. He was said to be second only to Sir Hans Sloane in building the Museum’s collections, bringing to it some 529 works of Rembrandt and 73 of Dürer amongst the drawings and prints, and some 4,500 volumes including the first illustrated edition of Dante’s Divine Comedy (printed in 1481) and many other ancient tomes, of value near £25,000 in total. Particularly beautiful and renowned was the 1653 etching of The Three Crosses by Rembrandt. Today the British Museum lists some 4,930 items from the Cracherode bequest. Aside from the Museum bequest, Clayton’s elaborate home-made will directed some lesser bequests and legacies, made a trust to pay debts, and left the residue of his estate, realty and personalty, to his sister Ann, who was 12 years his senior, being born in 1718. Clayton died on 5 April 1799 and Ann proved the will on 17 April. So she found herself in her early eighties a woman with no immediate family and sitting on considerable wealth. It is a truth universally acknowledged, that a single elderly woman in possession of a good fortune must be in want of a charming priest. Ann was indeed to make friends with a priest very shortly, and a lofty one at that, in an episode that could almost have come from the pages of Jane Austen. It so happened that brother Clayton was also a close friend of Shute Barrington. The men had broadly similar backgrounds. Barrington had been schooled at Eton not Westminster, and was four years junior to Clayton, being born in 1734. Like Clayton, Shute’s was a story of a scion of the minor gentry moving up the social scale through Oxford and the Church. Shute was the fifth son of an Irish landowner who had been made viscount. He made his way as a scholar and after a distinguished student career at Oxford was rewarded on graduation with fellowships at Merton and Christ Church, and in due course took a Doctorate of Civil Laws. At Christ Church, where he held a canonry on top of his studentship, he would have been in close contact with Clayton Cracherode. At 35 years of age he was made Bishop of Llandaff, and he also held various other wealthy livings, including the prebendary of St Paul’s which would have put him into the thick of London society. Shute first married Diana Beuclerk, the daughter of the Duke of St Alban’s, who died in childbirth, and then Jane Guise, the daughter of a baronet, who brought him a large dowry. His personal fortune of £160,000 at death derived in part from his marriages but mainly from the emoluments

Morice v Bishop of Durham 173 of a well-rewarded career at or near the top of the Church hierarchy. The wealth of the churchmen in this era was notorious, and also a source of controversy as it was rooted in tithes and taxes that were seen to burden agriculture and business, and the fiscal emoluments and privileges of the clergy were finally curbed in legislative reforms in 1836. But all that lay in the future.39 During Barrington’s earlier career in London he drew closer to his great friend Wilberforce, and soon became his chief supporter and a major source of his funding, at a time when other clerics kept their distance. Barrington adopted Wilberforce’s anti-slave trade cause as his own, attacking that trade in 1775 as ‘a traffic as inhuman in the mode of carrying it on, as it is unjustifiable in it’s principle’.40 Wilberforce reciprocated Barrington’s admiration and support, referring to him as ‘a very sun, the centre of an entire system’.41 The two great men had much in common—born to wealth, power and privilege; urbane, sociable and well-spoken; and mixing radical fervour in religious and moral causes with the traditional views of the elite. Yet Barrington’s basic conservatism exceeded that of Wilberforce, and should not be ignored as a factor in their relationship. The Bishop demonstrated his loyalty to the Crown that had early preferred him by speaking in favour of the Anglican monopoly in public life, and even praising the Stuart monarchy and condemning the Commonwealthmen in public sermons (though his own forebears had been Roundheads). When Barrington’s father William fell victim to a court plot and lost his pension, George III reinstated his privileges and insisted that William’s son Shute be given the greater diocese of Salisbury to show the family favour. So in 1782, at the age of 48, Shute found himself ensconced in wealth and power in one of the most regarded clerical posts in England. Bishop Barrington immediately demonstrated to his new diocese his phenomenal capacities for charitable activity. He was talented both at getting and spending. He set up large charitable trusts to repair the cathedral and episcopal palace, and also to maintain the poorer clergy; this harked back to the medieval tradition of ‘pious causes’ that was evoked earlier, whereby charity was seen as nearly synonymous with the welfare of the Church. The new Bishop of Salisbury was especially successful at raising funds by public subscriptions, allowing donors to associate themselves with larger good causes, and here Barrington was helped by a well-publicised ‘anonymous’ donation by a Berkshire gentleman who toured the diocesan buildings for

39 EJ Evans, The Contentious Tithe: The Tithe Problem and English Agriculture 1750–1850 (London, Routledge & Kegan Paul, 1976); G Best, Temporal Pillars: Queen Anne’s Bounty, the Ecclesiastical Commissioners, and the Church of England (Cambridge, CUP, 1964). 40 S Barrington, Sermons, Charges and Tracts (London, Bulmer, 1811) 45. 41 JH Overton, The English Church in the Nineteenth Century, 1800–1833 (London, Longmans, Green, 1894) 89.

174 Joshua Getzler a whole day and concluded the tour by signing the subscription book and giving over a bill drawn for £1,000. The man’s credit was sound, for it was George III himself, travelling incognito in order to visit his loyal subjects and inspect the activities of a favoured bishop. Barrington certainly made charitable activity his leitmotif; for example, in a sermon in 1783 he spoke of his ‘ardent wish of contributing to the general welfare’ through philanthropy.42 But he was not all sweetness and light; in his sermons and public speeches he lambasted Methodists and dissenting evangelicals, and argued to maintain the religious disabilities against non-conformists and most especially against Catholics.43 His concept of charity was not general investment in religious life and community, but rather that respectable Anglican society should pour money into the national Church to enable it to do good works, guided by safe hands such as his. Perhaps blunting the aggression of his public political views, Barrington was known to be genial and broad-minded in his personal life. He had warm relations with evangelicals within the Church and dissenters without, closer perhaps than any other leading churchman; and he also befriended French Catholic bishops exiled by the Revolution, whom he supported materially. Shute Barrington’s star ascended still further when he became the Prince Bishop at Durham in 1791, and this led to further enlargement of his charitable enterprises. Perhaps the crown of this was Barrington’s creation of a network of educational institutions, starting with Sunday schools and eventually leading to whole systems of day schools and teacher training colleges. As a great landowner at Durham, he was adept at squeezing rents and mining royalties to pay for his charities, and his final major round of school foundations was paid for by a legal action he won for arrears of lead-mining royalties that yielded him the vast sum of £70,000. Barrington was also closely involved in charities for dissemination of bibles and other books to the poor, for the education of clergy and teachers, and for the promotion of ecclesiastical scholarship; for example, William Paley did his greatest work as a moralist and theologian in Barrington’s circle in Durham, and Barrington appointed him to a wealthy rectory to support him in old age. Barrington’s charitable activities remained thoroughly entwined with those of Wilberforce, particularly after the move to Durham. Together they created in 1796 the Society for Bettering the Condition and Improving the Comforts of the Poor, and they recruited the national clergy in droves to support it. But this was only their largest and most prominent venture; together they also started up nearly 50 other charities, with Barrington personally 42

Barrington (n 40) 76. Shute Barrington’s views of Roman Catholicism are laid out in his tract The Grounds on which the Church of England Separated from the Church of Rome Reconsidered, in a View of the Romish Doctrine of the Eucharist (London, Bulmer, 1809). 43

Morice v Bishop of Durham 175 serving as President or in some other office-holding role in maybe half of Wilberforce’s philanthropic organisations. The two men’s philanthropic partnership dominated Anglican social action at the turn of the century. Barrington saw philanthropy and faith as the twin foundations of his religion: ‘genuine Christianity’ was ‘the union of pure devotion with universal benevolence’.44 He was said to be frugal at home in order to be liberal in the world outside: ‘No one … ever better understood the true value of money, or employed it more judiciously as the instrument of virtue.’45 So how did so great a figure as Shute Barrington and one so worldly in the ways of clerical finance become embroiled in the headache of the Cracherode inheritance? Much may be learnt from the Bill and Answer in the case of Morice, together with other Chancery records touching on the case that are preserved in the National Archives.46 We must be careful in using the pleadings of the rival parties and the arguments of counsel as objective sources of fact; but where the parties managed to agree, we can be relatively certain of the forensic value of these narratives. Before moving into the details of these pleadings it is as well to set forth what can be known of the plaintiff William Morice himself.47 He was born in 1733, a first cousin of Clayton and Ann, his father being brother to Cracherode’s mother. Confusingly, Morice’s father was also named William; and his sister, the co-plaintiff, shared the name Mary with Clayton’s mother. William Morice was educated at Hertford College, Oxford, and served as a curate and then rector in London over a good half-century. From 1768 he held the post of Secretary of the Society for the Propagation of the Gospel, and organised missionary activity across the globe; in this role he became close to the Archbishop of Canterbury and the Bishop of London, luminaries of that Society. He must have greatly impressed the church elders in London, for in 1772 he became Chaplain-in-Ordinary to the King, and was made a Doctor of Divinity in 1781. He was a well-connected and important churchman in his own right, and would have had the self-confidence to challenge even a great prelate such as Shute Barrington in order to prevent the residue of his cousin’s estate leaving the family. With seven children of his own he certainly would have need of the money, as his counsel Romilly adverted to in argument. William brought the action to claim the

44

Barrington (n 40) 244. Durham County Advertiser, 8 April 1826, 4, col 1. 46 National Archives, London, C 13/602/15—Bill in Chancery of William and Mary Morice; Answers of Shute Barrington, the Lord Bishop of Durham, the Reverend Richard Bullock, and four others; C 13/1378/9—Examination of Shute Barrington, Bishop of Durham; TS 11/371—Copy Bill and Brief of the Attorney-General Spencer Perceval (with annotations of counsel, Mr John Mitford) in Morice v Bishop of Durham; the various documents are dated January–November 1803. 47 FV Mills, Sr, ‘William Morice (1733–1819)’, Oxford Dictionary of National Biography (Oxford, OUP, 2004), online edn accessed 30 July 2010. 45

176 Joshua Getzler residue of cousin Ann’s estate jointly with his sister Mary, of whom little is known. William lived at 53 Gower Street, midway between the sites where University College and the new British Museum were to be built some two decades after his great case. According to William Morice’s pleadings,48 Clayton Cracherode had died leaving real estate of over £50,000. The Bill narrated that legacies were given of £500 to the Westminster School, £100 to the Westminster Infirmary, then a conventional trust to pay debts. The residue of Clayton’s real and personal estate was said to be left to Ann. Morice may not have stated the whole of the estate value nor the terms of the will accurately; according to probate, Clayton had left behind over £100,000 in 3 per cents, yielding £2,300 per annum, as well as his lands and his vast art and book collection. His rents alone brought him £800 per annum. His legacies and bequests were in fact on a much greater scale than Morice’s Bill narrated—£1,000 each to Westminster School and Christ Church, his collections and much of his personalty to the British Museum. It was notable that Parliament bestowed upon Clayton’s various public donations an ad hoc charitable exemption from duties, a privilege embracing the legacies to the educational corporations and ‘the Books etc lately bequeathed to the British Museum’.49 Clayton also made assorted smaller bequests to friends.50 Shute Barrington was left three precious early sixteenth-century copies of the Bible from Spain and Italy, and another friend received further antique books, including one of the earliest Homeric texts extant in print. These treasures were later gifted back into the Cracherode collection at the British Museum by the recipients. The scale of Clayton’s overall and residual estate turned out to be an important issue in the will proceedings that followed Ann’s death. This was because the first important claim of Morice was that Ann was too old and frail to understand the size of her inherited fortune. Therefore her testamentary instruction directing the residue of her personal estate to the control of Barrington was vitiated by mistake or ignorance, since Ann had no idea of the great extent of that residue. According to the Bill, the octogenarian Ann was ‘very deaf so as to be constantly obliged to use an Ear Trumpet … very weak and infirm in Body … and was unacquainted with the extent of her Brother’s Fortune’. Then came what was in effect an accusation of undue influence against the good Bishop Barrington. Apparently Barrington had never met Ann Cracherode before Clayton’s

48

C 13/602/15, Bill of William and Mary Morice, dated 27 January 1803. The Times, 20 June 1799, reporting a House of Commons resolution in committee the day before. 50 Clayton’s personal papers were destroyed on his death, as his will dictated. Probate and the records of the British Museum may reveal how much of his personal estate went to the British Museum and how much was bequeathed elsewhere. 49

Morice v Bishop of Durham 177 death. But the Bishop introduced himself ‘a day or two after the Death of Clayton’, as a friend of the deceased who knew Clayton’s mind very well and who would ‘assist her in the arrangement of her affairs’ and help her distribute her estate to such objects as Clayton would have wanted. Terms for various legacies were discussed, and then the undue influence, even pressure began. According to the Bill, Barrington won Ann’s confidences and in due course insisted that he be made sole executor and residuary legatee of the personalty, for him to distribute to ‘such objects of benevolence and liberality’ as he ‘in his own discretion shall most approve of’. On the day he made this proposal, the Bill asserted, he insisted on a positive answer, else ‘he would have nothing more to do with her concerns and walked into the next room’. Ann decided to concede what the Bishop asked, for as she said, the ‘Lord Bishop was a good Man’, of ‘high rank, higher than her family’; and he would take nothing for himself but ‘an Office of Care and Trouble’. According to the Bill, Barrington then affirmed to her that he ‘refused to take the Executorship on any other condition than as a Trust, and not for his own Benefit’. Very shortly a new will by Ann had been drafted with Barrington’s assistance, leaving a £16,000 legacy to the cousin William Morice, a further £17,000 to one Reverend Richard Bullock DD, another high-born and well-connected London clergyman, and various other small legacies to kin and friends, together with the traditional clause dictating a trust to pay all debts due at death. The residue of personalty left on Ann’s death in 1802 turned out to be more than £30,000. To estimate the scale of this wealth, on an historical retail price index this would amount in present prices to £2.1 million. On an average earnings index the figure is 10 times greater. Morice prayed for this enormous gift of residue on trust to be declared ‘void for uncertainty’, but also argued that it was voidable for mistake and ignorance since Ann did not know what she was leaving, and also bad due to ‘misrepresentation’ and pressure by the Bishop. The terms of the misrepresentation were that Clayton had wanted the residue of the family wealth to go to charity, but that the Bishop had misrepresented his wish in order to induce Ann to give him the greater powers over the residue. It was further suggested that the large legacy to Bullock was tainted by the conduct of the Bishop in procuring it.51 The Reverend Bullock gave his own Answer to the Bill, protesting his bona fides and those of the Bishop, and defending his large legacy from impeachment. His own career exemplifies that union of money, religion and

51 Bridgeman v Green (1755) 2 Ves Sen 627, 28 ER 399 (per Lord Wilmot) had established that an innocent third party could not retain a benefit procured by the fraud or undue influence of another; the doctrine was affirmed by Lord Eldon shortly after Morice in Huguenin v Baseley (1807) 14 Ves Jun 275, 33 ER 526. For the relationship of the more familiar equitable undue influence with the separate probate jurisdiction over undue influence, see P Ridge, ‘Equitable Undue Influence and Wills’ (2004) 120 LQR 617, 620–26.

178 Joshua Getzler patriotism of his generation of clerics. In 1797, during a fiscal crisis caused by war, he joined a lobby of merchants under the Lord Mayor publicly advocating acceptance of convertibility of Bank of England notes,52 and in 1798 he organised a ‘voluntary subscription’ in his parish in Streatham to raise further war finance; £1,493 5s was immediately subscribed ‘with the most perfect Unanimity … and a Committee was appointed to receive the further Subscriptions of such Persons as were prevented attending here to-day’. The good parishioners then voted to thank their Reverend for his ‘impartial Conduct’ in collecting and directing their money to the good of the nation.53 He even married his daughter patriotically, to a Scottish RearAdmiral. As it turned out, his sizeable legacy from Ann survived Morice’s attack. But the Bishop was not so fortunate. What are we to make of the accusations of wrongdoing made against a noble and regarded Bishop? It may be that these were merely a conventional type of allegation, not entirely specious but added to the pleadings to lard up the case. Accusations of bad conscience might also be added in to provide a firm basis for the jurisdiction of Chancery as a court able to prove or void a will. The trying of fraud gave the Lord Chancellor a juristic cause to remove the probate from the default jurisdiction of the Prerogative Court of the Archbishop of Canterbury; trusts raised against a deceased’s estate for payment of debt could perform a similar jurisdictional function.54 We might also guess that the allegation of fraud was inserted substantively as an alternative ground of decision, a backstop, should the uncertainty argument fail. It may be that insinuating bad conduct in one’s adversary was part of the rhetorical process of argument in the Court of Conscience, tracking the classical rhetorical rules that one should make sure to blacken one’s opponents and destroy their credibility when putting one’s own case. No outright accusation of fraud or undue influence was made, simply ‘misrepresentation’ and exploitation of ‘mistake’ and ‘ignorance’, what we might now call unilateral mistake or exploitation of vulnerability vitiating full consent by the testatrix. Yet the narration of how Barrington had stormed out of the room in order to push Ann to accept his sole executorship and control of her residue, presuming on his power as a man of rank and importance, looks like something more than a conventional story. Maybe Morice even showed a certain daring in so impugning the conduct of a great Lord Bishop in open court. As it turned out, arguments concerning fraud and vitiated intention never surfaced in the two Chancery hearings of 1804 and 1805; indeed the Bishop’s good faith was anxiously affirmed at all times. We cannot know if the court’s decision to avoid the 52

The Times, 27 February 1797. The Times, 13 February 1798. 54 Helmholz (n 14) and references (n 19) above. I am grateful to Mike Macnair for the point about trusts for debt. 53

Morice v Bishop of Durham 179 will for uncertainty was driven in part by judicial unease at the Bishop’s conduct. The merits may have been against him as well as the law. What, then, was Barrington’s defence? In his Answer55 he stated that Ann at all times was of ‘perfect mental faculty’ and ‘went walking in fine weather’. She spoke clearly, ‘in distinct voice’. Before making her will she had taken an account of her estate and knew exactly its extent and what she was doing with it. Barrington claimed he himself had no idea of the extent of the estate and thought the residue likely to be ‘negligible’. Ann had initially asked Barrington to be executor, ‘and pressed him to accept the Residue for his own use which he declined … She then desired this Defendant to accept it in Trust’. Barrington asked her if she had no person to give it to; on ‘her assuring him she had not’, he agreed to proceed. Another factor was that Ann’s agent who managed her estates had quite recently lost her the sum of £800, whether through negligence or fraud it was not said. Ann had asked cousin William to manage her affairs after that incident, but then turned to her new friend Barrington for help because of his ‘high Rank compared to her Relations’. Ann some time later dictated a new will revising her legacies and providing that the residue be distributed by the Bishop to the kind of objects that her late brother might have approved; the Bishop took that to mean that he should have a ‘power’ and ‘discretion’, and recorded that instruction in the language of ‘objects of benevolence and liberality [etc]’. There seem to have been various drafts and codicils, but ultimately the will was finalised on 16 April 1801. The story of his storming from the room to force Ann’s hand the Bishop rejected, with ‘protestations of Honour’, asking why no witness of the parlour incident had been brought forward as informer.56 There is one more element of the story of the relationship of Ann and her new friend ‘of high Rank’, the Lord Bishop. Barrington included Ann in a series of London dinners and charity events between the time of their meeting in 1799 and her death three years later.57 There she could mingle with the cream of society and tastefully advertise the application of her newly-inherited wealth to good causes. The Times reported a star-studded event that took place on 27 March 1801: At a Respectable MEETING of INHABITANTS of the METROPOLIS … for the purpose … of commencing a SUBSCRIPTION for the FURTHER RELIEF of the LABOURING POOR of the Cities of London and Westminster, the Borough of Southwark, and adjacent Parishes; The LORD BISHOP of DURHAM in the Chair: Resolved unanimously, That a further Subscription be now made, for the

55

C 13/602/15, Answer of Shute Barrington, 14 May 1803. These details come from C 13/602/15, Answer of Shute Barrington, and TS 11/371, Copy Bill and Brief of the Attorney-General. 57 Death Notice, The Times, 19 July 1802, overstating Ann’s age at death as 85, again styling her ‘Mrs Anne Cracherode’. 56

180 Joshua Getzler purpose of alleviating the distresses of the Industrious Poor, by affording them certain Articles of Provision at reduced prices, and for other necessary relief.

A subscription was immediately entered, and at the head of the list of 64 subscribers stood the Bishop of Durham, who gave £52 10s, his wife, who gave £10 10s, and in the third place one ‘Mrs Cracherode’ who gave £10 10s. Forty-ninth was ‘W Wilberforce Esq, MP’, who gave £21. Many others gave £50, but Ann Cracherode (for it must have been her; ‘Mrs’ denoted a woman of rank as well as a married one) was given the greater honour. The meeting then empowered a ‘Committee for the Relief of the Industrious Poor of the Metropolis’ comprising ‘Noblemen and Gentlemen’ (including the Bishop and Wilberforce) to carry forward the good works; fresh subscriptions were invited to be received ‘at Lloyd’s Coffee-house … and by all the Bankers of the Metropolis’. We find Ann supporting a prominent London charity in March 1802, being a School for the Indigent Blind at St George’s Field. Again the Lord Bishop of Durham gave his imprimatur to this cause, serving as President. Ann gave £3 3s, alongside more than 150 other London worthies, but was unable to attend the sumptuous annual subscription dinner on 3 June; a few weeks later, on 17 July 1802, she died at her home in Queen Square, Westminster. The equity suit to overturn Ann’s bequest of residue commenced very shortly after her death in July 1802. After the initial decree in 1804, a notice was published on 23 July of that year addressed to Ann’s creditors, requiring them to bring their claims against the estate to a Master in Chancery or be excluded from the distribution.58 The appeal of March 1805 was followed swiftly by moves to execute the Morice claim; we have a notice of an auction of the Cracherode properties ‘to be peremptorily SOLD’, conducted on 30 April 1805 by the same Master in the Sale-Room of the Court of Chancery.59 And with this sale completed and the decree executed, Ann fades from public record.

E. THE LEGAL ARGUMENTS: BEFORE THE MASTER OF THE ROLLS

We have investigated the dramatis personae of this case in some detail. We may now turn to the arguments in court, which commenced before the Master of the Rolls on 7 February 1804. Counsel for Morice was Samuel Romilly, later to become a notable Solicitor-General and criminal law

58

The Times, 23 July 1804. The Times, 22 April 1805. There was a flutter of controversy whether the auction was tainted by its timing, possibly being mounted before all the public knew the confirmed results of the main litigation: see Morice v Bishop of Durham (1805) 11 Ves Jun 57, 32 ER 1009, per Lord Eldon C. 59

Morice v Bishop of Durham 181 reformer. In speaking against the Bishop’s claim to execute the residue, it is interesting what Romilly did not argue as well as what he did. The accusations of misrepresentation and undue influence contained in the pleadings seem to have been quietly dropped. This omission struck Lord Eldon as remarkable on the appeal. During the later hearing of 18 March 1805, he entered in his judicial notebook: ‘As to alledged mistake of Mrs C in making her will, that was not insisted upon at the hearing.’60 Barrington must have appreciated the tact as well as the skill of the counsel who helped defeat him, for shortly after the suit he appointed Romilly as Chancellor of the County Palatine of Durham, a lucrative post with few duties. Was there a secret or tacit pact? Romilly seized on Barrington’s statement in his Answer abjuring any personal interest in the residue: ‘This is admitted to be a trust…’ The key question then was whether the trust could take effect as a charity. The object of ‘benevolence’ might be read as a synonym for charity but not ‘liberality’, which tended to mean generous bounty to the public or to individuals at large. Romilly noted that ideas of charity and liberality changed over time: ‘Formerly [that is, in ancient Rome] exhibitions or combats by wild beasts and gladiators were considered objects of liberality.’ Today an exhibition of pictures for the public to enjoy might count as liberal provision, but this was not charitable giving comparable to the founding of a hospital. Neither would a court enforce a liberal trust to give a person or class of persons comforts. Romilly admitted there was little case law discussing uncertain objects of beneficence. The closest case was the unreported Brown v Yeall before Lord Thurlow,61 where it was decided that a trust to distribute religious books at large was ‘so absurd and impracticable, that it was impossible to execute it’, even though the goals of advancing religion and book-learning were laudable charitable objects. A modern court might say that the trust in Brown failed on the criterion of administrative unworkability. In Attorney-General v Whorwood, a 1750 case before Lord Hardwicke, a man gave his house in trust to University College, Oxford, the property to be inalienable for so long as a senior fellow should live in the house and give hospitality. The gift failed as charitable devise; Lord Hardwicke held that the addition of vague words requiring a good and civil use of the property did not add a tincture of charity to a private bequest; a benefit to one individual fellow who was expected to use the property casually to please others was private bounty only, it was a gift ‘answering no good to the college or the public’. The next question in Whorwood was whether the devised property was to go to the college absolutely, or to the heirs at law on resulting trust; this key question was reserved upon further inquiry 60 Lord Eldon, Judicial Notebook 1804–05, MS, Georgetown Law Library Special Collection, at 99. 61 Noted in Moggridge v Thackwell (1802) 7 Ves Jun 36, at 51–52; 32 ER 15, 20.

182 Joshua Getzler into the powers of the landowner as donor and of the college as donee.62 Romilly then raised the recent case of Townley v Bedwell,63 where before the Lord Chancellor he had argued to preserve a trust created to maintain a botanical garden. The testator had transferred his garden to trustees, and the residue of his personal estate to create a fund for the maintenance and enlargement of the garden. The testator also stipulated that the garden was to exist in perpetuity, ‘as I trust it will be a public benefit’. Romilly had compared this bequest to a valid trust to maintain a naval monument, but Lord Eldon had pointed out that trusts for monuments depended on the goodwill of the residuary heirs who ‘might pull it down’, that is they were merely trusts of imperfect obligation. The opposing argument of Richards, counsel for the heirs, was ‘that the object being either void, or not declared’, the property could not be converted as specified in the will instruction. Lord Eldon, agreeing that no valid charitable object had been stated, ‘asked, for whose benefit all this was to be’.64 He stressed that quite apart from mortmain constraints on perpetual charitable dedication of land by will,65 the gift of personalty to sustain the garden was void for vague objects. In the present case of Morice the roles of the two counsel in Townley v Bedwell were reversed, with Romilly now arguing for invalidity and Richards for validity. Richards was joined by Mitford representing the Attorney-General to support the charitable bequest. In the Rolls Court Richards did not directly argue that the Bishop might have taken an absolute ownership or general power subject to precatory instructions. Instead the suggestion was that if he took the property on trust to appoint to charitable objects that had failed for vagueness or impossibility, the trustee would be expected in due course to appoint to different charitable objects under the doctrine of general charitable intent. It would therefore be ‘premature’ to rush to court to avoid the initial trust whilst the trustee yet had that ‘personal trust reposed … to exercise his discretion’. For support counsel referred to Moggridge v Thackwell, an important case that had been argued elaborately before Lord Eldon two years before.66 In that case a testatrix had left a large personal residue to an executor, ‘desiring him to dispose of the same in such charities as he shall think fit, recommending poor clergymen who have large families and good characters’. The court could uphold the bequest as showing a general charitable intent,

62 Attorney-General v Whorwood (1750) 1 Ves Sen 534, 27 ER 1188, per Lord Hardwicke C Romilly claimed that later report held that the next of kin obtained the property in that case, but his reference to Corbyn v French (1799) 4 Ves Jun 418, 434; 31 ER 213, 221, per Lord Redesdale reveals no such result. 63 Townley v Bedwell (1801) 6 Ves Jun 194, 31 ER 1008; there was to be another round of litigation, (1808) 14 Ves Jun 591, 33 ER 648. 64 Townley v Bedwell (n 63) 198, 1011. 65 Eg the Charitable Uses Act 1736. 66 Moggridge v Thackwell (1802) 7 Ves Jun 36, 32 ER 15.

Morice v Bishop of Durham 183 even though the instruction to benefit a certain class of clergymen selected by moral worth (and fertility) was inept; the court could still enforce the executor’s distribution to general charitable objects, allowing that he might have an eye on the precatory words appended to the bequest. Lord Thurlow had found the case marginal, and Lord Eldon reheard it after Thurlow’s death. Lord Eldon had affirmed with some reluctance, as the general intent doctrine could be pushed too hard in preventing illegal, ill-judged and inept bequests being resulted back to the innocent heirs at law. The policy mischief was that the Crown could use cy-près to whisk away failed bequests from families whenever any kind of charitable intention could be discerned on the part of a testator. In his Moggridge judgment Lord Eldon tried to reconcile the warring authorities by giving a clear statement of the operation of cy-près:67 [T]he testator’s intention of charity was the principal intention; that he meant at all events some charity; that his unlawful purpose was a mode of disappointing it; and the mode therefore was out of the question; and the intention should be carried into effect by another mode.

Applying these principles to the present case, counsel for the Bishop argued that the object in Moggridge of promoting clergymen who had proved their moral worth and their capacity for offspring ‘was as loose as can be described’, yet Lord Eldon had allowed that trust to stand. Helping persons who had fallen on hard times and whose expectations of life had been ruptured could be called ‘charity’ or ‘benevolence’—‘[t]hese are subjects upon which different opinions will be held’. Since the Cracherode will had shown an intent to pursue goals encompassing charitable giving, it could be seen as a charitable bequest choosing an inadequate mode, and the court could either wait and see if appointments were made within due confines of charity or else immediately order reappointment by cy-près. Next the great opinion of Wilmot CJ in the case of Attorney-General v Lady Downing68 was invoked by Richards and Mitford to press a generous application of cy-près. Wilmot CJ was asked to give his advice in Chancery as to the proper law regarding a charitable gift to found a new college in Cambridge. The testator, Sir George Downing, had made the will in 1717 but died a generation later in 1749, after the passing of the 1736 Charitable Uses Act which would have avoided any testamentary gift of realty or funds to purchase realty. Downing was so long-lived that all five of the executors named in the will had died. His heir at law inherited the land subject to the gift instruction, then died and gave all his property to

67 Ibid, 77; 29. Jones (n 12) 146–47 confuses Eldon’s commentary on past cases with those issues being decided presently in the court. Eldon’s tortuously discursive style makes such confusion a constant risk for the modern reader. 68 Attorney-General v Lady Downing (1767) Wilmot 1, 97 ER 1.

184 Joshua Getzler his wife. The Attorney-General then sued the wife to execute the charitable trust and endow the college. Wilmot CJ held that the 1736 Act should not operate with retrospective effect to catch wills made before its passing; and that outside the Act general issues of controlling mortmain gifts to corporations should be decided by the Crown as a question of public policy, and not decided by the courts. In any case the general charitable intent of the founder was clear, and the court should find a way to ensure a charitable use of the wealth would occur, eg by finding a trust for charity rather than a trust to build a particular form of perpetual college. The death of the trustees did not defeat the gift as the King could take over the execution. But the death of an appointee might have destroyed a power to appoint to charity. In the result cy-près was ordered and the Crown took over the execution of the trust; the funds were then applied to endow the college as had been intended. To justify the power of the court to take over failed charitable gifts, Wilmot CJ had investigated the sources of charity law in Roman as well as Church sources. The core passages of his judgment are worth recalling:69 Property, destined to superstitious uses, is given by Act of Parliament to the King, to dispose of as he pleases; and it falls properly under the cognizance of a Court of Revenue. But where property is given to mistaken charitable uses, this Court distinguishes between the charity and the use; and seeing a charitable bequest in the intention of the testator, they execute the intention, varying the use, as the King, who is the curator of all charities, and the constitutional trustee for the performance of them, pleases to direct and appoint. If it were res integra, much might be said for the heir at law; because in every other case, if the testator’s intention in specie cannot take place, the heir at law takes the estate. And as the motive inducing the disinherison in a charitable devise, is a passion for that particular charity which he has named, if that particular charity cannot take place, cessante causâ, cessaret effectus. The right of the heir at law seems to arise as naturally in this case as in any other; but instead of favouring him as in all other cases, the testator is made to disinherit him for a charity he never thought of; perhaps for a charity repugnant to the testator’s intention, and which directly opposes and encounters the charity he meant to establish. But this doctrine is now so fully settled, that it cannot be departed from; and the reason upon which it is founded, seems to be this: The donation was considered as proceeding from a general principle of piety in the testator. Charity was an expiation of sin, and to be rewarded in another state; and therefore, if political reasons negatived the particular charity given, this Court thought the merits of the charity ought not to be lost to the testator, nor to the public, and that they were carrying on his general pious intention; and they 69

Ibid, 32–34; 13–14.

Morice v Bishop of Durham 185 proceeded upon a presumption, that the principle, which produced one charity, would have been equally active in producing another, in case the testator had been told the particular charity he meditated could not take place. The Court thought one kind of charity would embalm his memory as well as another, and being equally meritorious, would entitle him to the same reward. There is a law in the Digest, which seems to have furnished a hint for varying the destination of a donation to the public.70 … It is plain they looked at the motive of the gift, the immortalizing the memory of the donor, which was the only future reward a Pagan could enjoy. For this law was made 100 years before Christianity was the religion of the Empire. The particular spectacle directed was only the means by which that future reward was to be secured. Any other spectacle would as effectually answer that purpose. They looked at the end and aim of that benefaction, and shaped the means in such a manner, as without any violation of the laws, might secure the attainment of it. The reason, which animates the law, applies as forcibly to a legacy given to a charitable use under the Christian dispensation.

Wilmot CJ concluded that since the dominant purpose of a charitable donor was to seek honour or redemption, even if the specific bequest was a ‘pillar of vanity’ that could not be executed as intended, the donor’s desire for fame or salvation continued and should be effected by the court through some other mode. The alternative solutions of either returning the assets to the heirs, or vesting the assets absolutely in the executors as an unassigned residue, were both unacceptable. Counsel for the Bishop in Morice relied heavily on Wilmot CJ’s broad view of cy-près in order to support the Cracherode bequest, but they had sampled very selectively the history of cy-près cases and had radically simplified a complex body of law. A counter to the wide doctrine of the Downing case had been developed by Sir Pepper Arden MR in the case of AttorneyGeneral v Bishop of Oxford (1786), stating that a trust disposition towards a special charitable object could not be subject to cy-près unless there was a ‘general charitable intent’.71 This was a valuable corrective to the tendency of some earlier Lord Chancellors to ride roughshod over the specific charitable intentions of donors, as in the celebrated or infamous case of Da Costa v De Paz.72 There Lord Hardwicke C had held that a bequest to a ‘Jesuba’ (ie a yeshiva or house of Jewish study) was not to be tolerated by

70 Digest of Justinian 33.2.16 (Modestinus) and 33.2.17 (Scaevola) were here quoted, recounting how a testamentary gift was made to a town to put on an annual spectacle to honour the memory of the testator. The spectacle could not go forward as planned; the proper solution was for the town elders to meet to reallocate the gift to a fresh commemoration since ‘it was unfair that the sum which the deceased had intended for the spectacle should fall to the profit of the heirs’. 71 Cited and discussed in Corbyn v French (1799) 4 Ves Jun 418, 431–32; 31 ER 213. 72 Da Costa v De Paz (1754) Dick 249, 21 ER 268; Amb 228, 27 ER 150; 2 Swanston 532, 36 ER 715.

186 Joshua Getzler an English court, and yet the donation being charitable in intent could be applied instead to a charity of the Chancellor’s choosing. He applied the funds to a foundling home that would bring up children in the Christian faith. The case was relied upon by Wilmot CJ in the Downing case in 1767 and was regarded as good law;73 but in its result Da Costa v De Paz had shocked the conscience of society. Later judges rebelled and began shaving back the operation of cy-près, particularly where religion was concerned. In the case of Isaac v Gompertz before Lord Thurlow on 17 July 1786,74 all but one of a group of legacies to support Jewish study and religion were upheld as charitable, save one legacy of funds for maintenance of a synagogue, this being reserved for the Crown to decide upon an appointment cy-près. Frederic Maitland in his late essay ‘Trust and Corporation’ supposed that trust law as a form of associational law had been an important force in allowing non-Anglican religions to function under the Anglican monopoly; he was right, but the road was bumpy.75At any rate, by the time of Morice a body of law hostile to cy-près had amassed,76 and this law would have been present to the mind of the judges. To return now to counsel’s arguments: Romilly in reply picked up the issue of who should get the residue of a failed charitable bequest. He distinguished the present case from Cook v Duckenfield,77 where a testator settled property on trust for charitable distribution to objects later to be nominated but forgot to make a codicil supplying any such instructions. It was impossible to accept that the trustee-executors could have been allowed to keep the unallocated residue in such circumstances since a trust intention was obvious. But neither could there be any finding that the property should result back to the heirs, as the testator had made clear that he wanted the fund to go to charity and not his heirs. Cy-près was therefore ordered. However, in the present case of Morice, no such charitable intention appeared: ‘It is extraordinary, if this testatrix meant charity, that she

73

(1767) Wilmot 1, 34–35; 97 ER 1, 14–15. The case was summarised by A-G Perceval in arguendo in Moggridge v Thackwell (1802) 7 Ves Jun 36, 32 ER 15. 75 FW Maitland, State, Trust and Corporation (D Runciman and M Ryan (eds)) (Cambridge, CUP, 2003) 75. Jones (n 12), 140–43 gives a valuable corrective. See, eg, In re Masters of Bedford Charity (1819) 2 Swanston 470, 36 ER 696, where Lord Eldon C refused to allow charitable funds for the education, apprenticeship and marriage of persons engaged in religious practice to be made available to Jewish children who fitted the qualifying criteria. His peroration is at 527–28, 712: ‘I apprehend that it is the duty of every judge presiding in an English Court of Justice, when he is told that there is no difference between worshipping the Supreme Being in chapel, church, or synagogue, to recollect that Christianity is part of the law of England …; that in giving construction to the charter and the acts of parliament, he is not to proceed on that principle farther than just construction requires; but to the extent of just construction of that charter and those acts, he is not at liberty to forget that Christianity is the law of the land.’ 76 Jones (n 12), 134–53. 77 Cook v Duckenfield (1743) 2 Atk 562, 26 ER 737, per Lord Hardwicke C. 74

Morice v Bishop of Durham 187 did not say so; and how she could avoid a word so likely to occur.’78 Since retention by the executor was not a possibility anymore, a resulting trust to the next of kin had to follow. It is important to examine here a case Lord Eldon mentioned later in the appeal, and which would also have been present to the lawyers’ minds in the Rolls hearing, namely, Bishop of Cloyne v Young.79 The decision held that executors holding a residue unallocated by a will could no longer presume to keep the residue as tacit beneficiaries but must result that wealth back to the heirs at law for land and heirs at will for personalty in the absence of a contrary intent for them to take any benefit from their office.80 This was a key case extending the presumption of strict accountability for fiduciaries installed by Keech v Sandford in 1726;81 prior to 1750 executors enjoyed a presumption that they could keep any residue of a deceased estate as payment for their trouble.82 Sir William Grant’s judgment in Morice was short and addressed only a handful of the points argued before him. He began by stating that ‘[t]he only question is, whether the trust … be a trust for charitable purposes. That it is upon some trust, and not for the personal benefit of the bishop is clear from the words of the Will; and is admitted by his Lordship; who expressly disclaims any beneficial interest.’ If it were not a charitable trust then it clearly would fail for lack of objects. It was ‘too indefinite to be executed by this Court,’ and ‘[t]here can be no trust, over the exercise of which this Court will not assume a control; for an uncontrollable power of disposition would be ownership, and not trust’.83 A clear trust imposed for the benefit of uncertain objects must therefore leave property undisposed that must result back to the takers in default. This was a slightly different point from that decided in Cloyne, for the residue in Morice was caused by a failure of an attempted disposition, not by a gap or privation of dispositive intention leaving property in the hands of the executor with no information

78

(1804) 9 Ves Jun 399, 404; 32 ER 656, 659. Bishop of Cloyne v Young (1750) 2 Ves Sen 91, 28 ER 60, per Lord Hardwicke C. 80 Sir William Grant MR, in a case following Morice, gave an example of when circumstances allowed executors to keep a residue of a will, namely, where the assets had been subject to a general power allowing them to appoint to themselves: Gibbs v Rumsey (1813) 2 Ves & Bea 294, 35 ER 331. He pointed out that Morice could be distinguished since the executor in that case had clearly not been intended to have any possible beneficial claim to the assets. These points regarding the default destination of unallocated residue are elaborated in Morice v Bishop of Durham (1809) 2 Ves Jun Supp 177, 34 ER 1046. Because of doubts, the presumption against executors enunciated in Bishop of Cloyne v Young was afforced 80 years later by the Executors Act 1830. 81 J Getzler, ‘Rumford Market and the Genesis of Fiduciary Obligations’ in A Burrows and A Rodger (eds), Mapping the Law: Essays in Memory of Peter Birks (Oxford, OUP, 2006) 57; DR Paling ‘The Pleadings in Keech v Sandford’ (1972) 36 Conv 159. 82 See North v Crompton (1671) 1 Ch Cas 196, 22 ER 759; Fane v Fane (1681) 1 Vern 30, 23 ER 284. 83 (1804) 9 Ves Jun 399, 404–05; 32 ER 656, 658. 79

188 Joshua Getzler about what might have been intended for it. These were two different types of automatic resulting trust, to use anachronistic language.84 Grant MR next made his well-known holding that all non-charitable trusts ‘must have a definite object’, for reasons of enforceability by the court: ‘There must be somebody, in whose favour the Court can decree performance.’85 This, as has been pointed out more than once, is a non sequitur, for even if the class of objects was amorphous, the court could still decree performance to someone who fairly fell within the class. Some further argument is necessary to explain why the court must know exactly who the beneficiaries are before decreeing performance. It may be that the equitable presumption of equality of distribution in the absence of a contrary indication meant that a complete class of definite beneficiaries had to be identified before a private trust could be recognised.86 The principle of Saunders v Vautier,87 giving the complete set of beneficiaries a power to take the legal estate, still lay in the future,88 but Grant MR’s theory nonetheless seems to look at a trust as vesting equitable estates in the beneficiaries, and the court therefore had to know who the equitable owners were before it could execute the trust. This view did not take account of the operation of discretions and power to appoint which inevitably blurred the sense of a fixed class of beneficiary-owners. Grant MR next addressed the issue of a possible charitable intent in the Cracherode bequest. He acknowledged that charities were peculiar in that cy-près was available to reform the objects where a charitable intent was present but the objects were too uncertain to be enforced. However, in this case, the choice of the words ‘liberality and benevolence’ could not be read as objects of charity and hence there was no general charitable intent. ‘That word [ie charity] in its widest sense,’ he explained,89 denotes all the good affections, men ought to bear towards each other; in its most restricted and common sense, relief of the poor. In neither of these senses is it employed in this Court. Here its signification is derived chiefly from the Statute of Elizabeth. Those purposes are considered charitable, which that Statute enumerates, or which by analogies are deemed within its spirit and intendment; and to some such purpose every bequest to charity generally shall be applied.

84

Cf WJ Swadling, ‘Explaining Resulting Trusts’ (2008) 124 LQR 72. (1804) 9 Ves Jun 399, 405; 32 ER 656, 658. 86 Kemp v Kemp (1801) 5 Ves Jun 849, 31 ER 891, per Sir Pepper Arden MR. 87 (1841) 4 Beav 115, 49 ER 282 (MR); (1841) Cr & Ph 240, 41 ER 482 (LC). 88 P Matthews, ‘The Comparative Importance of the Rule in Saunders v Vautier’ (2006) 122 LQR 266; J Getzler, ‘Transplantation and Mutation in Anglo-American Trust Law’ (2009) 10 Theoretical Inquiries in Law 355. 89 (1804) 9 Ves Jun 399, 405; 32 ER 656, 658–59. 85

Morice v Bishop of Durham 189 This confinement of charity to analogies to the Statute had never been stated quite so boldly or baldly before.90 Grant MR concluded that the testatrix’s choice of the words ‘liberality and benevolence’ and the purposeful avoidance of the word ‘charitable’ was done ‘in order to leave the Bishop the most unrestrained discretion’. And it followed that ‘the trusts may be completely executed without bestowing any part of this residue upon purposes strictly charitable’. The conclusion was that ‘[t]he residue therefore cannot be said to be given to charitable purposes; and, as the trust is too indefinite to be, disposed of to any other purpose, it follows, that the residue remains undisposed of; and must be distributed among the next of kin of the testatrix’.91

F. THE LEGAL ARGUMENTS: BEFORE THE LORD CHANCELLOR

On the appeal, heard before Lord Eldon on 18 March 1805, Richards as counsel for the Bishop changed tactics. Sir William Grant MR had held that legal charity was narrower than charity in common speech. Richards argued contra that the traditional list of legally-valid charities was very wide, and indeed often outstripped any common usage of the word charity; for example, the Statute of Elizabeth included repair of bridges and ports. Moreover, relief money paid to the poor was clearly charitable at law even though in effect it simply alleviated the tax burden of ratepayers who had a legal duty to pay the poor’s subsistence; one could rephrase this point to say that paying for an existing public duty to be performed was not a shift of wealth to the needy but was more in the nature of a negotiorum gestio performed to benefit the public or a large part thereof. This suggested that charity could mean just about any liberal spending that added 90 The tying of Chancery control to the Statute was the main aspect of Morice noted by Spence (n 10) I, 591, but Spence adduced cases supporting an intrinsic power to decide charitable purposes in the Court of Chancery concurrent with and separate to the Statute, implicitly contradicting Grant MR’s holding (eg Bailiff of Burford v Lenthall (1743) 2 Atk 553, 552; 26 ER 731, 733, per Lord Hardwicke C: ‘But courts of equity have in all cases done it, not from any authority, but from conscience’, referring to Charitable Corporation v Sutton (1742) 2 Atk 400, 26 ER 642; Attorney-General v Ironmongers’ Company (1834) 2 My & K 576, 581; 39 ER 1064, 1066, per Leach MR: ‘The jurisdiction of Courts of Equity with respect to charitable bequests is derived from their authority to carry into execution the trusts of any will or other instrument, and the Court is to proceed according to the intention expressed in the will or instrument’). Lord Eldon C may have seen this jurisdiction as controlling the exercise of powers rather than determining their boundaries, eg Ex parte Kirkby Ravensworth Hospital (1808) 15 Ves Jun 305, 314; 33 ER 770, 773: ‘[W]here the governors or visitors are themselves trustees; or are making a fraudulent use of such powers as they have as visitors or governors: yet it is clear, that in such cases the Court of Chancery has jurisdiction by way of information’. Cf L Shelford, Practical Treatise on the Law of Mortmain and Charitable Uses and Trusts (London, Sweet, 1836) 59, 83, 666–67. 91 (1804) 9 Ves Jun 399, 406; 32 ER 656, 659.

190 Joshua Getzler to the public benefit in any way. Richards could here draw on the stream of decisions giving an expansive view of charity as public benefit for the purposes of restricting charitable gifts under the 1736 Charitable Uses Act. The Cracherode bequest could draw on that jurisprudence safely, because it was a gift purely of personalty and was not within the remit of the Act’s prohibitions which aimed at transfers of realty. Richards also added a novel argument that he had pointedly not raised before the Master of the Rolls. He suggested that the Bishop could after all be seen as absolute owner of the residue, with a discretion to distribute governed by mere words of precation. If the objects of the trust of residue were undefined so to prevent the residuary distributing under a mandatory trust, the bequest would fail as a trust and the residuary might take absolutely. This meant that the doctrine of Bishop of Cloyne, presuming against benefit of residue to the executor, had to be confronted and neutralised. Richards argued that the large provision which had been made separately for Morice might reverse the presumption that any further residue under the estate should pass to the heirs; it should stay with the executor, who would now be subject to a precatory obligation in place of the failed mandatory trust instruction. Barrington’s disavowal of personal interest could be seen simply as a strong indication that he took the precatory obligations seriously as a man of honour. His disavowal did not amount to a rejection of the residual estate in right of full ownership; it was rather an extralegal promise to carry out the testatrix’s precations. The Attorney-General added to this the argument that the court could well supervise the trust to ensure a valid charitable disposition. The example was given of a gift to a Catholic confessor; a court could ensure that the money would not be spent on superstitious purposes invalidated at law, such as private masses, but could steer the priest toward valid charitable spending. Moreover, there was case law allowing severance of properly non-charitable heads from valid ones.92 Romilly for the plaintiffs in reply urged that a trust for ‘vague and indefinite’ objects must result back to the next-of-kin. Lord Eldon interjected to affirm that Bishop of Cloyne v Young stood for the proposition that a declaration of trust without proper specification of the objects was now presumed to give rise to a resulting trust for the next of kin, ie it did not leave an allocated residue that could be appropriated by the executor. Eldon also raised the case of Pierson v Garnet93 (which Eldon himself had argued 92

Citing Attorney-General v Doyley (1735) 4 Vin 485; 2 Eq Cas Ab 194, 22 ER 167. (1786–87) 2 Bro CC 38, 226; 29 ER 20, 126. There had been long debate in earlier cases over the status of precatory or informal trusts: see Eales v England (1702) Precedents in Chancery 200, 24 ER 96; Harding v Glyn (1739) 1 Atk 469, 26 ER 299. In the year before Morice went to court, Lord Eldon C went out of his way to affirm Pierson from the bench, distancing himself from his earlier doubts and hostility to the case: Brown v Higgs (1803) 8 Ves Jun 573, 574; 32 ER 473, 479. Long after Morice had been decided, Lord Eldon 93

Morice v Bishop of Durham 191 unsuccessfully as junior to Ambler before Kenyon MR and Lord Thurlow). He suggested that this authority went still further to hold that any testamentary language suggesting that a reception of property was made for the purpose of transmission to heirs was creative of fiduciary duties to account for the property and carry out the conveyance, even absent the traditional language of trust. In other words, the courts would be chary of finding that such informally-expressed testaments created precatory obligations only. Romilly picked up on Eldon’s line of thought and developed it. The Roman law on creating a fideicommissum was invoked to support the view that in all cases where any donative intention could be inferred in the testamentary transfer of property to an intermediary, the property goes into trust and becomes unavailable to the trustee as executor, unless there was strong evidence that he was to be in the beneficial class.94 Having done all this work to rebut the possibility of a mere precatory obligation, Romilly then argued against a finding of mandatory charitable trust. He acknowledged that the word ‘charity’ could connote almost any virtuous act in common language; and conversely that the law could find a charitable intent in the absence of any use of the word ‘charity’ or ‘charitable’. In the present case, however, the will trust had used the words ‘liberality’ and ‘benevolence’ in such a way as must expand the purpose of the trust beyond the bounds of charity. Here Romilly brought some interesting evidence from Cicero’s De Officiis, where one particular classification of civic virtues ran thus:95 Of this again there are two divisions—justice, in which is the crowning glory of the virtues and on the basis of which men are called ‘good men’; and, close akin to justice, charity, which may also be called benevolence (kindness) or liberality (generosity) [quam eandem vel benignitatem vel liberalitatem appellari licet].

Cicero goes on to show how benevolence and liberality can each work injustice, as where they lead to flattery of the object or partiality between C reaffirmed this principle in Ommanney v Butcher (1823) Turn & R 260, 37 ER 1098. For cases to the contrary, finding that precatory trusts were imperfect or voluntary only, see Meredith v Heneage (1824) 1 Simons 542, 57 ER 681; and Lomax v Ripley (1855) 3 Smale & G 48, 65 ER 558, where, however, the precatory intentions may have been tacit between the parties and never declared. The objective test for finding a binding declaration of trust has recently been affirmed in Byrnes v Kendle [2011] HCA 26, esp at [98]–[118] per Heydon and Crennan JJ. 94 D.30.1.1.1 (Ulpian) (‘Legacies are held to be equal to fideicommissa in all respects’); D.30.1.115 (Ulpian) (‘Even an expression such as “I want you to give”, “I desire you to give”, “I believe you will give”, is a fideicommissum’); D.30.1.118 (Neratius) (‘A fideicommissum left in terms such as “I require”, “I desire that you give” is valid, and even if worded “I wish my inheritance to be Titius’s”, I know that you will remit my inheritance to Titius’) (trs from A Watson (ed), Digest of Justinian (Philadelphia, University of Pennsylvania Press, 1985)). 95 (1805) 10 Ves Jun 522, 529–30; 32 ER 947, 950. I have used the translation of De Officiis by W Miller (Cambridge, Mass, Harvard University Press, 1913) 1.7. Romilly gives this passage as 1.8.

192 Joshua Getzler persons. Another suspect version of liberality is prodigality, for example providing gross entertainments or bribes to the populace, though Cicero concedes that bread and circuses had their place in regulating relationships between the orders in the Rome of his day.96 Romilly concluded these reflections by invoking the moral authority of William Paley, who classifies the species of charity and then contrasts these with ‘liberality, which is not charity in any sense of the word’:97 I mean the giving of entertainments or liquor for the sake of popularity: or the rewarding, treating, and maintaining, the companions of our diversions as hunters, shooters, fishers, and the like. I do not say, that this is criminal I only say that it is not charity; and that we are not to suppose, because, we give, and give to the poor, that it will stand in the place, or supersede the obligation, of more meritorious and disinterested bounty.

Romilly concluded that since liberality was capable of such a wide array of meanings, ‘for that very reason the Court cannot compel the executor to perform the trust; or ascertain, when there is a breach’. A trustee might spend on liberal but non-charitable objects, such as putting on picture exhibitions, horse races, or promoting inquiry into ‘the interior of Africa to contribute to raise the degraded state of society in that part of the world’; clearly none of these objects brought charitable public benefit! The objects had to be capable of regulation by law, for ‘though an improper application by the Bishop cannot be supposed, there can be no security against the disposition of the heir’. Romilly concluded by offering a four-way template of the heads of charity, which adumbrates the classical definition produced by the House of Lords in 1891:98 There are four objects, within one of which all charity, to be administered in this Court, must fall: 1st, relief of the indigent; in various ways: money: provisions: education: medical assistance &c.: 2dly, the advancement of learning: 3dly, the advancement of religion; and, 4thly, which is the most difficult, the advancement of objects of general public utility.99

Romilly then gave instances where the court had restrained odd and vague bequests as not capable of being fitted within the fourth omnibus head of public benefit. The Cracherode bequest was so wide that the court 96

De Officiis (n 95) 2.16. W Paley, Principles of Moral and Political Philosophy (London, Faulder, 1785) I, 256, cited at (1805) 10 Ves Jun 522, 530; 32 ER 947, 950. There was a certain irony in having the ideas of Paley, a client of Barrington’s, used in the argument against the Bishop. In a further twist, Paley died a few weeks after the case. 98 Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531, 583, per Lord Macnaghten. In Inland Revenue Commissioners v Baddeley [1955] AC 572, 607, Lord Reid suggests ‘that Lord Macnaghten took his classification from the argument of Sir Samuel Romilly in Morice v Bishop of Durham’. 99 (1805) 10 Ves Jun 522, 530–2; 32 ER 947, 950–1, for all quotations in the above paragraph. 97

Morice v Bishop of Durham 193 could not ensure that it would be applied within the four established heads; ‘benevolent’ appointments might be within the confines of charity but might result in ‘prodigality’. Lord Eldon clearly listened carefully to this part of the argument, for in his notebook100 we find these entries towards the close of the day’s hearing: 4 Objects within which all Charity falls: 1. 2. [3.] 4.

relieving the Indigent advanc[ement]t of learning advanc[ement]t of religion advancing Objects of gen[era]l further Charity.101

Could a Trustee draw the line between when Charity ends and when Prodigality begins?102 Charity has got a fixed Sense in the Court. Benevolence has not.103

One senses that this is the moment when Romilly won the case for Morice, along the way developing a legal definition of charity that survived to the end of the twentieth century. Lord Eldon began his judgment rather surprisingly by turning the three certainties requirements for valid private trusts into an argument that perhaps no trust at all was present, and so the Bishop might be seen as taking absolutely:104 Prima facie an absolute interest was given; and the question was, whether precatory, not mandatory, words imposed a trust upon that person; and the Court has said, before those words of request or accommodation create a trust, it must be shewn, that the object and the subject are certain; and it is not immaterial to this case, that it must be shewn, that the objects are certain. If neither the objects nor the subject are certain, then the recommendation or request does not create a trust; for of necessity the alleged trustee is to execute the trust; and the property being so uncertain and indefinite, it may be conceived, the testator meant to leave it entirely to the will and pleasure of the legatee, whether he would take upon himself that, which is technically called a trust.

Pierson and the other earlier cases that characterised an informallyexpressed intention into an intention to benefit via a trust were not germane here, as the bequests in those cases had involved a vague dispositive intention but certain object and subject. In Morice there may have been language of trust intention but no clear objects, so perhaps no trust duties ever arose.

100 Lord Eldon, Judicial Notebook 1804–05, MS, Georgetown Law Library Special Collection. 101 Ibid at 103. 102 Ibid at 103a. 103 Ibid at 105a. 104 (1805) 10 Ves Jun 522, 536; 32 ER 947, 952.

194 Joshua Getzler Uncertainty of object or subject ‘are always used by the Court as evidence, that the mind of the testator was not to create a trust; and the difficulty, that would be imposed upon the Court to say, what should be so applied, or to what objects, has been the foundation of the argument, that no trust was intended’.105 Having raised this possibility as a counter-factual, Lord Eldon then put aside the argument on the basis that the will had so clearly left the residue to the Bishop on trust, that there could be no doubt he was accountable as trustee. He gave the analogy of a settlement on trust with instructions as to objects to be given to the trustee later by the settlor. This would initially create a resulting trust in favour of the settlor, subject to a shift of the beneficial interest to a later identified object, or also the creation of a power to appoint later to those objects once clearer instructions had been given. Lord Eldon was here referencing old and well-established testamentary practices of landowners whereby property would be settled on trustees inter vivos and instructions for distribution then appended by a will communicated at death. Such two-step testamentary devices had sometimes erupted into controversy, with challenges to the efficacy of ambulatory instructions or conditions added after creation of the trust; but the practice was deeply rooted.106 It therefore made good sense to state that a recipient of testamentary trust property who did not at the time of will execution or a later time up to death receive sound instructions as to objects, must hold on resulting trust for the heirs at law. Lord Eldon expressly put aside from consideration the Bishop of Durham’s disavowal of personal interest and the confidence the court might have that he would as absolute owner have carried out the precatory will of the testatrix impeccably as an upstanding and honourable man: ‘I must look only to the Will, without any bias from the nature of the disposition, or the temper and quality of the person, who is to execute the trust.’107 Lord Eldon next addressed the possibility of a proportionate division, converting half the residue under the ‘benevolent’ object to charity and letting the ‘liberal’ part result back. He rejected this solution since there was no clear authority to support it. The case of Attorney-General v Doyley108 involved a distribution to be made to ‘deserving’ maternal relations; since ‘deserving’ lacked certain meaning the court simply ordered an equal distribution to the maternal relations, who were sufficiently identified. No such perfection of the terms of the Cracherode bequest was possible. 105 Ibid, 536–37; 952–53. This statement is the main idea from Morice extracted in Lewin (n 10) 79; the requirement of certainty of objects is also mentioned at 175. 106 See eg Earl of Pembroke’s Case (1379) Rot Parl 60–61; Re Lord Dacre of the South (1535) in JH Baker, Baker and Milsom’s Sources of English Legal History, 2nd edn (Oxford, OUP, 2010) 127–32. 107 (1805) 10 Ves Jun 522, 537; 32 ER 947, 953. 108 Attorney-General v Doyley (1735) 4 Vin 485; 2 Eq Cas Ab 194, 22 ER 167, also debated at length in Moggridge v Thackwell (1802) 7 Ves Jun 36, 32 ER 15.

Morice v Bishop of Durham 195 Lord Eldon then addressed the case of Brown v Yeall, the case of an inept bequest of religious books where the mode of distribution was left absurdly vague. He indicated that he thought there was sufficiently clear charitable intent squarely in the heart of religious and educational purpose to have supported validity such that a cy-près appointment might have been possible, and he criticised Thurlow’s decision for not striving to save the bequest.109 It was unclear to Eldon why Brown should have failed when the Society for the Propagation of the Gospel, a trust for the circulation of bibles and religious books, should flourish as a charity. Perhaps here Lord Eldon was teasing the plaintiff Morice, who of course was Secretary of that Society. But Brown nonetheless stood as good authority for the principle that the court must be able practically to enforce the trust. Summarising this discussion of the authorities, Lord Eldon made the following key statement, often cited as the ratio of his judgment:110 As it is a maxim, that the execution of a trust shall be under the controul of the Court, it must be of such a nature, that it can be under that controul; so that the administration of it can be reviewed by the Court; or, if the trustee dies, the Court itself can execute the trust: a trust therefore, which, in case of mal-administration could be reformed; and a due administration directed; and then, unless the subject and the objects can be ascertained, upon principles, familiar in other cases, it must be decided, that the Court can neither reform mal-administration, nor direct a due administration.

Where a trust was charitable, the court or the Crown could control the execution by reference to those objects authorised by the preamble to the Statute of Elizabeth, ‘or to purposes having analogy to those’. Objects were recognised as ‘charitable’ in the Court of Chancery not because they could properly be described as charitable, but simply because they were so denominated by the Statute. The problem the court faced in the present case was that the Bishop was authorised to apply the residue to ‘benevolent’ and ‘liberal’ objects that might or might not stand within the legal meaning of charity, and the court had no means to uphold the bequest and yet control the expenditure within the positive bounds of charity. ‘There is no magic in words,’ and the court was not to engage in a critical examination of the sense of ‘charity’, ‘benevolence’ and ‘liberality’ in Christian or classical cultures; rather the court was simply to look at the terms of the will to decide whether the testatrix ‘meant to repose in the Bishop a discretion, not to apply the property for his own benefit, but that would enable him to apply it to purposes more indefinite than those … sufficiently defined to be controlled and managed by this Court’. Since those indefinite purposes 109 In Baker v Sutton (1836) 1 Keen 224, 232–33; 48 ER 292, 295, Lord Langdale MR held that Lord Eldon had in effect overruled Brown to hold that support for religion was presumptively charitable. 110 (1805) 10 Ves Jun 522, 539–40; 32 ER 947, 954.

196 Joshua Getzler went beyond charity and so failed, and since the Bishop was directed to take on trust not for himself, he must hold the residue to such objects ‘as the Law will dispose of it’, which meant on resulting trust back to the heirs of the estate.111 Lord Eldon’s decision had a legislative quality, making a policy decision that charitable objects should be derived from the preamble to the 1601 Statute and so surrendering any court discretion to decide whether an object has sufficient public benefit and clarity to warrant enforcement. Why did he decide so? He had taken his lead from Sir William Grant’s judgment, but he went into far greater detail in explaining why the court should limit itself in allowing trusts for vague public benefit. Clues may be gleaned from the careful notes he took throughout the hearing, dated 18 March 1805, some of which we have already seen.112 These notes are independently interesting as they exhibit Eldon’s intellectual method during Chancery hearings. Eldon begins in his notes by observing that the trust was ‘not void’; that it was ‘good against the next of kin, if not good to a Charity’ if it enabled the Bishop ‘to execute purposes of a benevolent and liberal Nature’. So he had quickly decided that there was a trust, meaning that of the four possible destinations for the residue—Bishop, next-of-kin, charity on cy-près, or wide benevolent purposes—it could not be the first. Then comes the startling note: ‘The B[isho]p … has already bestowed considerable part of this.’ So on losing the case, Barrington would have been subject to an account to restore any distributed residue and so perform the resulting trust as required.113 Eldon then writes:114 Stat. Eliz.—speaks of Objects not Charity within the ordinary meaning of the word. Benevolent and Liberal Objects include charitable Objects, but charitable may not include benevolent but liberal objects. The Law does not therefore use the word Charity in the ordinary way.

The enforcement issue quickly surfaced: ‘Bishop must be compellable to distribute, if it is a good disposition he may select, but he must select among Objects.’ It is then hinted that the whole case might have gone the other way if ‘liberality’ had not been used in the objects: Benevolence is Charity. If Benevolence had been the only word used the b[e]q[ues]t would have been good. The word Charity need not be added … Benevolence explains charity.115

111

Ibid, 542–43; 955, for all quotations in the above paragraph. Lord Eldon, Judicial Notebook 1804–05, MS, Georgetown Law Library Special Collection. 113 Ibid at 99. 114 Ibid. 115 Ibid at 99a. 112

Morice v Bishop of Durham 197 The question then discussed is whether the objects might be interpreted ejusdem generis so that benevolence ‘which comes first’ might be assimilated to an implicit charitable intent and capture ‘liberality’ within its own confines of meaning.116 ‘If they mean distinct Things—Court has its Choice…’ Eldon then gave an example clearly drawn from the notorious cy-près case of Da Costa v De Paz: ‘Suppose it given to Foundling Hospital & Jewish Synagogue?’ Eldon then ruminated whether the case of Pierson v Garnet (which as counsel he had lost) always required that vague testamentary language desiring a distribution had to be read as making a trust: ‘Suppose in that Case Pierson was Trustee if it turned on Quantum ascertained, but the unascertained Objects were benevolent purposes.’117 The next issue addressed was the forensic search for the testatrix’s intentions: ‘What would any Lady out of Court say those Words mean?’118 The Attorney-General held that a concrete assessment of Cracherode’s intent was possible:119 ‘This is a bequest substantially to Charity—no such uncertainty in the Object as shall defeat it. The Words are expressive of achievable purposes in Testator’s Mind.’ The Attorney reasserted the privilege of charity to be carried forward by a court even if imperfectly expressed: ‘Charity a more favoured legator than any other’.120 An interesting example was then given to show that subjective intent might not control the meaning of stated objects at law, building on arguments of counsel:121 ‘Suppose a Roman Catholic was to give to his Confessor his residue for such Charitable purposes as that Confessor should appoint. The Object in the Mind of the Testator might be improper purposes. The Court can’t hold that.’ Eldon then rehearsed the arguments over proportional and equal splits when obnoxious or indefinite tests for distribution were excised from dispositions. After hearing counsel expound classical and philosophical theories of benevolence Eldon wrote: ‘I can’t define in words Liberality & Benevolence. They are too large. Court can’t execute for that reason.’122 This suggests reasons why Eldon finally cleaved to the Statute of Elizabeth as the sole guide to definition of charity; perhaps positivistic definition was the only secure anchor in a politicised and contested field; philology and philosophy were too at large to help. He also rejected the idea that it might ‘depend upon the Person what are Objects of Liberality & Benevolence’; the idea that a subjective knowledge of the field to be surveyed could give certainty 116 Just such a reinterpretation of Morice based on ejusdem generis was offered in Re Sutton, Stone v Attorney-General (1885) LR 28 Ch D 464. 117 Lord Eldon (n 112) at 99a–100. 118 Ibid at 100a. 119 Ibid. 120 Ibid at 101. 121 Ibid. 122 Ibid at 101a.

198 Joshua Getzler to indefinite objects conflicted with the decision in Moggridge.123 We have already seen his positive reaction to counsel’s setting out of four heads encompassing the possibilities of charity. So Lord Eldon affirmed the decree on 20 March 1805, ‘thinking the Trust too general’, but that the ‘Bishop was a Trustee’ and hence could not keep the property.124 The residue therefore went to the heirs at law. The vice in the bequest was in its technique, not its content. Ann Cracherode could have given her wealth away to such objects as she desired in her own lifetime; she could have left it by will to the Bishop absolutely, in the hope he would use it well; but she could not harness trust law to make a disposition conditioned by vague instructions and exceeding the bounds of charity.

G. THE INFLUENCE AND SIGNIFICANCE OF MORICE

This is not the place to begin a full-scale discussion of the influence of Morice on later law. Nonetheless, we can make a preliminary foray to conclude. The first case to examine the ratio of Morice was Doe d Toone v Copestake, decided by Lord Ellenborough in May 1805.125 He side-stepped the thrust of the case by asserting that a gift on trust to the officials from time to time of a Methodist congregation to spend as they thought fit created a general power for them to apply the wealth as they wished, and hence was not a charitable bequest colliding with the 1736 mortmain statute or with the doctrine of Morice. This was a perfect example of how denying the existence of a charitable use, and so pushing a gift outside the law, was the pragmatic method to save the gift:126 This is nothing like a devise to charitable uses. The trustees may apply the estate to any use they think fit. The will of the testator does not aim at confining them to apply it to charitable uses. If I were to guess at his meaning, I should rather suppose that be meant them to apply it to superstitious and fanatical uses: it is left to their caprice: and unless we can say that it is a devise to charitable uses, it is not within the [1736] statute. The case recently decided by the Master of the Rolls is stronger than this.

In later cases Sir William Grant MR saw the finding of mandatory trust in cases of charitable giving as lying at the heart of the ruling in Morice.127 In James v Allen (1817) he explained why the particular bequest had failed

123

Ibid at 103. Ibid at 110a. 125 Doe d Toone v Copestake 6 East 328; 102 ER 1313. 126 Ibid, 332; 1314. The tension with Morice is noted in Highmore (n 10) 94, 132. 127 Gibbs v Rumsey (1813) 2 Ves and Bea 294, 35 ER 331; to same effect, Vezey v Jamson (1822) 1 Simons & Stuart 69, 57 ER 27, per Sir John Leach V-C. 124

Morice v Bishop of Durham 199 in Morice: it was not simply the word ‘liberality’ in the objects of the will in Morice that proved fatal; a will requiring distribution to ‘benevolent’ objects was also bad, for ‘[i]f it might, consistently with the will, be applied to other than strictly charitable purposes, the trust is too indefinite for the Court to execute’.128 The arguments confining charitable purposes as contained in Lord Eldon’s judgment were adopted extensively in numerous cases, perhaps most notably and influentially in Page-Wood V-C’s judgment in Thomson v Shakespeare in 1859, which prevented a trust for a monument to the memory of the testator’s namesake taking effect as a charity.129 By 1896 Lindley LJ was celebrating Lord Eldon’s judgment in Morice as ‘the leading case … one of the most important upon all questions of charities’.130 The apotheosis came in 1899 when Lord Davey in the House of Lords treated Morice as the fountainhead for the modern doctrine of valid charitable trusts;131 and it was again so treated in the Lords in 1944 in the Diplock litigation.132 But the nagging policy issues that lurked within Morice, notably the attempt to distinguish charity proper and benevolence or public benefit through reference to historical rules only, were not stably resolved. Two problems could not be dispelled, namely, whether the recognised heads of charity (religion, education, relief of poverty) were subject to a supervening public benefit requirement;133 and whether the catch-all fourth head of general public benefit was capable of embracing fresh activities outside the traditional categories, such as communal recreation and political action.134 The courts felt they could not expand the heads of charity to keep abreast of changing social conditions, because judges lacked the constitutional legitimacy to expand the fiscal privileges that accompanied charitable status.135 The question then became—could they get past Morice

128 James v Allen (1817) 3 Mer 17, 19; 36 ER 7, 8, followed in Ellis v Selby (1836) 1 My & Cr 286; 40 ER 384, per Lord Cottenham C. 129 Thomson v Shakespeare (1859) Johnson 612, 70 ER 564, affd (1860) 1 De GF & J 399, 45 ER 413, and approved in Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531, 544, per Lord Halsbury C. For other applications of Morice, see Nightingale v Goulbourn (1848) 2 Ph 594, 41 ER 1072; Briggs v Penny (1849) 3 De G & Sm 525, 64 ER 590; Whicker v Hume (1851) 14 Beav 509, 51 ER 381; Beaumont v Oliveira (1868–69), LR 6 Eq 53, LR 4 Ch 31; In re Douglas (1887) LR 35 Ch D 472 (CA); Commissioners for Special Purposes of Income Tax v Pemsel (1889) LR 22 QBD 296 (CA). In total I have found over 200 cases to date that cite Morice in the English courts alone. 130 In re Macduff [1896] 2 Ch 451, 463 (CA). 131 In re Hunter, Hunter v Attorney-General [1899] AC 309, 323–24 (HL). 132 Chichester Diocesan Fund v Simpson [1944] AC 341, 358, per Lord Wright. 133 Gilmour v Coats [1949] AC 426; Leahy v A-G for New South Wales [1959] AC 457 (PC); M Harding, ‘Trusts for Religious Purposes and the Question of Public Benefit’ (2008) 71 MLR 159. 134 Eg Re Astor’s Settlement Trusts [1952] Ch 534; IRC v Baddeley [1955] AC 572; Bowman v Secular Society [1917] AC 406; cf Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539. 135 See, eg, Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531, 563, esp 566 per Lord Bramwell (dissenting).

200 Joshua Getzler and invent non-charitable purpose trusts as a solution bringing none of the fiscal and administrative difficulties of charities? There were a number of exits from this impasse, and all were tried. One was simply to use unincorporated associations as a mixed contract-trust solution that could do the work of a purpose trust perfectly adequately; but these devices were multipartite and cumbersome, and might collide with partnership and company law. Another approach was to allow an uncertain class of persons to benefit from a non-charitable purpose trust, provided palpable benefit was brought to an identifiable core of that class.136 Another was to build upon the institution of the discretionary trust and relax the requirements of certainty for the class of potential objects; the court would no longer presume to identify a closed list of persons who could demand their share of trust property or directly enforce due execution of the trust; limited controls by the court at the suit of interested parties might still suffice, provided the court could supervise trust powers and discretions in some wise and remove errant trustees who misperformed. This solution emerged from pension cases.137 Yet another was to tolerate and expand the anomalous purpose trusts; or to promote trusts of imperfect obligation that could start to deliver some of the insolvency protection and managerial advantages of normal trusts.138 The uniting feature of these solutions was to move away from a correlative set of rights and duties tightly binding trustees and beneficiaries, and instead see the trust as a network of obligations, vesting powers of monitoring, control, enforcement and enjoyment in different groups of individuals. The first limb of Morice—that there be certain beneficiaries who alone can ask the court to decree performance in their favour—is thereby quietly jettisoned and the trust evolves out of

136 Re Denley’s Trust Deed [1969] 1 Ch 373. Goff J worried in his judgment that he was abandoning the Morice principle that the court should be able to control the trust (at 387–88). 137 Notably McPhail v Doulton [1971] AC 424. See JW Harris, ‘Trust, Power and Duty’ (1971) 87 LQR 31. Also important were In re Manisty’s Settlement [1974] Ch 17, 27–28, per Templeman J; Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587, 1617–18, per Warner J; and Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 (PC). 138 LH Leigh, ‘Trusts of Imperfect Obligation’ (1955) 18 MLR 120; L McKay, ‘Trusts for Purposes—Another View’ (1973) 37 Conv 420; NP Gravells, ‘Public Purpose Trusts’ (1977) 40 MLR 397; M Pawloski and J Summers, ‘Private Purpose Trusts: A Reform Proposal’ [2007] Conv 440. Advocacy for non-charitable purpose trusts as a type of public law institution is developed by P Baxendale-Walker, Purpose Trusts (London, Butterworths, 1999), criticised by J Penner in (2000) 14 Trust Law International 118. Following Lord Millett’s speech in Twinsectra Limited v Yardley [2002] 2 AC 164, esp [76], Quistclose trusts have controversially been characterised as private purpose trusts, eg Cooper v PRG Powerhouse Ltd [2008] EWHC 498 (Ch) per Evans-Lombe J at [12]–[24]. Debate over the fiduciary or contractual quality of purpose-impressed loans continues, see WJ Swadling (ed), The Quistclose Trust: Critical Essays (Oxford, Hart Publishing, 2004) chs 2–6; JA Glister, ‘The Nature of Quistclose Trusts: Classification and Reconciliation’ (2004) 63 CLJ 632.

Morice v Bishop of Durham 201 the form set for it in the early nineteenth century and develops a novel twenty-first-century guise.139 The counter-argument is that the classical beneficiary principle of Morice, requiring definite equitable claimants of trust property with standing to sue, has become more, not less, valuable in controlling equitable property in the modern world.140 A trust law allowing any range of obligations to be impressed on property without identifiable owner-enforcers could let in fanciful and complex rights that have the potential to destabilise insolvency priorities, stoke speculation as legal complexity masks and expands risk, and invite the creation of new-fangled perpetuities and restraints on alienation. This has already happened.141 The Morice ruling, born of a squabble over an inheritance between two high churchmen at the time of the Napoleonic wars, provided basic principles that proved their value in controlling the law of trusts over the next two centuries. It is a jurisprudential inheritance that has proved its worth, and should be passed on intact to future generations to ensure that they too enjoy a secure and workable system of trust law.

139 DJ Hayton, ‘Developing the Obligation Characteristic of Trusts’ (2001) 117 LQR 96 is the leading advocate of this new approach. See also P Parkinson, ‘Reconceptualising the Express Trust’ (2002) 61 CLJ 657; D Waters, ‘The Protector: New Wine in Old Bottles?’ in AJ Oakley (ed), Trends in Contemporary Trust Law (Oxford, OUP, 1996) 114. 140 Justifications for maintaining the beneficiary principle in a cross-jurisdictional world are given by Matthews (n 6), precursed by P Matthews, ‘The New Trusts—Obligations Without Rights?’, in Oakley (ed) (n 139) 1. 141 See Getzler (n 88); LW Waggoner, ‘US Perpetual Trusts’ (2011) 127 LQR 423.

7 Tulk v Moxhay (1848) BEN MCFARLANE*

A. INTRODUCTION

T

ULK V MOXHAY1 is a landmark case in more than one sense. The land to which it relates, in London’s Leicester Square, is well-known both to London residents and tourists visiting the capital. The case itself is, of course, familiar to practitioners, and is one of the very few equity or land law cases that students can unfailingly recall. It is regularly cited across the common law world, and has been used to justify injunctions against the display of lions in Paddington in 18882 and against the opening of a wedding chapel in Tennessee in 2008.3 However, just as Leicester Square itself has changed markedly since the mid-nineteenth century, so has our understanding of the case. The significance of Lord Cottenham’s decision is now said to consist in its foundational role in the law of restrictive covenants—it is seen as having ‘invented a new interest in land’.4 It is true that, just as the decision played a role in shaping the Leicester Square that we know today, so did it have a part in shaping the rules currently applying to restrictive covenants. This chapter will look at the impact of Tulk both on the Soho scene and on the legal landscape—asking, in particular, what the decision can tell us about the law of restrictive covenants and, more importantly, about the nature of equity and of equitable property rights. More than 160 years after the decision, a lawyer coming to Tulk is in a similar position to a tourist arriving at Leicester Square: he may feel he is at an important landmark, but

*

I am grateful to Christopher Knowles for his helpful research assistance. The ‘official’ report of the decision of Lord Cottenham LC is that of Phillips: (1848) 2 Ph 774, 41 ER 1143. A longer, but less coherent, version of Lord Cottenham’s decision is contained in the Hall and Twell reports: (1848) 1 Ha & Tw 105, 47 ER 1435. The decision is also reported at (1848) 18 LJ Ch 83. 2 Hall v Ewin (1888) LR 37 Ch D 74. 3 Gambrell v Nivens 275 SW 3d 529 (2008). 4 See eg C Harpum et al (eds), Megarry & Wade’s Law of Real Property, 7th edn (London, Sweet & Maxwell, 2008) 32-033. 1

204 Ben McFarlane may be less sure as to why it is important. The usefulness of Tulk is perhaps similar to the usefulness of the garden in Leicester Square to those tourists: it provides a pause for reflection and a chance to orientate ourselves by reference to other landmarks of which we are more sure. Equally, however, inattentive tourists may find their time in Leicester Square to be costly; and those examining the nature of equitable property rights must also be on their guard when considering Tulk. Whilst a number of valuable legal lessons can be learned from the decision, Tulk v Moxhay is one of those landmarks that is useful precisely because, if you end up there, you know have, in some respects at least, gone wrong.

B. THE BACKGROUND

(1) The Factual Background Lord Cottenham’s decision, dismissing Edward Moxhay’s motion to dissolve an injunction granted in favour of Charles Augustus Tulk, was far from the first decision concerning the use of land in the area now known as Leicester Square. The history of the land is very usefully set out in chapter XVII of volumes 33 and 34 of the Survey of London,5 to which the factual parts of this chapter are heavily indebted. The current name of the land ultimately derives from the 1630 purchase by Robert Sidney, the Second Earl of Leicester, of four acres of St Martin’s Field, at a price of £160. In a nicely proleptic twist, neighbouring residents had sought to prevent the Earl from building on the land—parishioners of St Martin’s argued that this would interfere with the various rights they had in relation to the land, including the right to dry clothes there. The dispute was referred to the Privy Council, and it was decided that the intended mansion could be built on the northern half of the land, but on two conditions: first, the Earl had to pay an annual sum to the Parish by way of compensation; secondly, the southern part of the land (thereafter known as Leicester Field) was to be6 turned into Walkes and planted with trees along the walkes, and fitt spaces left for the Inhabitantes to drye their Clothes there as they were wont, and to have free use of the place, but not to depasture it, and all the foote ways through that Close to bee used as now they are.

As a result, Leicester House was completed, on the north side of what is now Leicester Square, in 1635. 5 ‘Leicester Square Area: Leicester Estate’, in F Sheppard (ed), Survey of London, Volumes 33 and 34: St Anne Soho (London, University of London, 1966). Available online at (accessed 17 August 2011). 6 PRO, SP16/181, no 27. References for the further material discussed in this section are available in ch XVII of vols 33 and 34 of the Survey of London (n 5).

Tulk v Moxhay 205 The restrictions on the use of Leicester Field were removed, it seems, when, in 1670, Charles II granted the Earl a building licence relating both to the Field and some adjacent land also purchased by the Earl. The plan on which the licence was based envisaged a square central garden, surrounded on each side by houses built in a uniform style. In the building leases granted by the Earl, the form of each house was precisely set out and it was specified that, in the absence of permission from the Earl, no shop could be made fronting the Square. Further, posts and rails were to be set up to enclose the central garden, in which the builders agreed to plant ‘young trees of Elm’. The garden was, it seems, open to the public. In 1698, it was the scene of an actual, rather than a merely legal, duel, resulting in the death of ‘a pretty young man, Coll. Richard Coote’s son of Ireland’.7 An engraving of around 1727, by Sutton Nicholls, shows a symmetrical garden, with carefully placed trees, surrounded by a wall and railings—it is reminiscent of a smaller-scale Place des Vosges. As a result of the control retained by the Earl over the use of the houses, Leicester Square was at the time a largely residential area, pleasant enough for Leicester House to become the home of Frederick, Prince of Wales, from 1728 to his death in 1751. The Survey of London reports that, from the late seventeenth century and throughout the eighteenth century, the residents were drawn largely from ‘wealthy county families’ and included Lord Somers, then Lord Chancellor, and, later on, William Hogarth and Sir Joshua Reynolds.8 Throughout this period, the freehold to the Square and garden remained vested in the Sidney family, who were thus in a position to use rents from the houses to maintain the garden. Indeed, a bold plan to improve the garden ‘after the Manner of Lincoln’s Inn Fields’ was drawn up in 1737, and included the building of a central fountain. This plan was not put into practice,9 but an addition to the garden did occur on 19 November 1748 when, on the occasion of the Prince of Wales’s birthday, an equestrian statute of George I was unveiled. The seventh, and last, Earl of Leicester died in 1743, and his estate passed to Mary and Elizabeth Sidney, the only surviving legitimate heirs of the body of the fourth Earl. On Mary’s death in 1758, a life interest in her half share passed to Anne Howard, with remainder to Anne’s son, Sir George Yonge (MP for Honiton and fifth baronet of Effingham). It was George who initiated the Tulk family’s connection to the Square, when he sold his interest to James Stuart Tulk, a merchant from Tottenham. Elizabeth, meanwhile, died in 1783. Her half share had been very heavily mortgaged, principally to finance her successful, but ultimately ruinous, claim to the Leicester estate.

7

The reference given by the Survey of London (n 5) is as follows: PRO 6, SP32/15, no 156. The Times (8 December 1873) 9 later recalled that ‘Reynolds, in the height of his fame, received a daily levée of beauties at his house on the west side [of Leicester Square].’ 9 A plan referring both to Lincoln’s Inn and a fountain was perhaps always likely to excite controversy. 8

206 Ben McFarlane In 1785, on the application of Elizabeth’s creditors, Lord Thurlow, the Lord Chancellor, ordered a Chancery master to take an account of all the claims on Elizabeth’s estate and, if necessary, sell her share in the land. To facilitate a sale, Elizabeth’s executors sought a partition of the co-owned land, and this was ordered by the Lord Chancellor in 1787. A commission was set up to consider the terms of the partition, and their first meeting, appropriately enough, took place in a pub in Leicester Square. The certificate of partition was confirmed by the Lord Chancellor in January 1789.10 The first James Stuart Tulk had died in 1775, and his half share in the Leicester estate passed to his son (who shared his name) and other family members. On the partition, they received land on the east, south and west sides of the Square. Land on the north side of the Square, including Leicester House, was therefore available to meet Elizabeth’s debts. The Tulk family also received the garden, but subject to the condition that11 the Owners and Proprietors … shall for ever afterwards at their own sole and proper costs and charges keep and maintain the said Square garden or pleasure Ground and the railing round the same in sufficient and proper repair as a Square Garden or pleasure Ground in like manner as the same now is.

The land on the north side of the Square was sold off in 29 lots, the auction having been advertised in the London Gazette of 18 July 1789.12 Of the 16 different purchasers, many were tradesmen, and two years later, Leicester House was demolished to allow for further building. It is clear that the events of 1789 had a revolutionary effect on the character of the Square: as the editors of the Survey of London put it: ‘The division of the Leicester estate … and the subsequent demolition of Leicester House marked the beginning of the social disintegration of the square.’13 For example, some of the land within the footprint of Leicester House was used for entertainment of varying sorts: Barker’s Panorama was built in 1793, and 1809 saw the opening of a needlework gallery. The tradition continues in some form today, as the Leicester House site is now occupied by the Empire cinema. The reduction in the number of residential tenants may have made it more difficult for the Tulk family to subsidise maintenance of the garden through rents: for example, from 1839 to 1851, four houses on the east side of the Square, comprising part of the Tulk lands, stood empty whilst unsuccessful attempts were made to convert them into a theatre. Any lingering chance of reversing this shift was removed in 1843–46, as the opening of New

10 11 12 13

The partition order is available in the National Archives: C 14/1018/ L7. Ibid. The advert itself made no mention of the garden. Survey of London (n 5) vols 33 and 34, ch XVII, 425.

Tulk v Moxhay 207 Coventry Street and the widening of Cranbourn Street caused a significant increase in the traffic through the Square. By the middle of the nineteenth century, the majority of the land on the east, south and west sides of the Square remained in the Tulk family, although it had been subdivided into more than 10 distinct plots. On the death of the younger James Stuart Tulk in 1791, the right to the garden passed to his brother, John Augustus Tulk. In 1807, John Augustus made a settlement in favour of his son, Charles Augustus Tulk, who had just reached the age of 21. The land acquired by Charles included several houses around the Square, as well as the garden. Charles covenanted with his father that he and his heirs and assigns would14 at all times hereafter keep … the piece or parcel of ground in Leicester Square now used as a Garden … in its present form and in an open state uncovered by any buildings upon the same and shall and will keep … the said piece or parcel of ground now used as a Garden in neat and ornamental order.

A year later, Charles, who had studied but never practised law, conveyed the fee simple in the garden to Charles Elms, a dentist living in Leicester Square, for £210. That deed contained the famous covenants:15 And the said Charles Elms, for himself, his heirs, executors, administrators and assigns, doth covenant, promise, and agree to and with the said Charles Augustus Tulk, his heirs, executors, and administrators, in manner following—that is to say, that he, the said Charles Elms, his heirs and assigns, shall and will, from time to time, and at all times for ever hereafter, at his and their own proper costs and charges, keep and maintain the said piece or parcel of ground and square garden, and the iron railing around the same, in its present form, and in sufficient and proper repair as a square garden and pleasure ground, in an open state, uncovered with any buildings, in a neat and ornamental order; and shall not nor will take down, nor permit or suffer to be taken down or defaced, at any time or times hereafter, the equestrian statute now standing or being in the centre of the said garden, but shall and will continue to keep the same in its present situation, as it now is; and also, that it shall be lawful to and for the inhabitants of Leicester Square aforesaid, tenants of the said Charles Augustus Tulk, and of John Augustus Tulk Esq, his father, their heirs and assigns, as well as the said Charles Augustus Tulk and John Augustus Tulk, their heirs and assigns, on payment of a reasonable rent for the same, to have keys (at their own expense), and the privilege of admission therewith annually, at any time or times, into the said square garden and pleasure ground.

14

Deed of 25 Oct 1807, held at the National Archies: CP 43/899, ff 101–18. This formulation of the covenants is set out in the Hall & Twells report: (1848) 1 Hall & Twells 105, 105–06; 47 ER 1345, 1345. The formulation in the Phillips report is briefer but not materially different: (1848) 2 Ph 774, 775; 41 ER 1143, 1143. 15

208 Ben McFarlane Elms’s legatee left the garden in turn to Robert Barrow,16 who, in 1834, sold it to John Inderwick, a resident of Leicester Square, for £400. Inderwick covenanted on behalf of himself, his heirs, executors, administrators and assigns that he and they would ‘observe, perform and keep all and singular the covenants, conditions and agreements’ in the 1808 release to Elms, and would indemnify Barrow, his heirs, executors and administrators from the performance of the covenants, or any claims or costs relating to them.17 In 1839, Inderwick sold the garden by auction, the particulars of sale ingeniously describing the land as18 [a] very valuable plot of freehold ground, consisting of the extensive pleasuregrounds forming the open plot of the whole of Leicester Square, namely the valuable land lying within the railing, and containing 3926 square yards, or threequarters of an acre and ten perches (be it more or less). There is malheureusement, a covenant which restrains the possessor of the fee simple from building on this grand and unrivalled open space; an Act of Parliament, however, might remedy the difficulty; and it will perhaps be difficult for an enterprising character to withstand the temptation; but the leading feature is the certainty that, in the immense improvements which are in full progress, this square must necessarily be required, or, failing to make suitable terms with the possessor of this valuable land, an extinguisher must, of course, be at once placed upon the ground plan, which is now upon the point of adoption, namely to communicate Covent Garden with Piccadilly, thus opening a grand thoroughfare to the City of London, and giving to Her Majesty a decent and proper line of road when she honour our national theatres with a visit.

The optimistic phrasing of the particulars perhaps calls to mind the modern-day practice of ‘land banking’, whereby shares of ownership of green-belt land are advertised on the basis that current building limitations will one day be lifted.19 It is unclear whether he was personally convinced of the Queen’s need for speedy access to the West End, but Hyam Hyams was the successful bidder at the auction, paying £451. He then assigned his contract to Edward Moxhay. A former shoe-maker and ‘speculative biscuitbaker’,20 Moxhay was now, ominously enough, a builder: in 1830, he had begun work on the Hall of Commerce at 52 Threadneedle Street. It might seem that the protagonists are in place and the stage is now set for Tulk v Moxhay. First, however, a long-running dispute arose as to the terms of the sale of the garden to Moxhay. Inderwick refused to complete

16 His name is given as Robert Barron in the 1873 pleadings in Webb v Tulk and Wyld (in the National Archives: C 16/902/11), but Barrow is the form used by the court in Moxhay v Inderwick (1847) 1 De Gex & Smale 708, 63 ER 1261. 17 Moxhay v Inderwick (1847) 1 De Gex & Smale 708, 710; 63 ER 1261, 1262. 18 Moxhay (n 16) 708, 1261, 1262. 19 A Private Members Bill, The Sale of Green Belt Land Bill, introduced into the House of Commons in 2005, sought to tackle this practice. 20 W Thorndale, Old and New London: Volume 1 (1878), ch XLVI: available online at (accessed 17 August 2011).

Tulk v Moxhay 209 the sale unless Moxhay agreed to be bound by the covenants Inderwick himself had entered into when buying the land. In 1844, Moxhay brought a suit for specific performance, asking for a transfer of the title to the land without the need for any covenants to be made on his part. In 1847, Knight-Bruce V-C held that it was not necessary to decide if ‘any action or suit might be sustained against Mr Moxhay or Mr Inderwick upon the covenant contained in the conveyance to Mr Elms’, but that the contract of sale could not be enforced without protecting the vendor from the consequences of his own contract with Barrow.21 Moxhay therefore had the choice of being released from the contract of purchase, or of forcing a transfer on the basis that he provide a sufficient indemnity to Inderwick in relation to his potential liability under his 1839 covenants with Barrow. In the end, the transfer occurred without any covenants being made by Moxhay—Moxhay paid Barrow’s widow £120 to release Inderwick from the covenants he had made to her husband.22 In return for £571, plus not insignificant legal costs, Moxhay thus acquired a fee simple in the garden without himself having made any promises in relation to the use of the land. Moxhay immediately started to cut down the trees in the Square; Tulk, presumably fearing that Moxhay intended to build on the garden, sought an injunction to prevent Moxhay from cutting down any trees or shrubs, from removing any of the iron railing around the garden, from putting up any building, from taking down or defacing the statute of George I, from committing ‘any waster, spoil, destruction or nuisance’ or from ‘altering the present form of the said piece of ground or garden’. It is worth noting that each of Tulk and Moxhay agreed that the garden was in a ‘foul, neglected and ruinous condition’ and was a ‘most unsightly object and a disgrace and reproach to the neighbourhood’.23 The Survey of London independently confirms that, in the first half of the nineteenth century, the garden was ‘a neglected and dirty place’.24 This was, perhaps, unsurprising: the partition and sale of the Leicester estate had deprived the area of unitary control by a single owner, or small group of co-owners, making its management and maintenance more difficult. As noted above, the character of Leicester Square had changed, with a shift to commercial rather than residential tenants and a large increase in traffic. Further, whilst the 1808 covenants mention the possibility of charging local residents a rent to cover the upkeep of the garden, owners such as Elms and Inderwick had no means of obliging residents to contribute, and so the costs of maintaining 21

Moxhay (n 16). Deed of 2 March 1848. The reference given by the Survey of London (n 5) is GLC, Legal and Parliamentary Dept, D7311. 23 (1848) 11 Beav 571, 573; 50 ER 937, 939. The quotations are from counsel for Moxhay. Counsel for Tulk agreed that the garden was ‘foul and dilapidated’: ibid at 581, 941. 24 The reference given by the Survey of London (n 5) is to the Leicester Square Scrapbook, vol 1, 34. 22

210 Ben McFarlane the garden were almost certain to be disproportionate to any benefit that an individual owner such as Elms or Inderwick might receive. It is most likely that, as the particulars of the 1839 auction sale attest, the attraction of the garden to Elms and his successors in title was the prospect that the restrictive conditions on its use might be lifted by an Act of Parliament, just as the royal licence of 1670 had released the Earl of Leicester from the duty to keep the land available for the drying of clothes. Despite the poor condition of the garden, and the obligation in the 1808 covenant to keep the garden in a ‘neat and ornamental order’, it seems that the ex parte injunction granted against Moxhay in Tulk’s favour, and upheld first by Lord Langdale MR25 and then by Lord Cottenham LC, was purely negative: it prevented Moxhay from (inter alia) cutting down trees and shrubs on the garden, and from erecting any building there, but did not require him to maintain the garden, or to restore it to its previous state.26 It may be that, given the changes in the surrounding area, Tulk himself had little interest in the garden, and planned only to assert a right to stop building, so as to profit from that right by, perhaps, licensing a suitable project.27 It may also be that, due to the decision in Keppell v Bailey,28 to be discussed below, it would have seemed unduly ambitious to ask the court to impose a positive duty on a successor in title.

(2) Legal Background The Third Report of the Commissioners on the Law of Real Property, published in 1832,29 considered that the law relating to the effect of covenants on third parties was ‘defective, or imperfectly settled’30 and that ‘there is considerable difficulty in determining the extent to which the assigns of the covenantor can be charged with the obligation’.31 There were two fundamental questions, and uncertainty as to each. First, in what circumstances could the burden of a covenant ‘run at law’: that is to say, when would the covenant made by a predecessor in title impose a legal duty on a successor

25

Tulk v Moxhay (1848) 11 Beav 571, 50 ER 937. For further discussion of this aspect of Tulk v Moxhay, see C Bell, ‘Tulk v Moxhay Revisited’ [1981] Conveyancer & Property Lawyer 55 and a reply by R Griffiths, ‘Tulk v Moxhay Reclarified’ [1983] Conveyancer & Property Lawyer 29. 27 Certainly, the Tulk family did later give such a licence to James Wyld: see section C(1) below. 28 (1834) 2 My & K 517, 39 ER 1042. 29 Third Report of the Commissioners on the Law of Real Property (1832), Parliamentary Papers 1832 (484) XXIII. 30 Third Report (n 29) 45. A similar complaint has recently been made by the Law Commission of England and Wales: see Law Commission, Making Land Law Work: Easements, Covenants and Profits a Prendre (Law Com No 327, 2011) paras [5.4]–[5.20]. 31 Third Report (n 29) 46. 26

Tulk v Moxhay 211 in title to the covenantor? Secondly, if a covenant did not run at law, when, if at all, could equity intervene to enforce the covenant against the successor? Given the practical importance of freehold covenants, it is no surprise that these questions had already come before the courts. Indeed, in November 1822, Lord Eldon LC heard two claims that a covenant entered into by the defendant’s predecessor in freehold title could be used to stop building in Bloomsbury.32 In neither case was the covenant enforced; but in neither case did the Lord Chancellor state that it was impossible for such covenants to bind successors. In Roper v Williams,33 an injunction to enforce an 1816 covenant was denied on the basis of Roper’s acquiescence in the successor in title’s building on the land. Roper had initially served a notice that such building should cease, but had subsequently been ‘shown the opinion of counsel that the rights under the covenant could not be insisted on’ and so had failed to take any further steps. Lord Eldon stated that ‘[v]ery little in cases of this nature is sufficient to show acquiescence; and courts of equity will not interfere unless the most active diligence has been exerted throughout the whole proceedings’.34 In Duke of Bedford v The Trustees of the British Museum,35 the Trustees wished to extend the museum northwards and eastwards, in order to house the Elgin marbles. The Duke sought an injunction, relying on a covenant entered into, in 1675, by a predecessor in title of the Trustees. Sir John Leach denied the application, seemingly on the basis that no injunction could be granted unless it was established that the covenant ran with the land at law. When the application came before Lord Eldon, he expressed no opinion on that crucial point. Rather, he stated that even if an action at law were possible, it did not follow that an injunction would be granted. In this case, the crucial factor was that the ‘acts of the Russell family themselves had destroyed the purpose for which the covenant was inserted in the deed of June 1675’.36 For that purpose was twofold: to preserve the uninterrupted views of Southampton House, which had since been demolished; and to maintain the open character of the surrounding neighbourhood, which the Russell family themselves had since built on. As a result, it could not be shown that it would be inequitable not to grant an injunction and the applicant was left to his remedies, if any, at law. Roper v Williams and Duke of Bedford v Trustees of the British Museum each contributed to the uncertainty surrounding the effect of covenants on

32 The cases are examined in more detail by S George, ‘Tulk v Moxhay Restored—To Its Historical Context’ (1990) 12 Liverpool Law Review 173. 33 Roper v Williams (1822) Turn & R 18, 37 ER 999. 34 Ibid, 22. 35 Duke of Bedford v The Trustees of the British Museum (1822) 2 My & K 552, 39 ER 1055. 36 Ibid, 568, 1061.

212 Ben McFarlane successors in title.37 Nonetheless, these decisions may have had some role in preparing the ground for the eventual enforcement of freehold covenants against successors in title. Certainly, the Commissioners on the Law of Real Property stated that such enforcement should be developed in equity, rather than at common law, as a court of equity would have the flexibility to deny enforcement in cases of acquiescence, change of circumstances or uncertainty.38 The Third Report of the Real Property Commissioners, however, left a vital question unanswered—if equity is to enforce a freehold covenant against a successor in title, what is the conceptual basis for such intervention? One such basis was suggested, two years after the Third Report, by Sir Edward Sugden (later Lord St Leonards, Lord Chancellor) when appearing as counsel in Keppell v Bailey.39 His first argument was that the defendants were bound at common law by the positive freehold covenant entered into by their predecessors in title. His second argument was that, even if the freehold covenant in that case did not run with the land at common law,40 the notice which, prior to their purchase, the defendants had received of the existence and nature of the covenant, imposed an obligation which bound them in conscience, and which a Court of Equity would not suffer them to violate.

Lord Brougham LC’s rejection of Sugden’s first argument remains the most eloquent judicial defence of the numerus clausus principle in the common law world. His Lordship’s analysis of the second argument was clearly informed by the need not to undermine the limits thus imposed on ‘real burdens’. In his view, a covenant which does not itself create such a burden41 cannot bind such assignee by affecting his conscience. If it did, then the illegality would be of no consequence; and however wild the attempt might be to create new kinds of holding and new species of estate, and however repugnant such devices might be to the rules of law, they would prove perfectly successful in the result, because equity would enable their authors to prevail …

The seemingly conclusive nature of Keppell was challenged, however, even before the decision in Tulk v Moxhay. Certainly, the lapidary nature of Lord Brougham’s judgment did not daunt Sugden who, in his Vendors

37 See too Collins v Plumb (1810) 16 Ves Jr 454, 33 ER 1057, in which Lord Eldon relied on the uncertainty of a covenant’s terms in refusing to enforce it against a successor in title. 38 Third Report (n 29) 55. A parallel can perhaps be drawn with the more modern attempt to allow promissory estoppel to be used as a means to give effect to contractual variations— the equitable basis of the doctrine may, for example, be used to ensure that a promisee does not profit from a promise procured by pressure: see eg the approach of Lord Denning MR in D&C Builders Ltd v Rees [1966] 2 QB 617 (CA). 39 Keppell v Bailey (1834) 2 My & K 517, 39 ER 1042. 40 Ibid, 526, 1045. 41 Ibid, 547, 1053.

Tulk v Moxhay 213 and Purchasers,42 provided the most sophisticated contemporary account of the controversy surrounding the effect of covenants on successors in title, as well as setting out possible objections to Lord Brougham’s analysis. It would perhaps be dangerous to follow a commentator in the Harvard Law Review of 1891, and to use Sugden’s work as evidence that Keppell v Bailey was ‘unfavourably received by the profession’43—it rather shows that, perhaps unsurprisingly, the decision was not welcomed by losing counsel in the case.44 The significance of Sugden’s analysis rather lies in the attempt to establish a possible conceptual basis for a distinctly equitable doctrine permitting the enforcement of covenants against successors in title. Sugden’s rejoinder to Lord Brougham’s analysis rests on two key points. First, even if a covenant does not run at law, it is unnecessary and incorrect to describe it as an ‘illegality’—the covenant does operate to impose a duty on the covenantor, and that duty is one which, in a suitable case, equity may enforce by an injunction. Secondly, as part of the protection it provides to that initial duty, a court of equity may also allow a successor in title to be bound—in doing so, it would simply safeguard the initial personal obligation and therefore would not contradict the proposition that the covenant does not run at law. Sugden placed particular reliance on the analogy with a prior contract for the sale of an estate in land, arguing that it reflected precisely that model of intervention and that ‘[i]t is remarkable that the strict analogy should not have presented itself to the mind of the learned judge’.45 Support for Sugden’s attack on Keppell was soon provided by Whatman v Gibson46 and Mann v Stephens:47 in each case, an injunction was granted against a holder of a fee simple in order to prevent action contrary to a covenant entered into by his predecessor in title. Whatman concerned the enforcement of what would now be known as a building scheme, dating from 1799, designed to maintain the residential nature of the plots sold by a common vendor in Ramsgate. The report of Shadwell V-C’s48 judgment contains no reference to authority but a recognition of the practical

42 E Sugden, A Practical Treatise on the Law of Vendors & Purchasers of Estates, 11th edn (London, Butterworths, 1839) 496–507. 43 C Giddings, ‘Restrictions upon the Use of Land’ (1891) 5 Harvard Law Review 274, 274. 44 Sugden and Lord Brougham crossed swords on other occasions, with the latter’s wit apparently giving him the upper hand in the House of Commons—see W S Holdsworth, A History of English Law (London, Methuen, 1972 edn) vol 15, 646. 45 Sugden (n 42) 505. 46 Whatman v Gibson (1838) 9 Sim 196, 59 ER 333. 47 Mann v Stephens (1846) 15 Sim 377, 60 ER 665. 48 Shadwell was counsel for the Duke in Duke of Bedford v Trustees of the British Museum (n 35).

214 Ben McFarlane importance of the building scheme to maintaining the character of the locality:49 Each proprietor is manifestly interested in having all the neighbouring houses used in such a way as to preserve the general uniformity and respectability of the row, and, consequently, in preventing any of the houses from being converted into shops or taverns, which would lessen the respectability and value of the other houses.

There is no suggestion, however, of a positive basis for equitable intervention, other than notice. Indeed, in the report, the Vice-Chancellor’s view is phrased negatively: ‘I see no reason why such an agreement should not be binding in equity on the parties so coming in with notice.’50 In Mann v Stephens, the Vice-Chancellor relied on his own decision in Whatman to grant an injunction restraining the defendant from building a brewery, or any building other than a private house or ornamental cottage, erected ‘so as to be an ornament, rather than otherwise, to the surrounding property’; and, in fact, the defendant was committed for refusing to comply with the injunction. Lord Cottenham LC discharged the committal order, as there was insufficient evidence to support it. The injunction was also varied to remove the uncertain stipulation as to ornamentality, but was otherwise held to have been properly granted. This discussion of Whatman and Mann highlights the often arbitrary nature of landmark status,51 which has been denied to each of them but won by Tulk v Moxhay. One might expect that if such status were to be merited, the decision in Tulk would provide not just a further example of equity’s enforcement of a freehold covenant against a successor in title, but also a principled justification for such enforcement.

C. THE DECISION AND ITS IMPACT

(1) The Factual Impact The decision in Tulk v Moxhay did nothing to improve the condition of the Leicester Square garden, or the health of Charles August Tulk or Edward Moxhay, each of whom was dead within three months of the decision. Neither did it prevent building on the garden, which soon became the home of Wyld’s Great Globe. A forerunner of the Millennium Dome, opened to coincide with the Great Exhibition, this was a concave globe with a diameter 49

Whatman (n 46) 207, 338. Ibid. 51 AWB Simpson, A History of the Land Law, 2nd edn (Oxford, Clarendon Press, 1986) 267, suggests that only the vagaries of mid-nineteenth-century law reporting denied Mann wider recognition. 50

Tulk v Moxhay 215 of 60 feet, containing elevated platforms from which visitors viewed a scale model relief map of the earth’s surface, consisting of over 6,000 plaster-ofParis casts.52 Moxhay had died heavily in debt, largely due to the Hall of Commerce project, and his mortgagees sold the garden to James Wyld, who, in 1851, paid the Tulk family for a licence permitting him to construct the Globe and to keep it in place for 10 years. As part of this agreement, Wyld also granted two options to purchase a half share of the garden for £500, exercisable on the ending of the licence. One such option was granted to the younger John Augustus Tulk (Charles’s half-brother); the other to Charles’s heirs. Wyld also felt obliged to reach an agreement with one Henry Webb, a resident of the north side of the Square, who had not acquired any of the Tulk land but who claimed that he could prevent building on the garden by enforcing the terms of the 1789 partition. Under this agreement, entered into in July 1851, Wyld also promised to restore the garden to ‘good condition as a square garden and pleasure ground’. Despite its educational value, the Globe did little to raise the tone of the Square, and in Bleak House, the region ‘lying about the Haymarket and Leicester Square’ is described as ‘a centre of attraction to indifferent foreign hotels and indifferent foreigners, racket-courts, fighting-men, swordsmen, footguards, old china, gaming-houses, exhibitions, and a large medley of shabbiness and shrinking out of sight,’53 where, on a winter morning, ‘[b]ehind dingy blind and curtain, in upper story and garret, skulking more or less under false names, false hair, false titles, false jewellery, and false histories, a colony of brigands lie in their first sleep.’54 Indeed, in 1861, during the First Reading of the Gardens in Towns Protection Bill, Lord Redesdale informed the House of Lords that, ‘some time ago’, he had called their Lordships’ attention to the state of Leicester Square garden.55 An attempt was made to improve matters when, in 1865, the Metropolitan Board of Works, forerunner to the London County Council, announced its intention to take control of the garden. By this point, one of the options granted by Wyld in 1851 had been exercised by John Augustus Tulk. John Augustus successfully opposed the plans of the Metropolitan Board of Works, on the basis that the relevant statutory authority applied only if the garden had been ‘set apart for the use or enjoyment of the inhabitants’56 of

52 As noted in Punch (1851) vol XX, 5: ‘The World, as has often been remarked by moralists before, is exceedingly hollow; but then, if it were not, we could never have seen it for one shilling.’ Thanks to the scale of 1 inch for every 10 miles, Wyld ‘compressed volcanoes into a thimble, and condensed lakes into the size of a tea-cup!’ 53 C Dickens, Bleak House (1852–53), ch 21. 54 Ibid, ch 26. 55 Hansard, HL Deb 01 August 1861, vol 164, col 1817. 56 Act for the Protection of Garden or Ornamental Grounds in Cities and Boroughs (26 Vict c 13), s 1.

216 Ben McFarlane Leicester Square.57 Two months later, Wyld sold his half share of the garden to Charles’s seven heirs, with the result that the freehold of the garden was once again controlled by the (now extended) Tulk family.58 In 1862, the indefatigable Henry Webb brought an unsuccessful action seeking to force John Augustus to restore the garden;59 in 1873, he succeeded in obtaining an order that John Augustus remove hoardings which had been erected around the garden to advertise (inter alia) cocoa and cheap trousers,60 and it was confirmed that no building could be erected on the garden.61 There is some irony in the fact that an injunction to prevent building on the garden was thus awarded against Charles’s brother; but it is important to note that Webb was relying not on the covenant made by Elms in 1808, but rather on the 1789 partition order, as well as the terms of Wyld’s 1851 agreement with Webb.62 The condition of the garden continued to be a matter of public concern. In 1868, The Builder stated that the garden itself had ‘long been a scandal to those who have any regard for the proper maintenance of our public monuments, and for the dignity or even the decency of the metropolis of Great Britain’.63 On 8 December 1873, The Times stated that the garden had ‘long been the opprobrium of the Metropolis’ and regarded it as a visible manifestation of the ‘barbarous apathy’ of Londoners. It thundered: Only in Rome in the Papal days could neglect and decay be seen in any degree resembling the aspect of Leicester Square, and even in Rome ruin and dirt never struck the eye with such an appearance of sordid squalor … it must be confessed to our shame, as a nation proud of the faculty of self-governance, that we have allowed such a nuisance to remain unabated so long …

Perhaps stirred by this philippic, the Metropolitan Board of Works sought an Act for the compulsory purchase of the garden. While this received Royal Assent in 1874, the Board was not obliged to invoke it, as by October 1874, Albert Grant MP, who had independently decided to purchase the garden for the public, had acquired not only John Augustus’s undivided half share of the garden, but also the rights of all of the seven Tulk family members with interests in the other half share.64 The total cost to the philanthropic 57 See Tulk v Metropolitan Board of Works (1867) LR 3 QB 94 and Tulk v Metropolitan Board of Works (1868) LR 3 QB 682 (Exchq). 58 Each heir paid £142 17s 1d, making a total of £1,000—the option to purchase the half share for £500 had lapsed in 1862. 59 The pleadings are held by the National Archives: C 16/902/W 11. 60 In his answer to Webb’s 1862 bill of complaint, John Augustus had averred that none of the advertisements was ‘otherwise than of a proper and useful character’: C 16/902/W 11, p 26. 61 The order was made by the Master of the Rolls on 5 December 1873: see The Times, 8 December 1873, 9. 62 As may be seen from Webb’s 1862 bill of complaint: C 16/902/ W 11, pp 23 and 26. 63 The Builder, 25 July 1868, 542–43. 64 One of those seven had recently died in Australia, which delayed completion of the conveyancing.

Tulk v Moxhay 217 Grant was over £11,000, and he spent further sums in repairing and landscaping the garden, adding a marble fountain and busts of famous former residents of the Square, Reynolds and Hogarth included. The 1874 Report of the Board of Works noted that on 3 July 1874, at the opening ceremony of the new garden, the title transferred by Grant to the Board was to ‘the once dreary and desolate piece of ground … transformed into a beautiful garden.’

(2) The Legal Impact We have seen that, following the decision in Tulk v Moxhay, further action was required to restore the Leicester Square garden. It took even longer for order to be imposed on the law of freehold covenants. The first reported decision in Tulk v Moxhay is that of Lord Langdale MR, upholding the ex parte injunction already granted in Tulk’s favour.65 Rather than seeking to clarify the law, the Master of the Rolls acknowledged its uncertainty and anticipated, or perhaps even encouraged, a further motion by Moxhay, stating that ‘however inconvenient the contest may be to the parties themselves, it would certainly be a benefit to the public if this case should lead to an authoritative and final determination on these two questions.’66 Yet the later decision of Lord Cottenham LC did not provide such certainty. For example, in 1909, Jolly’s Restrictive Covenants Affecting Land admitted that ‘the law [as to] whether the doctrine of Tulk v Moxhay applies to a covenant personal to the covenantee and the benefit whereof cannot be annexed to any particular property, is in a state of great uncertainty.’67 The clearest part of Lord Cottenham’s short judgment is its rejection of the view that equitable intervention by way of injunction is limited to cases in which the covenant runs at law: ‘[T]he question is not whether the covenant runs with the land …’68 Lord Cottenham thus rejected the general proposition that equity has a role to play only when a defendant is subject to a legal liability. That must be correct, and is demonstrated by, for example, the power of a trust beneficiary to assert a right against a stranger receiving a trust asset. The important question, however, is whether, in the specific context of covenants, there is a positive basis on which a third party can be bound by a covenant which does not run at law. It can perhaps best

65

(1848) 11 Beav 571, 50 ER 937. Ibid, 582, 942. 67 W Jolly, Restrictive Covenants Affecting Land (London, Stevens & Sons, 1909) 24. J Ames, ‘Specific Peformance For and Against Strangers to the Contract’ (1903) 17 Harvard Law Review 174, 180, notes that there was similarly no consensus on that question in the US authorities. 68 (1848) 2 Ph 774, 777; 41 ER 1143, 1144. 66

218 Ben McFarlane be said that Lord Cottenham’s approach suggests, but does not definitively establish, three possible bases.69 The first of these possible rationales is the least convincing. Lord Cottenham states that Elms having bought his land at a discount, owing to the restrictions on its use, ‘nothing could be more inequitable that that the original purchaser should be able to sell the property the next day for a greater price, in consideration of the assignee being allowed to escape the liability which he had himself undertaken’.70 On one reading of this statement, the power to award an injunction against a successor in title is justified, and thus limited, by the need to prevent an original covenantor from making an unjust profit. Such a rationale has both conceptual and practical problems. Conceptually, if the concern is to prevent the original covenantor’s unjust profit, it would seem that the response should be to impose a duty on the covenantor, rather than his successors in title. Further, if the covenantor’s unjust profit were the only concern, it is difficult to see why the successor in title’s notice of the covenant should have any role to play. Practically, the rationale cannot meet the need, identified by both the Commissioners on Real Property and Shadwell V-C in Whatman v Gibson,71 to secure the protection of a covenantee in a case where the covenantor does not seek to make a profit by selling free from the covenant. After all, Elms himself made no profit from selling the land, as it passed under his will; and, as we have seen, when Barrow sold to Inderwick he did not attempt to do so free from the restrictions on the use of the land. It is therefore no surprise that this rationale was not developed in the later case law. Two further possible rationales are evident in Lord Cottenham’s judgment, and the tension between them was the principal reason why that judgment failed to clarify the law of freehold covenants. On the first of these rationales, equitable intervention is based on the defendant’s acquisition of his rights with notice of the original promise. Lord Cottenham states:72 It is said that, the covenant being one which does not run with the land, this Court cannot enforce it; but the question is, not whether the covenant runs with

69 It should be emphasised that these are not the only possible rationales for the decision in Tulk. For an attempt to explain the doctrine in Tulk as depending on the unjust enrichment of the successor in title, see Ames (n 67). A Tettenborn, ‘Covenants, Privity of Contract, and the Purchaser of Personal Property’ [1982] CLJ 58 makes a similar argument as to the basis of the dictum of Knight Bruce LJ in de Mattos v Gibson (1849) 4 De G & J 276, 45 ER 108. The objections to an unjust enrichment analysis set out by H Stone, ‘The Equitable Rights and Liabilities of Strangers to a Contract’ (1918) 18 Columbia Law Review 291 at 298–300, do however seem to be decisive: Stone notes, for example, that ‘the profit is not unmerited unless the restriction is legally operative and upon some theory or other the purchaser is so acting as to invade the plaintiff’s equitable right’. 70 (1848) 2 Ph 774, 778; 41 ER 1143, 1144. 71 Whatman v Gibson (1838) 9 Sim 196, 59 ER 333. 72 (1848) 2 Ph 774, 777–78; 41 ER 1143, 1144.

Tulk v Moxhay 219 the land, but whether a party shall be permitted to use the land in a manner inconsistent with the contract entered into by his vendor, and with notice of which he purchased.

This reasoning is consistent with the initial promise giving the promisee a purely personal right against the promisor: it seems that the promisee’s protection against the successor in title depends on a new right, arising directly against the successor in title as a result of his own conduct.73 This analysis influenced, and initially gained support from, the famous dictum of Knight Bruce LJ in de Mattos v Gibson74 that, if he receives property with knowledge of a contract relating to it, a successor can be prevented from acting inconsistently with the terms of the contract.75 Along with Lumley v Wagner76 and Lumley v Gye,77 Tulk and de Mattos can be seen as part of a trend, developed both in equity and at common law, to prevent third party interference with contractual obligations. For example, in Luker v Dennis,78 Fry J expressly held that developments to the ‘equitable doctrine of notice’, such as the decisions in de Mattos and Catt v Tourle,79 meant that he was not bound by Lord Brougham’s statement in Keppell v Bailey that notice of a pre-existing agreement, by itself, cannot suffice to bind the conscience of a successor in title. It is worth noting in passing that, although it had been cited to him, Fry J did not refer to Tulk at all in his judgment. Whilst the influence of Tulk was felt indirectly—Fry J did rely on Catt v Tourle, in which Selwyn LJ in turn relied on Tulk—this confirms the view that Lord Cottenham’s judgment was not yet a landmark but was rather part of a broader trend to prevent knowing third party interference with contractual rights.80 It may therefore be that Tulk’s current landmark status depends on the fact that this broader trend was ultimately restricted—in

73 For the distinction, see B McFarlane, ‘Identifying Property Rights: A Reply to Mr Watt’ [2003] Conveyancer & Property Lawyer 473 and ‘Equity, Obligations and Third Parties’ [2008] Singapore Journal of Legal Studies 308. See too L Smith, ‘Transfers’ in P Birks and A Pretto (eds), Breach of Trust (Oxford, Hart Publishing, 2002) 111. 74 de Mattos v Gibson (1849) 4 De G & J 276, 282; 45 ER 108, 110. 75 de Mattos (n 74) 282, 110. The dictum in full is as follows: ‘Reason and justice seem to prescribe that, at least as a general rule, where a man, by gift or purchase, acquires property from another, with knowledge of a previous contract, lawfully and for valuable consideration made by him with a third person, to use and employ the property for a particular purpose in a specified manner, the acquirer shall not, to the material damage of the third person, in opposition to the contract and inconsistently with it, use and employ the property in a manner not allowable to the giver or seller.’ 76 Lumley v Wagner (1852) 1 De GM & G 604, 42 ER 687. 77 Lumley v Gye (1853) 2 El & Bl 216, 118 ER 749. 78 Luker v Dennis (1877) 7 Ch D 227. 79 Catt v Tourle (1869) LR 4 Ch App 654. 80 Eg, Snell’s Equity, whilst discussing Catt v Tourle from its 2nd edition in 1872, made no mention of Tulk until its 8th edition in 1887.

220 Ben McFarlane particular, the dictum of Knight Bruce LJ in de Mattos v Gibson has been treated with caution81 and scepticism.82 In fact, by the time of Luker v Dennis, there was already strong evidence that the courts were beginning to prefer a different rationale, also present in Lord Cottenham’s judgment. The Lord Chancellor’s very brief consideration of Keppell v Bailey included the view that Lord Brougham ‘never could have meant to lay down that this Court would not enforce an equity attached to land by the owner, unless under such circumstances as would maintain an action at law’.83 On this analysis, it is not notice alone which justifies equitable intervention. Further support for this rationale comes from Lord Cottenham’s statement, earlier in the judgment, that84 if there was a mere agreement and no covenant, this Court would enforce it against a party purchasing with notice of it; for if an equity is attached to the property by the owner, no one purchasing with notice of that equity can stand in a different situation from the party from whom he purchased.

On this view, the covenantor’s initial promise does not simply give the covenantee a personal right against that covenantor, capable of being protected against successors in title who acquire their right with notice of the initial promise. Rather, by virtue of that initial promise, ‘an equity is attached to the property’, and it is that pre-existing equitable property right that may be asserted against successors in title. It is no longer the job of the covenantee to prove that the successor acquired his rights with notice of the initial promise; rather, notice is one aspect of the grounds the successor must establish in order to show that he can escape from the equity attached to the land which, prima facie, persists through the transfer of that land to the successor. This model can thus better meet the practical need of securing the protection of the covenantee, who is no longer obliged to establish the actual notice of the successor in title. This may be seen, for example, in Wilson v Hart.85 In that case, the defendant was merely a tenant from year to year—his landlord was a successor to the freehold title of the original promisor. As he had not investigated his 81 See eg Formby v Barker [1903] 2 Ch 539 (CA), in which Vaughan Williams LJ limited the scope of the dictum by seeing it as equivalent to the tort of procuring a breach of contract. This approach was followed by Browne-Wilkinson J in Swiss Bank v Lloyd’s Bank [1979] 1 Ch 548, 573. 82 See eg Barker v Stickney [1919] 1 KB 121 (CA), in which Scrutton LJ at 131–32 took the view that in relation to land, the de Mattos principle had been limited to cases where the initial promise created a restrictive covenant (a recognised equitable property right), whereas ‘as to personal property it was found that the general rule of Knight Bruce LJ was quite impracticable’; see too Port Line Ltd v Ben Line Steamers Ltd [1958] 2 QB 146. For an attempt to defend the validity of Knight Bruce LJ’s dictum in cases where a transfer of property would otherwise deny the claimant the chance of an injunction, see Tettenborn (n 69). 83 (1848) 2 Ph 774, 779; 41 ER 1143, 1145. 84 Ibid, 778; 1144. 85 Wilson v Hart (1866) 1 Ch App 463.

Tulk v Moxhay 221 landlord’s title, the defendant, prior to acquiring his tenancy, had no actual notice of a covenant not to use the land for the sale of intoxicating liquor. As a result, the defendant did not fall, for example, within the principle set out by Knight Bruce LJ in de Mattos. Nonetheless, an injunction was granted, as it was held that the defendant ought to have inquired into the title of his landlord.86 Wilson was applied in Feilden v Slater,87 in which, again, an injunction was granted to prevent the sale of alcohol from the defendant’s premises. In that case, James V-C’s interpretation of Wilson was that88 if a man will take an underlease he must be bound by all the covenants in the original lease. And although, no doubt, that was a strong instance of legislative action on the part of the Judges of this Court, one can easily see the immense amount of mischief which was intended to be obviated by it.

The courts’ developing preference for the rationale that the initial covenant may create an ‘equity attached to the property’ had important practical and conceptual consequences. Practically, the law better met the perceived need to secure the value of the covenant to the land benefitting from it, as the covenantee did not need to prove that the successor in title of the covenantor had acquired his right with notice of the initial covenant. Conceptually, when deciding if the initial promise does, by itself, create an equitable burden, it is natural to focus carefully on the precise terms of that promise. This impact of this shift in focus, away from the conduct of the successor in title and to the content of the initial promise, may be seen in a series of decisions, made in a period of 20 years or so from 1880, which played a decisive role in shaping the modern rules as to restrictive covenants. For example, the Court of Appeal’s decision in Haywood v Brunswick Permanent Building Society89 established that the ‘rule of Tulk v Moxhay’90 could not be used to enforce a positive covenant against a successor in freehold title.91 As we have seen, cases such as Wilson v Hart had determined that the ‘rule of Tulk v Moxhay’ could be used to enforce a covenant against a yearly tenant with no actual notice of the covenant; and in Haywood, Lindley LJ specifically noted that it would be ‘absurd’ for a yearly tenant

86 Wilson was applied in Patman v Harland (1881) LR 17 Ch D 353, even though in that case the lessee had been assured by his lessor that there was no restrictive covenant preventing him from using the land as an art college. 87 Feilden v Slater (1869) LR 7 Eq 523. 88 Ibid, 530. 89 Haywood v Brunswick Permanent Building Society (1881) 8 QBD 403 (CA). 90 Ibid, 408 (Brett LJ). 91 In the period between Tulk and Haywood, there had been some evidence to the contrary: see eg Morland v Cook (1868) LR 6 Eq 252, Cooke v Chilcott (1876) 3 Ch D 694. See further S Gardner, ‘The Proprietary Effect of Contractual Obligations under Tulk v Moxhay and de Mattos v Gibson’ (1982) 98 LQR 279, 293–99.

222 Ben McFarlane to be subject to a positive burden.92 In its recent report, Making Land Law Work: Easements, Covenants and Profits à Prendre,93 the Law Commission noted precisely this point, recognising that any new statutory scheme allowing for the enforcement of positive freehold covenants must take care to define precisely which successors are to be bound.94 It is very difficult to see how such distinctions could have been drawn judicially, and this is certainly one explanation for the Court of Appeal’s decision in Haywood. The enforcement of positive duties might also have caused difficulties for the relationship between the common law and equitable rules. It may be argued that an equitable doctrine which permits for injunctions preventing action contrary to the terms of a prior promise is not in direct conflict with the common law rules as to the running of covenants, as the defendant is not made liable for breach but rather is enjoined from a particular course of action. Where positive covenants are concerned, it is more difficult to accept both a common law rule that the defendant is not liable (for example) to pay a specific sum and an equitable rule that the defendant can be forced to make such a payment. This difficulty may partly explain Lord Templeman’s statement in Rhone v Stephens:95 Equity cannot compel an owner to comply with a positive covenant entered into by his predecessors in title without flatly contradicting the common law rule that a person cannot be made liable upon a contract unless he was a party to it.

Indeed, the limitation of the Tulk doctrine to negative promises is also consonant with a common feature of equitable intervention: the acknowledgement that the defendant has a particular right is coupled with the placing of limitations on the exercise of that right.96 In contrast, the imposition of a duty to perform under the Tulk doctrine, where no such duty is recognised by the common law rules, would cause common law and equity to give different answers to the same question, and thus risk incoherence and confusion.97 The decision in Haywood was an important part of the final victory in the interpretation of the ‘doctrine in Tulk’ as resting on the recognition of a new form of equitable interest in land. The decisive moment, however, was the decision of the Court of Appeal in London & South Western Rwy Co

92

Haywood (n 89) 411. (Law Com No 327, 2011) paras 6.106–6.117. 94 The proposal is that a tenant with a lease granted for a term of seven years or less will not be bound by a positive land obligation: Law Commission (n 93) 6.109. 95 Rhone v Stephens [1994] 2 AC 310, 318. 96 Such a model can be seen, eg, in the operation of promissory estoppel: see eg Central London Property Trust Co Ltd v High Trees House Ltd [1947] KB 130. 97 For a general discussion of this danger, see A Burrows, ‘We Do This At Common Law, but That In Equity’ (2002) 22 OJLS 1. 93

Tulk v Moxhay 223 v Gomm.98 At first instance, Kay J held that the defendant was bound ‘on the principle of Tulk v Moxhay’, as he had acquired the land with notice of a predecessor’s covenant.99 Kay J also held that the covenant had not created any estate or interest in the land, and was therefore not within the rule against perpetuities. As late as December 1881, then, the notice-based rationale of Tulk still had some currency. The Court of Appeal, however, allowed Gomm’s appeal, and Lord Jessel MR’s judgment contained an influential analysis of what he called ‘the doctrine of [Tulk v Moxhay]’.100 Confirming the decision of the Court of Appeal in Haywood, Lord Jessel stated that the doctrine must be confined to restrictive covenants; but it was the conclusion he drew from this that proved particularly influential. His Lordship suggested that the doctrine of Tulk was101 either an extension in equity of the doctrine of Spencer’s Case to another line of cases, or else an extension in equity of the doctrine of negative easements; such, for instance, as a right to the access of light, which prevents the owner of the servient tenement from building so as to obstruct the light.

Lord Jessel’s reasoning draws an important link between a preference for the ‘equity attached to the property’ rationale and the placing of limits on the content of the initial promise. The analogy with leasehold covenants and easements proved particularly influential. For example, Formby v Barker102 concerned an attempt by an executor of the initial promisee to enforce a promise limiting the use of the land against a successor in title to the initial promisor. The promisee had sold the whole of his estate to the initial promisor, and so had retained no land which could benefit from the limits imposed. Building on Lord Jessel’s analysis, as well as the dicta of Collins LJ in Rogers v Hosegood,103 the Court of Appeal held that the Tulk doctrine could not apply in such a case, as the initial promise was ‘a mere personal covenant collateral to the conveyance’: just as a leasehold covenant had to benefit the estate of the landlord or tenant, and an easement had to accommodate a dominant tenement, a restrictive covenant had to benefit some land. Vaughan Williams LJ specifically considered, and rejected, the view that the Tulk doctrine ‘is based upon obligations on the conscience of a person taking an estate with notice of a restrictive covenant binding it’.104

98 London & South Western Rwy Co v Gomm (1881) 20 Ch D 562. It seems the defendant may well have been related to the defendant in Whatman v Gibson (n 46). 99 Gomm (n 98) 576. 100 Ibid, 582. 101 Ibid, 583. 102 Formby v Barker [1903] 2 Ch 539 (CA). 103 Rogers v Hosegood [1900] 2 Ch 388 (CA). 104 Formby v Barker (n 102) 551.

224 Ben McFarlane In Re Nisbet & Potts’ Contract,105 the crucial question was whether a restrictive covenant could be enforced against a squatter who had barred the title of the initial covenantor: someone who thus was not a successor in title to the covenantor, and had no notice of the initial covenant. At first instance, Farwell J, referring to Gomm and Rogers v Hosegood, stated:106 It is clear therefore that the person entitled to the benefit of the negative covenant over Blackacre has an equitable interest in Blackacre, and that such interest has the same nature and qualities as any other equitable interest in land in respect of priority, notice and the like, but that notice forms no part of the cause of action in respect of such equitable interest.

On this view, notice becomes relevant only when a third party attempts to escape from the prima facie binding effect of the equitable interest by proving himself to be a purchaser for value—this route, of course, was not open to a squatter. Neither was it open to a bona fide purchaser of the squatter’s estate, as it is ‘for the vendor to prove that he had no notice from the prior deeds, and he can only do this by producing such deeds’.107 Farwell J’s analysis was confirmed by the Court of Appeal, with Collins LJ stating that108 it seems to me that the law is clearly established in accordance with Sir George Jessel’s view of the subject, and consequently that in this case the burden of the restrictive covenant did remain imposed on the land so as to be binding upon any person who could not show that he had bought for value and without notice.

D. THE NATURE OF EQUITABLE PROPERTY RIGHTS: LESSONS FROM TULK

The importance of Tulk v Moxhay is often said to lie in its invention of a new form of equitable property right. We have seen, however, that Tulk was not the first case in which a predecessor in title’s promise not to use land in a particular way was protected against a successor to his fee simple title: Whatman v Gibson and Mann v Stephens provide two earlier examples. Similarly, Tulk itself did not decisively and authoritatively establish the nature, or even the existence, of an equitable interest in land—that conclusion was reached only after a number of later cases, decided over a period of 60 years or so. Those cases grappled with the tension, apparent in Lord Cottenham’s decision in Tulk, between two different methods by which a

105 106 107 108

Re Nisbet & Potts’ Contract [1905] 1 Ch 391 (ChD), [1906] 1 Ch 386 (CA). [1905] 1 Ch 391, 398. Re Nisbet & Potts’ Contract [1905] 1 Ch 391 (ChD), 402. [1906] 1 Ch 386 (CA) 404.

Tulk v Moxhay 225 successor may be bound: by a new direct right; or by a pre-existing right which persists through a transfer to the successor. More generally, the treatment of Tulk tells us something about landmark cases: many such cases have to be understood not as isolated high-points, but rather as one part of a more gradual development and refinement of legal principle. This is not to say that the very idea of a landmark case is misleading—even if a new principle does require further refinement to survive and flourish, its initial existence may be due to an individual flash of insight in a particular judgment. One of the past advantages of equity, certainly useful in the nineteenth century, was the general absence of juries; this allowed innovative judges the latitude to set out a new principle or concept, trusting that it was to be interpreted and applied by judges rather than laymen. Further, somewhat paradoxically, a lack of clarity as to the basis of a case may in fact assist its acquisition of landmark status: as we have seen, one of the reasons for the name recognition of Tulk is precisely that judges in later cases had to refer to the ‘doctrine in [or rule of] Tulk v Moxhay’, as the conceptual basis of that principle could not be clearly stated.109 Indeed, a further lesson to be taken from the story of Tulk110 is that judicial interpretation of a decision may include the re-characterisation of that principle. Simpson, noting that the limits imposed on the Tulk doctrine in later case law were not demanded by Lord Cottenham’s decision itself, concludes that ‘[i]n the typical manner of lawyers a new history was invented to give plausibility to these restrictions’.111 This does not mean, however, that we should necessarily be sceptical about the re-characterisation of an earlier decision. Ongoing discussion as to the correct basis of a decision is a natural and commendable aspect of judge-made law, and the doctrine of precedent does permit the re-interpretation of judicial reasoning, provided that consistency is maintained, as far as is possible, with the results of the decided cases. The later treatment of Tulk shows that even if lawyers and legal scholars may feel some doubts about putting forward a new view of a decision, such re-interpretation may in fact be welcomed by the courts. More specifically, what can the story of Tulk tell us about the nature of equitable property rights? It is here that, like those tourists pausing in Leicester Square, we need to be careful. At an abstract level, Lord Cottenham’s general method is revealing. Following Sugden’s model, discussed in section B(2) above, his Lordship started with the duty imposed on the initial promisor, and then asked if the protection given to the promisee might be extended so as to bind a successor in title to that promisor. 109

The decision in Re Hastings Bass [1975] Ch 25 (CA) provides a more recent equivalent. One which is also relevant to Re Hastings Bass (n 109): see now Pitt v Holt [2011] EWCA Civ 197. 111 A Simpson, A History of the Land Law, 2nd edn (Oxford, Clarendon Press, 1986) 259. 110

226 Ben McFarlane In addition, Lord Cottenham emphasised that the initial promise did not have to be formal: it need not be a covenant in the technical sense of a promise in a deed. This is consistent with the view, controversial but shared by a number of both past112 and current commentators,113 that there is a fundamental conceptual difference between legal property rights and equitable property rights. On one version of this view, the operation of equitable property rights consists precisely in their building on an initial duty owed by one party to another, and then allowing that duty to have an effect on a third party. In this way, Lord Cottenham’s judgment, like that of Knight Bruce LJ in de Mattos v Gibson, reveals the ‘raw doctrine’114 on which the operation of equitable property rights is based: the extension of an initial duty to a third party acquiring a right from the party initially bound. One danger of those two judgments, however, is to assume that the ‘raw doctrine’ is all that one needs to explain the operation of such rights. Such a view, or at least a view very close to it, was adopted by Stone.115 On Stone’s model, the binding effect of an equitable property right on a third party comes from the duty of such a third party not to interfere with an initial duty owed by another, such as, in this context, the duty of the initial promisor. The later refinement of Tulk, making clear that an equitable property rights exists only if the initial promise is of a particular type (for example, it must benefit some retained land of the promisee), caused a problem for Stone’s analysis, and he therefore had to regard cases such as Formby v Barker as wrongly decided.116 An alternative, and more persuasive, analysis is that those cases demonstrate the weakness of Stone’s model: it fails to distinguish between those initial duties which are protected as equitable property rights, and those which are not. For example, the approach taken by courts to promises restricting the use of chattels117 and to contractual licences of land,118 set in the second decade of the nineteenth century and continuing today, demonstrates that a successor in title’s knowledge of an initial promise relating to the use of property

112 See eg F Maitland, Equity (Cambridge, CUP, 1909), esp chs 9–11; H Stone, ‘The Nature of the Rights of the Cestui Que Trust’ (1917) 17 Columbia Law Review 467. 113 See eg R Chambers, An Introduction to Property Law in Australia, 2nd edn (Sydney, Lawbook Co, 2008) [13.90]; L Smith, ‘Trust and Patrimony’ (2008) 38 Revue Générale de Droit 379; B McFarlane, The Structure of Property Law (Oxford, Hart Publishing, 2008); B McFarlane and R Stevens, ‘The Nature of Equitable Property’ (2010) 4 Journal of Equity 1. 114 This is the expression used by S Gardner, ‘The Proprietary Effect of Contractual Obligations under Tulk v Moxhay and de Mattos v Gibson’ (1982) 98 LQR 279, 317. 115 Stone (n 112). 116 See H Stone, ‘The Equitable Rights and Liabilities of Strangers to a Contract’ (1918) 18 Columbia Law Review 291, 312–13. 117 See eg Taddy & Co v Sterious & Co [1904] 1 Ch 354; Barker v Stickney [1919] 1 KB 121 (CA). 118 See eg King v David Allen & Sons [1916] 2 AC 54 (HL).

Tulk v Moxhay 227 is not sufficient to give the promisee protection against the successor. As Gardner has noted, the limits placed by the courts on the content of equitable property rights makes clear that the ‘raw doctrine’ cannot be used to allow any duty relating to property to bind a party who later acquires that property with notice of the initial duty.119 To that extent, the limits later placed on Tulk demonstrate that, ultimately, the decision could not escape from the reasoning in Keppell v Bailey: it is for the courts, not the parties, to decide which duties are capable of binding successors, even successors with notice of those duties. So far, then, the legal story of Tulk demonstrates two key points: equitable property rights depend on the extension of an initial duty to a successor of the party initially bound; but not all duties relating to property give rise to equitable property rights. How, then, are we to decide which duties are to produce such rights? It is at this point that Tulk can no longer be used to make general conclusions about the nature of equitable property rights; indeed, it would be dangerously misleading to do so. For the development of the doctrine in Tulk can best be seen as an attempt by the courts to match the content of the equitable property right (that is, the nature of the initial promise) to the practical role performed by that right. In other words, the limits on the content of the right are dictated by the policy concerns which led to the initial recognition of the right. We have seen that those policy concerns are evident before, in and after Tulk. In Whatman v Gibson, Shadwell V-C noted the practical importance to each proprietor of a house in the Ramsgate building scheme of ‘having all the neighbouring houses used in such a way as to preserve the general uniformity and respectability of the row’.120 In Tulk itself, Lord Cottenham noted that, in the absence of a power to restrain future use when selling land, ‘it would be impossible for an owner of land to sell part of it without incurring the risk of rendering what he retains worthless’.121 In Nisbet & Potts’ Contract, Cozens-Hardy LJ, justifying the binding effect of a restrictive covenant on a squatter, stated that ‘[t]he value of estates in the neighbourhood of London and all large towns, and the amenity of those estates, depend almost entirely upon the continuance of the mutual restrictive covenants affecting the user and enjoyment of property.’122 These statements support Gardner’s suggestion that the development of the Tulk doctrine consisted of ‘the adaptation of the doctrine to the particular object of a local law for the protection of amenity’.123 It is of course possible to question the benefits of allowing such ongoing restrictions to be

119 120 121 122 123

Gardner (n 114) 317–20. (1838) 9 Sim 194, 207; 59 ER 333, 338. (1848) 2 Ph 774, 777; 41 ER 1143, 1144. [1906] 1 Ch 386 (CA) 409. Gardner (n 114) 310.

228 Ben McFarlane placed on the use of land. Heller, for example, has discussed the problems attendant on an ‘anti-commons’, a situation where a number of people each have a separate right to prevent others from making a particular use of land.124 Indeed, the deplorable state of the Leicester Square garden for much of the nineteenth century provides a clear example of the ‘tragedy of the anti-commons’. Heller does, however, recognise the positive externalities that may be produced, in the right circumstances, by restrictive covenants: in a case such as Whatman, for example, a number of residents may benefit from the covenants imposed in a building scheme, and thus what one might call a ‘comedy of the anti-commons’125 may result. From an economic perspective, the aim is to strike the right balance, so that the rules as to which duties have binding effect will, overall, allow for the increased value of benefitted land to outweigh the burdens imposed on other land. In particular, it is worth noting that a reason generally given against the recognition of new burdens on land is the fact that the sale of land may therefore be made more difficult. In contrast, the possibility of imposing a binding restrictive covenant could be a crucial factor in the willingness of an owner of a large plot of land to sell parts of that land; the recognition of the restrictive covenant as an interest in land may thus, consistently with one of the principal aims of property law legislation in the nineteenth century, have facilitated the transmission of land. This is not to suggest that the judges, in refining the rules as to when a covenant may create an equitable property right, attempted to make such economic calculations. It may be the case that the recognition of a new equitable interest in land was based in part on the need to cater for a common practical aim of vendors of land. Certainly, the Third Report of the Royal Commissioners into the Law of Real Property stated that covenants attempting to limit the future use of land were of ‘frequent occurrence’;126 the popularity of such agreements may also be seen by the fact that, in 2005, Land Registry estimated that 79 per cent of registered freehold titles were subject to at least one restrictive covenant.127 A desire to give effectiveness to popular arrangements may be seen as an influence in other areas of equity, such as the relative liberalisation of certainty tests to discretionary trusts128 and the recognition of floating charges as capable of

124 M Heller, ‘The Tragedy of the Anticommons: Property in the Transition from Marx to Markets’ (1998) 111 Harvard Law Review 621. 125 The phrase ‘comedy of the commons’ was coined by C Rose, ‘The Comedy of the Commons: Custom, Commerce, and Inherently Public Property’ (1986) 53 University of Chicago Law Review 711, in response to G Hardin’s classic ‘The Tragedy of the Commons’ (1968) 162 Science 1243. 126 Third Report (n 29) 54. 127 Law Commission CP No 186 (2008), App A: at the time, 13,081,491 of 16,643,383 registered freehold titles were subject to a restrictive covenant. 128 See eg McPhail v Doulton [1971] AC 424; Re Baden (No 2) [1972] 2 All ER 1304.

Tulk v Moxhay 229 binding third parties;129 it may also have a role to play in the future, when current overage arrangements are put under greater scrutiny. The direct use of a particular policy concern to justify the existence, nature and operation of an equitable property right is, however, unusual. As a result, restrictive covenants are an unusual form of equitable property right. They differ from other equitable property rights in three key ways. First, the restrictive covenant can exist only in relation to land: a duty not to use a chattel in a particular way does not create an equitable property right.130 It might be said that, for example, an equitable lease or equitable easement shares that feature. In those cases, however, the source of the equitable property right is a party’s duty to grant a recognised common law property right, and the common law rules ensure that such rights can exist only in relation to land. In contrast, the limitation of restrictive covenants to land is the result of an independent equitable rule. Secondly, a restrictive covenant can be held only by a party who also holds a right in land that benefits from the duty imposed by the covenant. It might be said that an equitable easement shares this feature, but again, that requirement flows from a condition imposed on the content of the legal property right, not an independent equitable rule. Thirdly, as shown by Re Nisbet & Potts’ Contract,131 a restrictive covenant can impose a duty on a third party even if that party is not a successor in title to the initial promisor. This is not the case with other forms of equitable property right, such as the right of a beneficiary under a trust.132 Each of these features of a restrictive covenant may be explained as a consequence of the policy behind the recognition of such rights; but it is the fact that the content of such rights has been so shaped that gives restrictive covenants their anomalous status. Indeed, the conceptual oddity of restrictive covenants as a form of equitable property right has been consistently remarked on by commentators. In 1909, for example, Jolly’s view, having considered a number of possible conceptual bases, was that ‘[t]he equitable burden created by a restrictive covenant must therefore be regarded as sui generis’;133 the most recent edition of Preston & Newsom similarly concludes that ‘[a]s a matter of theory it is difficult to say exactly

129 See eg Re Panama, New Zealand and Australian Royal Mail Co (1870) 5 Ch App 318; Re Colonial Trusts Corporation, ex p Bradshaw (1879) 15 Ch D 465. 130 See eg Taddy & Co v Sterious & Co [1904] 1 Ch 354; Barker v Stickney [1919] 1 KB 121 (CA). 131 [1906] 1 Ch 386 (CA). 132 See eg The Lord Compton’s Case (1587) 3 Leo 197, 74 ER 629; Chudleigh’s Case (1595) 1 Co Rep 113b, 76 ER 261; MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675 (CA). 133 W Jolly, Restrictive Covenants Affecting Land (London, Stevens & Sons, 1909) 17.

230 Ben McFarlane what place restrictive covenants occupy in the legal scheme of things … In practice, they should be treated as sui generis.’134 One way to understand the anomalous nature of restrictive covenants is through a comparison with the classic example of an equitable property right: the right of a beneficiary of a trust. As discussed in section B(2) above, one of Sugden’s arguments in favour of the binding effect of freehold covenants on third parties consisted of an analogy with the vendor– purchaser constructive trust. One difficulty with this analysis was pointed out by Roundell Palmer, counsel for Moxhay, in Tulk v Moxhay itself. In the case of the vendor–purchaser constructive trust, a promised act by the covenantor remains unperformed, as no conveyance has been made. In recognising an equitable property right, a court of equity can therefore latch on to this duty to transfer a common law property right. In contrast, in Tulk v Moxhay itself, Tulk’s argument was that the promise made by Elms in the 1808 conveyance immediately gave Tulk a right capable of assertion against Moxhay, even though there was no further conveyance to anticipate.135 Indeed, it can further be argued that, in the vendor–purchaser constructive trust, the vendor does not come under a contractual duty to transfer land to the purchaser; he comes under a duty to transfer his right to the land. The subject-matter of the trust is therefore the vendor’s right to the land, rather than the land itself. A similar analysis applies in all trusts: the essence of the trust is that a trustee is under a duty in relation to a specific right.136 It may further be argued that this need for the initial duty to relate to a specific right may be used as a general, conceptual test for existence of an equitable property right.137 On this view, the anomalous nature of the restrictive covenant depends on the fact that it fails the general test applied in the recognition of equitable property rights. As noted by Stone, the duty of the initial promisor relates directly ‘to the physical user of the land’ and not to a specific, free-standing right of the promisor.138 In other words, the restrictive covenant gives its holder a right in relation to the land, rather than a right in relation to a right of the party initially bound.139 In this important way, the restrictive covenant is thus closer to a legal property right. This is perhaps no surprise, given the decisive influence of Lord Jessel MR’s analysis in

134 G Newsom (ed), Preston & Newsom’s Restrictive Covenants Affecting Freehold Land, 9th edn (London, Sweet & Maxwell, 1998) 1–12. 135 (1848) 11 Beav 571, 581; 50 ER 937, 942. 136 W Swadling ‘Property’ in AS Burrows (ed), English Private Law, 2nd edn (Oxford, OUP, 2007) 4-140; McFarlane and Stevens (n 113). 137 For further detail, and refinements of this test, McFarlane and Stevens (n 113); and McFarlane (n 113) Part D2. 138 Stone (n 116) 308. 139 For more detailed discussion of this point, see McFarlane and Stevens (n 113) 13–15.

Tulk v Moxhay 231 London & SW Rwy Co v Gomm140 that the doctrine in Tulk was best seen as a development of either one of two sets of common law rules. It may be argued that whilst the content of equitable property rights can be defined by a conceptual test, there is no such test to the content of legal property rights, which may be justified only consequentially, on policy grounds.141 The influence of common law may thus be seen both in the policy-based development of restrictive covenants and in their effect, normally denied to equitable property rights, of binding anyone who comes to the burdened land, irrespective of whether that party is a successor in title to the initial promisor. This analysis should not be taken to mean that the decision in Re Nisbet & Potts’ Contract, allowing a restrictive covenant to bind a squatter, is necessarily a bad one—the policy concerns behind the recognition of restrictive covenants, discussed above, certainly justify their binding effect on a third party who succeeds to the land of the initial promisor, even if he does not succeed to any right of that promisor. It does mean, however, that it would be dangerous to draw conclusions as to the general nature of equitable property rights from a case such as Re Nisbet & Potts’ Contract. For example, the recent Court of Appeal decision in Shell UK Ltd v Total UK Ltd142 held, for the first time, that a beneficiary may be able to recover damages for consequential loss suffered by the beneficiary (but not the trustee) as a result of a stranger’s interference with trust property. As a number of commentators have noted,143 the decision is problematic and appears to be contrary to previous authority.144 In particular, by equating the position of a beneficiary with that of a party holding an unencumbered legal property right,145 the Court of Appeal seems to ignore the distinctive way in which beneficial interests bind third parties: by identifying a right in the hands of the third party which is the same as, or a product of, the right initially held on trust. It would be unfortunate if a decision such as that in Re Nisbet & Potts’ Contract, based on the special nature of the restrictive covenant, were used to buttress the decision in Shell UK.

140

(1882) 20 Ch D 562, 583. See McFarlane (n 113) 137–40; and B McFarlane, ‘The Numerus Clausus Principle and Covenants Relating to Land’ in Bright (ed), Modern Studies in Property Law, vol 6 (Oxford, Hart Publishing, 2011). 142 Shell UK Ltd v Total UK Ltd [2011] QB 86 (CA). 143 See eg P Turner, ‘Consequential Economic Loss and the Trust Beneficiary’ [2010] CLJ 445; K Low, ‘Equitable Title and Economic Loss’ (2010) 126 LQR 507. 144 Such as Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd [1986] AC 785 (HL). See too the cases cited in n 132 145 [2011] QB 86 (CA) [132]. 141

232 Ben McFarlane E. CONCLUSION

We have seen that Tulk v Moxhay cannot take sole credit for the existence of the current garden in Leicester Square, nor for the restrictive covenant’s current status as an equitable interest in land. The judicial interpretation and development of ‘the doctrine in Tulk v Moxhay’ suggests that, from the very start, the decision was a conclusion in search of a reason. One explanation for equity’s intervention, suggested by Lord Cottenham’s judgment, was that Moxhay had acquired his fee simple with notice of Elms’s 1808 promises. This rationale was inconsistent with the approach which had been taken in Keppell v Bailey, and has been rejected by later courts as an unjustifiable expansion of third party liability. Tulk may thus remind us of the original purpose of a landmark, as establishing a boundary and thus signifying to those who reach it that they have gone too far and strayed into forbidden territory. A second explanation for equitable intervention, again suggested by Lord Cottenham’s judgment, was that Elms’s 1808 promises had created an equity, attached to the Leicester Square garden. At one level, Tulk thus provides a useful reminder that equitable property rights depend on an extension of an initial duty to a third party. The first difficulty, however, is that we need to specify precisely which duties are allowed to count as equitable property rights and thus have this special effect on third parties. It is therefore no surprise that later cases had to fill in this gap, by defining precisely when a promise relating to the use of land creates an equitable property right. This process was complicated by the second difficulty of the ‘equity attached to the property’ rationale: equitable property rights, in general, attach not to physical things but to other rights. It has been suggested that this feature of equitable property rights provides the test needed to distinguish those duties that create mere personal rights from those that give rise to equitable property rights: we need to ask if the duty relates to a particular right of the party owing the duty. A promise that simply relates to the use of land, rather than to any specific right, fails this test. This explains why, for example, an equitable property right is created by neither a contractual licence of land nor a promise relating to the use of a chattel. In establishing the nature of the ‘equity’ in Tulk, therefore, the courts, in effect, adopted a consequentialist rather than conceptual approach, moulding the content of the equitable interest to the policy justifying its recognition. The most significant result of this consequentialist approach was that the restrictive covenant betrayed its equitable origins and came to resemble, in important respects, a legal property right. If the reforms recently proposed by the Law Commission are implemented then this metamorphosis, in England and Wales at least, will soon be completed. The equitable ‘doctrine of Tulk v Moxhay’ will be dispelled from registered land: a Tulk transferring his registered freehold title to an Elms, but wishing to control the

Tulk v Moxhay 233 future use of that land, will have to acquire a legal interest in Elms’s land, complying with the necessary formality requirements in order to do so. This change will allow for the implementation of a particular policy to which, on any model, equitable property rights are poorly suited: the imposition of positive burdens on at least some successors in title. As a result, such successors of our future Elms may be placed under a positive common law duty to maintain a garden. The seeds may have first grown in equity, but the full flowering will take place only in the more conducive setting of common law.

8 Prince Albert v Strange (1849) LIONEL BENTLY*

A. INTRODUCTION

A

CCORDING TO AWB Simpson,1 the concept of a ‘leading case’ was ‘invented’ during the mid-nineteenth century, with the first published collection of ‘leading cases’ being John Willliam Smith’s A Selection of Leading Cases in Various Branches of the Law in 1837.2 Prior to this, the standard legal publications were either law reports or treatises containing syntheses of the law of particular areas. The birth of the case-book was not straightforward: doubts surrounded the commercial viability,3 as well as the legality,4 of this new model of publication. Nevertheless, the formula—40 or so carefully selected cases in a single portable volume—proved a great success, spawning a host of imitators in Constitutional Law,5 Real

* This chapter emanates from work done preparing Gurry on Confidence: The Law of Confidentiality (Oxford, OUP, 2012). I am grateful to my co-authors, Tanya Aplin, Phill Johnson and Simon Malynicz, as well as to OUP, for allowing me to draw upon that here. 1 AWB Simpson, Leading Cases in the Common Law (Oxford, Clarendon Press, 1995) ch 1 (‘The Study of Cases’). 2 JW Smith, A Selection of Leading Cases in Various Branches of the Law (London, Maxwell, 1837). 3 As is clear from the preface, the book was something of an experiment—the author promising a second volume if the first turned out to be successful. It did, and the second volume containing a further 33 cases was promptly issued in 1840. Smith’s book was widely praised. According to Samuel Warren, ‘Memoir of the Late John William Smith, of the Inner Temple, Barrister-at-Law’ (1847) 61 (376) Blackwood’s Edinburgh Magazine 129, 144–45, ‘immediately upon its appearance, [the book] arrested the attention of all persons competent to form an opinion on the subject, as a sterling and permanent addition to the highest class of legal literature’. 4 Saunders and Benning v Smith and Maxwell (1838) 3 My & Cr 710, 40 ER 1100. 5 EC Thomas, Leading Cases in Constitutional Law Briefly Stated (London, Stevens & Haynes, 1876); 2nd edn (London, Stevens & Haynes, 1885); 3rd edn (London, Stevens & Haynes, 1901); 4th edn by CL Attenborough (London, Stevens & Haynes, 1908); 5th edn by Hugh Bellot (London, Sweet & Maxwell, 1924); 6th edn by Hugh Bellot (London, Sweet & Maxwell, 1927); 7th edn by E Slade (London, Sweet & Maxwell, 1934); 8th edn by O Hood Phillips (London, Sweet & Maxwell, 1947). In 1952, O Hood Phillips started a new series Leading cases in constitutional law/Based on ‘Thomas & Hood Phillips’ (London, Sweet & Maxwell, 1952) which went into a second edition in 1957, a third edition in 1967, a fourth in

236 Lionel Bently Property6 and Equity,7 each of which became ‘well-known and deservedly standard works’,8 and each with multiple editions. While it is true that the publication of books of ‘leading cases’ did not represent the first use of the term,9 in this period the notion of ‘leading case’ took on the status of a proper noun, with each word capitalised. The proliferation of these books and their widespread use placed the idea of ‘leading cases’ right in the centre of legal education and legal thought. Around the same time as books of leading cases started to be published,10 the Vice-Chancellor, Knight Bruce, and the Lord Chancellor, Lord Cottenham, decided Prince Albert v Strange,11 granting the Prince Consort injunctive relief to prevent the publication of a catalogue describing engravings he and Queen Victoria had made and circulated only amongst family and friends. While the case never featured in any of the nineteenth-century case-books (the subject lying outside the core concerns of the areas where such case-books emerged),12 as we shall see, Prince Albert v Strange has frequently been described as a ‘leading case’. In this chapter, I want to explore the circumstances in which such designation has been used for the case. More specifically, the chapter examines the successive re-presentation of the case, first as a case of no great legal significance and then, in turn, as a leading case in three different areas of law: copyright, breach of confidence and the protection of informational privacy.

1973 and a fifth in 1979. Following the death of Owen Phillips in 1986, Paul Jackson authored a sixth edition in 1988. 6 OD Tudor, Selection of Leading Cases on Real Property, Conveyancing, and the Construction of Wills and Deeds (London, Butterworths, 1856); 2nd edn (London, Butterworths, 1863); 3rd edn (London, Butterworths, 1879). Tudor died in 1887, and a fourth edition was issued by new editors in 1898 (London, Butterworths, 1898). 7 F White and O Tudor, A Selection of Leading Cases in Equity (London, W Maxwell, 1849–50), which went into six editions while White and Tudor were alive and a further three thereafter. The Preface explains that the plan for the book was suggested by ‘the very able volumes of the late Mr JW Smith which contain a selection of the Leading Cases principally taken from the Common Law Reports’. 8 J Haynes, The Student’s Leading Cases (London, Stevens, 1878) vii. 9 Simpson (n 1) (at 5, fn 10) acknowledges that the term appeared in cases going back as early as 1612. 10 By coincidence, one of the counsel for Strange, Samuel Warren, was the inspiration for John William Smith’s decision to attempt such a case-book. 11 Prince Albert v Strange (1849) 2 De G & Sm 652, 64 ER 293; (1850) 13 Jurist (OS) 45 (Knight Bruce V-C); 1 Mac & G 25, 45 ER 1171; 1 H & Tw 1, 47 ER 1302; (1850) 13 Jurist (OS) 109 (Lord Chancellor). 12 White and Tudor, for example, never sought to include it in their leading cases in Equity. That said, one reviewer did complain that the 4th edn of G Goldsmith, The Doctrine and Practice of Equity, or a Concise Outline of Proceedings in the High Court of Chancery (London, Benning & Co, 1849) failed to refer to the case ‘and, indeed, the other cases on copyright which have been published in the reports since the third edition of the work’: (1849) 11 Law Mag Quart Rev Juris (ns) 321.

Prince Albert v Strange 237 The changing way in which subsequent generations of lawyers have repositioned Prince Albert v Strange—its ‘legal historiography’—highlights a contradiction in the work done by the concept of a ‘leading case’. If the idea of the ‘leading case’ assumes a historical origin from which subsequent law is said to emerge, the legal historiography exposes that very instability of those historical materials as a constraint on interpretation, revealing them to be, in fact, a resource for constant reinterpretation. The status of a case as ‘leading’ is conferred only afterwards as a response to the very changes that the idea of a ‘leading case’ purports to deny. Moreover, if the idea of a leading case assumes that the meaning of the case—its ‘principle’—can be discovered from the report itself, the legal historiography highlights that such meaning does not appear from the law report alone: the meaning of the case is (as much) the product of the environment in which the case, or its report, falls to be (re-)interpreted.

B. THE DECISION IN PRINCE ALBERT V STRANGE

Prince Albert v Strange concerned the publication of a 30-page catalogue which described 63 (or so) of the etchings of Prince Albert and Queen Victoria. The catalogue had been compiled by one of the defendants, the journalist Jasper Tomsett Judge,13 to accompany an exhibition of prints taken from the royal press which Judge was proposing to hold. The 63 prints themselves had been acquired by Judge, probably (though this was not proved or admitted) for £5,14 (perhaps indirectly, via one Whittington) from Middleton,15 an employee of John Brown of Windsor, whom the Royals had entrusted to make the prints. Fifty-one copies of the catalogue, which bore Victoria’s coat of arms, and contained brief descriptions and

13 Jasper Judge had something of a history of upsetting the upper classes. In 1825, as a consequence of his writings as editor of The Cheltenham Journal, he was horsewhipped by one of his antagonists, and brought an action for damages, being awarded £500: Jasper Judge, The Trial of Judge versus Berkeley and other, Tried at Hereford on Thursday, August 4, 1825 (Cheltenham, S Harper, 1825). 14 The various negotiations leading to Judge’s purchase from Middleton in August 1848 are described in Judge’s Answer, 21 December 1848, C14/778/A70. 15 The bill of complaint refers to Middleton having taken the etchings and given them to Whittington, from whom Judge purchased them.

238 Lionel Bently appraisals of the etchings, had been printed by William Strange.16 An example of one entry was as follows:17 No 54. Two French Women, drawn and etched by Prince Albert, after E Landseer. January 10, 1842. Very extraordinary talent is here displayed by His Royal Highness. It is equal to the best of the Prince’s productions, and would be highly creditable even to the most eminent artist of the present day.

Possibly out of courtesy,18 William Strange, the publisher, sent a copy of the catalogue to the Palace, and Prince Albert responded immediately by seeking injunctive relief preventing its exhibition and publication.19 This

16 William Strange (1801–71), a printer at 21 Paternoster Row, was a significant publisher of cheap literature for the new urban working classes. His most famous publication was the weekly comic journal, Figaro in London, which is said to have had a circulation of some 70,000 in 1832. He was involved in the resistance to the newspaper stamp and other ‘taxes on knowledge’ that took place during the early 1830s, and also in various actions for libel and infringement of copyright. See Sewell v Strange, The Morning Chonicle (22 April 1839) (libel); Leader v Strange, The Era (2 December 1849) (infringement of music copyright); The Morning Post (24 February 1851) (referring to action brought against Strange for pirating the designs of covers of the Illustrated London News). Strange was insolvent in 1829, 1835, and 1840, and once again, as a consequence of the legal costs in Prince Albert v Strange: The Morning Post (4 November 1829); The Morning Post (3 November, 1835); The Examiner (11 January, 1851); In Re Strange (Court of Bankruptcy), Morning Chronicle (24 February 1851); The Morning Post (24 February 1851); The Morning Post (12 November 1853); The Morning Chronicle (14 November 1853). See, D Magee, ‘William Strange’, in Dictionery of Nineteenth-Century Journalism in Great Britain and Ireland (London: Academia Press, 2009) 606–07; and, more generally, Patricia Hollis, The Pauper Press: A Study in Working-Class Radicalism of the 1830s (OUP, 1970) 127, 128, 200, 201, 314; Louis James, Fiction for the Working Man, 1830–1850 (OUP, 1963); I McCalman, Radical Underworld: Prophets, revolutionaries and pornographers in London, 1793-1840 (Oxford: Clarendon, 1993), 219–21; J Phillips, ‘Prince Albert and the Etchings’ [1984] European Intellectual Property Review 344. In 1849, William Strange sold his business to his son, William Strange Junior, who continued in much the same vein as his father had done: publishing unstamped papers (before the stamp was repealed in 1855), printing obscene literature (such as Paul Pry and The Women of London, for which he received a three-year jail sentence in 1857), infringing copyright (Williams v Sheard, The Morning Post (24 December 1849), and tripping in and out of bankruptcy. See The Morning Post (21 September 1851); The Era (26 November 1854); The Morning Chronicle (11 May 1857). According to evidence in a case brought by William Strange Senior against a printer who had mistakenly sent material to William Strange Junior, father and son were no longer on good terms in 1852: see Strange v Savill, The Morning Chronicle (11 June 1852). 17 The comments in the catalogue were complimentary. Not all commentators were so appreciative: Reynold’s Weekly Newspaper (17 November 1850) (referring to Albert’s ‘wretched scrawls of etchings’). 18 See counsel’s submission in The Times (14 December 1848) 6. Copies were sent to six or seven other persons ‘of high rank and intimately associated with the court’ (including the Duchess of Kent, the King and Queen of Belgium, the Lady in Waiting): The Morning Chronicle (14 December 1848). But in Romilly’s submissions, the defendants sent the catalogue either in the hope that it would be ignored, so that they might argue that the Royal couple had assented to the exhibition, or so that, in order to avoid the invasion of their privacy, they would pay Strange and Judge not to hold the exhibition. The latter interpretation seemed plausible to Knight Bruce V-C: see (1849) 2 De G & Sm 652, 688; 64 ER 293, 308. 19 It is notable that Judge and Strange had collaborated in a number of publications concerning the royal household and royal affairs: JT Judge (ed), Royal Correspondence: The

Prince Albert v Strange 239 was granted ex parte,20 and in due course Judge and Strange sought to have the injunction lifted, at least as regards publication of the catalogue.21 Lengthy hearings were held first before Vice-Chancellor Knight Bruce and then, on appeal, before the Lord Chancellor. Neither the motion nor the appeal was successful, and later in 1849 Knight Bruce V-C made the injunction perpetual. Knight Bruce V-C first considered the case over the Christmas recess, and on 12 January 1849 delivered a judgment upholding the injunction. The bulk of his reasoning involved an exploration of the principles underpinning the case law on rights in manuscripts and unpublished writings, the scope of the rights conferred on the authors of such works and the extent to which the principle by reference to which such a right had been developed extended beyond literary subject matter to encompass engraving. While he acknowledged that in Donaldson v Beckett,22 the House of Lords had held that published works were protected under the Statute of Anne or not at all, he took the view that the decision did not impact upon the proposition that at common law the author of a book has the sole right of first publishing the work, a proposition which he described as ‘generally or universally agreed to be correct’.23 Having reviewed the authorities, Knight Bruce V-C went on to recognise the extensive breadth of the right to object to unauthorized publication: it included, in his view, a right to prevent translation, abridgment, summary

Private Letters of Queen Victoria and Louis Philippe, On Political and Domestic Subjects (London, W Strange, 1848) (a compilation of translations by Judge’s son, JAF Judge, of correspondence salvaged following Louis-Philippe’s rapid departure from the Tuileries in the face of the 1848 revolution, and previously published in French by Taschereau); JT Judge, Sketches of Her Majesty’s Household (London, W Strange, 1848) (a list of positions and salaries paid to members of the royal household); JT Judge, Court Jobbery: Or The Black Book of the Palace, Being An Analytical List of All the pensions Granted by the Queen (London, W Strange, 1848). A host of other books by Judge, to be published by Strange, are advertised in Royal Correspondence. See Phillips (n 16) (exploring the background to the case, in particular, Jasper Judge’s activities over the preceding decade as a highly critical reporter on royal affairs). Phillips’s view that Judge was sued because of previous criticisms he had made of the Royal household was shared by some contemporaries: Lloyd’s Weekly Newspaper (22 July 1849). Judge’s previous activities are explored at length in C Jerrold, The Married Life of Queen Victoria (London, G Bell, 1913) ch 10. 20 Against Strange on 20 October 1848; and extended against Judge on 6 November. See Daily News (7 November 1848); The Examiner (11 November 1848). Jasper Judge sent a letter to The Era (19 November 1848), in which he asked that readers refrain from forming a view as to his behaviour until he had had an opportunity to vindicate his character. 21 The Times (14 December 1848) 6 reported Knight Bruce as saying that when granting the ex parte order, ‘he had serious doubts regarding the catalogue’. See also Freeman’s Journal and Daily Commercial Advertiser (15 December 1848); The Morning Chronicle (14 December 1848). But, by admitting that the injunction against exhibition was rightly granted, counsel for the defendant effectively limited the scope of their arguments to the extent of the plaintiffs’ rights, rather than to their existence. 22 Donaldson v Beckett (1774) 2 Bro PC 145, 1 ER 837. 23 (1849) 2 De G & Sm 652, 691; 64 ER 293, 310.

240 Lionel Bently or ‘even a review’ of the unpublished matter. This, he acknowledged, was much wider than the rights of an author in a work which had been lawfully published, which could legitimately be ‘translated, abridged, analysed, exhibited in morsels, [or] complimented’.24 Then he considered the basis of such rights, with a view to determining whether they were restricted to ‘literary subjects’. He found the basis in the common law protection of ‘property’ through rules that were ‘capable of adapting themselves to the various forms and modes of property which peace and cultivation might discover and introduce’. That notion was based on labour, so that25 wherever the produce of labour is liable to invasion in an analogous manner, there must … be a title to analogous protection and redress … To consider, then, the case of mechanical works, or works of art, executed by a man for his private amusement or private use; whatever protection these, or some of these, may have by Act of Parliament, they are not, I apprehend, deserted by the common law.

Consequently, etchings that had been kept unpublished fell to be protected, and the protection was broad enough to justify a prohibition on the description of the etchings. Strange appealed. Lord Cottenham, the Lord Chancellor, confirmed the decision of the Vice-Chancellor but, in contrast, relied on two distinct grounds.26 First, like Knight Bruce V-C, the Lord Chancellor recognised that the plaintiff had a common law ‘property right’ in the unpublished etchings,27 and that the ‘exclusivity’ implicit in such a property encompassed the actions of the defendant. Lord Cottenham LC said he considered that the ‘object and effect’ of ‘a catalogue, list or description’ of the etchings was exactly the same as the issuing or display of copies, both being ‘means of communicating knowledge and information’.28 The principle underpinning the (accepted) prohibition on copying or exhibition thus would

24

Ibid, 693; 311. Ibid, 697; 312. He referred to the statement of Yates J in Millar v Taylor (1769) 4 Burr 2303, 98 ER 201, dissenting, that ‘the immorality of pirating another man’s invention is full as great, as that of purloining his ideas’ (at 2386–87, 246). 26 1 Mac & G 25, 45 ER 1171; 1 H & Tw 1, 47 ER 1302 (Lord Chancellor). (Ibid at 42, 1178, he stated: ‘It was said by one of the learned counsel for the defendant that the injunction must rest upon the ground of property or breach of trust; both appear to me to exist.’) See also 1 H & Tw 21, 47 ER 1310. Lord Cottenham LC began, in fact (at 1 Mac & G 40–41, 45 ER 1177; 1 H & Tw 19, 47 ER 1309), by referring to a third ground for relief: the misrepresentation made in the catalogue that the exhibition had been approved of by the Royals, in so far as they supplied facsimiles of their signatures. But as the injunction extended to publication of any catalogue, this ‘wrong’ was insufficient of itself to support it. 27 While both judges accepted that such right existed in unpublished works of art, as well as literature, it is not clear they agreed as to other subject matter to which the right related. Knight Bruce V-C clearly thought the right extended to mechanical works and medical recipes (and thus would cover what we consider today to be trade secrets), but Lord Cottenham LC talked of the ‘property in the author or composer of any work, whether of literature, art or science’: 1 H & Tw 21, 47 ER 1310; 1 Mac & G 42, 45 ER 1178. 28 1 Mac & G 25, 43; 45 ER 1171, 1178; 1 H & Tw 1, 22; 47 ER 1302, 1310. 25

Prince Albert v Strange 241 justify prohibiting the publication of a description or catalogue. This right extended in scope beyond the rights conferred by statute—copyright—in published works. More specifically, the ‘cases upon abridgment, translation, extracts and criticisms from published works, have no reference whatever to the present question’.29 Lord Cottenham LC, however, added a second basis for injunctive relief. ‘This case,’ he explained, ‘by no means depends solely upon the question of property, for breach of trust, confidence, or contract, would of itself entitle the Plaintiff to an injunction’.30 He relied on three authorities: Duke of Queensberry v Shebbeare,31 Abernethy v Hutchinson32 and Tipping v Clarke,33 as well as the obiter dictum of Lord Eldon LC in Wyatt v Wilson.34 Given that the court accepted that the Royals had kept the etchings private, in the absence of any explanation from the defendant as to how he came by the etchings legitimately, the court concluded that ‘the catalogue and the descriptive and other remarks therein contained, could not have been compiled or made, except by means of the possession of the several impressions of the etchings surreptitiously and improperly obtained’.35 The impressions must have originated in ‘a breach of trust, confidence, or contract’. The evidence suggested, in fact, that it was the employee of Brown, the printer, who had committed the original breach; but even if a person to whom Albert or Victoria had given a copy had passed it on to Strange or Judge, that would ‘equally be a breach of trust, confidence, or contract’.36 As far as Strange and Judge were concerned, the case did not end with the Lord Chancellor’s judgment.37 Judge sought to raise funds to pay for his costs (which he indicated amounted to between £1,500 and £2,000) from a lecture tour,38 on which he continued to proclaim his innocence. He stated that the images had circulated freely around Windsor and Eton long before he purchased them, and that he and Strange had not planned to exhibit the etchings without the consent of the Royals. Judge made similar claims in a book published by Strange, in which Judge presented himself as the victim 29

Ibid. 1 Mac & G 25, 44; 45 ER 1171, 1178; 1 H & Tw 1, 23; 47 ER 1302, 1311. 31 Duke of Queensberry v Shebbeare (1758) 2 Eden 329, 28 ER 924 (Lord Keeper Robert Henley, later Earl of Nothington and Lord Chancellor). 32 Abernethy v Hutchinson (1824–25) 1 H & Tw 28, 47 ER 1313; (1825) LJ Ch (OS) 209. 33 Tipping v Clarke (1843) 2 Hare 383, 67 ER 157. 34 ‘If one of the late king’s physicians had kept a diary of what he heard and saw, this Court would not, in the king’s lifetime, have permitted him to print and publish it.’ Quoted at 1 Mac & G 25, 46; 45 ER 1171, 1179; 1 H & Tw 1, 25; 47 ER 1302, 1311. 35 1 Mac & G 25, 44; 45 ER 1171, 1178; 1 H & Tw 1, 23; 47 ER 1302, 1311 (emphasis added). 36 1 Mac & G 25, 45; 45 ER 1171, 1179; 1 H & Tw 1, 24; 47 ER 1302, 1311. 37 Rumours circulated that Judge and Strange were contemplating indicting Prince Albert for perjury, and that Judge might exhibit the engravings in the United States: The Belfast Newsletter (16 February 1849). 38 Liverpool Mercury (17 April 1849). 30

242 Lionel Bently of a malicious persecution by the Royal household.39 In due course, the injunction was made perpetual, and Judge was ordered to deliver up the etchings.40 The Crown did not ask for costs against Strange, but (despite coming to court in forma pauperis) costs were ordered against Judge. Knight Bruce V-C had no doubt where justice lay:41 [Judge’s] case seemed to him to be one of entire and undissembled dishonesty. It would be a slur on jurisprudence, an insult to the administration of justice in this country, if such a breach of trust, to use the mildest phrase, should be without remedy … [H]is case seemed to him to fail alike in law, equity, truth and common honesty.

According to Judge, these costs amounted to £300, and the Prince’s generosity in not asking Strange to pay meant that Judge alone bore Prince Albert’s costs.42 After taxation, Judge was called on to pay £181,43 and when he failed to pay he was jailed at Reading.44 After nearly three weeks, the Queen sent Mrs Judge a cheque for £180 to enable her to pay off the solicitors’ costs that led to Judge’s imprisonment.45 As for William Strange, he and his family had left the country for France in February 1849,46 but returned in October 1850, whereupon he faced bankruptcy proceedings. His debts of over £1,574 included a debt of £570 to his solicitor, Smith.47

C. THE INTERPRETATION OF PRINCE ALBERT AS A LEADING CASE

(1) A Case of Public Interest But No Legal Significance The immediate audience for Prince Albert v Strange was the general public. As one would expect of a case concerning the Royal family, the proceedings

39 J Judge, A Statement of Facts Relating to the Proceedings in Chancery in the Case of the ‘Royal Etchings’ (London, William Strange, 1849), reviewed in Lloyd’s Weekly Newspaper (22 July 1849); The Era (12 August 1849). 40 Lloyd’s Weekly Newspaper (3 June 1849). Judge appealed: Judge, ‘To the Editor of the Satirist’, The Satirist (18 August 1849) 370. 41 John Bull (2 June 1849) 348. 42 Letter from Judge to the Editor, Lloyd’s Weekly Newspaper (12 August 1849); ditto, The Era (12 August 1849); ditto, The Northern Star and National Trades Journal (18 August 1849). 43 Judge, The Satirist (18 August 1849) 370. 44 Judge, The Northern Star and National Trades Journal (1 September 1849); The Satirist (25 August 1849) 379. Note also the editorial sympathetic to Judge at 377. 45 The Times (12 September 1849); Liverpool Mercury (14 September 1849); John Bull (15 September 1849) 585; The Era (16 September 1849) (including letter, dated 8 September 1849, from Anson, Her Majesty’s Privy Purse, to Mrs Judge). 46 Mary Judge to Her Majesty the Queen, 25 August 1849, set out in Jasper Judge, To the Editor of the Satirist, The Satirist (22 September 1849) 407; and The Northern Star (22 September 1849). 47 In Re Strange (Court of Bankruptcy), Morning Chronicle (24 February 1851).

Prince Albert v Strange 243 excited considerable popular interest. The public gallery was crammed full during the days of the hearing,48 and the case was widely reported in the popular press and magazines across the land.49 One paper reported the issue as being one to which ‘we attach more importance than the ordinary news’.50 The Leeds Mercury explained that ‘from its extreme novelty and the many nice legal points which are involved, [the case] excites the greatest interest, not only in legal circles but throughout the country’.51 But in truth, the public’s curiosity derived not from the novelty or complexity of the legal issues, so much as from the celebrity of the participants.52 The Glasgow Herald noted that while other European sovereigns were fugitives or ‘trembling on the throne’, the fact that the British Queen was concerned with protecting her privacy was evidence of ‘the healthiness of our institutions and the absolute tranquillity of our condition’.53 Jerrold’s Weekly Newspaper also favourably compared the action of the Prince with the manner in which such an affront to the monarch might be treated elsewhere in Europe, taking satisfaction from the fact that Strange and Judge were not condemned to a dungeon without trial but rather proceeded against in a court of law.54 An editorial in The Lady’s Newspaper in February 1849 also reflected on the revolutions in many European countries the previous year, taking satisfaction in the case as an illustration of the robustness of the British constitution, including the equality before the law of ‘the prince and the peasant’. The paper, nevertheless, clearly supported the Royals both in their opting, ‘like sensible people of rank and fortune’, to spend their leisure hours in ‘cultivating the fine arts’, and in the doubtless difficult decision ‘to exert a right they incontestably have, of preventing such an intrusion on their private life’.55 Writing 14 years later, one legal commentator recalled that the ‘vulgar intrusion’ on ‘royal privacy ‘had awakened much public sympathy’.56

48 Freeman’s Journal and Daily Commercial Advertiser (15 December 1848) (‘the court was extremely crowded’); The Lady’s Newspaper (10 February 1849) (on the day that the Lord Chancellor gave judgment ‘there was a very full attendance of the bar and a crowd of strangers in the court long before his lordship sat’). 49 Liverpool Mercury (31 October 1848); Caledonian Mercury (2 November 1848) (reproducing stories from the Atlas and Literary Gazette); The Preston Guardian (11 November 1848). 50 The Atlas, reprinted in the Daily News (30 October 1848). 51 Leeds Mercury (9 December 1848); The Lady’s Newspaper (9 December 1848) (an identical comment). 52 Thus, eg, the papers reprinted Prince Albert’s affidavit and the full list and description of the etchings—achieving pretty much the same level of publicity as Strange’s catalogue. See, eg, The Morning Chronicle (7 November 1848); The Standard (7 November 1848). 53 The Glasgow Herald (30 October 1848). 54 Reprinted in Manchester Times (7 November 1848). 55 The Lady’s Newspaper (3 February 1849). 56 CP Phillips, The Law of Copyright in Works of Literature and Art and in the Application of Designs (London, Stevens & Haynes, 1863) 10.

244 Lionel Bently The case also received the attention of the legal press: the editor of the Legal Observer said he considered Albert v Strange to be the only case in the previous term that was ‘calculated to excite public attention or to create … unusual interest’.57 The Law Magazine suggested the case had legal significance, arguing that ‘stripped of its adjunctive circumstances of interest derived from the exalted station of the parties engaged … [i]t would be difficult to overrate the importance of the bearing of the principle of law adopted in this case’.58 In subsequent years the case would often be referred to by legal commentators as a ‘celebrated’ case,59 and it certainly was a case with which jurists were assumed to be familiar. In 1883, Copinger would refer to the case as one of ‘peculiar interest’ because of the ‘high position of the parties’, a comment repeated in the two subsequent editions.60 Fortyfour years after the decision, one member of the Court of Appeal was able to refer in passing to Prince Albert, calling it ‘the case with which we are all familiar’.61 In the face of such public attention, it is worth noting that Lord Cottenham denied that the case was of any great legal importance. Opening his judgment, Lord Cottenham LC stated:62 The importance which has been attached to this case arises entirely from the exalted situation of the plaintiff, and cannot be referred to any difficulty in the case itself. The precise facts may not have occurred before; but those facts clearly fall within the established principles, and the application of them is not attended with any difficulty.

Had Lord Cottenham’s statement been taken at face value, one could imagine the case would have barely made an impression outside the footnotes of the legal textbooks and journals. But no one seems to have been convinced by the Chancellor’s assertion that the legal issues fell squarely within the terms of the existing law. In fact, the case seems constantly to have been in the legal textbooks in the 160 years since the decision. But, while the decision has always been regarded as important, peculiarly, the reasons for that importance have repeatedly shifted.

57 ‘Conclusion of the Term. Commencement of the Session of Parliament’ (1849) 37 Legal Observer, Digest and Journal of Jurisprudence 265, 266 (3 February 1849). 58 ‘Right of Privacy of Authors in their Unpublished Works’ (1849) 10 Law Magazine: Or Quarterly Review of Jurisprudence (ns) 321. 59 TE Scrutton, The Laws of Copyright (London, John Murray, 1883) 119, 222; B Neill, ‘The Protection of Privacy’ (1962) 25 MLR 393, 395 (calling Prince Albert ‘celebrated’); Tchenguiz v Imerman [2011] EWCA Civ, [2011] Fam 116 at [55] (Lord Neuberger MR). 60 WA Copinger, The Law of Copyright in Works of Literature and Art, 2nd edn (London, Stevens & Haynes, 1881) 11. 61 Lamb v Evans [1893] 1 Ch 218, 236 (Kay LJ). Kay LJ (1822–97) was the oldest of the three members of the court and the only one in practice when Prince Albert v Strange was decided; Bowen LJ (1835–94) and Lindley LJ (1828–1921) were the other two judges. 62 (1850) 13 Jurist (OS) 109, 111.

Prince Albert v Strange 245 (2) A Leading Case on Copyright (‘Property’) in Unpublished Works? The first occasion (that I have found) on which Prince Albert v Strange was described as a ‘leading case’ was by C Phillips in his text on copyright in works of literature and art in 1863,63 where the author observed that ‘Prince Albert v Strange may be termed the leading case on copyright before publication.’ This was reiterated in William Kerr’s treatise on injunctions in 1867,64 and by J Shortt in his 1871 treatise on the law relating to works of literature and art.65 Scrutton, who referred to the case as ‘celebrated’, covered it in the section of his book dealing with copyright in unpublished works.66 In other commentaries, if not expressly designated a ‘leading case’, Prince Albert was primarily characterised as a case on ‘common law copyright’ or ‘property in unpublished works’,67 and offered a suitably prominent place in the analysis thereof.68 That Prince Albert should be treated by commentators as a case on common law copyright is unsurprising—this was the basis of the ViceChancellor’s decision, and one of the grounds to which the Lord Chancellor had referred. But by the mid-nineteenth century there were plenty of cases on common law copyright—in conveyancing precedents,69 unpublished law reports,70 letters,71 delivered but otherwise unpublished lectures72 and performed but unpublished plays. What did commentators mean when they identified Prince Albert as a ‘leading case’ in this field? In the Preface to A Selection of Leading Cases in Various Branches of the Law (1837), John William Smith articulated some of the goals of, and ideas that underpinned, the identification of ‘leading cases’. Smith explained that the collection was targeted both at students and practitioners, revealing thus

63

Phillips (n 56) 14. W Kerr, A Treatise on the Law and Practice of Injunctions (London, Maxwell, 1867) 183 (calling Prince Albert ‘the leading case on the subject’, a phrase which is repeated in the following three editions until the chapter is eliminated on the passage of the Copyright Act 1911). 65 J Shortt, The Law Relating to Works of Literature and Art: Embracing the Law of Copyright, the Law Relating to Newspapers, the Law Relating to Contracts (London, Cox, 1871) 50. Repeated in the 2nd edn (London, Reeves & Turner, 1884) 26. 66 Scrutton (n 59) 119, 222. 67 In the supplement to his book on injunctions, CS Drewry discussed Prince Albert only under ‘unpublished works’: CS Drewry, A Supplement to The Law and Practice of Injunctions (London, Sweet, 1849) 38–39. See Scrutton (n 59) 222–23 (treating Prince Albert v Strange as a case concerning property in unpublished artistic compositions). 68 Copinger (n 60) 11–16. 69 Webb v Rose (1732), unreported but described by R Deazley, On the Origin of the Right to Copy (Oxford, Hart Publishing, 2004) 6–7. 70 Forrester v Waller (1741) unreported. 71 Pope v Curl 2 Atk 342, 26 ER 608; Thompson v Stanhope (1774) Amb 737, 27 ER 476; Gee v Pritchard, (1818) 2 Swanst 402, 36 ER 670; Palin v Gathercole (1844) 1 Coll 565, 63 ER 545 (Vice-Chancellor). 72 Cullen v Lowndes (13 December 1771) (Lord Chancellor Apsley) (injunction to prevent publication of University of Edinburgh professor’s, Dr William Cullen, lectures). 64

246 Lionel Bently that the designation had both a pedagogical function and a more pragmatic one. As to the former, the book described the difficulties facing a student who decided to learn the law by turning to the law reports:73 [H]e finds himself astray amid the masses of accumulated lore … he feels his judgment perplexed, his choice distracted, and his immediate wish is that some guide would direct him to the leading cases, embodied in which he might discover those great principles of law of which it is necessary that he should render himself thorough master, before he can trace with accuracy the numerous ramifications with which those principles are expanded in the surrounding multitude of decisions.

Smith later claimed that this goal of acquainting students with ‘first principles’ of the law was best achieved largely by citing older cases, from time when the matter was ‘altogether novel’.74 He suggested that more recent cases, in contrast, tended to involve the application of those principles ‘to particular facts’, and so, pedagogically speaking, were less valuable.75 For the lawyer, Smith promised something much less ambitious—a ‘portable collection’. Well over a century before the photocopier, the law reports were, quite simply, too bulky and too heavy to be carried. A single volume of key cases could overcome that problem. To be successful, selection would be all important:76 The leading cases are those with the names of which he [the practising lawyer] is most familiar, which he has most frequently occasion to consult, and which, consequently, he would, if it were practicable, willingly carry into court and round the circuit with him.

Each case that was included ‘involves, and is usually cited to establish, some point of principle of real practical importance’.77 The characteristics that commentators looked for in a ‘leading case’ were manifold: the selected report must ‘embody’ a principle, distinct from the peculiar facts, and the principle enunciated must be one that is subsequently followed; the case would usually be ‘the first ’articulation of the principle; and, moreover, to be useful pedagogically, the statement of principle must be clear. This dimension of clarity was referred to by White and Tudor in the Preface to their Leading Cases in Equity:78 ‘Each of the cases chosen will, it is believed, be found either to be frequently referred to in practice, or to enumerate clearly, for the first time, some important principle of equity.’ In what ways did Prince Albert v Strange meet these criteria? The case was not breaking new ground when it held that an author would be protected

73 74 75 76 77 78

Smith (n 2) v–vi. Ibid, vii. Ibid, viii. Ibid, vi. Ibid, vi. White and Tudor (n 7) xxx.

Prince Albert v Strange 247 from unwanted disclosure of his work. There were plenty of cases establishing this going back as far as Webb v Rose in 1732; and whilst the earliest ones were unreported (and so, lacking an account of the reasoning, inapt to be described as ‘leading cases’),79 many had been reported.80 A number of those might have excluded themselves from the capacity to be described as ‘leading’, perhaps because of doubts over the quality of the reporting81 or the soundness or authoritativeness of the reasoning,82 but still, in terms of sheer age, the identification of Prince Albert v Strange was most peculiar: after all, when Phillips first described the decision as the ‘leading case’ in 1863, it was one of the most recent cases on the topic, not one of the oldest. Moreover, Lord Cottenham himself denied that the matter was at all novel, explicitly characterising the case as one that had attracted public attention by virtue of its particular facts. Given that Prince Albert v Strange seems to fail William Smith’s criteria for a ‘leading case’, why did commentators nevertheless give it this designation? There seem to be two possible reasons. The first is because, in some respects, Prince Albert v Strange did develop the law from its existing ground, so that the case could be said to indicate the scope of the protection of unpublished works better than the earlier authorities. The second reason 79 Eg, Webb v Rose (1732) and Forrester v Waller (1741) were unreported, though they were nevertheless widely cited. Webb v Rose was referred to in Tonson v Collins (1761) 1 Bl W 321, 330–31; 96 ER 180, 185. Both Webb and Forrester were referred to in Millar v Taylor (1769) 4 Burr 2303, 2330–31; 98 ER 201, 217 (Willes J), 2379, 242–43 (Yates J); Lord Mansfield referred to Webb, Forrester, Pope and Shebbeare as ‘the four cases in Chancery’ establishing an incorporeal right at common law (see ibid, 2396–98, 252–53). These showed that ‘it is agreeable to the principles of right and wrong, the fitness of things, convenience, and policy, and therefore to the common law, to protect the copy before publication’. In his dissenting judgment, rejecting common law copyright, Yates J (ibid at 2379, 242) categorised these cases as ‘causes on private trespass; surreptitiously or treacherously publishing what the owner had never made public at all, nor consented to the publication of’. Both Webb and Forrester were again cited in argument in Macklin v Richardson (1770) Amb 694, 27 ER 491, and in the judgment in Thompson v Stanhope (1774) Amb 737, 740; 27 ER 476, 478. 80 Pope v Curl (1741) 2 Atk 342, 26 ER 308; The Duke of Queensbury v Shebbeare (1758) 2 Eden 329, 28 ER 94; Thompson v Stanhope (1774) Amb 737, 27 ER 476; Perceval v Phipps (1813) 2 V&B 19, 35 ER 225; Gee v Pritchard (1818) 2 Swanst 402, 36 ER 670; Abernethy v Hutchison (1824–25) 1 H & Tw 28, 47 ER 1313; (1825) LJ Ch (OS) 209. 81 Thompson v Stanhope (n 80) was reported by the barrister, Charles Ambler, whose reputation as a reporter is not particularly impressive. JW Wallace, The Reporters Arranged and Characterized (Boston, Mass, Soule and Bugbee, 1882) 513 (claiming that in ‘many instances the language of the Judges was so erroneously reported that false ideas were given of the points decided’); VV Veeder, ‘The English Reports, 1202–1865’ (1901) 15 Harvard Law Review 1, 114–15 (stating that ‘their statement of facts is often defective, their reports of the arguments of counsel are far from lucid, and sometimes they give an incorrect report of the decree’). 82 The reasoning in Pope v Curl (n 80) might have been thought dubious because of Lord Hardwicke’s express reference to the Statute of Anne, when the Act explicitly conferred protection only on published books. The judgments of the Court of King’s Bench in Millar v Taylor (1769) 4 Burr 2303, 98 ER 201 were widely cited, but were not treated as ‘leading’, in part, no doubt, because the reasoning was obiter (the case concerning published works) and in part because the result was overturned by the House of Lords in 1774 in Donaldson v Beckett (n 22). See Perceval v Phipps (1813) 2 V&B 19, 35 ER 225 too.

248 Lionel Bently why Prince Albert might have been identified as a leading case is because of its (then) recent vintage. Such a clear reaffirmation of the principle of protection of unpublished works took on particular importance in the face of another decision of the House of Lords, Jefferys v Boosey,83 that could have been understood as rejecting common law protection of unpublished matter as an incorporeal property. Prince Albert v Strange developed the law relating to unpublished works in at least two respects. First, this was the first time the court had protected a work of visual art by these means. Lord Cottenham LC declared:84 The property of an author or composer of any work, whether of literature, art, or science, in such work unpublished, and kept for his private use or pleasure, cannot be disputed, after the long line of decisions in which that proposition has been affirmed or assumed.

Here was a generalised statement of the principle of protection of all unpublished intellectual creations. Previous cases had concerned letters or dramatic works, but there had been no case law dealing with protection of engravings or sculptures prior to publication.85 This certainly was a significant development, and in due course would come to be followed in an 1861 case on paintings.86 The second way in which Prince Albert v Strange developed contemporary protection of unpublished works lay in the extension of the scope of protection to cover the description of the content or subject of unpublished works, not just the reproduction and publication of the work itself. Lord Cottenham LC saw little distinction between reproducing unpublished works and describing them:87 The means are different, but the object and effect are similar: it is to make known to the public, more or less, the unpublished works and compositions of the author, which he is entitled to keep wholly for his private use and pleasure, and to withhold altogether, or as far as he may please, from the knowledge of others.

83

See text accompanying n 91 infra. (1849) 1 Mac & G 25, 42; 41 ER 1171, 1178. 85 Engravings and sculptures, once published, were protected by statutory copyright. Paintings and drawings were not even within a statutory regime until 1862. 86 Turner v Robinson (1860) 10 Ir Ch R 121 (MR), 510 (CA in Ch). If the extension of the action to cover art (paintings, engravings and so on) was significant, there were some who thought that the scope of the common law right in unpublished matter was broader still, and could encompass unpublished inventions. Thomas Webster, the famous barrister, for example, represented to the 1871 Select Committee on Patents that ‘people have property in their inventions, so long as they keep them secret, as they have in pictures and lectures’, citing Abernethy (n 32) and Prince Albert v Strange as the grounds for such a proposition. See Report of the Select Committee on Letters Patent (1871), [601]. 87 Prince Albert v Strange (n 11) 43, 1178. 84

Prince Albert v Strange 249 Significantly, the arguments based on the right to criticise a work were treated as irrelevant:88 Cases upon abridgments, translations, extracts, and criticisms of published works have no reference whatever to the present question. They all depend on the extent and right under the acts with respect to copyright, and have no analogy to the exclusive right of the author in unpublished works, which depend entirely on the common law right of property.

Prince Albert was thus a significant intervention establishing more limited exceptions in relation to unpublished, as opposed to published, works. In defining the breadth of what would be protected, and the depth of protection, Prince Albert v Strange became the case that would most efficiently reveal the principle of the law to students seeking an understanding thereof. As Phillips explained:89 All to whom the doctrine of copyright-before-publication is interesting and new, and they may be many, should peruse and reperuse in extensu [Prince Albert v Strange] both in the regular reports and in the ‘Jurist’ ... [for] a clear judicial exposition of the principles of law upon which this copyright is based.

On that basis, despite its recent vintage, contemporaries thought it appropriate to treat the case as the ‘leading case’ on the subject.90 The second reason why it might have suited commentators to treat Prince Albert v Strange as a ‘leading case’ on property in unpublished material was because of its recent vintage. Whereas a ‘leading case’ was normally identified as the ‘origin’ of a particular legal doctrine, Prince Albert v Strange may have been chosen as a clear reaffirmation of an old principle. This was regarded as important by commentators and textbook writers precisely because a contemporary authority coming from the court of last resort, the House of Lords, had cast doubt on the whole line of authority that led to Prince Albert. The decision in question was the House of Lords’ decision of 1854 in Jefferys v Boosey.91 This was a case concerned with the protection of the published works of foreign authors, but the issue had prompted a thorough investigation of the fundamentals of common law and statutory protection of books and music. Ultimately, the case was decided by a vote of the peers, but prior to voting the House heard first the views of the judges and then three speeches from three Law Lords. Amongst the latter, the speeches of Lord Brougham and Lord St Leonard’s spoke against the existence of any ‘common law copyright’, in the sense of an incorporeal right in the work distinct from the corporeal property right in the chattel in which the work 88 89 90 91

Ibid. Phillips (n 56) 10. See, especially, Shorrt (n 65)’s summary, at 54, of why Prince Albert was important. Jefferys v Boosey (1854) 4 HLC 814, 10 ER 681.

250 Lionel Bently was first materialised (the manuscript or engraved plates). Lord Brougham acknowledged that the right of the author before publication was ‘unquestioned’ but defined it in a way that reduced it to a chattel owner’s right in the physical manuscript as opposed to a property right in an incorporeal ‘work’:92 He has the undisputed right to his manuscript; he may withold, or he may communicate it, and communicating, he may limit the number of persons to whom it is imparted, and impose such restrictions as he pleases upon their use of it. The fulfilment of the annexed conditions he may proceed to enforce, and for their breach he may claim compensation.

Having then discussed the possibility of a right after publication he concluded:93 Thus, whatever may have been the original right of the author, the publication appears to be of necessity an abandonment; as long as he kept his composition to himself, or to a select few placed under conditions, he was like the owner of a private road; none but himself or those he permitted could use it; but when he made the work public, he resembled that owner after he had abandoned it, and could not directly prohibit passengers, or exact from them a consideration for the use of it.

Lord St Leonard’s agreed with Lord Brougham’s view that ‘no commonlaw right exists after publication’,94 though the logic of his argument suggested that the right that existed prior to publication was more limited than that recognised by Lord Brougham. This is because Lord St Leonard’s found compelling the analogy between unpublished invention and books, and treated the only right that existed prior to publication as the right to the composition, ‘just as he has a right to any other part of his personal property’. The obvious reading of these two speeches in Jefferys v Boosey was that the only right which an author had prior to publication was the personal property right over the manuscript,95 the tangible entity, enforceable through the torts of detinue, trover or conversion. Given that the vote of the peers followed the advice of these Law Lords, one might have thought the vote an endorsement of the view that no incorporeal right existed in an unpublished work as such. Such a reading, however, contradicted the orthodox understanding expressed in the legal commentaries before the decision. And, as Ronan Deazley has explored elsewhere, such a reading was not adopted in subsequent case law or commentaries.96 The speeches of

92

Ibid, 962, 739 (Lord Brougham). Ibid, 965, 740 (Lord Brougham). 94 Ibid, 977, 744 (Lord St Leonard’s). 95 R Deazley, Rethinking Copyright: History, Theory, Language (Cheltenham, Edward Elgar, 2006) 64; citing, eg, Phillips (n 56) 2. 96 Deazley, ibid, ch 3. 93

Prince Albert v Strange 251 Lords Brougham and St Leonard’s were cited on a number of occasions,97 but were read in a way which left untouched the notion of a property right in the unpublished work. The right of the author of an unpublished work continued to be seen as as an incorporeal right in relation to the work rather than a mere chattel property in the manuscript (if any).98 Although a host of different factors influenced the manner in which the law came to ignore the views expressed in two speeches of the Law Lords,99 the recognition of Prince Albert v Strange as a leading case appears to have had a not insignificant role. After all, it was a case that was exhaustively argued by top counsel before first the Vice-Chancellor and then the Lord Chancellor. Both courts embraced an extensive scope of application of the property right in unpublished works. Prince Albert thus stood, if not as a leading case by orthodox criteria, as a strong decision in support of a common law right. Moreover, it was a decision that was difficult, if not impossible, to square with the attempt by Lord Brougham and Lord St Leonard’s to reduce ‘common law copyright’ in unpublished material to an extensive understanding of the rights of a person in his chattels.100 By highlighting Prince Albert v Strange, commentators effectively adumbrated their preferred view as to how the ‘conflict’ between Jefferys v Boosey and the common law rights should be resolved. Having said this, it is peculiar that it was the barrister CP Phillips who first adopted the language of ‘leading case’ for Prince Albert v Strange. The peculiarity of this derives from the fact that Phillips appeared to recognise, and indeed embrace, the implications of Jefferys.101 Phillips’s account of what he calls ‘copyright-before-publication’ is deeply puzzling, and seemed to contain contradictory claims, and his elevation of Prince Albert v Strange to a leading case was certainly not intended as an outright rejection of Jefferys.102 He begins by describing copyright-before-publication as the 97 Turner v Robinson [1860] Ir Ch R 121, 132 (Master of the Rolls); In Re Dickens, Dickens v Hawksley [1934] 1 Ch 267, 286 (Lord Hanworth MR), 294 (Romer LJ). 98 Macmillan v Dent [1907] 1 Ch 107, 120–21 (Fletcher Moulton LJ); Mansell v Valley Printing Co [1908] 1 Ch 567, 573 (Swinfen Eady J); [1908] 2 Ch 441, 445 (Cozens Hardy MR), 447 (Farwell LJ); In Re Dickens, Dickens v Hawksley [1934] 1 Ch 267, 288 (Lord Hanworth MR), 292 (Romer LJ), 303–04 (Maugham LJ). 99 Deazley (n 95) ch 3 (describing the way in which judges and commentators achieved this result). In part, this was possible because the decision (like that in Donaldson v Beckett in 1774) was by vote, rather than by reasoned ruling—and thus the authority of statements as to the existence (or not) of a right in unpublished works was left unclear. More significantly, the case was about rights (if any) of Boosey in a published work, so turned most clearly on interpretation of the Statute of Anne itself. As the Lord Chancellor explained, the case concerned statutory copyright, not ‘the right to publish, or to abstain from publishing a work not yet published at all’ ((1854) 4 HLC 954, 10 ER 735). Consequently, the views of Lord Brougham and Lord St Leonard’s on the common law right could be disregarded as obiter. 100 Scrutton, who could see the conflict, likewise reasoned that nothing in Jefferys v Boosey qualified the ‘direct decision’ of Prince Albert v Strange. See Scrutton (n 59) 224. 101 Phillips (n 56) 2. 102 Ibid, ch 1.

252 Lionel Bently right of first publishing the ‘original and material product of intellectual labour’ that is ‘incidental to the property exclusively vested in the absolute and lawful possessor of the material product’.103 Thus he seems to follow Jefferys v Boosey and suggest that the right is a component of the chattel property. Later, however, he says that ‘the nature of the right of an author in his unpublished works has long been known to be analogous to rights of ownership in other personal property’,104 and discusses Prince Albert v Strange as a recent, lucid exposition of that principle. This seems to treat the right as an incorporeal property right in the work that is similar in nature to chattel property rights (a view recognised most famously in the opinion of Erle J in Jefferys v Boosey that the Lords did not appear to follow). However, although Phillips commends a close reading of Prince Albert, the passages he selects to reproduce come from the judgment of Knight Bruce V-C, and at points sound not dissimilar in tone to those of Lords Brougham and St Leonard’s in Jefferys v Boosey. A further section of the chapter is given over to a re-reading of the ‘letters cases’, hitherto understood as recognising an author’s right to restrain publication, and which were difficult to explain on the basis that copyright-before-publication vested in the owner of the chattel property (the recipient of the letter). However, preferring the latter position, that the copyright-before-publication vests in the owner of the paper carrying the letter,105 Phillips offers a new reading of Pope v Curl as a case concerning a published work,106 and suggests other cases might be based on implied contract or breach of trust and confidence.107 If Phillips’s account attempts to confront contradictions between Jefferys v Boosey and the earlier cases, and sees Prince Albert as a text that assists that task, those who followed saw Prince Albert as an authoritative reaffirmation of the earlier orthodoxy that ‘copyright-before-publication’ was an incorporeal property right vesting in the author of a work, rather than a right ancillary to ownership of the chattel property in a manuscript. This was clearly the position taken by Shortt, who shared Phillips’s view of Prince Albert as authoritative but seemed to draw a very different message from it.108 Walter Copinger, who published the first edition of his work on copyright in 1870, also reiterated the common law right of the author, citing Lord Cottenham’s judgment in Prince Albert as affirmation (and not even referring to the different views of their Lordships in Jefferys).109 Scrutton, who in contrast recognised the conflict, reasoned that nothing in Jefferys v 103

Ibid, 2 (emphasis added). See also ibid, 15. Ibid, 10 (emphasis added). 105 Ibid, 34. 106 Ibid, 27. 107 Eg ibid, 31 (highlighting Gee v Pritchard (n 71) as involving a ‘breach of faith’). 108 Shortt (n 65), 50, 54. 109 W Copinger, The Law of Copyright in Works of Literature and Art (London, Stevens & Haynes, 1870) 9. 104

Prince Albert v Strange 253 Boosey qualified the ‘direct decision’ of Prince Albert v Strange.110 Prince Albert was the ‘leading case’ because it was a case on point. If the identification of Prince Albert v Strange as a leading case on common law copyright/property in unpublished matter was in some respects surprising, its status as such came to an abrupt end in 1912, when the Copyright Act 1911 abolished ‘common law copyright’ and assimilated the rights in unpublished works to those granted to published works. Section 31 declared: No person shall be entitled to copyright or any similar right in any literary, dramatic, musical, or artistic work, whether published or unpublished, otherwise than under and in accordance with the provisions of this Act, or of any other statutory enactment for the time being in force ...

Transitional provisions converted existing common law rights into statutory copyright, and thereafter all newly-created works fell automatically within the single statutory regime. The effect was to formalise the scope of copyright in unpublished works and to link it more directly to copyright in published works, the case law in relation to which drove its conceptualisation. As GS Robertson said in his commentary on the Copyright Act 1911,111 ‘such distinctions as there used to be between the incidents of the common law right in unpublished works and copyright in published works have ceased to exist’. Although the potential for indefinite protection was retained, and although the rights recognised in the new regime were broader in coverage than the previously limited statutory right to print and reprint (including thereafter the right to perform, to translate and to dramatise), such statutory copyright would be infringed only by use of a substantial part of the ‘expression’ (rather than ideas) and was subject to a range of exceptions, such as fair dealing for news reporting. The effect was a largely unnoticed but historically rare cutting back in the scope of protection: authorities such as Prince Albert v Strange no longer defined either the subject matter of copyright, or the breadth of rights in unpublished works.

(3) A Leading Case on Breach of Confidence? The 1911 Act did not, however, spell the end of Prince Albert’s characterisation as a leading case. Beginning in (not coincidentally) 1912, Prince Albert v Strange starts to be viewed as a foundational moment and, as such, a ‘leading case’ in a different field of law: the action for ‘breach of confidence’, an action available to a holder of information which is not generally 110 111

See Scrutton (n 59) 224. GS Robertson, The Law of Copyright (Oxford, Clarendon Press, 1912) 42.

254 Lionel Bently available to the public against a person who has wrongfully disclosed the information in breach of some duty to keep it secret or not to use it. Prince Albert had not been viewed as a leading case on confidence in the period between the decision and 1911, and the status of ‘leading case’ in the field of breach of confidence was really secured for it only in the second half of the twentieth century. Of course, the case is referred to in late nineteenth-century discussions on the law of confidence, but largely in passing. Instead, reliance is usually placed on cases that preceded Prince Albert, such as Yovatt v Winyard,112 Abernethy v Hutchison113 and Tipping v Clarke,114 or two decisions decided shortly after Prince Albert, Morison v Moat115 and Gartside v Outram.116 For example, Edward Lloyd, in his discussion of ‘rights analogous to trade mark rights’ as encompassing cases of breach of faith or confidence,117 refers to Yovatt, Tipping and Morison, before mentioning Prince Albert.118 Similarly, William Kerr’s treatise on injunctions states that ‘[a] Court of Equity will, in the exercise of its jurisdiction to correct abuse of confidence, restrain by injunction the disclosure of confidential communications, papers and secrets’,119 and cites Morison and Gartside v Outram, rather than Prince Albert. The judicial treatment of confidentiality in the late nineteenth century offered a similar appraisal of the significance of Prince Albert, referring occasionally to Lord Cottenham’s judgment but not suggesting that the decision had any privileged status. For example, in Merryweather v Moore,120 Kekewich J referred to Prince Albert as having ‘repeated’ what Wigram V-C said in Tipping v Clarke and as a source cited by North J in Pollard.121 In Lamb v Evans, Kay LJ refers to Morison as the ‘leading case’ and in turn mentions Turner V-C’s reliance on Prince Albert.122 In Robb v

112

Yovatt v Winyard (1820) 1 Jac & W 394, 37 ER 425. Abernethy v Hutchinson (n 32). See I J Alexander, Copyright Law and the Public Interest in the Nineteenth Century (Oxford, Hart Publishing, 2010) 88–89. 114 Tipping v Clarke (1843) 2 Hare 383, 67 ER 157. But, to similar effect, see Murray v Heath (1831) 1 B & Ald 804, 109 ER 985. 115 Morison v Moat (1851) 9 Hare 241, 68 ER 492. 116 Gartside v Outram (1856) 3 Ju (NS) 39 (Page-Wood V-C). 117 E Lloyd, The Law of Trade Marks (London, Draper, 1862) 32. 118 Ibid, ch V, 42 ff. 119 W Kerr, A Treatise on the Law and Practice of Injunctions (London, Maxwell, 1867) 177. 120 Merryweather v Moore [1892] 2 Ch 518, 522. 121 Pollard v Photographic Company (1888) 40 Ch D 345. 122 Lamb v Evans [1893] 1 Ch 218, 236. He explains that ‘[t]here a man entrusted by the plaintiff with copperplates for the purpose of taking impressions for the plaintiff took surreptitiously additional impressions, which came into the hands of the defendant Strange, who published a catalogue of them. He was restrained from doing it because, as Lord Justice Turner says, he obtained them by a breach of the trust and confidence under which the things to be described in that catalogue had been entrusted to the care of the printer.’ Bowen and Lindley LJJ did not refer to Prince Albert. 113

Prince Albert v Strange 255 Green,123 Hawkins J cited Prince Albert, but (as with Kekewich J) for Lord Cottenham’s approval of Wigram V-C’s speech in Tipping v Clarke rather than as an authority in itself. On appeal,124 neither Esher MR nor AL Smith LJ referred to it, while Kay LJ refers to Morison, noting Turner V-C’s citation of Lord Cottenham’s statement that ‘[t]his case by no means depends solely upon the question of property, for a breach of trust, confidence, or contract, would of itself entitle the plaintiff to an injunction’.125 In general, Prince Albert v Strange was cited indirectly or as one of a bundle of relevant authorities.126 The case was situated as a supporting actor, rather than being offered a ‘leading’ role. The treatment of Prince Albert in this way seems largely to reflect the fact that the case was thought of neither as a key ‘first’ in the development of the law, nor as a particularly clear enunciation of a legal ‘principle’. By and large, Yovatt v Winyard was recognised as the first case in which an injunction had been awarded to prevent breach of contractual confidentiality obligations.127 In this case,128 the plaintiff, William Yovatt, had formerly been in partnership with Delabere Blaine until the latter died, leaving Yovatt the veterinary business. William Winyard was a former employee assistant or journeyman of Yovatt, under an agreement which stated that he was to learn general knowledge of business but was not to be taught the means of composing the medicines. Winyard left Yovatt’s employment and entered into business for himself. Yovatt suspected that his former employee had surreptitiously accessed the books of recipes and copied them, and was now selling the preparations, and Winyard confirmed that suspicion when he offered for a small salary not to divulge the secrets. The Lord Chancellor granted an injunction to restrain the defendant from communicating the recipes, ‘upon the ground of there having been a breach of trust and confidence’. In Abernethy v Hutchinson the court showed a willingness to imply an obligation of non-disclosure (as opposed to requiring an express stipulation) and to extend liability for breach to third party recipients.129 Here, the surgeon Sir John Abernethy brought an action to restrain systematic publication in the (then) newly-formed medical journal, The Lancet, of detailed accounts

123

Robb v Green [1895] 2 QB 1. [1895] 2 QB 315. 125 Ibid, 319 (Kay LJ). 126 One exception is Pollard v Photographic Company (n 121), where North J cited Prince Albert alone (at 354) for the proposition that ‘independently of any question as to the right at law, the Court of Chancery always had an original and independent jurisdiction to prevent what that Court considered and treated as a wrong, whether arising from a violation of an unquestionable right or from breach of contract or confidence’. 127 Although such obligations (supported by penalties) were already common, Lord Eldon LC had previously denied that they could be enforced in Chancery. See Newbery v James (1817) 2 Mer 446, 35 ER 1011; Williams v Williams (1817) 3 Mer 157, 36 ER 61. 128 Yovatt v Winyard (n 112). 129 (1825) 1 H & Tw 28, 47 ER 1313; (1825) LJ Ch (OS) 209. 124

256 Lionel Bently of the weekly lectures he had given to paying students at St Bartholomew’s Hospital. At the third lecture, Abernethy made clear his objection to the publication of the lectures, but the practice continued. The application was initially unsuccessful, being founded on copyright (‘property’) in the unpublished work, because Abernethy’s affidavit admitted that the lectures were not delivered from an existing written text (and the notes on which they were said to be based had not been produced). Lord Eldon LC declined, in those circumstances, to grant an injunction, indicating that the question of whether there could be copyright in such a work would first need to be determined in a court of law.130 However, he indicated that an action might successfully be brought on the basis of breach of contract or breach of trust, and granted leave to bring a motion on that basis.131 Abernerthy (after some delay) accordingly amended his bill, and in June 1825 an injunction was granted. The court took the view that while pupils might take notes for purposes of their own study, they were under an implied contractual duty not to publish their notes for profit. Lord Eldon LC then reasoned that ‘[a]s the lectures must have been procured in an undue manner from those who were under contract not to publish for profit, there was sufficient to authorise the Court to say the Defendants shall not publish’.132 If the student could not publish for profit, for the Defendants to do so ‘would certainly be what this Court would call a fraud in a third party’.133 In the light of Yovatt and Abernethy, it is not entirely surprising that Prince Albert v Strange was not described as a leading case, as it would not have met the contemporary understanding of being the ‘origin’ of the principle. Neither was there an authoritative restatement of the principles underpinning the laws of confidence. Instead, Lord Cottenham offered vague and unspecific reasoning, explaining the case as one in which the court134 exercises an original and independent jurisdiction, not for the protection of a merely legal right, but to prevent what this court considers and treats as a wrong, whether arising from violation of an unquestioned right, or from breach of trust, confidence, or contract, as in the present case, and in The case of Abernethy’s Lectures.

The use of the phrase ‘breach of trust, confidence, or contract’ was not a particularly clear recognition of an independent action for ‘breach of confidence’, ie a cause of action distinct from contract or fiduciary duties. Indeed,

130 131 132 133 134

The reasoning on this part is most fully reported in (1825) LJ Ch (OS) 209, 213–16. (1825) LJ Ch (OS) 209, 217–18. Ibid, 219. Ibid, 219. Prince Albert v Strange (1849) 1 Mac & G 25, 46; 41 ER 1171, 1179.

Prince Albert v Strange 257 two years later, in Morison v Moat, Turner V-C, granting an injunction to prevent revelation of a secret medicine, observed as follows:135 That the Court has exercised jurisdiction in cases of this nature does not, I think, admit of any question. Different grounds have indeed been assigned for the exercise of that jurisdiction. In some cases it has been referred to property, in others to contract, and in others, again, it has been treated as founded upon trust or confidence, meaning, as I conceive, that the Court fastens the obligation on the conscience of the party, and enforces it against him in the same manner as it enforces against a party to whom a benefit is given the obligation of performing a promise on the faith of which the benefit has been conferred; but, upon whatever grounds the jurisdiction is founded, the authorities leave no doubt as to the exercise of it.

The first reference that I have found to Prince Albert v Strange being a ‘leading case’ on confidentiality dates from 1913.136 As already noted, the 1911 Act abolished common law copyright via section 31, but a proviso added that137 ‘nothing in this section shall be construed as abrogating any right or jurisdiction to restrain a breach of trust or confidence’. A number of authors saw the proviso as an opportunity to reinterpret old common law copyright cases as cases of breach of confidence. Joe Brook Richardson, a barrister from Lincoln’s Inn, writing a commentary on the Act, discussed the Prince Albert case as the ‘leading case’ on ‘rights arising out of the repose of confidence’.138 Richardson conceived these as contractual rights to restrain publication, observing that after the Act ‘their importance has greatly increased, as they are available in cases where there is no copyright’. The author predicted that, after 1912, the courts would ‘imply a contract sufficiently wide to prevent all acts which would have been breaches of the Common Law right before The Copyright Act 1911’.139 Easton, author of the fifth edition of Copinger in 1915, followed Richardson’s lead. Prince Albert was identified as a ‘leading case’ on the law of confidence, and other old cases, decided primarily as common law copyright cases, such as Caird v

135

Morison v Moat (1851) 9 Hare 241, 255; 68 ER 492, 498. JB Richardson, The Law of Copyright (London, Jordan & Co, 1913) 45. See also JM Easton (ed), The Law of Copyright in Works of Literature, Art, Architecture, Photography, Music and the Drama … by the Late Walter Arthur Copinger, 5th edn (London, Stevens and Haynes, 1915) 31 (‘a leading case on the subject’). 137 The provision was introduced as an amendment to the Act by Lord Gorrell: (1911) 10 Hansard (5th Ser), HL, 486. See R Dreben, ‘Publication and British Copyright Law’ (1956) 7 Copyright Law Symposium 3, 24 (claiming that while the 1911 Act was ‘revolutionary on its face’, the law of unpublished works remained ‘almost intact’). 138 Richardson (n 136) 44. 139 Cases such as Exchange Telegraph v Gregory [1896] 1 QB 147 (CA) and Exchange Telegraph v Central News [1897] 2 Ch 48, where the court had treated stock exchange information and information about racing results as protected by the common law right, were proposed as examples of situations that could be treated as ones of implied confidence. Richardson (n 136) 39, fn 3. 136

258 Lionel Bently Sime140 (a House of Lords decision on common law copyright in lectures), were recharacterised as cases on implied obligations to confidentiality. Like Richardson, Easton understood breach of confidence to be based on breach of a contractual obligation of secrecy, though it was acknowledged that the contractual obligation might be implied from the circumstances of the case. This pitch for Prince Albert to be regarded as a ‘leading case’ on confidence did not sit particularly easily with Easton’s simultaneous treatment of breach of confidence as a form of implied contractual obligation. After all, neither Judge nor Strange was in any relationship with Prince Albert, let alone one which might be said to be contractual. The contractual characterisation of the action for breach of confidence was dominant during the first half of the twentieth century, as is particularly apparent from the six editions of Kerr on Injunctions issued between 1867 and 1927.141 While the first four editions say the court will exercise its equitable jurisdiction to restrain breach of confidence by fastening an obligation on the conscience of the party, the 5th and 6th editions (from 1914 and 1927) see the basis of the action as contractual: In all cases where a confidential relationship can be shown to exist, the Court implies a contract on the part of a person who has derived any confidential communication through the relationship, that he will not use the information to the detriment of the person from whom he received it ... The obligation extends to those who have acquired the information at second hand from such persons.

Despite the contradiction, Copinger both claimed that ‘there must be a contract for secrecy’ and continued to call Prince Albert v Strange ‘a leading case upon the subject’ in the three editions published before and immediately after the Second World War.142 The explanation for this seems to lie in the analytical inertia that seems virtually inherent in treatises that go into multiple editions. Prince Albert was once again referred to as a leading case on confidence in Harold Fox’s The Law of Master and Servant in Relation to Industrial and Intellectual Property in 1950.143 Not insignificantly, Fox’s suggestion came two years after the Court of Appeal decision in Saltman v

140

Caird v Sime (1887) 12 App Cas 326. Kerr (n 64) 177; 2nd edn (London, Maxwell, 1878) 436; 3rd edn (London, Maxwell, 1888) 481; 4th edn by EP Hewitt, SE Williams and JM Paterson (London, Sweet & Maxwell, 1903) 420; 5th edn by John Melvin Paterson (London, Sweet & Maxwell, 1914) 503; 6th edn by JM Paterson (London, Sweet & Maxwell, 1927) 487. 142 FE Skone James, Copinger on the Law of Copyright, 6th edn (London, Sweet & Maxwell, 1927) 27; 7th edn (London, Sweet & Maxwell, 1936) 33–34; Copinger and Skone James on the Law of Copyright, 8th edn (London, Sweet & Maxwell, 1948) 34–35. 143 HG Fox, The Law of Master and Servant in Relation to Industrial and Intellectual Property (Toronto, University of Toronto Press, 1950) 103. 141

Prince Albert v Strange 259 Campbell,144 a case which might legitimately be regarded as the modern foundation of the action for breach of confidence. The case involved a complex, and unformalised, relationship between a number of companies and a potential manufacturer of hole-punches. At first instance, the claim had failed because the plaintiff was not able to establish the existence of a contractual relationship with the defendant. On appeal, the Court of Appeal held that such a contract was unnecessary, Lord Greene MR stating that ‘the obligation to respect confidence is not limited to cases where the parties are in contractual relationship’.145 Drawing together the principles that he said had been established in a number of cases, including Morison v Moat,146 the Master of the Rolls approved the following summary:147 If a defendant is proved to have used confidential information, directly or indirectly obtained from a plaintiff, without the consent, express or implied of the plaintiff, he will be guilty of an infringement of the plaintiff’s rights.

Although Saltman did not have an immediate impact, it started to be as referred to as the key authority in a host of cases towards the end of the 1950s and at the beginning of the 1960s.148 For the most part, these cases concerned relationships of manufacture and supply, and could have been put in pre-war terms of implied contract and inducing breach, but it was more convenient to recognise a free-standing obligation under the Saltman rubric. This line of cases concluded with the decision of Megarry J in Coco v Clark,149 where Megarry J offered an account of the law that has taken on foundational status. Megarry J suggested that the origin of the ‘action for breach of confidence’ lay in the earliest operations of the courts of Chancery, but had been obscured until ‘[i]n the middle of the last century, the great case of Prince Albert v Strange … reasserted the doctrine’.150

144

(1948) 65 RPC 203 (HC, CA). (1948) 65 RPC 203, 211. 146 Morison v Moat (n 135). 147 (1948) 65 RPC 203, 213. 148 Nichrotherm Electrical Co Ltd v Percy [1956] RPC 272, 279–80 (Harman J), [1957] RPC 207, 215 (CA); Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd (31 July 1959) [1967] RPC 375, 388–89, 391, 392 (Roxburgh J) and [1960] RPC 12, 131 (CA); Ackroyds (London) Ltd v Islington Plastics Ltd [1962] RPC 97, 102 (Havers J); Paul (Printing Machinery) Ltd v Southern Instruments (22 February1961) [1964] RPC 118, 121 (Edmund Davies J); Peter Pan Manufacturing Corporation v Corsets Silhouette Ltd (1962) [1964] 1 WLR 96, 102–03; Bostitch Inc v McGarry & Cole Ltd (31 July 1963) [1964] RPC 173, 176 (Cross J); Brian Collins (Engineers) Ltd v Charles Roberts & Co Ltd [1965] RPC 429, 431–32; Suhner & Co AG v Transradio Ltd [1967] RPC 329, 333–34 (Plowman J). 149 Coco v Clark [1968] FSR 415. 150 Ibid, 419 (Megarry J). 145

260 Lionel Bently Subsequent cases, with one or two exceptions,151 further reinforced the ‘foundational’ or ‘leading’ status of Prince Albert. In Attorney-General v Jonathan Cape,152 Widgery CJ referred to the developing equitable doctrine that a man shall not profit from the wrongful publication of information received by him in confidence. This doctrine, said to have its origin in Prince Albert v Strange (1849) 1 H & T 1, has been frequently recognised as a ground for restraining the unfair use of commercial secrets transmitted in confidence.

As literature devoted to the burgeoning case law on confidence started to proliferate, Prince Albert found itself positioned as a leading case. The Law Commission, reviewing the area of law in 1974, described Prince Albert as one of the two ‘basic cases usually cited to support the jurisdiction’.153 In the following decades, Francis Gurry, whose elegant 1984 book provided one of the first systematic treatments of the modern action, refers to Prince Albert as ‘the leading early case’,154 and John Hull, for example, in his book Commercial Secrecy,155 says that the case, along with Morison v Moat, are ‘often regarded as the foundation stones of a distinct action for breach of confidence’. More recently, Vicky Jones and Alastair Wilson QC have written that the case is ‘usually regarded as the starting point for the development of the law of confidential information’.156 Nevertheless, if we step back for a moment, the central status offered to Prince Albert looks surprising. Most obviously, the new wave of postwar cases were largely concerned with commercial confidences and the legal regulation of the movement of commercially valuable information between businesses. Yet Prince Albert had concerned the privacy of the recreational activities of the Royals. Given the existence of cases like Yovatt

151 The case is not mentioned in Lord Goff’s seminal speech in the Spycatcher case, Attorney-General v Guardian (No 2) [1990] AC 109. In fact, only Lord Griffiths referred to Prince Albert (and then merely for the proposition that an obligation of confidence will bind a third party with knowledge of the breach): ibid, 268F. The case barely gets a mention in G Jones, ‘Restitution of Benefits Obtained in Breach of Another’s Confidence’ (1970) 86 LQR 463. 152 Attorney-General v Jonathan Cape [1976] QB 752, 769. In argument, the AttorneyGeneral (Sam Silkin QC) asserted (at 755) that ‘[t]he origin of the doctrine is found in Prince Albert v Strange (1849) 1 H & T 1, where it was said that breach of confidentiality gives rise to a remedy on its own and it is not necessary to found it on breach of contract or another established remedy’. 153 Law Commission, Breach of Confidence, Working Paper No 58 (London, HMSO, 1974), [7]. 154 F Gurry, Breach of Confidence (Oxford, Clarendon, 1984) 13. 155 J Hull, Commercial Secrecy (London, Sweet & Maxwell, 1998) para 2.05, 26. 156 V Jones and A Wilson, QC, ‘Photographs, Privacy and Public Places’ [2007] European Intellectual Property Review 357, 360. Linda Clarke likewise asserts that ‘from Prince Albert v Strange onwards, the courts have been willing to grant injunctions to prevent breaches of confidence’: L Clarke, ‘Injunctions and the Human Rights Act 1998: Jurisdiction and Discretion’ (2002) 21 Civil Justice Quarterly 29, 32.

Prince Albert v Strange 261 and Morison v Moat, it seems odd that Prince Albert v Strange should have been singled out so frequently as the leading case. What, then, explains the post-war elevation of Prince Albert v Strange into a leading case on breach of confidence? I should like to suggest four possible reasons. First, in contrast with the late nineteenth century, the question that preoccupied jurists with respect to confidentiality had changed. Then the issue had been the basis for granting injunctive relief, and Yovatt v Winyard stood as the earliest authority on that issue. By the second half of the twentieth century, the courts were looking for the earliest case in which relief had been justified outside of contractual relationships: Yovatt v Winyard, Tipping v Clarke and Gartside v Outram were of no help here. Moreover, Abernethy seemed to have been put as a case of contract, and Morison v Moat certainly had contractual elements (in the form of the partnership agreement that Moat senior had broken by disclosing the recipe to his son, the defendant). Prince Albert v Strange was—despite what Richardson would have had readers believe in 1912—the earliest case in which relief had been granted in situations that could not necessarily be equated with participation in a breach of contract. Secondly, and related to this, the context in which confidentiality was now important had shifted (in part as a result of the Copyright Act 1911). Prince Albert v Strange looked like a weak authority on breach of confidence so long as common law copyright offered strong protection with fewer conditions. Once copyright in unpublished works was pinned back, confidentiality became relevant in relation to artistic confidences as much as commercial and business secrets, and thereafter the figuring of Prince Albert as a ‘leading case’ looked much more appropriate. Moreover, from the viewpoint of treatise-writers, viewing the case as one of confidentiality usefully highlighted the advantages of the action over statutory copyright for unpublished works, in particular the capacity for the law of confidence to protect information (such as the verbal description of the pictures), not merely to prevent reproduction. Thirdly, the figuring of Prince Albert as the leading case highlighted the flexibility of the action, offering space for its application to information other than commercial confidences. We have already noted its significance in Attorney-General v Jonathan Cape, the first case explicitly to apply the action to governmental information (the secrets revealed in Cabinet).157 Over a decade earlier, in Argyll v Argyll,158 Ungoed-Thomas J had referred to Prince Albert in holding that personal information was also protectable through the action for breach of confidence.159 With these developments, 157

Attorney-General v Jonathan Cape Ltd [1976] QB 752, 769. Argyll (Duchess of) v Argyll (Duke of) (1964) [1967] Ch 302. 159 Ibid, 312D (counsel for the defendant describing Prince Albert as the ‘leading case’), 318E–20E (Ungoed-Thomas J). 158

262 Lionel Bently cases like Yovatt or Morison lost their attractiveness as potential ‘leading cases’. In some ways, then, the placing of Prince Albert as a leading case on confidence became self-fulfilling, because it generated a body of law that was best organised around a case that was not itself one of commercial confidence. Lastly, the treatment of Prince Albert as a ‘leading case’ sat with a growing tendency to characterise the action for breach of confidence as ‘equitable’. If Richardson and Easton’s discussion of Prince Albert as a leading case on confidence looked odd when the dominant conception of the obligation was contractual, the identification of the case as ‘leading’ was entirely consonant with a growing orthodoxy that developed that the action for breach of confidence was ‘equitable’.160 Saltman may have been the basis of this orthodoxy, but it had received some legislative encouragement in the Copyright Act 1956. Whereas the saving in section 31 of the 1911 Act had referred to ‘any right or jurisdiction to restrain a breach of trust or confidence’, section 46(4) of the 1956 Act stated that nothing in the Act ‘shall affect the operation of any rule of equity relating to breach of trust or confidence’.161 Although the changed terms went virtually unnoticed even by the leading commentators, this seems both to have reflected and reinforced the changed mindset.

(4) A Leading Case on Informational Privacy (The Tort of Misuse of Private Information)? If the story of Prince Albert v Strange’s transmutation into a ‘leading case’ in copyright or confidence were not interesting enough, there is now a sense that the case is being repositioned as a ‘leading case’ on the protection of personal information or informational privacy. No one has yet (to my knowledge) actually applied the label, but judicial observations and the statements of commentators suggest this might not be far off. The capacity for Prince Albert to justify a legal action protecting privacy was famously recognised over a century ago by Samuel D Warren and Louis Dembitz Brandeis in the 1890 Harvard Law Review. In this article, the authors sought to discover whether the common law offered any remedy to protect the privacy of an individual, ‘[o]f the desirability—indeed 160 Ibid, 322C–D; Attorney-General v Guardian Newspapers Ltd [1990] 1 AC 109, 255 (Lord Keith) (‘independent equitable principle of confidence’), 268 (Lord Griffiths) (‘an equitable remedy’); OBG v Allan [2008] 1 AC 1, [276] (Lord Walker) (‘equitable jurisdiction’); Kitechnology BV & Ors v Unicor GmbH Plastmaschinen and Ors [1995] FSR 765, 778 (equitable jurisdiction). 161 Copyright, Designs and Patents Act 1988, s 171(1)(e) retains this language: ‘Nothing in this Part affects—(e) the operation of any rule of equity relating to breaches of trust or confidence.’

Prince Albert v Strange 263 the necessity—of some such protection, there can, it is believed, be no doubt’.162 They argued there was such a remedy, not based, perhaps as one might have expected, on extension of the law of defamation’s protection of ‘reputation’,163 but rather on case law which had protected authors and artists against unauthorised publication of their works—particularly Prince Albert v Strange.164 Using the classic methodology of searching for an ‘underlying principle’ or ‘golden thread’ to explain existing cases, the authors ‘discovered’ that the common law sought to protect ‘the right to one’s personality’. For Warren and Brandeis these cases were not properly explained as cases of ‘property’ in the products of one’s labour, but were better seen as ‘instances and applications of a general right to privacy’.165 The cases protected private ‘thoughts, emotions, and sensations’, and the authors argued that ‘these should receive the same protection, whether expressed in writing, in conduct, in conversation, in attitudes or in facial expression’.166 Prince Albert v Strange was key.167 As is well known, the Warren and Brandeis article made a very significant impact in the United States,168 and after some hesitation169 the analysis was accepted in Pavesich v New England Life Insurance Co.170 However, while Prince Albert v Strange may have proved influential in the United States, Warren and Brandeis’s interpretation never gained ground in England. Indeed, as we have seen, despite the widespread use of the language of ‘privacy’ in the plaintiff’s bill, the court judgments171 and the contemporary commentaries on the case,172 the case was explicitly decided on

162 SD Warren and LD Brandeis, ‘The Right of Privacy’ (1890) 4 Harvard Law Review 193, 196. 163 Ibid, 197–98. 164 The authors also relied on implied contract and trade secret cases: ibid, 210–14. 165 Ibid, 198. 166 Ibid, 206. 167 Ibid, 193–220. 168 WL Prosser, ‘Privacy’ (1960) 48 California Law Review 383 (‘It has come to be regarded as the outstanding example of the influence of legal periodicals upon American law’); H Kalven, Jr, ‘Privacy in Tort Law—Were Warren and Brandeis Wrong?’ (1966) 31 Law and Contemporary Problems 326, 327 (‘that most influential law review article of all’); Hirsch v SC Johnson & Son, Inc, 90 Wis 2d 379, 280 NW 2d 129, 133 (S Ct Wisconsin, 1979) (Heffernan J). 169 For the immediate case law, see Prosser, ibid, 384–85. 170 Pavesich v New England Life Insurance Co 50 SE 68 (1905) (Sup Ct, Georgia). 171 Knight Bruce V-C, for example, said he could not ‘but see that the etchings, being executed by the plaintiff and his consort for their private use, being the produce of their private labour, and belonging to themselves, they were entitled to retain them in a state of privacy, and to withhold them from publication’: (1850) 13 Jurist (OS) 45, 58. The injunction was certainly not less justified, he continued, because it sought to prevent ‘an intrusion—an unbecoming and unseemly intrusion—... if intrusion can fitly describe that which is a sordid spying into the privacy of domestic life—into the home of a family—of a family whose private life forms not their only unquestionable title to the most marked respect.’ Ibid. 172 See, eg, The Lady’s Newspaper (3 February 1849); ‘Right of Privacy of Authors in their Unpublished Works’ (1849) 10 Law Magazine or Quarterly Review of Jurisprudence (ns) 321.

264 Lionel Bently other grounds173 and, as noted, was interpreted as primarily concerned with ‘property in unpublished works’ and later as a case on ‘breach of confidence’. English lawyers representing plaintiffs whose concerns were privacy-based brought actions on recognised grounds—implied contract, defamation and even breach of confidence—most notably in Argyll v Argyll.174 While the courts were thus never really called upon to rule that there was no law of privacy in England,175 it was widely accepted right up until virtually the end of the twentieth century that there was no independent action for breach of privacy.176 Then, in Wainwright v Home Office, the House of Lords ruled expressly against such an independent tort.177 Nevertheless, the capacity of breach of confidence to protect some personal information in some circumstances was, of course, widely acknowledged. The Younger Committee stated that the action was capable of affording much greater protection of privacy than was generally realised.178 However, the capacity was significantly limited by the requirement of some sort of pre-existing relationship of confidentiality, and doubts over whether ‘strangers’ ever owed obligations of confidence.179 As is well known, things have changed dramatically since 2000. The protection of ‘informational privacy’ has been ‘shoe-horned’ into the action for breach of confidence,180 and the requirement of a ‘pre-existing’ obligation has been dropped.181 The immediate trigger for the shift was the Human Rights Act 1998, which 173 Percy Winfield observed that while the case ‘has some references in the arguments and the judgments to privacy, ... the decision proceeded on other grounds’: P Winfield, ‘Privacy’ (1931) 47 LQR 23, 24, fn 2. See also B Neill, ‘The Protection of Privacy’ (1962) 25 MLR 393, 395. 174 Argyll (n 158). 175 In fact, Percy Winfield argued in 1931 that the House of Lords retained a ‘free hand’ to recognise such a tort: Winfield (n 173) 34. 176 See eg Neill (n 173) 394 (‘It can be stated with some confidence that English law does not recognise [a right of privacy]’); Home Office, Lord Chancellor’s Office and Scottish Office, Report of the Committee on Privacy (London, HMSO, 1972) Cmnd 5012 (‘the Younger Committee’) 287 (‘English law does not recognise a right of privacy, in the sense of providing civil or criminal remedies against invasions of privacy as such’); Kaye v Robertson [1991] FSR 62. 177 Wainwright v Home Office [2004] 2 AC 406, [32] (Lord Hoffmann). See also Campbell v Mirror Group Newspapers [2004] 2 AC 457, [11] (Lord Nicholls). 178 Younger Committee (n 176) [630]; Law Commission, Breach of Confidence, Working Paper No 58 (London, HMSO, 1974) [1]. The sentiment was echoed in G Phillipson and H Fenwick, ‘Breach of Confidence as a Privacy Remedy in the Human Rights Act Era’ (2000) 63 MLR 660, 662. 179 R Wacks, Personal Information: Privacy and the Law (Oxford, OUP, 1989) 108, 132; Phillipson and Fenwick (n 178) 670–72. 180 Douglas v Hello! Ltd (No 3) [2005] EWCA Civ 595, [2006] QB 125, [53]. Lord Phillips MR, giving judgment for the Court, indicated that the Court found it far from satisfactory ‘to shoehorn within the cause of action for breach of confidence claims for publication of unauthorised photographs of a private occasion’. 181 Campbell v Mirror Group Newspapers Ltd [2004] UKHL 22, [2004] 2 AC 457, [14] (Lord Nicholls) (‘This cause of action has now firmly shaken off the limiting constraint of the need for an initial confidential relationship.’)

Prince Albert v Strange 265 led the courts to pay greater heed than previously to the case law of the European Court of Human Rights—and, in this context, particularly to the case law on Article 8 ECHR. Although the transformation of breach of confidence into a tort of ‘misuse of private information’ (as Lord Nicholls described it in Campbell v Mirror Group Newspapers) was abrupt,182 there have been occasional attempts to link the new case law back to Prince Albert v Strange—to position that case as a ‘leading case’. In Douglas v Hello! Ltd (No 5),183 Lindsay J began his analysis thus: At the broadest level of generality it can be said that equity offers remedies where a breach of an appropriate confidence, personal or commercial, is threatened or has occurred. There is nothing new about the availability of remedies in either type of confidence—see, for example, Prince Albert v Strange (1849) 1 H & T 1, a case as to personal confidence but in which authorities on commercial confidence are cited.

On appeal, Lord Phillips of Worth Matravers MR (sitting in the Court of Appeal) sought to emphasise that Prince Albert was not merely the ‘origin’ of the law of confidence, but importantly was a case concerned with privacy:184 We now turn to consider the law of confidence as it has developed up to this point. We start with Prince Albert v Strange (1849) 1 Mac & G 25. Prince Albert obtained an injunction restraining the defendant from publishing a catalogue of etchings made by himself and Queen Victoria. One ground for the grant of this equitable remedy was that the information in the catalogue must have been obtained by breach of trust, confidence or contract. The information in question was personal, not commercial, although the defendant intended to make money out of it, and Lord Cottenham LC remarked that ‘privacy is the right invaded’.

Lord Phillips MR’s motives in drawing the link were not clear,185 but it is evident that the effect is to treat Prince Albert v Strange as if it had been decided on the basis of the protection of informational privacy, rather than merely being a seminal case on the action for breach of confidence. More recently, in Tchenguiz v Imerman, Lord Neuberger MR observed that186 [t]he earliest cases on the topic pre-date even the days of Lord Eldon LC. However, the jurisprudence really starts with a number of his decisions and then

182

[2004] 2 AC 457, 465, [14]. Douglas v Hello! Ltd (No 5) [2003] EMLR (30) 641, 701, [181]. 184 Douglas v Hello! Ltd (No 3) (n 181) 150, [54] (emphasis added). 185 While the creation of a genealogy in this way might be seen as a strategy by which to confer legitimacy on recent developments, this hardly seems to have been Lord Phillips’s motivation, given that in the previous paragraph he had expressed a degree of discomfort with using the action for breach of confidence to protect privacy interests. 186 Tchenguiz v Imerman [2010] EWCA Civ 908, [2011] Fam 116, [55]. 183

266 Lionel Bently continues throughout the nineteenth century. There are many reported cases but it is convenient to start with the celebrated case of Prince Albert v Strange ...

In the following paragraphs,187 Lord Neuberger MR (like Phillips MR in Douglas) highlighted Lord Cottenham’s statement that ‘privacy is the right invaded’, though on this occasion it was not abstracted from the surrounding proposition: ‘in the present case, where privacy is the right invaded, postponing the injunction would be equivalent to denying it altogether.’ Of course, these cases might be said to be continuing the established tradition of recognising Prince Albert as the leading case on ‘breach of confidence’,188 or even on ‘breach of confidence with respect to personal information’ (as it had been in Copinger since the section had been reworked by John Mummery for the 11th edition in 1971).189 That said, one can see that there is more to positioning Prince Albert as a ‘leading case’ on the tort of undisclosed private information. First, this would embed the new action for the protection of undisclosed private information within the seamless ‘body’ of common law. In turn, such a contextualisation might avoid the characterisation of privacy protection as ‘foreign’ and unfit for English legal culture (as some commentators have even characterised Warren and Brandeis’s intervention in the US).190 Secondly, to embed the case in this way might help to secure the longevity of the developments from the political threats to repeal the Human Rights Act 1998.191 Thirdly, placing Prince Albert centre-stage might justify reliance on the jurisprudence from the United States, which (as we have noted) grew from the Warren and Brandeis intervention that itself relied on Prince Albert. Indeed, two leading scholars have explicitly made such a claim that US jurisprudence ‘is particularly relevant to the development of a cause of action from the same roots’.192 The same root is Prince Albert v Strange. Thus there are tendencies to reposition Prince Albert as the ‘leading case’ on the protection of ‘undisclosed private information’. Of course, there are impediments too: not least, widespread belief that English law did not offer 187

[2011] Fam 116, [57]. Cf Campbell v MGN Ltd [2004] 2 AC 457, [43]–[45] (Lord Hoffmann) (referring to Prince Albert, noting the emphasis on privacy but explaining that the case depended on the prior existence of a confidential relationship between the Royal engravers and their printer). 189 EP Skone James, Copinger and Skone James on Copyright, 11th edn (London, Sweet & Maxwell, 1971) 39, [96], ‘Private and Personal Facts’. 190 James Q Whitman, ‘The Two Cultures of Privacy: Dignity Versus Liberty’ (2004) 113 Yale Law Journal 1151, 1202. 191 This latter strategy is, to a certain extent, achieved by treating the speech of Lord Goff in A-G v Guardian (No 2) [1990] 1 AC 109, 281, as a ‘turning point’ in the law: see OBG Ltd v Allan; Douglas v Hello! Ltd; Mainstream Properties Ltd v Young [2007] UKHL 21, [2008] AC 1, [272] (Lord Walker) (‘The most important single step in the course of the law’s recent development has been the speech of Lord Goff …’). To similar effect, see [2008] AC 1, 87, [307] (Baroness Hale). Most of what emanated from Lord Goff might as readily have been ignored as ‘obiter dicta’. 192 Philipson and Fenwick (n 178), 662 n 15. 188

Prince Albert v Strange 267 any claimants any such cause of action until recently. That consciousness may ultimately turn out to be too big a stumbling block to this ‘celebrated’ case becoming a ‘leading case’ for the third time in 160 years.

D. CONCLUSION

In William Smith’s conception, the use of leading cases was in part a pedagogical device, premised on the importance of learning how to elucidate legal principles from the case law. In its original conception, then, a ‘leading case ’ is one that others follow, and likely elaborate: the leading case perhaps being (as lawyers like to say) the ‘fons et origo’, or, if not foundational, a critical reformulation. Conceived in this way, the idea of a ‘leading case’ assumes that judicial development of law involves an evolutionary logic— the leading invention is a macro-shift, one that is followed by a series of refinements. Moreover, the method assumes the case as a receptacle of a legal principle that can be uncovered by the student who is able to excavate through the specific factual application. The principle is to be found by the student merely by carefully reading the case. The approach was regarded as hugely attractive in the United States, as soon as the proliferation of case law was starting to be perceived as a real problem.193 The technique was famously endorsed by Langdell at Harvard from the 1870s, and, despite subsequent shifts in legal theory, the language of the ‘leading case’ has maintained a central position in legal commentary and judicial thought ever since. The legal historiography of Prince Albert v Strange, however, highlights a contradiction intrinsic in the notion of a ‘leading case’. There can be few cases that have so frequently been referred to as a ‘leading case’ as Prince Albert, and yet the historiography shows that there have been significant shifts in what the case is supposed to represent. It has gone from being a ‘leading case’ on copyright to one on confidence, and is fast becoming one on the protection of informational privacy. Thus it is evident that the ‘principle’ that the student is expected to elicit from the case never was a matter simply residing in the case, waiting to be uncovered or to be articulated just from reading the case. The elevation of one case above another, and one principle over another, results from a process of reinterpretation that may occur long afterwards, by judges, lawyers and scholars. Commonly, the process of identifying one decision as a leading case, appealing as it inevitably does to the past, reaffirms the stability of law, at the very moment that it develops it.

193 G Ross, Leading Cases in the Commercial Law of England and Scotland (Philadelphia, Pa, T & JW Johnson, 1854–58) vol 1, iii.

9 Ramsden v Dyson (1866) NICK PIŠKA

I beg to say that in all this controversy … I have not in the slightest degree thought of, and I hope not spoken of, Sir John in his private individual character. I have simply looked upon him as a power. (Letter to the editor of the Huddersfield Chronicle, 18 April 1860)

A. PRELUDE

T

HERE ARE BROADLY two approaches to the history of landmark cases: one questions the authenticity of the case (did it introduce or make possible a turning-point in the existing legal order?), while the other questions the truth of the case (what did the case really decide?), although the former is often answered by way of the latter. Such historical investigations are premised on the belief that the case (by which is usually meant the judgment) conceals a truth that is waiting to be discovered, that the case can be unfolded in such a way as to reveal its true meaning. This is true of both doctrinal and contextual historical analyses of landmark cases. Ramsden v Dyson1 is, in many respects, a prime candidate for such treatment: although it wasn’t considered to be of much doctrinal significance at the time, it has come to be considered the foundation of the modern law of proprietary estoppel, despite an ambiguity remaining as to the nature and scope of the decision that stems from the different ways in which the majority and the more influential dissenting opinion expressed the relevant principle. However, in this chapter I refuse the temptation to pursue the ‘truth’ of the case. Instead, I approach Ramsden as the surface effect of temporally and spatially dispersed political and discursive events, and ask how local disputes encounter political struggles and mobilise the language and authority of equity. In this way I build around the juridical event a ‘polyhedron of intelligibility’, a form of description which multiplies the domains of reference, relations described and elements that are brought

1

Ramsden v Dyson (1866) LR 1 HL 129.

270 Nick Piška into relation, in order to rediscover its conditions of possibility, to make visible its singularity. In so doing I shift the question of the case, the juridical event, from its truth to its becoming.

B. PROPERTY PRACTICES AND SOCIO-ECONOMIC DEVELOPMENT IN HUDDERSFIELD

The House of Lords gave its decision in Ramsden v Dyson on 11 May 1866, but the events leading to it began just under a century earlier in what was then the small market town of Huddersfield in the West Riding district of Yorkshire. Until 1920 the vast majority of the freehold to the land in Huddersfield was held by the Ramsden family.2 The Ramsden Estate in Huddersfield begins with the marriage of William Ramsden to Joanna, the daughter of John Wode (or Wood) of Longley in Almondbury, near Huddersfield, in 1531. On her death, William inherited her dowry of land, shops and workshops in Huddersfield. William left a substantial estate to his brother John in 1580, who in turn left it to his son, who purchased the Manor of Huddersfield from Queen Elizabeth I in 1599. A major step in the industrial expansion of Huddersfield was the obtaining of a Market Charter in 1671 from Charles II by John Ramsden, a staunch Royalist and also the first baronet. The Ramsden family had also been an enterprising family of clothiers, and the market held on Tuesdays was predominately for the purchase and sale of cloth, initially held in the churchyard but in 1766 moved to the Cloth Hall built by the third baronet, Sir John Ramsden. However, it is with the fourth baronet—another Sir John Ramsden—that this story begins. Sir John inherited the freehold to Huddersfield in 1769. He was a major influence in the industrialisation of the town, building canals at his own expense and enlarging the Cloth Hall. As one pamphlet later explained, at the time Sir John inherited,3 [t]he town of Huddersfield was a small insignificant midway resting place, between Manchester and Leeds, having very little trade, and that in low woollens. No sooner had the late Sir John entered on his heritage, than he set about devising such plans and projects as would be calculated to encourage enterprize, and to render the district as productive to its landlord as its qualifications and local advantages appeared calculated to render it.

2 The following account of the early history of Huddersfield is based on C Stephenson, The Ramsdens and their Estate in Huddersfield: the Town that Bought Itself (Almondbury, Huddersfield Public Libraries, 1972). 3 ‘Idem’, The Huddersfield Tenant-Right Question, including some account of the Origin of Tenant Rights, and a brief history of the Tenant Right Movement from the period of the first interference with that tenure up to the present time (Huddersfield, 1860) v.

Ramsden v Dyson 271 Despite this, Sir John showed little interest in the active management of the Estate or in Huddersfield, visiting the area only twice during his lifetime.4 The management of the Estate was left entirely to his land steward, John Bower, and Bower’s local agent, Joseph Brook.5 Jane Springett explains the role of each:6 Bower visited Huddersfield twice a year, on rent days and to audit the accounts. He usually stayed two weeks, during which time he would examine applications for land, fix rents and, if requested, draw up leases for which he charged a fee of fifteen guineas. For the rest of the year a local part-time agent, Joseph Brook, was responsible for recording any applications for land, staking out the plots and provisionally fixing rents.

Most people held dwelling property as tenants-at-will; according to Stephenson, the first recorded lease in Huddersfield was not until 1780.7 A practice was established whereby an application would be made for a plot of land. As Bower visited only twice a year, the application would often be made through Brook, which would involve treating Brook to a pint in his pub before visiting the land, where the plot would be measured and rent fixed. The prospective tenant would then enter possession and build their property. On completion, the tenant would attend Longley Hall, where they would be entered on Sir John’s rent-roll.8 The tenant could either take a 60-year lease, renewable on the payment of a fine, usually double the rent, every 20 years forever, or they could be entered on the rent-roll without a lease, what became known as ‘tenant-right’. Brook and Bower inculcated a belief that there was no need to take a lease—indeed that it would be ‘folly’ to take a lease—that Sir John would never disturb their possession, and if they ever required a lease then one would be granted. The tenant-right property was treated in much the same way as any other form of property, with tenants being able to transfer, sell, bequeath and mortgage their tenant-right, the transaction being entered on the rent-roll at Longley Hall. Overall, it was a very informal practice, and in many respects the lease was considered a mere formality. In 1816 the way in which the fine was calculated for renewal of the 60-year lease was changed, which led to a sharp decline in the uptake of

4 J Springett, The Mechanics of Urban Land Development in Huddersfield 1770–1911 (PhD thesis, University of Leeds, 1979) 153. 5 On land stewards and agents in this period, see D Spring, The English Landed Estate in the Nineteenth Century: its Administration (Baltimore, Md, Johns Hopkins Press, 1963) 97–134. 6 J Springett, ‘Landowners and Urban Development: the Ramsden Estate and Nineteenth Century Huddersfield’ (1982) 8 Journal of Historical Geography 129, 132. 7 Stephenson (n 2) 6. 8 Jane Springett points out that even these formalities were often overlooked, with people erecting buildings without permission; and if they did so they were not made liable for arrears: Springett (n 6) 132.

272 Nick Piška leases. Springett explains that by 1840, ‘tenants viewed tenancy-at-will as a cut price perpetual lease for which no fine had to be paid’.9 However, tenant-right wasn’t simply a cut-price version of the 60-year lease; it was a property system which made possible the expansion of Huddersfield. The only way an expansion in trade could occur was with an increase in population. In the period from 1801 to 1841 Huddersfield’s population more than trebled, rising from 7,268 to 22,744.10 This required an increase in the number of dwelling houses. With a cheap alternative to the 60-year lease, working men could invest their smaller incomes in erecting dwellings without worrying about paying fines. To this end, numerous money clubs, building clubs and other mutual workers’ associations were established, where workers would pay into a fund, which would then contribute to the ‘purchase’ of the plot, with the association being entered as mortgagee on the rent-roll.11 This allowed the workers not only to build their own dwellings, but also to ‘own’ them. Sir John died in 1839. By way of will he settled the Estate on his grandson, Sir John William Ramsden (‘Ramsden’), as life tenant.12 As Ramsden was a minor, the management of the Estate fell to trustees until he came of age.13 The will did not include any power to grant leases, nor to renew existing leases, until Ramsden was of full age. This problem was resolved in 1844, when the trustees obtained a private Act of Parliament extending their leasing powers.14 The preamble to the Act, after setting out the terms of Sir John’s will and the settlements, confirmed the practice of leasing that took place up to the death of Sir John: And whereas by reason and on the Faith of the Uniformity of the System or Manner of dealing with the said Lands and Hereditaments, and the Fulfilment by the said Sir John Ramsden of the Expectations or Promises so raised or given by his Steward or Agent, many Persons were induced to erect Houses and Buildings on the said Lands and Hereditaments of the said Sir John Ramsden in the said

9

Springett (n 6) 133. Figures in Springett (n 4) 52. On the growth of Huddersfield generally, see H Marland, Medicine and Society in Wakefield and Huddersfield 1780–1870 (Cambridge, CUP, 1987) 7–51. 11 On money and building clubs in this period, see PHJH Gosden, Self-Help: Voluntary Associations in Nineteenth Century Britain (London, BT Batsford Ltd, 1973). 12 Sir John’s son, John Charles Ramsden, having died during Sir John’s lifetime. The will separated what was known as the ‘settled estate’ and the ‘devised estate’. The settled estate, created on the marriage of Sir John’s son to Isabella, made Ramsden a life tenant, with a right to break the settlement when he came of age, while the devised estate was held by trustees during Ramsden’s life, and after his death for the use of his male heirs successively. 13 The trustees included Lord Fitzwilliam and Lord Zetland, both large landowners in their own right, brothers to Ramsden’s mother, Isabella, who was also a trustee. 14 7 & 8 Vic c 21. In 1848 the trustees obtained another private Act of Parliament, in conjunction with the Huddersfield Improvements Act, mainly to give them further powers to raise capital on the Estate, but also powers relating to improvements on the Estate: 11 & 12 Vic c 14. 10

Ramsden v Dyson 273 Townships of Huddersfield and Almondbury … without written Agreements … And whereas at the Time of the Death of the said Sir John Ramsden many Persons who had applied for and taken Land as aforesaid had erected and built Houses and Buildings, and were in the Course of erecting Houses and Buildings, on the said Lands and Hereditaments, but the Leases of such Land, Houses, and Buildings had not been granted …

The Act was for those wanting a lease, but no distinction as a matter of practice was drawn between tenants entering possession and wanting a 60-year lease, and those entering possession and continuing in possession as tenant-right holders. The Act provided powers to grant 60-year leases to those who built on the basis of the tenant-right system, and to renew such leases as Sir John would have been bound to renew had he still been living, as well as giving powers to grant original leases not exceeding 60 years. During this period John Bower died and George Loch became the trustees’ land agent. Loch was careful to tend to the needs of the tenantry. As a pamphlet from the time pointed out:15 ‘The utmost unbounded confidence was placed in Mr Loch, while his intelligent and enlightened superintendence of the Estates, inspired the people with the utmost reliance in his wisdom.’ Joseph Brook was replaced by Alexander Hathorn as a full-time local agent, assisted by Thomas Brook as full-time surveyor. This signalled a change in the way the Estate was managed. Now the building processes were more strictly supervised by the land agents, who were required to send daily and weekly reports to Loch. The purpose of this was both to increase rents and to control the quality of building. Nevertheless, throughout this period the tenant-right system of acquisition, transfer and mortgage continued, and the general understanding that a lease would be granted when necessary was confirmed when the land agent deemed it necessary to grant leases to tenant-right holders in order for them to receive compensation when their land was required for the building of the railway.

C. QUESTIONS OF SECURITY: THE FIRST DEPUTATION

In 1851 the population of Huddersfield was approximately 30,880. The following year Ramsden came of age. Following the rapid growth of Huddersfield, his role was not simply that of the aristocratic landowner, but rather that of the urban landlord in Victorian England. In this context Ramsden wanted to improve the security and the efficiency of the leasing system, and appointed Mr Nelson, a London solicitor, to help him with the management of his estate, causing Loch to resign. In the years that followed, the tenantry became increasing anxious as to the security of their

15

‘Idem’ (n 3) 1.

274 Nick Piška tenure. Leaseholders were concerned with increasing rents and fines, and the tenant-right holders both with rents and the possibility of dispossession with or without compensation for the capital expended on the land. Once appointed, Nelson sought to increase both the rents and the security of tenure on the Estate. The key means of doing this was encouraging the granting of leases, which had a higher rate plus a renewal fine. However, as Springett points out, while Loch ‘was very conscious of the need to maintain the tenant’s confidence in the estate in order to promote its continued development, particularly in handling tenancies at will,’ Nelson ‘was more concerned with legality and considered tenancies-at-will detrimental to the interests of the estate since they lowered the potential annual income. The way he achieved its abolition completely undermined the confidence upon which Loch had set great store’.16 The first tactic was to refuse to permit the erection of dwellings on tenant-right tenure. A second tactic was to require the signing of a declaration in the transfer or mortgaging of tenant-right that it was held as ‘tenant-at-will’. The third was a refusal to enter transfers on the rent-roll at Longley Hall, in effect bringing to an end the system of tenant-right conveyancing, but also undermining the security of the whole property and lending market in Huddersfield.

(1) Ramsden v Swift and the Auction Incident The tension this caused with the tenantry came to a head with two events in 1858. In the Yorkshire Spring Assizes an action of ejectment was brought against Frederick Swift, a tenant-right holder, in Ramsden v Swift.17 The facts as reported are relatively brief. In 1803 Swift’s father occupied the property. In 1842 the father died, passing the leasehold in dispute to his three sons as executors. In 1853 notice to quit was served on Swift. Counsel for Swift agreed that a verdict should be returned for Ramsden. The impact of the case was crucial: it decided that as tenant-right holders had no legal title, they were simply tenants-at-will, and as such Ramsden was entitled to evict them without notice. This had obvious implications not only for the holders of tenant-right, but also for the money and building clubs and the progress of Huddersfield more generally. The spectre of the Swift case hangs over the whole tenant-right affair. Why did Ramsden want to evict Swift? On Ramsden’s behalf it was argued that Swift was withholding the benefit of the inheritance from certain beneficiaries under the will,

16

Springett (n 6) 137. Leeds Mercury (13 March 1858); The Times (15 March 1858). I used the British Library’s online 19th-century newspaper archive for this project. Footnote references to the Huddersfield Chronicle and Leeds Mercury will be HC and LM, respectively, hereafter, followed by the date of publication. 17

Ramsden v Dyson 275 and consequently Ramsden’s agent intervened to assist the beneficiaries, the costs of which were borne by the Estate, and a lease was granted to the rightful beneficiaries. A local newspaper, the Huddersfield Chronicle (‘Chronicle’), argued that things were very different; Swift was willing to carry out the terms of the will, but the Estate’s agent had refused to recognise the sale of the property in order to impose a lease with a higher rate of rent.18 The Chronicle’s concern, in principle, was that Longley Hall had appropriated jurisdiction of probate over wills concerning tenant-right. The greater concern was that it authorised the dispossession of tenant-right holders without compensation. The second event in 1858 is reported in the Chronicle as ‘Tenant-Right Confiscation on the Ramsden Estate’. The article explains that there was a19 settled design to violate and set aside the understanding upon which the owners of Tenant-right property had been induced and encouraged to build; a design, in fact, to confiscate this Tenant-right property by taking advantage of the letter of the law in violation of its spirit, and in defiance of all the claims and considerations of equity and honourable dealing.

The event was the sale at auction of tenant-right property left by the late Thomas Kilner. The auction commenced in the usual fashion, but when it came to the sale of the tenant-right property the auctioneer stated that it was his ‘painful duty’ to explain that the tenant-right property could not be sold as a consequence of information he had received that morning. This produced ‘considerable sensation in the room’. Mr Floyd, a solicitor, admitted that he had received a note from Ramsden’s solicitors, Messrs Fenton, Jones and Rayner, stating that the tenant-right was Ramsden’s and that his rights must be respected, but that he had considered this to be purely a matter of form, it having been given in numerous previous transfers. On the night before the auction, Kilner’s trustees received notice that it was at their peril if they sold the property, but that out of respect for the testator, Ramsden would be willing to transfer the property on condition that the purchasers take a lease for the term of 99 years ‘dating from the time when the late testator became possessed of the property’. Floyd added that if Ramsden were to die then the lease would be determined, so the purchasers would purchase at the risk that Ramsden could die at any moment. He then referred to the justice of the matter, the meanness of Ramsden, and how the uncertainty could have an impact on the peace and prosperity of Huddersfield. The editor commented that this event at the auction demonstrated the real intentions of the Estate, which was to undermine the old scheme of tenant-right and replace it with a new system of leasing on

18 19

Also see LM (30 May 1864); LM (31 May 1864). HC (12 June 1858).

276 Nick Piška 99-year leases, a form of building lease common to London with which Nelson was familiar.

(2) A Great Meeting at Philosophical Hall Shortly thereafter a notice was placed in the Chronicle of a meeting regarding the Ramsden Estate management.20 The notice announced that there had been a requisition to the Constable to convene a public meeting, signed by upward of 3,000 tenant-right holders and other inhabitants of Huddersfield—‘the names of quiet, sober, hardworking, and saving men— men who have toiled, and sweat, and who have almost denied themselves the necessaries of life, in their anxiety to get together the means for “a cottage of their own”’—who had together spent at least £750,000 building upon Huddersfield, previously considered good security by lending institutions. The intention was to appoint a deputation to Ramsden that no change in the system of leasing be made, particularly the introduction of 99-year leases, and that measures be immediately taken for the peace and prosperity of Huddersfield that equitably and honourably secured the tenant-right owners in possession of their properties. The meeting had the sole purpose of appointing a deputation to confer with Ramsden, clothing the appointed deputation with the moral support of the public. In July a great meeting was held at the Philosophical Hall.21 Moving the first resolution, that a deputation be appointed to wait upon Ramsden to endeavour to effect a satisfactory arrangement with respect to tenantright property, John Freeman gave an account of the property practices in Huddersfield. He stated that ‘[a] more simple and perfect system of transfer and recognition of ownership you can scarcely conceive’. Freeman pointed to the major decline in the building trade between 1854 and 1858, the cause of which he put down to the insecurity of tenure and the consequent lack of investment from money and building clubs. One Mr Clough then spoke in support of the resolution. Unlike Freeman, he stated that the tenant-right system was as bad a system as possible and that some change was needed, in particular that tenant-right and leasehold should be amalgamated under a 999-year lease. He pointed out the ‘murderous expense’ involved in the 60-year renewable leases. A second resolution appointed the deputation, and a third that the deputation would include a compilation of facts and statistics regarding the practices and benefits of tenant-right. Someone then explained the powers under the will and settlement, the effect of the 1844 and 1848 Acts, and that Ramsden could only do what was within his

20 21

HC (17 July 1858). HC (31 July 1858); LM (31 July 1858); Manchester Times (31 July 1858).

Ramsden v Dyson 277 powers. The meeting was adjourned until the deputation returned from the interview with Ramsden. In this first meeting various policy aspects of ‘tenant-right’ were brought into play. First, the economic benefit to the tenant-right owners and the money and building clubs. Secondly, the economic benefit to the Ramsden Estate of the speed with which tenant-right allowed Huddersfield to expand, therefore increasing the rent-roll. Thirdly, the economic benefit that would accrue to the Ramsden Estate if the buildings were ‘confiscated’ without compensation. Fourthly, the concern with the economic growth of Huddersfield as a market-town, and with maintaining the spirit of the population. Fifthly, the legal aspect of the claim—the powers under Ramsden’s settlement, whether the tenant-right holders were entitled to a lease, and the consequences for conveyancing and will-making. Finally, the moral claims against Ramsden, and how it would affect his honour. All these arguments were put forward by the deputation to Ramsden.

(3) The Deputation The deputation met Ramsden on 24 August 1858.22 The memorial presented to Ramsden included an historical account of tenant-right and statistics demonstrating its benefits to Huddersfield; it argued that the reason for Huddersfield’s prosperity was its distinctive property system which acted as a ‘stimulus to prudence’, ie investment in the soil. The memorial appealed to Ramsden as a young statesman—Ramsden had previously been MP for Taunton and the West Riding, and was then canvassing in the West Riding—to understand the working-man’s position. The memorial also commented on the position of the money and building clubs, and the money invested in the land. The deputation were careful not to make demands but pointed out that the 99-year ‘system of leasing would prove highly injurious both to you and to the town’, and that the buildings in Huddersfield were built in a superior manner (they were generally built of stone) to those areas which granted 99-year leases. The deputation concluded that their object in bringing the memorial was to have the issue ‘equitably arranged’. There followed a three-hour discussion with Ramsden. The deputation specifically referred to the Swift and Kilner incidents. Ramsden said he never intended to raise the ground rent to a rack rent, but wanted a fair rent for his land according to the circumstances of each plot. The deputation explained the impact of the stopping of transfers on the tenant-right system, namely that it had brought the building and property industries to a

22 The memorial presented to Ramsden and the deputation’s report were printed in the Chronicle: HC (11 December 1858). Also see LM (11 December 1858).

278 Nick Piška standstill. Ramsden expressed his regret, but he had made up his mind that a more settled system should be adopted, and again referred to inadequate rentals of tenant-right property compared to leasehold property. There was some discussion of Ramsden’s powers to grant such leases and bind his successors. Ramsden suggested leaving a statement addressed to his successor to respect 99-year leases, but the deputation pressed on Ramsden that only an Act of Parliament would be adequate. The deputation emphasised the need for security, particularly given the liabilities to which tenant-right had been subjected, such as money clubs. Ramsden also ‘expressed a very decided resolution to grant no more renewable leases, that future leases should be for a fixed term of years’ and that 99 years was as valuable, according to an actuarial valuation, as the renewable leases. The deputation was satisfied that Ramsden entertained cordial feelings towards the tenantry and that he wished to give some sort of security to the tenant-right holders. The result of the deputation was that Ramsden never intended, nor did he currently intend, to charge more than a fair and equitable rent, and that Ramsden intended to get additional leasing powers by way of Act of Parliament.

(4) A Cause for Celebration A year later a meeting was held in the Philosophical Hall in order for tenant-right holders to express their opinions on Ramsden’s Estate Bill.23 The meeting took place at 6pm, too early for many tenant-right holders to attend but necessary in order to communicate views to Ramsden that night, as the Bill was at a late stage in Parliament. It was explained that the deputation had received a letter from Nelson stating that a committee should be appointed to consult with him on the terms of the Bill. The first version of the Bill was considered objectionable by the committee, as the terms of the proposed leases deprived the tenant of much of the value of the lease through back-rentals, fines and so on. Two judges appointed to comment on the terms of the Bill made similar remarks to the deputation, so Ramsden brought a new Bill which included powers to grant 99-year and 1,000-year leases. But when the Bill went before Lord Redesdale, chair of the House of Lords committee on private bills, the power to grant 1,000-year leases was struck out. Members of the deputation went before Lord Redesdale to argue that it was of great importance to Huddersfield, and that in reality the power was no more than Ramsden already had in so far as 60-year leases were renewable for life and tenant-right holders should never be disturbed in possession. The deputation reported that Lord

23

HC (13 August 1859). Also see LM (9 August 1859).

Ramsden v Dyson 279 Redesdale would not budge, so the Bill only contained power to grant 99-year leases. A resolution was passed accepting the Bill. The meeting ended with resolutions thanking Ramsden and the deputation, and a statement that ‘the time would come when the town would see the necessity of urging upon [Ramsden] the necessity of granting long leases’ of 1,000 years. The preamble to the Ramsden’s Estate (Leasing) Act 185924 repeats much of the history of the tenant-right system as set out in the memorial, and asserts that it would be ‘expedient and just to the Persons who have so built on the Holdings or have succeeded by Purchase or otherwise to the same in the Expectation of not being so disturbed’, as well as to Ramsden and those interested in remainder in the Estate, and that provision should be made for the granting of leases on long terms of years. On the evening of 10 November 1859 the people of Huddersfield were again assembled in the Philosophical Hall, this time for the purpose of celebration. As reported in the Leeds Mercury, the Philosophical Hall ‘was the scene of a joyous festival—the respectable and numerous tenants of Sir John Ramsden being assembled for the first time in his presence, and all regarding him with the respect and confidence inspired by the resident landlord and the graceful host’.25 A number of speeches were made and many toasts proposed. Ramsden gave a speech stating, amongst other things, that he was glad the tenant-right question had been settled satisfactorily. Toasting to a prosperous and harmonious future, he said he had great pleasure in connecting the toast with the name of Thomas Crosland, a man well-known and widely respected. The Chronicle commented, ‘we hail the proceedings of Thursday as a solid foundation for a sound and enduring understanding, and a pleasant intercourse, between parties who never ought to have been estranged’.26 Jane Springett explains that during this period Ramsden lost faith in Nelson as his representative in Huddersfield, and that his days of being an absentee landlord were over. Ramsden wrote to Nelson just before the tenant-right dinner, explaining that:27 the manner in which I hitherto neglected my duties there and of the injurious extent to which it had reacted on my own character and interests. As absentee I was very ignorant of my own property and as a very ignorant and careless proprietor I delegated to you a vast amount of business which ought properly to have been discharged to myself …

Ramsden resolved to undertake business on the Estate through direct personal intercourse with the town, or else through direct instruction with 24 25 26 27

22 & 23 Vic c 4. LM (12 November 1859). HC (12 November 1859). Quoted in Springett (n 4) 168–69.

280 Nick Piška Hathorn, his resident local agent. It might, then, be thought that with Nelson gone, new powers to grant 99-year leases and Ramsden taking a more active role in the management of the Estate, things would improve. However, things were to get worse before they got better.

D. QUESTIONS OF EQUITY: THE SECOND DEPUTATION

In the same issue of the Chronicle as the deputation’s report in 1858, there appeared an editorial criticising the deputation for settling the future of Huddersfield; the decision of Ramsden not to push for 999-year leases was considered to have a potentially ‘suicidal effect’ on both Ramsden’s own interests and the interests of Huddersfield.28 The reason for this was plain: ‘Who, that is sane, would erect such buildings as are erected in Huddersfield, for a term of 99-years—then to pass away into the hands of the ground landlord?’ The editor noted the equitable claims of the tenantright owners, and stated that questions were still open and needed to be settled through public discussion. A couple of weeks after the tenant-right dinner there appeared in the Chronicle a letter to the editor, signed under the pseudonym ‘A TenantRight Owner’.29 The writer claimed that Ramsden had been placed in a false position in respect of the tenant-right holders by his ‘friends’ (ie the members of the first deputation), and that the tenant-right holders’ meeting at which the Bill was discussed, ‘as far as the tenants-at-will were concerned, was a farce—if it were not altogether “a mockery, a delusion, and a snare.”’ The writer criticised the 99-year leases for not being to the benefit of the tenant-right holders. Indeed, throughout 1859 and the first half of 1860 a series of letters appeared in the Chronicle, usually preceded by an editorial introduction, written under the pseudonym ‘Idem’, passionately critiquing the 1859 Act and emphasising the need for tenant-right action. In May 1860 these letters, together with select extracts from the editorials, were published in pamphlet form under the short-title ‘The Huddersfield TenantRight Question’.30 The focus of the pamphlet’s arguments was that 99-year leases were not to the economic benefit of the tenant-right holders and were to the economic advantage of the Ramsden Estate. First, they were not as beneficial as the tenants-right holders understood their position to be under tenant-right, ie that they would not be disturbed in possession as long as they paid their

28

HC (11 December 1858). HC (26 November 1859). 30 The full title was The Huddersfield Tenant-Right Question, including some account of the Origin of Tenant Rights, and a brief history of the Tenant Right Movement from the period of the first interference with that tenure up to the present time. 29

Ramsden v Dyson 281 rent, which was lower than that proposed under the 1859 Act, which also included more burdensome terms regarding the maintenance of the property. Secondly, they were not as beneficial as the 60-year lease to which they believed they were entitled. To this end, the pamphlet provided an economic analysis of the overall cost of rent and fines under the 60-year lease and the 99-year lease in order to demonstrate that Ramsden’s actuary was incorrect in his assertion that the 99-year lease was as valuable as the 60-year renewable lease. Thirdly, the 99-year lease gave Ramsden a windfall as the houses were built of good stone that would last 999 years. A more general concern expressed was that the quality of building in Huddersfield would drop if 99-year leases were adopted, compared to the nearby Thornhill Estate which gave 999-year leases and already had a much higher quality of building. Circulating these arguments were comments regarding Ramsden’s honour and the ‘equity’ of the tenant-right claims. In June 1860 ‘one of the largest and most enthusiastic meetings ever held in Huddersfield took place in the Philosophical-hall’.31 About 2,000 people—including female tenant-right holders, safely located in the orchestra pit—were present, most notably Frederick Robert Jones Junior, Joshua Hobson and Thomas Crosland. The purpose of the meeting was to bring to Ramsden’s attention the tenant-right owners’ dissatisfaction with the 99-year leases and to form a Tenant-Right Owners’ Defence Association (hereafter ‘TRDA’). The chair of the meeting and the TRDA was Frederick Robert Jones Junior, a supposedly reluctant public speaker and formerly a solicitor in the partnership which acted for the Ramsden Estate on matters of tenant-right, Messrs Fenton, Jones and Rayner. Jones’s opening speech stated the various objections to the 99-year leases, and a debate ensued on the justice of those leases. The tenant-right holders didn’t want to appropriate from Ramsden what was rightly his, but they expected him likewise to give the tenant-right holders their due. This balance was posed in the form of a question of equity: ‘Are the 99 years’ leases in equity that which meets the whole case, and deals out to you that which is your due?’ This question was answered by reference to the history of property practices in Huddersfield, as a local custom which Sir John knew and on which the tenants relied. Resolutions were passed criticising the 99-year leases, again reciting the history of Huddersfield and the connection of local custom with the workers, and proposing that a second deputation be sent to Ramsden. When Joshua Hobson rose to address the meeting he was greeted with great cheers. He pointed out that this was the first true tenant-right meeting, and consequently he must explain his presence as he was not a tenant-right holder. He said that the fact that he had been asked should be enough, but

31

HC (9 June 1860).

282 Nick Piška additionally his family were brought up within the system and some of them remained tenant-right holders. He criticised the previous deputation and the ‘love feasts’ that occurred on the obtaining of the 1859 Act. He then revealed Jones, chair of the TRDA, as the Chronicle’s correspondent going by the name ‘Idem’: he said that he had given up hope for the tenantright holders until Jones started his campaign against the 99-year leases. Hobson was politically radical: a key player in the Chartist movement of the early nineteenth century, one-time editor of the Chartist Northern Star, occasional correspondent for the Leeds Mercury, and from 1855 to 1871 the editor of the Chronicle, of which the proprietor was Thomas Crosland.32 He was a champion of the working man, an active campaigner unafraid of imprisonment and a great public speaker. He also had previous dealings with the Ramsden Estate. During Ramsden’s minority the conditions of Huddersfield greatly deteriorated; it has been remarked that during this period, ‘[t]he dwellers in the town centre lived in almost unbelievable insanitary conditions and state of squalor’.33 With the alarm of cholera in the late 1840s, and himself coming close to death from cholera, Hobson undertook a campaign for the improvement of Huddersfield, which led to the Huddersfield Improvement Act 1848. An exchange with the Ramsden Estate emerged as a dispute over Sir John’s will, in which he left £20,000 for the improvement of the town, which the Estate interpreted to mean the improvement of the value of the Estate for Ramsden, while Hobson interpreted it to mean improvement for the tenants of the town. In his biography of Hobson, Stanley Chadwick suggests that the seeds of the tenant-right dispute lie in this earlier clash.34 A second deputation, together with a new memorial, was sent to Ramsden.35 There was some urgency in this deputation, as the deadline for applications for 99-year leases was fast approaching. The first deputation had been cordial, involving discussion and debate. The second deputation was very different. Ramsden was in London, and so offered to pay for the deputation to travel to the capital. Jones refused this on the basis that it was improper. On their arrival, Ramsden invited the deputation to lunch. This

32 Hobson was born in 1810, in Huddersfield, and died in 1876. He was also the Poor Law Guardian of Huddersfield. On Hobson, see S Chadwick, ‘A Bold and Faithful Journalist’ Joshua Hobson 1810–1876 (Huddersfield, Kirklees Libraries and Museums Service, 1976); S Cordery, ‘Joshua Hobson and the Business of Radicalism’ (1988) 11(2) Biography 108. On Chartism, Hobson and the Chartist press, see D Thompson, The Chartists (Hounslow, Temple Smith, 1984); A Briggs (ed), Chartist Studies (London, Macmillan Press, 1959); JK Walton, Chartism (London, Routledge, 1999). 33 Chadwick (n 32) 44. 34 Ibid, 47. 35 HC (11 August 1860). See LM (28 August 1860) for the text of the memorial and Ramsden’s reply. A detailed account of the meeting is set out in the report of the next meeting of the tenant-right holders in HC (18 August 1860).

Ramsden v Dyson 283 was also refused. The deputation read Ramsden their memorial, which was more like a set of demands: That your memorialists confidently put it to you, sir, as a gentleman of birth, of education, of feeling, and of honour, and as an Englishman, whether it is proper, and just, and noble, that advantage should be taken of a scintilla of law, and an attempt made to deprive them of, or qualify, a right which in their ignorance they conceived to be unquestionable; and your memorialists feel bound fearlessly, to say they are advised, under all the circumstances of the case, that right—so equitable and so just—can be maintained, if it should be necessary.

Ramsden, in turn, read a prepared reply, suggesting that the 1859 Act was obtained for, and the terms laid down by, the tenants, and that he was unwilling to allow the question of leasing powers to be re-opened. The TRDA was a highly organised union, with an executive committee and local sub-divisions for the different districts, with Jones as chair, the Chartist Hobson as secretary and the Chronicle its key apparatus. What was at stake for the tenant-right holders in this dispute? Most materially it was their homes and the ability to provide for their families and descendants, as well as the continuing viability of the local economy and the confidence of the money clubs in investing in the tenant-right scheme. More generally, though, it was a question of principle: the tenantry’s right to the products of their labour or compensation for that labour as against its appropriation by the landlord. The TRDA, with its Chartist background, was in effect a campaign on this principle.

E. THE MOBILISATION OF EQUITY

On 13 August 1860 another meeting was held at the Philosophical Hall, lasting five hours into the night, at which the second deputation was meticulously reported.36 Tenant-right owners were also informed that the opinion of two lawyers had been sought, Mr Ellis, a recorder in Leeds, and Mr Daniel QC, a Chancery barrister, as to the position of the tenant-right holders based on the principles of equity. Ellis’s opinion was that in terms of strict law the tenants were merely tenants-at-will, and that although copyholds and customary freeholds incorporate local customs, he did not think the facts in this case went so far as to establish a custom that would alter the nature of the estate. Although Ramsden could not force current tenants into 99-year leases, as the 1859 Act was permissive only, he did have power to evict. However, Ellis was of the view that equity might intervene as there had been an oral agreement acted upon by the tenants, and if the terms could be clearly ascertained then equity would enforce 36

HC (18 August 1860).

284 Nick Piška the agreement. However, he warned that this would not necessarily bind Sir John’s or Ramsden’s successors. Daniel QC agreed: the tenants had no right at law, but the position was different in equity. Regarding those taking under Sir John when he was absolute owner, he considered they had a claim to have his representations made good. Regarding those taking under more limited interests, their position was more complicated, but Daniel QC did not consider that they could be evicted without compensation for the value of the buildings erected under the expectation of not being disturbed in possession. This right to compensation might be enforced by an injunction. Daniel QC referred to a number of cases, including The Earl of Oxford’s Case,37 but did not state the principles on which his opinion was based. He advised the tenant-right holders not to accept any increase in rent during this period so as not to disturb any equity that might have arisen, and that one or two test cases might be brought. Resolutions were then read and passed. First, that the TRDA deeply regretted Ramsden’s ‘cold and austere spirit’ towards the tenant-right owners. Secondly, that the TRDA exercise the option of not applying for 99-year leases. Thirdly, that the TRDA be brought into active operation and that a fund be collected from its members. In a letter to the editor appearing in the same issue of the Chronicle as the report of the meeting, Jones, the chair of the TRDA, set out the principles of equity relevant to the future action of the tenant-right owners. He drew attention to Daniel QC’s reference to The Earl of Oxford’s Case, in particular the reference to the law of God, equity and good conscience speaking for the claimant, and the law of the land not speaking against the claimant. He then drew an analogy between that case and the tenant-right owners’ case, and stated that ‘the Tenant-rights carried with them an equity—such an equity as had been, ages before, pointed out by Lord Ellesmere’, and that Ramsden had attempted to defeat such an equity through requiring tenants to sign a piece of paper on the transfer or mortgaging of tenant-right property saying that they held property as ‘tenant-at-will’. Jones attached no importance to this; it was regarded as a mere formality introducing no substantive change. Neither could the 1859 Act deprive them of their equity. Again citing The Earl of Oxford’s Case, he explained that in equity a person who has expended money on improvements on another’s land, and the other stands by and allows them to do so, will be entitled to be indemnified for such expenditure with pecuniary compensation; and as it is inequitable for the owner to profit from his fraud, he will be interdicted from proceeding at law. He then alluded to Dann v Spurrier,38 and said

37 38

(1615) Rep Ch 1, 21 ER 485. Discussed by David Ibbetson in ch 1 of this volume. (1802) 7 Ves Jun 231, 32 ER 94.

Ramsden v Dyson 285 that Ramsden would be compelled to compensate the tenant-right holders in equity: The Chancellor will ridicule and squash the whole—and for these reasons, namely:—that the applications have been made in fear and panic; that many tenants were not informed of the amount of the increased or revised rents which will be charged upon them; and that in no instance were the terms of lease stated. chancellors do not allow ignorant men to bind themselves when blindfolded.

After Jones’s letter, the editor of the Chronicle (Hobson) set out the relevant principles in point-by-point form, again citing The Earl of Oxford’s Case and alluding to Dann v Spurrier, to the effect that tenant-right holders could not be dispossessed or rent raised without Ramsden either giving a lease on the old terms, or providing monetary compensation to the present value of the buildings on the land. Further opinions of Daniel QC were taken and reported at a meeting of the tenant-right owners in September 1860.39 Amongst other things, he distinguished two types of case: those where there had been a promise and performance of the promise will provide a lease; and those where there was no promise but a lien would be provided for the present value of expenditure on the land which might also protect possession. He considered that the 1844 Act’s preamble provided evidence against the Ramsden Estate. Resolutions were then made to protect equitable rights by maintaining rent at its current rate, and that any attempt to dispossess a tenant-right holder would be resisted. At this point the language becomes militaristic and political: Mr Cowgill, of the Rifle Volunteer Corps for Defence of Land, stated there was more to fear of Ramsden than with Napoleon III, and that every tenant-right holder must do their duty; and Mr Halstead referred to the middle-class property reverting to the aristocracy and said that the tenant-right struggle was a process of levelling. November was a busy month in Huddersfield, as it was the month of the Ramsden Rent Audit. It also included something of a scandal and another aggregate meeting of the tenant-right owners. On 10 November 1860 the Chronicle reported what it called ‘a new element in the tenant-right agitation’ involving secret meetings between the Constable, Mr Wright Mellor, and certain members of the first deputation to Ramsden.40 This was a strange incident. Invitations had been sent by the Constable, only intended for a small group, but a much larger group attended. Once the Constable had been forced to leave, a tenant-right rally took place, with a number of the members of the first deputation changing their allegiances and remaining. This created a stronger bond between tenant-right holders against 39 40

HC (22 September 1860). Also see HC (3 November 1860). HC (17 November 1860). On the rent-audit, see HC (10 November 1860).

286 Nick Piška those who opposed them. On 19 November there was a meeting of the tenant-right owners, this time at Gymnasium Hall.41 As a consequence of the meeting of the ‘selected few’, Jones stated that the tenant-right movement had taken a potentially political turn, and moved that the TRDA was nonpolitical. This was a response to the Examiner, which had been publishing letters regarding the Chronicle’s political links, particularly the accusation that Hobson was leading the tenant-right holders into a political quagmire. A resolution was then passed appointing Jones as agent and legal representative for the tenant-right holders. In May 1861 Jones published a second pamphlet, containing two letters to the editor of the Chronicle setting out legal arguments.42 Again Jones referred to The Earl of Oxford’s Case, and then stated that43 [t]he discretion of Equity, so to speak, as then, so now, relieves any abuse which may have been superinduced by the strict requirements of law. Its province is to allay the rigour of, and to moderate, law, where law carried out to the letter might lead to oppression. It regulates the principles of law so as to prevent the application of those principles from becoming, contrary to the purpose and the wisdom of their origin, a justification for wrong-doing.

He then looked at the specific principles that might be relevant. First, part performance, and in particular that possession itself was considered to be execution of an agreement. Secondly, strict tenants-at-will were entitled in equity to emblements, that is to profits from corn sown. He considered the analogy with tenant-right to be sufficiently strong that equity would grant relief, either granting the lease to which the tenants believed they were entitled, or else paying compensation in the nature of emblements.44 Thirdly, that the tenants were neither tenants-at-will nor from year-to-year but quasi-leaseholders; they held a 60-year renewable lease in equity on the basis of part-performance and specific performance. Jones also explicitly referred to Dann v Spurrier in support of the tenant-right claim.45 The Huddersfield tenant-right question was therefore framed in terms of equity. The mobilisation of equity manifested itself in two ways: a rhetorical strategy, and a doctrinal strategy. First, the tradition of equity was invoked as part of a rhetorical strategy in which equity was tied to certain values— honour, justice, fairness—and mythologies—the historic mission of equity and its assistance of the vulnerable and ignorant, and the mythology of the

41

HC (24 November 1860). FR Jones, Can the Tenant-Right Owners be Disturbed in Possession? The Question Argued, & Authorities Adduced. TWO LETTERS Reprinted from the ‘Huddersfield Chronicle’ of May 4 & 11, 1861, Containing Proposals for a Settlement of the Question (Huddersfield, 1861). 43 Ibid, 6. 44 Ibid, 8. 45 Ibid, 15. 42

Ramsden v Dyson 287 concomitant emergence of Huddersfield from immaturity and the custom of tenant-right. Secondly, equity’s principles and doctrines were put into play in form of advice from counsel and Jones’s legal opinions. The two strategies were connected, as the doctrines of equity were often placed within the framework of equity’s jurisdiction to do justice. The Earl of Oxford’s Case was the strategic bridge, as it was put into discourse for both its doctrinal and symbolic power. Equity was mobilised and put into the public imagination, thereby galvanising support for the TRDA’s actions, through a number of mediums. Most directly, it was put into play in the various aggregate meetings of the TRDA, where Jones would give his opinions on the matter and where the opinion of counsel would be heard. However, these meetings were ‘doubled’ through their subsequent reporting in the Chronicle, thereby not only reaching a wider audience but also having the effect of confirming what had been said for those who had been present. Jones’s letters to the Chronicle and subsequent pamphlets also contributed to the mobilisation of equity within the tenant-right struggle. But what was the utility of mobilising equity within that struggle? Why was ‘equity’ such a key feature in this discourse? Most obviously, the tenantright owners only had a claim in equity, it having been held that at common law they were only tenants-at-will. However, this is not an adequate explanation for the strength and quantity of the discourse on equity, especially as equity had been associated with tenant-right before the Swift case. Instead we can point to three qualities of equity that intersect with three objectives of its mobilisation. First, an affective quality: the rhetorical strategy has an emotional intensity, exciting the human passions and fostering hope in humanity. Secondly, an authoritative quality: the doctrinal strategy functions within a juridical model which has the power to silence that which opposes it, and consequently demands respect. Thirdly, a personal quality: equity is coupled to the figure of the Chancellor, which reinforces both the affective and authorial qualities. Each of these qualities of equity contributed to the various objectives of the TRDA: to galvanise the tenant-right owners; to resist Ramsden’s strategy of rights, powers and law; and to appeal to the Lord Chancellor.

F. THE TENANT-RIGHT SUIT

November 1861 heralded a marked shift in the tenant-right struggle. The headline in the Chronicle says it all: ‘The Tenant-Right Struggle. An Impending Crisis. Notice to Quit Served Upon Leaders of the Defence Movement’.46 The notices were taken as a declaration of war, and tenant-right

46

HC (9 November 1861).

288 Nick Piška holders were told they must take action to protect their property: there must be a ‘spirit of determined and indignant resistance’ to any confiscation. The editor warned of a ‘personal antagonism’ between Ramsden and his tenants, the ‘evil effects’ of which even the young would not see the end. In an accompanying letter, Jones stated that Ramsden had immortalised himself and would regret his indiscretion forever; if he won he would be hated, and if he lost he would be despised. Jones confidently predicted that ‘the Rules of Equity will provide “a greasy pole” down which he will be necessitated to effect an inglorious descent’. In April 1862 a sixth aggregate meeting was held, where it was communicated to the TRDA that seven bills had been filed in Chancery.47 In his opening speech, Jones drew attention to the character of Chancery: Some one has well said, ‘Thank God we have a House of Lords.’ As truly may we say, ‘Thank God we have a Court of Equity;’—(cheers)—a court which while it will allow the law of the land to do its work so long as law does not interfere with justice, but which, with mildest but irresistible sway, will interpose where innocence and weakness are borne down by that arbitrariness and that despotism which, I regret to say, is sometimes found endeavouring to take advantage of bare naked legality.

It was decided to proceed with one of the seven bills, that concerning Joseph Thornton, as it covered a number of different transactions. In 1837 Thornton, ‘a twenty-five year old partner in a cloth dressing firm, decided to build a “gentleman’s residence”’.48 He applied in the usual way, was let into possession and expended around £1,850 building ‘Edge House’. Brook and Thornton’s father visited the site shortly before completion, where a discussion took place regarding the granting of a lease. Brook stated it would be folly to take a lease, that Thornton would be equally safe without one and that he could get a lease whenever he wanted. On completion Thornton stayed in possession paying the agreed rent, and was entered on the rent-roll as ‘tenant-right’. In 1845 he applied for an additional piece of land adjoining the property. Hathorn agreed, but it was stated that it was held ‘at will’. Again Thornton entered possession and expended money on the land. Finally, in 1857 he borrowed money from the Commercial Money Club, of which Lee Dyson was president. They visited Longley Hall where Dyson was entered on the rent-roll as mortgagee. They also signed forms stating that the property was ‘tenant-at-will’, although neither read the forms and in all they were at Longley Hall for approximately five minutes.

47

HC (5 April 1862). G Minter and E Minter, Discovering Old Huddersfield (5 vols 1993–2002) vol 5, 54: available at (accessed 28 June 2011). 48

Ramsden v Dyson 289 The tenant-right holders’ claim was multilayered, encompassing questions of contract, property and compensation. First, they claimed that tenantright gave them a right to perpetual possession of the land, so long as they paid the rent. Secondly, that this encompassed the right to transfer and mortgage ‘tenant-right’. Thirdly, that if they so wished they could ask for a lease, and they were entitled to be granted a 60-year lease, renewable every 20 years forever. Fourthly, that they were entitled to compensation for the improvements made to the land, namely, the capital invested in building dwelling-houses. This compensation could be satisfied through the grant of a lease, specifically the 60-year renewable lease, or else a lien on the land coupled with an injunction preventing their being disturbed until fully compensated. However, Thornton’s Bill was limited to two forms of relief. In the first instance, a declaration that the claimant was entitled to a 60-year lease. Alternatively, a declaration that the claimant was entitled to a lien on the property for the value of the improvements, with an injunction protecting possession until compensation be paid. The tenant-right case came before Stuart V-C in February 1864, with Malins QC and Mr Fielding joining Daniel QC on behalf of the TRDA, and the Attorney-General (Roundell Palmer QC), Bacon QC and Mr Barber for the Ramsden Estate.49 Stuart V-C gave his decision in favour of Thornton on 25 May 1864.50 He stated that ‘[t]his Court has gone very far in many cases to protect the possession of a tenant who has in good faith expended money on land in a reasonable confidence that his possession would not be disturbed’.51 He continued that the land had been taken for the purpose of building, and that if a rent had been fixed but not a term of years, Chancery ‘never would presume that the landlord had a right to take the immediate possession and enjoyment of the building, without any compensation, as soon as the tenant had expended his money upon it’.52 Moreover, ‘there is sufficient evidence of an understanding or agreement that the possession of the tenant should not be disturbed’.53 Regarding the language of ‘tenantat-will’, Stuart V-C stated it was merely used to distinguish those tenants who had a lease from those who did not. This was not a case of specific performance and the Bill did not pray relief on that footing; rather, the case stood on ‘an equity much higher and more positive than the discretionary and ordinary equitable jurisdiction for specific performance’.54 Stuart V-C granted a lease in accordance with the 1844 Act, with rent being fixed in the usual manner. The possibility of compensation was not considered, on 49 For the Chronicle’s coverage of the proceedings, see HC (13 February 1864); HC (20 February 1864); HC (27 February 1864); HC (5 March 1864). 50 (1864) 4 Giff 519, 66 ER 812; The Times (26 May 1864). 51 (1864) 4 Giff 519, 571; 66 ER 812, 834. 52 Ibid. 53 Ibid. 54 (1864) 4 Giff 575, 66 ER 836.

290 Nick Piška the basis that both sides thought a lease most appropriate if relief were to be granted. Following Stuart V-C’s decision a series of angry letters were exchanged on the topic, with Ramsden blaming certain people for instigating unrest, particularly Crosland who used the Chronicle as his mouthpiece and had known activists (ie Hobson) in his pay, which provoked an editorial in The Times denouncing Ramsden for attempting to force 99-year leases on his tenantry on pain of eviction, even if 99-year leases were more suitable than the tenant-right system.55 In March 1865 Jones wrote to the Chronicle to bring to readers’ attention that an appeal was likely in the tenant-right case,56 and in May an eighth meeting of the tenant-right holders was held in which Jones summed up the Chancery decision in four words: ‘No disturbance without compensation.’57 The appeal was heard during June and July 1865, with Lord Westbury the Lord Chancellor.58 Although Thornton was stated to be the respondent as well as Dyson, in truth Thornton had been replaced by his assignees, having been declared bankrupt. Shortly after the hearing had ended, Westbury LC resigned as Lord Chancellor. Opinion of the Lords was not given until 11 May 1866, with Lord Cranworth now Lord Chancellor. The majority allowed Ramsden’s appeal.59 Cranworth LC stated that in order to succeed, Thornton had to prove both a belief that he had an absolute right to a lease and that Sir John knew of that mistaken belief; but that in relation to both the 1837 and 1845 transactions Thornton had failed to establish that he believed he had an absolute right beyond that of a tenant from year-to-year, or that Sir John knew that Thornton held such a belief. Regarding the evidence presented that persons taking land without a lease would never be disturbed, Cranworth LC interpreted this to mean only that tenants could rely on the honour of the Ramsden family, which would exclude the jurisdiction of the court of equity; it meant that Ramsden would not disturb their possession, not that he could not. Cranworth LC stated that this was consistent with Jones’s evidence that investment was made on the basis of tenant-right tenure due to the confidence reposed in the honour of the Ramsden family. Regarding the evidence that persons taking possession of land without a lease might have one if only they asked for one, this was also explained in terms of reliance on the honour of the Ramsden family and that any leases granted to tenant-right holders were not evidence of a contract or right but rather a matter of favour. Moreover,

55

See LM (30 May 1864); LM (31 May 1864); The Times (1 June 1864); LM (4 June 1864). HC (11 March 1865). 57 HC (27 May 1865). 58 For the Chronicle’s coverage of the proceedings, see HC (17 June 1865); HC (24 June 1865); HC (1 July 1865); HC (8 July 1865). 59 (1866) LR 1 HL 129. 56

Ramsden v Dyson 291 in relation to the 1845 transaction, Cranworth LC stated that ‘every precaution was taken to shew to persons who took land after the death of Sir John that they were mere tenants at will’,60 with tenants being required to sign an application which had the words ‘tenant at will’ printed in large conspicuous letters so as not to be overlooked. Both Cranworth LC and Lord Wenslydale were of the view that ‘tenant at will’ was used in its proper legal sense and that the tenants must be taken to have understood it in this sense. Amongst other things, both Cranworth LC and Lord Wenslydale also doubted whether Brook was an agent capable of binding Sir John, and whether a personal equity binding against Sir John could bind the Estate. Dissenting, Lord Kingsdown stated that whether relief would be given depended on the tenant’s understanding when entering possession, which depended on the evidence regarding the terms or agreement held out by Ramsden. While the majority had interpreted the evidence such that there were two classes of tenant entering possession, one who had agreed to take a lease and another who had not, Lord Kingsdown was of the view that on taking possession there was only one class of tenant, but that some subsequently took up the leases to which they were entitled. Regarding the references to ‘tenant-at-will’, he thought rather more emphasis had been placed on these words than they deserved, and that ‘tenant at will’ had a technical meaning in the context of Huddersfield equivalent to copyhold, that is, holding at the will of the lord and according to the custom of the manor. Moreover, he considered that the circumstances in which the 1857 terms were signed were such that he could ignore them. Shortly after the decision, the Law Journal published a leader stating, for a case involving so little law and, despite ‘a huge bulk of evidence’, ‘a really narrow compass of facts’, it was curious to consider how the majority and minority could ‘arrive at conclusions diametrically opposed’.61 How might we explain this difference in the interpretation of the facts? The leader also expressed concern that the decision encouraged landlords to allow tenants to rely on their honour with impunity to the landlords themselves; but why did the tenants think equity would protect their reliance on honour, and why did the majority reject those claims?

G. EQUITY AND THE POLITICS OF TENANT-RIGHT

The tenant-right question in Huddersfield connected with wider discourses on ‘tenant-right’ and English land reform in nineteenth-century Britain. ‘Tenant-right’ has an historical connection with the agrarian community,

60 61

Ibid, 160. Reprinted in HC (28 July 1866).

292 Nick Piška and Chancery would protect vulnerable tenant-right holders against the greater excesses of power of the landowners. However, the socio-economic developments of the nineteenth century, coupled with a reform movement strongly influenced by liberal political economy, militated against the continuance of local land customs and Chancery’s continuing protection of tenant-right holders. Tenant-right had already been an issue in the seventeenth and eighteenth centuries. In an article on Keech v Sandford62 Andrew Hicks argues that that case can be understood only with comprehension of the nature of ‘tenant-right’,63 which he explains referred to ‘the customary right to renew leases to maintain possession of the land over long periods and across generations’.64 That is, tenant-right was short for ‘tenant-right of renewal’. This right of renewal operated in the ecclesiastical context, where ‘there developed a settled practice of granting a renewal to the sitting tenant so long as the fines and rents were paid’.65 Strictly speaking, the tenant right of renewal was neither a legal nor an equitable right, but rather a right to expect a favour. This caused some concern; in the eighteenth century, for example, the Old Whig or The Consistent Protestant ran an article giving reasons why a law was necessary ‘to oblige spiritual persons and bodies politick to renew their leases for customary and reasonable fines’.66 However, tenant-right was not entirely unprotected. As Hicks says, the right of renewal (the tenant-right) was treated as ‘the traceable substitute of a trust asset’ which Chancery would protect, in Keech v Sandford apparently through the imposition of a constructive trust.67 However, this does not tell the whole story of ‘tenant-right’. In particular, tenant-right was both a form of landholding in itself, not just a right of renewal, and a system of compensation for tenants-at-will, aspects that would come to prominence in the nineteenth century in the context of agricultural tenancies and the Irish land question.

(1) Tenant-Right and Agricultural Tenancies Perhaps the context in which tenant-right is best known is agricultural law concerning the right of an outgoing tenant to compensation for unexhausted

62

Keech v Sandford (1726) Sel Cas Ch 61, 25 ER 223. A Hicks, ‘The Remedial Principle of Keech v Sandford Reconsidered’ (2010) 69 CLJ 287, 295–98. 64 Ibid, 295. 65 Ibid, 295. 66 31 March 1737. 67 Hicks (n 63) 296. 63

Ramsden v Dyson 293 improvements.68 Halsbury’s Laws of England defines ‘tenant-right’ as ‘the right of the tenant to take or receive after the determination of his tenancy the benefit of the labour and capital expended by him in cleaning, tilling and sowing the land during his tenancy’.69 This is now regulated by statute, but it originated as an agricultural custom, initially regulating the termination of agricultural leases between outgoing and incoming tenants, but later developed in the context of outgoing tenants and landlords. The main function of tenant-right was to allow a fair apportionment of returns from the land to an outgoing tenant, such as crops planted. Tenant-right in this context emerged from year-to-year tenancies which were the dominant model for agricultural landholding.70 Jones states that ‘the concept of tenant right was not merely a heady idea of land reform advocates or the mysterious consequences of ancient practice’; rather, ‘it had legal precedent and a solid base upon which to theoretically expand into more general usage’.71 That legal basis was the law of emblements:72 If a tenancy was unexpectedly ended owing to some totally unforeseen circumstance, during a period in which the occupier’s crops were growing, the tenant possessed the right to enter on the land and harvest the crops, irrespective of the termination of his tenancy.

Although tenant-right did not usually apply to permanent improvements, in Lincolnshire there was a custom of compensation for permanent improvements. In the course of the nineteenth century the discourse of ‘tenant-right’ in the agricultural context took on increasing importance. As Julian McQuiston has stated:73 ‘Of all the issues within the agricultural community that agitated the British farmer during the reign of Queen Victoria, tenant right proved to be the most durable and significant.’ But what was the issue, and why was it such a problem in the nineteenth century? According to McQuiston, the issue was that agricultural improvements required an increasingly considerable amount of capital investment, and tenant farmers did not feel that they had adequate security for their investments, investments which would be taken either by the incoming tenant or by the landlord.74 With the discovery of the Lincolnshire tenant-right custom, a discourse emerged claiming tenant-right to the compensation for 68 See JR McQuiston, ‘Tenant Right: Farmer against Landlord in Victorian England 1847– 1883’ (1973) 47(2) Agricultural History 95; AW Jones, ‘Glamorgan Custom and Tenant Right’ (1983) 31(1) The Agricultural History Review 1; JR Fisher, ‘Landowners and English Tenant Right, 1845–1852’ (1983) 31(1) The Agricultural History Review 15. 69 Halsbury’s Laws of England, vol 1, 5th edn, ‘Agricultural Land’ (2008), para 364. 70 Jones (n 68) 6. 71 Ibid, 7. 72 Ibid. 73 McQuiston (n 68) 95. 74 See, in particular, McQuiston (ibid) and Fisher (n 68).

294 Nick Piška capital improvements. However, ‘law’—apparently in thrall to the ideology of freedom of contract—was unwilling to recognise any right to compensation unless improvements were made in the context of an agreement.75 In the 1840s a tenant-right movement emerged,76 and in 1848 a Parliamentary Committee investigated the possibility of a general system of tenant-right, but no statutory intervention was made until the Agricultural Holdings (England) Act 1975.77 The problem, it seems, was not so much that landlords did not pay compensation, as an unwillingness to have that custom codified. As Fisher explains:78 Many landowners recognized the justice of [tenant-right] and, indeed, that it could prove economically beneficial to themselves. However, as a class they opposed statutory recognition of the principle because of the adverse implications for their predominant role in tenurial relationships.

This was not only a struggle between the tenantry and their landlords, but also a political and ideological struggle, which in turn led to the breakdown of ‘the customary bonds of deference and responsibility that had once united all who acknowledged the primacy of the land’.79 McQuinton concludes his account of the tenant-right movement by suggesting that the conflict was80 the outward sign of the social revolution implicit in that cause. Hammered by the twin blows of an ever-developing technology and a changing economy, the traditional structure of rural England and its accompanying conventions crumbled.

(2) Tenant-Right and the Irish Land Question Tenant-right was also a political question in what has come to be known as the Irish land question, at the time also known as ‘tenant-right in Ireland’.81 Just as McQuinton described the agricultural tenant-right question as one of the most important in the nineteenth century, Timothy Guinnane and

75 See A Densham, ‘Agricultural Tenancies: Past and Present’ in S Bright (ed), Landlord and Tenant Law: Past, Present and Future (Oxford, Hart Publishing, 2006) 111–14. 76 For an account of the tenant-right movement in this context, see McQuiston (n 68) and Fisher (n 68). There was massive newspaper, pamphlet, magazine and journal output on tenant-right in this context, especially in the agricultural and farming press, but also in the legal journals. Time and space prevent further discussion here. 77 For an account of the Act and subsequent reforms, see Densham (n 75) 114–27. 78 Fisher (n 68) 15. 79 McQuiston (n 68) 97. 80 Ibid, 112–13. 81 On the Irish land question generally, see ED Steele, Irish Land and British Politics: Tenant-Right and Nationality 1865–1870 (Cambridge, CUP, 1974). On tenant-right in Ulster, see MW Dowling, Tenant Right and Agrarian Society in Ulster 1600–1870 (Dublin, Irish Academic Press, 1999).

Ramsden v Dyson 295 Ronald Miller have stated that ‘tenant-right was perhaps the most famous and vexatious land-tenure institution in nineteenth-century Ireland’.82 At the heart of the Irish land question was the feeling of historic dispossession as a consequence of English colonialism, which not only imposed English rule but also entailed a shift in ownership, with the vast amount of Irish land held by English landowners or landowners siding with English rule. Irish tenant-right was concerned not only with improvements to land, although that was an important aspect of the discourse, but also with the tenant’s right to sell the right to occupy the land. The Irish peasantry, according to strict law, had no property rights in the land, as they were tenants-at-will or sometimes yearly tenants. However, as Steele explains, ‘[w]hatever the law courts said, Irish tenants assumed they possessed rights of that kind, as indeed they did under the native customary tenures which had had no legal existence since the courts ruled against them in the seventeenth century’.83 Tenant-right was therefore a customary form of tenure, which allowed for quiet possession but also constituted a form of property, in so far as it could be transferred and bequeathed, and a right to compensation for unexhausted improvements. The origins of this custom can be traced back to certain customary forms of tenure found in the northern regions of England.84 Hoyle argues that the tenant-right custom goes back at least as far as the sixteenth century, when tenants from the north-west ‘appearing before the equity courts described themselves as tenants by “an ancient and laudable custom of tenant right”’.85 In many ways, tenant-right holding was similar to copyhold, as in both the tenant had the right to bequeath the tenantry, and from this a right to alienate the tenant right. Copyhold and tenant-right differed in terms of the frequency of fines; but more importantly copyhold was a manorial custom, whereas tenant right was a leasehold custom developed from the system of life leases. Because copyhold was a manorial custom, the manorial court had jurisdiction regarding the size of the fine and other questions. Tenant-right was not an entirely unprotected custom though. Hoyle provides ample evidence to demonstrate that Chancery had a long acquaintance with questions of tenant-right, and tended to give effect to tenant-right customs through the protection of tenants from oppressive and

82 TW Guinnane and RI Miller, ‘Bonds without Bondsmen: Tenant-Right in NineteenthCentury Ireland’ (1996) 56(1) The Journal of Economic History 113, 113. 83 Steele (n 81) 7. 84 See SJ Watts, ‘Tenant Right in Early Seventeenth-Century Northumberland’ (1971) 6 Northern History 64; RW Hoyle, ‘Lords, Tenants and Tenant Right in the Sixteenth Century: Four Studies’ (1984) 20 Northern History 34; RW Hoyle, ‘An Ancient and Laudable Custom: the Definition of Tenant right in North-Western England in the Sixteenth Century’ (1987) 116 Past and Present 24. 85 Hoyle, ‘An Ancient and Laudable Custom’ (n 84) 25.

296 Nick Piška inequitable conduct by lords.86 Although the tenants based their claims on custom, the custom could not usually be proved to be immemorial, only ‘the managerial practice of the lord’. Equity would in effect codify and give the sanction of law to such managerial customs when conflict arose.87 However, in the sixteenth century, tenant-right was gradually brought to an end as an ordinary system of property,88 although ‘tenant-right’ continued in the agrarian imagination, including in Ireland. In the course of the nineteenth century, aristocratic landowners in Ireland ignored customary land rights, leading to agrarian outrage following a large number of evictions in the 1860s89 and a feeling of living under ‘an active and unwavering landlord tyranny’.90 This led to the formation of various tenant-right movements, including a Tenant League and a Tenant Right Conference in 1860. The tenant-right agitation in Ireland was clearly political, led to violent clashes and to a large amount of coverage in the newspapers and journals, both in Ireland and England, and eventually led to the recognition of tenant-right in the Irish Land Act 1870. The discourse on tenant-right in Ireland was a melting-pot of law, political and economic theory, and racist assumptions. Initially tenant-right had been associated with insecurity and the imposition of a form of property by violence and terrorism. In 1863, Henry Fawcett, a professor of political economy at Cambridge, stated that ‘[t]he fact that such a tenant-right, which is neither just nor legal, can be maintained is … sad evidence that the social condition of Ireland has been so deplorable, that a right could be established by terrorism with as much certainty as by law’.91 However, others accepted tenant-right as an economically efficient form of property, and John Stuart Mill wrote in support of agrarian agitation and tenantright, although in his earlier writings he may not have been as supportive.92 In 1851 the Law Review carried an article on the tenant-right agitation in Ireland.93 The author states that an appreciation of economic laws, in particular concerning rent and ownership as given by Ricardo, would give a better understanding of the situation. The author suggests that the 86

Ibid, 43–52. Also see Hoyle, ‘Lords, Tenants and Tenant Right’ (n 84). Hoyle, ‘An Ancient and Laudable Custom’ (n 84) 51–52. 88 See RH Tawney, The Agrarian Problem in the Sixteenth Century (London, Longmans, Green and Co, 1912); E Kerridge, Agrarian Problems in the Sixteenth Century and After (London, Allen & Unwin, 1969); Watts (n 84); Hoyle, ‘Lords, Tenants and Tenant Right’ (n 84). 89 Guinnane and Miller state that in the 1860s some 9,600 families were evicted (although 1,600 were readmitted to their holding): see Guinnane and Miller (n 82) 118. 90 Steele (n 81) 55. 91 Quoted ibid, 52. 92 Ibid, 48–55. See further ED Steele, ‘JS Mill and the Irish Question: The Principles of Political Economy, 1848–65’ (1970) 13 Historical Journal 216; and ED Steele, ‘JS Mill and the Irish Question: Reform, and the Integrity of the Empire, 1865–70’ (1970) 13 Historical Journal 419. 93 Anon, ‘Tenant-Right in Ireland’ (1851) XIII Law Review and Quarterly Journal of British and Foreign Jurisprudence 94. 87

Ramsden v Dyson 297 tenant-right system actually increases the value of the land, and points to the advantages of the tenant-right system: the tenant is secure in possession or in getting compensation, so freely expends capital and labour on the land; and as the tenant-right holder has a stake in the country, this leads to a peaceful and orderly community. The author asks whether tenant-right custom should be legalised and, if so, how. The author shows that tenantright holders’ labour is not recognised by existing property laws. Through a discussion of Locke and Bentham, the author considers the justifications for granting property rights, particularly labour. Labour might be expended on one’s own property, but also on property belonging to another. The tenantright question concerns the latter. The author asks to whom the increased value of land should belong when that labour has been expended with the tacit consent of the owner of the land but without remuneration: ‘This is the entire tenant-right question.’94 The author notes that the civil law has a rule that the owner must reimburse for improvements made prior to retaking possession, based on an equitable principle. The author then refers to a number of cases where the common law adopts this principle, namely East-India Company v Vincent,95 Stiles v Cowper96 and Jackson v Cator,97 all of which would be cited in argument in Ramsden. The problem with these cases for the protection of tenant-right is that they only apply to an occupant who builds without notice of true title, or a tenant holding under a lease. The author then quotes Dann v Spurrier and says it is to be observed that English judges in modern times constantly endeavour to modify the strict rule of common law regarding tenant improvements. Later the author states:98 The tenant … may well be supposed to make no improvements without his landlord’s knowledge; and if the landlord consents to the tenant’s investment of his capital and labour, he has no natural right to confiscate it. His present right in this country is derived from the feudal law, which belonged to a past age, and was instituted for the purpose of maintaining what here has ceased to exist,—an hereditary military aristocracy.

So the author concludes that the tenant-right system should be legalised in Ireland, and all improvements by a tenant should be his property unless there is agreement to the contrary. He concludes with the hope that the legislature will take notice, as ‘the peace and prosperity of Ireland depend upon its equitable adjustment’.99

94 95 96 97 98 99

Ibid, 103. East-India Company v Vincent (1740) 2 Atk 83, 26 ER 451. Stiles v Cowper (1748) 3 Atk 692, 26 ER 1198. Jackson v Cator (1800) 5 Ves Jun 688, 31 ER 806. Anon (n 93) 111. Ibid, 115.

298 Nick Piška However, in the year that Ramsden was decided, an article devoted to the Irish tenant-right question was published in the Westminster Review.100 The author of this article was less impressed with the tenant-right system, in particular how removed the custom was from the public’s understanding of the most familiar maxims of economy and law, and that such a custom must be abolished: ‘It is surely time to unloose the swaddling-clothes, and teach the country finally to put away childish things.’101 Indeed, the author linked the tenant-right system to a lack of civilization and intelligence: ‘The condition of England and Scotland is healthy, that of Ireland is all but mortally diseased,’102 and later ‘The notion of acquiring a saleable interest in a tenancy-at-will has not so much as dawned upon the less erratic fancy of an English occupier’.103

(3) Tenant-Right and the Changing Landscape of Property The discourse of tenant-right was well-known in mid-nineteenth-century political and legal circles, and it carried with it political connotations going back as far as the agrarian problems of the sixteenth century, where tenant-right is coupled with local custom possessed by the tenantry and traditionally protected by Chancery, but also to agricultural and colonial problems in the nineteenth century. In framing their discourse in terms of ‘tenant-right’, the members of the TRDA were aligning themselves with a particular political position. For example, the Chronicle carried a number of articles expressing solidarity on the Irish tenant-right question,104 and the Law Journal article referred to Irish tenant-right in its leader on Ramsden. To conduct their struggle through the discourse was a political strategy connected to mid-Victorian class tensions and more general social, economic and political developments. For example, Avner Offer has stated that by the 1860s there was a conflict brewing between radical liberalism and the landowners.105 The rapid urbanisation of England, coupled with an increasing industrialisation, had a number of consequences.106 First, the decreasing power of the aristocracy, hence the emerging possibility of political movements, such as Chartism. Secondly, what could be called the 100

Anon, ‘Tenant-Right in Ireland’ (1866) 30:1, LXXXVI Westminster Review Art I, 1. Ibid, 6. 102 Ibid, 7. 103 Ibid, 8. 104 See HC (28 March 1863); HC (11 April 1863); HC (16 May 1863); HC (7 January 1865). 105 A Offer, Property and Politics 1870–1914: Landownership, Law, Ideology and Urban Development in England (Cambridge, CUP, 1981) 32. 106 See D Spring, ‘English Landowners and Nineteenth-Century Industrialism’ in JT Ward and RG Wilson (eds), Land and Industry: The Landed Estate and the Industrial Revolution (Newton Abbot, David & Charles, 1971); R Dennis, English Industrial Cities of the Nineteenth Century: a Social Geography (Cambridge, CUP, 1986). 101

Ramsden v Dyson 299 English land question concerning the reform of property law, particularly the conveyancing system107 and the appropriate form of building lease,108 but which included a questioning of the efficiency of settled land.109 To what extent can we find traces of the politics of tenant-right and the changing landscape of property in Ramsden v Dyson? First, it is worth noting that three of the five judges had been Lord Chancellor and were heavily involved in law reform, particularly with the creation of an efficient system of conveyancing that guaranteed security of property which local, customary tenures would tend to disrupt. Stuart Anderson opens his account of the making of English land law noting that Lord Brougham urged the abolition of local tenures.110 Indeed, in 1834 Lord Brougham had stated that111 great detriment would arise and much confusion of rights if parties were allowed to invent new modes of holding and enjoying real property, and to impress upon their lands and tenements a peculiar character, which should follow them into all hands, however remote.

Although Lord Brougham was not present at the judgment, he was present during the hearing, and Cranworth LC states that Lord Brougham had communicated with the panel on the subject and entirely concurred with Cranworth LC’s views.112 Moreover, Anderson provides an account of how both Cranworth LC and Lord Westbury had competing Bills for a land registration system before Parliament.113 This was clearly in the mind of those present at the hearings; Malins QC (who had previously been an MP and opposed reform114) had opened his case in Chancery with the quip that the system in Huddersfield was such a complete system of registration that it might be adopted for a Bill, prompting much laughter in the courtroom.115 Secondly, Cranworth LC described the mode of dealing with property in Huddersfield as ‘peculiar’,116 and concluded with a general comment that that system must be put to an end:117 The supposed transfers were altogether ineffectual, and it is a subject of wonder to me that litigation was not long ago occasioned by it. The present Appellant

107 See Offer (n 105) and S Anderson, Lawyers and the Making of English Land Law 1832–1940 (Oxford, OUP, 1992). 108 See M Davey, ‘Long Residential Leases: Past and Present’ in Bright (ed) (n 75) 147–57. 109 See FML Thompson, ‘Land and Politics in England in the Nineteenth Century’ (1965) 15 Transactions of the Royal Historical Society 23; E Spring, ‘Landowners, Lawyers, and Land Reform in Nineteenth-Century England’ (1977) 21 American Journal of Legal History 40. 110 Anderson (n 107) 3. 111 Keppell v Bailey (1834) 2 My & K 517, 536; 39 ER 1042, 1049. 112 (1866) LR 1 HL 129, 162. 113 Anderson (n 107) 107–12. 114 Ibid, 97. 115 See HC (13 February 1864). 116 (1866) LR 1 HL 129, 137. 117 Ibid, 162.

300 Nick Piška endeavoured to do what he thought fair and just, by obtaining powers to grant leases for ninety-nine years. Whether that was more or less than his tenants at will had a right to look for from what they call the honour of the family is a point on which I give no opinion, but that some arrangement should be adopted which should put an end to the system hitherto pursued seems to me absolutely indispensible.

This is a telling conclusion. First, Cranworth LC considered that the tenant-right system must be replaced by a proper system of leasing, which he earlier stated the trustees had sought to introduce by requiring applications in writing, expressly stating the form of the lease, and being made on printed forms.118 The tenant-right system was not ‘altogether ineffectual’ though: possession was in fact transferred and bequeathed, and money raised by mortgage, for many years without much dispute. Secondly, it would be very difficult to replace the tenant-right system had Cranworth LC held in favour of the tenant-right holders, as to do so would involve depriving them of their property rights, while holding that they had no rights cleared the way for Ramsden to create a more certain system of leasing. Finally, although Cranworth LC did not express an opinion on the appropriate length of the lease, his reference to Ramsden’s honour indicates that Ramsden ought to make some sort of arrangement, and it may be that some pressure was put on Ramsden here to obtain power to grant longer leases. Thirdly, the majority’s political sympathies clearly lie with Ramsden. Lord Wensleydale characterised the dispute as of ‘great importance’ not because it affected the welfare of a large number of tenants, but rather ‘as it affects a very large and valuable property in the district of Huddersfield’,119 that is, the Ramsden Estate. Moreover, Cranworth LC’s account of the facts clearly illustrates a dim view of the tenant-right holders. In the first place he doubted whether there existed such a ‘tenant-right’ custom in the lifetime of Sir John as the tenants relied upon, which suggests that he considered ‘tenant-right’ entered the public imagination in some period following Sir John’s death, despite the recognition of such a custom in the preamble to 1844 Act. Secondly, and more importantly, he observed that the tenantright holders were in such stations of life ‘making it improbable that they would be able well to scan and consider the precise nature of the reputation to which they depose’ and that ‘they were very likely to have been led by an involuntary bias to give colour to the general belief and reputation in question, to which a little closer examination, by persons in a different sphere of life, might have shewn it was not entitled’.120 In other words, not only was there not a custom, but the tenants were of such low intelligence and position in society that they gave undue credit to the customs of the Estate 118 119 120

Ibid, 159. Ibid, 165. Ibid, 144.

Ramsden v Dyson 301 and did not understand the proper legal position. Instead of following this line of argument to the conclusion that the tenants were entitled to relief (because they acted involuntarily, as they were ignorant and vulnerable), Cranworth LC instead favoured following technical legal logic, for example distinguishing between ‘could’ and ‘would’ to demonstrate that the tenants had the wrong sort of belief.

H. CONCLUSIONS

Ramsden is best known as the foundation of the modern law of proprietary estoppel.121 To contemporary lawyers it is interesting because the majority and minority expressed the relevant principle in different ways, and because estoppel is not mentioned anywhere in argument or the decision. However, at the time Ramsden was not given attention for its doctrinal impact but rather for its unusual facts. A leader in the Law Journal stated that ‘several useful lessons, though not much law, may be collected from the great Huddersfield Tenant-right case’.122 Instead of focusing on doctrinal curiosities, this chapter has sought to unfold Ramsden as a local, discursive and socio-political event. In doing so, I have shown how equity was mobilised within a local struggle between landlord and tenant, which in turn encountered and intersected with broader social, political and economic events, shifts and discourses in the nineteenth century. For example, we have seen how tenant-right was associated with the progress of Huddersfield, but that simultaneously a broader discourse was circulating on whether tenantright was an efficient or irrational system of ownership and compensation. Moreover, concerns were first expressed in terms of security, but it quickly became a question concerning the proper balance between security and equity, a theme that continues to pervade equitable discourse. Can any conclusions be drawn about how Ramsden marks the landscape of equity? Arguably Ramsden signals a rupture in equity from which we have been trying to emerge ever since. Equity had a long history of protecting tenant-right—in its property, conveyancing and compensatory manifestations—and thereby was associated with the protection of the agrarian classes and local customs. It is therefore unsurprising that the TRDA conducted its struggle in the language of equity. Perhaps, then, Ramsden marks an end to equity’s association with the local, with custom and with tradition, and the emergence of standardisation, rationalisation and security of property as the flag-bearers of the new equity’s image in the commercial world. However, equity continues to mark the contemporary 121 Lord Neuberger, ‘The Stuffing of Minerva’s Owl? Taxonomy and Taxidermy in Equity’ (2009) 68 CLJ 537, 541. 122 Reprinted in HC (28 July 1866).

302 Nick Piška landscape with examples of its concern with honesty and tradition, vulnerability and good conscience, and hopefully it will continue to do so.

I. EPILOGUE

Following the House of Lords decision, more tenants came forward requesting 99-year leases under the 1859 Act. However, Ramsden didn’t think it appropriate to grant such leases. Rather, as he wrote in a letter to Wright Mellor, Mayor of Huddersfield, dated 19 March 1867, he thought it was time to forget the past—he was going to apply to Parliament for authority to grant 999-year leases!123 As he makes clear in his letter, this was a renewed application for such a power, having previously been rejected by Lord Redesdale in 1859. The reason he hadn’t reapplied sooner? It had been rendered impossible by the untoward events in Huddersfield, which had been a matter of pain and regret to him just as much as it had been prejudicial to his tenants. Not long thereafter a Bill was introduced in Parliament, and on 13 May 1867 the final aggregate meeting of the TRDA was held at Gymnasium Hall, with both tenant-right holders and leaseholders under the 1859 Act present. Jones took the chair and stated to the gathered crowd— which numbered only about 150 people, apparently owing to the late time at which the meeting was announced—that ‘a night of weeping is often followed by a morning of joy. … Let the past be buried in oblivion—let all our aspirations have reference to the future’.124 Jones told the audience that Ramsden had offered the tenant-right owners an ‘olive branch of peace’, and that his change of policy showed an element of human susceptibility. Hobson gave an account of the Bill, to which there were cheers and applause for the clauses providing power to grant 999-year leases to tenant-right holders, including those who had taken a 99-year lease under the 1859 Act, as well as clauses providing Ramsden with authority to renovate Longley Hall as a home, so that he could be nearer his tenantry, and construct new estate offices in the centre of Huddersfield for his tenantry’s convenience. A number of resolutions were passed congratulating Ramsden and the new measure, and proposing an address be sent from Jones to Ramsden expressing gratitude at the measure prompted by Ramsden’s high feelings of honour. The chairman then read the proposed address and accompanying letter, dated 13 May 1867, just over a year after the House of Lords decision. The Ramsden Estate Act 1867 was passed on 25 July 1867.125 The preamble stands in stark contrast to that of the 1859 Act, but also suggests 123 124 125

LM (25 March 1867). HC (18 May 1867). 30 & 31 Vic c 2. See HC (3 August 1867).

Ramsden v Dyson 303 that the decision to grant 999-year leases was motivated not so much by Ramsden’s concern with his tenantry as by the advantages to Huddersfield as a town.126 After setting out the various wills, settlements and previous Acts, the preamble explains that neighbouring areas were in the habit of granting 999-year leases, which had been to their advantage at the expense of the town of Huddersfield, with progress and improvements being diverted away from Huddersfield. It might be asked why Ramsden decided to litigate, if less than a year later he would give the TRDA what it wanted. There are a number of possibilities. He may have been motivated by a personal grievance against the TRDA, coupled with personal pride and the need to establish authority within Huddersfield. There is also the broader point regarding authority, which is that, like the 1859 Act, the 1867 Act gives Ramsden power to grant 999-year leases but did not make them compulsory; Ramsden was therefore necessary in order to secure his right to evict tenant-right holders without granting them a lease. Finally, the question might instead be phrased not in terms of why litigate, but why decide to get power to grant longer leases. Ramsden’s honour had come in for criticism in the national press following the litigation, and implicitly in certain remarks by Cranworth LC, so his change of mind may have been motivated by a desire to protect what remained of that honour, and he may have realised the socio-economic benefits of the longer lease both to himself and to Huddersfield compared to the damage done through his insistence on 99-year lease. Following the Act the tenant-right dispute disappeared, although there were a number of subsequent tenant-right cases which went unreported in the legal journals, the outcomes of which seem to have gone unreported even in the local press. In the same year as the new 999-year leasing powers were granted, the Huddersfield Improvement Commissioners held a special meeting, in which it was decided that it was in the best interests of Huddersfield that a charter of incorporation be applied for.127 A Charter of Corporation was shortly granted, and as the nineteenth century came to a close the Corporation gradually took the position of the Ramsden family in the administration and governance of Huddersfield. On 16 April 1914, The Times carried an obituary for Sir John William Ramsden. His son—another Sir John,128 Sir John Frecheville Ramsden—inherited the estate, although Ramsden had handed it over a few years previously. On 25 October 1919, The Times announced the sale of Huddersfield to the Corporation for 126 C Stephenson, The Ramsdens and their Estate in Huddersfield: the Town that Bought Itself (Almondbury, Huddersfield Public Libraries, 1972) argues that the 1867 Act was obtained by the tenants in the face of Ramsden. This was clearly not the case. 127 LM (25 May 1867). 128 And also the last, as the family honours passed to Major Geoffrey William Ramsden, who assumed the name ‘Pennington’ in lieu of ‘Ramsden’ in 1925. See the obituary to Sir John Frecheville Ramsden, The Times (7 October 1958).

304 Nick Piška £1.3 million. In his history of the Huddersfield Estate, Clifford Stephenson describes this as the moment when the town bought itself. His account of the sale portrays it (with pronounced understatement) as ‘drama and coincidence which a writer of fiction would scarce dare to invent for fear of overstretching the credulity of his readers’.129 There had been a suggestion as early as 1894 that the Corporation purchase the Estate. Springett’s figures suggest that the Estate had for some time not been making a profit, or much of a profit, for the Ramsdens, probably as a consequence of the mid-century delay in granting 999-year leases interrupting the growth of Huddersfield, as well as the Ramsdens’ insistence on good-quality buildings as opposed to so-called ‘jerry buildings’ and ‘back-to-backs’. When Ramsden finally gave in towards the end of the century, the moment had already passed. On 24 October 1919, a middle-man, Copley, agreed the purchase of the Estate with Sir John Frecheville Ramsden on behalf of the Western Australian Insurance Company (Limited). Copley in turn agreed to sell the estate to the Corporation without commission, but on the condition that the Corporation used his insurance business for the following 20 years. The sale between the three parties—Ramsden, Copley and the Corporation—was completed on 29 September 1920. The Corporation was thereafter landlord and estate manager in Huddersfield. It finally emerged from debt in 1972, prompting the then Chairman of the Estate and Property Management Committee of the Corporation, Clifford Stephenson, to write a brief history of the Estate. However, the celebration was short-lived, as the management and the freehold passed to the Local Authority (Metropolitan District 6D) in 1974 following local government reorganisation. What is now Kirklees Council to this day still owns the freehold to much of the former Estate. However, the Council has sold the freehold reversion to approximately 2,000 domestic properties from the Ramsden Estate, and many leaseholders exercised their rights under the right-to-buy legislation and purchased their freehold. In 1994 and 1996 the Council sold the freehold interest to its 999-year residential leases to a private company based in London. Having finally freed themselves from the fetters of the power of private landlords to which the people of Huddersfield had been subject for centuries, the people of Huddersfield are again subject to private ownership. This time, though, it is not that of the Ramsden family but that of a profit-seeking private company. Feudalism, landed aristocracy or capitalism—it doesn’t seem to make much difference as far as Huddersfield is concerned.

129

Stephenson (n 126) 9.

10 Bishop of Natal v Gladstone (1866) CHARLOTTE SMITH

A. INTRODUCTION

O

N 6 NOVEMBER 1866, giving judgment in the case of Bishop of Natal v Gladstone,1 Lord Romilly granted a decree ordering the trustees and treasurers of the Colonial Bishoprics Fund to pay the proceeds of the endowment set up for the Anglican see of Natal to the then bishop of that see, John William Colenso. In doing so he rejected the defendants’ argument that, since the Crown had no authority under the prerogative to establish a diocese in Natal or to confer coercive jurisdiction upon its bishop, there was in fact no bishop of Natal to whom the proceeds of the endowment were payable. In terms of general equitable doctrine Romilly’s judgment was neither profound nor innovative. Having found that there was a contract between the plaintiff and the defendants under which the defendants had agreed to pay the plaintiff a salary in return for performing the duties and functions of a bishop of the Church of England in Natal, he relied upon the doctrine of specific performance. In a statement which, perhaps because of its supremely uncontroversial content, was unsupported by reference to authority or by the arguments of counsel before him, he asserted:2 [I]t is true that this Court will occasionally refuse specifically to enforce a contract where one of the parties who entered into it did so by mistake, and while ignorant of the real state of the case, yet, where the contract has not only been entered into, but has also been acted upon, and where it is impossible to restore all the parties to it to the same position which they were in before the contract was made, the Court of Chancery never annuls the contract …

1

Bishop of Natal v Gladstone (1866) LR 3 Eq 1. Ibid, 53–54. Of the six counsel who appeared, only Fitzjames Stephen, appearing for the plaintiff, argued the case on the basis of contract and mistake of law (at 14–16). 2

306 Charlotte Smith Further, he argued, the only mistake which might have been made was a mistake of law. The parties had, it was argued, believed that the Crown had the ability to create a diocese and confer coercive jurisdiction upon its bishop in Natal. This mistake could not be relied upon because ‘[i]gnorance of the law, according to the hackneyed, but most necessary maxim in our jurisprudence, and, indeed, in every jurisprudence, excuses no one’.3 More important than his statements regarding mistake of law and the limits of the remedy of specific performance, was what Romilly had to say about the principles governing the legal treatment of voluntary religious associations and the application of their endowments and property. In a pronouncement which has since become embedded in equitable jurisprudence across the former British Empire,4 he determined that5 if a class of persons in one of the dependencies of the English Crown, having an established Legislature, should found a church calling themselves members of the Church of England, they would be members of the Church of England—they would be bound by its doctrines, its ordinances, its rules, and its discipline, and obedience to them would be enforced by the civil tribunals of the colony over such persons; but if a class of persons should, in any colony similarly circumstanced, call themselves by any other name—such as, for instance, the Church of South Africa—then the Court would have to inquire, as a matter of fact, upon proper evidence, what the doctrines, ordinances, and discipline of that church were; and when these were made plain, obedience to them would be enforced against all the members of that church. But the fact of calling themselves in communion with the Church of England would not make such a church a part of the Church of England, nor would it make the members of that church members of the Church of England.

In short, a church which identifies itself as a local branch of a parent church will, by the terms of its voluntary agreement of association, be taken to be bound by the doctrines, discipline and government of the parent church, and the secular court will determine what those doctrines, discipline and government are. Further, in drawing a distinction between local branches of a parent church (eg the Church of England in Natal) and independent churches in

3 Ibid, 54. This seems a little unfair since, as will be discussed below, it is evident that the Crown itself had laboured under the same misapprehension, and that the courts had not ruled on the status of colonial bishops until after the bishopric of Natal had been erected. 4 See eg the Australian cases on this point, including: Wylde v Attorney-General (NSW) [1948] HCA 49, (1948) 78 CLR 224; Attorney-General (ex rel Elisha and Others) v Holy Apostolic and Catholic Church of the East (Assyrian) Australia NSW Parish Association (1989) 98 ALR 327; Attorney-General of Victoria (ex rel Archbishop Harkianakis) v St John the Prodromos Greek Orthodox Community Inc [2000] VSC 12; Radmanovich v Nedeljkovic (2001) 52 NSWLR 641; Solowij & Ors v The Parish of St Michael & Ors [2002] SASC 408; Christian Revival Crusade Inc v Milne & Ors [2007] SADC 125; Metropolitan Petar v Mitreski [2003] NSWSC 262. I am indebted to Gary Phillips for directing me to these cases. 5 (1866) LR 3 Eq 1, 37.

Bishop of Natal v Gladstone 307 communion with a parent church (eg the Church of Natal in communion with the Church of England), Romilly did much to shape the evolution of the Worldwide Anglican Communion, for while only local branches of a parent church were to have an automatic right to the endowments made for the advancement of the parent church in a particular area, only independent churches could determine their own doctrine, discipline and government.6 A church’s designation of itself as being either a local branch of a parent church or an independent church in communion with that body determined, then, both the degree of local autonomy in matters of doctrine and discipline, and also the financial fortunes and viability of the church in question. Most important of all, however, was Romilly’s assertion that an Anglican bishop and a local branch of the Church of England could exist where the absence of Establishment meant that the Church in that place was merely a voluntary association. In order to understand the significance of this aspect of his judgment, and of his wider assertions, it is necessary to understand the case’s contemporary context as part of a complex series of suits, spawned not only by a localised and acrimonious dispute between two colonial bishops, but also by the legal and constitutional ‘growing pains’ of the evolving British Empire. The quest for such understanding, to which much of this chapter is devoted, reveals the compelling tale of a pivotal moment in the Anglican imperial endeavour, of ecclesiastical high policy and controversy, and of misadventure in the enterprise of colonial and imperial administration.

B. THE GROWTH OF EMPIRE, THE EXPORT OF ANGLICANISM, AND THE EXPANSION OF THE COLONIAL EPISCOPATE

The high Victorian period was dominated by imperial expansionism, and the export of the Church of England overseas went hand in hand with this. Once there were large and State-sponsored communities of English settlers in the colonies, there was a strong sense that these communities should have the spiritual care and superintendence of the Church of England. This was, after all, the Church which divine providence had given to England as being that best calculated to meet its spiritual needs and to raise the spiritual and

6 See Merriman v Williams (1882) LR 7 App Cas 484. Though note that where trusts for a local branch of a parent church have failed because that local branch has died out, the endowments established for its support may be applied cy-près to the support of an independent church in communion with the parent church so long as it remains true to the doctrine, discipline and government of the parent church. On this point see Re Colonial Bishoprics Fund 1841 [1935] Ch 148.

308 Charlotte Smith moral calibre of its citizens. It was, moreover, part of the birthright of every English man and woman.7 Setting aside the needs of English settlers, the spiritual wants of native peoples had also to be met. If it was true that providence had given England the Church of England as the best means of civilising Englishmen and bringing them to faith, then it was also true that England owed the advantages of imperial wealth and power to the benevolent intervention of that same power. That being the case, it had a duty to use the opportunities offered by Empire to bring the Gospel to native peoples to whom it was unknown, for to do so ‘was to open before them not only the prospect of eternal life but also the road to unlimited social and economic development’.8 Whether the aim was to serve the spiritual needs of English colonists far from home, or to bring the indigenous population to salvation in Christ, the expansion of the colonial episcopate was seen by many, particularly High Churchmen, as being essential to Anglican endeavours overseas. Just as it was often assumed that the Church of England was the best of all the reformed churches, so too it was assumed that episcopal government was the best of all forms of church government. Without resident bishops the colonial churches could not grow to full spiritual life, since without bishops their discipline could not be maintained, their clergy and laity perpetuated, and their corporate life patterned according to the Book of Common Prayer. Put succinctly, without resident bishops there was no one readily available to ordain the clergy of the fledging colonial churches, nor to confirm their laity and bring them into the full spiritual life of the Church.9 Thus, though cynics might complain that it was ‘impossible to conceive what can have been the practical necessity for establishing Bishops who should superintend a dozen clergy and pay long visits to this country’,10 the

7 Such ideas pervade many of the diverse works of Church–State theory in this period, as seen in works such as: T Arnold, Fragments on Church and State (London, B Fellowes, 1845), ST Coleridge, On the Constitution of Church and State According to the Idea of Each, 3rd edn (London, William Pickering, 1869), B Disraeli, Church and Queen: Five Speeches (London, GJ Palmer, 1865), WE Gladstone, The State in its Relations with the Church (2 vols), 4th edn (London, John Murray, 1841), SL Holland, The National Church of a Democratic State (London, Rivingtons, 1886), FD Maurice, The Kingdom of Christ or Hints to a Quaker Respecting the Principles, Constitution, and Ordinances of the Catholic Church, vols I and II, 3rd edn (London, Macmillan and Co, 1883), R Palmer, A Defence of the Church of England against Disestablishment, 5th edn (London, Macmillan, 1911). 8 B Stanley, ‘“Commerce and Christianity”: Providence Theory, the Missionary Movement, and the Imperialism of Free Trade, 1842–1860’ (1983) 26(1) The Historical Journal 71, 74. See also H Le Couteur, ‘Anglican High Churchmen and the Expansion of Empire’ (2008) 32(2) Journal of Religious History 193 and T Yates, ‘The Idea of a “Missionary Bishop” in the Spread of the Anglican Communion in the Nineteenth Century’ (2004) 2 Journal of Anglican Studies 52. 9 S Taylor, ‘Whigs, Bishops and America: the Politics of Church Reform in Mid-EighteenthCentury England’ (1993) 36(2) The Historical Journal 331. 10 ‘The Case of the Founders of Colonial Bishoprics’, The Times, 21 June 1866, 8.

Bishop of Natal v Gladstone 309 drive to expand the colonial episcopate attracted significant levels of public support and generous private giving in the mid-nineteenth century.11 The defendants in Bishop of Natal v Gladstone, being the trustees and treasurers of the Colonial Bishoprics Fund, were at the heart of the movement promoting the expansion of the colonial episcopate. The Fund was formed on 27 April 1841 when a meeting of clergy and laity at Lambeth Palace resolved: 1. That the Church of England, in endeavouring to discharge her unquestionable duty of providing for the religious wants of her members in foreign lands, is bound to proceed upon her own principles of apostolical order and discipline. 2. That the want of episcopal superintendence is a great and acknowledged defect in the religious provision hitherto made for many of the colonies and dependencies of the British Crown. 3. That the acquisition of new colonies, and the formation of British communities in various parts of the world, render it necessary that an immediate effort should be made to impart to them the full benefit of the church, in all the completeness of her ministry, ordinances, and government. 4. That a fund be raised towards providing for the endowment of bishoprics in such of the foreign possessions of Great Britain as shall be determined upon by the archbishops and bishops of the United Church of England and Ireland: that their lordships be requested to undertake the charge and application of the fund, and to name a treasurer or treasurers, and such other officers as may be required for conducting the necessary details.12

After its foundation the personnel and precise role of the Colonial Bishoprics Fund reflected the perceived significance of the expansion of the colonial episcopate, the public support attaching to it and the influence of the Colonial Bishoprics Fund in shaping its results. So, for example, while the Fund’s trustees were the bishops and archbishops of the Church of England and Ireland, its treasurers included, in addition to eminent senior clerics, a number of prominent and predominantly High Church statesmen and lawyers. At the time of Bishop of Natal v Gladstone, for example, the treasurers were the Chancellor of the Exchequer and future Prime Minister William Gladstone, the future Solicitor-General and Lord Chief Justice John Duke Coleridge, and the Vice Chancellor and future Lord Chancellor William Page Wood.13 Further, not only did successive Colonial Secretaries and Colonial Office officials take a keen interest in the erection

11 One prominent donor alone, Angela Burdett Coutts, gave £60,000 for the endowment of several colonial dioceses and two associated archdeaconries. For what looks like a deposition to this effect (possibly generated in respect of Bishop of Natal v Gladstone), see Papers of Archbishop Tait (hereafter ‘Tait’), vol 158, f 97 (16 June 1866) (Lambeth Palace Library). 12 Extracted at (1866) LR 3 Eq 1, 2–3. 13 See defendants’ answer in Bishop of Natal v Gladstone in TS 18/870 (National Archives).

310 Charlotte Smith of new dioceses and the selection and appointment of colonial bishops, they also displayed a very real willingness to consult with key members of the Colonial Bishoprics Fund on likely candidates.14

C. THE LEGAL STATUS OF COLONIAL BISHOPS AND THE PATHOLOGY OF A LEGAL MUDDLE

Though the routine consultation of the Church on the matter of episcopal appointments was not an official feature of Church–State relations at home, the Fund’s trustees, many of its donors and the Colonial Office itself seem to have seen the arrangements made for expansion of the Anglican episcopate in the colonies as closely mirroring those of the home Church. In England, for example, the Crown selected the candidate and issued the relevant dean and chapter with a congé d’élire for his election before the named individual was consecrated under the authority of Letters Patent. In an adaptation of this procedure, colonial bishops, though they might be chosen by the Colonial Office in consultation with the key trustees of the Fund,15 were consecrated only once Letters Patent had been issued authorising that act. Moreover, just as Letters Patent for English bishops conveyed upon their holders general and coercive jurisdiction over all persons residing within their diocese, so too (purportedly) did those of colonial bishops. Here, though, lay the nub of the problem which ultimately led to the litigation of which Bishop of Natal v Gladstone was so important a part, for the Church of England in the colonies, unlike the Church of England at home, was not Established and could not function upon the same legal basis as if it were. The assumption, however, that the legal status of English and colonial bishops was analogous went unchallenged for around 16 years before being unsettled by the ruling of the Queen’s Bench in R v Eton College.16 The question in that case was whether the appointment of the holder of an ecclesiastical living to a colonial bishopric gave the Crown the right of next presentation. If a colonial bishop was a full bishop of the Church of England then it did. If, however, a colonial bishop was not such a bishop

14 See eg Correspondence relating to colonial bishoprics laid before both Houses on the command of the Queen (C 3661 of 1866) and also extracted notes from the journal of the Colonial Bishoprics Fund on the endowment of the diocese of Natal, Papers of Archbishop Longley (hereafter ‘Longley’), vol 3, ff 419–24 (Lambeth Palace Library). The Colonial Bishoprics Fund had undertaken to consult with, and seek the approval of the Crown for the creation of colonial bishoprics and the appointment of bishops. See declaration of 1 June 1847, extracted at (1866) LR 3 Eq 1, 3. 15 Though this probably did not amount to an absolute duty. See eg a rather acrimonious exchange between Henry Hawkins of the Colonial Bishoprics Fund, Archbishop Longley and Lord Buckingham over the appointment of the Bishop of Gibraltar in 1868, Longley, vol 3, ff 3–8. 16 R v Eton College (1857) 8 El & Bl 610, 120 ER 228.

Bishop of Natal v Gladstone 311 then it did not. Ultimately the court held that a colonial bishop was a mere ‘titular bishop’, and that therefore the Crown did not have the right of next presentation. The decision in Eton College rested upon the idea of the partial transmission of the common law to newly-settled colonies. Coke had declared that the common law, and the rights and liberties enshrined within it, were distinctly English in character and application. As the customary law created by a particular set of courts in a particular place, it could not be transplanted wholesale into new colonies, though English settlers could carry with them such of their essential rights and liberties as were fitted to their new circumstances.17 Significantly, in the estimation of the Queen’s Bench, relying upon Coke’s jurisprudence concerning the status of the Irish bishops, neither the English Church Establishment nor its ecclesiastical law fell into that category. The Church of England in the colonies was not Established, and its bishops did not have coercive jurisdiction unless this had been provided for by colonial or imperial legislation.18 That the implications of the judgment in Eton College passed apparently unheeded is undeniable,19 though the reasons for this are less clear.20 It was not, in fact, until the eruption of internecine ecclesiastical warfare in the Cape and Natal that cause for alarm was recognised.21 In Long v The

17 See especially Calvin v Smith (1608) 7 Co Rep 1a, 77 ER 399. For an excellent discussion of Coke’s jurisprudence on this point, see DJ Hulsebosch, ‘The Ancient Constitution and the Expanding Empire: Sir Edward Coke’s British Jurisprudence’ (2003) 21(3) Law and History Review 439. Note, however, that contrasting jurisprudence and academic explanations of the colonial (non) expansion of the common law also exist. On this see especially BH McPherson, ‘How Equity Reached the Colonies’ (2005) 5 Queensland University of Technology Law and Justice Journal 102. 18 Eton College (n 16) 635–36, 238. See also Re Bishop of Natal (1864) 3 Moo PC (NS) 115, 148–50; 16 ER 43, 57. This reflects shifting policies in many colonies, where State funding for churches was being withdrawn. It also reflects shifting attitudes in England where, though many continued to support the Establishment of the Church of England and the benefits which it conferred upon the State, State funding of the Church of England was being dismantled and discontinued. The Established Church was no longer seen as an essential part of the constitution. 19 One can look in vain through the news reports and Colonial Office papers of the time for any indication that a serious problem existed. 20 A Colonial Office official later suggested that, though they had been aware that there might be an issue with the mode of appointment, they had not seen that the jurisdiction of the colonial bishops was in any way affected. I think this is the case referred to in CO 885/3/7: ‘Memorandum on the Effects of the Judgment of the Judicial Committee in the Case of the Bishop of Natal’ (19 May 1865) (National Archives). Though the date given is 1847 rather than 1857, I can find neither legal advice nor litigation for 1847. Elsewhere they assume that no questions were raised until at least 1857. 21 This conflict spawned a long series of suits including, in addition to Bishop of Natal v Gladstone: Long v Bishop of Cape Town (1863) 1 Moo PC NS 411, 15 ER 756; Re Bishop of Natal (1864) 3 Moo PC (NS) 115, 16 ER 43; Bishop of Natal v Green (1868) 18 Law Times 112; The Bishop of Cape Town v The Bishop of Natal (1869) 6 Moo PC NS 203, 16 ER 702; Merriman v Williams (1882) LR 7 App Cas 484; and Re Colonial Bishoprics Fund 1841 [1935] Ch 148. For an overview, see generally P Hinchliff, The Church in South Africa

312 Charlotte Smith Bishop of Cape Town,22 the first of several suits generated by the actions of Robert Gray as Metropolitan Bishop of Cape Town, the Judicial Committee of the Privy Council held that the Bishop’s Letters Patent, being issued without reference to authorising legislation and after constitutional government had been conferred upon the colony, ‘were ineffectual to create any jurisdiction, Ecclesiastical or Civil, within the Colony’.23 Just as in England the Crown was powerless to create ecclesiastical jurisdiction without authorising legislation, so too was this the case in colonies which had some form of representative self-government. In such colonies, in the absence of colonial or imperial legislation stating otherwise, the Church of England stood in the same position as any other religious body. Like any other voluntary association it could make whatever rules and arrangements for the maintenance of discipline as it saw fit. The binding force of such rules and arrangements, however, depended upon the consent of its members, and they could be enforced (unlike the jurisdiction of English bishops at home) only by reference to the civil courts. In the words of the Judicial Committee:24 In such cases the Tribunals so constituted are not in any sense Courts: they derive no authority from the Crown; they have no power of their own to enforce their sentences; they must apply for that purpose to the Courts established by law, and such Courts will give effect to their decision, as they give effect to the decisions of arbitrators, whose jurisdiction rests entirely upon the agreement of the parties.

Undeterred, in the December of 1863 Bishop Gray of Cape Town, having found Bishop Colenso of Natal guilty of holding and teaching false and erroneous doctrine, issued a sentence depriving him of his bishopric. Colenso of Natal had, however, already entered a protest stating that Gray lacked the jurisdiction to impose such a penalty, which amounted not only to a deprivation of spiritual office, but also to a deprivation of property such as could be authorised only by reference to the civil courts in the absence of coercive ecclesiastical jurisdiction. Almost exactly one year later Colenso’s appeal, in Re the Bishop of Natal,25 came before the Judicial Committee of the Privy Council, with judgment being delivered in March 1865. Once again the Judicial Committee, which this time included Sir John Romilly upon the panel, unambiguously denied the Crown’s ability to create coercive ecclesiastical jurisdiction by an unsupported act of the prerogative (ie by Letters Patent issued other than in respect of enabling

(London, SPCK for the Church Historical Society, 1968) and John William Colenso: Bishop of Natal (London, Nelson, 1964); see also PR Spiller, ‘The Colenso Cases: A Perspective of Law in Nineteenth Century Natal’ (1983) 13 Natalia 76 and ID Darby, ‘The Anglican Diocese of Natal: A Saga of Division and Healing’ (1981) 11 Natalia 43. 22 23 24 25

Long v Bishop of Cape Town (n 21). Ibid, 460, 774. Ibid, 461–62, 774. Re the Bishop of Natal (1864) 3 Moo PC NS 115, 16 ER 43.

Bishop of Natal v Gladstone 313 legislation) in a colony possessed of representative government. Further, it reiterated that the Church of England was ‘not a part of the constitution in any Colonial Settlement, nor [could] its authorities … claim to be recognized by the law of the Colony, otherwise than as members of a voluntary association’.26 Bishop Gray of Cape Town could not, therefore, deprive Colenso by his own action because he had no valid claim to possess coercive ecclesiastical jurisdiction, and though spiritual authority was ‘incidental to the office of Bishop’,27 a sentence of deprivation was a ‘matter of coercive legal jurisdiction’.28 Worse, however, was to come for Bishop Gray and his supporters. The Judicial Committee also decided that the Oath of Canonical Obedience taken by Colenso to Gray was ineffective by reason of mistake. Colenso had been consecrated and had taken the oath on 30 November 1853, but at that point there was no Metropolitan Bishop of Cape Town since Gray had surrendered his own Letters Patent to allow for the division of his diocese to create that of Natal. New Letters Patent were not issued to Gray until 8 December 1853. Not only, then, was Gray unable to depose Colenso by use of the coercive jurisdiction purportedly granted to him by his Letters Patent, but his consensual jurisdiction, which should have been conferred by the Oath of Canonical Obedience, was also invalid. The circumstances leading to the Judicial Committee decisions in Long and Re the Bishop of Natal were redolent of bureaucratic farce and ineptitude.29 They illustrated not only the almost inevitable disparity between the pace of legal and bureaucratic change in a Colonial Office which possessed both a small staff and a diverse and extensive domain, but also the inescapable tension between the inexorable drive for colonial self-government and the Church of England’s imperial endeavour. One of the defining features of high Victorian imperialism was that nearly all colonies with large populations of European settlers were granted some form of representative self-government. The creation of representative institutions in such colonies was driven by a number of factors. Many in Westminster and Whitehall saw the creation of such institutions as not only part of a duty to share the providentially-granted advantages of the English system, but also as the only means of holding together such a disparate empire. Further, extensive State-sponsored emigration schemes meant

26

Ibid, 148, 56. Ibid, 154, 58. 28 Ibid, 155, 58. 29 An appearance heightened by the fact that, on 3 June 1865 (see HC 450 of 1865) the Secretary of the Treasury was directed to deny Gray’s request for the payment of his legal expenses in the latter case on the basis that he should have understood how the law stood after Long, but the Colonial Office had itself continued to issue Letters Patent in colonies with representative governments as late as September 1863 (three months after judgment in that case). See CO 197/13 (National Archives). 27

314 Charlotte Smith both that the State had invested heavily in the colonial project, and that it was able by force of numbers effectively to replicate British institutions overseas. At the same time, many colonists strongly identified themselves as British citizens, and demanded the common law rights and freedoms which flowed from this. Key amongst these was a right to representative self-government.30 The grant of representative self-government to the colonies, though controlled by Whitehall, both changed the role of the Crown in those colonies affected and necessarily challenged the established ways in which those colonies were ordered. Nowhere is this clearer than in the debacle over episcopal patents. The foundation of the decisions in Long and Re the Bishop of Natal was the principle that once a colony had been granted representative government, the Crown’s ability to act by use of the prerogative alone was confined to a power of veto over colonial legislation. It could not, therefore, use its prerogative powers independently of enabling colonial or imperial legislation in order to confer a general territorial and ecclesiastical jurisdiction upon a bishop in a named diocese.31 Evidently, though, mistakes and confusion occurred. In seeking to explain how it was that Letters Patent including terms granting coercive jurisdiction had been granted in the Cape and Natal, the Judicial Committee pointed to the indiscriminate copying of existing Letters Patent when Letters Patent for new dioceses were drafted. The court suggested that Colonial Office officials, apparently ignorant of the law, were in the habit of copying Letters Patent for colonies where enabling legislation had provided for the erection of dioceses, without regard to whether such legislation existed in the case before them.32 This was vehemently refuted by the Colonial Office, which noted that the instrument granting representative assemblies to Natal had lacked the usual clause reserving the right of the Crown to legislate by order in council.33 Indeed, in making one of a succession of efforts to secure remedial legislation, one of the most prominent Colonial Office officials

30 For a discussion of this see eg RM Cooke, ‘British Evangelicals and the Issue of Colonial Self-Government’ (1965) 34(2) Pacific Historical Review 127 and AGL Shaw, ‘British Attitudes to the Colonies c 1820–1850’ (1969) 9(1) The Journal of British Studies 71. See also W Cornish, ‘Empire’s Law’ in W Cornish et al, The Oxford History of the Laws of England, vol XI (Oxford, OUP, 2010) 234–54. 31 See Re the Bishop of Natal (n 25) and, for an overview, M Banton, Administering the Empire, 1801–1968: a Guide to the Records of the Colonial Office in the National Archives of the UK (London, Institute of Historical Research/National Archives of the UK, 2008) ch 2. 32 Re the Bishop of Natal (n 25) 151, 58. 33 See CO 885/3/7 (n 20)—though actually you can trace various of the Letters Patent to a common root. See Correspondence Relating to Conditions, as Regards Endowment which HM Government Required to be Presented to the House of Commons (HC 476 of 1866).

Bishop of Natal v Gladstone 315 complained bitterly that it was the Judicial Committee rather that the Colonial Office that was the source of the problem, asserting:34 Into these difficulties the Colonial churches are plunged, because a Court of Justice has pronounced that a mode of proceeding during a long course of years by the Government of the country, under the authority of the great lawyers of the day, and (I take leave to say) with the implicit sanction of Parliament, is invalid.

The grant of representative self-government to settled colonies was problematic not only for the method by which the Church of England appointed its colonial bishops and created their dioceses,35 but also for the fundamental aims and assumptions of the trustees and donors of the Colonial Bishoprics Fund. The resolutions further to which the Fund was created included a statement that ‘the Church of England, in endeavouring to discharge her unquestionable duty of providing for the religious wants of her members in foreign lands, is bound to proceed upon her own principles of apostolical order and discipline’.36 An extensive notion of local autonomy formed no part of this vision and might further be seen as undermining it.37 As if to prove this, one of the first actions of the bishops of New Zealand after Re Bishop of Natal was to surrender their Letters Patent and to declare that they were bishops of the Church of New Zealand in communion with the Church of England. So, too, Bishop Gray of Cape Town ultimately followed suit, creating the Church of South Africa.38 Stepping back from generalities, the Judicial Committee’s decisions in Long and Re Bishop of Natal posed two immediate problems for the Colonial Bishoprics Fund and the Colonial Office. First, even if you understood those decisions as affecting only bishops in colonies with representative government whose Letters Patent had not been subsequently recognised by colonial or imperial legislation, there were 25 bishops dotted around the globe who potentially lacked any ecclesiastical jurisdiction or authority for their actions. It followed that, since 59 Geo III c 60 stated that any person ordained by a bishop not having ‘ecclesiastical jurisdiction’ over a defined territory should not be capable of officiating or holding preferment in the Established Church, the marriages performed by clergy ordained by such 34 See CO 885/3/11: ‘Colonial Episcopate’ by ‘FR’—Presumably Frederic Rogers (November 1866). 35 The Government apparently privately announced that the Crown would withdraw from all involvement in the appointment of colonial bishops. See CO 885/3/5: ‘Correspondence and Draft Bill Respecting Colonial Bishoprics’ (14 June 1865) (National Archives). 36 Declaration of 1 June 1841, extracted at (1866) LR 3 Eq 2. 37 While High Churchmen were troubled by visions of heterodoxy, many Evangelicals could accept neither the rationale for the grant of self-government nor the exclusion and ill-treatment of indigenous peoples which often followed. See eg Cooke (n 30). 38 For concerns about the disintegration of doctrinal unity which might follow such moves, see eg letter of Angela Burdett Coutts to Lord Russell (28 December 1865) Burdett Coutts Papers, BUR M4 f 4 (Westminster Archives Centre). See also a letter by her to the Colonial Secretary along the same lines at Lambeth Palace Library, Tait, vol 158, ff 103–06.

316 Charlotte Smith bishops might not be valid at law. If the bishops who had ordained them had lacked ecclesiastical jurisdiction then the clergy could not be clergy of the Church of England.39 Secondly, if the Letters Patent had been ineffective to create dioceses and confer ecclesiastical jurisdiction upon their bishops then it was at least questionable whether the proceeds of the endowments made for the support of those dioceses could properly be paid to the bishops in question.40 The stage was now set for the case of Bishop of Natal v Gladstone. Colenso of Natal lodged a bill in Chancery41 asking for a decree to be made for the payment to him of the proceeds of the endowment appropriated to the Bishop (or perhaps the diocese)42 of Natal, which the Colonial Bishoprics Fund had withheld, pending the decision of the Judicial Committee, since being notified by Gray that he had been deposed for heresy.

D. UNDERSTANDING BISHOP OF NATAL V GLADSTONE

Responding both to the bill and answers43 lodged in Bishop of Natal v Gladstone and the arguments of counsel before him,44 two core and interrelated issues fell for Romilly’s consideration: the effectiveness of the Letters

39 One of the immediate consequences of the Judicial Committee’s decisions was an effort to secure legislation clarifying the position of colonial bishops. See eg CO 885/3/5; CO 885/3/10: ‘Colonial Bishops Bill’ (May 1866) (National Archives); ‘The Colonial Secretary on Church Matters’, John Bull (London, 14 July 1866) 477; CO 885/3/11: ‘Colonial Episcopate’ (November 1866) and ‘Colonial Bishops Bill 1867’ (National Archives). 40 See CO 885/3/7 above, n 20; also CO 380/210 ff 39–55—Colonial office memo for private circulation on the effect of Long v Bp of Cape Town on the Australian and other bishoprics (National Archives); also John Bull (n 39). 41 See TS 18/870 (n 13). 42 This is one of the points of contention between the parties. 43 TS 18/870 (n 13). The papers are preserved in the files of the Treasury Solicitor because the Attorney-General was officially involved since the diocese was a royal donative, and he was personally involved as counsel for, and one of, the defendants. For a good idea of the factors influencing the preparation of the defence case, see also the documents sent by Angela Burdett Coutts (an important benefactor of the colonial churches) to Bishop Tait of London (one of the trustees of the Colonial Bishoprics Fund and de facto overseer of colonial bishops) in June 1866: Tait, vol 158, ff 101–09. 44 Counsel for the plaintiff were William Milbourne James QC (later a Vice Chancellor and then a Lord Justice), James Fitzjames Stephen (who was perhaps attracted to the plaintiff’s cause by his own religious scepticism), John Westlake (who often appeared in clergy discipline suits, had a large practice before the Judicial Committee of the Privy Council and had been tutored by Colenso) and E Charles (who also often appears in lists of counsel in clergy discipline suits). The defendants’ counsel were Roundell Palmer QC A-G (moderate High Churchman and defender of Establishment as well as a future Lord Chancellor) and Charles Jasper Selwyn QC (who was appointed Solicitor-General under Derby and made a Lord Justice in 1868). One thing of note is how many of those involved in the case hailed from Trinity College Cambridge, including: Colenso, Stephen, Westlake, Selwyn and Romilly himself. Biographical information taken from the Oxford Dictionary of National Biography (Oxford, OUP, 2004), available at , articles 14630, 21210, 25064, 26375, 36840.

Bishop of Natal v Gladstone 317 Patent as between the parties, and whether the objects for which the contested endowment had been made had in fact failed. To determine these issues he identified three questions which he had to answer: what the duties and functions of a bishop of the Church of England were; the extent to which the Letters Patent had failed to enable the plaintiff to perform these duties and functions; and the true purposes for which the funds were subscribed to the endowment.45 In addressing these questions, both Romilly and counsel often provided a window upon attitudes towards, and debates about, the role and organisation of the Church of England. On one view, the success or failure of the objects for which the contested endowment had been made depended upon, if not the validity, then at least the effectiveness of the Letters Patent. As such, both sets of counsel devoted considerable energy to addressing this point. Counsel for the plaintiff argued that the Letters Patent were valid because it was established legal principle that they should be construed, so far as possible, in such a way as to render them valid, and further that the inclusion within them of terms which were invalid did not invalidate them in their entirety. Further, if they were not valid then they nevertheless had to be treated as valid until set aside under an action of scire facias. Even then, a finding that the Letters Patent were invalid would not enable the defendants to escape their obligations since they should have known this and mistake of law was no defence.46 Defence counsel refuted the allegation that they were attempting to invalidate the Letters Patent, arguing instead that they were merely seeking to establish what the effect of the Judicial Committee’s decisions was. The answer, they said, was that the Letters Patent were entirely ‘void and nugatory’ for all purposes. They were, it was argued, ineffective to vacate the old see of Cape Town, to sub-divide it and to create the new diocese of Natal out of it. This being the case, no diocese of Natal existed, no endowment could have been appropriated to it and the plaintiff was a mere titular bishop. He therefore had no claim on any endowment for the diocese of Natal, even if it was held to have been made.47 The defendants’ understanding of the Judicial Committee’s decisions regarding Letters Patent issued in respect of colonies with representative government echoed popular understandings of the time. The Times, for example, had complained that ‘[s]olemn documents have passed the Great Seal over and over again which are simply null and void’.48 Romilly, 45

See (1866) LR 3 Eq 1, 24. On this point see Fitzjames Stephen (1866) LR 3 Eq 1, 16. Stephen, though not leading counsel for the defendant, seems to have played the leading role in shaping Romilly’s judgment. Certainly he was the only counsel to argue on the basis of contract and to mention mistake of law—both of which points were decisive in Romilly’s decision. 47 (1866) LR 3 Eq 1, 19–20 (Roundell Palmer). 48 ‘The Judgment of the Privy Council in the Case of the Bishop of Natal’, The Times, 21 March 1865, 11. 46

318 Charlotte Smith however, who had been one of the judges in Re Bishop of Natal, was swift to dismiss this understanding. He affirmed that the Letters Patent were generally valid, but ineffective insofar as they purported to confer coercive jurisdiction upon the plaintiff. This, he said, was what the Judicial Committee had determined.49 They had been effective to secure the consecration of Bishop Colenso, and to confer upon him all of the powers flowing from this. They had nothing to say to those episcopal powers of visitation and pastoral oversight which the bishop exercised Administratio Rei Familiaris.50 Bishop Colenso therefore possessed the status of a bishop and all of a bishop’s powers, except for that of coercive jurisdiction. If, as Romilly determined, Colenso was a bishop in all respects except for the possession of coercive ecclesiastical jurisdiction, the next question was whether the lack of such jurisdiction was sufficient to defeat his claim to be both a bishop of the Church of England in general and the Bishop of Natal in particular. In other words, could a bishop be a diocesan bishop (ie not a mere titular bishop) and a bishop of the Church of England if he lacked a general coercive jurisdiction within the territorial limits of the diocese to which he had been appointed? If he could not then, counsel for the defendants argued, the objects for which the endowment had been made had clearly failed.51 The defendants advanced three interrelated propositions in order to establish the necessary link between the existence of coercive ecclesiastical jurisdiction, the existence of the diocese or see of Natal, and the identity (or not) of Colenso as a bishop of the Church of England and Bishop of Natal. First, they asserted that the intention had been to create a legal see such as was an ‘incident to a church established by law’, and this necessarily included the creation of an episcopate with all the advantages of doctrine and discipline available to bishops of the Church of England in England.52 This intention had not, they argued, been fulfilled if the bishop did not have general coercive jurisdiction within the territorial limits of his diocese and exercised through his own courts.53 This lack struck at the heart of what the Church of England was, and what the donors of the Colonial Bishoprics Fund had set out to perpetuate in Natal. It made the church in Natal something to which adherents had actively to choose to belong, rather than, as was the case in England, an institution to which everyone who did not actively secede was legally held to belong.54 In short, without the existence 49

(1866) LR 3 Eq 1, 28 and 31. Ibid, 29. 51 Ibid, 18–21 (Palmer). 52 Ibid, 18 (Palmer). 53 Ibid, 21 (Selwyn). 54 Ibid. See also eg statement by Sir George Rickards at (1883) Reports of Church Congress, 75–76, and more generally MJD Roberts, The Role of the Laity in the Church of England c 1850–1885 (DPhil, Oxford, 1974) ch 7. 50

Bishop of Natal v Gladstone 319 of coercive ecclesiastical jurisdiction there was no Anglican Establishment, and without that Establishment ‘the full benefit of the church, in all the completeness of her ministry’ had not been conveyed to Natal.55 Secondly, they argued that without the existence of a general coercive jurisdiction within defined territorial limits there could not in fact be a see or diocese. These terms, counsel argued, had no meaning in ecclesiastical law except in relation to the grant of coercive jurisdiction in a defined territory.56 Their final proposition, then, was that this meant that there was no diocese of Natal to which the contested endowment could have been appropriated, and that there could therefore be no Bishop of Natal entitled to payment from its proceeds. Romilly seems to have had little patience with these arguments. He was clearly sceptical of the argument that the absence of coercive ecclesiastical jurisdiction defeated the objects of the contested endowment. That endowment had, in his estimation, been created for the purpose of providing Anglican episcopal oversight for the people and clergy of Natal, and that purpose was still viable. The Letters Patent had successfully secured the consecration of a bishop for Natal, and had conferred upon him all of those powers necessary to perform the functions of such a bishop, and to enforce the obedience of the clergy. The only distinction between the Bishop of Natal and the bishop of an English diocese was that the Bishop of Natal, lacking coercive jurisdiction, had to enforce his authority through the medium of the secular courts. Though this placed the Church of England in Natal upon the same constitutional and legal footing as any other voluntary religious association, it did not defeat the purposes for which the endowment had been created.57 In reaching his determination Romilly evinced little sympathy for assertions that territorial coercive jurisdiction was a prerequisite for the existence of an effective Anglican episcopate. He was demonstrably antipathetic towards arguments based upon appeals to the distinctive qualities, attributes and arrangements of Anglican Church government. He was convinced both that the most important powers or functions of a bishop were those which he derived from his consecration, that is from his spiritual office rather than the Church’s relationship with a particular State, and that the territorial division of the Church of England, upon which the defendants placed such dependence in their definition of terms such as ‘see’ and ‘diocese’, was merely a matter of ecclesiastical and administrative

55 Resolutions upon the creation of the Colonial Bishoprics Fund in 1841, extracted at (1866) LR 3 Eq 1, 3. 56 (1866) LR 3 Eq 1, 19–20. 57 Ibid, 12–13 (James), 15–16 (Stephen) and 34 (Romilly).

320 Charlotte Smith convenience. Having several times reminded counsel that the bishops of the early church had been mere titular bishops, he asserted:58 [Colenso] is a titular bishop all the world over; he is a territorial bishop within his see or diocese of Natal; and with the assistance of the secular tribunals he can perform all the acts and duties which belong to the office of a bishop according to the doctrine of the Church of England. It is clear that this was all that was included in the word bishop from the earliest institution of that office down to the time when, the Christian religion having become the religion of the state, coercive jurisdiction was conferred on the prelates of the Christian church.

It is far from clear, however, that the donors of the Colonial Bishoprics Fund shared Romilly’s indifference towards Anglican ecclesiology. Coercive jurisdiction, the possession in other words of ecclesiastical courts the authority of which did not depend upon the consent of those appearing before them, was an essential feature of the Establishment of the Church of England. Further, in setting up the Colonial Bishoprics Fund, a meeting of the clergy and laity of that church had resolved that, in supplying the spiritual wants of its members overseas, the Church of England would ‘proceed upon her own principles of apostolical order and discipline’, and that she would strive to ‘impart to them the full benefit of the church, in all the completeness of her ministry, ordinances, and government’.59 For many donors, coercive jurisdiction and the Establishment of which it was a part were an integral feature of such aims. By assisting in efforts to send duly consecrated bishops into the colonies, they had believed that they could be certain that the churches there were ‘the Church established, with all the ecclesiastical and political odour of Anglican sanctity’.60 For such donors the existence of valid coercive ecclesiastical jurisdiction and the trappings of Establishment went to the very essence of what the Church of England was, and to the maintenance of the colonial churches as branches of it, rather than as independent churches. Their argument was, citing Caudrey’s Case,61 that where there was no coercive jurisdiction, and therefore no ecclesiastical courts, the Queen could not be Head of the Church as she was in England. It followed from this that there could be no Royal Supremacy in ecclesiastical matters as that term was understood in England, and that there was no way of ensuring that the colonial churches adhered to the doctrines and discipline of the Church of England.62 The objects for which they had subscribed funds could not, therefore, be 58

Ibid, 34. Ibid, 2–3. ‘The Case of the Founders of Colonial Bishoprics’, The Times, 21 June 1866, 8. See also the protests of Angela Burdett Coutts (one of the most eminent and vocal of the donors) at Tait, vol 158. ff 101–02 (copy of letter to Archbishop Longley (12 July 1865) sent to the Bishop of London in the lead-up to Bishop of Natal v Gladstone); and HO 45/OS7924 (Petition to the Crown, 2 May 1866) (National Archives). 61 Caudrey’s Case (1591) 5 Co Rep 1a, 77 ER 1. 62 (1866) LR 3 Eq 1, 20 (per Palmer). 59 60

Bishop of Natal v Gladstone 321 achieved. As Angela Burdett Coutts complained in a letter much referred to by counsel63 for the Colonial Bishoprics Fund:64 I had always understood that in undertaking to provide funds for the endowment of Colonial Sees I was co-operating with the Archbishops and Bishops of the United Church of England and Ireland in laying the foundation of a system of efficient Church Government for the members of our National Church resident in their respective Colonies, and that the Crown by its Letters Patent had power to give legal effect to an order of things calculated to secure that the doctrine and discipline of the Church of England by law established should be maintained in their completeness amongst the congregations of our own Communion in those Colonies. Without this security I should not have guaranteed the Endowment Funds, and upon the faith of this having been accomplished by the issuing of Her Majesty’s Letters Patent I fulfilled in each case my guarantee.

In such sentiments Angela Burdett Coutts, and other donors of like mind, evinced a conviction, commonly seen in debates on clergy discipline at home, that the appeal to the Crown which existed by virtue of the Royal Supremacy was the best, if not the only, guarantee of the Church’s uniformity in doctrine and discipline.65 At the same time they seem to have assumed, as was relatively common after the decisions of the Judicial Committee in Long and Re Bishop of Natal, that the Royal Supremacy (at least in ecclesiastical matters) did not exist in those colonies where the Letters Patent were, as they at the time understood it, invalid. They understood the denial of a final appeal in ecclesiastical causes to the Queen as Head of the Church as meaning that the colonial churches, being voluntary associations, might alter their doctrine and discipline as they chose.66 The connection between the home and colonial churches would, therefore, almost inevitably be broken, and the funds endowing the dioceses of colonial churches might be

63 Despite its wide circulation, Burdett Coutts was indignant about the use made of the letter in the case and Romilly’s assumption that she was one of the subscribers to the endowment for Natal. We see this in correspondence between Burdett Coutts and Romilly at MS 1381, f 165 and MS 1386, ff 367–68 (Lambeth Palace Library). See also the letter sent by her lawyers to The Times, 9 November 1866, 9. 64 Letter to Archbishop Longley (n 60). See also copy included in Correspondence relating to colonial bishoprics laid before both Houses on the command of the Queen (C 3661 of 1866). Angela Burdett Coutts was so convinced that the doctrine and discipline of the Church of England could not be maintained in the colonies without Royal Supremacy expressed through valid Letters Patent, that she made several attempts so secure legislation returning endowments to the original donors if such Letters Patent were not issued to the bishops of colonial dioceses—see draft and sketch of bill or clauses (June 1866), Burdett Coutts Papers, BUR M5 (Westminster Archives Centre). 65 For a discussion of this aspect of clergy discipline, see C Smith, ‘The Quest for an Authoritative Court of Final Appeal in Ecclesiastical Causes: A Study of the Difficulties, c 1830–1876’ (2011) 32(2) Legal History 189 and C Smith, ‘Ridsdale v Clifton: Representations of the Judicial Committee of the Privy Council in Ecclesiastical Appeals’ (2008) 19(3) King’s Law Journal 551. 66 On this point see ‘The Case of the Founders’ (n 60), and especially (for an advanced High Church paean of praise for this) ‘The Colonial Church’, Church Times, 5 January 1867, 6.

322 Charlotte Smith applied to the support of bodies which departed from the fundamentals of faith of the Church of England. Again, though, Romilly evinced a strong preference for pragmatism over the niceties of Anglican political theology. The Royal Supremacy was in his conception fully present in the colonies, even where the Church of England existed only as a voluntary association. First, a bishop could only be consecrated as a bishop of the Church of England under the authority of the Crown, and as an office holder of the Crown a bishop had to submit to the Crown’s visitorial jurisdiction and orders.67 Secondly, the Royal Supremacy, though not demonstrated through an appeal from ecclesiastical courts to the Queen in Council, was amply demonstrated in the enforcement of the doctrines and discipline of the Church of England in the colonies by their civil courts. Lastly, the Royal Supremacy was imported to the colonies by the consent of the members of the Church there to the terms of their association, that is to the doctrines and discipline of the Church of England, which included the Royal Supremacy.68 Though Romilly rejected their reasoning, he was plainly sympathetic to the underlying concern of the Colonial Bishoprics Fund and its donors that the doctrine and discipline of the Church of England should be maintained in the colonial churches along with their close ties to the home Church. Where he differed from the defendants was in his understanding of how this end was best attained. In his words:69 I believe that when a careful inquiry is made into what the difference is that lies between them, it will be found that the law, as pronounced by the Judicial Committee, is likely to afford greater stability and unity to the Church of England in her colonial dependencies than if the law had been as contended for by the Bishop of Cape Town.

In making this assertion Romilly was plainly much exercised by one of the odder features of the Letters Patent to which the defendants attached such significance. Those Letters Patent gave an appeal in the last resort not to the Crown (as was the case in England), but to the Archbishop of Canterbury. They were, therefore, in Romilly’s view, inimical not only to a right understanding of Royal Supremacy,70 but also fundamentally to the cause of uniformity of doctrine and discipline in the daughter churches of the Church of England across the Empire. As he explained:71 In the one case, if the letters-patent effected all that they were originally supposed to effect, the law on the subject would be declared by one prelate of the Church 67 (1866) LR 3 Eq 1, 34–35, 46–47, 52–53. He seems (at 47) to identify royal authority for consecration as the defining mark of a bishop of the Church of England. 68 Ibid, 34–35, 44–45. 69 Ibid, 34. 70 Ibid, 52–53. 71 Ibid, 34–35.

Bishop of Natal v Gladstone 323 of England, with an appeal to another prelate, and possibly finally to the Primate of all England, where the matter would end. In the other case, the law would be declared by a civil tribunal with an appeal to the Sovereign in Council, where also the matter would end The law, it is important to observe, is and must be the same in both cases, and ought to be similarly administered, and that law is the law of the doctrines and ordinances of the Church of England. The former are fixed and immutable, the latter are equally fixed until altered by statute. This law, whether it be enforced by the ecclesiastical or by the civil tribunal, is the same, and should receive the same construction, and, when ambiguous, the same interpretation; but if it be administered by different tribunals, a variation and discordance will arise which would be much to be deplored.

In adopting what seems to have been an innately pragmatic approach, though one very much imbued with his own attitudes to the matters in hand, Romilly apparently understood his judgment as facilitating the aims of the Colonial Bishoprics Fund. In his view, what had been sought had been to provide for the spiritual wants and episcopal oversight of the members of the Church of England in the colonies. This, albeit in a manner different from that which prevailed in England, had been achieved. Further, Romilly was keenly aware that if he had accepted the defendants’ arguments then not only would the application of the large sums of money subscribed for the endowment of colonial bishoprics have been cast into doubt and confusion, but many colonial churches might have been left without any financial support at all.72 The defendants could, in other words, have succeeded only at the cost of the whole endeavour towards the expansion of the colonial episcopate.73 Here we get not only to the crux of the defendants’ problem, but also to the connection between this case and the wider controversies abroad in the Victorian Church. We also, not so incidentally, find an explanation of one of the more curious features of the case, namely that Colenso’s doctrinal proclivities and fitness to serve as a bishop of the Church of England were never at any point raised in the proceedings. While the Colonial Bishoprics Fund had no desire at all to undermine the colonial episcopate and the expansion of the Church of England overseas, it did feel a pressing need to rid itself of a bishop whose theology was, in the eyes of conservative Churchmen of all types, heterodox at best. To have in office and to pay a bishop who denied the literal truth of the Bible was, at that time, seen as being both scandalous and dangerous to the

72 This was even more pressing at this time, since the Crown had ceased to issue Letters Patent and was instead issuing Mandates for consecration which often did not name a diocese at all. See eg CO 381/56 ff 125–26: ‘Mandate for the consecration of Samuel R Waddelow as the Bp of Grafton and Armidale’ (14 August 1866) (National Archives). 73 (1866) LR 3 Eq 1, 57. The Colonial Bishoprics Fund, though complaining that Romilly had contradicted the Judicial Committee’s decisions, cited this as one of the reasons for its decision not to appeal. See ‘The Bishop of Natal’, The Times, 5 March 1867, 9.

324 Charlotte Smith moral and spiritual health of those under his care.74 There were, however, grave difficulties attaching to his removal. First amongst these was that the Judicial Committee in Re Bishop of Natal had held that Colenso’s Oath of Obedience to Bishop Gray of Cape Town, his Metropolitan, was invalid. It followed from this that Colenso had not voluntarily subjected himself to Gray’s jurisdiction and could not be removed by Gray’s judgment. The remaining option was to seek Colenso’s removal by the Judicial Committee of the Privy Council or some other court. Here, too, there were problems. The Letters Patent had not by their terms given an appeal to the Judicial Committee as the final court of appeal in ecclesiastical causes. Neither was that tribunal likely to find favour with the many High Church supporters of the Colonial Bishoprics Fund. Many of these could not accept as meaningful the distinction between the interpretation and application of the legal documents within which the doctrines of the Church of England were enshrined and the interpretation or alteration of the Church’s doctrine. Nor could they accept the authority of a secular court to determine matters which they consequently defined as being spiritual in nature, and therefore as belonging to that category of questions over which the Church alone had jurisdiction. Even in its guise as the final court of ecclesiastical appeal, the Judicial Committee was impugned by such Churchmen as lacking the requisite spiritual authority to bind the clergy in matters of doctrine. Crucially, though it included at least one bishop upon its panel at this period,75 it was created by statute and, in the eyes of its High Church detractors, constituted a wilful denial of the Reformation Settlement under which ecclesiastical causes fell to be decided by the Queen in Chancery as constituted in the mixed body of civilian and common law judges and bishops known as the High Court of Delegates.76 If an appeal to the Judicial Committee as the court of final ecclesiastical appeal was abhorrent then an appeal to it in its role as final court of appeal in colonial matters, or indeed to any civil court, must have been even more distasteful.77 This, together with the fact that the Colonial Bishoprics Fund 74 On Colenso’s biblical criticism, see P Hinchliff, John William Colenso: Bishop of Natal (London, Nelson, 1964) chs 5–7. 75 Church Discipline Act 1840, s 16. 76 Bishop Gray of Cape Town had apparently submitted only ‘under protest’ to being represented in Re Bishop of Natal, before the Judicial Committee of the Privy Council, precisely because he did not wish to be seen to recognise the authority of that tribunal in matters of doctrine. See Hinchliff (n 74) 152–53. On the debate in general, see C Smith, ‘The Quest for an Authoritative Court of Final Appeal’ (n 65); RE Rodes Jnr, Law and Modernization in the Church of England: Charles II to the Welfare State (Notre Dame, Ind, University of Notre Dame Press, 1991) ch 4; MD Stephen, ‘Gladstone and the Composition of the Final Court in Ecclesiastical Causes, 1850–73’ (1966) 9(2) The Historical Journal 191; A Burns, The Diocesan Revival in the Church of England, c1800–1870 (Oxford, Clarendon Press, 1999) ch 7. 77 Though note their apparent volte face in debates on the Judicature Bill 1873, during which they sought to secure the transfer of ecclesiastical appeals from the Judicial Committee

Bishop of Natal v Gladstone 325 had apparently been advised that it could not raise the question of heresy in a court without jurisdiction to try such questions,78 probably explained why Colenso’s doctrinal fitness for the role of bishop was resolutely ignored by counsel. Further, though Romilly was firm in his belief that he could have decided whether Colenso’s doctrine was consistent with that permitted by the Church of England,79 and that this ‘might have had an important bearing on the question whether the Plaintiff is or is not entitled to be paid the salary in question’,80 there was perhaps little confidence that it would have materially affected the outcome. That his particular brand of biblical criticism was troubling to orthodox Anglican beliefs was not in doubt. Yet in a similar furore over the doctrinal heterodoxy of advanced liberal biblical scholars, the Judicial Committee had rejected charges of false doctrine made against two of the contributors to Essays and Reviews.81 Not only had the court demonstrated a commitment to doctrinal breadth at the expense of what some saw as essential orthodoxy, but it seemed to indicate that the formularies of that Church of England were almost incapable of strict interpretation and application in a court of law. As one author has put it:82 The Articles [of Faith of the Church of England] were not a confessional statement, but rather a collection of short summaries of doctrine, open to interpretation and comprehending different shades of Trinitarian belief and both Calvinist and Arminian interpretations of justification by faith. The Church of England, in short, was not a confessional Church on the pattern of the Reformed Churches on the Continent, but was rather a distinctively English national Church.

In these circumstances, lacking the means to be rid of Colenso by the exercise of consensual spiritual jurisdiction or appeal to some other acceptable tribunal, the best possible outcome was for the Colonial Bishoprics Fund to be able by financial pressure to compel Colenso to resign. Failing that, if it was not paying the salary to him, it could at least find and appoint

of the Privy Council to Selborne’s new unified Court of Appeal. There was reason to suspect, however, that this was a tactical move designed to undermine the authority of the final court of ecclesiastical appeal, and therefore to justify disobedience to its orders. On this see C Smith, ‘The Quest for an Authoritative Court of Final Appeal in Ecclesiastical Causes’ (n 65). 78

‘The Bishop of Natal’ (n 73). (1866) LR 3 Eq 1, 58. 80 Ibid, 27. He was very concerned to point out that he had been ‘compelled to decide the case on the assumption that the Plaintiff is in every respect fit and proper to fill the office of bishop’ (ibid, 58). 81 Williams v Bishop of Salisbury and Wilson v Fendall (1863) 2 Moo PC NS 375, 15 ER 943. Delivering judgment in this case Lord Westbury is famously reputed to have been credited by one wag with the claim to have ‘dismissed hell with costs and … denied orthodox members of the Church of England of their hope of eternal damnation’. For an excellent account of this episode, see I Ellis, Seven against Christ: A Study of ‘Essays and Reviews’ (Leiden, EJ Brill, 1980). 82 SJ Brown, The National Churches of England, Ireland, and Scotland 1801–1846 (Oxford, OUP, 2001) 5. 79

326 Charlotte Smith another orthodox bishop to have care of his diocese. That Romilly was very well aware of this was abundantly clear. Indeed he declared that he would be ‘foolish’ to ‘pretend ignorance of what has been at the root of the proceedings against the Plaintiff in Cape Town, and of the refusal of the Defendants to pay to the Plaintiff the income attached to the bishopric of Natal’.83 Such considerations were not, however, sufficient to sway him in the defendants’ favour.

D. CONCLUSION

As indicated in the introduction to this chapter, and as only too clearly demonstrated in the examination which followed, Lord Romilly’s application of the rules relating to specific performance and mistake of law are better seen as the delivery of a final coup de grace to the defendants’ arguments than as the main foundations for his judgment. They were the means by which his decision might be placed beyond reproach, and by which it might be rendered more palatable and less ecclesiastically contentious; but if we want to understand why his decision might be considered to be a landmark one then we need to look both elsewhere in his judgment and to its wider context. For its protagonists Bishop of Natal v Gladstone was just one of several suits litigated over the control of the funds and property attached to the diocese of Natal.84 Its consequences, however, served to shape the development of the Anglican Communion in South Africa for over half a century. In some respects its effects, looked back upon at some distance of time, appear to us to be farcical in nature. Denied a means of being rid of Colenso, Gray secured the appointment of a rival bishop, rival churches were formed and eventually a scheme for sharing the cathedral was devised. Ultimately, until the last of the congregations loyal to Colenso had gone the way of all men, there were two Anglican Churches in South Africa, with the smaller one in possession of a large part of the property and income given for the support of the Church of England in that region.85 For the Church of England in general Romilly’s judgment came at a decisive moment in the development of that entity which we now call the Worldwide Anglican Communion. Following the decisions of the Judicial Committee in Long and Re Bishop of Natal, all with a stake in the colonial 83

(1866) LR 3 Eq 1, 58. See Bishop of Natal v Green (1868) 18 Law Times 112 and The Bishop of Cape Town v The Bishop of Natal (1869) 6 Moo PC NS 203, 16 ER 702. 85 This situation was ended by Re Colonial Bishoprics Fund 1841 [1935] Ch 148. For an overview of the saga, see ID Darby, ‘The Anglican Diocese of Natal: A Saga of Division and Healing’ (1981) 11 Natalia 43; and for a more detailed account, see generally P Hinchliff, The Church in South Africa (London, SPCK for the Church Historical Society, 1968). 84

Bishop of Natal v Gladstone 327 church project had to work out how to function in legal circumstances which were quite different from those which they had perhaps anticipated or assumed would apply. How were bishops to be appointed in voluntary colonial churches? How were their dioceses to be assigned and ordered? How were their relationships with each other to be determined? How was discipline to be enforced and church government managed? How were voluntary colonial churches to relate to the Established Church of England? All of these were questions which fell to be discussed in protracted correspondence between colonial bishops and their English counterparts.86 All were questions which led to the first Pan-Anglican (Lambeth) Conference in 1867.87 Ultimately they were questions to which different colonial churches in different parts of the world found different answers. Some clung fiercely to traditional conceptions enshrined in the Crown Mandate or Patent for consecration and appointment. They held to the identity of their church as the local branch of the Church of England wherever they happened to be. Others surrendered their patents and, though continuing to affirm their spiritual ties to the home church as churches in communion with the Church of England, essentially declared their autonomy and independence from it in government, doctrine and discipline.88 Though much vilified in contemporary comment, and often taken as being either wrongly decided or inconsistent with the Judicial Committee’s decisions, Romilly’s judgment provided a basis not only for the continued existence of the Church of England’s colonial project, but also for the security of the colonial churches’ property rights and endowments. In the inevitable wrangles which followed, as the Worldwide Anglican Communion became more fragmented and diverse, it gave the colonial churches who wished for it their independence, while maintaining a degree of fidelity to the original donors’ intentions. By posing the choice between independence and property it has also perhaps done much to safeguard a degree of unity or consistency in doctrine and discipline within the Worldwide Anglican 86 See eg extended (and conflicting) correspondence (in 1867–68) between the Bishop of Canterbury and Bishops in New South Wales over arrangements for new dioceses and how things should be done in light of the Judicial Committee’s decisions, at Tait, vol 170, ff 59–60, 62–64, 65–66, 74–77, 291–94. 87 See RT Davidson (ed), The Lambeth Conferences of 1867, 1878, 1888 (London, SPCK, 1889) ch 1, for an account of the first Lambeth Conference. For a flavour of the public reaction to the Lambeth Conference of 1867, see the collection of cuttings and pamphlets at class mark H5021.1 at Lambeth Palace Library. 88 Notably, Bishop Gray of Cape Town founded what became the Church of South Africa, and the New Zealand bishops surrendered their patents and declared that they were bishops of the Church of New Zealand in communion with the Church of England. Even within one colony bishops might be deeply divided over how best to proceed. For instance, Bishop Barker of Sydney was greatly attached to Letters Patent and a traditional conception of Royal Supremacy, whereas Bishop Tyrrell of Newcastle, NSW, emphasised the voluntary nature of the Church in New South Wales and the desirability of local autonomy. See Tait, vol 160, ff 21–23, 28, 34–35.

328 Charlotte Smith Communion, at least to the extent that such an enterprise is possible where the core formularies of the mother Church are so consciously broad. Self-evidently, then, Romilly’s decision was an important event in the history and evolution of the Anglican Communion. It also, however, has broader significance as a powerful reminder of the inescapability of a case’s context, and of the social and religious mores at play in the functioning of Equity. It reminds us of both just how decisive the context of individual cases is in shaping the development of legal and equitable doctrine, and of how much of that context is lost from the sight of the modern lawyer. Lastly, though modern judges might be more wary of the unguarded publication of their religious and ecclesiastical views, it reminds us to be cautious of claims that these never, even if only subconsciously, shape the development of the law. One might ascribe Romilly’s judgment to his pragmatism, of which it was undoubtedly in part a product, but it bore the no less clear imprint of his personal ecclesiology.

11 Earl of Aylesford v Morris (1873) CATHARINE MACMILLAN

A. INTRODUCTION

A

CHARACTERISTIC OF a landmark case is that it stands for a proposition of law. In Earl of Aylesford v Morris,1 Lord Selborne held that where there existed an inequality between contracting parties, with weakness on one side and an extortionate advantage taken of that weakness on the other, the contract could not stand unless the party claiming the benefit of the contract could rebut the presumption by establishing that the transaction was ‘fair, just and reasonable’. This chapter examines the historical circumstances behind the formulation of this proposition.

B. PATRIARCHAL CULTURAL PRACTICES

The Earl of Aylesford’s case arose within a particular cultural practice of the English aristocracy; namely, their strong preference for the preservation of family wealth and status through male primogeniture. The strict settlement2 allowed this practice and functioned by giving a life estate to the owner of the land, with remainders in tail to his children. Trustees were inserted into this arrangement to preserve contingent remainders and to raise money for the maintenance of family members. Within each generation the settlement was renewed. In this resettlement, the son surrendered his fee tail for a life estate accompanied by an allowance. In theory a son could refuse to allow the resettlement, but in practice such a refusal did not

1

Earl of Aylesford v Morris (1873) LR 8 Ch App 484. The process is described in detail by S Anderson, ‘Property’ in W Cornish (ed), The Oxford History of the Laws of England, Vol XII 1820–1914: Private Law (Oxford, OUP, 2010), ch 3; and also by E Spring, ‘The Settlement of Land in Nineteenth-Century England’ (1964) 8 The American Journal of Legal History 209, 209–16. 2

330 Catharine MacMillan occur.3 Strict settlements supported a patrician order ‘highly conscious of themselves, their families, and their order in time’.4 The patriarchal nature of this system placed the eldest son (and his siblings) within the control of the father, who determined the allowances payable to his children and had control over the interest to be inherited by the eldest son. The patriarch was himself simultaneously constrained by the settlement structure and prevented from dissipating the family fortune. The use of strict settlements meant that members of landowning families made critical decisions, not easily revocable, at certain points in time under the permanent sentiments of their social group rather than by the whims of a particular individual.5 Settlements worked to preserve wealth, and thus protected future generations from the depredations of a dissolute patriarch. And in so preserving family fortunes, settlements worked to preserve a particular family’s political and financial position within the nation. Heirs often found it hard to live within the allowance granted to them. By the nineteenth century, increasing longevity meant that they might wait some time for their inheritance. Some were tempted to borrow against their inheritance, or even to sell it in some manner. Chancery viewed both forms of transaction with suspicion.

C. ‘CATCHING BARGAINS’ WITH HEIRS

In the nineteenth century, courts of both law and equity exercised a jurisdiction over fraud and would set aside a contract tainted by fraud.6 Equity’s jurisdiction in this regard was broader than that of the common law,7 for it extended beyond actual fraud to constructive fraud. While actual fraud involved ‘an intention to commit a cheat or deceit upon another to his injury’,8 constructive fraud encompassed acts which, although they did not possess an evil design to perpetrate a positive fraud, were deemed equally reprehensible because of their tendency to deceive or to violate confidence,

3 Nathaniel Lawrence, a leading conveyancing solicitor, stated that he never knew of a son who refused to re-settle the estate: 1881 [C. 3096] Minutes of evidence taken before Her Majesty’s Commissioners on Agriculture, vol II: 835. 4 D Cannadine, The Decline and Fall of the British Aristocracy (New Haven, Conn, Yale University Press, 1990) 24. 5 J Habakkuk, Marriage, Debt and the Estates System, English Landownership 1650–1950 (Oxford, Clarendon Press, 1994) 76. 6 On the interface of law and equity in contractual fraud, see M Lobban, ‘Contractual Fraud in Law and Equity, c1750–c1850’ (1997) 17 OJLS 442. On the 19th-century development of undue influence, see M Lobban in Cornish (ed) (n 2) 400–09. 7 Lord Hardwicke, in Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125, 155–57; 28 ER 82,100–01, set out five species of fraud for which equity would provide relief. 8 J Story, Commentaries on Equity Jurisprudence, 2nd edn (reprinted London, A Maxwell, 1839) vol I, §187, 162.

Earl of Aylesford v Morris 331 or impair or injure public interests. Equity protected those who maintained a confidential relationship not only in which one party reposed confidence in another, but also in those instances where an imbalance existed between the parties such that the stronger took advantage of the weak. Heirs were weak, for their necessities drove them to form unconscionable bargains.9 Although recognising that the doctrines within the subject of constructive fraud could seem artificial, if not arbitrary, Story explained such a jurisdiction as being founded upon a desire ‘to apply the principle of preventive justice, so as to shut out the inducement to perpetrate a wrong’.10 The disallowance of such contracts was intended to remove the incentive for their creation. Lord Hardwicke, in Earl of Chesterfield v Janssen,11 stated that equitable relief was always extended to a bargain entered into with heirs, reversioners and expectant heirs in the lifetime of their parent, because these cases usually contained elements of all the different species of fraud:12 ‘There is always fraud presumed or inferred 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.’13 Where expectant heirs or reversioners received inadequate value for their exchange,14 equity extended a generous protection to them.15 This protection was not prevented by the applicant’s mature age;16 nor by the fact that the applicant understood the transaction;17 nor by the fact that the applicant was not in pecuniary distress.18 Where an heir was put to effort to seek out his lender or purchaser, this only showed his necessity.19 Where equity presumed that inequality existed, the onus lay upon the other party to establish that these factors did not exist20 and that a fair price had been paid21—in short,

9 Individuals other than heirs were also thought deserving of such protection: Evans v Llewellyn (1787) 12 Bro CC 150, 29 ER 86. 10 Story (n 8) §258, 8214. 11 Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125, 28 ER 82. 12 Ibid, 157, 101. 13 Ibid. 14 The inadequate value was the material consideration (Peacock v Evans (1809) 16 Ves Jun 512, 516; 33 ER 1079, 1080, per Grant MR) and attracted the attention of equity to the relationship between the parties. Where the consideration was grossly inadequate, Thurlow LC observed that ‘the Court has never suffered it to stand’: Gwynne v Heaton (1778) 1 Bro CC 1, 6; 28 ER 949, 951. 15 Nott v Hill (1682) 1 Vern 167, 23 ER 391; Gwynne v Heaton (n 14); Shelly v Nash (1818) 3 Madd 232, 56 ER 494. 16 Davis v Duke of Marlborough (1819) 2 Swan 108, 36 ER 555. 17 Wiseman v Beake (1690) 2 Vern 121, 23 ER 688; Evans v Chesshire (1806) Ves Sen Supp 300, 28 ER 532. 18 Bromley v Smith (1859) 26 Beav 644, 53 ER 1047. 19 Gwynne v Heaton (n 14). 20 Gowland v De Faria (1810) 17 Ves Jun 20, 34 ER 8; Chesterfield (n 11). 21 Shelly (n 15).

332 Catharine MacMillan that the bargain was reasonable.22 Strict settlements went some way to encouraging the profligacy of a young heir23 and the equitable jurisdiction functioned to constrain such profligacy. It was important, as White and Tudor observed, that there existed the character of an heir.24 Equity was concerned with two interrelated aspects of this character. The first was that of the heir himself. A contract with an expectant heir was one in which ‘the parties do not meet upon equal terms—there is distress on one side, and greediness of gain on the other’.25 The heir was distressed by his want of money and his wants were such that he could not reveal them to his family, for to reveal them might well endanger his expectancy.26 The need to conceal his wants made the heir ‘a slave to the person with whom he treated’.27 Unable to communicate with his family, the inexperienced heir was unable to receive proper advice. Courts were also concerned that the availability of money through such transactions might well feed the heir’s extravagances, leading him to a dissolute, debauched or destructive life.28 The second aspect was the heir’s family. It is striking that while there were only short considerations of the policy reasons behind equitable intervention in unconscionable bargains with heirs, these were more frequently concerned with the family’s position than the heir’s pitiable state. There was a direct correlation between these two aspects, for the heir’s state was pitiable because of his dependency. Equitable considerations around the heir’s family fell into two categories. The first of these was the danger that the depredations of an expectant heir could destroy his family’s fortune. Lord Hardwicke famously observed that money-lending contracts with heirs were a form of fraud upon a third party, for such a contract ‘misleads the ancestor; who has been seduced to leave his estate not to his heir or family, but to a set of artful persons, who have divided the spoil beforehand’.29 The equitable jurisdiction was exercised to ‘prevent the ruin of families’.30 The sale of a reversion ‘tended to the manifest ruin of families; therefore the policy of the nation thought fit … to put a stop to so mischievous a practice,

22

Davis (n 16) 139, 566, per Eldon LC. Habbakuk (n 5) 299–301. 24 F White and O Tudor, A Selection of the Leading Cases in Equity with Notes, 4th edn (London, William Maxwell and Son, 1872) I, 594, relying upon Swanston’s note to Davis v The Duke of Marlborough (n 16). 25 White and Tudor (n 24) I, 596. 26 Chesterfield (n 11) 144–45, 94. 27 Ibid, 131, 86 (per counsel for plaintiff). 28 Earl of Arglasse v Muschamp (1684) 1 Vern CC 237, 23 ER 438; Berney v Pitt (1686) 2 Vern CC 14, 23 ER 620. 29 Chesterfield (n 11) 157, 101. 30 Ibid, 158, 101. The reason is also tendered in the judgment of Burnett J, ibid at 145, 93. See also the judgment of Lord Jeffries LC in Berney v Pitt (1686) 2 Ch Rep 396, 21 ER 697. 23

Earl of Aylesford v Morris 333 by setting aside all these bargains with young heirs, for reversions’.31 The protection of family estates underlay the reasoning of Lord Eldon in Davis v Duke of Marlborough,32 who acknowledged that ‘in many cases those who obtain relief from their annuities, have really taken as much advantage of the annuitants as those annuitants have taken of them’.33 The reporter Swanston noted that ‘this doctrine appears to be founded in part on the policy of … preventing the waste of family estates’.34 Even greater concerns attended unconscionable bargains with the heir to a peerage.35 The desirability of such a contractual discouragement was regarded as a just reason for the doctrine.36 The second category of equitable considerations was that the availability of money encouraged disobedience amongst heirs.37 Protection of family estates was also intended to prevent the ‘seducing [of] an heir apparent from a dependence on his ancestor’.38 An heir who was no longer dependent upon his family financially was much more likely to disobey the dictates of the head of the family. This was not to be encouraged, for heirs needed to cooperate with the overriding objectives of the resettlement of the family estate. A key reason behind the tenant in tail’s agreement to a resettlement of the family estate lay in his need for money. That the protection of the heir’s family was the central objective of the courts of equity may be seen in many of the instances in which transactions with heirs were allowed. Where the contractual arrangements were made within a family, equity would not automatically intervene. Where father and son bargained over the son’s reversionary interests, the court regarded them as settlements39 and would not interfere in the absence of undue influence. If a father and son joined together in a contract, or the father was aware of the son’s dealings,40 the bargain was generally not unconscionable. So, too, where the heirs to a common ancestor agreed to a division of their expectancies, equity would not intervene.41 Lastly, if the heir, having received his expectancy, then affirmed the earlier transaction, a court of equity would

31 Cole v Gibbons, Martin v Cole (1734) 3 P W 290, 293; 24 ER 1070, 1071, per Talbot LC See also the reasoning of Baron Smyth in Baugh v Price (1752) 1 Wil K B 320, 323; 95 ER 640, 642. 32 Davis (n 16). 33 Ibid, 139, 566. 34 Ibid, 171, 572. 35 Earl of Portmore v Taylor (1831) 4 Sim 182, 213; 58 ER 69, 80. 36 Peacock v Evans (1809) 16 Ves Jun 512, 515; 33 ER 1079, 1080, per Grant MR. 37 Baugh v Price (1752) 1 Wil K B 320, 95 ER 640. 38 Cole (n 31) 293, 1071, per Talbot LC. 39 Twedell v Twedell (1822) TR 1, 13; 37 ER 992, 997; White and Tudor (n 24) I, 603, considered the point in detail. 40 King v Hamlet (1835) 3 Cl & F 218, 6 ER 1419. 41 Beckley v Newland (1723) 2 PW 182, 24 ER 691; Harwood v Tooke (1812) 2 Sim 192, 57 ER 76; and Wethered v Wethered (1828) 2 Sim 183, 57 ER 757.

334 Catharine MacMillan be unlikely to set it aside.42 Equity considered that the heir then acted freely and with full information. It was also relevant that ‘there was no ancestor or relation left upon whom any deceit could be committed in consequence of any new agreement’.43 Equity’s tender protection of an heir’s contractual dealings which concerned his expectancy thus worked to prevent the dissipation of the family’s wealth. The individual judges and lawyers who worked to protect this system were themselves personal participants in this system of strict settlements.44 Two mid-century legislative developments seemed to have the capacity to erode equity’s protection of expectant heirs. The first was the repeal of the usury laws in 1854.45 From 1854, loans to heirs at exorbitant rates of interest were possible at law. No longer open to challenge on legal grounds, as had been frequently done,46 this left equity without a complement at law. The second enactment sought to alleviate equity’s strict treatment of the sale of reversions.47 The Act followed upon concerns that the strict equitable doctrine effectively disabled an heir from parting with his reversion,48 and provided that from 1868, a bona fide purchase made without fraud or unfair dealing could not be set aside merely on the ground of undervalue.

D. THE SEVENTH EARL OF AYLESFORD

The first Earl of Aylesford, ‘Silvertongue Finch’, had been a lawyer and Solicitor-General to Charles II. The sixth Earl of Aylesford, well liked and involved in public affairs,49 had married Jane Knightley, by whom he had six children. Their eldest child, Heneage Finch, was born in 1849 to a life of wealth and power. The life of a nineteenth-century peer was an extraordinary one. The peerage was small, numbering 260 in 1800 and only 520 by 1900,50 and

42

Chesterfield (n 11). Ibid, 159, 103. 44 The purchase of land by lawyers is detailed by Habbakuk (n 5) 443–48. One of his examples is Lord Aylesford’s ancestor, Sir Heneage Finch: ibid, 443. 45 An Act to repeal the Laws relating to Usury and to the Enrolment of Annuities, 1854. 46 The first issue in Chesterfield (n 11) had been whether or not the bargain was a usurious loan. 47 An Act to amend the Law relating to Sales of Reversions, 1867. 48 See, eg, Earl of Aldborough v Trye (1840) 7 Cl & F 436, 7 ER 1136; Edwards v Burt (1852) 2 De G M & G 55, 42 ER 791. 49 Before taking his seat in the Lords, he had been a Member of Parliament; he was also the Deputy Lieutenant for Warwickshire and Major of the Warwickshire Yeomen Cavalry: The Times, 15 April 1871, 5. 50 GE Mingay, Land and Society in England 1750–1980 (London and New York, Longman, 1994) 120. 43

Earl of Aylesford v Morris 335 difficult to enter.51 The ‘New Domesday’ enquiry, published as Return of the Owners of Land in 1876, established that 80 per cent of the country was owned by fewer than 7,000 people. This pattern of land ownership was more concentrated and monopolistic than any other in Europe.52 Land was the basis not only for wealth, but also for political power in an age before universal suffrage. The British landed elite were thus also more powerful than their Continental counterparts.53 Heneage Finch’s life was played out at the very zenith of aristocratic power in Britain. After 1880, various pressures both political and economic were to undermine the British aristocracy.54 While the Aylesford family were far from the wealthiest members of this elite, they were sufficiently wealthy to be described as ‘very rich—in fact, perfect gold-Finches’.55 Heneage was thus born not only into a patrician order, ‘the most wealthy, the most powerful, and the most glamorous people in the country corporately—and understandably—conscious of themselves as God’s elect’,56 but, as the eldest son, at the very top of this order. That he was singularly unsuited to this role was to test greatly the system of strict settlements so carefully designed by lawyers to protect the wealth of a family. As the eldest son, Heneage was given the title Lord Guernsey. The impetuous and extravagant behaviour that was to mark his life began early. He left Eton at age 16 and lived with military tutors, as it was intended that he would enter the army. During his minority he had begun to accumulate debts to tradesmen. His father gave him no regular allowance and never provided him with more than £500 in a year. To meet his debts Guernsey was introduced around 1869 to a solicitor, John Graham, who lent him money on promissory notes.57 Guernsey could not recall the amount lent or the interest payable.58 The promissory notes were dishonoured and Graham, around May 1870, and shortly after Guernsey attained his majority, lent a further £4,000 on acceptances to discharge the notes. Guernsey had never had such money before and spent every penny of it, although he later deposed, ‘I have not the remotest idea what I did with it’.59 When Graham pressed for payment, Guernsey sought even more money. Graham

51

Cannadine (n 4) 20. Ibid, 55. 53 JV Beckett, The Aristocracy in England 1660–1914 (Oxford, Basil Blackwell, 1986) 21. 54 On this process, see generally Cannadine (n 4). 55 Funny Folks, 16 November 1878, 363. 56 Cannadine (n 4) 2. 57 National Archives of the UK (PRO). C 16/692/A67, Earl of Aylesford v Morris, affidavit of John Graham, 27 June 1871, para 3. 58 National Archives (n 57), deposition of Heneage Earl of Aylesford, 5 December 1871. 59 Ibid, 19. 52

336 Catharine MacMillan declined to provide more but introduced Guernsey to Robert Morris, a money-lender of some notoriety. Morris agreed to lend Lord Guernsey £8,000, and on 1 July 1870 took two promissory notes from Guernsey, one for £3,000 and the other for £5,000. As collateral security, Morris took out an insurance policy on Guernsey’s life for £6,000. Graham was paid £3,000. Guernsey himself received only £3,800, from which the insurance premium was paid. Morris kept the remaining £1,200 as a discount, a fact which drove the effective interest rate higher than the stated 60 per cent. Guernsey later deposed that while he thought that the interest rate was 60 per cent, he did not know if that was high or low, but observed it was the rate he thought all money-lenders charged.60 Guernsey was pleased with the transaction as he had found a means to finance his extravagances. Childish in many ways, he was careful to keep any information about his financial situation from his father, the sixth Earl. Over the summer of 1870 he borrowed thousands of pounds from another money-lender, Henry Padwick, and became indebted to Corbett Holland for £2,000 for the purchase of more horses. Guernsey’s lawyers’ pleading that he was not ‘a person of business habits’ was an accurate description.61 By the autumn of 1870, Lord Guernsey was again in trouble for he had fallen into a common money-lender’s trap. Money was lent easily to one in a class with a social position to lose. The money, however, was lent on a short-term note, and when it came due, the pressure upon the borrower was even greater. A hotelier introduced Guernsey to Captain Charles Addison. Addison was a monetary agent, self-described as ‘the intermediate person bringing the capitalist and the borrower together’, for which the borrower paid Addison a percentage.62 Guernsey was desperate, for he owed thousands to various people, and one, Holland the horse vendor, had initiated legal proceedings. As explained to Addison, Guernsey sought to borrow between £25,000 and £30,000, mortgaged against his reversionary interest in the Aylesford estates.63 Here he encountered a serious problem, for he would not provide any information about the family settlement. As Addison explained, no one knew if Guernsey was the heir-in-tail to his father’s estates or not, or whether or not Guernsey even knew of the terms of the family settlement.64 In Addison’s words: I had the strongest doubt whether he was entitled because I thought his father might probably have the whole power over the estates and the Plaintiff was 60

Ibid, 30. National Archives (n 57), Aylesford v Morris, Bill of Complaint, para 6. 62 National Archives (n 57), deposition of Charles Addison, 1. Wickens V-C described his role as ‘introducing improvident young men to money-lenders and getting 5 per cent’: The Times, 10 December 1872, 11. 63 National Archives (n 57), affidavit of John Graham, 7. 64 Ibid, deposition of Charles Addison, 5. 61

Earl of Aylesford v Morris 337 known to be very extravagant and that his father might tie him up in such a way that he could not make a security.…65

It was suggested that Guernsey obtain a copy of the current settlement.66 This Guernsey declined to do, for to go to the family solicitors would be to bring the entire matter to his parents’ attention. Guernsey was naive, but not so naive as not to realise that he was at a critical point. His father, at 45 years of age, was a comparatively young man, but in the spring of 1870 he had fallen ill; by autumn his decline was a matter of great consternation. It seems likely that the family realised he was dying. While his parents were probably not aware of the extent of their eldest son’s extravagances, they must have known enough of his temperament to be worried. His father and grandfather had resettled the family estate the day before his father had married in 1846, and it would appear that his father intended to repeat the practice. Lord Guernsey was engaged to Edith Peers-Williams, and their nuptials, originally intended for the autumn, had been postponed due to his father’s illness.67 Thus Guernsey found himself in a situation where the resettlement he had hoped would occur in the autumn had not, and he had quickly to find money in ways that would not panic his parents when the time shortly came to resettle the family estates. Addison searched without success for a money-lender who would advance sufficient sums to Guernsey. The problem was that money-lenders would not advance to an heir who was greatly indebted, known for his extravagances and to whom, rumour ran, his father would not wish to leave his estates.68 The search ended when Morris approached Addison and offered again to lend money on even more onerous terms.69 Morris proposed to take three bills of exchange from Guernsey. Addison had Guernsey, now visiting at his future father-in-law’s house in Wales, sign the three bills on 19 December 1870 and return them to him. Guernsey was at a crisis point. With his father ‘on the point of death’, Guernsey had ‘the devill’s own row’ with his mother.70 An odd aspect of the case is that Guernsey was the heir in fee tail, and with his father’s demise imminent he stood to inherit absolutely the great Aylesford estates. A complete absence of financial acumen marked all of Guernsey’s dealings, and this may account for the oddity.

65

Ibid. National Archive (n 57), Aylesford v Morris, affidavit of George Curtis. 67 Sporting Gazette, 4 January 1871, 25. 68 National Archives (n 57), Aylesford v Morris, deposition of Charles Addison, 3; 7. 69 This familiar practice, and the context in which it occurred, is described in HL Bellot and RJ Willis, The Law Relating to Unconscionable Bargains with Money-Lenders (London, Stevens and Haynes, 1897) vii–x; see also T Farrow, The Money-Lender Unmasked (London, Roxburghe Press 1895). 70 National Archives (n 57) Earl of Aylesford v Morris, deposition of the Right Honourable Heneage Earl of Aylesford, 22. 66

338 Catharine MacMillan The December transaction gave Morris bills of exchange totalling £11,000. Just over £9,000 went to Addison, who paid £8,000 to Morris to discharge the promissory notes. Addison received £275, Guernsey £207, and the remainder went to Morris on a discount, an action which (again) drove the effective interest rate higher than 60 per cent. On 3 January 1871, Guernsey was back in London to collect the £207, and also to sign promissory notes for £5,500 with another money-lender, John Dicker.71 It was also the day that the Aylesford estates were resettled. Under this settlement, Guernsey took a life interest in the settled estates, remainder to the use of his first son.72 At his father’s urgent request, Guernsey married Edith Peers-Williams the following Sunday.73 Two days later, the sixth Earl died and Guernsey succeeded his father. Lord Aylesford’s succession brought the money-lenders down upon him. Morris commenced a legal action to recover the £12,262 13s due on the bills. The family solicitors discovered from the seventh Earl of Aylesford what he had so zealously kept from his father—that he was greatly indebted and at exorbitant interest rates. When the family solicitors’ offer to pay the amount actually advanced and interest at 15 per cent was rejected, Lord Aylesford filed a bill of complaint in Chancery seeking an order to stay the action at law upon terms that the bills stand as security only for the amount actually advanced and interest at 5 per cent.

E. THE CONCERN ABOUT MONEY-LENDERS

Lord Aylesford brought his action at a time of contemporary concern about the evils of money-lending. The repeal of the usury acts, increasing life expectancy and the availability of cheap printing facilities created an environment in which money-lenders advertised their services widely. The ideal target was wealthy, and one with a social or professional position which would be disadvantaged by the disclosure of his borrowings. Circulars were sent so widely that even the First Lord of the Admiralty received one (sent under the misapprehension he was still an undergraduate) asking if he desired ‘pecuniary aid’.74 Contemporaries despaired over the situation: ‘[A] greater pest to society than is the West-end moneylender it is impossible to conceive...’.75 So great were the perceptions of the dangers of money-lenders that Mitchell Henry MP introduced a Loans to Infants Bill

71 National Archives of the UK (PRO), C 16/693/A119, Earl of Aylesford v Dicker, Bill of Complaint, para 9. 72 Details of the settlement are set out in The Earl of Aylesford’s Estate Act, 1882. 73 Sporting Gazette, 14 January 1871, 25. 74 The Era, 15 December 1872, 4. 75 The Examiner, 16 March 1872, 276.

Earl of Aylesford v Morris 339 in 1872.76 The Bill aimed to prevent the initial ensnaring of the borrower, which usually occurred in his infancy, by making it a misdemeanour either to solicit an infant to borrow money or to offer to lend money. The punishment for the misdemeanour was insufficient on its own to deter the money-lender’s practices, but a greater deterrent lay in the provision which rendered absolutely void any bond, note, bill or other security given for a loan to an infant where such a loan had been solicited. While Henry’s Bill was talked out of a second reading in June 1873, the reactions to it in the press provide a glimpse of contemporary concerns. At a social level, while little sympathy was evinced for money-lenders, it was thought that youths ensnared by these practices were better protected from such evils by the teachings of their parents and the public examples set by the unwary.77 At a legal level, Parliamentarians were critical of a Bill which rendered criminal those acts which had previously attracted civil consequences. Concern was expressed that the legislation might encourage young men to lie about themselves when borrowing and thus entrap money-lenders.78 It was also criticised as not applying to shop-keepers who sold exorbitantly priced goods on credit.79 The Bill attracted further criticism for being difficult to apply, likely to drive young men to professional usurers charging even higher percentages, and unlikely to prevent the advertisements and circulars which were one of the most objectionable features of the subject. The means employed were inappropriate and framed to make the situation worse.80 Much better, it was argued, to leave the enforcement of such loans with Chancery, which intervened in usurious contracts on behalf of infants to set aside the contract and reduce sums owed to a fair amount.81 The result in Earl of Aylesford v Morris contributed to the Bill’s failure, for it demonstrated the protection Chancery afforded infants from money-lenders.82

F. EARL OF AYLESFORD V MORRIS AND ADDISON

(1) Vice-Chancellor Wickens It was in this atmosphere of public concern about the evils of moneylending that Aylesford’s case was brought. The rarity of a peer alleging

76 1872 (107) Loans to infants. A bill for the protection of persons under twenty-one years of age from the solicitations and frauds of money-lenders. 77 The Examiner (n 75) 276, 277. 78 The Pall Mall Gazette, 26 June 1873, 2. 79 Anon, ‘Minors and Money-lenders’, The Pall Mall Gazette, 27 June 1873, 10. See also The Times, 22 April 1872, 12. 80 The Solicitors Journal and Reporter, 20 April 1872, 457. 81 Ibid. 82 Saturday Review, 8 March 1873, 315.

340 Catharine MacMillan that an unfair advantage had been taken of him, combined with the titillating glimpse of an indiscreet life, ensured that it attracted great public interest.83 Vice-Chancellor Wickens heard the case in December 1872.84 Lord Aylesford alleged that at the time of the first transaction with Morris, he had been the tenant in tail to a very large estate, had just come of age, was not experienced in business matters and ‘was without any professional advice or assistance’.85 He was also ‘in great pecuniary want’.86 As a result of his pecuniary circumstances and distress, the defendants Morris and Addison took an unfair advantage of him: the amount of the discount and the interest rate exacted were exorbitant and unconscionable. Lord Aylesford deposed that the unfair advantage lay in the high interest charged, for ‘they ought to have let me have money at a lower rate of interest because they knew perfectly well that I was certain to come into the property and that I could pay them and I was quite right in borrowing the money if I wanted it’.87 The case against Addison was brought on the basis that he had an interest in the bills and had acted in confederacy with Morris. Wickens V-C accepted the argument that Addison had not practised a deception and had no interest in the bills.88 Morris’s Answer to the case largely denied that he had knowledge of the matters set out. Morris denied knowledge of the plaintiff’s financial circumstances, his pecuniary wants or that he was fearful of his family’s discovery of the transactions. Morris also denied that any advantage had been taken of the plaintiff. Morris alleged that he had thought that the solicitor Graham acted as the plaintiff’s attorney in the first transaction. The amount of the discount and the rate of interest were not exorbitant or unconscionable. The plaintiff could not get money on easier terms elsewhere and had actually paid as much to others.89 Morris had risked his money on the personal security of a plaintiff ‘whose acceptances were not held in much estimation’ by others. No security was taken over any estates the plaintiff might eventually receive.90 As Morris’s counsel argued, it was likely that the estates would be resettled to give the plaintiff only a life interest or an even more limited interest, and the risk existed that the plaintiff might sell his interest in the estates.91 83 The Times, 3 December 1872, 11; 5 December 1872, 9; 6 December 1872, 11; 10 December 1872, 11; Birmingham Daily Post, 10 December 1872, 5; and the Daily News, 10 December 1872, 2. 84 (1872) 21 WR 188; 42 LJ Ch 546; 54 LT 113 (Ch). 85 National Archives (n 57) Earl of Aylesford v Morris, Bill of Complaint, para 7. 86 Ibid, para 4. 87 National Archives (n 57) Earl of Aylesford v Morris, deposition of Lord Aylesford, 36. 88 (1872) 21 WR 188, 189 (Ch). 89 The Chancery records indicate Addison had arranged a loan from the money-lender John Dicker at a rate of 80%: (n 71). 90 National Archives (n 57) Earl of Aylesford v Morris, Answer of Robert Morris, para 35. 91 The Times, 10 December 1872, 11.

Earl of Aylesford v Morris 341 Vice-Chancellor Wickens allowed the action and ordered that the bills and insurance policy stand security only for the actual amount advanced and interest at 5 per cent. In his opinion the repeal of the usury laws and the Sales of Reversions Act left unimpaired the ability of equity to protect those who were unable to protect themselves. While a contracting party was entitled to assume that the other party was competent to look after his own interests, such assumptions were ‘altered when he makes a contract of weight and importance with a person whom he knows to have just emerged from infancy’.92 While no strict rule could define when this ‘comparative incapacity’ arose, Lord Hardwicke’s observations in Chesterfield v Janssen indicated the relevant considerations. Lord Aylesford was barely out of his minority, and while many of his age might have had sufficient experience and character to protect themselves, Lord Aylesford was ‘a very weak young man, whom the money-lender knew to have already involved himself in mere wantonness, and without excuse, and to be ready to involve himself again’.93 Any man of common sense would have realised the effect of the transactions with Morris, but Lord Aylesford did not have the advice of such a man. Morris undoubtedly knew a good deal about both Lord Aylesford’s prospects and his difficulties in raising money on these prospects at reasonable interest rates. It was possible to infer the existence of an influence from the imprudence of the act done. The repeal of the usury laws did not prevent equity from inquiring into whether an incompetent man should be allowed to give such interest on a large loan, for the interest here would have quadrupled the debt in four years. Morris was bound to consider whether a person who had just emerged from his infancy was to be looked upon as one who was fully competent and ‘to see that the plaintiff had disinterested and complete assistance sufficient to bring the contracting parties on terms of something like equality’.94 The reaction of the press was swift and diverse. The Times viewed the decision favourably, for Morris’s scheme had been to compel Guernsey’s father to pay the ruinous debts his son had incurred, and no man should be liable for another’s debts.95 But while neither The Law Times nor the Solicitors’ Journal96 saw anything new in the decision, it attracted a largely critical reaction from the general press. While no sympathy was extended to money-lenders, there was concern about setting aside a contract entered into to pay gambling debts. While recognising that the decision represented 92

Aylesford (n 88) 189. Ibid. 94 Ibid, 190. 95 The Times, 11 December 1872, 7. A view shared by The Sheffield & Rotherham Independent, 13 December 1872, 2. 96 ‘The case … involved no novelty either of fact or doctrine’: Solicitors’ Journal, 21 December 1872, 139. 93

342 Catharine MacMillan an equitable distaste for usurious loans,97 concerns were expressed as to the desirability of an equitable intervention which disrupted contracts. The Economist stated that it was ‘simply monstrous’ that the law should hold people bound by their contracts in some instances but that the Vice-Chancellor would release others from contracts he subsequently found to be inequitable.98 It was far preferable that courts confined themselves to enforcing contracts rather than setting them aside. The better view was that of Baron Bramwell, who decried equitable intervention into a contract, no matter how improvident that contract, as mischievous.99 Such intervention, far from protecting expectant heirs, worked against their interests, for it encouraged heirs to enter into improvident contracts which they thought not to be binding: ‘[T]he judge-made usury law of the Court of Chancery will infallibly end in the worse ruin of the class which is induced to trust to it.’100 The imprecise basis for the equitable intervention was also criticised. The Saturday Review thought it preferable for Guernsey to have left unpaid debts unenforceable at law than to have borrowed money at exorbitant rates to satisfy them.101 The decision was explicable on the basis ‘that Lord Guernsey was such an utter and obvious fool that all persons who had dealings with him were bound to be on their guard lest they took an unfair advantage of him’.102 Because Lord Aylesford had reached his majority when he contracted, the case gave rise to questions about the competency of young men.103 Such problems were, it was thought, best solved by a better education for young men than by legal interventions. As The Law Times was quick to observe, however, the equitable jurisdiction exercised was one in which age was only a factor in setting aside an unconscionable bargain.104 The Solicitors Journal agreed that Chancery was not bound by the strict rules of the age of majority, and defended the lack of precision with the concepts underpinning the equitable jurisdiction. To define such concepts would be to systematise dishonesty, for precise definitions would point out the limits of impunity.105

97 98 99

The Spectator, 14 December 1872, 1574. The Economist, 14 December 1872, 1518. Preston v Dania (1872) LR 8 Ex 19, discussed in The Economist, 23 November 1872,

1432. 100

The Economist, 14 December 1872, 1518. Saturday Review, 14 December 1872, 752. 102 Ibid. 103 The Spectator, 14 December 1872, 1574; see also North Wales Chronicle, 14 December 1872, 3; The Sheffield & Rotherham Independent, 13 December 1872, 2. 104 The Law Times, 14 December 1872, 108. 105 Solicitors’ Journal, 21 December 1872, 139. 101

Earl of Aylesford v Morris 343 The commercially unreal nature of the decision attracted further criticism. While the Daily News welcomed the decision, it derided it as unrealistic:106 We can imagine a truly disinterested money-lender retaining a staff of lawyers to advise the young fools coming to him for loans … [D]oes not a gentle voice coming from the Law Courts beg of the spider to warn the fly before twisting a coil round him?

The Saturday Review thought it possible that some moderation on the part of money-lenders might be encouraged, for if they wanted the help of the law, ‘at least of that side of the law which is worshipped at Lincoln’s Inn, they will do well to distrust contracts which are excessively in their favour’.107 The moderation of money-lenders would act as the best protection of the improvident and the weak-minded. The decision acted as a focus for social and political criticism. Lord Aylesford, as a nobleman, it was stated, had received a tender protection not available to other youths. Indeed, there are points raised in the case which should be attentively studied by those ill-informed persons who fancy that in England the rich and the poor fare equally well in our Courts of Justice, and that the law itself is an impersonal machine, dealing out judgments without respect to the social position of the plaintiff and the defendant.108

The political ramifications of the decision were also noted, for Lord Aylesford was a hereditary legislator. If he was not fit to enter into his own contracts, how could he be fit to legislate? ‘Is it not pitiable to think that “a weak young man,” whose recent conduct has been that of an imbecile should have a voice in the Upper House of Parliament?’109 The Times found that the great value of the case lay in dissuading young men from assuming debts lest they be unable to discharge them: ‘[A]bstract advice is soon forgotten, not so the case of the young Earl of Aylesford.’110 This example, however, did Lord Aylesford’s reputation little good since ‘the conspicuous figure he plays in the eyes of the world is not an ennobling one—rather it is pitiable and humiliating’.111 As The Spectator observed, few men would resort to the Court of Chancery to prove themselves babies.112

106

Daily News, 11 December 1872, 4. Saturday Review (n 101) 753. 108 Daily News, 11 December 1872, 5. 109 Reynolds’ Newspaper, 15 December 1872, 6. 110 The Times, 12 December 1872, 7. 111 The Sheffield & Rotherham Independent, 13 December 1872, 2. 112 The Spectator, 21 December 1872, 1621, 1622. The Liverpool Mercury, 8 March 1873, 7, observed that ‘it must have required either a very considerable amount of moral courage, or a very severe pressure of necessity, to enable the Earl of Aylesford to come before the world and proclaim himself guilty of “culpable folly and extravagance”’. 107

344 Catharine MacMillan (2) Lord Selborne and Lord Justice Mellish Morris’s appeal was heard before a court filled with members of the bar and other gentlemen. Morris argued that the transaction had been set aside because of Lord Aylesford’s youth and the high rate of interest charged.113 Neither circumstance brought the case within the equitable jurisdiction. Aylesford had attained his majority. The rate of interest was high, but it reflected the risk of granting an unsecured loan to the plaintiff and was, effectively, the market rate for loans to Lord Aylesford. Morris also argued that to set aside a bargain solely on the basis of the high rate of interest went beyond the jurisdiction of cases based upon Chesterfield v Janssen.114 It had only been recently that the older cases concerned with the sale of reversions or loans on security had been extended to personal loans. The repeal of the usury laws and the alteration to the sale of reversions undermined the basis for the earlier cases. Here there was no fraud or concealment, no fiduciary relationship; and Lord Aylesford had not been under pressure when he contracted, for he borrowed not out of necessity but to fund extravagances. Morris came to equity not to seek assistance in enforcing his security, but only to uphold his legal rights. If Lord Aylesford had a defence, it was open to him to raise it at law under the Common Law Procedure Act 1860.115 Lord Aylesford’s counsel argued that all the elements necessary to set aside the transaction were present: weakness and inexperience on the part of the plaintiff, and an advantage taken of these factors by the defendant. Morris had assisted Lord Aylesford in his extravagances and in a manner that a court of equity could not countenance. The repeal of the usury laws had been brought about to assist commercial men and not to encourage extravagance. Here, the interest rate was high and also compounded, a fact which alone justified equitable intervention.116 Lord Aylesford could not escape the accumulation of interest at this rate and risked losing all his estate in bankruptcy. Morris knew very well what he was about, for he either knew or had the means of knowing that the plaintiff would succeed to a very great estate. Lord Selborne, with whom Mellish LJ agreed, affirmed the decision of Vice-Chancellor Wickens. Lord Selborne began his judgment by reasserting the equitable jurisdiction, described by Lord Hardwicke in Chesterfield v Janssen, to relieve against the fraud ‘which infects catching bargains with heirs, reversioners, or expectants, in the life of the father’.117 Two characteristics

113 Counsel’s arguments are set out in the law report ((1873) LR 8 Ch App 484) and also 21 WR 424, 424–25; The Times, 21 February 1873, 11. 114 Chesterfield (n 11). 115 Preston v Dania (n 99). 116 Gwynne v Heaton (n 14). 117 Chesterfield (n 114) 157, 102.

Earl of Aylesford v Morris 345 were always found in such bargains: weakness on the one side and usury, or extortion or advantage taken of that weakness, on the other side. Equity presumed fraud from the circumstances of the contracting, and this presumption was not negated by the repeal of the usury laws. The usury laws had been enacted not for want of power in a court of equity to set aside the transactions, but to give the party a short remedy at law. Neither the repeal of the usury laws nor the alteration to the sale of reversions removed the equitable jurisdiction to presume fraud and to relieve against that fraud. The fraud was not an active deceit but an unconscientious use of the power that arose from the circumstances and conditions where the stronger party gained dominion over the weaker party. When the relative position of the parties raised this presumption, ‘the transaction cannot 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’.118 The Victorian concern about the evils of money-lending is apparent in Lord Selborne’s description of the process of catching bargains with heirs:119 The victim comes to the snare (for this system of dealing does set snares, not, perhaps, for one prodigal more than another, but for prodigals generally as a class), excluded, and known to be excluded, by the very motives and circumstances which attract him, from the help and advice of his natural guardians and protectors, and from that professional aid which would be accessible to him, if he did not feel compelled to secrecy. He comes in the dark, and in fetters, without either the will or the power to take care of himself, and with nobody else to take care of him.

In Lord Selborne’s view, it made no difference in catching bargains with heirs whether the heir was, as here, entitled to a vested remainder rather than an expectant heir. Likewise, it made no difference if there was no dealing with the estate in remainder. The plaintiff was trusted on the credit of his expectations, and that was sufficient to bring him within these principles. Equity sought to set aside the bargain with the heir in order to implement an underlying principle of public policy, namely, the prevention of damage to the heir’s family and, indeed, to great families generally. In Lord Selborne’s words,120 it is a sort of indirect fraud upon the heads of families from whom these transactions are concealed, and who may be thereby induced to dispose of their means for the profit and advantage of strangers and usurers, when they suppose themselves to be fulfilling the moral obligation of providing for their own descendants.

118 119 120

Earl of Aylesford v Morris (1872) LR 8 Ch App 484, 491. Ibid, 491–92. Ibid, 492.

346 Catharine MacMillan That his judgment is based on such a concern is apparent in the cases cited, for these were all decided with reference to this public policy goal of maintaining a family’s wealth.121 Such a concern would not be sufficient on its own to set aside a bargain, but it would be sufficient where it connected with an equity personal to the plaintiff in a particular case. Lord Selborne’s concern to protect family wealth was heightened because the Bankruptcy Act 1861 extended to non-trading debts, with the result that the creditor could make the debtor bankrupt.122 Lord Aylesford’s case presented a young man who, having developed expensive and extravagant habits and with debts to pay, arranged a transaction with Morris within a half year of attaining his majority. He was the eldest son of a wealthy landowner, entitled to the estates in tail. The first transaction was parent to the second and occurred when Lord Aylesford was but nine months into his majority. The total debt was large and at an exorbitant rate of interest which would have doubled the debt every year. That other money-lenders would not advance money at a lower rate of interest did not prove a bargain that a court of equity should uphold. The transactions were concealed from the plaintiff’s father and the plaintiff had no disinterested advice. In short, the Plaintiff, therefore, entered into these transactions, not only without any competent and disinterested advice or assistance, but without that accurate information as to his own means and circumstances which could only be obtained if his fears had been overcome and the veil of secrecy between himself and his family removed.123

Such circumstances of contractual formation, coupled with the ‘oppressive and extortionate’ terms of the bargain, placed upon Morris the burden of adducing evidence proving that the contract was fair and reasonable having regard to the risk he ran. Morris had failed utterly to adduce such evidence, neither was he able to establish that there had been any real bargaining or attempt to assess the nature or value of Lord Aylesford’s great expectations. For these reasons, Lord Aylesford was entitled to the relief he sought. The judgment was significant for a number of reasons. The first was the assertion that the equitable doctrine to relieve against unconscionable bargains survived the repeal of the usury laws and the legislative allowance of the sale of reversions.124 The second was that this equitable protection extended not only to the sale of remainders or reversions, but to unsecured personal loans too. The third reason underlying the importance of 121 See, eg, Shelly v Nash (1818) 3 Madd 232, 56 ER 494; Smith v Kay (1859) 7 HLC 750, 11 ER 299n; King v Hamlet (1835) 3 Cl & F 218, 6 ER 1419. 122 Aylesford (n 118) 498. See also Mellish LJ’s comments in the course of argument: 21 WR 424. 123 Aylesford (n 118) 495. 124 Bellot and Willis (n 69) 37–40.

Earl of Aylesford v Morris 347 Lord Selborne’s judgment was that he distinguished this circumstance of ‘catching bargains with expectant heirs’ from those circumstances which arose from the undue influence of a relationship of confidence between the parties. Critical accounts of ‘The Great Money-lending Case’ were published widely.125 Concerns were voiced as to the principle upon which the case had been decided. It was said that the desperation and necessity of Lord Aylesford had been acted upon by the money-lender, but, it was noted, the desperate needs of one party were not (and could not be) the basis for equitable intervention when such a party contracted.126 In truth, there had been no necessity here, for it had always been open to Aylesford not to pay gambling debts or the loan contracted in his infancy, or to have made a clean breast of it with his father.127 The presumption of fraud practised by the money-lender was also criticised. As the Solicitors’ Journal noted, ‘the transaction is set aside as immoral and unconscientious on the part of the lender, the morality and conscience of the borrower are left to his own keeping’.128 The Economist stated that there was only a semblance of general principle in the case, and it did not justify intervention in contracts between people of full age and in absence of actual fraud. If actual fraud could not be established there should be no ‘presumptions’ of fraud, for it was unacceptable to enquire into the reasonableness of a transaction ‘because it is thought that the one party at the bargain was not so clever as the other’.129 The precedent was dangerous, for ‘hundreds of foolish contracts are made every day in business, which are afterwards ruinous to one of the parties’, and if Lord Selborne’s principle were applied generally, ‘the utmost mischief and confusion would follow’.130 The Economist recognised that Chancery had really extended its special protection to an expectant heir (‘in a rather grandmotherly way’131), but questioned whether heirs could not be protected from their follies in a more effective fashion. Parents should educate those who would come into property as to the effective management of wealth rather than trusting Chancery to set aside disadvantageous contracts. The Economist was also critical of the public policy basis for equitable intervention, namely, the protection

125 But note the view of the Liverpool Mercury, 8 March 1873, 7, ‘that the decision is a very just one’ because it prevented the ruinous transactions which could take place between spendthrift heirs and professional money-lenders. 126 Saturday Review, 8 March 1873, 315. 127 Ibid, 316. 128 Solicitors’ Journal, 8 March 1873, 359, 360. 129 The Economist, 8 March 1873, 309. 130 Ibid. 131 Ibid. The Economist was also of the view that ‘the tenderness of the courts appears to be confined to expectant heirs’: ibid.

348 Catharine MacMillan of great estates. It was ‘a most absurd policy’ to ‘facilitate the possession of property by people who are not trained to look after it’, and it was preferable that the improvident ‘should be quickly ruined’ rather than extend a special protection to heirs.132 There was no justification for a special protection extended to some members of society and not others.133

G. LORD AYLESFORD’S LATER LIFE

The hope that Lord Selborne’s reprieve would allow the Earl of Aylesford to reform himself was never realised.134 The observation in The Times that ‘when such is the first act of a career, the only legitimate outcome is one tragic and sad’135 proved prescient. Lord Aylesford led a life marked by childish and impetuous behaviour.136 Shortly after assuming his peerage he was convicted for throwing bags of flour at passers-by as he raced along in a carriage.137 The incident attracted the attention of Chartists challenging hereditary privileges: The Earl of Aylesford is an officer in the Life Guards and a peer of the realm. What an edifying sight it must have been—one of our hereditary legislators perched on the top of a vehicle, throwing flour at the passers-by! … How the Americans … must envy us our hereditary peerage ... .138

Age and responsibility brought little maturity. Three years later he sought to greet Queen Victoria at Leamington railway station as she travelled to Balmoral. Because of her desire not to be met (she apparently thought Aylesford a fool), railway officials attempted to prevent his entry to the station. Lord Aylesford, declaring himself above the law, led his Warwickshire 132

Ibid. Ibid. 134 The decision ‘may be used to edification, if it determines him to keep out of future scrapes, and to do something worthy of his high position. He is now a married man; let us hope that he is in safe keeping’: The Sheffield & Rotherham Independent, 13 December 1872, 2. 135 The Times, 12 December 1872, 7. 136 The Aylesford motto ‘Aperto vivere voto’ (‘To live with will unfettered’) was a principle Lord Aylesford embraced in full: Reynolds’s Newspaper, 9 July 1871, 5. 137 ‘Lord Aylesford … has struck out a new path to honour; for in an age marked by an inane feebleness, he has hit upon the plan of pelting peaceable passengers on the highway with flourbags, and has thereby incurred the displeasure of an unenlightened magistrate, who—as insensible to the rights and privileges of aristocracy as Mr Gladstone—actually issued his unroyal warrant, under which the youthful peer was fined like any vulgar individual of the order of plebeians’: Reynolds’s Newspaper, 6 August 1871, 1. See also The Times, 3 July 1871, 11. 138 Reynolds’s Newspaper, 25 June 1871, 5. Reynolds’s Newspaper never let its readers forget the flourbag incident. Reporting the Prince of Wales’s trip to India, the newspaper observed that Lord Aylesford was in line for a marquisate: ‘The Prince, it is said, asked Lord Beaconsfield to raise the Earl of Aylesford to a marquisate, by the title of Marquis of Flourbag, in consideration of his exploits from the roof a four-horse drag.’(Reynolds’s Newspaper, 10 September 1876, 2) 133

Earl of Aylesford v Morris 349 Yeomanry onto the railway’s property, assaulted an official and created a nuisance.139 His behaviour was frequently described in the press as ‘aristocratic ruffianism and rowydism’. These childish antics made Aylesford an easy target for ridicule and criticism by the Chartist GWM Reynolds in his Reynolds’s Newspaper.140 Reynolds sought peacefully to dismantle a system of privileges held by the elite.141 Greatly influenced by French republicanism, he thought that the existence of an all-controlling aristocratic elite impeded the natural development of a society based on republican egalitarianism. The solution to this problem was not revolution but ‘a peaceful and yet constant agitation to bring about fundamental change’.142 Critically reporting Aylesford’s antics provided an ideal form of agitation. Aylesford, it was frequently observed, was a hereditary legislator who obtained unenviable notoriety in the law courts for breaking the laws he was intended to frame.143 Based on such examples, this system of governance was indefensible, unsustainable and ultimately unworkable. Lord Aylesford was also used as a means to criticise the Church of England, for he possessed seven advowsons: it was an ‘infamous system which gives the appointment of the clergy to such foul-lived persons as Lord Aylesford, who has seven fat livings at his disposal’.144 That Lord Aylesford travelled in the highest circles of English society not only made him a tempting target for Reynolds’s agitation, but also meant that his expenditure was of the highest order. Aylesford was a friend of the Prince of Wales, who thought him a most amusing fellow. The entertainment of royalty was an expensive venture, as Lord Aylesford discovered when he hosted a royal party at Packington Hall in November 1874 and entertained Prince Edward and the Tsarevich Alexander. Lord Aylesford shared the Prince of Wales’s love of horse racing and gambling. His cronies’ pet name for him, ‘Sporting Joe’, was well deserved. So great was his addiction to gambling that he borrowed as he gambled. The racehorses he had purchased as a youth were merely the first of many such acquisitions; but while his expenditure on horses was massive, success on the turf eluded him. His gambling addiction was worsened by his alcoholism. Inebriation either created or worsened his foolish behaviour. He had, for example, an

139

Reynolds’s Newspaper, 31 May 1874, 4; Reynolds’s Newspaper, 23 August 1874, 3. Reynolds saw the newspaper as a great educator of the masses, teaching them their rights and wrongs with a view to effecting a silent revolution of the heart: MH Shirley, ‘GWM Reynolds, Reynolds’s Newspaper and Popular Politics’ in A Humpherys and L James (eds), GWM Reynolds, Nineteenth-Century Fiction, Politics, and the Press (Aldershot, Ashgate, 2008) 83. 141 Ibid, 86. 142 Ibid, 87. 143 Gracchus, ‘Causes of National Decay’, Reynolds’s Newspaper, 22 June 1879, 2. 144 Gracchus, ‘Bishops at Business’, Reynolds’s Newspaper, 14 July 1878, 3. 140

350 Catharine MacMillan unfortunate tendency to assault ordinary men, many of whom encountered him as they went about their lawful occupations.145 Described as ‘a noble lord, who is handier with his fists than is any way desirable’,146 such ignoble actions were often published. Membership of the Prince of Wales’s Marlborough House set was to precipitate the foremost disaster of Lord Aylesford’s life. The Marlborough House set was noted for its generally discreet extra-marital sexual activities,147 and it was these which were to place Lord Aylesford at the centre of two sensational divorce cases.148 In August 1875, Edith, Lady Aylesford, gave birth to a second daughter (Alexandra, named for her godmother, Princess Alexandra). In the autumn, the Prince of Wales was sent to India on an official visit. He was accompanied, to Queen Victoria’s disapproval, by a number of his friends, including Lord Aylesford. Lady Aylesford, who had just suffered the loss of her father, remained at Packington Hall with her daughters. Although their marriage had apparently been contracted out of love rather than dynastic ambition,149 it had not been a happy one for Lady Aylesford given her husband’s behaviour. His regular routine was to rise around midday, and then to amuse himself in the evening at the theatre and in establishments such as Cremorne Gardens, a well-known haunt of prostitutes. There he formed adulterous associations, a habit which led him to suffer from venereal disease between 1873 and 1875.150 He would then take himself to his club and return home at three or four in the morning, so intoxicated that his footman had to carry him to bed. As Lady Aylesford wrote to her mother-in-law, she had ‘suffered much’ at the hands of a husband who had ‘long ceased to care’ for her.151 145 Examples abound in the press, and some resulted in convictions, although charges were usually dropped. See, eg, Reynolds’s Newspaper, 26 January 1879, 6; 19 January 1879, 6, which details the assault and beating of two attendants at Covent Garden Theatre who had the temerity to request his ticket, with the later observation that Aylesford’s language was not that of a gentleman; or the assault of a police constable at Ascot (Reynolds’s Newspaper, 15 June 1879, 5), or of a solicitor’s clerk attending to Lord Aylesford’s business (Reynolds’s Newspaper, 8 April 1874, 1). 146 Reynolds’s Newspaper, 15 June 1879, 5. 147 Discussed in R Pearsall, The Worm in The Bud, The World of Victorian Sexuality (London, Pimlico, 1993) 20–30. 148 For this context, see M Diamond, Victorian Sensation, Or, the Spectacular, the Shocking and the Scandalous in Nineteenth-Century Britain (London, Anthem Press, 2004) ch 4. The two divorces were first, between Lord and Lady Aylesford and, subsequently, between Marchioness and Marquis of Blandford. The Aylesford divorce hearing was covered in The Times: 4 July 1878, 11; 5 July 1878, 4; 6 July 1878, 7. Reynolds’s Newspaper, 7 July 1878, 5, provided a more lurid and sensational account. 149 Lady Aylesford was known as an accomplished horsewoman, but she was not titled and brought little to her marriage settlement: The Times, 4 July 1878, 11. 150 National Archives of the UK (PRO), J 77/200/5324, Aylesford v Aylesford and Blandford, Additional Particulars of the Queen’s Proctor, 1 July 1878. 151 Letter, March 1876, from Edith, Lady Aylesford to Jane, Dowager Countess of Aylesford, quoted in Minutes of Evidence taken before the Committee for Privileges on the Aylesford Peerage Claims, p 21, Parliamentary Archives, HL/PO/DC/CP/3/6.

Earl of Aylesford v Morris 351 In this piteous state Lady Aylesford began a love affair with one of her husband’s closest friends, Lord Blandford (later the seventh Duke of Marlborough). Together they formed a plan to elope to Paris; her letter to Lord Aylesford informing him of this caused his immediate return to England. Aylesford, incensed by this behaviour, resisted family attempts to solve the problems caused by the affair. The Prince of Wales was furious at Lord Blandford; rumours appeared in the press.152 Blandford’s brother, Randolph Churchill, in an attempt to protect the family’s honour, went to the Princess of Wales with indiscrete letters written by the Prince to Lady Aylesford. While royal scandal was averted, the Prince of Wales did not recognise Churchill for over a decade. Lord Aylesford, deterred from duelling with Lord Blandford, separated from his wife, and on her assurances that she would no longer see Lord Blandford, entered into a deed of separation with her in May 1877. Later in the year, however, Lady Aylesford went to Paris with Lord Blandford, where they lived together under the name Spencer. Lord Aylesford petitioned for divorce. The divorce case caused a press sensation, particularly because of Reynolds’s Newspaper’s general attacks upon the sexual depravity of aristocrats.153 Although the case was initially undefended (and Lady Aylesford desired a divorce154), the Queen’s Proctor intervened, alleging collusion between Lords Blandford and Aylesford, and adultery on Lord Aylesford’s part. The hearing before Sir James Hannen was to produce astounding revelations of debauchery: ‘Lord Aylesford appears … as a sot, a spendthrift, an adulterer and pretty well all that is foul and filthy.’155 As the press observed, most of the aristocracy, and the Prince of Wales, must have been aware of the debauched nature of Aylesford’s life.156 Critically, it was established that Aylesford had formed an intimate relationship with a Mrs Dilke, the wife of a neighbouring landowner. Dilke, having threatened to shoot Lord Aylesford, took his own life. Unsurprisingly, the jury found that while Lady Aylesford and Lord Blandford had committed adultery, Lord Aylesford had himself been guilty of it too. The jury also found collusion between Lords Blandford and Aylesford. While this was probably not the case,157 the dismissal had great personal and dynastic ramifications for Lord Aylesford, because separation from a wife he could not divorce

152 ‘Aylesford says directly his friend Wales comes home he will ask him to get Blandford appointed to the place of Lord of the Bedchamber, he having been engaged during the Prince’s visit to India in qualifying himself to perform the delicate duties of the post’: Reynolds’s Newspaper, 23 April 1876, 6. 153 M Diamond, ‘From Journalism and Fiction into Politics’ in Humpherys and James (eds) (n 140) 92. 154 The Times, 4 July 1878, 11. 155 Reynolds’s Newspaper, 7 July 1878, 5. 156 Reynolds’s Newspaper, 14 July 1878, 3. 157 Lord Aylesford publicly denied collusion: The Times, 6 July 1878, 7.

352 Catharine MacMillan debarred him from producing a male heir, a fact which gave him little cause to preserve his estates.158 As his solicitor stated, this sent him ‘to the devil headlong’.159 As contemporaries observed, Aylesford was ‘utterly unable to manage his own affairs’.160 A decade after his inheritance, Aylesford had, astoundingly, charged almost a quarter of a million pounds against his life estate.161 His credit was so poor that many refused to carry loans for him. So great was his profligacy, however, that he even mortgaged the family heirlooms to raise money. In 1880, he suffered the indignity of having the bailiffs arrive to seize the furnishings of Packington Hall. Characteristically, Aylesford told them he was off to the races and asked if they could wait until his return.162 To protect his possessions, Chancery again became involved in his affairs.163 While his brother and brother-in-law purchased the heirlooms from the mortgagee, it was at this point that the family accepted that action had to be taken. Their realisations were no doubt sharpened by the impending enactment which was to be the Settled Land Act 1882.164 This statute had the effect of allowing the life tenant to sell the inheritance without any other consent, an ability noted by contemporary coverage.165 As was observed, the ability to keep land in a family by settlement was largely overridden.166 Such an enactment could have fatal consequences for Lord Aylesford’s family, and the great Aylesford estate was resettled by private Act of Parliament. Passed the same day as the Settled Land Act 1882, Lord Aylesford’s Estate Act 1882 vested Lord Aylesford’s life interest in his trustees. By so vesting his life interest, the resettlement prevented Lord Aylesford (or his creditors) from selling the estate to meet his debts. The trustees were also empowered to raise money to pay Aylesford’s debts, and all the family lands except the family seat in Warwickshire were sold.167 Lord Aylesford, still able to enter losing bargains, exchanged his life interest for an annual sum of £2,500, later reduced to £1,500.168 This, however, was not an unconscionable bargain upon the foolish Earl, for it occurred by parliamentary enactment and its reasonability was approved by two judges.169 158 The inability to produce an heir of a near contemporary, the fifth Earl of Lonsdale, was a significant factor in his dissipation of his family’s estates: D Sutherland, The Yellow Earl (Glasgow, Molendinar Press, 1980) 3. 159 Reynolds’s Newspaper, 7 July 1878, 5. 160 Reynolds’s Newspaper, 2 January 1881, 3. 161 The charges are set out in the Earl of Aylesford’s Estate Act 1882. 162 Reynolds’s Newspaper, 12 December 1880, 5. 163 Cobbet v Cox, reported in Reynolds’s Newspaper, 19 December 1880, 6. 164 See Anderson (n 2) 90–94. 165 Solicitors’ Journal, 11 November 1882, 19–20. 166 The Law Times, 29 April 1882, 451. 167 Lord Middleton bought the Leicestershire lands for £135,000 and Lord Romney bought the Kent lands for £100,000: Aberdeen Weekly Journal, 29 January 1885, 2. 168 Lord Aylesford’s Estate (Amendment) Act 1884, s 4. 169 Baron Huddleston and Mr Justice Cave: Parliamentary Archives, HL/PO/JO/10/9/1049.

Earl of Aylesford v Morris 353 In 1883 the seventh Earl went to Texas to live on his annuity as a cattle rancher.170 He was singularly unsuccessful in this enterprise (partly because of further racehorse expenditure),171 but he was well liked by Texans, who enjoyed his lengthy drinking parties, tall tales, and his willingness to participate in wild and reckless sports. Having celebrated the new year of 1885 continuously for a fortnight, Aylesford died of cirrhosis of the liver. He was 35 years old. A fellow peer, Lord Derby, observed that ‘he had run through his whole fortune by gaming, racing, and extravagances generally; and was one of the very worst examples of the English peerage’.172 Aylesford’s demise left an estate described by Bacon V-C as ‘not a very flourishing one’173 as Aylesford’s trustees still tried to settle his debts.174 The insurers suffered a ‘severe blow’175 as 56 policies totalling £210,000 were paid out.176 Upon the seventh Earl’s death, Lord Selborne intervened once again to keep the Aylesford estates within the family, when he accepted the claim of the younger brother, Charles Wightwick Finch, to the peerage.177 The problem arose because Lady Aylesford and Lord Blandford had had a son, Guy Bertrand, born in Paris in late 1881.178 His birth was initially concealed from the Aylesfords. When they learned of it, a further private Act was required to deal with his existence.179 With her secret revealed, Lady Aylesford (who had been permanently separated from her two daughters when she left her husband) brought her baby son to London to enjoy his company. She had him baptised, with her husband given as the father. Upon the seventh Earl’s death, his brother’s petition for the peerage was contested by Lady Aylesford on behalf of her son. The Law Lords who were a part of the House of Lords’ Committee for Privileges demonstrated knowledge of Aylesford’s shambolic life and the dangers this presented to his family’s estates.180 The decision of the Committee to allow his younger brother’s claim was a final legal act to prevent Aylesford’s actions from alienating his family’s estate.

170 He was not alone in this endeavour: R Graham, ‘The Investment Boom in British-Texan Cattle Companies, 1880–1889’ (1960) 34 Business History Review 421. His Texan life is detailed in LM Woods, British Gentlemen in the Wild West (London, Robson Books, 1989). 171 Sutherland (n 158) 46. 172 J Vincent (ed), The Later Derby Diaries (Bristol, University of Bristol, 1981) 103. 173 In re the Earl of Aylesford, Machell v Poulett, The Times, 20 April 1886, 4. 174 See, eg, In re the Earl of Aylesford (n 173) and The National Discount Company of Ireland v Burr (1885) The Times, 23 January, 3; In re Earl of Aylesford’s Family Settlement, Poulett v Finch (1885) The Times, 7 May 1885, 11. 175 Reynolds’s Newspaper, 18 January 1885, 5. 176 Detailed in the schedule to the Earl of Aylesford’s Estate Act, 1882. 177 Committee for Privileges v The Aylesford Peerage (1886) LR 11 App Cas 1. 178 It was the birth of this son which caused Lord Blandford’s wife to divorce him (leading to Lord Aylesford’s indirect involvement in a second scandalous divorce). 179 Earl of Aylesford’s Estate (Amendment) Act 1882. 180 Parliamentary Archives, HL/PO/DC/CP/5/1 MSS. Speeches Airth to Balfour, Aylesford, 45, 54–59.

354 Catharine MacMillan H. LATER APPLICATIONS OF EARL OF AYLESFORD V MORRIS

It is one of the curious features of Aylesford v Morris that a contract case which grew out of English landholding practices was to flourish in Commonwealth jurisdictions but enjoy a somewhat stunted growth in its native soil. The decision was first relied upon by barristers and judges where money-lenders had advanced loans to expectant heirs, to establish that the equitable jurisdiction survived legislative changes.181 The correctness of the decision was confirmed by the House of Lords in 1877,182 and in Fry v Lane183 the criteria of Aylesford v Morris were transplanted to cover a claimant who was poor and ignorant. By the turn of the nineteenth century, however, the case had largely fallen out of use and was not employed to develop a larger doctrine of unconscionability.184 It was only by the end of the twentieth century that Aylesford v Morris was referred to by English judges in a deferential rather than detailed manner.185 In contrast, the decision played a much larger role in the development of both what constituted a presumption of fraud and the criteria necessary to rebut this presumption in Commonwealth jurisdictions such as Canada,186 Australia187 and New Zealand.188 The absence of a similar development in England is all the more puzzling given the stretching of undue influence to cover third party lenders in cases such as Barclays Bank Plc v O’Brien189 and Royal Bank of Scotland Plc v Etridge (No 2).190 A broader doctrine of unconscionability might have been a preferable method of resolving these sorts of situations. Such a consideration, however, is beyond the scope of this chapter, as is the House of Lords’ rejection191 of Lord Denning’s general principle of unconscionability.192 What can usefully be considered are the reasons stemming from Aylesford v Morris itself as to why the decision did not grow into a greater doctrine of 181 Beynon v Cook (1875) LR 10 Ch App 389. In Beynon’s case, Jessel MR stated (at 393) that hard bargains in money-lending contracts were not about fraud. See also Nevill v Snelling (1880) LR 15 Ch D 679. In Eyre v Hughes (1876) LR 2 Ch D 148, 157–58, though, counsel employed the case to support a more general proposition that equity would prevent any oppressive bargain or advantage exacted from a man under grievous necessity and want of money, in a case concerned with a mortgage. 182 O’Rorke v Bolingbroke (1877) LR 2 App Cas 814. 183 Fry v Lane (1889) LR 40 Ch D 312. 184 Note, however, Cresswell v Potter [1978] 1 WLR 255. 185 See, eg, Alec Lobb v Total Oil [1985] 1 WLR 173, 181, per Dillon LJ; Crédit Lyonnais Bank v Burch [1997] CLC 95, 101, per Nourse LJ; and Armitage v Nurse [1998] Ch 241, 253, per Millett LJ. 186 Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710 (BCCA). 187 Blomley v Ryan (1956) 99 CLR 362 (HCA). 188 O’Connor v Hart [1985] 1 NZLR 159 (JCPC). 189 Barclays Bank Plc v O’Brien [1994] 1 AC 180. 190 Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44, [2002] 2 AC 773. 191 National Westminster Bank v Morgan [1985] AC 686. 192 Lloyd’s Bank v Bundy [1975] QB 32.

Earl of Aylesford v Morris 355 unconscionability in England. One possible reason is that the case was decided on the very eve of the Judicature Acts, and in the subsequent fusion the equitable jurisdiction was not encouraged. There is some indication that common law judges found the equitable jurisdiction to release people from contractual arrangements on the basis of extortionate interest rates an odd one.193 Another reason lies in the critical reaction that the decision received in the press. While legal publications largely defended it, it is clear that both commercial interests and political reformers were hostile to the decision. The former group were particularly concerned with the possibility that an unbridled equitable doctrine might lead to ex post facto judicial regulation of contracts. Many common law judges shared these concerns.194 A more probable reason is that Aylesford v Morris was seen as particularly applying to loans to heirs. There are two aspects to this reason. The first is that the case was recognised by English judges as arising out of the peculiar difficulties that could ensue from the practice of tying up a family’s wealth in a strict settlement. Many of these difficulties began to fade from the late nineteenth century with the reform of property laws. In addition, for various economic and political reasons, the privileged position of the English aristocracy faded in the twentieth century. The judicial protection of this elite as a public policy goal also disappeared. So, too, did the heir tightly controlled by his immediate ancestor. When these pressing concerns were removed, Aylesford v Morris became more difficult to apply. The second aspect is that the particular problem of money-lending to heirs was soon largely dealt with by legislation. While Henry’s Loans to Infants Bill of 1872 never became law, some of its policies were implemented in the Infants Relief Act 1874. In particular, the 1874 Act rendered many money-lending contracts with infants void, and since the money-lender’s snare was usually set during an heir’s minority, the Act worked to prevent cases from arising. While this protection was unable to prevent the full evils of money-lending, legislative protection to expectant heirs who had attained their majority was provided by the Money-lenders Act 1900. In 1906, the House of Lords held that the 1900 Act went beyond those cases in which the Court of Chancery would have given relief.195 Aylesford v Morris, characterised as a money-lending to heirs case, involved a subject English law later dealt with by legislation. From this perspective, Aylesford v Morris was a legal response to the evils of money-lending which flourished in the late Victorian age. Lord Selborne’s judgment was thus only one means by which the law attempted to control a particular problem. In the future, English claimants largely sought their protection from legislation rather than judicial decision. 193 194 195

Webb v Mansell (1877) The Times, 1 February, 11. Preston v Dania (1872) LR 8 Ex 19. Samuel v Newbold [1906] AC 461.

12 Re Hallett’s Estate (1879–80) GRAHAM VIRGO

A. INTRODUCTION

B

EING CHARACTERISED AS a landmark decision can be a burden. For once perceived as a landmark, the case can be used and abused as authority for a variety of propositions far removed from what was actually decided. Like a game of Chinese whispers, the ratio of the decision may be slightly altered each time it is cited, ending up radically different from where it started. This is especially true of the decision of the Court of Appeal in Re Hallett’s Estate,1 properly characterised as a landmark decision on the law of tracing, and one of the most significant decisions in Equity in the late nineteenth century. Although the decision of the Court of Appeal, and the judgment of Sir George Jessel MR in particular, has been regularly cited in English and other courts, that citation is often vague. For example, in Re Diplock’s Estate2 the Court of Appeal relied ‘on the principle on which Hallett’s case was founded’ and the ‘equity underlying Hallett’s case’, without identifying the principle or the equity. In Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd,3 Lord Templeman controversially recognised the possibility of tracing into the defendant’s assets even if their acquisition was not attributable to the claimant’s value, and justified this with reference to a dictum from Re Hallett which was taken out of context.4 In Sinclair v Brougham,5 various members of the House of Lords relied on Re Hallett’s Estate as support for a variety of new propositions of law, 1 Re Hallett’s Estate; Knatchbull v Hallett; Cotterill v Hallett (1879–80) 13 Ch D 696. The Court of Appeal gave two judgments, which were reported together, along with Fry J’s decision at first instance. 2 Re Diplock’s Estate [1948] Ch 465, 526. See also Re Leslie Engineers Ltd [1976] 1 WLR 292, 300 (Oliver J) and Re Lehman Brothers International (Europe) [2009] EWHC 3228 (Ch), [2010] 2 BCLC 301 [236] (Briggs J). 3 Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072. 4 Re Hallett’s Estate (n 1) 719. 5 Sinclair v Brougham [1914] AC 398.

358 Graham Virgo which Stoljar observed involved the judges manufacturing the opportunity to talk about Re Hallett and giving it ‘something of a new mystique, as if it held untold possibilities’.6 The principles underlying the decision have even been incorporated as the standard term of a contract, again without identifying what those principles are.7 Before the significance of the case can be assessed, it is important to be clear what it actually decided. It may be regarded as authority for two propositions: (a) Where a fiduciary sells goods belonging to the principal and pays the proceeds of sale into a personal bank account which is already credited with the fiduciary’s own money, the principal can trace the value of his goods into that bank account, despite the mixing of value with that of the fiduciary. (b) Where a fiduciary has withdrawn value from a mixed bank account and has dissipated it, the fiduciary is presumed to have dissipated his own value and not that of the principal, even though the principal’s money was credited to the account before that of the fiduciary. Therefore, the rule in Clayton’s Case,8 whereby payments which are first credited to the account are assumed to be the first to be withdrawn, does not apply where the principal’s funds are mixed with those of the fiduciary. The identification of these basic propositions can tell us only so much about the significance of the decision. The real importance of the case may be assessed only with an awareness of its context, the nature of the decisionmaking process and an appreciation of subsequent developments. It will be seen that the case tells us a lot more about Equity than just the nature of the tracing rules; it exemplifies the equitable approach to judicial development of the law and the identification of fundamental principles.

B. THE CONTEXT OF THE DISPUTE

Re Hallett’s Estate involved proprietary claims to funds credited to the bank account of an insolvent solicitor who had misappropriated money from a client and from a trust in which he had a life interest. Although the judges in the Court of Appeal focused their attention on the key principles of Equity 6

S Stoljar, ‘Re-examining Sinclair v Brougham’ (1959) 22 MLR 21, 30. See, eg, Viglen’s standard terms: ‘Until the Seller is paid in full for the goods the relationship of the Buyer to the Seller shall be fiduciary in respect of the goods or other goods in which they are incorporated or used and if the same are sold by the Buyer the Seller shall have the right to trace the proceeds thereof according to the principles in Re Hallett’s Estate (1880) 13 Ch D 696.’ 8 Devaynes v Noble, Clayton’s Case (1816) 1 Mer 572. 7

Re Hallett’s Estate 359 relating to the tracing of property, the decision was of wider practical significance at the time because of serious concerns about the activities of fraudulent and bankrupt solicitors, and because the Court of Appeal was still working out the implications of the enactment of the Judicature Acts.

(1) Fraudulent and Bankrupt Solicitors Henry Hughes Hallett was a solicitor who practised initially from Staple’s Inn in London and subsequently at 58 Lincoln’s Inn Fields. It is unclear why he was tempted to misappropriate assets belonging to a trust and a client, although perhaps he needed to do so to maintain the high standard of living to which he was accustomed.9 Such misappropriation of assets by solicitors was not uncommon. From the late 1870s until the end of the nineteenth century, there was much adverse publicity arising from substantial frauds and defalcations committed by solicitors.10 Although in 1895 the Law Society asserted that such defalcations related to only a tiny proportion of trust funds administered by solicitors, in absolute terms this was a large amount11 and was becoming a public scandal. Probably the most notorious example of solicitor fraud was that of Benjamin Lake, a former president of the Law Society and chairman of its Discipline Committee, who had misappropriated assets from three trust funds, was convicted in 1901 and was sentenced to 12 years’ imprisonment.12 There was also public concern about solicitors who had become bankrupt. In the week before Hallett’s death in 1878, Sir Henry Peek MP requested the Solicitor-General to disclose details of how many solicitors had been declared bankrupt.13 Although this information was not forthcoming in Parliament, in a number of editorials and letters to the editor published in the Solicitors Journal over the following weeks various allegations were made and disputed concerning the extent to which solicitors had taken advantage of the Bankruptcy Act. Solicitors had been brought within the

9 According to census returns, Hallett lived comfortably. In 1851 he owned a house in Kingston-upon-Thames which he occupied with his wife, three children, a footman, cook, nurse and housemaid. In 1861 he had a nurse, nursemaid, cook, housemaid and general servant. By 1871, when a number of his children had left home, the household consisted of a nurse, cook, parlourmaid and housemaid. 10 H Kirk, Portrait of a Profession (London, Oyez Publishing, 1976) 214. 11 P Polden, ‘Solicitors’ in The Oxford History of the Laws of England, vol XI: 1820–1914: English Legal System (Oxford, OUP, 2010) 1108, 1163. See generally M Lunney, ‘The Law Society and the Defalcation Scandals 1900’ (1996) 17 Journal of Legal History 244. 12 JS Anderson, Lawyers and the Making of English Land Law (Oxford, OUP, 1992) 207–08; Lunney (n 11) 260–61. See also Re Murray (1887) 57 LT 223 (payment of the proceeds of sale of a client’s house into the solicitor’s bank account); Sharp v Jackson [1899] AC 419 (payment of trust money into a firm’s bank account). 13 (1878) 22 Solicitors Journal 237.

360 Graham Virgo bankruptcy jurisdiction only in 1861; and from that date until 1877, 942 solicitors had been declared bankrupt,14 with one being declared bankrupt 12 times. Concern was expressed about solicitors speculating with client money or living an extravagant life, or simply being neglectful of their clients’ affairs.15 Some of the major London firms of solicitors suffered significant financial losses at this time.16 This was partly due to collapsing share prices, but money was also lost in speculative investments in property, or simply through gambling.17 Another contributing factor was that solicitors often carried on a banking or money-broking business as well.18 In 1895 Gibson noted that19 the bankruptcy of solicitors is generally brought about by their entering upon some outside business with a view to making a fortune, not being content to earn a mere livelihood by the exercise of that profession to which they are attached, and on the lines of which they have been educated and brought up; in short, the bankruptcy is the result of disobeying the maxim, ‘Ne sutor ultra crepidam’.

The nature of solicitor fraud and the risk of bankruptcy were captured brilliantly by Granville-Barker in his play The Voysey Inheritance, first performed in 1905. The play opens with a son of a solicitor, who is about to inherit the family law firm, discovering that his father has been speculating with his client’s money, originally to make good the losses suffered as a result of his own father’s similar malpractice, but more recently to feed his gambling addiction. The moral dilemma at the heart of the play is whether the family should perpetuate the theft or risk public dishonour. The malpractice involved capital held in trust for clients being used to maintain the Voysey family’s opulent lifestyle, while the clients, unaware of the misappropriations, were kept quiet by receiving what purported to be regular interest payments on their misappropriated capital. The father describes his malpractice as follows: My practice is to reinvest my clients’ money when it is entirely under my control. The difference between the income this money has to bring to them and the income it is actually bringing to me I utilise in my endeavour to fill up the deficit in the firm’s accounts … in fact, to try and put things straight.

The fact that Hallett was a fraudulent solicitor was not lost on the members of the Court of Appeal. Jessel MR recognised that the case ‘unfortunately

14

Polden (n 11) 1161. (1878) 22 Solicitors Journal 326. 16 Polden (n 11) 1163. See also Lunney (n 11) 264, fn 13. 17 M Birks, Gentlemen of the Law (London, Stevens, 1960) 271. 18 See (1895) 13 Gibson’s Law Notes 280. 19 Ibid, 282. Pliny the Elder, Naturalis Historia xxxv, 36, 85–86: Sutor, ne ultra crepidam (roughly: ‘Shoemaker, stick to making shoes’). 15

Re Hallett’s Estate 361 presents one more instance of a solicitor betraying his trust’ and that the issue was which of his numerous clients should suffer from his fraud.20 The root of the problem for clients arising from solicitor fraud and bankruptcy was that solicitors tended to mix the funds of their clients with the office account, so that the client’s money once mixed would become lost on the solicitor’s bankruptcy.21 This practice originated with the Georgian attorneys, who saw themselves as bankers and considered that they were entitled to use the money of their clients and take the interest which it generated for themselves. Consequently, in the eighteenth century the relationship between solicitor and client was essentially that of debtor and creditor. Although, during the nineteenth century, the relationship had started to shift to one of trustee and beneficiary,22 or what we would now describe as fiduciary and principal, solicitors would still pay client money into their own bank accounts, save very exceptionally where the contract with the client contained a direction to the contrary.23 Even in the 1880s, the practice of mixing clients’ money with that of the solicitor was common. The textbooks of this period assumed that this was perfectly acceptable.24 At this time the Law Society had no disciplinary functions. It was only in 1888 that the Solicitors Act authorised the establishment of a Discipline Committee to hear complaints about solicitors. Before then the responsibility for discipline of the profession lay entirely with the courts, which had the power to strike a solicitor from the roll.25 But applications had to be brought by the Law Society, which could afford to make an application only where clear cases of fraud were brought to its notice. In the late nineteenth century about half a dozen solicitors were struck off each year from a total on the roll of over 10,000.26 The criminal law provided little scope for regulating solicitor malpractice. Misappropriation of clients’ money was not a crime until the enactment of the Larceny Act in 1901, save if the client had earmarked the funds for a particular purpose. The 1901 Act made it an offence for an agent fraudulently to convert any funds held as 20

Re Hallett’s Estate (n 1) 706. Polden (n 11) 1161. 22 Birks (n 17) 245. 23 Ibid, 245. 24 EF Turner, The Organisation of a Solicitor’s Office, 2nd edn (London, Waterlow & Sons, 1886) 48–55, identified five different methods for managing client money, three of which did not involve the creation of a separate client bank account. See also Turner (1885) 29 Solicitor’s Journal 301. The first edition of A Cordery, The Law Relating to Solicitors of the Supreme Court of Judicature (London, Stevens & Sons, 1878) 81, made no adverse comment about paying client money into the solicitor’s personal bank account. By the 2nd edn (London, Stevens & Sons, 1888) solicitors were advised, at 124, to keep a proper diary or record of clients’ business. Solicitors are now required to keep clients’ money separate from their own by opening client accounts: Solicitors’ Regulation Authority Accounts Rules, 2011, rule 13; published online at . 25 Kirk (n 10) 76. 26 Birks (n 17) 245. 21

362 Graham Virgo agent. Consequently, proprietary claims brought by the clients of solicitors to recover their money provided the only plausible mechanism for judicial intervention in solicitor fraud, and Re Hallett’s Estate provided an opportunity for Equity to be used to enable such claims to succeed.

(2) The Judicial Players Four judges were involved in Re Hallett’s Estate. Sir Edward Fry was the trial judge, and Jessel MR, Baggallay and Thesiger LJJ sat in the Court of Appeal. Awareness of the background and personalities of these judges is crucial to understand their approach to decision-making, their use of precedent and their identification of principle, all key themes in the case. It is the judgment of Jessel MR which has proved to be the most influential subsequently. He had a profound influence on the development of the Equity jurisdiction in the 1870s until his death in 1883. He has been described as ‘[o]ne of the great creative Judges of English legal history. He consciously modified the law when he felt that the old rules were no longer in accord with modern conditions.’27 He marshalled ‘previous decisions with breadth of thought and grasp of distinguishing detail and rapidly swept from the books a mass of bad law’.28 He made up his mind quickly and, having done so, became impatient of argument and was unduly brusque in manner.29 This brusqueness is especially clear in his first judgment in Re Hallett’s Estate, where he dispatched Fry J’s judgment in an earlier decision with derision.30 He only twice reserved judgment in the Court of Appeal, and both times at the request of his colleagues; with one of those occasions being in Re Hallett’s Estate itself. He was self-confident and has been reported as saying: ‘I may be wrong and sometimes am but I never have any doubts.’31 His influence on the development of modern Equity was profound. Before he became a judge he was an MP and Solicitor-General, in which capacity he steered through Parliament what became the Supreme Court of Judicature Act 1873 which fused the administration of the Common Law and Equity courts.

27 A Goodhart, Five Jewish Lawyers of the Common Law (Oxford, OUP, 1949) 22. See also Denning (1950) 66 LQR 412. 28 AP Peter, Analysis and Digest of the Decisions of Sir George Jessel, late Master of the Rolls (London, Stevens and Sons, 1883), Preface. See also EA Bell, These Meddlesome Attorneys (London, Secker, 1939) 52. 29 Polden (n 11) 765. 30 Jessel and Fry had taken very similar routes to the Bench. Both had been educated at University College London (Jessel becoming Vice-Chancellor from 1881 until his death). Jessel was a mathematician and botanist (obtaining the university prize for vegetable physiology); Fry was a botanist (his British Mosses was published in 1892); both were called to the Bar at Lincoln’s Inn and both became Benchers of that Inn; they were also both elected as Fellows of the Royal Society. Fry was elevated to the Court of Appeal following Jessel’s death. 31 Goodhart (n 27) 19.

Re Hallett’s Estate 363 He subsequently was a member of the committee which was empowered to make rules for the Supreme Court under the Judicature Acts, and played a leading part in making the new system work.32 As his obituary in the Solicitors Journal observed,33 ‘no judge did more to carry out the principles and purposes of the Judicature Acts and to regulate their operation by the rules of common sense and practical convenience, than the late Master of the Rolls’. Although there were times when Jessel MR might be regarded as having sought substantive fusion of Common Law and Equity,34 he was well aware that the main purpose of the 1873 Act was to effect a fusion of courts not a fusion of law, and soon after Re Hallett’s Estate he expressly rejected any substantive fusion of Common Law and Equity.35 Baggallay LJ also was learned in Equity, having practised in Chancery as a barrister. He too had been an MP and had participated in debates on the enactment of what became the Judicature Act. Thesiger LJ had a Common Law practice at the Bar where he had dealt primarily with commercial and compensation cases. He had less opportunity to mould the rapidly developing law in the period after the enactment of the Judicature Act, since he died in 1880. Probably his first judgment in Re Hallett’s Estate was his most significant contribution in the Court of Appeal, a contribution which has not received the attention which it deserves, largely, no doubt, because of the influence of Jessel MR’s judgment. But Thesiger LJ’s judgment is just as learned and, as regards the appropriate analysis of proprietary claims, perhaps even more significant.

C. THE BACKGROUND TO THE LITIGATION

(1) The Marriage Settlement In 1847, Hallett married Bridget-Anne at Kingston-upon-Thames.36 A marriage settlement was made by him that year by virtue of which £2,300 Consols (bonds) were settled by him for the benefit of himself for life with remainder to his wife and their children. The trustees of this settlement were two of his brothers. Over the following years several changes were made in the investment of the trust funds. In January 1850 the Consols were sold and the proceeds were handed by the trustees to Hallett who invested them in various mortgages, as noted in a memorandum which was handwritten by him in the folds of a draft of the marriage settlement. This memorandum recorded 32

Polden (n 11) 765. (1883) 27 Solicitors’ Journal 342. 34 See Polden (n 11) 770; Sir A Mason, ‘The Place of Equity and Equitable Remedies in the Contemporary Common Law World’ (1994) LQR 238, 241. 35 Salt v Cooper (1880) 16 Ch D 544, 549. 36 (1847) 182 The Gentleman’s Magazine 311. 33

364 Graham Virgo that the final mortgage debt was paid off in 187037 and the proceeds were then invested in Russian bonds of a nominal value of £2,590. Interest payments in respect of the mortgages were paid to Hallett by virtue of his life interest under the marriage settlement, and were recorded by him in his diaries. Despite what he had written in the memorandum, it appears that the proceeds of the final mortgage were not invested specifically in any bonds. Rather, by 1877 Hallett had simply allotted two sets of Russian bonds, from a considerable number of bonds which were already in his possession, to represent the trust funds of the marriage settlement. One set of bonds was of a nominal value of £1,554 and the other of £1,036. Just before Hallett’s death, his son found the £1,554 bonds and delivered them to the trustees. The trustees sold them and retained the proceeds of sale. It was subsequently held that these were the proceeds of the original trust funds and could be retained by the trustees.38

(2) Mrs Cotterill’s Bonds Hallett had acted as the solicitor for Mrs Amelia Cotterill for over 20 years. In 1860 he purchased Russian bonds for her of the nominal value of £1,258. In February 1868 she deposited these bonds with him, plus £1,000 Midland Wagon Company bonds. In March 1871 Hallett sold the Midland Waggon Company’s bonds for £1,010. He allotted some Russian bonds which were already in his possession to represent the proceeds of the sale. Hallett gave Mrs Cotterill a receipt for these bonds which confirmed that he held £1,258 and £1,184 bonds in safe custody for her, the latter representing the proceeds of the Midland Wagon Company bonds. Later in 1871 Mrs Cotterill deposited a further £450 of 1871 Russian bonds with him for safe-keeping. By the end of 1871 Hallett held £2,892 of bonds for her.

(3) Deposit of the Bonds In June 1873 Hallett took to his bankers a large quantity of Russian bonds in two parcels which he deposited in his own name. The envelope of one parcel was subsequently lost, but the envelope of the other had an indorsement on it showing that it contained bonds worth £2,442, namely, the bonds which he held on behalf of Mrs Cotterill except for the 1871 Russian bonds. The other parcel was found to have contained £2,590 worth of bonds which Hallett held for the trustees.

37 38

In fact it was paid off in 1869. Re Hallett’s Estate (n 1) 699 (Fry J), confirmed by the Court of Appeal, at 706.

Re Hallett’s Estate 365 (4) The Proceeds of Sale In 1877 various transactions occurred without the authority of the trustees or Mrs Cotterill: (a)

In August, Hallett requested his bankers to transfer the bonds he held for the trustees into his possession. (b) On 3 November, he directed his bankers to sell Mrs Cotterill’s £450 Russian bonds. The net proceeds of sale of £341 was credited to his personal bank account. (c) On 8 November, he deposited with his bank £1,036 of Russian bonds which were some of the bonds he held for the trustees. Consequently, on this date there was a total of £3,478 of Russian bonds in the custody of his bank. (d) On 14 November, he sold all of these bonds. He received net proceeds of £1,804 in respect of Mrs Cotterill’s remaining bonds, and £770 in respect of the bonds belonging to the trustees. On the same day, £2,574 was credited to his personal bank account, which was already credited with £1,796. By the end of the day there was £4,370 standing to his credit. The consequence of these transactions was that all Mrs Cotterill’s bonds had been sold and some of those belonging to the trustees, save for the £1,554 worth of bonds which remained in Hallett’s possession and were later found by his son. All the proceeds of the sales were credited to his bank account in the following order, as evidenced by the entries in his pass book and the books of the bank: £341—the proceeds of Mrs Cotterill’s £450 bonds; £770—the proceeds of sale of some of the bonds belonging to the trustees; £1,804—the proceeds of sale of the remaining bonds belonging to Mrs Cotterill. Over the next few months Hallett withdrew £2,662 in total by cheque for his own purposes. He died insolvent on 2 February 1878. If nothing more had been credited to his account after 14 November 1877 the balance of his account at his death would have been £1,708, but from that date until his death an additional £1,320 was credited to his account.39 The balance of the account at his death was £3,029 and always exceeded £2,574, the value of the proceeds of sale of the bonds belonging to the trustees and Mrs Cotterill credited to the account on 14 November. Probate was granted to Hallett’s wife on 14 May 1878. A creditor’s action was commenced for the administration of Hallett’s estate. Summonses were taken out by the trustees of the marriage settlement, who claimed £770 from the amount credited to Hallett’s bank account and a declaration that the proceeds

39

(1879) LJ Ch App 415, 416.

366 Graham Virgo of the sale of the £1,554-worth of bonds which had been found in Hallett’s possession belonged to them. A summons was also taken out by Mrs Cotterill, who claimed £1,708, although the actual amount due to her was £1,804. She did not claim for the £341 proceeds of the bonds sold on 3 November, apparently because it was assumed that this had already been withdrawn and spent by Hallett. In the light of the subsequent decision of the Court of Appeal, this failure to claim for the proceeds of these bonds was mistaken.40 A sum of £2,600 had been paid into court in respect of the creditor’s action, which was sufficient to meet the claims of the trustees and Mrs Cotterill. The problem was that Hallett had died insolvent, and there were numerous claims against the estate from other creditors. The key issue, therefore, was simply whether the trustees and Mrs Cotterill could claim in priority to these creditors. Crucially, the trustees and Mrs Cotterill were not seeking priority between themselves. Had there been insufficient funds credited to Hallett’s bank account at his death to meet the claims of both the trustees and Mrs Cotterill, the Court of Appeal would have needed to consider issues relating to competition between innocent parties which were not fully examined until Re Diplock’s Estate.41

D. THE TRIAL

On the first day of the hearing on 10 July 1879, Fry J gave judgment in the claim of the trustees of the marriage settlement. He held that £2,590 of the bonds in Hallett’s possession had been appropriated to the trust of the marriage settlement, and the trustees could trace the proceeds of those bonds which had been sold and credited to Hallett’s bank account. The key question then was whether the rule in Clayton’s Case42 applied so that the earlier drawings from the account were to be attributed to the sums first paid in. Fry J considered that, in principle, where a bank balance consisted partly of a man’s own money and partly of trust funds which he could not lawfully apply for his own purposes, all drawings from the account should be considered to be of his money rather than that of the trust fund. But he considered himself to be bound by authority43 to apply the rule in Clayton’s Case. Consequently, the success of the trustees’ claim depended on the timing of the respective entries in the bank’s books. Since the trustees’ money had been credited just before that of Mrs Cotterill on 14 November, it was the trust money which was considered to have been spent first. Consequently, Fry J disallowed the claim of the trustees altogether. 40 Although it may have raised issues concerning the application of the lowest intermediate balance rule. See the text to n 130. 41 Re Diplock’s Estate (n 2). 42 Clayton’s Case (n 8). 43 Pennell v Deffell (1853) 4 De G M & G 372, 43 ER 551; Frith v Cartland (1865) 2 Hem & M 417, 71 ER 525; Brown v Adams (1869) LR 4 Ch 764.

Re Hallett’s Estate 367 On 12 July 1879, Fry J gave judgment in the claim of Mrs Cotterill. He held that Hallett was not a trustee of the bonds for her;44 but since he was her solicitor and held the bonds as agent and bailee for her, and because he lacked authority to dispose of the bonds or to mix the proceeds of sale with his own money, he was a fiduciary who had acted in breach of duty. It followed that she was entitled to the same relief as though he had held the bonds as trustee for her.45 Consequently, she could follow the proceeds of sale into the balance standing to his credit in the bank account. But the rule in Clayton’s Case was applied to her claim too, which was reduced substantially but not disallowed completely. Significantly, if Fry J had found that Hallett did have authority to sell the bonds and pay the proceeds into his own bank account, he would have concluded that Mrs Cotterill was merely a general creditor. Focusing on the absence of Hallett’s authority to act enabled him to distinguish his own judgment in Ex parte Dale.46 That case concerned a bank which was employed as a special agent to collect and remit money to the plaintiff. The money collected by the bank became mixed with other money and the bank then went into liquidation. Fry J had held that, although the bank was a fiduciary, the money it had collected formed part of its general assets so the plaintiff was only a general creditor and did not have priority over the bank’s other creditors. In Re Hallett’s Estate, Fry J explained this result on the ground that the bank had been authorised to mix the receipts with its own money. He acknowledged that this conclusion removed some of the force of the observations he had made in Ex parte Dale concerning Pennell v Deffell47 which had held that it was possible to trace into a mixed fund. In Ex parte Dale, Fry J had struggled to reconcile Pennell v Deffell with a number of earlier cases which had recognised that, since money has no earmark, it was not possible to trace into a mixed fund.48 Although he considered that ‘the principles of equity are very much opposed to that line of decision’,49 he did not feel able to depart from the earlier cases and concluded that Pennell v Deffell applied only where a trustee had mixed money from a trust fund with his own money. Although Fry J’s passing reference to Pennell v Deffell in Re Hallett’s Estate suggests that it was of little relevance to the outcome of Mrs Cotterill’s claim, that was not the case. Hallett had mixed Mrs Cotterill’s money with

44

Re Hallett’s Estate (n 1) 702. Ibid, 703. 46 Ex parte Dale (1879) 11 Ch D 722. 47 Pennell v Deffell (1853) 4 De GM & G 372, 43 ER 551. 48 Including Whitecomb v Jacob (1710) 1 Salk 160, 91 ER 149; Scott v Surman (1742) Willes 400, 125 ER 1235; Ryall v Rolle (1749) 1 Atk 165, 26 ER 107; Ex parte Dumas (1754) 1 Atk 232, 26 ER 149; Ex parte Sayers (1800) 5 Ves Jun 169, 31 ER 528; Taylor v Plumer (1815) 3 M & S 562, 105 ER 721. 49 (1879) 11 Ch D 772, 777. 45

368 Graham Virgo his own, so it was necessary to determine whether it was possible to trace into a mixed fund. His analysis of Pennell v Deffell in Ex parte Dale meant that it was possible to trace into a mixed fund only where the defendant was a trustee and not where he was merely a fiduciary, since then the established rule that money had no earmark would apply. Having recognised that Hallett was only a fiduciary and not a trustee, it should have followed that Mrs Cotterill’s claim should have failed. For her claim to succeed Fry J needed to find a way to bring it within the principle recognised by Pennell v Deffell. He did that by concluding that Hallett’s unauthorised sale and mixing was a breach of fiduciary duty which meant that Mrs Cotterill should be given the same relief as if Hallett had been a trustee for her. Treating Hallett as if he was a trustee then made it possible to trace into the mixed bank account E. THE DECISIONS OF THE COURT OF APPEAL

The plaintiff who brought the creditor’s action appealed against Fry J’s decision on the grounds that, as regards Mrs Cotterill’s claim, she should not have recovered anything in priority to the general creditors because Hallett did not hold the bonds as trustee for her but only as bailee, and as regards the claim of the trustees, there was insufficient evidence that any bonds had been purchased with trust money or had been appropriated to the trust. The trustees appealed against Fry J’s decision to apply the rule in Clayton’s Case to defeat their claim to £770. Mrs Cotterill appealed against the application of that rule to reduce her claim. The Court of Appeal delivered two decisions, one on 3 December 1879 concerning the claims of the trustees and Mrs Cotterill to the funds credited to Hallett’s bank account, and the second, on 11 February 1880, concerning the application of the rule in Clayton’s Case. (1) Claim of the Trustees of the Marriage Settlement The decision of Fry J was unanimously confirmed as a finding of fact, namely, that £2,590 of the bonds had been allotted to the trust so that they constituted trust property. (2) Claim of Mrs Cotterill The issue concerning Mrs Cotterill’s claim was considered to be a question of law.50 A number of distinct stages may be identified in the reasoning of the court. 50

Re Hallett’s Estate (n 1) 707 (Jessel MR).

Re Hallett’s Estate 369 (a) Fiduciary Relationship The Court of Appeal confirmed that Hallett did not hold the bonds as trustee for Mrs Cotterill51 but as bailee, and he received the dividends as her agent. Consequently he stood in a fiduciary position towards her and she was the beneficial owner of the bonds and the proceeds of sale.52 He had breached his fiduciary duty by selling the bonds improperly and paying the proceeds to his bank account. It followed that Mrs Cotterill had the same right of relief as if Hallett had been her trustee.53 (b) Claim to Proceeds of Sale It was recognised that the principal could claim the proceeds of sale where her property had been disposed of by a fiduciary, regardless of whether the sale was rightful or wrongful, although in the latter case the claimant would need to adopt the sale in order to take the proceeds.54 But in either case the principal needed to identify the proceeds of sale in the defendant’s property. Even though Mrs Cotterill’s money had become mixed with Hallett’s own money in his bank account, it had not been disputed that her money remained at his bankers at the time of Hallett’s death, and it was held that she was entitled to claim the proceeds of the bonds from the money credited to his bank account. Subject to the application of the rule in Clayton’s Case, this was sufficient to dispose of the appeal, but the judges went on to consider other matters relating to proprietary claims. (c) Proceeds of Sale Invested Where the proceeds of sale of the principal’s property had been invested by the fiduciary without first becoming mixed with the fiduciary’s money, it was recognised that the claimant could elect either to take the property purchased or to have a charge on that property for the amount of money owed by the fiduciary.55 (d) Tracing into a Mixed Fund The real concern for the Court of Appeal was not the decision of Fry J in this case, but his earlier decision in Ex parte Dale that money could not be traced

51 Although Jessel MR in his second judgment did describe Hallett as a trustee of the bonds: ibid, 726. But throughout the case ‘trustee’ is sometimes used as shorthand for all fiduciaries: ibid, 709 (Jessel MR). 52 Ibid, 720 (Jessel MR). 53 Ibid, 721 (Baggallay LJ). 54 Ibid, 709 (Jessel MR). 55 Ibid.

370 Graham Virgo into a mixture because it had no earmark. Indeed, Jessel MR recognised that, had it not been for that decision, the doctrines of Equity were such that Mrs Cotterill’s case would have been too clear for argument. All three judges recognised that it was possible to trace money into a mixed fund even where the money had been mixed by a fiduciary. Jessel MR first sought to identify the relevant equitable principles and then assessed the earlier cases with reference to them. He considered that the key principle was that the rules on following money through mixtures applied regardless of the nature of the fiduciary relationship and were not confined, as Fry J had suggested, to express trusts. Consequently, if a bailee sold the bailed goods, the bailor could follow the proceeds in Equity even if they had become mixed with other money. So, for example, if the bailor’s 1,000 sovereigns were put into a bag by the bailee who accidentally dropped a sovereign of his own into it, the bailor would have a right to take 1,000 sovereigns out of the bag, because there was effectively a charge over the contents for that amount.56 The same rules would apply if the money was mixed in a bank account, with a charge on the whole fund for the amount due. Although the old authorities had recognised that it was not possible to follow money into a mixture because money had no earmark,57 Jessel MR considered them to be based on a wrong reason and to have been overruled. In argument he had said,58 ‘but that doctrine is now settled that money may be ear-marked. Subsequent Judges have followed the decision blindly, though the reason for it is gone.’ He was particularly scathing of Fry J’s reliance on Whitecomb v Jacob for the principle that money has no earmark:59 [W]ith the single exception that the sole ground for the decision has been overruled, it is to be an authority! Did ever any one hear anything, if I may say so, so extraordinary as such a comment on an old case?

And later:60 I do not know of anything more mischievous than for a Judge to say, ‘The cases before me establish no principle, but they quite establish something else which I will now enunciate, and therefore hold myself bound by those cases to establish another principle which was never suggested or thought of by the Judges who decided the original cases.’ It is only out of my great respect and esteem for the 56

Ibid, 711 (Jessel MR). Noting in particular Whitecomb v Jacob (1710) 1 Salk 160, 91 ER 149; Ryall v Rolle (1749) 1 Atk 165, 26 ER 107; and Ex parte Dumas (n 49). But some earlier cases had recognised that it was possible to trace into a mixed fund. See, eg, Lord Chedworth v Edwards (1802) 8 Ves June 46, 49; 32 ER 268, 270 (Lord Eldon LC). 58 (1879) 49 LJ Ch 415, 416. T Lewin, Practical Treatise on the Law of Trustees, 7th edn (London, Maxwell & Son, 1879) 764 similarly recognised that ‘the notion seems to have originated from some misconception and cannot be supported’. 59 Re Hallett’s Estate (n 1) 714. 60 Ibid, 720. 57

Re Hallett’s Estate 371 learned Judge from whom this appeal comes that I thought it right to go so fully into the cases to shew that there is no foundation whatever for the suggested distinction …

Jessel MR considered that the principle that money has no earmark had been overruled by Lord Ellenborough in Taylor v Plumer.61 He supported much of the reasoning of Lord Ellenborough, notably that it was possible to follow the product or substitute of the original thing as long as it could be ascertained. Jessel MR then said:62 Now there comes a point which is not correct, but which I am afraid only ceases to be correct because Lord Ellenborough’s knowledge of the rules of Equity was not quite commensurate with his knowledge of the rules of the Common Law …

This was the proposition that money would cease to be ascertained when it became ‘mixed and confounded in a general mass of the same description’.63 Jessel MR thought that Lord Ellenborough could not have been aware of the equitable rule which gave the claimant a charge over the mixture so that the means of ascertainment remained, regardless of whether the money had been mixed by an agent or a trustee. Jessel MR considered Pennell v Deffell,64 a decision of the Court of Appeal in Chancery, to be of greater weight than the old cases since it was more recent. In that case Knight-Bruce LJ had recognised that it was possible to trace into a mixed fund even where the mixing had been undertaken by an agent. As Thesiger LJ recognised, this part of the decision of the Court of Appeal did not involve the creation of any new principles65 but removed a lot of old authorities, and clearly identified the function and proper interpretation of the existing principles. (e) Mixture Invested Where the proceeds of sale are mixed with the fiduciary’s money and this is used to purchase property, the beneficial owner cannot elect to take that property because it was not bought with what Jessel MR called ‘trust money simply and purely’66 but with a mixed fund. But the claimant would still be entitled to a charge on the property for the amount of trust money which had been spent. Confining the claimant to a charge was not significant to the result of the case, since a charge over Hallett’s bank account

61

Taylor v Plumer (n 48). Re Hallett’s Estate (n 1) 717. 63 Taylor v Plumer (n 48) 575; 727. 64 Pennell v Deffell (n 47). This had been followed in Harford v Lloyd (1855) 20 Beav 310, 52 ER 622; Frith v Cartland (1865) 2 Hem & M 417, 71 ER 525; Brown v Adams (1869) LR 4 Ch 764; Ex parte Cooke (1876) 4 Ch D 123; Birt v Burt (1879) 11 Ch D 773n. 65 Re Hallett’s Estate (n 1) 724. 66 Ibid, 709. 62

372 Graham Virgo was all that the trustees and Mrs Cotterill needed to obtain priority over his general creditors. (f) The Rule in Clayton’s Case This was the one area of disagreement amongst the judges in the Court of Appeal. The former Chancery practitioners held that the rule in Clayton’s Case did not apply as regards withdrawals made by a fiduciary from a mixed fund, whereas Thesiger LJ, the former Common Law practitioner, considered the court to be bound by earlier authorities67 to apply the rule in such circumstances. Although Jessel MR considered the rule in Clayton’s Case to be convenient and applicable unless there was evidence of contrary agreement or a contrary intention might be presumed,68 he considered it to be inapplicable where the withdrawals were made by a fiduciary because where a man could do an act rightfully he should not be allowed to say that he had acted wrongly.69 In other words, where a trustee has withdrawn money from a mixed fund consisting of trust money and his own money, he could not say that he had withdrawn trust money when he could lawfully withdraw his own money. Although Fry J had considered himself to be bound by Pennell v Deffell to apply Clayton’s Case, and even though that decision was one of the Court of Appeal in Chancery, Jessel MR considered that he could treat it as simply wrong on this point, since it had involved an error not in the identification of the underlying principle but in its application to the facts70 and it was only of marginal significance to the result. Baggallay LJ agreed with the analysis of Jessel MR71 but rejected the conclusion in Pennell v Deffell, either on the ground of inadequate discussion of the application of Clayton’s Case or because the case might have turned on special facts not noted in the law report. He considered that no injustice would arise from departing from Pennell, because nobody would have relied on it and it did not involve the logical consequence of an application of principles. For Baggallay LJ the key principle was that where a fiduciary had withdrawn money from a mixed fund, it was appropriate to attribute to him an intention to act honestly.72 He noted that the attribution of such an intention in this case was possible because Hallett had at all times left

67

Particularly Pennell v Deffell (n 47). Re Hallett’s Estate (n 1) 728. 69 Ibid, 727. See also Pinkett v Wright (1843) 2 Hare 120, 67 ER 50; affd (1846) 12 Cl & Fin 764 (HL). 70 Re Hallett’s Estate (n 1) 730. 71 Ibid, 731. 72 Ibid, 740. At 743 he also referred to the presumption of an honest intention on the part of the trustee. 68

Re Hallett’s Estate 373 enough in his bank account to satisfy the claims of both claimants in full.73 It is unclear whether this was anything other than a coincidence, especially because, as Jessel MR had recognised, there were numerous other clients whose money he had misappropriated.74 Although Thesiger LJ accepted the force of the principle that a trustee should not be allowed to rely on his own unlawful conduct, and he acknowledged that a judge should have the courage of his convictions, he considered that it was equally desirable that a judge should respect the opinions of other judges.75 Crucially, he noted that the court in Pennell v Deffell was a court of co-ordinate jurisdiction with the new Court of Appeal. Consequently, the principles which were explicitly decided by that case should be applied by the Court of Appeal, and further, the rule had been applied in respect of claims against fiduciaries in subsequent cases.76 (g) The Result The effect of both decisions of the Court of Appeal was that both the trustees and Mrs Cotterill were able to recover all they had claimed, since all the withdrawals from 14 November 1877 until Hallett’s death three months later were assumed to be of his own money. Although Mrs Cotterill had claimed £1,708, she could have recovered the remaining £94 Hallett had obtained from the sale of the same bonds. She might even have been able to recover the £341 he had made from the earlier sale of her bonds, but only if it had been possible to prove that the balance of Hallett’s bank account between 3 and 14 November 1877 had not fallen below that amount.77 If the balance had fallen below £341, he would necessarily have dissipated some of her proceeds of sale.

(3) Re Hallett’s Estate Revisited The Solicitor’s Journal78 described the first decision of the Court of Appeal as demolishing a rather irrational limitation of a useful doctrine by enabling a principal to follow trust money into a mixed fund. The second decision usefully restricted the application of Clayton’s Case. Both these aspects of the case remain relevant today. But the law of tracing, and proprietary claims more generally, has not remained static since 1880. It is important, therefore, 73

Ibid, 731. Ibid, 706. 75 Ibid, 752. 76 Eg, Merriman v Ward (1860) 1 J & H 371, 70 ER 790; Brown v Adams (1869) LR 4 Ch 764; Ex parte Cooke (n 64). 77 DA McConville, ‘Tracing and the Rule in Clayton’s Case’ (1963) 79 LQR 388, 394. 78 (1879) 24 Solicitor’s Journal 101. 74

374 Graham Virgo to revisit Re Hallett’s Estate in the light of subsequent developments. In doing so it will be seen that the case continues to be important in resolving some of the difficult contemporary issues relating to proprietary claims. (a) A Structure for Proprietary Claims Although the proper mode of analysing proprietary claims is controversial, it is possible to identify a framework for their analysis. This requires the consideration of five separate questions: (a) Can the claimant identify an initial interest in property, sometimes known as the proprietary base? (b) Can the claimant identify the value of his property in an asset which is in the defendant’s possession? This requires the application of the tracing rules. (c) What is the nature of the claim in respect of that property; in particular, is the claimant bringing a proprietary or a personal claim? (d) What is the appropriate remedy to vindicate the claimant’s property rights? (e) Does the defendant have any defences? In analysing Re Hallett’s Estate from a contemporary perspective, the crucial questions relate to the identification of a proprietary base, the operation of the tracing rules and the determination of the appropriate remedy. (b) Identifying the Initial Proprietary Interest In a simple case where the claimant is a beneficiary of an express trust and the trustee has misappropriated trust property, the claimant clearly has an equitable proprietary interest by virtue of the trust. But in a case such as Re Hallett’s Estate, the identification of a relevant proprietary interest for each claimant is potentially more difficult to establish. The Court of Appeal recognised that Hallett held the bonds for Mrs Cotterill as her bailee and the proceeds of sale as her agent. Although the court did not consider the nature of the relationship between the trustees and Hallett, presumably Hallett also held the bonds as their bailee and the proceeds of sale as their agent,79 because it is likely that the trustees had transferred the trust funds to Hallett to invest them in his capacity as a solicitor, in the same way that he invested funds for other clients including Mrs Cotterill. It follows that legal title to the bonds and the proceeds of sale would have vested in both the trustees and Mrs Cotterill. But if that is the case, how could they assert an equitable proprietary interest to the proceeds

79

LD Smith, The Law of Tracing (Oxford, Clarendon Press, 1997) 124.

Re Hallett’s Estate 375 of sale credited to Hallett’s bank account to enable them to obtain an equitable charge over the account? There are a number of mechanisms which might be identified to explain their entitlement to such an equitable remedy. (i) Express Trust An equitable proprietary interest would arise if the bonds or the proceeds of sale were held on an express trust for the claimants. The Court of Appeal expressly found that Hallett was not a trustee for Mrs Cotterill. Smith has, however, suggested80 that the trustees’ claim was based on an express trust, in that Hallett held the bonds on trust for the trustees who then held the equitable title on trust for the beneficiaries of the marriage settlement. But there is nothing in any of the reports of Re Hallett’s Estate to indicate that any of the judges adopted such a dual trust analysis, which cannot anyway explain the equitable proprietary claim of Mrs Cotterrill. (ii) Equitable Charge to Vindicate Legal Proprietary Rights Perhaps the remedy of an equitable charge is available even though the claimant asserts a legal proprietary interest. This was advocated by Maudsley, who argued that equitable proprietary remedies should protect beneficial ownership regardless of whether the beneficial owner has legal or equitable title to property.81 If this is correct, it would involve a radical reappraisal of the law of proprietary claims, since it would no longer be necessary to construct artificially an equitable proprietary interest in order to obtain an equitable proprietary remedy.82 It would mean that there had been a significant substantive fusion of Common Law and Equity. There is nothing in Re Hallett’s Estate to support such fusion, which would be contrary to Jessel MR’s own understanding of the effect of the Judicature Act. (iii) Subsisting Equitable Interests An alternative way of justifying an equitable proprietary remedy where the claimant has a legal proprietary interest is by asserting that one person can have both legal and equitable proprietary interests in an asset at the same time. This method of analysing proprietary claims is contrary to the modern orthodoxy which requires a particular event to create an equitable 80 Ibid. See also A Oakley, ‘The Prerequisites of an Equitable Tracing Claim’ (1975) 28 Current Legal Problems 64, 71. 81 RH Maudsley, ‘Proprietary Remedies for the Recovery of Money’ (1959) 75 LQR 234, 243. See also Smith (n 79) 344. 82 See, in particular, Lord Browne-Wilkinson’s analysis of the constructive trust in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 and his treatment of a thief as a fiduciary.

376 Graham Virgo proprietary interest,83 so the person with the legal proprietary interest cannot also be regarded as having an equitable interest. But this method of analysing proprietary claims has been advocated by some commentators,84 and even Jessel MR recognised that a person could own property at Common Law and in Equity at the same time.85 In fact there is a dictum of Jessel MR in Re Hallett’s Estate itself which might be considered to support this method of analysing proprietary claims. He said:86 If you have goods bargained and sold to a man upon trust to sell and hand over the net proceeds to another, that other is the beneficial owner; but if, instead of being bargained and sold, so as to vest the legal ownership in the trustee, they are deposited with him to sell as agent, so that the legal ownership remains in the beneficial owner, can it be supposed, in a Court of Equity, that the rights of the beneficial owner are different, he being entire beneficial owner in both cases? I say on principle it is impossible to imagine there can be any difference. In practice we know there is no difference, because the moment you get into a Court of Equity, where a principal can sue an agent as well as a cestui que trust can sue a trustee, no such distinction was ever suggested, as far as I am aware. Therefore, the moment you establish the fiduciary relation, the modern rules of Equity, as regards following trust money, apply.

Now this dictum is ambiguous. It certainly does suggest that the beneficial owner who retains legal ownership has rights recognised in a Court of Equity.87 But the context of the dictum is significant. Jessel MR was rejecting the suggestion of Fry J in Ex parte Dale that the operation of the tracing rules depended on whether the defendant was trustee or agent. Jessel MR was asserting that, for the purposes of tracing, the agency relationship was no different from a trust relationship but that there must be a fiduciary relationship of some kind. This is clear from the final sentence of the dictum; the fiduciary relationship is required to follow property. But, crucially, that final sentence specifically refers to following trust money; it is still necessary to show that the money which is being followed derives from a trust. That the rules on following or tracing depend on the identification of a trust relationship, but that this may be wider than an express trust, is supported by a dictum of Thesiger LJ, which has not received the attention it deserves. He said:88

83 Ibid, 706 (Lord Browne-Wilkinson). See also RM Goode, ‘The Right to Trace in Commercial Transactions’ (1976) 92 LQR 529, 531. 84 See, in particular, Oakley (n 80) 74. See also D Browne (ed), Ashburner’s Principles of Equity, 2nd edn (London, Butterworth & Co, 1933) 87. 85 Loosemore v Tiverton and North Devon Railway Co (1883) LT 162, 165. 86 Re Hallett’s Estate (n 1) 710. 87 Oakley (n 80) 72. 88 Re Hallett’s Estate (n 1) 722. See also Sinclair v Brougham (n 5) 421 (Viscount Haldane).

Re Hallett’s Estate 377 It has been established for a very long period, in cases at Law as well as in cases in Equity, that the principles relating to the following of trust property are equally applicable to the case of a trustee, using the term in the narrow and technical sense which is applied to it in the Court below, and to the case of factors, bailees, or other kinds of agents … The principle of law may be stated, as it appears to me, in the form of a very simple, although at the same time very wide and general proposition … wherever a specific chattel is intrusted by one man to another, either for the purposes of safe custody or for the purpose of being disposed of for the benefit of the person intrusting the chattel; then, either the chattel itself, or the proceeds of the chattel, whether the chattel has been rightfully or wrongfully disposed of, may be followed at any time, although either the chattel itself, or the money constituting the proceeds of that chattel, may have been mixed and confounded in a mass of the like material.

He considered that the only apparent exception to this principle was where,89 although there may have been a trust with reference to the disposition of the particular chattel which these moneys subsequently represented, there was no trust, no duty in reference to the moneys themselves beyond the ordinary duty of a man to pay his debts; in other words, that they were cases where the relationship of debtor and creditor has been constituted, instead of the relation either of trustee and cestui que trust, or principal and agent.

Although Thesiger LJ did not relate his analysis to the identification of legal or equitable interests in property, it is clearly the existence of the fiduciary relationship which is crucial to the proprietary claim and which we would today say creates the equitable proprietary interest. But, implicit in what he says, the mere existence of a fiduciary relationship is not sufficient in its own right to enable the claimant to assert a proprietary claim. As Millett LJ later recognised in Paragon Finance plc v DB Thakerar & Co (a firm),90 the question is not simply whether, for example, an agent is a fiduciary, because all agents owe fiduciary duties, but whether the agent owed fiduciary duties in respect of the property which he received so that he was trustee of it. This trust may be express or implied from an ‘unexpressed but presumable intention of the parties, having regard to all the circumstances of the case’.91 Such an intention will be implied, for example, where the fiduciary is under a duty to keep goods or money received separate from his own assets so that it cannot be used for his own purposes,92 or where the fiduciary is entrusted

89

Re Hallett’s Estate (n 1) 724. Paragon Finance Ltd v DB Thakerar & Co (a firm) [1999] 1 All ER 400. 91 Harris v Truman (1881) 7 QBD 340, 356 (Manisty J). 92 So, eg, money paid into a client account by a solicitor will be held on trust for the client: Plunkett v Barclays Bank Ltd [1936] 2 KB 107, 117 (du Parcq LJ). 90

378 Graham Virgo with money to buy specific property so that the money and any property purchased with it will be held on trust for the principal.93 Although these principles were not specifically identified in Re Hallett’s Estate, the conclusion that both the trustees and Mrs Cotterill could trace into Hallett’s bank account is consistent with their having an equitable proprietary interest in the proceeds of sale of their bonds. This arose because Hallett had been entrusted with the bonds as bailee, so that he was under a duty to keep them separate from his own. Consequently, when the bonds were sold, he was under a duty to keep the proceeds separate from his own money and so held them on trust for both claimants. In fact the Court of Appeal had the opportunity in Re Hallett’s Estate to clarify when a fiduciary’s receipts will be held on trust for the principal, since this was the crux of the dispute in Ex parte Dale94 where Fry J had held that the plaintiff had no proprietary interest in money collected by the defendant bank even though the bank was the plaintiff’s agent. In Re Hallett’s Estate he distinguished Ex parte Dale on the basis that the bank’s receipt had been authorised whereas in Re Hallett’s Estate the solicitor’s sale of the bonds had been unauthorised. None of the judges in the Court of Appeal criticised the result of Ex parte Dale, but it is unclear why the unauthorised nature of the receipt should affect whether the receipt was held on trust or not. It has been suggested that the results of Re Hallett’s Estate and Ex parte Dale are reconcilable95 because the defendant in the latter case was a bank which was not under any obligation to pay the money it had received to the claimant and so was simply a debtor and not a trustee of the sum received.96 But it is not possible to conclude that the bank was under an obligation to account for the money collected only because it was a bank; it had been employed as a special agent and was characterised by Fry J as a fiduciary. Some other reason needs to be identified as to why the bank was under no obligation to hold the receipts on trust for the claimant. That reason cannot be that the money had been received from a third party rather than from the claimant, because such receipts from third parties have been recognised as being held on trust for the claimant.97 The reason may, however, be identified from another decision of Jessel MR, sitting as a trial judge and given only a few months after Re Hallett’s Estate. In Kirkham v Peel98 he declined to apply Re Hallett’s Estate and confirmed that a principal had only personal rights to money received by its

93 Middleton v Pollock (1876) 4 Ch D 49; Harris v Truman (1881) 7 QBD 340, affd (1882) 9 QBD 264 (CA); Hancock v Smith (1889) 41 Ch D 456, 461 (Lord Halsbury LC). 94 Ex parte Dale (n 46). 95 Oakley (n 80) 73. See also Smith (n 79) 125. 96 Oakley (n 80) 71. 97 Lyell v Kennedy (1889) 14 App Cas 437. 98 Kirkham v Peel (1880) 28 WR 941.

Re Hallett’s Estate 379 agent. His decision was approved by the Court of Appeal.99 The claimant in that case was a merchant who had consigned goods to the defendant for sale in India on commission. When the claimant transferred the goods to the defendant he was paid an advance of 85 per cent of their value. Once the goods had been sold the defendant was liable to account to the claimant for the outstanding 15 per cent of the value. The defendant invested the proceeds of sale in India and the claimant sought an account of the profit from that investment. It was held that once the goods had been sold, the defendant was accountable to the claimant only for the balance of the value and did not hold the proceeds of sale on trust even though he was the claimant’s agent. Jessel MR noted that Re Hallett’s Estate had nothing to do with the case of a commission merchant or agent, but was confined to the ‘case of a bailee, ordinarily called a factor, who sells single articles, and whose duty it is to remit the necessary proceeds to his principal’.100 That is not quite consistent with Jessel MR’s own analysis of the facts in Re Hallett’s Estate, where he described Hallett as holding the proceeds of sale of the bonds as agent for Mrs Cotterill, but that was an agency which derived from the bailment of the bonds themselves. The agency in Kirkham v Peel was different, since, as Jessel MR emphasised, no commission agent would ever keep separate bank accounts,101 the implication being that there was never any expectation that the proceeds of sale would be kept separate from the defendant’s own money. It follows that a fiduciary will hold property on trust for the claimant only where he can be considered to be under an obligation to keep the property separate so that it is earmarked. As regards goods, this obligation will arise where the defendant is a bailee. So, in Kirkham v Peel the defendant did not hold the proceeds of sale of the goods on trust because the goods had not been bailed to the defendant; title to those goods had passed. As regards money, the obligation to keep the money separate will arise where the defendant is required to pay the money into a separate bank account or has actually kept the money separate. So, in Lyell v Kennedy,102 where rent was collected by the defendant as agent for the claimant and was paid into a separate bank account, it was held on trust for the claimant, whereas, in Ex parte Dale, the receipts were not paid into a separate bank account and it was presumably never anticipated that they would be earmarked in this way, so they were not held on trust.

99 (1880) 44 LT 195. The facts are identified more clearly from the judgments of the judges in the Court of Appeal. 100 Kirkham v Peel (n 98) 942. 101 See also, (1880) 44 LT 195, 196 (James LJ). 102 Lyell v Kennedy (1889) 14 App Cas 437.

380 Graham Virgo The principles relating to when a solicitor’s receipts will be held on trust were accurately identified by Cordery in 1888:103 Special circumstances are required to raise the relation of trustee and [cestui que] trust between solicitor and client, as where the solicitor receives his client’s money not for remittance, nor as banker merely, but for a particular purpose and with the duty of calling it for the benefit of the client, and keeping it until it is called for.

This analysis of when a fiduciary will hold goods and money on trust has important implications for other situations. So, for example, what would have happened in Re Hallett’s Estate if, as Maudsley hypothesised,104 money had been paid to Hallett by a third party on behalf of Mrs Cotterill, rather than being derived from her property? Maudsley suggested that even then the money would be held on trust for Mrs Cotterill; but if Hallett was under no obligation to keep those receipts separate from his own, and bearing in mind the practice relating to solicitors at the time it would be difficult to identify such an obligation, the case would be indistinguishable from Ex parte Dale and Hallett would only have been personally liable to account for the money received. Similarly, where a fiduciary has received a bribe from a third party, such receipts should not be regarded as being held on trust unless the court declares them to be so because they were received fraudulently.105 Until such declaration there is only a personal liability to account to the principal for the value of the receipt,106 because those receipts will not have been earmarked. Furthermore, if the principle that receipts by fiduciaries are not automatically held on trust had been explicitly recognised then the House of Lords would not have made its fundamental error in Sinclair v Brougham107 in holding that the relationship between the depositors and the directors of a building society was fiduciary so that, when the building society had become insolvent, the depositors had a proprietary claim for repayment because their deposits were held on trust. The House of Lords relied specifically on Re Hallett’s Estate to reach this conclusion.108 But a building society which had borrowed money without any obligation to keep the money separate was only a debtor and not a trustee. This decision limped along for over 80 years until it was finally put out of its misery by the House of Lords in Westdeutsche Landesbank Girozentrale v Islington LBC.109 Re Hallett’s Estate was not to blame for this confusion.

103

Cordery (n 24) 125. Maudsley (n 81) 243. 105 Metropolitan Bank v Heiron (1880) 5 Ex D 319. 106 Lister and Co v Stubbs (1890) 45 Ch D 1; Re Mouat [1899] 1 Ch 831, 835 (Stirling J). See now Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347, [2011] Bus LR 1126. 107 Sinclair v Brougham (n 5). 108 Ibid, 421 (Viscount Haldane), 447 (Lord Parker) and 459 (Lord Sumner), 109 Westdeutsche Landesbank Girozentrale v Islington LBC (n 82). 104

Re Hallett’s Estate 381 In fact, had the case been analysed more carefully, it would have been obvious that the proprietary claim in Sinclair v Brougham must fail. (c) Tracing Although the equitable rules of tracing and the way they are analysed have developed significantly since 1879, Re Hallett’s Estate has been highly influential in that development, but often as a result of a misunderstanding as to exactly what the case decided. The case has been especially influential as regards four aspects of the tracing rules. (i) Fiduciary Requirement It has often been assumed that it is possible to rely on the equitable tracing rules, and so trace into a mixed fund, only if property has been transferred in breach of a fiduciary duty; so a fiduciary relationship is a prerequisite to equitable tracing. This has proved significant in maintaining the distinction between tracing rules at Common Law and in Equity. This fiduciary requirement was recognised by Viscount Haldane in Sinclair v Brougham,110 was adopted by the Court of Appeal in Re Diplock’s Estate111 and subsequently treated as representing the law.112 Although Jessel MR did say that ‘the moment you establish the fiduciary relation, the modern rules of Equity, as regards following trust money, apply’,113 the preferable view is that the identification of the fiduciary relationship is only relevant to the identification of an equitable proprietary interest and is not a prerequisite for tracing.114 Even in Sinclair v Brougham the fiduciary relationship requirement was used to identify the equitable proprietary interest to enable Equity to declare a charge on a bank account, albeit incorrectly, and not as a condition for tracing.115 Although in Re Diplock’s Estate the trial judge had treated Re Hallett’s Estate as authority for the proposition that the right to trace was only available where there was a fiduciary relation between the parties to the action,116 the Court of Appeal was not willing ‘to see the arm of equity thus shortened’117 by treating mixing by the fiduciary as a requirement to trace. Rather, where the mixing had been undertaken by an innocent volunteer, the trigger for the award of proprietary relief was that a proprietary interest had been created 110 111 112 113 114 115 116 117

Sinclair v Brougham (n 5) 421. Re Diplock’s Estate (n 2). See, eg, Agip (Africa) Ltd v Jackson [1990] Ch 265; [1991] Ch 547 (CA). Re Hallett’s Estate (n 1) 710. Smith (n 79) 123. See also Oakley (n 80) 82. Sinclair v Brougham (n 5) 421 (Viscount Haldane LC) and 441 (Lord Parker). Re Diplock’s Estate [1947] Ch 716 (Wynn-Parry J). Re Diplock’s Estate (n 2) 526.

382 Graham Virgo by the wrongful dealing by the fiduciary.118 Once this interest had been created it could be traced into property in the possession of an innocent third party as long as the means of identification remained;119 the fiduciary relationship was not a precondition for tracing. Crucially the Court of Appeal identified the following as the key principle:120 [E]quity may operate on the conscience not merely of those who acquire a legal title in breach of some trust, express or constructive, or of some other fiduciary obligation, but of volunteers provided that as a result of what has gone before some equitable proprietary interest has been created and attaches to the property in the hands of the volunteer.

In Agip (Africa) Ltd v Jackson,121 Millett J considered the only restriction on tracing in Equity was that there was some fiduciary relationship which permitted the assistance of Equity to be invoked. He considered that this depended on authority rather than principle. But it depended on neither. The fiduciary relationship relates to the identification of the proprietary interest and not to the tracing rules. (ii) Assumption that the Trustee Acted Rightfully A key feature of Re Hallett’s Estate was the principle that a trustee should be assumed to have acted rightfully, so that where money was withdrawn from a mixed fund, this will be presumed to have been the trustee’s own money. The assumption that the trustee acted rightfully was later extended to cases where the trustee had withdrawn money from the mixed fund and used this to acquire property, subsequently dissipating the remaining value in the fund.122 In such a case, if the Hallett presumption were applied, the claimant’s proprietary claim would fail since it would be assumed that the money withdrawn was that of the trustee and so the claimant’s money was dissipated. To avoid such a result, the assumption that the trustee acted rightfully should be assessed at the time the claim is made. Consequently if, as events turned out, it is better for the claimant to claim against the value taken from the mixed fund rather than what remained in the account, the claimant will be able to do so by treating the trustee as having withdrawn the trust money first. In Re Hallett’s Estate the assumption that the trustee acted rightfully was justified on the basis that a trustee would be presumed to have acted

118

Ibid, 525. Ibid, 536. 120 Ibid, 530, relying on the judgment of Lord Parker in Sinclair v Brougham (n 5) 447. See also Campden Hill Ltd v Chakrani [2005] EWHC 911 (Ch) [74] (Hart J). 121 [1990] Ch 265, 290. See also [1991] Ch 547, 566 (Fox LJ). 122 Re Oatway [1903] 2 Ch 356; Re Tilley’s Will Trusts [1967] Ch 119. 119

Re Hallett’s Estate 383 honestly and to have intended to withdraw his money first.123 But any such presumption of intention is fictional, especially since, if the wrongdoer clearly intended to withdraw the claimant’s value first, he would still be deemed to have withdrawn his own money.124 In Re Oatway,125 where a solicitor trustee had mixed trust money with his own in his personal bank account, and had then withdrawn an amount which he used to purchase shares and dissipated what was left, the justification for the trust to claim the shares made no reference to any presumed intention that the solicitor had acted rightfully. Rather, the result was considered to be a function of there being a charge over the whole of the bank account. The solicitor was not entitled to withdraw anything from that account until the trust money had been restored to the trust. Any money withdrawn before then was subject to the charge, and consequently the shares were also subject to the charge.126 Whether the rules in Hallett’s Estate and Re Oatway are analysed by reference to presumed intention or as a function of there being an equitable charge over a mixed fund, the result is that the claimant has a right to elect127 to assert a proprietary right either against the value in the mixed fund or against any property purchased with value from that fund,128 and the claimant does not need to make this election until it is necessary to assert rights to property. It follows that one of the principles of tracing recognised by the House of Lords in Foskett v McKeown,129 namely, that the vesting of property rights should not depend on subsequent events, is incorrect; the claimant can choose whether to vest rights in the fund or an acquired asset depending on subsequent events. There is one other context in which the assumption that the trustee acted rightfully might have a role to play, namely, where the value credited to the mixed fund falls below the value which the claimant had contributed to it. In James Roscoe (Bolton) Ltd v Winder,130 Sargant J concluded that to the extent that the claimant’s contribution to the fund must have been withdrawn and dissipated, tracing will fail. This is perfectly logical. But he went on to distinguish Re Hallett’s Estate and concluded that tracing will fail even if the trustee has subsequently paid in his own money to the fund

123 Re Hallett’s Estate (n 1) 727 (Jessel MR) and 740 and 743 (Baggallay LJ); James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62, 67 (Sargant J). 124 JB Ames, Lectures on Legal History (Boston, Mass, Harvard University Press, 1913) 419. 125 Re Oatway (n 122). 126 Ibid, 361 (Joyce J). See also Boscawen v Bajwa [1996] 1 WLR 328, 336 (Millett LJ). 127 Shalson v Russo [2003] EWHC 1637 (Ch), [2005] Ch 281 [144] (Rimer J). Cf Turner v Jacob [2006] EWHC 1317 (Ch), [2008] WTLR 307 [102] (Patten J). 128 Primeau v Granfield 184 F 480 (1911) 484 (Judge Learned Hand). See also Ames (n 124) 420. 129 Foskett v McKeown [2001] 1 AC 102, 111 (Lord Browne-Wilkinson) and 138 (Lord Millett). 130 James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62.

384 Graham Virgo so as to restore the original balance. This is because the trustee could not be considered to intend to clothe his own money with a trust in favour of the claimant. He did, however, recognise that additional payments to a separate trust account, from which trust funds had been dissipated, would be considered to be a substitute for the trust money because there would then be a sufficient intention for the new money to be held on the old trust.131 But it is unclear why such an intention could not be presumed where a trustee’s money had subsequently been credited to a general bank account from which trust money had been withdrawn. Surely if Jessel MR had considered this point in Re Hallett’s Estate he would have concluded that the trustee would have acted rightfully and honestly, and so, where the funds have been restored, he should be presumed to have intended to reinstate the trust money. (iii) The Rule in Clayton’s Case The recognition in Re Hallett’s Estate that the rule in Clayton’s Case does not apply where a fiduciary has made a withdrawal from a mixed bank account has never been challenged. Indeed, the inapplicability of the rule in that context was affirmed by Fry LJ, as he then was, in Hancock v Smith.132 But the Court of Appeal in that case133 did acknowledge that if there were insufficient funds to meet the claims of all beneficiaries whose money had been mixed by a fiduciary, the rule in Clayton’s Case would apply as between them. There were similar obiter dicta as to the application of Clayton’s Case in Re Stenning.134 It was not until Re Diplock’s Estate135 that the rule in Clayton’s Case was actually applied where the money of innocent contributors had been mixed in a current bank account. This application of the rule is dubious for three reasons. First, the Court of Appeal in Re Diplock’s Estate stated that the rule applied where money from two different trusts was mixed in a bank account from which drawings were subsequently made and that this had not been adversely criticised, citing the judgments of Fry J in Re Hallett’s Estate and North J in Re Stenning as authority. The reference to the judgment of Fry J is odd, because his application of the rule to the facts of that case was rejected by the Court of Appeal. There are, however, dicta, again obiter, of that Court which are consistent with the rule being applied as between beneficiaries of different trusts. Jessel MR considered that the rule would apply in such 131 Ibid, 69. See also Re Diplock’s Estate (n 2) 552 (unmixing of money by placing it in a separate bank account). 132 Hancock v Smith (1889) 41 Ch D 456. 133 Lord Halsbury LC and Cotton LJ. Fry LJ did not consider this point. 134 Re Stenning [1895] 2 Ch 433. See also similar obiter dicta in Mutton v Peat [1899] 2 Ch 556, 560 (Byrne J). 135 Re Diplock’s Estate (n 2) 554.

Re Hallett’s Estate 385 a case unless there was a contrary agreement or a contrary intention could be assumed,136 and it might be difficult to assume such an intention where trust funds had been misappropriated without the beneficiaries’ knowledge. Baggallay LJ was more explicit in acknowledging that the rule applied where a trustee had mixed funds from distinct trusts.137 But, although influential, these dicta were obiter, as was that of North J in Re Stenning. Secondly, there was authority which was specifically opposed to the application of Clayton’s Case as between innocent contributors to a mixed fund.138 Lastly, Clayton’s Case concerned appropriation of payments and was not about tracing, so there has never been any justification for its application to proprietary claims. As McConville has convincingly argued,139 the rule provides a mode of accounting as between a creditor, such as a trustee, and his debtor, such as a banker, and is immaterial to the assessment of beneficiaries’ entitlement to the value credited to a bank account.140 Since Re Diplock’s Estate the rule in Clayton’s Case has been considered in a few cases in determining the proprietary claims of innocent contributors to a mixed fund, and in all of them it has been displaced, either by reference to the express or imputed intention of the parties141 or because the application of the rule would be impracticable or unjust.142 But the foundations for the operation of the rule in respect of proprietary claims is very weak and the preferable view is that it should never apply to such claims. As between innocent contributors to a mixed fund, the value of that fund should be shared proportionately between the claimants. (iv) Tracing at Common Law and in Equity One of the most significant debates about the law of tracing concerns the legitimacy of having different rules at Common Law and in Equity. But nothing was said by the judges in Re Hallett’s Estate to suggest that the tracing rules were peculiarly legal or equitable. Two reasons may be suggested for this.

136

Re Hallett’s Estate (n 1) 728. Ibid, 743. Thesiger LJ would have applied the rule even where the fiduciary had withdrawn money from the fund, so he would certainly have been willing to apply it as between two beneficiaries. 138 Re British Red Cross Balkan Fund [1914] 2 Ch 419; Re Hoburn Aero Components Ltd’s Air-Raid Distress Fund [1946] Ch 86. 139 McConville (n 84) 407–08. See also FW Maitland, Equity, revised edn, J Brunyate (ed) (Cambridge, CUP, 1936) 174. 140 An argument which was rejected in Barlow Clowes International Ltd v Vaughan [1992] 4 All ER 22, 33 (Dillon LJ). See also ibid, 39 (Woolf LJ). 141 Barlow Clowes (n 140); Russell-Cooke Trust Co v Prentis [2003] 2 All ER 478. 142 Barlow Clowes (n 140) 42 (Woolf LJ); Commerzbank Aktiengesellschaft v IBM Morgan plc [2004] EWHC 2771 (Ch), [2005] 1 Lloyd’s Rep 298. 137

386 Graham Virgo First, there was no difference at the time between tracing at Common Law and in Equity, so that it was possible to trace into a mixed fund in either case. Although Taylor v Plumer143 had held that it was not possible to trace money into a mixed fund, this was rejected by the Court of Appeal in Re Hallett’s Estate. But neither Jessel MR nor Thesiger LJ thought that this was because Lord Ellenborough CJ was applying Common Law rules which were different from those in Equity. Although Re Hallett’s Estate involved an equitable claim founded on equitable proprietary rights, there is no reason to think that the recognition that it is possible to trace money into a mixed fund was not intended to extend to tracing at Common Law. Indeed Thesiger LJ emphasised that the ability to trace money into a mixture had ‘been present to the mind of the Common Law Judges as well as to the mind of Equity Judges’.144 As the only judge from a Common Law background sitting in the court, this is a significant observation and one which was subsequently confirmed by Atkin LJ in Banque Belge pour L’Etranger v Hambrouck:145 The question always was, Had the means of ascertainment failed? But if in 1815 the common law halted outside the bankers’ door, by 1879 equity had had the courage to lift the latch, walk in and examine the books: Re Hallett’s Estate (1880) 13 Ch D 696. I see no reason why the means of ascertainment should not now be available both for common law and equity proceedings.

A second explanation for the absence of any discussion about a difference in the tracing rules at Common Law and in Equity was that, even if such a difference had developed during the nineteenth century, it did not survive the Judicature Act 1873. Although the purpose of that Act was to effect a fusion of courts and not a fusion of law, it also provided that where there was a ‘conflict or variance between the rules of equity and the rules of common law with reference to the same matter, the rules of equity should prevail’.146 The effect of this provision was that where contradictory rules from each jurisdiction were already shown to exist, the Equity rule would prevail.147 So if there had in fact been a difference between the tracing rules at Common Law and in Equity before the enactment of the Judicature Act 1873, since this would have involved a conflict of rules with reference to the same matter, the natural assumption of the judges, two of whom were intimately acquainted with the implications of that legislation, would have been that the equitable rule prevailed.

143

Taylor v Plumer (n 48). Re Hallett’s Estate (n 1) 722. 145 Banque Belge pour L’Etranger v Hambrouck [1921] 1 KB 321, 335. 146 Judicature Act 1873, s 25(11). 147 See Salt v Cooper (1880) 16 Ch D 545, 549; Re Hallett’s Estate (n 1) 712; Redgrave v Hurd (1881) 20 Ch D 1, 12. See also Walsh v Lonsdale (1882) 21 Ch D 9, 14, where Jessel MR applied the same principle but in a case where there were no contradictory rules at Law and in Equity. 144

Re Hallett’s Estate 387 So if Re Hallett’s Estate is not authority for the recognition of different tracing rules at Common Law and in Equity, how did such a distinction emerge? The cause was probably the confused judgment of Viscount Haldane in Sinclair v Brougham,148 who appears to have recognised different tracing rules at Common Law and in Equity, a view which may have been adopted by two members of the Court of Appeal in Banque Belge pour L’Etranger v Hambrouck,149 was affirmed in Re Diplock’s Estate150 and followed subsequently.151 Although Re Hallett’s Estate cannot be authority for this distinction between tracing rules emerging, Jessel MR might bear some responsibility for its recognition, since he justified the ability of Equity to trace into a mixed fund because Equity could impose a charge for the amount due on the whole fund.152 The Common Law lacked the ability to charge a fund, and so it might have been assumed that the Common Law could not trace into a mixture. But this is to confuse tracing and claiming. It does not follow from the inability of the Common Law to charge a fund that it is impossible to trace at Common Law into a mixed fund; tracing should still be possible, but the claimant would be confined to a personal claim against the recipient for the value received, the proprietary remedy of a charge simply not being available at Common Law. It was the failure to distinguish between the process of tracing and the act of claiming, a failure which may be identified in the judgment of Jessel MR, which may have influenced the subsequent recognition of distinct tracing rules at Common Law and Equity. But nothing said by any of the judges in Re Hallett’s Estate can justify such a distinction being drawn. The real distinction between Common Law and Equity concerns different rules for the identification of the proprietary base and different remedies to vindicate property rights; but, despite recent assertions to the contrary,153 there is no difference between the tracing rules at Common Law and in Equity.154

148 Sinclair v Brougham (n 5) 419–21. See Westdeutsche Landesbank Girozentrale v Islington LBC (n 82) 711 (Lord Browne-Wilkinson). 149 Banque Belge pour L’Etranger v Hambrouck (n 145) 327 (Bankes LJ) and 330 (Scrutton LJ). This distinction was rejected by Atkin LJ at 335, because of the decision in Re Hallett’s Estate. Bankes LJ (at 328) was willing to apply the equitable rule in Re Hallett’s Estate concerning tracing into a bank account. Even Scrutton LJ’s reference at 330 to the equitable extension of tracing did not preclude it from applying at Common Law. 150 Re Diplock’s Estate (n 2) 518 and 535. 151 Agip (Africa) Ltd v Jackson (n 112), 286; 566 (Fox LJ); El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717, 733 (Millett J); Boscawen v Bajwa [1996] 1 WLR 328; Shalson v Russo [2003] EWHC 1637 (Ch), [2005] Ch 281, 314 (Rimer J). 152 Re Hallett’s Estate (n 1) 717. The ability to charge the fund in Equity was also identified by Millett J as a reason why it was possible to trace in Equity through a bank account: El Ajou v Dollar Land Holdings plc (n 151). 153 See, eg, Shalson v Russo [2003] EWHC 1637 (Ch), [2005] Ch 281 [103]–[104] (Rimer J). See also Trustees of the Property of Jones and Sons v Jones [1997] Ch 159, 170 (Millett LJ: ‘unfortunate though probably inevitable’). 154 Foskett v McKeown (n 129), 113 (Lord Steyn) and 128 (Lord Millett).

388 Graham Virgo (d) Proportionate Share or Charge Jessel MR also considered the identification of the appropriate proprietary remedy. He recognised155 that where the whole purchase price of an asset was derived from the claimant’s money, he could elect to claim the asset as his property or as security for his claim by means of a charge. Where, however, the asset was purchased with money from a mixed fund, the claimant could only assert a charge over the asset. This was obiter,156 because Mrs Cotterell and the trustees only sought a charge over Hallett’s bank account to gain priority over Hallett’s other creditors. It is, however, at least from a modern perspective, an odd distinction for Jessel MR to have drawn. The consequence is that a wrongdoing trustee who misappropriates trust property but ensures that he contributes some small value to create a mixed fund is liable to repay to the beneficiaries only the value which had been misappropriated plus interest. If the mixed fund is used to purchase an asset which is then sold at a profit, the trustee need repay only the value misappropriated and can retain the profit. This undermines the fundamental principle of Equity that a trustee cannot profit from his wrong.157 Restricting the claimant to a charge over assets purchased with a mixed fund has been followed in New Zealand,158 but it was distinguished in England159 and not followed in the United States160 and Australia.161 Eventually in Foskett v McKeown162 Lord Millett rejected the distinction and held that a claimant whose money had been mixed in a fund could elect to claim either a proportionate share of the property which had been purchased with the fund, or a charge over the fund. The dictum of Jessel MR might, therefore, be relegated to a very short footnote in the history of equitable proprietary claims. But his dictum does raise a more significant point. How could Jessel MR, who was so sure-footed in his analysis of fundamental equitable principles and authorities, have got this so wrong? Perhaps this was simply a consequence of his tendency not to give reserved judgments, where a little further thought would have indicated the absurdity of the consequences of his dictum.

155

Re Hallett’s Estate (n 1), 709. Foskett v McKeown (n 129) 131 (Lord Millett). See also Maudsley (n 81) 243. 157 Scott v Scott (1963) 109 CLR 649, 660 (McTiernan, Taylor and Owen JJ). See also S Williston, ‘The Right to Follow Trust Property when Confused with other Property’ (1888) 2 Harvard Law Review 28, 29. 158 Re Kerr [1927] NZLR 177; Dexter Motors Ltd v Mitcalfe [1938] NZLR 804. 159 Re Tilley’s Will Trusts [1967] 1 Ch 1179, 1187 (Ungoed-Thomas J). 160 See, eg, Primeau v Granfield 184 F 480 (1911) 485 (Judge Learned Hand); Bowling v Bank of New Haven 219 Ky 731 (1927) 738 (Rees J). 161 Scott v Scott (1963) 109 CLR 649. 162 Foskett v McKeown (n 129) 131. 156

Re Hallett’s Estate 389 Lord Millett in Foskett v McKeown considered that the dictum was weakened because Jessel MR gave no reasons for the rule and none was readily apparent. But in the late nineteenth century the dictum might not have been as counter-intuitive as we might think today, for two reasons. First, Re Hallett’s Estate was decided at a time of significant deflation,163 so a charge would have been preferable to obtaining a proportionate share of the purchased asset, especially because what was being secured by the charge was not just the amount misappropriated but also interest, at a rate which varied between 3 and 5 per cent.164 In Scott v Scott165 the High Court of Australia recognised that the demand for a proportionate share remedy was unlikely to arise frequently in a time of stable land values, but was relevant in that case because the value of the property which had been purchased with the mixed fund had risen dramatically following inflation during and after the Second World War. Secondly, Jessel MR’s dictum was consistent with the exposition of the law adopted in Lewin’s A Practical Treatise on the Law of Trusts166 at the time. Jessel MR acknowledged167 in his judgment that he had consulted the ‘late Mr Lewin’s book on trustees’ as regards a different matter, namely, the decision in Ex parte Dumas.168 In the same section Lewin169 states that where trust money has been mixed with the trustee’s money and this has been used to purchase an estate, it is not possible to say which part of the estate was purchased with the trustee’s money but the trustee will have a lien upon the whole for the amount that was misemployed.170 Interestingly, slightly later in the same section Lewin also recognises that where a trust fund is traceable into land and the fund constitutes a part only of the money laid out in the purchase, ‘the court has usually given a lien merely on the land for the trust money and interest’,171 citing the same cases as for the

163 P Richards, Inflation: The Value of the Pound 1750–2001 (House of Commons Library Research Paper 02/44, 2002); published online at . 164 See Browne (ed) (n 84) 143. 165 Scott v Scott (n 157). The High Court of Australia wrongly distinguished Jessel MR’s dictum on the ground that Re Hallett’s Estate concerned tracing money into the hands of a banker, whereas Scott v Scott involved a trustee who was liable to account for his profit: ibid 659 (McTiernan, Taylor and Owen JJ). 166 7th edn (London, W Stevens, 1879). 167 Re Hallett’s Estate (n 1) 715. 168 Ex parte Dumas (n 48). 169 Lewin, 7th edn (n 166) 763–64. 170 Citing Lane v Dighton (1762) Amb 409, 413–1; 22 ER 274, 277 (Lord Hardwicke); Lewis v Madocks (1810) 17 Ves 48, 57; 34 ER 19, 23 (Lord Eldon); Price v Blakemore (1843) 6 Beav 507, 49 ER 922; Hopper v Conyers (1866) 2 LR Eq 549. 171 Lewin, 7th edn (n 165) 764–65, accepting that where the land is purchased only with the trust money, the beneficiary has a right to take the land itself.

390 Graham Virgo previous proposition.172 The use of the word ‘usually’ is important. Lewin appears to be less sure about the award of the lien where the mixing occurs at the time the property has been purchased than where mixing with the trustee’s money has occurred beforehand. One of the cases cited by Lewin is particularly significant. In Hopper v Conyers,173 a solicitor had borrowed money from a bank to buy land and then used the proceeds of a security which he had sold for one of his clients to pay off the loan, having told the client that he had reinvested the money on another good security. The solicitor regularly paid interest to the client, purportedly in respect of the security he had purchased. It was held that the client was entitled to a charge over the land to secure the money which was owed to him. But in this case, and all the others cited by Lewin, the claimant was only seeking a charge. There was no discussion of an entitlement to a proportionate share, presumably because this would not have been of any benefit to the claimant at the time. In 1879 there was one authority which supported the recognition of a proportionate share in property which has been purchased from a mixed fund, although that fund consisted of contributions from different trusts without any contribution from the trustee. In The Lord Provost, Magistrates and Town Council of Edinburgh v The Lord Advocate,174 the House of Lords, hearing an appeal from the Scottish Court of Session, held that where a trustee mixes the money of one trust with that of another and uses the mixed fund to purchase an asset, the beneficiaries of the two trusts shared the purchased asset in proportion to their prospective contributions. The date of this decision was July 1879, only a few months before Re Hallett’s Estate was heard by the Court of Appeal, but this case appears not to have been cited to it. Lord Blackburn considered that sharing of the asset in proportion to the contributions of the trusts was a new principle which was settled on principles of justice and good sense.175 Lord Hatherley recognised176 the right of a beneficiary whose funds have been dealt with in an illegitimate manner to elect either for the restoration of the fund, or to take a share of the profits. Principles of justice and good sense suggest that the same should be true where the mixed fund consists partly of the trustee’s own money. Consequently, for reasons of principle and authority, Jessel MR’s dictum was not justified even in 1879 and was correctly rejected in Foskett v McKeown.

172

With the addition of Scales v Baker (1859) 28 Beav 91, 54 ER 300. Hopper v Conyers (n 170). 174 The Lord Provost, Magistrates and Town Council of Edinburgh v The Lord Advocate (1879) 4 App Cas 823. 175 Ibid, 835. 176 Ibid, 841. 173

Re Hallett’s Estate 391 F. THE LEGACY OF RE HALLETT’S ESTATE

(1) Precedent and Principle in Equity The different approaches of the judges in Re Hallett’s Estate provide an insight into the role of precedent and principle in Equity which remains significant today. As regards the way the judges dealt with the existing authorities, Fry J had felt bound by authority to hold that money has no earmark as regards claims against fiduciaries and that the rule in Clayton’s Case applied to such claims. He was probably right as to the latter point, but could, as Jessel MR identified, have avoided the conclusion that money could not be traced into a bank account when it had been mixed by a fiduciary, by considering the more recent authorities. It was in the Court of Appeal that the different approaches to precedent were significant, especially as regards the application of the rule in Clayton’s Case. At one extreme was Jessel MR, who had no hesitation in identifying key principles and rejecting the cases which were opposed to it. At the other extreme was Thesiger LJ, who was much more concerned with the niceties of precedent, even though he appeared to consider the result to be unprincipled. In the middle was Baggallay LJ, who, whilst acknowledging the need to avoid the application of the rule in Clayton’s Case, considered it necessary to analyse the existing authorities to show how they could be distinguished and avoided.177 A similar difference of approach may be noted as regards the identification of the underlying equitable principle. Thesiger LJ, in his first judgment, and Baggallay LJ in both judgments, sought to extract the relevant principle underlying the law by reference to the cases. For Jessel MR, however, the principle came first, and if the cases did not fit with it, he was willing to reject them. He could see the destination Equity was trying to reach and was willing to remove any obstacles which barred the correct path. He recognised the different approach to legal development at Common Law and in Equity, for whereas the rules of the Common Law are supposed to have been established from time immemorial, the rules in Equity have been created, altered and improved over time.178 This observation proved especially influential subsequently to justify, for example, the expansion of the equitable jurisdiction to award compound interest.179 Jessel MR’s approach to the creative power of Equity also influenced his approach to the precedential value of old cases. He considered that the older precedents were of little value,

177

Re Hallett’s Estate (n 1) 744. Ibid, 710. 179 Westdeutsche Landesbank Girozentrale v Islington LBC (n 82) 696 (Lord Goff), a development which eventually occurred in Sempra Metals Ltd v IRC [2007] UKHL 34, [2008] AC 561. 178

392 Graham Virgo because equitable doctrines are progressive, refined and improved, so that the more modern cases are more useful than the ancient ones.180 For Jessel MR the only use of authorities was to establish a principle which a Judge could follow in deciding the case before him.181 His approach is especially well summarised in his damning critique of Fry J’s approach to the cases:182 [H]e decided against his own opinion as to the rules of Equity, in obedience, as he thought, to a series of authorities, opposed, as he conceived, to all principle, because he thought he was bound so to do, as it appears to me, in utter oblivion of what I will take the liberty of stating is the right mode of viewing authorities …

It is Baggallay LJ’s approach to precedent and principle which probably best characterises the judicial approach to the development of Equity since Re Hallett’s Estate, being conservative and gradual but logical and principled. There are, clearly, exceptions. Lord Denning was certainly in the Jessel MR school of judging. In the twenty-first century, with increasingly lengthy judgments, mass citation of authorities and an adverse effect on the overall quality of judging, we need a Jessel to give Equity the kick it needs to get it back on a principled path of development.183

(2) The Decision Re Hallett’s Estate may be considered to have made the following significant contributions to Equity jurisprudence: (a)

It confirmed the complete rejection of the rule that money has no earmark, and so marked a change of approach to the way money is identified.184 (b) It confirmed the shift in analysing the solicitor/client relationship from one of debtor/creditor to that of fiduciary/principal. (c) It provided a foundation, developed in subsequent cases, for determining when a fiduciary will hold property on trust for the principal. (d) It provides a secure foundation for the law of tracing which applies regardless of whether the claim is brought at Common Law or in Equity. For these reasons alone, Re Hallett’s Estate was a landmark decision. But if the layers of confusion created by 130 years of subsequent decisions are stripped away, it will be possible to return to a logical and principled law of tracing and proprietary claims.

180

Re Hallett’s Estate (n 1) 710. Ibid, 712. 182 Ibid. 183 Lord Neuberger MR’s masterly judgment in Sinclair Investments (n 106), suggests that he is able to step into Jessel MR’s shoes. 184 D Fox, Property Rights in Money (Oxford, OUP, 2008) para 8.13. 181

13 North-West Transportation Co Ltd v Beatty (1887) LIONEL SMITH*

A. INTRODUCTION

N

ORTH-WEST TRANSPORTATION Co Ltd v Beatty1 is well known throughout the Commonwealth as a foundational decision regarding the ability of corporate directors to contract with their own corporation, and in particular their ability to vote as shareholders for the approval of such conflict-affected contracts. The background to the case reveals a young nation in which enormous numbers of immigrants were seeking to start new lives on the western prairies. Before the trans-Canada railroad was completed in 1885, and long before a full road network was in place, shipping lines on the Great Lakes provided the only feasible way to reach the continental interior (the ‘North-West’). The dispute in Beatty was about a contract by which one of the directors of a company, who was also its majority shareholder, sold a steamship to the company over the objections of minority shareholders. In giving its advice, the Privy Council arguably misunderstood the nature of the corporate entity involved in the case, and produced a solution that has puzzled and divided commentators and legislators ever since.

B. THE BEATTYS AND THEIR BUSINESSES

In 1835, William (1794–1881) and Frances Beatty emigrated from Cootehill, County Cavan, in Ireland, to Upper Canada (now Ontario), along with their sons James (1826–1902) and William (1835–98), and their daughters

* I am grateful to the following students in my Business Associations course in Fall 2009, whose presentation on Beatty inspired the present project: Cristel Chabot-Lapointe, Brett Hodgins, Colin Jackson, Megan MacDonald and Rita Menneh. 1 North-West Transportation Co Ltd v Beatty (1887) 12 App Cas 589.

394 Lionel Smith Ann, Harriet and Rosetta.2 They settled near the town of Thorold, on the Niagara peninsula.3 Their son John (1838–1912) was born in Thorold. They were joined in 1843 by William Beatty Senior’s brother, who arrived from Ireland with his wife and son, Henry Beatty (1834–1914). By 1863, William Senior was an established businessman in Thorold, and one might imagine that he was nearing retirement. But in that year he travelled with his sons James and William Junior, and his nephew Henry, to the shores of Georgian Bay on Lake Huron, seeking to acquire logging rights. They acquired such rights in respect of a large tract of land, covering 84 square miles or 53,760 acres, around what is now Parry Sound; later on, they acquired a freehold estate to 2,198 acres on what became the town site.4 William Junior, a well-educated young man holding the degrees of BA, MA, and LLB, gave up a fledgling legal practice in Thorold in 1865 to become the manager of the family’s business interests in Parry Sound. He was eventually dubbed ‘Governor’ Beatty, so influential was he in the creation and the development of the town out of what was basically a logging camp. He was elected to the provincial legislature in 1867, and narrowly lost his attempt to secure a seat in the new federal Parliament following Confederation in the same year.5 He was staunchly opposed to the sale of liquor, having seen the effects of its abuse in logging camps, and in every sale of land in Parry Sound he inserted a restrictive covenant that forbade the sale of liquor, a covenant which was to run until 21 years

2 The principal sources for information about the Beattys are: FE McKean, The Beattys of Parry Sound (Parry Sound, Ontario, North Star Publishing, 1963); FE McKean, ‘Early Parry Sound and the Beatty Family’ (1964) 56 Ontario History 167; M Wheeler, North-West Transportation Company: The Beatty Boats (self-published, undated) (this book, by the granddaughter of John Beatty, is in the collection of the Lambton County Library, Ontario; it is unpaginated and so all references in the following footnotes are to the titles of chapters); an online entry in the Dictionary of Canadian Biography Online at , sv ‘Beatty, William’; and entries in the online Canadian Encyclopedia at , sv ‘Beatty, Henry’; ‘Beatty, Sir Edward Wentworth’; and ‘Parry Sound’. Other background on late 19th-century passenger shipping in the Great Lakes is available in SL Cameron, The Frances Smith: Palace Steamer of the Upper Great Lakes, 1867–1896 (Toronto, Natural Heritage Books, 2005); AG Young Great Lakes’ Saga (Owen Sound, Richardson, Bond & Wright Ltd, 1965). 3 For the layout of the Great Lakes, with modern place names, see Figure 1. The Niagara peninsula is the strip of land between Lake Erie and Lake Ontario. 4 Many years later, there was litigation to the Supreme Court of Canada regarding the effect of an 1881 grant of logging rights to William Beatty Jr; a printed form was used and the court divided 3:2 on whether Beatty acquired a freehold estate in the growing timber (as the dissenting judges would have held), or only a contractual right to enter and cut timber: Beatty Estate v Mathewson (1908) 40 SCR 557. 5 According to McKean (1963) (n 2) 8 and McKean (1964) (n 2) 172, this occurred because the voting for the enormous federal constituency took place at Sault Ste Marie, 300 miles from Parry Sound. William Beatty Jr set out with over a hundred friendly voters in the steamship Waubuno from Parry Sound, while his rival provided a vessel of his own for his supporters. The Waubuno broke down and did not arrive at Sault Ste Marie until after the voting was closed. Beatty lost by nine votes.

North-West Transportation Co Ltd v Beatty 395 after the death of the last surviving grandchild of Queen Victoria alive at the time of the grant.6 This meant that, for a grant made after 25 February 1883, the clause would have endured until 2002.7 The effects of the ‘Beatty Covenant’ were, however, abrogated by a private act of the Ontario legislature in 1950.8 At this time, the railroad reached only as far as Collingwood.9 Although they had built a road to Parry Sound, the Beattys knew that the best way for the town to communicate with the outside world was via water. Accordingly, they had built the Waubuno, their first steamship, in 1865. At that time she was one of the few passenger vessels on the upper Great Lakes. But the shipping concerns of the Beattys quickly grew. The Canadian Pacific Railway, reaching across Canada, would not be completed until 1885. There was an ongoing influx of immigrants to the Canadian West, then known as the North-West, primarily at this time to what is now Manitoba, to the west of Lake Superior. This created an enormous demand, not only for transportation of the immigrants themselves, but also of goods, mail and livestock to the west, and indeed to the many towns on the shores of the Great Lakes. Although navigation was not possible in the winter, a vessel on the upper Great Lakes could reach as far as Duluth, Minnesota, by way of what is now Thunder Bay, Ontario.10 These cities are almost in the middle of the North American continent. The graphic in the upper right of Figure 1 helps in understanding Great Lakes navigation. There are rapids on the St Marys River, which empties from Lake Superior into the lakes below at Sault Ste Marie,11 with a difference in elevation of seven metres. However, such was the importance of Lake Superior, the ‘inland sea’, in reaching the West that there were relatively large locks here as early as 1855 (and smaller locks even earlier).12 Lakes Michigan and Huron are, hydrologically, a single body of water at the same level and joined by the wide and deep Straits of Mackinac. Between Lake Huron and Lake Erie, the water level drops only three metres via Lake St Clair and the St Clair and Detroit Rivers, which are navigable without 6 McKean (1964) (n 2) 176–79. This is an example of a ‘royal lives’ clause, drafted on the understanding that a restrictive covenant—still a fairly new legal entity in the late 19th century—was subject as to its duration to the rule against perpetuities. The royal lives clause was designed to extend the duration of the covenant for as long as possible. The modern majority view is that such covenants are not subject to any limit of time. 7 Princess Alice, the last-born grandchild of Queen Victoria, was born on 25 February 1883 and died on 3 January 1981. 8 An Act Respecting the Town of Parry Sound, SO 1950, c 111. Section 1 of this private act essentially sets out the Beatty Covenant before declaring it null and void. 9 Just east of Owen Sound which appears on Figure 1. 10 The city of Thunder Bay was created in 1970 by the amalgamation of the cities of Fort William and Port Arthur. 11 There are twin cities of Sault Ste Marie, Ontario, and Sault Ste Marie, Michigan, on opposite sides of the river which here forms the border between the US and Canada. 12 Cameron (n 2) 7.

396 Lionel Smith

Figure 1: The Great Lakes Basin.

locks. Between Lake Erie and Lake Ontario is the Niagara Escarpment and a drop of 99 metres, which creates the Niagara Falls on the Niagara River. The Escarpment is by-passed by the Welland Canal. The first Welland Canal opened in 1829, with 40 locks; the current canal is the fourth, with eight locks. In the late nineteenth century, the locks in this canal were much smaller than those at Sault Ste Marie, and land transportation around Lakes Ontario and Erie was well established, with the result that the large steamships of the upper lakes did not typically descend below Sarnia or Detroit, and could not descend to Lake Ontario.13 This allows us to appreciate an advertisement for the North-West Transportation Company Ltd that appeared in 1880.14 The firm boasts connections with the railways that will bring the traveller to the point of departure at Sarnia: the Grand Trunk, the Great Western and the 13 Even today, although vessels can and do navigate from the Atlantic all the way to Thunder Bay, the smaller locks on the Welland Canal mean that there are some large vessels that ply the upper lakes only. 14 Figure 2.

North-West Transportation Co Ltd v Beatty 397

Figure 2: North-West Transportation Co Advertisement, 1880.

398 Lionel Smith

Figure 3: Waubuno.

Canadian Southern. It offers service to Lake Huron, Lake Superior and Manitoba15; and also boasts the advantage of the railway that runs west from Duluth, Minnesota, allowing access with no change of cars to St Boniface, Manitoba (now part of the city of Winnipeg, about 130 miles west of Kenora, Ontario).16 A journey from Sarnia to Duluth would typically take five days.17 Great Lakes navigation was dangerous; storms were frequent, charts were absent or poor, visibility could be impeded by fog or smoke from forest fires, and lighthouses and other signals of safe channels were few and far between.18 There was a very high rate of accidents and loss of life.19 From the mid-1860s, the Beattys became a significant presence in Great Lakes shipping. As has already been mentioned, the Beattys’ first vessel was the side-wheeler Waubuno, built in 1865.20 In 1870, she carried troops of the Red River Expedition led by Colonel Garnet Wolseley, to meet the Red

15 The province of Manitoba joined the original four provinces of Canada in 1870, albeit with a territory much smaller than its current size. At that time, its territory was not contiguous with Ontario, the land between being part of the enormous North-West Territories. Even modern Manitoba is entirely to the west of the land depicted in Figure 1. 16 There was a railroad running from Duluth in the late 1860s, long before the Canadian Pacific Railway ran west from Port Arthur (now Thunder Bay) in the 1880s. See Cameron (n 2) 122. 17 The Scanner, vol XIX, no 5 (February 1987) 7 (on file with author). This monthly journal (which is the journal of the Toronto Marine Historical Society) features a ‘ship of the month’, and in this issue the featured ship was the United Empire. The author is not specifically identified but is presumably JN Bascom, the editor. 18 See generally Cameron (n 2) 12–15. 19 Cameron, ibid, 10, provides figures for ‘disasters’ during 1863–71, the annual figure ranging from 421 to 1,914. These included collisions, groundings, fires, capsizing, foundering, serious leaks, loss of a mast, loss of cargo or exploded steam boilers; the numbers include only incidents involving ‘serious damage to hull or outfit’. 20 See Figure 3.

North-West Transportation Co Ltd v Beatty 399 River Rebellion.21 She belonged to the J & W Beatty Co, formed by James Beatty and William Jr to manage the families’ concerns in Parry Sound.22 It fell to James Beatty and his cousin Henry to lead the expansion of the family’s shipping interests.23 Henry, prior to this development, had enjoyed perhaps the most adventurous career of all the Beattys. After arriving in Thorold from Ireland at the age of 9, he moved to Minnesota and then California as a youth. In 1860, at the age of 17, he travelled to what is now British Columbia, in the midst of the Cariboo Gold Rush. He made a small fortune selling supplies to the miners and returned to Thorold in 1864, and it might be presumed that this allowed him to contribute substantial capital to the family business. James and Henry, with William Senior as a silent partner, formed the J & H Beatty Company, which was initially based in Thorold. Its headquarters were moved to Sarnia in 1870, and John Beatty also became concerned in the firm at that time. And it was at this time that the firm began to operate on a larger scale. The side-wheeler Manitoba was built for them in 1871. Somewhat larger propeller-driven vessels were then commissioned, namely the Ontario (1873) and the Quebec (1874). By this time, the Beattys ran one of the most significant shipping businesses on the lakes. Competition was fierce, however, as the traffic of Canadian immigrants to the West was enormous and almost all of them travelled by steamship, from either Sarnia or Collingwood where the railroads ended.24

C. THE NORTH-WEST TRANSPORTATION COMPANY LIMITED

Canada is a federal State, and its corporate law has always been complicated by the fact that both levels of government have the legislative authority to create business corporations. As a result, there are federally-incorporated business corporations and provincially-incorporated ones.25 Another complication, both the point and the burden of federalism, is that that there has never been uniformity among these many statutes. The English Companies Acts were envisioned as registration statutes for deed of settlement companies, and it was a matter of judicial interpretation to conclude that these

21

McKean (1963) (n 2) 13; McKean (1964) (n 2) 174. Wheeler (n 2) svv ‘Beatty Boats’ and ‘Waubuno’. 23 It is interesting to notice that the eldest brother, James, who emerges as a dominant figure in the businesses and in the litigation many years later, is the only family member who seems to have been interested in both the Parry Sound business and the Sarnia shipping business. 24 Cameron (n 2) 121–24. 25 And, arguably as a result of the Privy Council’s province-friendly decisions interpreting the Canadian constitution, there is very little difference between them in constitutional terms: B Welling, Corporate Law in Canada: The Governing Principles, 3rd edn (Mudgeeraba, Qd, Scribblers, 2006) 1–12. 22

400 Lionel Smith registered companies had legal personality.26 This model was followed in many Canadian provincial statutes, and remains in effect in Nova Scotia and British Columbia. However, there was another kind of business corporation statute in Canada, which was envisioned as a general incorporation statute modelled on the long-standing practice of incorporation by royal charter or letters patent.27 The first such enactment was an 1864 statute of the United Provinces of Canada, the pre-Confederation union of what is now Ontario and Quebec;28 it was re-enacted after Confederation as the Canada Joint Stock Companies Letters Patent Act.29 About half of the provinces eventually followed this model, until a wave of reforms beginning in the 1970s led to the modernisation of corporate law across Canada.30 The North-West Transportation Company Ltd was incorporated under this statute on 5 March 1877.31 The North-West Transportation Company was, in one sense, a new incorporated vehicle for the Beatty line that continued to be run out of Sarnia. However, it was also the product of a merger. One source indicates:32 The Asia was built [in 1873] in St Catharines for JC Graham and Sylvester Neelon of St Catharines and George Campbell of Windsor for their Lake Superior 26

Salomon v A Salomon and Co Ltd [1897] AC 22. Could it be that this mode of incorporation was influential in Canada because of the extraordinary power for centuries of the Hudson’s Bay Company? The Governor and Company of Adventurers of England Trading into Hudson’s Bay was incorporated by royal charter in 1670, and held until 1870 a trading monopoly over Rupert’s Land, all the territory that drained into Hudson’s Bay (the surrender of this land to the Dominion of Canada was authorised by Rupert’s Land Act 1868 (31–32 Vict, chap 105 (UK))). This made the Company the de facto government of a territory of 1.5 million square miles that covered about a third of modern Canada. By comparison, the surface area of the land that drains into the Great Lakes is modest; this is the drainage basin shown in Figure 1. The Company was continued under the general federal business corporations legislation in 1978; it now carries on retail sales operations through department stores and is controlled from the US. One Canadian author, however, notes that an English statute for incorporating joint stock banks by letters patent was passed in 1844, and that there was also a precedent in Nova Scotia legislation from 1796: FW Wegenast, The Law of Canadian Companies (Toronto, Burroughs and Co, 1931) 21, fn 7. 28 Wegenast (n 27) 21–22. 29 SC 1869, chap 13. 30 The modern Canadian statutes are a unique combination that shows a strong influence of both US and UK corporations law. The only remaining jurisdiction with a letters patent statute for business corporations is the province of Prince Edward Island (population circa 141,000). 31 Beatty (PC) (n 1) 594. It was not related to the North-West Transportation, Navigation and Railway Company that was created by special act in 1858. That earlier company was created as a part of a commercial and political campaign against the interests of the Hudson’s Bay Company, which at that time still held a trading monopoly over Rupert’s Land and was therefore able to block not only territorial expansion into what is now western Canada, but also any competing commercial ventures. This 1858 venture amounted to very little and was quickly absorbed by commercial interests controlled from England. See D Swainson, ‘The North-West Transportation Company: Personnel and Attitudes’ (1969) 26 Papers read before the Historical and Scientific Society of Manitoba 59. 32 Wheeler (n 2) sv ‘Asia’. Windsor is another port city: see Figure 1. St Catharines is also a small port, on the south shore of Lake Ontario, to the east of Hamilton. 27

North-West Transportation Co Ltd v Beatty 401 Line. In 1876, the J & H Beatty Line decided to enlarge and they joined with the Windsor Line to form the North-West Transportation Company. This added the Asia to the company.

Another confirms:33 The little Asia was built for JC Graham and Sylvester Neelon of St Catharines, and George Campbell of Windsor, for their ‘Lake Superior Line of Steamers’. J & H Beatty and Company of Sarnia soon became interested in this venture and operated the line in conjunction with the Northwest Transportation Company Ltd, Sarnia. Along with the steamer Sovereign, Asia operated between Windsor, Sarnia and Duluth, Minnesota from 1873 to 1881.

Some useful information on how the Company came to be formed may be found in the reports of a dispute between the incorporators.34 James, Henry and John Beatty made an agreement in December 1876 with Neelon, Graham and Campbell to form the new corporation. The venture was formed initially as a partnership, pending the issue of the letters patent by which the corporation was created. Each side contributed their respective vessels, along with the associated goodwill. The Beattys brought the Ontario, the Quebec and the Manitoba. Neelon, Graham and Campbell brought the Asia and the Sovereign, with the associated goodwill which included some government mail contracts. The corporation was created with 600 issued shares of $500 each. At the outset, James Beatty held 205 shares, while Henry held 120 and John held 52. Sylvester Neelon held 103, and Graham and Campbell held 60 shares each.35 Shortly afterwards, in May 1877, James Beatty formed the view that there had been misrepresentations on the side of Neelon, Graham and Campbell as to the value of the government mail contracts.36 The proceeding, however, was brought only in 1881. The claim was initially allowed, judgment being given only in 1885;37 but it was dismissed in the Ontario Court of Appeal and the Supreme Court

33 The Scanner, vol XV, no 1 (October 1982) 12 (on file with author). This monthly journal features a ‘ship of the month’ and in this issue the featured ships were the Manitoulin and the Asia. The author is not specifically identified but is presumably JN Bascom, the editor. 34 Beatty v Neelon (1886) 13 SCR 1. 35 There is an unexplained point in the reports, inasmuch as the proportionate shareholdings in the initial partnership were different. The partnership was created with 500 shares, and the Beattys’ interest was 380 out of 500, which is substantially more than 377 out of 600: Beatty v Neelon (SCC) (n 34) 16. The report says that the proportionate shares in the corporation were calculated ‘having regard to the original basis of distribution of stock as set forth in the said agreement’ (being the agreement of December 1876): ibid, 16. The point is also mentioned without explanation in the reports below: (1885) 9 OR 385 (Ch D) 387; (1885) 12 OAR 50 (CA) 52. 36 The allegation of misrepresentation was mainly against Campbell: Beatty v Neelon (SCC) (n 34) 9; Beatty v Neelon (CA) (n 35) 59. The Court of Appeal report also mentions (at 60) that Graham had died before the trial, and (at 55) that Campbell sold all his shares ‘within two or three months of the incorporation’. 37 Beatty v Neelon (Ch D) (n 35).

402 Lionel Smith of Canada, on the grounds that the plaintiffs had not proved their claim, and that anyway it should have been brought by the corporation.38 But the North-West Transportation Company was not the only shipping concern in which the Beattys were interested. Understanding the landscape is complicated by the overlapping names of some of the enterprises. One source refers to the opportunities that were open to a particular steamship captain in 1871: ‘As he contemplated his options, he was invited by James Beatty of Sarnia and the Collingwood Lake Superior Line to join their syndicate.’39 This Collingwood Lake Superior Line is not the same as the Lake Superior Line with which the Beattys merged in 1877; Collingwood is a long way from St Catharines, Windsor or Sarnia, and indeed there were several concerns that took their name from Lake Superior, including a US-based Lake Superior Transit Co. The Collingwood Lake Superior Line, it seems, was another enterprise, in which the Beattys, or at least James Beatty, had an interest—possibly a controlling interest.40 The same writer goes on to note that in 1876, the captain of the Beatty vessel Waubuno left to participate in the creation of the Georgian Bay Transportation Company.41 The Waubuno sank in 1879 with all hands in mysterious circumstances.42 One source indicates that by then she had been sold by the Beattys to another company.43 However, another indicates that she belonged at the time of her loss to the Georgian Bay Transit Company, ‘of which the Beattys were the owners’, and that while legal proceedings against this company were unsuccessful, William Beatty Jr suffered substantial financial loss in relation to the vessel and her cargo.44 Another account corroborates this (although it refers to the first, and may be derivative), adding that the Georgian Bay Transit Company was the ‘official’ name of J & W Beatty Co, which was not the shipping firm based in Sarnia but the Beattys’ business in Parry Sound.45 38 Beatty v Neelon (CA) (n 35); Beatty v Neelon (SCC) (n 34). In the Supreme Court of Canada, one of the five judges would have allowed the claim. 39 Cameron (n 2) 119–20. 40 McKean (1963) (n 2) 5, states that James Beatty was interested in the Collingwood Shipping Co. McKean (1964) (n 2) 170, says of James Beatty, after stating that he was the senior partner in the J & H Beatty Co in Sarnia: ‘He also had an interest in the Collingwood Shipping Co, and in other similar companies on the Great Lakes.’ Because only James is mentioned by both Cameron and McKean, it seems unlikely that the Collingwood concern was merely another name for the J & H Beatty Co, especially since the latter was based in Sarnia. See however, Young (n 2) 107: ‘The Lake Superior Line was established in 1870 by Messrs James H and Henry Beatty …’ 41 Cameron (n 2) 125. 42 McKean (1963) (n 2) 13–15; McKean (1964) (n 2) 174–75; Wheeler (n 2) sv ‘Waubuno’. 43 According to The Scanner, vol XIX, no 5, 8. 44 McKean (1963) (n 2) 14–15. 45 Wheeler (n 2) sv ‘Waubuno’; see also McKean (1964) (n 2) 175, which states that the Georgian Bay Transit Company was owned by J & W Beatty Co. It is not clear whether the Georgian Bay Transportation Company was the same entity as the Georgian Bay Transit Company.

North-West Transportation Co Ltd v Beatty 403

Figure 4: Asia.

Still another firm mentioned by the same writer is the Great Northern Transit Company; by 1885, he says, James Beatty was a director of this company.46 It seems clear that he had been interested in this enterprise for some time; but this firm may have been only an offshoot of the Beatty business in Parry Sound.47 The Great Northern, moreover, was probably not in direct competition with the North-West Transportation Company, as the former operated more locally on Lake Huron.48 Trying to cut through all these names, it may be that that the Georgian Bay Transit (or Navigation or Transportation) Company was only an offshoot or alternative name for the J & W Beatty Co, and that it evolved into the Great Northern Transit (or Transportation) Line (or Company); while the J & H Beatty Co, as we have seen, was the majority predecessor of the North-West Transportation Company Ltd. The status of the Collingwood Lake Superior Line, and James Beatty’s relationship to it, however, are difficult to ascertain. The creation of the North-West Transportation Co Ltd meant that ‘the little Asia’ joined the Beatty fleet.49 And in December 1880, work began 46

Cameron (n 2) 143, fn 17. Cameron (n 2) 167, describes the Great Northern Transportation Line, in 1887, as belonging to the ‘Collingwood Beattys’. Wheeler (n 2) sv ‘Amalgamation’ states this company originated as the Georgian Bay Navigation Company in 1870. The Scanner, vol XIX, no 5, 8 agrees, but gives 1875 as the date of origin. (Presumably the Georgian Bay Navigation Company was the same entity as the Georgian Bay Transit Company, that is, the Beatty firm in Parry Sound.) Wheeler also says, sv ‘Waubuno’, that it was the Georgian Bay Transit Company that became the Great Northern Transit Company, ‘with James H Beatty as part owner’. See also Young (n 2) 107, stating that James Beatty was ‘in the Great Northern Transit Company from its earlier days’. 48 The Scanner, vol XIX, no 5, 8. 49 See Figure 4. 47

404 Lionel Smith at Sarnia on a new steamship, the United Empire.50 She was an oak-hulled propeller-driven vessel, with 61 first-class staterooms, designed to be the grandest steamship on the lakes.51 She was being built, however, for the account of James Beatty himself.52 On the night of 13–14 September 1882, the Asia sank in a storm with the loss of well over 100 lives, most of them passengers, including women and children. This was one of the worst disasters in the history of Great Lakes shipping. Only two people survived, both passengers, and they told harrowing stories of how the lifeboats capsized repeatedly, and how most of those who had escaped the wreck and the capsizings died in the boats before morning, presumably of hypothermia.53 The loss of the Asia prompted a great deal of concern about the practice of overloading passenger vessels on the lakes. At the time of the sinking, she was chartered to the Great Northern Transit Co, which deflected some of the opprobrium from the North-West Transportation Co.

D. THE UNITED EMPIRE

Following the newsworthy launch of her hull in November 1882, the United Empire was nearing completion in early 1883.54 To understand the circumstances of her purchase by the North-West Transportation Company, we need to consult the law reports in the subsequent litigation. It is perhaps not surprising that the four different court decisions, containing a total of eight reasoned judgments, refer to different elements in the facts. It is, however, interesting that the appellate courts often refer to facts that are not mentioned in the judgment at first instance, which recites the allegations and the defence but does not make clear findings of fact.55 No reference is made in the first-instance judgment to any evidence given. The law report states that ‘The plaintiff joined issue on the statement of defence.’56 Perhaps this can be interpreted as indicating that the defendants stood mainly on the law, being willing to accept as true a large part of the factual allegations made

50

Beatty (PC) (n 1) 595. For detailed descriptions of the United Empire and her history, see The Scanner, vol XIX, no 5, 8; Wheeler (n 2) sv ‘United Empire (Old Betsy)’. 52 This is why he was personally liable when sued by the craftsman who built the engine, for the balance of the price: Beatty v Oille (1886) 12 SCR 706. Oille had also built the engines of the Manitoba and the Ontario: Wheeler (n 2) svv ‘Manitoba’ and ‘Ontario’. 53 An account of the sinking is in The Scanner, vol XV, no 1. The news first appeared in the Toronto newspaper, The Globe, 18 September 1882, 1. 54 See Figure 5. For accounts of the launch, at which the vessel’s prow refused to budge, see Wheeler (n 2) sv ‘United Empire (Old Betsy)’; see also The Scanner Vol XIX, No 5, 4. 55 Beatty v North-West Transportation Co (1884) 6 OR 300 (Ch D). 56 Ibid, 303. 51

North-West Transportation Co Ltd v Beatty 405

Figure 5: United Empire.

by the plaintiff.57 At any rate, there are not contradictory factual elements in the different judgments, and so in the account that follows it is taken to be enough that a fact is so stated in at least one of the judgments. Early in 1883, there were still 600 issued shares in the corporation, as there had been in when it was created in 1877; but the holdings had changed. James Beatty, who had originally held 205 shares, now held 200.58 William Beatty Jr, who had not been one of the original shareholders, now held 5 shares. Henry Beatty still held 120 shares. John Beatty, who had held 52, now held 59. Sylvester Neelon held 101 of his original 103. George Campbell had ceased to be a shareholder, while JC Graham now held 39 of his original 60 shares. There were now 5 shares held by the estate of an unidentified deceased former shareholder, and 71 shares held by one FS Hankey. The original five investors had all been directors; by now, Campbell having left, it appears that there were four directors, namely James, John and Henry Beatty, and Neelon, who was also the president and

57 Boyd C, however, noted (at 311): ‘The allegations of fraud and unfair dealings are not proved, and while I give judgment for the plaintiff I do so without costs.’ Unless this is read as a conclusion of law, it suggests that at least some of the plaintiff’s allegations were denied, but we are never told clearly which facts were disputed. 58 For the shareholdings, see Beatty (PC) (n 1) 597.

406 Lionel Smith had been since the corporation was formed. John Beatty had held the office of secretary-treasurer since the corporation was created.59 An annual general meeting of shareholders was scheduled for 7 February 1883. On 31 January 1883, James Beatty bought all of Neelon’s shares, giving him 301.60 On the day of the general meeting, James Beatty assigned five shares each to R Laird and JE Rose, which qualified them to be directors.61 A proposition was put to this meeting that the corporation should buy the United Empire, and a resolution was carried to the effect that a by-law for that purpose should be prepared and put to a special meeting of the shareholders to be held on 16 February.62 At the same meeting, James Beatty, William Beatty, John Beatty, Rose and Laird were elected directors.63 Cousin Henry, in other words, although an original and still substantial investor, lost his seat as a director, while three new directors—William Beatty Jr, Rose and Laird—held only five shares each, and were presumably prepared to support James Beatty.64 James Beatty was then elected president by the board, and John Beatty confirmed as secretary-treasurer. A directors’ meeting was held on 10 February 1883. A by-law was prepared which authorised the purchase of the United Empire for $125,000, reciting that it was essential for the corporation to acquire the new vessel. The price was to be paid partly in cash, but the bulk of it was to be paid over three years, with security given to James Beatty, the seller, by way of mortgages on the United Empire, the Manitoba, the Ontario and the

59

Beatty v North-West Transportation Co (1886) 12 SCR 598, 614. One of the strange elements in this whole story is that James, John and Henry Beatty had already commenced a lawsuit, basically alleging fraud, against Neelon, Campbell and Graham, on 21 February 1881. It did not go to trial until 1885, and was not resolved until the decision of the Supreme Court of Canada in 1886: Beatty v Neelon (SCC) (n 34). However, it was based on allegations that the fraud had been discovered in 1877. Bearing in mind his litigation against the craftsman George Oille (for which, see n 52), James Beatty was involved in three different appeals in the Supreme Court of Canada over a period of about 18 months. He lost all three, although he was of course eventually victorious in the suit which is the primary study of this chapter: Beatty (PC) (n 1). 61 Beatty (SCC) (n 59) 613; Beatty (PC) (n 1) 597. 62 Under the letters patent statutes, and also under modern Canadian statutes, by-laws are enacted, repealed or modified by a two-stage process. The enactment must be approved by the board, and then is in effect only until the next shareholders’ meeting, when it must be approved by an ordinary majority to continue in effect. It was perhaps to take advantage of this two-stage process that a by-law was used, even though a decision to purchase a ship might seem more suitably formulated as a resolution. The question as to what is the proper subject of a corporate by-law has long occupied commentators on Canadian corporate law. See Beatty v Neelon (Ch D) (n 35) 925–29; VE Mitchell, A Treatise on the Law Relating to Canadian Commercial Corporations (Montreal, Southam Press, 1916) 925–29; Wegenast (n 27) 243–46; Welling (n 25) 461, fn 49. 63 Beatty (SCC) (n 59) 613–14; Beatty (PC) (n 1) 595. 64 We cannot know that William Jr acquired his five shares from James; but the numbers suggest it, and again, a holding of five shares was needed to be a director. Recall that William Jr, ‘Governor’ Beatty, was based in Parry Sound; there is no suggestion in any of the sources of his being involved with the Sarnia-based enterprise before this point in time. 60

North-West Transportation Co Ltd v Beatty 407 Quebec. The by-law was approved by the board, and the contract between the corporation and James Beatty was executed the same day.65 This was followed by the special meeting of the shareholders on 16 February 1883, for the consideration of the by-law. At this meeting, James Beatty stated that the price of $125,000 was the actual cost of the boat, including $4,000 for superintendence, $800 for expenses and interest on advances, and that he will lay before the board a detailed statement of cost including the above items, and will credit on said $125,000 any sum by which said cost shall not equal said $125,000, the company agreeing to pay any excess …66

The $4,000 would appear to be, effectively, remuneration; we never hear more of the offer to produce a statement of cost. The price, one law report mentions, was nearly half of the issued capital of the corporation.67 Hankey, who held 71 shares, objected, stating that there was no need for a new vessel and that the valuation was excessive and unfair, and should have been submitted to outside and disinterested arbitration.68 When the question was called, James Beatty cast 291 votes in favour, while Rose, Laird and William Beatty each cast five votes in favour, making 306 in all. Graham, Hankey and Henry Beatty all voted against, as did John Beatty, voting therefore with his cousin against his brothers. But the votes against were only 289 in all. The purchase and sale went ahead; the United Empire was completed on 20 May 1883, and entered service as a vessel of the North-West Transportation Company. But on 31 May 1883, Henry Beatty commenced proceedings in the Chancery Division of the High Court of Ontario to have the sale set aside. John Beatty refused to be a plaintiff and was named a defendant, along with the corporation, James and William Beatty, and Rose and Laird. The case was argued before Boyd C in December 1883, with leading counsel on both sides, and on 19 January 1884 he gave judgment for the plaintiff:69 The allegations of fraud and unfair dealings are not proved, and while I give judgment for the plaintiff I do so without costs. My judgment proceeds upon the ground that the vendor’s fiduciary position incapacitates him from coercing a minority by means of a majority secured by his own vote in his own favour, without regard to the fairness or unfairness of the transaction.

65

Beatty (SCC) (n 59) 615; Beatty (PC) (n 1) 596. Beatty (SCC) (n 59) 615. 67 Beatty v North-West Transportation Co (1885) 11 OAR 205 (CA) 206. The issued capital was $300,000. 68 Beatty (CA) (n 67) 615–16. 69 Beatty (Ch D) (n 55) 311–12. 66

408 Lionel Smith There has been no valid ratification by the company, and the sale must be set aside, the vessel restored to the vendor and the profits made by her (if any) accounted for to him, he restoring to the company what was received as the price, and the profits made (if any). If desired a reference may be had on these points.

The defendants appealed and the case was argued in the Ontario Court of Appeal over four days in March 1885. On 17 April 1885, four judges of that court unanimously allowed the appeal, granting the defendants the costs of the trial but apparently not the costs of their appeal. Hagarty CJO said:70 In this case if James H Beatty had either resigned his seat at the board of directors, or even had absented himself wholly from all the deliberations of the directors and from their decision to purchase this steamboat, I cannot see how any question could arise as to his right to attend and vote at the general meeting—the mere fact of his being largely and directly interested in the question before the shareholders would be no ground for the rejection of his votes. … I do not think the case calls for any remark condemnatory of the motives of the principal defendant. I am willing to believe that he was actuated by the honest desire to promote the interests of the company. But I am of opinion that the matter might have been conducted in a much less objectionable manner—that he might have left its decision to the rest of his co-directors, uninfluenced by his presence or participation. Under all the circumstances I think we should not give the appellant the costs of the appeal. The bill in the Court below should be dismissed, with costs.

Henry Beatty in turn appealed to the Supreme Court of Canada. The case was argued over three days in November 1885, the appellant’s leading counsel now being Oliver Mowat QC, a father of Confederation and at this time the Premier and Attorney-General of Ontario. The appeal was unanimously allowed with costs by the five judges on 9 April 1886. And so it was that the defendants appealed again, to the Judicial Committee of the Privy Council. The hearing was in June 1887, now with English counsel, including Richard Webster QC, Attorney-General and later Baron Alverstone LCJ, for the appellants, and Sir Horace Davey QC, later Baron Davey, for the respondents.71 The appeal was allowed unanimously with

70 Beatty (CA) (n 67) 211 and 213. One other of the four judgments also held specifically that there should be no costs of the appeal (at 227). Another stated that the appeal should be allowed with costs (at 225), while the fourth did not mention costs (at 225). 71 The Board was perhaps not the strongest. Sir Richard Baggallay at this time was a judge of the Court of Appeal, but not a member of the House of Lords. The other members of the panel were Lord Hobhouse, Sir Barnes Peacock and Sir Richard Couch. Lord Hobhouse never served as one of Her Majesty’s judges, though he had a long service on the Judicial Committee of the Privy Council, and later participated in some hearings in the Judicial Committee of the House of Lords. Peacock and Couch were both judges in India who were appointed to the Privy Council on their return to England.

North-West Transportation Co Ltd v Beatty 409 costs, the advice of the Board being given on 21 July 1887 by Sir Richard Baggallay:72 The judges of the Supreme Court appear to have regarded the exercise by the defendant JH Beatty of his voting power as of so oppressive a character as to invalidate the adoption of the bye-law; their Lordships are unable to adopt this view; in their opinion the defendant was acting within his rights in voting as he did, though they agree with the Chief Justice in the views expressed by him in the Court of Appeal, that the matter might have been conducted in a manner less likely to give rise to objection.

E. ASSESSMENT

A number of authorities were cited in all four courts, but none was binding on any of them. The issue in the case was, on its face, quite a simple one. Clearly James Beatty, as a director of the corporation, was in a conflict of self-interest and fiduciary duty, with the results that the contract with the corporation was prima facie voidable and that Beatty was potentially liable to account for his profits on the sale. The assumption throughout was that the contract could be affirmed by a simple majority of the shareholders, and the question was whether James Beatty was or was not entitled to vote in his capacity as a shareholder. Eight judges thought he was, and six that he was not. It is fair to say that the decision has haunted Canadian corporate law ever since. The decision of the Judicial Committee may be examined from a number of perspectives.

(1) Majority Control and Controlling the Majority The idea that the courts should not become involved in the internal affairs of corporations, acting by majority decision of their shareholders, was underlined before much longer in Burland v Earle,73 another Privy Council case from Ontario involving conflict-of-interest contracts between a director and his own corporation. The two cases together were seen by contemporary lawyers as a very strong affirmation of majority control, even in the presence of self-interest.74

72

Beatty (PC) (n 1) 601. Burland v Earle [1902] AC 83 (PC). The case involved other issues as well. Burland was allowed to retain the profits he acquired on the conflict-of-interest contract with the corporation, even in the absence of any specific shareholder vote approving the contract. On this point, the decision now seems insupportable. 74 See, eg, Mitchell (n 62) 76–88. 73

410 Lionel Smith This majority control, however, was clearly subject to limits. What would have happened if the by-law had been to purchase the United Empire for $250,000 instead of $125,000? As every student of company law knows, the courts evolved a vague idea of ‘fraud on the minority’ which was aimed at addressing this kind of problem.75 But we can make two observations about this. First, the imposition of a limit of this kind on majority rule requires some evaluation of the substantive fairness of the transaction in question. This is not otherwise needed in the law related to self-dealing transactions. The reason is that if the person or persons to whom a duty of loyalty is owed consents to the transaction with full information, the transaction is effective; if those beneficiaries do not object, neither will the court. On the other hand, if one or more of the beneficiaries do object, or are unable to consent, then the transaction is voidable by those beneficiaries and the fiduciary is liable to account for profits, regardless of whether or not the transaction is substantively fair. The need to pay attention to the substantive fairness of the transaction arose because of the Privy Council’s decision that in the case of a corporate beneficiary, it was for the shareholders (including those interested on the other side of the transaction) to decide by simple majority whether the corporation did or did not consent to the transaction. Because the general law never requires the court to examine the substantive fairness of the transaction, it also means that no one is left with unanswered questions about the motivations of the person who owed the fiduciary duty. Either the transaction is avoided, or the only people who might object have decided not to object. But the result is that in the case itself, there are indeed unanswered questions. Why did James Beatty enter into a contract, in his personal name, for the construction of the United Empire? It seems unlikely that he wanted a 253-foot cargo and passenger steamship for his personal use. Did he plan all along to sell it to the North-West Transportation Company? In that case, why did the company not make the contract? Did he wish to keep open the possibility of selling it to a rival concern?76 This would be more troubling, although it seems quite unlikely: the United Empire was a grand vessel and the North-West Transportation Company was ‘the Beatty Line’. Even so, the law reports suggest that it was only after the vessel was under construction that the board of the corporation began to consider whether it would acquire her.77 Perhaps James Beatty simply assumed all along that the corporation would buy the vessel from him without question, and it was only when he realised that the sale was not guaranteed that he took steps to force the issue: buying 75 For a later discussion of the cases as they evolved in the first half of the 20th century, see Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286 (CA). 76 See n 39 and accompanying text. 77 Beatty (PC) (n 1) 595.

North-West Transportation Co Ltd v Beatty 411 out Neelon, and packing the board with his friends. Another question: why was it so important to him that he receive the $4,000 for ‘superintendence’, which seems to mean pure profit? Was it a point of principle for him? On such relatively small things, fortunes may be squandered on litigation, if only because of a perceived need to vindicate one’s judgement.78 And it is impossible not to wonder whether the figure of $4,000 was an accurate measure of his profit. Again, on what terms had James Beatty paid, or was he obliged to pay, the ship-builders? In other words, had he laid out his own capital up front, or were the terms of payment from the North-West Transportation Company such that they matched his obligations to the builders? This we shall never know, although the by-law included an item of $800 for expenses and interest on advances.79 The second observation goes beyond the problem of self-dealing transactions to corporate governance more generally. The problem of oppression of a minority by the majority is one that inheres in a regime of majority rule. In a collective organisation like a corporation, governed by majority rule at the level of the board and the general meeting, it is possible to follow all the rules scrupulously and still do atrocious things. This has led to the evolution of open-ended and discretionary remedies. In Canadian corporate law, what is colloquially called ‘the oppression remedy’ is one that may be activated by a wide range of conduct, and allows the court to make ‘any order it sees fit’.80 Although corporate law books and courses in Canada still pay attention to the fiduciary obligations of directors and officers, and the special regime for self-dealing contracts discussed below, as well as representative actions by which rights of the corporation may be vindicated by a shareholder, the truth is that the vast majority of corporate litigation in Canada now takes place in the framework of the oppression remedy.81

(2) Shareholder Authority The Judicial Committee of the Privy Council took it as obvious that the shareholders in general meeting of the North-West Transportation 78

James Beatty was nothing if not a hardball litigator. See n 60. He certainly did not pay the man who built the engine until much later: see n 52. 80 The text of the remedy in the federal statute is set out in the Appendix to this chapter. The most recent guidance on its interpretation is found in BCE Inc v 1976 Debentureholders [2008] SCC 69, [2008] 3 SCR 560. In short, courts will intervene when conduct that is otherwise lawful infringes on a complainant’s ‘reasonable expectations’. 81 This remedy is somewhat less relevant for publicly-traded corporations, since unhappy shareholders can simply sell their shares. However, it is certainly available in all contexts, including to some creditors, and some complainants may not wish to walk away after absorbing a loss in value of their security which, they may allege, was occasioned by oppressive conduct. The BCE case (n 80) involved an oppression claim by creditors of one of the largest publicly-traded enterprises in Canada. 79

412 Lionel Smith Company Ltd had the power to approve the contract by a simple majority. On this point, one commentator has stated that the decision is ‘demonstrably wrong’.82 An English company is a registered version of a deed of settlement company, and it makes sense in this context to understand the directors as holding their authority by delegation from the shareholders, by whose agreement the terms of the corporate constitution (including the authority of the directors) are set. Hence where the board is unable to act, for example due to conflicts of interest and duty, it falls naturally to the general meeting to make decisions on behalf of the company. But a letters patent corporation is not of the same kind. It is not called into existence by the registration of a kind of contract among investors. Rather, it is created by executive fiat (albeit one that is authorised by the statute, and not by the royal prerogative that underlies non-statutory charters).83 Why should this matter? To take one example, charter corporations were always held to have the capacity of a natural person. This principle would naturally apply to corporations created by letters patent under a general incorporation statute; there was no reason to think that the doctrine of ultra vires, which arose by the interpretation of the English registration statute, should necessarily have had any relevance to a different kind of entity.84 In the same way, the letters patent corporation cannot be seen as a contractual creation of the original investors. The authority of the board arises not by delegation but by original legislative grant. The statute allocates some decision-making powers to the shareholders in general meeting. But in this kind of corporation, the argument goes, there is no justification for finding any residual decision-making power in the shareholders when the directors cannot act. So if the board is incapacitated by a conflict, as arguably it was in Beatty, the correct answer might simply have been that the corporation was not able to approve the contract. The only organ that could have made such a decision—the board—had failed to do so, and dressing up as a bylaw a decision to adopt a contract that was voidable for breach of fiduciary duty should not necessarily have allowed the shareholders to speak for the corporation on a matter which did not otherwise belong to them. 82

Welling (n 25) 423. It was a uniform feature of all Canadian letters patent statutes that the relevant Minister ‘may’ (not ‘shall’) grant a charter to create the corporation following the submission of an application. This survives in some provinces in relation to not-for-profit corporations, and in the Prince Edward Island Companies Act, SPEI chap C-14, s 4: ‘The Minister may, by letters patent, grant a charter to one or more persons who apply therefor, constituting that person and others who may become shareholders in the company thereby created, a body corporate and politic for any purposes or objects to which the legislative authority of the Legislature extends …’ 84 The Privy Council did notice this point in Bonanza Creek Gold Mining Co v R [1916] 1 AC 566 (PC) 582–84. See also Wegenast (n 27) 130–41, and Communities Economic Development Fund v Canadian Pickles Corp [1991] 3 SCR 388, 401–02. 83

North-West Transportation Co Ltd v Beatty 413 In fact, putting the decision into the form of a by-law arguably created its own problems. In the litigation, it was generally assumed throughout that a favourable shareholder vote would solve everything, the issue being whether James Beatty could vote in that procedure. The contract was sealed on behalf of the corporation between the directors’ meeting and the shareholder meeting.85 Most of the judges assumed that the board’s decision had authorised the making of this contract; that because of the conflict, it was voidable; but that a subsequent approval by the shareholders could cure the contract of its voidable character.86 In this perspective, the issue was whether James Beatty could vote as a shareholder. One judge viewed the matter differently. Henry J, in the Supreme Court of Canada, took the view that the decision of the board itself was ineffective.87 His view was that James Beatty could not rightly vote as a director on the by-law, and probably neither Rose nor Laird could either, although this was never an issue that came up for decision.88 There is a serious issue in this point: the decision to buy the United Empire proceeded by way of a by-law, and the statute required by-laws first to be passed by the board and then to be confirmed by the shareholders. A valid decision of the board was therefore just as essential to the validity of the by-law as a valid shareholder approval. If we ask why the case was not viewed in this way, it is arguable again that the decision was tainted by an inappropriate application of principles from the deed of settlement company. In that context, we might state as a general principle that since all authority comes from the shareholders, they can approve of anything so long as the company has the capacity to do it.89 This reasoning simply does not transfer to a letters patent corporation.

85

Beatty (CA) (n 67) 223–24. Beatty (Ch D) (n 55) 306–07; Beatty (CA) (n 67) 206, 212, 215, 223–24 and 226–27; Beatty (SCC) (n 59) 603–04 and 621; Beatty (PC) (n 1) 596 and 600. 87 Beatty (SCC) (n 59) 612–13. 88 We do not have details of the voting at the directors’ meeting at which the by-law was approved. One report states that William Beatty Jr (who was based in Parry Sound) was not present (Beatty (PC) (n 1) 595), meaning that there were four directors at the meeting: James and John Beatty, Rose and Laird. The same judgment notes (at 598) that James Beatty, Rose and Laird were in a position to carry any resolution or to pass any by-law upon which they were agreed. But Henry J stated that the directors would not have passed the by-law but for ‘the vote of the party who was interested in making the sale’ (Beatty (SCC) (n 59) 612). John Beatty later cast his shareholder votes against the by-law, and so he might well have voted against it as a director; but Rose and Laird were clearly with James Beatty. Perhaps Henry J’s view was that the disqualification of James Beatty to vote as a director would also disqualify Rose and Laird, although he does not state this explicitly. Alternatively, his view might have been that the directors’ decision was invalidated by James Beatty’s participation, and that it was not possible to count the other votes to see whether it could be upheld. 89 This precise line of reasoning appears in the judgment of Burton JA in Beatty (CA) (n 67) 223–24, who notes that it was ‘faintly urged’ that the corporation’s shareholders had no power to authorise the purchase, and goes on to reject the contention on reasoning that applies much better to a deed of settlement company, before the recognition of the company as a legal person (‘anything which the agents could do the principals could also do’). 86

414 Lionel Smith One could argue, therefore, that the shareholders did not have the authority to approve the contract, as a matter of what might be called original jurisdiction, under the type of corporate constitution that was present. Perhaps the use of the by-law procedure might have allowed a way around that.90 But even if it did, the shareholders had a jurisdiction to approve only a by-law that had already been validly passed by the directors, which was arguably not the case here. To those who are accustomed to the deed of settlement company, it might seem odd to suggest that the shareholders lacked the power to approve the transaction. On the other hand, such a conclusion might have led to a better result in Beatty; and we can notice one other idea in this context. Boyd C stated that the decision could have been approved only by the unanimous consent of the shareholders.91 The same suggestion was made in the judgment of Ontario Court of Appeal in Burland v Earle, which concerned a corporation incorporated under the same statute as the North-West Transportation Company.92 This harks back to the foundations in trust law, but it might also be understood as a viable solution in corporate law where the statutory machinery by which the majority can bind the minority is simply not applicable. If everyone with a financial interest is content, the transaction can go forward; otherwise, the statute being silent, it cannot.93 Again, on that approach, the litigation in Beatty would have ended differently.

(3) Duties on Shareholders? Another way to address the kind of problem that arose in Beatty is to wonder whether even shareholders, when they cast their votes in a general meeting, are subject to some kind of constraints. In an important contribution, Sarah Worthington has argued that any vote in a collective undertaking is properly subject to some limits on the way it is exercised.94 Shareholder votes, she argues, can only be used bona fide for the purposes for which they are granted. This seems clearly to exclude

90 One might well wonder whether a power otherwise lacking in the shareholders could be generated simply by casting what was essentially a decision into the form of a by-law. See n 62. 91 Beatty (Ch D) (n 55) 311: ‘ratification is required by every individual of the class’. 92 Earle v Burland (1900) 27 OAC 540 (CA) 561. 93 Of course, the Ontario Court of Appeal was overturned on this point in Burland v Earle (n 73) (PC), with reference to Beatty, which the Court of Appeal in Burland had thought actually supported their judgment. In Burland there had not even been a shareholder vote to approve the defendant’s self-dealing profit, and the Privy Council’s decision on this point seems insupportable. 94 S Worthington, ‘Corporate Governance: Remedying and Ratifying Directors’ Breaches’ (2000) 116 LQR 638, 646–51. In addition to the authorities she cites, see also Hollinger International Inc v Black 844 A 2d 1022 (Del Ch, 2004), affd 872 A 2d 559 (Del, 2005).

North-West Transportation Co Ltd v Beatty 415 the case of shareholder voting to secure a private gain, and so on this view the correct result in Beatty would have been that the shareholder decision approving the by-law would have been voidable, presumably at the instance of any minority shareholder, thus making the contract itself voidable.

(4) Legislative Solutions There is a long history in Canadian corporate law of statutory regulation of contracts between directors and their own corporations.95 In the federal Canada Business Corporations Act (CBCA),96 this has evolved into a lengthy provision that provides detailed procedures for disclosure of self-interest by directors or officers who enter into material contracts or transactions with the corporation.97 The provision also disqualifies conflicted directors from voting in the board. Until 2001, it provided that if the procedures were followed, the contract or transaction was ‘not invalid’. It did not state clearly, however, that the director or officer could keep any profit he or she acquired. Neither did it provide any solution to the case in which some procedural defect had occurred; for example, if the director voted, the section had no application, even if there were 15 other votes all in favour. It was amended in 2001 to state clearly that the director or officer could retain profits if the procedures were fully complied with, and to provide a system for subsequent shareholder approval in cases where there was something less than full compliance with the section. Section 120(7), which applies where the rest of the section has been complied with, now provides: (7) A contract or transaction for which disclosure is required under subsection (1) is not invalid, and the director or officer is not accountable to the corporation or its shareholders for any profit realized from the contract or transaction, because of the director’s or officer’s interest in the contract or transaction or because the director was present or was counted to determine whether a quorum existed at the meeting of directors or committee of directors that considered the contract or transaction, if (a) disclosure of the interest was made in accordance with subsections (1) to (6); (b) the directors approved the contract or transaction; and (c) the contract or transaction was reasonable and fair to the corporation when it was approved.

95 Mitchell (n 62) 991–93, notes an early version that was added to the Ontario statute in 1902, and traces it to an English precedent for articles of association. 96 RSC 1985, chap C-44. 97 Section 120. There is no direct statutory regulation of the perhaps more common problem of misappropriation of corporate opportunities; this is left to general fiduciary law.

416 Lionel Smith Thus even before the amendments of 2001, we can see in paragraph 120(7)(c) a legacy of Beatty: the contract is subject to substantive review by the court, even if the procedures are followed to the letter. Sub-section 120(8) gives standing to the corporation or any shareholder to challenge a contract for non-compliance: If a director or an officer of a corporation fails to comply with this section, a court may, on application of the corporation or any of its shareholders, set aside the contract or transaction on any terms that it thinks fit, or require the director or officer to account to the corporation for any profit or gain realized on it, or do both those things.

Hence the holder of a single share may always demand a review of any selfdealing contract, for substantive fairness.98 The provision for shareholder approval after the fact is in sub-section 120(7.1). This allows the conflicted director or officer to vote as a shareholder.99 But we see, perhaps, another legacy of Beatty in that this section requires a special majority for shareholder approval.100 And again, as under sub-section 120(7), even if such approval is given, the contract is saved only if it is was reasonable and fair to the corporation when it was approved. The result is that even following shareholder approval, any shareholder may demand substantive review under sub-section 120(8). The text of the Canadian federal statute may be found in the statutes of most provinces, although in some cases without the 2001 amendments. A more recent legislative text shows a different approach but seems also to be marked by Beatty. The Quebec Business Corporations Act came into force in February 2011, and its sections 122–133 deal with self-interested contracts.101 This statute also allows substantive review, although rather than requiring that the contract be ‘reasonable and fair’, it requires that ‘the contract or transaction was in the interest of the corporation when it was approved’.102 If something goes wrong so that shareholder approval is needed, this statute requires only an ordinary resolution, but it disqualifies

98 There is a threshold of ‘materiality’ in that the section, by its sub-s (1), applies only to a material contract or transaction. 99 For the English position on self-dealing contracts, see PL Davies, Gower and Davies’ Principles of Modern Company Law, 8th edn (London, Sweet & Maxwell, 2008) 533–37. Here too, where the statute requires shareholder approval, the conflicted director may vote as a shareholder (at 544). Note, however, that by s 239(3) of the UK Companies Act 2006, a director may not vote as a shareholder on a vote to ratify his own breach of duty. 100 In the CBCA, a special majority means a two-thirds majority: s 2(1). A special majority is also required for shareholder approval under the British Columbia statute: Business Corporations Act, SBC 2002, chap 57, s 149. In the Saskatchewan Act, but only where the directors are unable to approve a transaction (presumably because they all have an interest), shareholder approval must be by a unanimous vote: Business Corporations Act, SS 1978, chap B-10, s 115(8.1). 101 Business Corporations Act, RSQ chap S-31.1. 102 Ibid, s 132.

North-West Transportation Co Ltd v Beatty 417 from voting any shareholders who have an interest.103 Moreover, even if the disinterested shareholders approve, under this provision the contract is saved only if it ‘was in the best interests of the corporation when it was approved’, which seems almost to invite the judge to take on the role of a director.104

(5) Shareholder Approval: Necessary but not Sufficient There are many situations in corporate law where shareholder approval is necessary. If a director or an officer wishes to take advantage of the terms of section 120(7.1), a special resolution is necessary. But it is not sufficient; any shareholder may still impugn the transaction, and the court will decide, among other things, whether the transaction was ‘reasonable and fair’. Indeed, this turns out to be generally true in Canadian corporate law: shareholder approval is often necessary, but never sufficient. The Canada Business Corporations Act is full of situations where shareholder approval is required. Obvious examples include the election and removal of directors, when an ordinary resolution is required;105 and fundamental changes to the corporation’s business or constitution, when a special majority is required.106 Those in the minority may feel aggrieved. Canadian corporate law not only provides for the possibility that leave may be given to bring an action to enforce any relevant rights of the corporation, as in the case of a breach by a director or an officer of a duty owed to the corporation;107 it also provides for a wide-ranging ‘oppression remedy’ that may be triggered by conduct that complies with the letter of the law but infringes someone’s ‘reasonable expectations’.108 And when such a claim is brought—a representative action to enforce the corporation’s rights, or a claim of oppression—shareholder approval of the conduct in question is never a defence.109 The result is that in Canadian corporate law, shareholder approval is often necessary, but it is never sufficient. This is a legacy of Beatty. The holding in the case has been made simply irrelevant by the modern statutes. 103

Ibid, s 133. Ibid, s 133. However, this may simply be a legislative slip. In the French text, which is equally authoritative, both s 132 and s 133 state that the contract must be ‘dans l’intérêt de la société’ without any reference to ‘best interests’. 105 CBCA (n 96), ss 6(4), 106(3) and 109(1). 106 Eg CBCA (n 96), ss 173, 183, 188(5) and 189. 107 CBCA (n 96), ss 239–240. 108 See the text to n 79. 109 Both kinds of claim, and also a claim to enforce the corporate constitution (under s 241) fall under Part XX of the CBCA (n 96). Section 242 (set out in the Appendix to this chapter) provides that in respect of any claim brought under that Part, shareholder approval may be taken account of by the court, but is never conclusive as a defence to a claim. 104

418 Lionel Smith (6) Conclusion Beatty turned on a paradox of majority rule. One buys shares, and the votes that go with them, out of personal self-interest, and one is allowed to be selfish with those votes. Combined with the principle of majority rule, which is necessary in order to make a collective organisation functional, this opens up the possibility of the kind of self-interested control of the organisation that took place in Beatty. Although there has been a range of reactions to the decision, in the case law, in the commentary and in the legislation, the outcome itself seems to be almost universally disapproved. In Canada, at least, where the dispute originated, the case is a dead letter.

F. WHERE ARE THEY NOW?

(1) The North-West Transportation Company By 1885, James Beatty was a director of the Great Northern Transit Company, called the ‘White Line’ for the colour of its ships’ hulls.110 The Great Northern Transit Company was taken over in 1899 by the North Shore Navigation Co Ltd, known as the ‘Black Line’. The North Shore Navigation Co began to compete, as the Northern Navigation Co, with the North-West Transportation Company. Finally, in 1902, the Northern Navigation Co took over the North-West Transportation Co, which brought the latter company to its end.111 In 1914 it merged with several other firms to create Canada Steamship Lines Ltd (CSL), a concern that still exists. CSL preserved the legacy of its predecessors by painting the funnels of its vessels with black and white rings for the Black and White Lines, and with a red base for the Beatty Line.112

(2) The United Empire The United Empire had the distinction of appearing on a Canadian bank note. In 1902 she appeared on the Canadian four-dollar bank note, in a 110

See n 47 and text. Wheeler (n 2) sv ‘Amalgamation’; The Scanner, vol XIX, no 5, 8–10. 112 This is the account in Wheeler (n 2) and in Young (n 2) 109; and it is easy to find images of CSL vessels with these three rings. It seems, however, that the same three rings were present on the funnel of the United Empire when she was owned by the North-West Transportation Company, at least if we can judge from the photos in The Scanner, vol XIX, no 5, between pp 5 and 6 (one of which is reproduced as Figure 5). Images of other Beatty vessels in Wheeler, however, show different colour schemes. The account in The Scanner (at 8 and 10) is that when the Northern Navigation Co took over the North-West Transportation Company, it took over the Beatty Line stack colours; and that CSL in 1924 adopted the Northern Navigation colours for its whole fleet. 111

North-West Transportation Co Ltd v Beatty 419 photo that showed her still in her North-West Transportation Co colours, emerging from a lock at Sault Ste Marie.113 She was rebuilt during the winter of 1904–05 and renamed the Saronic, a version of the name ‘Sarnia’ modified to fit the naming conventions of the Northern Navigation Co, whose vessels’ names ended in ‘ic’.114 She became part of the CSL fleet after the 1914 merger, and worked not only the Great Lakes but also the St Lawrence River as far as Quebec City. But then her luck turned. She was badly damaged by fire in 1915 and rebuilt as a steam barge, with her cabins removed. Following a grounding and another fire in 1916, CSL abandoned her to the underwriters. She was sold and, cut down even further, rebuilt as a tow barge and renamed the WL Kennedy. In 1924, following another accident, she sank in the Detroit River and so ended her days.

(3) The Beattys William Beatty Jr died in 1898, but there are still Beattys in Parry Sound; indeed there is still a Beatty Street, a William Beatty Public School and a William Beatty Co.115 But what of the shipping Beattys of Sarnia? James Beatty, the eldest of the brothers, died in 1902, at the time of the takeover of the North-West Transportation Co. John Beatty continued as manager of the Northern Navigation Co for some time, and died in 1912. Not surprisingly, Henry Beatty left the firm after the litigation began. He joined the Canadian Pacific Railway (CPR), engaged to help them to develop a strategy to link their existing rail lines in Ontario to their newlycompleted line running west from Fort William (now Thunder Bay).116 The completion of the railway, along the north shore of Lake Superior, would substantially undermine the business of the Great Lakes shipping lines, although in the meantime the CPR competed more directly by putting into service its own steamships on the lakes. It was perhaps with some relish that Henry Beatty supervised the construction of three steel vessels in Glasgow, that were technologically superior to the ships already in service on the lakes.117 He died in 1914.

113 The Scanner, vol XIX, no 5, 8, showing also the image (opposite 5); the version of the story in Wheeler (n 2) sv ‘United Empire (Old Betsy)’, seems less reliable. 114 The Scanner, vol XIX, no 5, 9. 115 See McKean (1963) (n 2) for descendants of William Beatty Jr up to 1960s and a picture (at 25) of the store as it appeared in 1964. At that time it was a department store, and the family was also engaged in ‘a fuel business, real estate’: McKean (1964) (n 2) 184. The school, the street and the current company (which appears to be in the business of property management) may be found on Google maps. 116 Cameron (n 2) 150–51. 117 Ibid, 150–11; Canadian Encyclopedia at , sv ‘Beatty, Henry’. Cameron (n 2) 153 (photo caption) notes that the CPR vessels Algoma, Athabaska and Alberta sailed across the Atlantic but had to be cut in half to be towed through the small locks of the lower Great Lakes, and this is confirmed in Young (n 2) 103, which

420 Lionel Smith His son, Edward Beatty, had the benefits of his father’s success in business.118 Born in 1877, he studied at Upper Canada College, the University of Toronto and Osgoode Hall. When a partner in his Toronto law firm was appointed general counsel to the CPR in 1901, Edward Beatty moved with him to Montreal as his assistant. Edward Beatty himself became general counsel in 1913, and in 1918 he became the first Canadianborn president of the CPR, which was perhaps the most substantial private enterprise in Canada at that time. He remained president until his death in 1943, overseeing the expansion of the railroad and steamship businesses, the building of a chain of hotels that are still the grandest in Canada and, in 1942, the creation of Canadian Pacific Airlines (which was taken over by Air Canada in 1986). Knighted in 1935, he served as Chancellor of Queen’s University from 1919–23, and as Chancellor of McGill University from 1921–42. Edward Beatty lived in a mansion on Pine Avenue, at the northern edge of the McGill University site. After his death, the University bought the house and named it Beatty Hall, a name it still bears.119 Edward’s brother, Henry Beatty, who had been the chief surgeon of the CPR, endowed a public lecture series in Edward’s memory.120 To this day, McGill continues to run the annual Beatty Memorial Lecture Series. Henry may have lost the lawsuit, but it was his sons who ensured that the family name stands, in Montreal, not for selfishness but for public service.

states that the vessels were cut in half at Montreal and put back together at Buffalo, NY. See n 13. 118 For Sir Edward Beatty, see Canadian Encyclopedia at , sv ‘Beatty, Sir Edward Wentworth’ and also . 119 See . According to the commemorative plaque that stands in front of the house where he was born in Thorold, Beatty left half of his estate to charity. 120 McKean (1964) (n 2) 171.

North-West Transportation Co Ltd v Beatty 421 APPENDIX: THE OPPRESSION REMEDY IN THE CANADA BUSINESS CORPORATIONS ACT, RSC 1985, CHAP C-44

238. In this Part, ‘action’ means an action under this Act; ‘complainant’ means (a)

a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates, (b) a director or an officer or a former director or officer of a corporation or any of its affiliates, (c) the Director, or (d) any other person who, in the discretion of a court, is a proper person to make an application under this Part. … 241. (1) A complainant may apply to a court for an order under this section. (2) If, on an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates (a)

any act or omission of the corporation or any of its affiliates effects a result, (b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or (c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, the court may make an order to rectify the matters complained of. (3) In connection with an application under this section, the court may make any interim or final order it thinks fit including, without limiting the generality of the foregoing, (a) an order restraining the conduct complained of; (b) an order appointing a receiver or receiver-manager; (c) an order to regulate a corporation’s affairs by amending the articles or by-laws or creating or amending a unanimous shareholder agreement; (d) an order directing an issue or exchange of securities; (e) an order appointing directors in place of or in addition to all or any of the directors then in office; (f) an order directing a corporation, subject to subsection (6), or any other person, to purchase securities of a security holder; (g) an order directing a corporation, subject to subsection (6), or any other person, to pay a security holder any part of the monies that the security holder paid for securities;

422 Lionel Smith (h)

an order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or any other party to the transaction or contract; (i) an order requiring a corporation, within a time specified by the court, to produce to the court or an interested person financial statements in the form required by section 155 or an accounting in such other form as the court may determine; (j) an order compensating an aggrieved person; (k) an order directing rectification of the registers or other records of a corporation under section 243; (l) an order liquidating and dissolving the corporation; (m) an order directing an investigation under Part XIX to be made; and (n) an order requiring the trial of any issue. … 242. (1) An application made or an action brought or intervened in under this Part shall not be stayed or dismissed by reason only that it is shown that an alleged breach of a right or duty owed to the corporation or its subsidiary has been or may be approved by the shareholders of such body corporate, but evidence of approval by the shareholders may be taken into account by the court in making an order under section 214, 240 or 241.

14 Rochefoucauld v Boustead (1897) YING KHAI LIEW*

A. INTRODUCTION

O

VER THE CENTURY or so since Rochefoucauld v Boustead1 was decided, the case has become central to the application of the maxim ‘equity will not allow a statute to be used as an instrument of fraud’ in the context of section 53(1)(b) of the Law of Property Act 1925. By virtue of section 53(1)(b), ‘a declaration of trust respecting any land … must be manifested and proved by some writing signed by some person who is able to declare such a trust’.2 However, in the appropriate circumstances, a trust may still be enforced against one who receives land subject to an oral declaration of trust despite the lack of proof of writing. Indeed, so central has Rochefoucauld been in this area of law that the enforcement of such a trust has come to be known as an application of ‘the doctrine in Rochefoucauld v Boustead’. Unfortunately the exact facts of Rochefoucauld have eluded many legal scholars. As a result, a number of potentially damaging analytical gaps exist in our understanding of this seminal case. For instance, while most scholars consider that the trust which arose in Rochefoucauld was a constructive trust, some have contended that the trust was an express trust. This uncertainty not only frustrates taxonomical efforts to rationalise the law

* Gratitude is due to Professor Craig Rotherham and Dr Christine Davis for their constructive comments on earlier drafts of this chapter. 1 The report commonly cited is [1897] 1 Ch 196 (CA). However, various other reports— which are largely consistent between themselves—supplement this main report with vital information for the purposes of this chapter. At the Court of Appeal level, these are: (1896) 13 TLR 118, (1896) 45 WR 272, (1897) 75 LT 502 and (1897) 66 LJ Ch 74. Only the Law Times report will be cited below where it is necessary to depart from the Official Report. 2 This more succinctly replaced s 7 of the Statute of Frauds 1677, which provided that ‘all declarations … of trusts or confidences of any lands … shall be manifested and proved by some writing signed by the party who is by law enabled to declare such trust’. References in this chapter to s 7 instead of s 53(1)(b) are merely contextual, and can otherwise be read interchangeably.

424 Ying Khai Liew governing various types of trust; it also obscures the true meaning of ‘fraud’ when this term is used in the context of the Rochefoucauld doctrine. This chapter aims to plug these analytical gaps by re-analysing Rochefoucauld and the doctrine to which the case gives its name. Part B closely scrutinises the facts of the case and concludes that the trust which arose there was constructive in nature. Part C then explores the theoretical basis of this constructive trust. This discussion then forms the basis of the analysis of the Rochefoucauld doctrine in parts D and E, which suggest a definition of ‘fraud’ and establish the relationship between ‘fraud’ and the constructive trust imposed in the case.

B. REJECTING THE EXPRESS TRUST CONCLUSION IN ROCHEFOUCAULD: AN ANALYSIS OF THE FACTS

The essence of the doctrine in Rochefoucauld v Boustead is rooted in the oft-quoted words of Lindley LJ’s judgment in the Court of Appeal:3 [T]he Statute of Frauds does not prevent the proof of a fraud; and … it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself. Consequently, notwithstanding the statute, it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the form of conveyance and statute, in order to keep the land himself.

As Lindley LJ indicates, a defendant must have taken a conveyance of land ‘as a trustee’ before ‘fraud’—whatever this term means—can come into play. In most cases, it is clear that the defendant did take ‘as a trustee’. However, close analysis of the unusual facts of Rochefoucauld reveals that an express trust could not possibly have arisen.

(1) The Facts In 1868, the claimant, the Comtesse de la Rochefoucauld, was the registered owner of certain coffee estates in Ceylon known as the Delmar estates. The estates were subject to a mortgage vested in a Dutch company. This was most likely a mortgage in the classical sense where the legal title to the land was transferred to the mortgagee, leaving the mortgagor with

3 Rochefoucauld (CA) (n 1) 1 Ch 206 (emphases added). His Lordship delivered the joint judgment of the Court of Appeal which also included Lord Halsbury LC and AL Smith LJ.

Rochefoucauld v Boustead 425 nothing more than an equity of redemption.4 The mortgagee wanted to call in the mortgage, but the Comtesse was unable to repay the mortgage debt. So she entered an agreement with the defendant, Boustead, and another man, Duff, under which they agreed to purchase the estates from the Dutch company and to hold these on trust for her, subject to her repayment of their outlay.5 Duff later pulled out of the arrangement, but Boustead went ahead. It was agreed that he would bid at the Dutch company’s auction of the estates. If and when he won the bidding, the Comtesse would not insist on her equity of redemption, with the result that he would only have to pay the Dutch company the price sufficient to cover her mortgage debt and expenses.6 It is unclear why the Comtesse wanted the estates to be sold by auction instead of securing an agreement with the company to the same effect from the start,7 since the classic context of an auction of a mortgaged property is a forced sale.8 Nonetheless, it is clear that the company was not a party to the initial agreement, although it did later sign an agreement to sell the estates at the agreed price.9 The arrangement was carried out and Boustead became the registered owner of the estates in 1873.10 He financed the bulk of his payment by an immediate remortgage of the estates to the Dutch company.11 Without the Comtesse’s knowledge, Boustead then repeatedly mortgaged—and eventually sold—the estates.12 A considerable surplus remained from the sale on which she sought an account,13 and the court held that Boustead could not invoke section 7 to deny her beneficial interest, for that would be to use the statute as an ‘instrument of fraud’.14

4

K Gray and SF Gray, Elements of Land Law, 5th edn (Oxford, OUP, 2008) para 6.1.6,

fn 2. 5

Throughout this chapter, this agreement will be referred to as the ‘initial agreement’. Rochefoucauld (CA) (n 1) 1 Ch 197–98. 7 The headnote of the Official Report merely states that the arrangement involving the auction was made ‘[t]o obviate some difficulties which arose’: ibid. 8 In recounting the facts, Lindley LJ observed that the parties’ arrangement was designed to avoid the Comtesse’s recently-divorced husband, Mr Cavendish, from enforcing the interest he acquired in the estates under the decree of the Divorce Court: Rochefoucauld (CA) (n 1) 75 LT 504–05. It is thus a plausible explanation that the sale by auction was to give an appearance to Mr Cavendish that the estates were being sold absolutely to Boustead, with the Comtesse retaining no interest in the estates. 9 Rochefoucauld (CA) (n 1) 75 LT 505. 10 Rochefoucauld (CA) (n 1) 1 Ch 205–06. 11 Ibid, 198. 12 Ibid, 204. 13 Ibid, 204. 14 Ibid, 206. 6

426 Ying Khai Liew (2) The Analysis In a recent essay,15 William Swadling has suggested that section 53(1)(b) merely provides a ‘rule … of evidence’16 which is ‘disapplied’ on a finding of ‘fraud’, ‘with the result that there would be nothing standing in the way of the express trust’s “validity”.’17 He concludes that section 7 was indeed ‘disapplied’, thus leading the court in Rochefoucauld to enforce the oral express trust directly.18 However, there appears to be no express oral trust which the court in Rochefoucauld could have enforced at all. For an express trust to exist, whether it is declared orally or in written form, there must be a settlor who declares the trust, and a settlor can only declare a trust over an interest which he owns: he cannot declare a trust of property that he does not have. On the facts of Rochefoucauld it appears that none of the parties could possibly have acted as settlor. The three possible candidates for the role of settlor will now be considered. (a) The Comtesse as the Settlor? One possibility is that the Comtesse was the settlor of the oral express trust. She would have been capable of settling the trust if she was indeed the transferor of the estates to Boustead. This view is given some credence by Simon Gardner’s analysis of Rochefoucauld, although he treats the trust as constructive.19 His observation that the Comtesse who was ‘the stipulated beneficiary was also the transferor’20 leaves open the possibility that it was she who settled the oral express trust. This possibility proves to be unsustainable on the facts, because the Comtesse was not capable of transferring—let alone settling—the estates. At first sight, the reports of the appellate decision say little concerning the Comtesse’s substantive rights, leaving room to speculate that she still had full ownership of the property. However, the reports of the first-instance decision not only reveal that the Dutch company was ‘in possession as mortgagees’;21 they also confirm that it sold the estates to Boustead using its ‘power of sale as mortgagees’.22 The inevitable inference from this is that the Comtesse’s interest was limited to an equity of redemption. Her limited rights in the estates all along made it impossible for her to have transferred

15 W Swadling, ‘The Nature of the Trust in Rochefoucauld v Boustead’ in C Mitchell (ed), Constructive and Resulting Trusts (Oxford, Hart Publishing, 2010) 95. 16 Ibid, 104. 17 Ibid, 105. 18 See too JE Penner, The Law of Trusts, 7th edn (Oxford, OUP, 2010) para 6.10. 19 S Gardner, An Introduction to the Law of Trusts, 2nd edn (Oxford, OUP, 2003) 90. 20 Ibid, 87, fn 12. 21 Rochefoucauld v Boustead (1896) 65 LJ Ch 794 (Ch D). 22 Rochefoucauld v Boustead (1896) 74 LT 783 (Ch D).

Rochefoucauld v Boustead 427 to Boustead what he obtained in 1873—the absolute title of the estates free from the mortgage. Thus, her consent to—and even her initiation of—the conveyance to Boustead could not result in her being the settlor of an express trust. It is noteworthy that Gardner has since admitted to ‘overlook[ing] the fact that the intended beneficiary in [Rochefoucauld] was not also the transferor’.23 Equally, nothing in Swadling’s article24 suggests that the Comtesse was the settlor of the trust. This possibility can, therefore, be ruled out. (b) The Dutch Company as the Settlor? Another possibility is to view the Dutch company as the settlor of the oral express trust. A measure of support for this view may be gleaned from another of Gardner’s works, despite his constructive trust analysis. He suggests that ‘the transferor (the Dutch company) intended the transferee (Boustead) to hold the property on trust for the Comtesse de la Rochefoucauld’.25 Proponents of the express trust analysis might surmise that this intention made the Dutch company the settlor. After all, the Court of Appeal did say that Boustead was ‘conveyed’ the land ‘as a trustee’,26 and it was the Dutch company which conveyed the land to Boustead. (i) A Factual Analysis It is undisputed that a settlor of an express trust must have a sufficiently certain intention to create the trust.27 It is not at all obvious that such an intention can be attributed to the Dutch company. On the facts as recounted by Lindley LJ,28 the initial agreement was reached between the Comtesse and Boustead sometime between 1868, when the Dutch company wished to call in the mortgage, and 1871, when Boustead and the Dutch company signed an agreement for sale to effectuate the initial agreement. The Dutch company’s involvement would thus appear to be separate from, subsequent to, and subject to the initial agreement between the Comtesse and Boustead: it was not a party to the initial agreement. In fact, the Dutch company appears to have been a disinterested party vis-à-vis the trust arrangement. This is seen in the fact that it sold the estates by auction, whereby Boustead 23

S Gardner, ‘Reliance-Based Constructive Trusts’ in Mitchell (ed) (n 15) 68, fn 19. Swadling (n 15). 25 Gardner (n 23) 68 (emphasis added). 26 Rochefoucauld (CA) (n 1) 1 Ch 206. The phrase ‘as a trustee’ surely leaves open the prior question of the nature of the trust which makes the defendant a trustee; but for the sake of argument we shall proceed as if this referred to an express trust. 27 Knight v Knight (1840) 3 Beav 148, 49 ER 58. 28 Rochefoucauld (CA) (n 1) 75 LT 505. 24

428 Ying Khai Liew had to submit the winning bid before he could ‘enter into an agreement with the company to purchase the estates … at a price sufficient to cover their mortgage debt and expenses’.29 Clearly, therefore, the Dutch company was only interested in recouping its mortgage debt, and did not intend to create a trust for the benefit of the Comtesse. (ii) A Theoretical Analysis Could it be argued that it does not matter what the Dutch company actually wanted, provided that it agreed—as it did—to give effect to the initial agreement by selling the estates to Boustead for the sum owing on the Comtesse’s security? It is a trite observation that a settlor may declare a trust over property only up to the extent of his own initial interest in that property; and one cannot grant an interest wider than the interest that one owns. In finding for the Comtesse, the Court of Appeal in Rochefoucauld recognised her absolute equitable interest in the Delmar estates. ‘[A]lthough [the Comtesse] admit[ted Boustead’s] lien on the property for his advances,’ the court clearly viewed her ‘as the defendant’s cestui que trust’.30 In addition, the account of Boustead’s dealings with the Delmar estates was to ‘be an account as between a trustee and his cestui que trust, not an account as between mortgagor and mortgagee’.31 It follows that, for the Dutch company to have been the settlor, it must first have been the absolute beneficial owner of the estates. However, this precondition is not met on the facts of Rochefoucauld, as seen through two different but related perspectives. First, the sale of the Delmar estates through the exercise of the Dutch company’s power of sale32 may be contrasted with the situation where land is being sold pursuant to an order of foreclosure. An order of foreclosure may be obtained only with the court’s permission,33 and it ‘vest[s] the ownership of, and the beneficial title to, the land, for the first time, in the [mortgagee]’.34 Had the Dutch company obtained an order of foreclosure, it would, as the absolute owner of the estates, have been capable of settling the property upon trust. Given that it sold as mortgagee, however, it is clear that no such order was obtained by the Dutch company. Secondly, the Comtesse’s equity of redemption subsisted all along in the Delmar estates, even up to the point when the estates were transferred to Boustead. Unless a mortgagor’s equity of redemption is foreclosed, ‘[t]he

29

Rochefoucauld (CA) (n 1) 1 Ch 197. Ibid, 209. 31 Ibid, 212. 32 See the text to n 22. 33 Ness v O’Neil [1916] 1 KB 706 (CA) 709. 34 Heath v Pugh (1881) 6 QBD 345 (CA) 360 (emphases added), affd (1882) LR 7 App Cas 235 (HL). 30

Rochefoucauld v Boustead 429 interest of the land … remain[s] in the mortgagor’.35 Furthermore, ‘[a]n equity of redemption has always been considered as an estate in the land … and therefore cannot be considered as a mere right only’.36 As Bowen LJ observed in Marquess of Northampton v Pollock,37 ‘equity regards the mortgaged property as security only for money, and will permit of no attempt to clog, fetter, or impede the borrower’s right to redeem and to rescue what was, and still remains in equity his own.’ Therefore, the Dutch company could not have expressly settled the Delmar estates on an express trust, even though it possessed the legal title to the estates as mortgagee. It was obliged to respect the Comtesse’s equity of redemption in this regard; and the obligation remained binding throughout, even though the Comtesse gave up that equity pursuant to her agreement with Boustead. (iii) A Further Analytical Inconsistency There is further evidence from the development of the law post-Rochefoucauld that rules out the analysis of the Dutch company as the settlor. In trusts texts, two factual situations are distinguished when discussing the ‘fraud’ exception to section 53(1)(b): the bipartite case, where A conveys land to B on an oral trust for A; and the tripartite case, where X conveys land to Y on an oral trust for Z. If the Dutch company were the settlor then Rochefoucauld would be a tripartite case, involving the Dutch company as settlor (X), Boustead as trustee (Y) and the Comtesse as the beneficiary (Z). Rochefoucauld would then be conclusive authority for supporting Z’s claim to the trust property. However, the application of the position in tripartite cases is far from settled, the dominant view even appearing to be against third party enforceability.38 Thus, for instance, John Feltham warns that, if Z may enforce the oral trust where Y refuses to carry it out, ‘then the operation of section 53(1)(b) is correspondingly reduced, biting only in a case where [Y] orally declares himself trustee of Blackacre for [Z].’39 Indeed, Rochefoucauld has only ever been considered as an authority which

35

Casborne v Scarfe (1737) 1 Atk 603, 605–06; 26 ER 377, 380. Ibid. 37 Marquess of Northampton v Pollock (1890) 45 Ch D 190 (CA) 215. 38 See TG Youdan, ‘Formalities for Trusts of Land, and the Doctrine in Rochefoucauld v Boustead’ (1984) 43 CLJ 306; JD Feltham, ‘Informal Trusts and Third Parties’ [1987] Conv 246; TG Youdan, ‘Informal Trusts and Third Parties: A Response’ [1988] Conv 267. See also JE Martin, Hanbury and Martin: Modern Equity, 18th edn (London, Sweet & Maxwell, 2009), para 3-005, fn 23; Penner (n 18) para 6.11; D Hayton, P Matthews and C Mitchell, Underhill and Hayton: Law of Trusts and Trustees 18th edn (London, LexisNexis Butterworths, 2010) paras 12.70–12.72; C Mitchell, Hayton and Mitchell: Commentary and Cases on the Law of Trusts and Equitable Remedies, 13th edn (London, Sweet & Maxwell, 2010) paras 3.64–3.66. 39 Feltham (n 38) 247. 36

430 Ying Khai Liew affects bipartite cases. As Hanbury and Martin observes:40 ‘Rochefoucauld v Boustead should not be regarded as [an authority to support Z’s claim] because effectively [X] arranged with [Y] that [Y] would buy from the mortgagee and hold on trust for [X].’ Hence the treatment afforded by these commentators to Rochefoucauld is also consistent with the view that the Dutch company could not have been the settlor. (c) John Boustead as the Settlor? The last possibility is the most promising for those who favour the express trust analysis. This takes the defendant, Boustead, to be the settlor of the trust. On this view, Boustead declared himself trustee for the benefit of the Comtesse after41 the estates were transferred to him from the Dutch company. This approach is endorsed by James Penner, who takes Rochefoucauld to be ‘a self-declaration case’ in which ‘Boustead … was the settlor of the trust’.42 Swadling also takes this view when he states that the Comtesse’s oral testimony proved ‘a declaration of trust by the defendant in her favour’.43 (i) Inconsistency on the Facts From the facts recounted by Swadling, it may not be immediately obvious that Boustead could not have declared the oral express trust over the Delmar estates. He notes that Boustead bought the estates in 1873, and subsequently mortgaged the estates ‘in 1876, 1877 and 1879, without the knowledge of the claimant’.44 This account appears to rely solely on the headnotes of the Official Reports.45 However, it fails to note that Boustead had ‘immediately remortgaged the estates to the Dutch company for £53,000, so that his actual payment out of pocket was under £5,000’.46 Even assuming that this arrangement was done with the full knowledge of the Comtesse, the immediacy of the remortgaging would have made it impossible for Boustead to have declared a trust over the unencumbered beneficial interest of the estates for the Comtesse’s benefit. There are two possible replies to this. The first is based on the fact that ‘[t]he estates were sold … many years ago’ and the Comtesse claimed to

40

Hanbury and Martin (n 38) para 3.005, fn 25. It is not possible to endorse an express trust analysis if we say that the relevant declaration occurred prior to Boustead’s obtaining the transfer of the estates, since an express declaration of trust of future property is void. See further, part C(2). 42 Penner (n 18) para 6.12. However, he says little else to justify this view. 43 Swadling (n 15) 113 (emphasis added). 44 Ibid, 97. 45 Rochefoucauld (CA) (n 1) 1 Ch 198. 46 Rochefoucauld (CA) (n 1) 75 LT 505. 41

Rochefoucauld v Boustead 431 be entitled only to the ‘considerable surplus [which] remained [from the proceeds of sale]’.47 This may appear to indicate that the Comtesse had admitted that her beneficial rights were held subject to the Dutch company’s rights under the remortgage, leaving open the possibility of concluding that Boustead had declared the trust after remortgaging the estates to the Dutch company. However, the court clearly held that the Comtesse was an absolute beneficiary of the estates;48 and also held that Boustead’s trusteeship commenced from the moment the estates were conveyed to him.49 These findings mean that there is no possibility based on the timing of events that Boustead could have settled the full beneficial interest of the Delmar estates on the Comtesse. Secondly, did Boustead have, for a scintilla temporis, the unencumbered title to the Delmar estates? The cases which have dealt with this issue have emerged from a similar factual pattern, where property is purchased with the aid of a charge or mortgage from the outset. Essentially, the question to be determined is whether there exists a moment in time wherein the purchaser may be said to have owned the unencumbered fee simple of the estate. If the answer is in the affirmative, it would at least be theoretically possible for Boustead to have declared an oral express trust during that slice of time. The only case deciding the point before Rochefoucauld was Meux v Smith,50 which essentially decided that no such scintilla temporis exists. Meux was followed by the Court of Appeal in Re Connolly Bros (No 2),51 which held that there is no scintilla temporis.52 In Church of England BS v Piskor,53 Evershed MR distinguished Re Connolly Bros and Meux and came to the opposite conclusion. However, the House of Lords in Abbey National Building Society v Cann54 held this ground of distinction to be invalid,55 preferring instead to view the purchaser as never having acquired anything more than an equity of redemption. Ultimately, therefore, the decision in Meux has proven accurately to reflect the law; and the second possible reply also fails. 47

Rochefoucauld (CA) (n 1) 1 Ch 204. Ibid, 212. Of course, the court also held that the Comtesse was subject to a lien in Boustead’s favour for his expenditures and expenses; but this does not mean that her interest was subject to the Dutch company’s interest obtained through Boustead’s remortgaging of the estates. 49 Ibid, 206. 50 Meux v Smith (1843) 11 Sim 410, 59 ER 931. 51 Re Connolly Bros (No 2) [1912] 2 Ch 25 (CA). 52 Although Re Connolly Bros (No 2) did not explicitly rely on Meux, the effect of this was noted by Evershed MR in Church of England BS v Piskor [1954] Ch 553 (CA) 564. 53 [1954] Ch 553 (CA) 564. 54 Abbey National Building Society v Cann [1991] 1 AC 56. In coming to this conclusion, the HL approved Re Connolly Bros (No 2); Coventry Permanent Economic Building Society v Jones [1951] 1 All ER 901 (Ch) and Security Trust Co v Royal Bank of Canada [1976] AC 503 (PC); and overruled Piskor. 55 [1991] 1 AC 56, 91. 48

432 Ying Khai Liew (ii) Inconsistency with the Judgment Furthermore, the court’s judgment did not refer to any occurrence after the transfer which could be interpreted to be a declaration of the trust. Instead, the emphasis was in no uncertain terms on the initial agreement between the Comtesse and Boustead which preceded the transfer. It was held to be ‘quite clear that the conveyance to the defendant grew out of the arrangement which he and Duff were to have carried out, and was made for precisely the same purpose’.56 Although Duff later ‘refused to carry it out’,57 the court emphasised that the transfer to Boustead was pursuant to that initial agreement, and not to any subsequent act or declaration by him after receiving the estates. Not only did the court speak of the defendant as having taken the conveyance ‘as a trustee’,58 in its final order it also ‘declared that the defendant purchased the Delmar estates as a trustee for the plaintiff’.59 These statements conclusively demonstrate that the court was not enforcing a trust self-declared by Boustead; otherwise he would not have been said to have purchased the estates as a trustee. (iii) A Further Analytical Inconsistency The analysis of Boustead as the settlor is also inconsistent with the development of the law since Rochefoucauld. Commentators agree that no ‘fraud’ arises when B, an owner of land, orally declares himself as trustee for A but fails to give effect to the declaration. As a result, section 53(1)(b) operates to prevent A from enforcing the orally-declared trust in this situation.60 Although there appears to be only one English decision on this point,61 a host of Commonwealth decisions62 adopt this position,63 and appear to be based on sound principle. As Timothy Youdan points out, the ‘fraud’ exception does not apply here because ‘the general statements of the doctrine, including that of Lindley LJ in the Rochefoucauld case, refer to the trustee 56

Rochefoucauld (CA) (n 1) 75 LT 505. Ibid, 505. 58 Rochefoucauld (CA) (n 1) 1 Ch 206. 59 Ibid, 212. 60 See eg Feltham (n 38) 247; Youdan, ‘Formalities’ (n 38) 325; Hanbury and Martin (n 38) para 3.005; M Pawlowski and K Everett, ‘Declarations of Trust and Unmarried Couples’ (1999) 29 Fam Law 721, 723; R Pearce, J Stevens and W Barr, The Law of Trusts and Equitable Obligations, 15th edn (Oxford, OUP, 2010) 227; Underhill and Hayton (n 38) para 12.70; Hayton and Mitchell (n 38) para 3.66. 61 Smith v Matthews (1861) 3 De G F & J 139, 45 ER 831. 62 Morris v Whiting (1913) 15 DLR 254 (Manitoba KB); Organ v Sandwell [1921] VLR 622 (SC Vic) 630; Permanent Trustee Co v Scales (1930) 30 SR (NSW) 391 Eq; Beemer v Brownridge [1934] 1 WWR 545 (Sask CA) 555–56 and 567; Last v Rosenfeld [1972] 2 NSWLR 923 (NSW Sup Ct) 928, 933; Wratten v Hunter [1978] 2 NSWLR 367 (NSW Sup Ct). 63 The cases cited in nn 60–61 come from Youdan, ‘Formalities’ (n 38) 325, fn 2, and Feltham (n 38) 247, n 6. 57

Rochefoucauld v Boustead 433 acquiring the property subject to a trust’.64 Indeed, ‘to hold otherwise would wholly frustrate the functions carried out by section 7’,65 leaving no room for that provision to apply.

C. THE BASIS OF THE CONSTRUCTIVE TRUST IN ROCHEFOUCAULD V BOUSTEAD

Given that none of the parties in Rochefoucauld could have possibly declared an oral express trust, this leads to the conclusion that the trust which was enforced in the case could not have been express. It is now necessary to consider the reasons why the constructive trust arose, on which Boustead was said to have taken the conveyance of the Delmar estates ‘as a trustee’.

(1) Agency It may be observed that an agency relationship arose from the initial agreement between the Comtesse and Boustead. It is difficult to provide a precise definition of agency,66 but it is at least clear that, pursuant to their agreement, Boustead did act ‘on behalf of’67 the Comtesse.68 As Griffith CJ subsequently commented in the High Court of Australia, in Cadd v Cadd,69 ‘in [Rochefoucauld] the agency relied upon was proved. There was no question really raised about it, and the other consequences followed.’ (a) The Agency in Rochefoucauld: Agent for the Purchase of Land Unlike the situations where an agent holds his principal’s property on the principal’s behalf70 and where an agent misuses his fiduciary position to

64

Youdan, ‘Formalities’ (n 38) 325. Ibid, 325–26. 66 See eg GHL Fridman, The Law of Agency, 7th edn (London, Butterworths, 1996) ch 1; FMB Reynolds, Bowstead and Reynolds on Agency, 18th edn (London, Sweet & Maxwell, 2006) Art 1. 67 Underhill and Hayton (n 38) para 1.13. 68 See too the headnote of the Law Times report which states that the Comtesse ‘alleged that [Boustead] bought the property as her agent’: Rochefoucauld (CA) (n 1) 75 LT 502. 69 Cadd v Cadd (1909) 9 CLR 171, 178. Feltham (n 38) 247 also treats Rochefoucauld as a case of agency. 70 This includes cases where the agent has sold the principal’s property according to his instructions and holds the proceeds of sale (eg Burdick v Garrick (1870) LR 5 Ch App CA (Ch) 233); and where property is given to an agent to be used in the course of performing a service for his principal (eg Shallcross v Oldham (1862) 2 J & H 609, 70 ER 1202). 65

434 Ying Khai Liew make unauthorised gains,71 Rochefoucauld falls within the category of agency relationships involving an agent purchasing property from a third party vendor on behalf of his principal. Where the agent is an ‘agent for the purchase of land’,72 section 53(1)(b) may pose a potential hurdle to the principal’s case. Interestingly, the courts have made a distinction between cases where the agent has only entered into a contract for sale with the vendor, and cases where he has proceeded to take the conveyance of the land. (i) Where the Agent has Merely Contracted with the Vendor Where an agent has merely entered into a contract with the vendor, ‘the estate in equity passes to the real purchaser’73—that is, the principal—once the vendor signs the contract,74 regardless of whether the principal is disclosed by the agent to the vendor.75 This conclusion is reached by extension from the case involving contracts for the sale of land between two parties. Here, ‘the vendor is a constructive trustee for the purchaser of the estate from the moment the contract is entered into’,76 ‘to the extent to which [the vendee] has paid the purchase-money’.77 This is based on the premise that equity ‘considers all things to be done which ought to have been done’.78 This is extended to tripartite cases where the purchaser is an agent: ‘following a long line of authorities’,79 the agency may be proved by parol evidence without contravening any statutory requirement of writing.80 The conclusion, therefore, is that ‘[t]he moment [the defendant] is agent he has not got the land at all. It is in equity vested in the principal, while at law it remains in the vendor.’81 (ii) Where the Agent has Taken a Conveyance In contrast, a different approach is taken where the agent has proceeded to take a conveyance of the land from the vendor. In this situation, ‘the agent

71 See generally Bowstead and Reynolds (n 66) para 6.041; Underhill and Hayton (n 38) Art 27. 72 Bowstead and Reynolds (n 66) para 2.037. 73 Cave v Mackenzie (1877) 46 LJ Ch 564 (Ch) 567. 74 See eg Wilson v Hart (1817) 7 Taunt 295, 129 ER 118; Heard v Pilley (1869) 4 Ch App 548 (CA); Cave (n 73). 75 Bowstead and Reynolds (n 66) para 2.037. 76 Lysaght v Edwards (1876) LR 2 Ch 499 (Ch) 510. This conclusion was reached after considering the case of Shaw v Foster (1872) LR 5 HL 321. 77 Shaw (n 76) 349 (Lord O’Hagan). 78 Ibid, 357 (Lord Hatherley LC). 79 Cave (n 73) 567. 80 In relation to s 4 of the Statute of Frauds, see eg Cave (n 73) 566 and Heard (n 74) 551. In relation to s 40 of the Law of Property Act 1925 and s 2 of the Law of Property (Miscellaneous Provisions) Act 1989, see eg Target Holdings Ltd v Priestley (1999) 79 P & CR 305 (Ch) [53] and McLaughlin v Duffill [2008] EWCA Civ 1627, [2010] Ch 1 [15]–[24]. 81 Cave (n 72) 567.

Rochefoucauld v Boustead 435 holds as trustee and … the difficulty of [the statutory writing requirement] is not avoided simply because the original appointment as an agent did not require to be in writing.’82 More specifically, where ‘there had been a conveyance to the defendant … so that he was legal owner … the case [comes] within the 7th section [of the Statute of Frauds].’83 As Bowstead and Reynolds observes, ‘[t]he assumption behind this rule is that … in the case of land, [a principal cannot] claim that conveyance to the agent vests property in the principal.’84 This view was taken in cases which pre-dated Rochefoucauld,85 and was also assumed in Rochefoucauld itself. (b) Resolution of the Issue after Rochefoucauld The difference in approach is based on an apparently sound distinction in the courts’ interpretation of section 486 and section 7 of the Statute of Frauds. In the case of a mere contract, the potential obstacle to the principal’s case—the oral appointment of the agent—is simply overcome by the view that ‘[section 4] shews, first, that it is not necessary that the agency should be proved by writing; and secondly, that you can prove the agency by parol and enforce the contract.’87 Conversely, where the agent has taken a conveyance of the land, the courts take it that there is a ‘trust or confidence of the land in the agent’,88 thus setting the case squarely within the scope of section 7. On the other hand, it would be troubling if the two cases yielded different results. As counsel for the plaintiff in James v Smith forcefully submitted, ‘it cannot … be contended that a man is to get into a better position by exaggerating his fraud by taking a conveyance.’89 In the eighteenth-century case of Bartlett v Pickersgill,90 the Statute of Frauds was indeed taken to prevent the principal from demanding the land from his agent who had taken a conveyance; and in James v Smith91 Kekewich J refused to overrule Bartlett. However, there were also authoritative decisions which cast

82 Du Boulay v Raggett (1989) 58 P & CR 138 (Ch) 151. See also Bowstead and Reynolds (n 65) para 2.037; G Thomas and A Hudson, The Law of Trusts (Oxford, OUP, 2004) para 1.63. 83 Cave (n 72) 565. 84 Bowstead and Reynolds (n 65) para 6.109. 85 See eg Mortlock v Buller (1804) 10 Ves Jun 292, 311; 32 ER 857, 864; Heard (n 74) 553; Cave (n 73) 567. 86 Section 4 of the Statute of Frauds provided that ‘no action shall be brought … upon any contract or sale of lands … unless the agreement … shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorised.’ 87 Cave (n 73) 566. 88 Ibid 567. 89 James v Smith [1891] 1 Ch 384 (Ch) 386. 90 Bartlett v Pickersgill (1760) 1 Cox 15, 29 ER 1041. 91 James v Smith (n 89).

436 Ying Khai Liew serious doubts on the Bartlett approach. In Heard v Pilley,92 the Court of Appeal was strongly of the opinion that Bartlett was inconsistent with the rule that equity will not allow a statute to be used as an instrument of fraud;93 and in Cave v Mackenzie, Jessel MR said that ‘where there has been a conveyance, different considerations [as compared to the case of a mere contract] probably arise; and that is shewn by the proviso which excepts a conveyance from the 7th section’.94 When Rochefoucauld came to be decided, the Court of Appeal laid the issue to rest by expressly rejecting Bartlett.95 Today, therefore, once an agency is proved, even if by parol evidence, the courts will never allow the agent to take advantage of section 53(1)(b), whether or not the agent has taken a conveyance.96 As Feltham observes, ‘[i]f B buys Blackacre from A and takes a conveyance, acting in whole or in part as agent for C, C’s interest will be enforced although the agency is entirely oral.’97 Whilst it is undeniably true that cases involving an agent for the purchase of land after Rochefoucauld are essentially reconciled, this does not explain the basis of the trust which was enforced in Rochefoucauld. One possibility is to analyse the case in terms of a declaration of trust of future property.

(2) Trust of Future Property The law concerning the disposition of future property is well established.98 At law, a purported assignment of future property is wholly void and conveys nothing to the intended assignee.99 Similarly, where future property is made the subject-matter of a declaration of trust, the trust is void for uncertainty.100 But where valuable consideration is given, equity will treat the assignment or declaration of the future property as a contract to assign the property. This becomes enforceable when the assignor receives the

92

Heard (n 74). Ibid, 552 and 553. 94 Cave (n 73) 567. The ‘proviso’ was clearly in reference to s 8 of the Statute of Frauds, which, in its more concise form in s 53(2) of the Law of Property Act 1925, reads ‘[s 53] does not affect the creation or operation of resulting, implied or constructive trusts’. 95 Rochefoucauld (CA) (n 1) 1 Ch 206–07. 96 This position seems to be anticipated in Bowstead and Reynolds (n 66) paras 2.37 and 6.108, fn 67. 97 Feltham (n 38) 247. 98 See generally Gardner (n 19) 156–59; AJ Oakley, Parker and Mellows: The Modern Law of Trusts, 9th edn (London, Sweet & Maxwell, 2008) para 5.088; Hanbury and Martin (n 38) para 4.023; Penner (n 18) para 8.10; Underhill and Hayton (n 38) paras 10.6–10.7 and 30.78–30.79; Hayton and Mitchell (n 38) paras 15.07–15.08. 99 Holroyd v Marshall (1862) 10 HL Cas 191, 11 ER 999; Re Tilt (1896) 40 Sol Jo 224 (Ch). 100 Re Ellenborough [1903] 1 Ch 697 (Ch); Williams v CIR [1965] NZLR 395. 93

Rochefoucauld v Boustead 437 property.101 Since a trust of future property is void, the enforcement of the agreement will never involve enforcing the express trust. Rather, a constructive trust arises102 if there is consideration to secure the ‘transfer [of] the beneficial interest to the … purchaser immediately on the property being acquired’,103 pursuant to the maxim that ‘equity considers as done that which ought to be done’.104 It is necessary to consider how the facts and the judgment in Rochefoucauld might fit within this category of constructive trusts, which analyses Boustead as having declared the trust. (a) The Facts The basis of the initial agreement between the Comtesse and Boustead was that Boustead would hold the estates ‘for the benefit of the plaintiff’.105 Yet, at that time, he had not acquired the estates from the Dutch company, neither did he have any present right to it. The merely expectant nature of the acquisition is emphasised by the fact that the carrying out of the agreement was contingent on Boustead submitting the winning bid at the auction of the estates.106 It is also necessary to identify the ‘valuable consideration’ given by the Comtesse to justify treating the void trust as a contract to assign the estates. Such consideration ‘is sufficient if there be a benefit to the defendant or a detriment to the plaintiff’.107 This exercise is challenging if reference is made solely to the Official Report,108 which omits the court’s statement of facts in its judgment. It might mislead one to assume, as Swadling assumes, that ‘the plantations were managed for [the Comtesse] by [Boustead]’ from the very beginning.109 In fact, the other reports consistently reveal that Boustead ‘was brought into the matter by Duff or by Mr Sabonadiere, the [Comtesse’s] agent in Ceylon’.110 Boustead was approached because he ‘had experience in the management of coffee estates and in receiving

101 Ellison v Ellison (1802) 6 Ves Jun 656, 31 ER 1243; Holroyd (n 99) 210; Tailby v Official Receiver (1888) 13 App Cas 523 (HL) 530; Re Lind [1915] 2 Ch 345 (CA). 102 S Worthington, Proprietary Interests in Commercial Transactions (Oxford, Clarendon Press, 1996) 199; C Rotherham, Proprietary Remedies in Context (Oxford, Hart Publishing, 2002) 11. 103 Holroyd (n 99) 1007. 104 Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1, 16. See Gardner (n 19) 157; Underhill and Hayton (n 38) para 30.79. 105 Rochefoucauld (CA) (n 1) 75 LT 505. 106 Rochefoucauld (CA) (n 1) 1 Ch 197–98. 107 Edgeware Highway Board v Harrow Gas Co (1874) LR 10 QB 92, 95 (emphasis added). 108 Rochefoucauld (CA) (n 1) 1 Ch 205. 109 Swadling (n 15) 96. 110 Rochefoucauld (CA) (n 1) 75 LT 505.

438 Ying Khai Liew and disposing of consignments of coffee from them, and had business transactions with Mr Sabonadiere.’111 It should be noted that Boustead was not initially an employee or a ‘friend’112 of the Comtesse, but a manager of coffee estates and a businessman with a vested interest in making a profit out of the arrangement. He decided to proceed with the agreement even after Duff had pulled out because he ‘hoped to become the [Comtesse’s] representative in England and the consignee of the produce of her estates, and he did not wish to break faith with the Dutch company.’113 It is unclear from the judgment whether Boustead did in fact become the Comtesse’s representative; but it is at least clear that, as part of the initial agreement with the Comtesse, she promised to hire Boustead ‘to work [the Delmar estates] as coffee plantations after he had acquired them’.114 The arrangement was not gratuitous: unlike Duff’s initial involvement, which was motivated by ‘considerations of friendship for the [Comtesse]’,115 Boustead did receive valuable consideration through being benefitted by the promise of employment.116 Furthermore, the court observed that ‘the Delmar estates were worth far more than the amount due to the Dutch company upon their mortgage’.117 There was surely no shortage of interest in the estates. Had the normal course of events taken place and the estates been sold without Boustead’s intervention, the Comtesse would have received a significant sum from the surplus of the sale. As part of the arrangement with Boustead, however, she gave up her equity of redemption to allow Boustead to purchase the estates at a price ‘sufficient to cover the debt, interest, and costs of the Dutch company’.118 The Comtesse’s act of giving up her equity of redemption was a detriment incurred pursuant to the agreement with Boustead. Indeed, the Comtesse’s giving up of her equity of redemption appears to have conferred yet another benefit on Boustead. It was earlier noted that ‘his actual payment out of pocket was under £5,000’, with the balance to the sum of £53,000 coming from remortgaging the estates to the Dutch company.119 It is unlikely that the Dutch company, which was in liquidation,120 and which auctioned the estates in the first place because it wanted to call in the Comtesse’s mortgage, would have advanced a much 111

Ibid, 505. See Penner (n 18) para 6.9 for this mistaken view. 113 Ibid. 114 Rochefoucauld (CA) (n 1) 1 Ch 205. 115 Rochefoucauld (CA) (n 1) 75 LT 505. 116 Rochefoucauld (CA) (n 1) 1 Ch 205. The giving of employment has long been viewed as constituting valuable consideration: see eg Hartley v Cummings (1847) 5 CB 247, 136 ER 871; Mumford v Gething (1859) 7 CB (NS) 305, 141 ER 834. 117 Rochefoucauld (CA) (n 1) 75 LT 505. 118 Rochefoucauld (CA) (n 1) 1 Ch 198. See also Rochefoucauld (CA) (n 1) 75 LT 505. 119 See the text to n 45. 120 Rochefoucauld (CA) (n 1) 75 LT 505. 112

Rochefoucauld v Boustead 439 higher sum to Boustead on the remortgage. By giving up her equity of redemption, therefore, the Comtesse may have benefitted Boustead, since he might not have been capable of financing the purchase of the estates had the price been significantly higher. (b) The Judgment Much of the judgment in Rochefoucauld was spent dismissing Boustead’s defences based on section 7 of the Statute of Frauds121 and the Statute of Limitations or laches.122 It was assumed to be unnecessary to determine the precise ground upon which the trust arose: it was sufficient that it did arise, loosely speaking, from ‘the circumstances under which the Delmar estates were conveyed to the defendant’.123 Nonetheless, the judgment makes two clear points about the trust: firstly, the events which occurred before Boustead purchased the estates made him a trustee upon receipt;124 and, secondly, an intention to create a trust was integral to the existence of the trust.125 The ‘trust of future property’ analysis accounts for these two points. The initial agreement between the Comtesse and Boustead evinced the latter’s intention to create a trust; and since the declaration over what was at that time merely future property was coupled with valuable consideration, Boustead took the estates ‘as a trustee’ of a constructive trust which bound him to carry out the initial agreement. Ultimately, however, this analysis does not satisfactorily explain the basis of the trust enforced in Rochefoucauld, which has never been understood as a trust of future property. Take Bannister v Bannister,126 for instance. The defendant, an elderly woman, conveyed two cottages to the claimant, her brother-in-law, on the understanding that she would be allowed to live rent-free in one of them for as long as she desired. Although Rochefoucauld provided authority for the proposition that a constructive trust had arisen for the claimant’s benefit,127 the decision was not based on a declaration of trust of future property.128 In addition, there are other categories of constructive trusts—the doctrine in Pallant v Morgan129 is one obvious example— where, similarly, a constructive trust arises in situations where an agreement is reached prior to the defendant obtaining the property in question. 121

Rochefoucauld (CA) (n 1) 1 Ch 205–07. Ibid, 208–12. 123 Ibid, 205. 124 Ibid, 205, 206, and 209. 125 Ibid, 208. 126 Bannister v Bannister [1948] 2 All ER 133 (CA). 127 Ibid, 136. 128 Indeed, neither did the case involve the brother-in-law acting as an agent for the purchase of land. This, too, signifies the need for analysing Rochefoucauld in terms broader than either the agency or the trust of future property analysis. 129 Pallant v Morgan [1953] Ch 43 (Ch) 48. 122

440 Ying Khai Liew However, rather than characterising the defendant as having declared a trust over future property, the courts enforce the constructive trust based on some other, much broader grounds. It is thus necessary to explore what those grounds are.

(3) Explaining Rochefoucauld: Constructive Trusts Responding to Intention and Reliance (a) Intention and Reliance In other categories of constructive trusts, such as those arising in the context of secret trusts,130 mutual wills131 and the doctrine in Pallant v Morgan,132 the constructive trusts arise in response to the elements of intention and reliance. In all of these cases, A transfers—or allows to be transferred—property to B pursuant to an oral promise by B to hold some beneficial interest in the property for A or C. The element of intention is shown by the agreement between A and B, where B promises to benefit A or C. The element of reliance arises through A’s transferring of (or allowing to be transferred) the property to B, where A suffers a detriment and/or B is conferred an advantage through the transfer. (b) Intention and Reliance as Independent Causative Events in Rochefoucauld It is clear enough that the case of Rochefoucauld falls within this category of constructive trusts which responds to the elements of intention and reliance. Through the initial agreement, the parties’ intention was that Boustead would benefit the Comtesse with the equitable title of the estates. Pursuant to that intention, and relying on Boustead’s promise, she detrimentally gave up her valuable equity of redemption, allowing Boustead to purchase the estates at the amount outstanding on her mortgage rather than the full market price. She also incurred a detriment through ceasing to pursue other means of achieving the result she intended, and instead relied on Boustead to achieve the same. Furthermore, the Comtesse’s reliance not only conferred 130 In these cases, the testator manifests to the apparent legatee his intention to benefit an ultimate beneficiary. The testator then leaves his will unchanged until his death in reliance on the apparent legatee’s agreement to fulfil the testator’s intention. A constructive trust binds the property received by the apparent legatee. 131 In these cases, two testators agree to benefit an ultimate beneficiary upon their death; and the first testator to die leaves his will unchanged in reliance on the survivor’s promise to do the same. A constructive trust binds the survivor to his promise. 132 In these cases, one bidding party agrees to cede some part of the to-be-acquired property to another bidding party; and in reliance on this, the latter refrains from attempting to procure the property. A constructive trust binds the former party to his promise.

Rochefoucauld v Boustead 441 an advantage on Boustead by allowing him to obtain the legal title to the estates; he also benefitted from being allowed to manage the estates and to pursue his business interests pursuant to the arrangement.133 (c) Explaining the Preference for the Intention and Reliance Analysis over the Trust of Future Property Analysis It was suggested earlier that the decision in Rochefoucauld could have been analysed on the trust of future property analysis.134 Indeed, many cases which fall to be analysed within the doctrine may be analysed in terms of a declaration of trust of future property, since the transferee in the cases always undertakes to hold property on trust prior to taking conveyance of that property. However, the fact that Rochefoucauld—and the doctrine it represents—has not been analysed on these terms is explicable in the light of the elements of intention and reliance. While trusts of future property appear to be contracts enforced pursuant to the ‘equity considers as done …’ maxim, on a closer look, it is more accurate to view the analysis as fundamentally requiring the element of reliance. A declaration of trust of future property will be re-characterised as a contract if, and only if, the intended beneficiary has given valuable consideration. It follows that it is a precondition for him to have relied on the settlor’s declaration before equity will intervene to enforce the declaration.135 However, reliance in the form of consideration is less compelling than reliance which arises through the transfer of the very property to which the promise relates. The giving up of property in reliance on the transferee’s promise is always more detrimental to the transferor and more advantageous to the transferee than reliance which arises through the giving of consideration, because the latter lacks an obvious link between the transferee’s promise (or intention) and the transferor’s reliance. As such, it is no surprise that the doctrine considers it unnecessary to react to the less certain form of reliance, and will always respond to the most certain form of reliance which arises through the transfer of property as reflected in the doctrine.

D. THE DOCTRINE IN ROCHEFOUCAULD V BOUSTEAD: WHAT IS ‘FRAUD’?

In considering oral declarations of trust over land, the existence of ‘fraud’ is often seen as the crucial element which determines whether the

133

This was noted in part C(2)(a). See part C(2). 135 As Buckley J observed in Re Ellenborough (n 100) 700, ‘an assignment for value binds the conscience of the assignor’ (emphasis added). 134

442 Ying Khai Liew Rochefoucauld doctrine will apply to give rise to a constructive trust, negating the requirement for writing. From the analysis of the doctrine as responding to the elements of intention and reliance, ‘fraud’ appears to have merely an auxiliary role, since it is not an event to which the doctrine responds. However, it is undeniable that the language of ‘fraud’ prevails in the doctrine, not least because it is used in the Court of Appeal’s statement of the doctrine in the case of Rochefoucauld itself. It is thus necessary to examine what ‘fraud’ really means in the doctrine. First, however, a discussion of the nature of section 53(1)(b) is required, since ‘fraud’ is closely linked to the requirements of that section.

(1) Nature of Section 53(1)(b) (a) The General View The phrase ‘manifested and proved by some writing’ in section 53(1)(b) has long been taken to ‘require the declaration to be evidenced by a signed writing and [that] in the absence of such writing the trust is valid although unenforceable’.136 Proponents of the constructive trust categorisation take the view that an enforceable ‘express trust is created by the settlor’s properly manifested intention to create that trust’.137 Thus, the lack of the requisite writing conclusively precludes the orally-declared trust from being enforced qua an express trust. Where the Rochefoucauld doctrine applies, these commentators claim that the courts are enforcing a constructive trust, the operation of which is exempted from the requirement for written evidence by section 53(2).138 (b) The Disapplication Thesis Opposed to this analysis is the ‘disapplication thesis’ most cogently developed by William Swadling and Paul Matthews. This provides the most sophisticated case made for the express trust characterisation. Swadling takes the view that section 53(1)(b) is not a rule of ‘enforceability’139 but

136

Youdan, ‘Formalities’ (n 38) 320–21, and see the cases cited there at fnn 76–77. R Chambers, ‘Constructive Trusts in Canada’ (1999) 37 Alberta Law Review 173, 183. See also R Chambers, Resulting Trusts (Oxford, Clarendon Press 1997) 220 ff; P Birks, An Introduction to the Law of Restitution, revised edn (Oxford, Clarendon Press, 1989) 65. 138 This provides: ‘This section does not affect the creation or operation of resulting, implied or constructive trusts.’ This more succinctly replaced s 8 of the Statute of Frauds 1677, which provided that, ‘[w]here any conveyance … shall or may arise or result by the implication or construction of law … then and in every such case such trust or confidence shall be of the like force and effect as the same would have been if this statute had not been made’. 139 Swadling (n 15) 107. 137

Rochefoucauld v Boustead 443 one of ‘proof’:140 it is ‘a rule of evidence’.141 To prevent the statute from being used as an instrument of fraud, the evidential requirement of writing is ‘disapplied’ on a finding of ‘fraud’, ‘with the result that there would be nothing standing in the way of the express trust’s “validity”.’142 The ‘disapplication’ of the requirement of writing removes any ‘barrier to the admission of the claimant’s oral testimony’ to prove the oral express trust,143 ‘and so whatever section 7 said, it could not have stood in the way … of the express trust’.144 This view is endorsed by Matthews, who says that, in Rochefoucauld, section 7 of the Statute of Frauds did ‘not apply, on the basis that otherwise it would enable a fraud to be perpetrated’.145 He goes on to criticise the general view by remarking:146 It is a complication that in some cases the judges who rely on the principle that equity will not allow the statute to be used as an instrument of fraud sometimes go on also to rely on s 53(2) of the Law of Property Act 1925, on the basis that this is a ‘constructive’ trust … However, that is just inconsistent and wrong. It is one or the other; it cannot be both simultaneously.

In his view, therefore, disapplying section 53(1)(b) leads to the direct enforcement of the oral express trust: it is inconsistent to justify the enforcement of the trust further by reference to section 53(2) through categorising it as a constructive trust. James Penner, too, contends that such reasoning is ‘fallacious’.147

(2) Rejecting the Disapplication Thesis (a) Inconsistency with the Facts of Rochefoucauld Taken at face value, the disapplication thesis may seem plausible. After all, section 53(1)(b) does not require declarations of trust over land to

140

Ibid, 108. Ibid, 113. 142 Ibid, 105. 143 Ibid, 105. 144 Ibid, 107. See also W Swadling, ‘The Proprietary Effect of a Hire of Goods’ in N Palmer and E McKendrick (eds), Interests in Goods, 2nd edn (London, LLP, 1998) 511–12; W Swadling, ‘A Hard Look at Hodgson v Marks’ in P Birks and F Rose (eds), Restitution and Equity, Vol 1: Resulting Trusts and Equitable Compensation (Oxford, Mansfield Press, 2000) 66. In his most recent work, Swadling admits that his express trust conclusion of Rochefoucauld is not the ‘dominant view’ and so he undertakes a point-for-point rebuttal of the ‘arguments for classifying the Rochefoucauld trust as constructive’ in order to show that the trust was express: Swadling (n 15) 95 and 100–13. 145 P Matthews, ‘The Words Which Are Not There: A Partial History of the Constructive Trust’ in Mitchell (ed) (n 15) 21. 146 Ibid, 21, fn 89. 147 Penner (n 18) para 6.10. A similar view is taken in PH Pettit, Equity and the Law of Trusts, 11th edn (Oxford, OUP, 2009) 98. 141

444 Ying Khai Liew be created in writing; instead, such declarations must only be evidenced by some signed writing. Indeed, the general view admits that an oral declaration does create an express trust, albeit one not enforceable by the courts. However, given that there was no express trust which arose on the facts of Rochefoucauld, whether orally declared or otherwise, the case did not fall within the ambit of the formality requirements at all. This is to say, there were no (express) ‘declarations … of trusts … of any lands’ that had to be ‘manifested and proved by some writing’. Even assuming that section 7 provided a rule of proof, its ‘disapplication’ in Rochefoucauld would prove nothing in the determination of the nature of the trust, since there was no (oral) express trust that could be enforced anyway. (b) Inconsistency with the Judgment in Rochefoucauld The analysis of section 7 as a rule of proof also does not sit well with the judgment in Rochefoucauld. According to Penner and Swadling:148 [Section 7] is not concerned with enforceability but with proof, a logically prior question. If a declaration of trust is alleged to have been made but an application of the statute means that that allegation cannot be made good, there will in the eye of the court be no trust at all, not a valid but unenforceable one.

This, taken with the disapplication thesis, suggests that the analytical sequence for determining whether section 53(1)(b) is ‘disapplied’ is that ‘fraud’ must be determined prior to the issue of proof. However, this is not reflected by the analysis in Rochefoucauld, where the Court of Appeal said that ‘it is a fraud on the part of a person to whom land is conveyed as a trustee … to deny the trust’.149 According to the judgment, then, it is a precondition for ‘fraud’ that the defendant is ‘a trustee’. Surely, it is only after considering all the relevant evidence that a court can determine whether he is or is not a trustee. The disapplication thesis thus mistakenly treats the existence of ‘fraud’ as a prerequisite for admitting the relevant evidence: Rochefoucauld clearly shows that evidence of the alleged trust is admitted, and the existence of the trust duly recognised, before the discussion of ‘fraud’ comes into play.150

148 J Penner and W Swadling, Law of Trusts (London, University of London Press, 2007) para 7.1.2. 149 Rochefoucauld (CA) (n 1) 1 Ch 206. 150 In fact, Swadling recognises the circularity of the issue: ‘[I]t is only once the evidence which the statute says is inadmissible is admitted that it will be known that a “trustee” is attempting to use the statute as an instrument of fraud.’: W Swadling, ‘Property: General Principles’ in A Burrows (ed), English Private Law, 2nd edn (Oxford, OUP, 2007) para 4.208, fn 307. It is surprising, then, that despite noting this circularity, he still incorporates it within the disapplication thesis.

Rochefoucauld v Boustead 445 (c) Failure to Explain ‘Fraud’ A fundamental flaw of the thesis is that it does not make clear when a ‘fraud’ will arise. Proponents of this thesis do not appear to have given an answer, preferring instead to accept ‘fraud’ as given in the cases. For instance, Swadling acknowledges the fact that ‘there is no authoritative statement’ for ‘what amounts to fraud for the purpose of this doctrine’,151 yet he is content to say that the court in Rochefoucauld ‘disapplied [section 7]on perfectly orthodox and long-settled grounds’.152 Without explaining what those grounds are, the disapplication thesis substantially alters section 53(1)(b) by writing into it a word which is not there: that declarations of trusts over land ‘“may” be manifested and proved by some writing’. This omission has implications for the general analysis of the doctrine—indeed, even affecting cases where an oral express trust can be said to have been declared on the facts such as Bannister v Bannister. (d) Uncertainty in Determining the Parties’ Legal Positions Another difficulty with the disapplication thesis is the confusion it creates for parties who are reviewing their legal position prior to the initiation of proceedings. Suppose that a transferee who is genuinely in doubt concerning his legal position merely seeks a court’s declaration and does not assert that he is the rightful owner of the property in question. Will he be declared to be the absolute owner of the property, given that he has not yet actively relied on the statute as an ‘instrument of fraud’? Surely no court would make such a declaration, since, if the case were litigated, the transferee would be held to be a trustee. Yet how will the court justify its declaration otherwise, if the oral express trust is precisely within the ambit of (the yet-to-be-‘disapplied’) section 53(1)(b)? And what if, instead of the transferee, it is the transferor who seeks such a declaration? Swadling writes that section 53(1)(b) ‘was not addressed to settlors at all, but to litigants attempting to prove declarations of trust, who will generally be beneficiaries’.153 It follows that, since the transferor is the prospective litigant who wishes to prove the transferee’s oral declaration of trust, he should be advised by the court that evidence of some writing is necessary to prove the trust, consistently with section 53(1)(b). Should he then, on the strength of this advice, decide not to litigate because he is unable to produce the written evidence needed? It is clear that the disapplication thesis must also be rejected for causing these regrettable confusions in defining the parties’ legal standing.

151 152 153

Ibid, para 4.208. Swadling (n 15) 113. Ibid, 104.

446 Ying Khai Liew (3) What is ‘Fraud’? (a) Not Relying on Section 53(1)(b) The first point of principle to be observed is that ‘it is not “fraud” to rely on legal rights conferred by Act of Parliament’.154 Even if it is argued that section 53(1)(b) does not confer a ‘legal right’ but acts merely as a ‘rule of evidence’, the principle remains, given that it is a valid rule conferred by Parliament.155 This principle is made clear in the self-declaration cases, where an owner of property, B, orally declares a trust over his property for the benefit of A. As observed earlier,156 B is able to rely on section 53(1)(b) if he changes his mind, rendering ‘fraud’ irrelevant in self-declaration cases.157 Thus, beyond merely relying on the statute, there must be something more in the way the statute is or might be used for a ‘fraud’ to arise. (b) Involves a Conveyance In Rochefoucauld, the Court of Appeal observed that a ‘proof of a fraud’ will involve proving that ‘the grantee … is … relying upon the form of conveyance and statute, in order to keep the land himself’.158 This suggests that, in addition to section 53(1)(b), the existence of a conveyance is central to the meaning of ‘fraud’. Thus, self-declaration cases never involve a conveyance to A because B already owns the property in question, while such a conveyance is always a feature in the Bannister-type cases where B receives A’s land on the express oral understanding that B is to hold some beneficial interest in the land on trust for A.159 Whenever a conveyance takes place, the true nature of the transaction is fundamental to determining the respective rights and obligations of the parties. This significantly varies depending on whether the true nature of the conveyance is a transfer as a gift, by virtue of a sale, pursuant to a trust arrangement, as a security, etc. In the Bannister-type cases, the existence of the conveyance means that the courts must determine whether the true nature of the transaction is an

154

Midland Bank Trust Co Ltd v Green [1981] AC 513 (HL) 531. Thus, it is difficult to defend the argument that courts are allowed to ‘disapply’ s 53(1) (b) despite no provision by Parliament to that effect. 156 See part B(2)(c)(iii). 157 Note, however, that although the Rochefoucauld doctrine does not apply, this does not preclude the possibility of A succeeding on a proprietary estoppel argument. 158 Rochefoucauld (CA) (n 1) 1 Ch 206 (emphasis added). 159 The reference in this section to Bannister as the archetype of the Rochefoucauld doctrine rather than the case of Rochefoucauld itself is due to the fact that there was no oral express trust on the facts of Rochefoucauld. This makes it difficult to compare Rochefoucauld with the self-declaration cases where an oral express trust is a standard feature. On the relevance of ‘fraud’ in Rochefoucauld itself, see part E(3). 155

Rochefoucauld v Boustead 447 outright transfer to B, or whether there is something more than an absolute conveyance. (c) Cloaks the True Nature of the Conveyance To discover the meaning of ‘fraud’, the possible arguments in the Bannistertype cases must be considered. One possible argument in B’s favour is to rely on the statute in his attempt to prevent the enforcement of the oral express trust. Since it is not a ‘fraud’ to rely on the statute per se, in essence B will succeed on this point and the oral express trust will not be enforced. In reply, A may seek to show that the conveyance to B was in reliance on B’s manifested intention to hold some beneficial interest in the property for A. If this is shown then A will have established the elements of intention and reliance to give rise to a constructive trust, which may be enforced through section 53(2). The only way in which B may make use of section 53(1)(b) to counter this argument is to combine the wording of the statute with the conveyance deed in hand. The argument is rather persuasive: if section 53(1) (b) requires a declaration of trust concerning land to be proved by some writing, and if the only proof available is the absolute form of conveyance to B, there can therefore be no enforceable trust consistent with the statute. In his attempt to establish himself as the rightful owner of the property, B is essentially attempting to cloak the discovery of the true nature of the transaction. However, the attempt fails to prevent the enforcement of the constructive trust which arises from the circumstances of the transaction, and which is excepted from the formality requirement of section 53(1)(b) by virtue of section 53(2). Furthermore, the law signifies its manifest disapproval of such an attempt by labelling it a ‘fraud’. ‘Fraud’, therefore, relates to the attempt to use the absolute form of the conveyance in combination with section 53(1)(b) to cloak the true nature of the transaction. (d) ‘Fraud’ in Context: A Description There are two ways in which the term ‘fraud’ may be used in the doctrine. It may act merely as an abridgement of the maxim ‘a statute may not be used as an instrument of fraud’; or it may take on a meaning independent of the maxim. The difference between the two, although subtle, is of crucial importance to the proper analysis of the doctrine. The point may be illustrated by reference to Scott LJ’s description of ‘fraud’ in Bannister v Bannister, where he observed:160 The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial

160

Bannister (n 126) 136.

448 Ying Khai Liew interest, and that is the fraud to cover which the Statute of Frauds or the corresponding provisions of the Law of Property Act, 1925, cannot be called in aid in cases in which no written evidence of the real bargain is available.

Where the meaning of ‘fraud’ is divorced from the maxim, it might be thought that the doctrine is engaged if, and only if, the absolute form of the conveyance is positively used to cloak the true nature of the transaction. A similar view might be taken of the Court of Appeal’s words in Rochefoucauld that ‘it is a fraud on the part of [the transferee] … to deny the trust and claim the land himself’:161 a positive denial of the trust might appear to be a pre-condition for the application of the doctrine. This is, however, inaccurate in the light of the maxim. The statement that ‘section 53(1)(b) may not be used as an instrument of fraud’ remains wholly relevant, even in a case where the transferee has not actively set up the form of the conveyance to deny the transferor’s interest. In Scott LJ’s terms, the emphasis of the maxim is not on the ‘setting up’ of the form of the conveyance nor the ‘defeating’ of the other’s interest, but rather on the fact that the statute ‘cannot be called in aid’ in such a case. Similarly, the emphasis in Rochefoucauld was not on the transferee’s active ‘denial of the trust’, but on the fact that ‘the Statute of Frauds does not prevent the proof of a fraud’.162 Thus, although ‘fraud’ relates to the attempt to use the absolute form of the conveyance and the statute to cloak the discovery of the true nature of the transaction, the reference to ‘fraud’ does not presume that the transferee has in fact attempted to do so. Rather, ‘fraud’ merely describes a state of affairs163—the cloaking of the true nature of the transaction using the conveyance deed and section 53(1)(b). More specifically, ‘fraud’ describes the state of affairs which the constructive trust prevents—the ‘defeating’ or ‘denial’ of the trust using the conveyance. This is consistent with the analysis of intention and reliance as the causative events of the doctrine, since the causative events are those that would make a denial of the true nature of the transaction a ‘fraud’, not the occurrence of such an act of denial.

E. A CLOSER LOOK AT ‘FRAUD’

(1) Not a Causative Event One danger of giving ‘fraud’ a meaning divorced from the maxim is that it encourages the ‘defeating’ or ‘denial’ of the trust to be viewed as a causative 161

Rochefoucauld (CA) (n 1) 1 Ch 206. Ibid (emphasis added). 163 ‘Fraud’ has also been said to be merely ‘a conclusion of law’ (Mountain v Styak [1922] NZLR 131, 140) which ‘follows from the facts found’ (Bannister (n 126) 136). 162

Rochefoucauld v Boustead 449 event triggering application of the doctrine. For instance, according to the disapplication thesis, section 53(1)(b) is disapplied only when an act of ‘fraud’ is actively perpetrated by the transferee. In this vein, Tony Oakley writes, ‘what brings about the intervention of equity is the acquisition of property on the strength of an oral undertaking … followed by an attempt to renege on the undertaking … because of the lack of the necessary statutory formalities.’164 This seems to suggest that the constructive trust arises in response to the recipient’s wrong in reneging on the undertaking, when this is clearly not required to give rise to the doctrine. Given that ‘fraud’ is a malleable concept in equity, taking it to be a causative event may even lead to fundamental misunderstandings of the law. For instance, in Hodgson v Marks, Ungoed-Thomas J held at first instance that the ‘fraud’ exception was available even against a bona fide purchaser who only discovers the trust after the purchase.165 This mistaken view was perhaps prompted by the misconceived idea that it is wrong—and thus a ‘fraud’—for a purchaser who later discovers a trust to refuse to honour it. The conceptualisation of ‘fraud’ as a causative event leads to inexorable analytical difficulties. Consider the period of time between the conveyance of the property and the transferee’s reneging on his undertaking. If the act of reneging is a causative event, it follows that, in this period, A has no rights under a constructive trust, since the doctrine has not yet been engaged, neither can the transferor enforce the transferee’s oral express undertaking, since this is prevented by section 53(1)(b). Not only will this put the parties in a state of deadlock, it may also be that any profits made out of the property, for instance pertaining to rents received from the tenants in the meantime, may be kept by the transferee. This perverse state of affairs does not reflect the law. The point may be put in another way. Suppose that the transferor dies immediately after he conveys the property pursuant to the transferee’s undertaking. There is no doubt that the doctrine in Rochefoucauld v Boustead will enable the transferor’s heirs or estate to enforce the undertaking against the transferee, even though the transferee had not reneged on his undertaking. Or suppose that the transferee dies instead of the transferor immediately after the conveyance.166 Here, the impossibility of the transferee reneging on

164

AJ Oakley, Constructive Trusts, 3rd edn (London, Sweet & Maxwell, 1997) 53–54. Hodgson v Marks [1971] Ch 892 (CA) 909. The inconsistency of this view is noted in D Hayton and C Mitchell, Hayton and Marshall: Commentary and Cases on the Law of Trusts and Equitable Remedies, 12th edn (London, Sweet & Maxwell, 2005) para 2.27. 166 A less extreme but similar case arose in Re Duke of Marlborough [1894] 2 Ch 133 (Ch). The transferee died before re-assigning the property—a leasehold—to the transferor, and had not reneged on the parties’ agreement to retransfer the equity of redemption to the transferor. At 146 Stirling J held that, ‘if the [transferee] had in his lifetime refused to convey … he could not have set up the statute … [and] the Plaintiff, as claiming under him, is in no better position’. 165

450 Ying Khai Liew his undertaking is indisputable; yet few would deny that the transferor may enforce the transferee’s undertaking against his heirs or estate. These observations demonstrate that the application of the Rochefoucauld doctrine entails a substantive interest arising prior to and irrespective of any later act of the transferee. The proprietary right arises to bind the transferee from the outset—that is, from the moment the conveyance is completed. As Millett LJ observed in Paragon Finance plc v DB Thakerar & Co, the transferee’s ‘possession of the property is coloured from the first by the trust and confidence by means of which he obtained it’.167 Such a right, and the corresponding obligation, arises pursuant to a constructive trust which responds to the causative elements of intention and reliance. This analysis allows the parties—and the courts—to determine with certainty that the transferee will always be bound by a constructive trust once the true substance of the conveyance reflects the elements of intention and reliance.

(2) The Symbiosis between ‘Fraud’ and the Constructive Trust Besides acting as a description of a state of affairs, the concept of ‘fraud’ (as an abridgement of the maxim) serves as an emphasis of the context in which the doctrine is relevant. In Rochefoucauld, the transferee was described as ‘a person to whom land is conveyed as a trustee, and who knows it was so conveyed’.168 ‘Fraud’ is thus relevant only in situations where the elements of intention and reliance arise on the facts—the intention being reflected in the ‘knowledge’ of the transferee, and the reliance arising through the transferor’s conveyance of the property to him. This serves to accentuate the close link between the term ‘fraud’ and the existence of the constructive trust. Inasmuch as section 53(2) ‘does not affect the creation or operation of … constructive trusts’, it allows proof of the causative events of constructive trusts. To the same extent, therefore, it allows ‘the proof of a fraud’169—that is, proof of the elements of intention and reliance—in spite of any attempts to use the form of conveyance to deny this.

(3) ‘Fraud’ in Rochefoucauld Given the intimate link between ‘fraud’ and the constructive trust, it follows that the doctrine is not related to, neither does it enforce, the oral express

167 Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400 (CA) 409. For general discussion of this idea, see ch 22 of the present volume, by Christian Daly and Charles Mitchell. 168 Rochefoucauld (CA) (n 1) 1 Ch 206. 169 Ibid, 206.

Rochefoucauld v Boustead 451 trust on the facts, contrary to the analysis of the disapplication thesis. This point is clearly discernible from the judgment in Rochefoucauld. Given that there was no oral express trust on the facts, the case did not fall at all within the ambit of section 7 of the Statute of Frauds, which affects only oral express trusts to render them unenforceable. Even if section 7 ceased to exist, there still would not have been an express trust on the facts. Nonetheless, it was still possible for Boustead to have used the absolute form of the conveyance, together with section 7, to cloak the discovery of the constructive trust. This possibility made it necessary for the court to speak of ‘fraud’—that is, to describe the case as one in which the enforcement of a constructive trust would avoid the cloaking of the true nature of the transaction. It is, therefore, unnecessary for the facts of a case to fall within the ambit of section 53(1)(b) in order for the doctrine in Rochefoucauld to apply. Instead, the facts must give rise to the elements of intention and reliance to engage the doctrine. In order for the term ‘fraud’ to be relevant in the doctrine, there must also be the possibility of the transferee using the conveyance and section 53(1)(b) to cloak the discovery of the elements of intention and reliance on the facts. Furthermore, given that an act of ‘fraud’ is not a causative event of the trust, it is seems unnecessary to couch the emphasis of the doctrine in Rochefoucauld in terms of a ‘fraud doctrine’170 or a ‘fraud’ exception. Rather, it is a more accurate reflection of the doctrine to treat it as a sui generis sub-category of constructive trusts which responds to the elements of intention and reliance.

F. CONCLUSION

Contrary to recent claims, the trust which was enforced in Rochefoucauld v Boustead was clearly a constructive trust, since none of the parties involved was capable of declaring an express trust. In the context of agency, Rochefoucauld established a new category of constructive trust, where an agent who takes a conveyance from a third party will always be bound by a constructive trust for the benefit of his principal. Arguably, the trust in the case itself might be explained as an example of a constructive trust arising in the context of the ‘trust of future property’ analysis. However, the lack of

170 In Singh v Anand [2007] EWHC 3346 (Ch) [144], HHJ Norris QC attempted to apply ‘the pure form of [the ‘fraud’] doctrine as applied in Rochefoucauld v Boustead’ to bind the nominees of the transferor of shares; while refusing to impose a constructive trust based on Bannister v Bannister, since in that case ‘a constructive trust was imposed on the transferee’ (emphasis added). This is inconsistent, given that the doctrine in Rochefoucauld always imposes a constructive trust on the transferee, Bannister being merely a case which applies the doctrine. This confusion illustrates the inconsistencies which may arise if the doctrine is misinterpreted as reflecting a ‘fraud’ rationale.

452 Ying Khai Liew support given to this analysis in cases which have relied on Rochefoucauld suggests that a better explanation may be proffered: that it gave rise to a constructive trust which responded to the elements of intention and reliance, consistent with other categories of constructive trusts. The ‘disapplication thesis’, which favours the view that the doctrine ‘disapplies’ section 53(1)(b) to allow the enforcement of the oral express trust, is unworkable. The doctrine in Rochefoucauld entails that section 53(1)(b) renders an oral express trust unenforceable; instead, it enforces a constructive trust where the causative elements of intention and reliance are fulfilled on the facts. ‘Fraud’ is merely a description of the state of affairs which the constructive trust prevents—the transferee’s reneging on his undertaking through using the absolute form of the conveyance and section 53(1)(b) to deny the true nature of the conveyance.

15 Re Earl of Sefton (1898) CHANTAL STEBBINGS*

A. INTRODUCTION

I

N 1898 A case came before the Court of Appeal concerning the extent of the power of the Lord Chancellor over the estate of a lunatic.1 Litigation in lunacy was prolific, and the law reports abound with reports of cases addressing every aspect of lunacy, in relation to a lunatic’s person and his property. The case of Re Earl of Sefton,2 though short and, at the court’s own admission, decided with less time and care than it would have wished, is one that is of particular significance within a body of jurisprudence that is striking in its paucity of obvious leading cases. It is an important case within the highly complex nineteenth-century law of lunacy, then in its formative period, because it is one of the surprisingly few cases that directly addressed the juxtaposition and interrelationship of two strands of jurisdiction that together comprised the law of lunacy: the ancient jurisdiction of the Lord Chancellor under the royal prerogative, and the expression of his jurisdiction in statute. The case both reflects and addresses the tensions inherent in this regime, and through the litigation this chapter examines the nature of the relationship and the insight the case affords. B. PERSONAL BACKGROUND OF THE FIFTH EARL OF SEFTON

The lunatic at the centre of this litigation was Charles William Hylton Molyneux, the fifth Earl of Sefton. He was born in 1867, the eldest of the *

The support of the British Academy for this research is gratefully acknowledged. Blackstone defined a lunatic as ‘one who has had understanding, but by disease, grief, or other accident has lost the use of his reason. A lunatic is indeed properly one that has lucid intervals; sometimes enjoying his senses, and sometimes not’: 1 Bl Com 304 (1783 edition). Recovery was, therefore, possible. An idiot, on the other hand, was ‘one that has had no understanding from his nativity; and therefore is by law presumed never likely to attain any’: ibid, 303. See too A Highmore, A Treatise on the Law of Idiocy and Lunacy (London, J Butterworth, 1807; reprinted New York, Garland Publishing, Inc, 1979) 1–14. 2 The case is reported in several series of law reports. The principal report is that in [1898] 2 Ch 378, and other full reports may be found at (1898) 67 LJ Ch 518; (1898) 78 LT 765; (1898) 14 TLR 466. 1

454 Chantal Stebbings three sons of William Molyneux, fourth Earl of Sefton, and was known as ‘Mull’ to his family. He held a commission in the Lancashire Hussars Yeomanry, was attaché to the British Embassy in Paris and ADC to the Lord Lieutenant of Ireland. The Molyneux family was noted for its interest in sport, and Charles was a keen, fit and able steeplechaser. In March 1894, he took part in the Altcar Steeplechase in Liverpool. He fell badly at the first fence, apparently suffering only from a mild concussion for which he was treated, and appeared to make a full recovery. One month later his condition worsened, and it became clear that he had suffered severe brain damage from the fall. He became so mentally unstable that he had to be placed under surveillance. When his father died on 27 June 1897 and Charles became the fifth Earl at the age of 30, he was an invalid and not expected to survive many months. In November 1897 he was declared a lunatic in law. Although in 1899 it was thought that he was showing signs of recovery, his physical condition deteriorated, and he died at Croxteth Hall on 2 December 1901 at the age of 34. He was buried in St Chad’s Church, Kirkby, three days later.3 Although Charles died with debts of some £31,000, he was a man of considerable wealth. The Molyneux family owned extensive estates in Liverpool and all over Lancashire, including the Sefton and Croxteth estates. These were valued at some £800,000 each, and brought in net rentals of £21,000 and £30,000 a year respectively. Court proceedings began in 1898. As part of his marriage settlement of July 1866, Charles’s father had been tenant for life of the Croxteth estate, and Charles was the tenant in tail in remainder. During his father’s lifetime, Charles disentailed this settled estate as far as he was able to do so without his father’s consent as ‘protector’ of the settlement, and he acquired a base fee in the estate. This base fee would endure for as long as he had male issue. Charles’s father was also the absolute owner of the Sefton estate. By his will, made in 1893, Charles’s father devised the Sefton estate to his three sons as successive tenants for life with remainders to their issue in tail male, after the determination of life estates, and with various remainders over. He made provision to allow the tenant for life of the Sefton estate to appoint a jointure and to charge substantial portions for younger children. Charles’s father also directed that every person who became entitled to the possession of the devised Sefton estate, and who should also become entitled to the settled Croxteth estate, should disentail the settled Croxteth estate within one year of becoming entitled, and resettle it on the same terms as the devised Sefton estate. He also provided that if Charles should execute the settlement as directed, he would receive a legacy of £10,000 and have his considerable debts paid out of the income of his residuary estate. If Charles refused, then at the end of the year his interest in the devised Sefton

3

Court Circular, The Times, 6 December 1901, 9.

Re Earl of Sefton 455 estate under the will would determine. These arrangements were ‘usual and ordinary and proper’;4 in other words, they reflected normal conveyancing practice. Charles’s next of kin, other than his next brother Osbert, took out a summons asking that the court order the resettlement of the Croxteth estate on Charles’s behalf. Having been heard by a Master in Lunacy, and then by a judge in chambers, the matter came up for hearing in June 1898 in the Court of Appeal by Lord Lindley MR, Collins LJ and Chitty LJ. Time was of the essence: not only was Charles seriously ill and not expected to live many more months, but the decision to resettle had to be made within the year in order to retain the interest in the Sefton estate under the will. As Charles’s father had died in June 1897, the resettlement had to be executed by the 27 June 1898. The case came before the court for hearing on 13 and 14 June 1898.

C. QUESTIONS FOR THE COURT

There were, essentially, two questions before the court. The first question was specific to the facts of the case, namely, whether it would be for the benefit of Charles that the order to resettle the Croxteth estate should be made. Indeed, the only reason the Master in Lunacy had refused to make the order was because he doubted whether it was truly for Charles’s benefit that the estate be resettled. All the case law affirmed that any order made in lunacy had to be for the benefit of the lunatic. In the Sefton case the court adopted a wide view of benefit. It refused to accept that the benefit was simply a question of the lunatic’s pecuniary benefit, and thought that it should look beyond that.5 On the facts it was clearly for Charles’s benefit, both narrowly and broadly conceived, to perform the condition on which alone he could keep the Sefton estate. The court was in no doubt that it was for Charles’s benefit ‘in every sense of the term’6 to comply with the conditions. The immediate material and pecuniary benefits that Charles would receive if he performed the condition were, most obviously, that he would be able to keep the Sefton estate devised by his father’s will, and he would receive a legacy of £10,000 and a large income out of which he could pay off his considerable debts. There were wider advantages too, principally that the Croxteth and Sefton estates would be kept together as his father had intended. As Collins LJ observed, ‘[i]t is only by taking the very narrowest view of his benefit, and also by assuming that there is no possibility of his recovery, that it can in any sense be said not to be for 4 5 6

[1898] 2 Ch 378, 388 (Chitty LJ). Ibid, 384 (Lindley MR). (1898) 78 LT 765, 768 (Chitty LJ).

456 Chantal Stebbings his benefit’.7 On this basis it was agreed that accepting the Sefton estates on the condition laid down in his father’s will was exactly what Charles would have done had he been sane and likely to live, ‘and if he were actuated by those feelings which sons are or ought to be actuated by—namely, respect for his father’s wishes’.8 It was, indeed, what any reasonable man would do.9 The second question was the important question of principle, and the reason why this case is regarded as a landmark case in lunacy jurisdiction. It was whether the court had the jurisdiction to order that the Croxteth estates be disentailed and resettled.

D. CHANCERY LUNATIC

The jurisdiction of the Lord Chancellor in lunacy applied to a class of lunatics known as Chancery lunatics. Only they came under the almost exclusive control of the Lord Chancellor, while other categories of lunatic were regulated by local justices of the peace and by a bureaucratic body created in the mid-nineteenth century to regulate the very great proportion of lunatics, who were paupers. Charles Molyneux was a Chancery lunatic, namely, an individual whose lunacy had been proved by inquisition. This was a formal process reserved for lunatics who were both propertied and whose physicians believed were unlikely ever to recover. Accordingly they were usually individuals who had been in that state for some years.10 Some resided in private asylums, while some were kept at home. In 1859 there were 602 Chancery lunatics11 and just over 1,000 in 1877,12 but by 1908 the number had fallen to only some 15 a year.13 The reason for this decline was the complexity and expense of the process of inquisition, and the development of other forms of legal protection for the estates of lunatics. The process whereby an individual was ‘found’ to be lunatic by inquisition was one of considerable formality, delay and expense,14 despite reforms

7

[1898] 2 Ch 378, 390 (Collins LJ). Ibid, 383 (Lindley MR). 9 Ibid, 388 (Chitty LJ). 10 Minutes of Evidence before the Select Committee on Lunatics, House of Commons Parliamentary Papers (1859 session 1) (204) iii 75, q 1113; Minutes of Evidence before the Select Committee on Lunacy Law, House of Commons Parliamentary Papers (1877) (373) xiii 1, qq 814, 9431–34. 11 Minutes, Lunatics (n 10) q 1107. 12 Minutes, Lunacy Law (n 10) q 78. 13 Report of the Royal Commission on the Care and Control of the Feeble-Minded (1908) House of Commons Parliamentary Papers (4202) xxxix 159. 14 For the detailed process for an inquisition in lunacy, see Minutes, Lunatics (n 10) qq 950–98. See too the comments of Lord Lyndhurst, The Times, 31 March 1852, 2. 8

Re Earl of Sefton 457 introduced in 184215 and again in 1853.16 It began with an application to the Lord Chancellor made by a friend or relative of the alleged lunatic. He or she would present a petition accompanied by evidence, notably the medical findings of qualified practitioners, along with details as to the lunatic’s circumstances and property. The petition was heard by the judge in chambers, and if there was a prima facie case, he would order an inquiry to be held by the Master in Lunacy. The petition could be opposed, but if the Lord Chancellor thought fit, he would order the Master to make inquiry as to the individual’s state of mind. This inquiry was a trial, known as an inquisition. After 1853, when the process was simplified to some extent, it could be held with or without a jury,17 but in either case it was an open court and the public was entitled to attend. It was held in the lunatic’s home or at his asylum, often in his presence, and frequently with the attendance of counsel. If the inquisition found that the patient was indeed lunatic, ie of unsound mind and incapable of managing his affairs, the next step was for the Master to ascertain the extent of the property of the lunatic, identify his heir and next of kin, and ensure the protection of his person and property.18 All this, including the history and nature of the lunacy, had to be reported to the Lord Chancellor for his approval. If the lunacy was not contested, he would simply countersign the report. The whole reason underlying the process whereby an individual became a Chancery lunatic lay in his property ownership. It was the possession of property that both demanded and permitted the intervention of the Lord Chancellor in his lunacy jurisdiction.19 As Chancery lunatics were generally wealthy, their families and friends were able to give them immediate and temporary financial assistance, and would resort to the formal procedure only when the lunatic was clearly a confirmed case.20 Under the authority of General Orders, the Master in Lunacy inquired fully into the property of the lunatic. He would ascertain what the property and fortune comprised, and the extent of the income arising from it. He would inquire how the lunatic had been maintained, and would assess the sum suitable for future

15 Lunacy Act 1842 (5 & 6 Vict c 84), where the issue of General Orders under the authority of the Act simplified the process. 16 See generally (1852) 16 Law Review and Quarterly Journal of British and Foreign Jurisprudence 190. 17 Lunacy Regulation Act 1853, s 42 (16 & 17 Vict c 70). Inquisitions became increasingly rare in the early 20th century. Between 1914 and 1923 there were in all only 11 inquisitions, none of which was held with a jury: Report of the Royal Commission on Lunacy and Mental Disorder, House of Commons Parliamentary Papers (1926) (2700) xiii 373, 415. 18 For this second stage in the process, see Minutes, Lunatics (n 10) qq 999–1009. After 1842, the Master in Lunacy would make these inquiries under General Orders. At the time of the Sefton litigation, the procedure for the judicial inquisition as to lunacy was found in the Lunacy Act 1890, ss 90–107 (53 & 54 Vict c 5). 19 Minutes, Lunacy Law (n 10) qq 818–20; 1347; 9507. 20 Minutes, Lunatics (n 10) q 1114.

458 Chantal Stebbings support. This allowance would be set aside to maintain the individual in the rank to which he had become accustomed.21 The care an individual received depended on his income, and wealthy lunatics could enjoy constant medical care, carriages and servants. Questions as to the allowance for a lunatic’s maintenance came before the Masters incessantly.22 The consequences of being found lunatic by inquisition were profound in relation to the lunatic’s property. The whole objective of the Lord Chancellor’s jurisdiction was to protect the lunatic’s property. Once so found, the lunatic’s property came under the protection of the Lord Chancellor, and indeed the motive of the friends and relatives who initiated the process was generally to ensure the property was protected in this way. The individual’s control over his or her own property was removed entirely, and no valid disposition could be made, even during a lucid interval.23 The lunatic was ‘deprived … of the power of squandering his property’.24 It was the judicial authority, through the Master in Lunacy, that took complete and informed control of the lunatic’s property. The Master was described as ‘the protector of the person and property’,25 the ‘guardian of the property’,26 but he could do nothing without the formal sanction of the Lord Chancellor. It was the Master who made every arrangement relating to the money and property of the lunatic.27 The ‘committee of the estate’ was the public expression of the protection of the lunatic’s property by the court. The choice of committee lay with the family, but the Master had to be convinced that he or she was a fit and proper person to act as such,28 and he made the appointment. The court protected the lunatic’s property in that the committee of the estate had little discretion in the management of the lunatic’s estate.29 Unlike the committee of the person, who had complete control over the lunatic’s care and residence,30 the power of the committee of the estate was far more 21 In the case of small estates, the whole income was generally used for maintenance; but in the case of large estates there was frequently a surplus, and this surplus of the lunatic’s property was paid into court and invested in government stock. The income was accumulated for the lunatic’s benefit, if he recovered, or for those entitled on his death: Minutes, Lunatics (n 10) qq 1234–43. Where the estate was large and the lunacy long, large sums would accumulate in the court. 22 Minutes, Lunatics (n 10) q 1012. 23 This continued until such time as he should recover and be discharged (signified by the issue of a supersedeas). At that point he would be restored to his property. 24 HL Deb 2 May 1853, series 3, vol 126, col 903. 25 Minutes, Lunatics (n 10) q 1186. 26 Minutes, Lunacy Law (n 10) q 11077. 27 The Master in Lunacy had no control over the person of the lunatic. The lunatic was entrusted to the care of relations, and his or her good treatment ensured by the supervision of the Chancery visitors through an annual visit required by the legislation: ibid, qq 4394, 9461. 28 Minutes, Lunatics (n 10) qq 999, 1145. 29 Minutes, Lunacy Law (n 10) q 866. 30 Ibid, q 838.

Re Earl of Sefton 459 constrained. The committee constituted merely ‘the legal hand to pay and receive all money’,31 and had little more power than a bailiff. Whenever there was a need to sell, lease or mortgage any portion of the estate, to effect any repairs or do any other act in relation to the corpus of the lunatic’s property, the committee had to have the authority of the Master who, armed with evidence as to the suitability of the transaction, had to obtain the sanction of the Lord Chancellor.32 This management of the lunatic’s estate by the Lord Chancellor was paid for by a percentage levied on the lunatic’s income.33 The court was not the owner of the lunatic’s estate, merely its guardian or trustee.34 The guiding principle of the Lord Chancellor in his dealings with the property of lunatics was to ensure that, should they recover, they would find their estates exactly as they were when they became insane.35 Accordingly, the court was conservative and careful in all that it permitted to be done, and would sanction no substantial change unless it was a matter of urgency.36

E. THE PARENS PATRIAE JURISDICTION

The question of principle before the court in the Sefton case was as to its jurisdiction to order the committee of Charles’s estate to accept the Sefton estate on the condition laid down in his father’s will and to take all steps to effect it. There were two possible sources of jurisdiction under which the court could make such an order: original or statutory. The original inherent jurisdiction of courts of law in lunacy matters was derived from the royal prerogative. As parens patriae, the Crown had the care and custody of the persons and property of those incapable of looking after themselves. This was a right and a duty. Lunatics, like children, needed to be protected by the law. And this was genuinely so, for their vulnerability derived from their state of health, their mental condition, not from any kind of social construct, as in the case of married women. In relation to propertied 31

Minutes, Lunatics (n 10) q 1147. Ibid, qq 1148–51. 33 Lunacy Regulation Act 1853, s 26 (16 & 17 Vict c 70). Incomes between £100 and £1,000 would pay 4%; 3% for incomes up to £5,000; 2% above £5,000; nothing paid on incomes above £10,000. 34 It was arguable that one effect of that was that when it was asked to dispose of the lunatic’s property under that jurisdiction, it had to take into account the interests of persons affected other than the lunatic and could not alter their rights. Charles’s next brother, who was the next remainderman, and who would succeed to the earldom on Charles’s death childless, argued this on the authority of Re Pares (1879) 12 Ch D 333, on the basis that the disentailing and resettling of the Croxteth estate would be to his detriment, but this merely drew the terse response from Lindley MR that ‘we have nothing to do with that’: (1898) 78 LT 765, 766. 35 Minutes, Lunatics (n 10) q 1159. 36 Eg, it would not permit the conversion of realty into personalty or vice versa, and carefully controlled the amounts spent on repairs: ibid, q 1160. 32

460 Chantal Stebbings lunatics there was a clear danger of unlawful detention and pecuniary misappropriation, a danger that was recognised from the earliest times.37 So lunatics were clear subjects for legal protection, a protection founded on necessity.38 That jurisdiction was delegated by the Crown to the Lord Chancellor by letters patent under the sign manual.39 By the early nineteenth century it could be exercised by anyone authorised to do so by the sign manual,40 and it came to be exercised by the Lord Chancellor and all the Lords Justices of Appeal. The Lord Chancellor had the care and custody of the persons and estates of persons of unsound mind so found by inquisition,41 but it was a jurisdiction delegated to him personally and so was unconnected with the jurisdiction of the Court of Chancery. Indeed, it was related only in so far as the issue of the writ of inquisition formed part of the common law jurisdiction of Chancery.42 As James LJ famously observed in 1873:43 Unsoundness of mind gives the Court of Chancery no jurisdiction whatever. It is not like infancy in that respect. The Court of Chancery is by law the guardian of infants whom it makes its wards. The Court of Chancery is not the curator either of the person or the estate of a person non compos mentis, whom it does not, and cannot make its ward … It can no more take upon itself the management and disposition of the property of a person abroad, or confined to his bed, by illness. The court can only exercise such equitable jurisdiction as it could under the same circumstances have exercised at the suit of the person himself if of sound mind.

The extent of the parens patriae jurisdiction was unlimited and had never been, and could not be, defined. In a case on wardship in 1828, where the court discussed its scope, Lord Redesdale drew the analogy between the jurisdiction over infants and that over the mentally incompetent, and observed that it went ‘as far as is necessary for protection and education’;44 similarly, 37 For the early history of lunacy jurisdiction, see Sir W Holdsworth, A History of English Law, vol 1 (London, Methuen & Co, 1903) 261–62; Sir F Pollock and FW Maitland, The History of English Law, 2nd edn (Cambridge, Cambridge University Press, 1898; reissued 1968) vol 1, 464. 38 Wellesley v Duke of Beaufort (1827) 2 Russ 1, 20; 38 ER 236, 244, where Lord Eldon discusses the jurisdiction of the Court of Chancery and comments on the Crown’s parens patriae jurisdiction. 39 The jurisdiction was transferred to the Court of Wards and Liveries when that court was created in 1540 by 32 Hen VIII c 46, and remained there until 1660 when the Act 12 Car II c 24 transferred exercise of the royal prerogative over idiots and lunatics to the Lord Chancellor. 40 14 & 15 Vict c 83 (1851) added two Lords Justices of Appeal in Chancery, while 15 & 16 Vict c 87 (1852) provided that the jurisdiction could be exercised by anyone for the time being entrusted by virtue of the sign manual. 41 Only in 1908 was it provided that the inherent jurisdiction could be exercised even where there had been no inquisition. The last inquisition was probably in 1959: R Jennings, ‘Jurisdiction in Lunacy’ (1960) 23 MLR 421, 422 n. 42 3 Bl Com 427 (1783 edition). 43 Beall v Smith (1873) LR 9 Ch App 85, 92. 44 Wellesley v Wellesley (1828) 2 Bli NS 124, 136; 4 ER 1078, 1084.

Re Earl of Sefton 461 Lord Manners remarked that it was ‘impossible to say what are the limits of that jurisdiction’.45 Three guiding principles were clear. The first was that the jurisdiction had to be exercised for the benefit of the individual in question. The court declared in 1793 that46 the Chancellor is to administer the estate tanquam bonus paterfamilias, taking every advantage fairly to increase and improve it without engaging in risks and hazardous adventures … Whatever tends towards ordinary improvement it is strictly the duty of the administrator to do, considering only the immediate interest of the proprietor of the estate.

Accordingly, the reason the Sefton case came to be litigated was the doubt in the Master’s mind that to carry out the resettlement of the Croxteth estate was truly for Charles’s benefit. The second guiding principle was that it was directed primarily to the protection of property. Though nowhere stated, historically the law relating to persons of unsound mind concentrated almost exclusively on the property of those persons.47 And, thirdly, it was clear that the inherent jurisdiction related to the persons and estates of those found insane by inquisition. The ancient parens patriae jurisdiction of the Crown over the property of the mentally ill was stated by the statute De Prerogativa Regis in 1324.48 It read that the King shall provide, when any (that beforetime hath had his Wit and Memory) happen to fail of his Wit, as there are many per lucida intervalla, that their Lands and Tenements shall be safely kept without Waste and Destruction, and that they and their Household shall live and be maintained competently with the Profits of the same, and the Residue besides their Sustenation shall be kept to their Use, to be delivered unto them when they come to right Mind …

The legislation reveals how the fundamental distinction between idiots and lunatics shaped the law of lunacy. Because lunatics, unlike idiots, were presumed to be capable of recovery, the Crown was never more than a trustee for them, obliged by law to protect their property and be prepared to account to them for all the profits of the estate on their recovery or, if they did not recover, on their death to those properly entitled. It was this relationship and obligation that the statute De Prerogativa Regis declared: the king was to provide for the maintenance of lunatics, to preserve their lands and profits for their (the lunatics’) use should they recover. The king could take nothing for himself. The legislation drew a fine distinction

45

Ibid, 2 Bli NS 142–43, 4 ER 1086. Oxenden v Lord Compton (1793) 2 Ves Jun 69, 73; 30 ER 527, 530. 47 The early law shows that it was not limited to property: Beverley’s Case (1603) 4 Co Rep 123b, 126a–b; 76 ER 1118, 1124 (Lord Coke). 48 17 Edw II c 10 (1324). This short Act is called the Lands of Lunatics Act in the Chronological Table of Statutes. 46

462 Chantal Stebbings between idiots and lunatics in this respect, and placed the lunatic in a stronger position.49 It thus confirmed that the land of lunatics vested in the Crown during the continuance of the insanity.50 The statute constituted a recognition, affirmation and declaration of a pre-existing jurisdiction. It did not create the jurisdiction, and the jurisdiction did not derive from it.51

F. STATUTORY JURISDICTION

In the nineteenth century, in response to the large growth in the number of the insane, which itself demanded greater regulation and state intervention, a raft of legislation was enacted which addressed all aspects of lunacy, including the property of Chancery lunatics. This legislation of the nineteenth century, which above all was intended to effect the new state regulation of lunatics, ‘remodelled’ the lunacy jurisdiction.52 Earlier legislation was mainly directed towards the care and visitation of lunatics, concerns about the deprivation of liberty and the procedures whereby these matters were addressed within the legal process,53 but from the middle of the century provisions were made concerning property. The Infants’ Property Act 183054 gave power to order any land of any lunatic to be sold, or charged or mortgaged in order to pay any debts, to discharge any incumbrances on his or her estates and to pay for the costs of obtaining the commission in lunacy; while the Property of Lunatics Act 185255 extended those provisions to any estate or interest of the lunatic in land or stock, in reversion, or remainder or expectancy, in order to authorise the payment of any expenditure made or debt incurred for the maintenance or otherwise for the benefit of the lunatic, and payment of maintenance expenses. The most significant enactment was the Lunacy Regulation Act 1853,56 which not only effected important procedural

49 The Lands of Idiots Act 1324 (17 Edw II c 9) provided that: ‘The King shall have the Custody of the Lands of natural Fools, taking the Profits of them without Waste or Destruction, and shall find them their Necessaries, of whose Fee soever the Lands be holden. (2) And after the Death of such Idiots he shall render it to the right Heirs, so that such Idiots shall not aliene, nor their Heirs shall be disinherited.’ 50 Unlike the case of idiots, the Crown could make no profit from this. In the case of idiots, where the land was vested in the Crown subject to the provision of maintenance, it was regarded as a profitable right. 51 FW Maitland, ‘The “Praerogativa Regis”’ (1891) 6 English Historical Review 367. 52 Holdsworth (n 37) 263. 53 See (1848–49) 9 Law Review and Quarterly Journal of British and Foreign Jurisprudence 313. 54 Infants’ Property Act 1830, s 28 (11 Geo IV & 1 Will IV c 65). 55 Property of Lunatics Act 1852, s 1 (15 & 16 Vict c 48). 56 16 & 17 Vict c 70.

Re Earl of Sefton 463 reforms57 but also conferred on the Lord Chancellor wider express powers relating to lunatics’ property. The court was given the power to sell or mortgage the corpus of the lunatic’s estate, but only for the purposes of meeting the costs of maintenance or the payment of debts, and for specific purposes laid down in the Act.58 The Lunacy Act 1890, the major consolidating Act drafted by Sir Henry Theobald, continued the practice of conferring express powers on the court to perform specific acts in relation to the lunatic’s property. These powers appeared comprehensive. They included the power to make orders as to the management of the estate;59 the power to deal with or dispose of any of the lunatic’s property for the discharge of any incumbrance;60 the power to direct the committee to sell, exchange and lease the lunatic’s property, and to exercise any power or give any consent for the exercise of any power for his or her own benefit;61 and the power to direct the committee of the lunatic to execute and do anything necessary to give effect to any order made under the Act.62 The key statutory provision in the 1890 Act was section 116, under which various provisions of the Act relating to property applied, provisions which went a long way towards divesting lunatics of the control and management of their property and to putting them in the hands of others, albeit under the supervision of the court. These provisions applied to a range of persons of unsound mind, including Chancery lunatics. This was the statutory law applicable at the time of the Sefton litigation in 1898.

G. THE JURISDICTIONAL ISSUE BEFORE THE COURT

In the light of an unlimited inherent jurisdiction and a statutory jurisdiction which appeared in point, it would seem that the court had ample authority to order Charles’s committee to accept the devise of the Sefton estates on the conditions specified in the will. The point at issue, however, was that such an act would constitute the disposition of a portion of Charles’s interest in his real estate. He was entitled to a base fee in the Croxteth estate, and if he followed the directions of his father’s will he would have to resettle

57 Under the 1853 Act the Lord Chancellor was give important procedural powers to make General Orders regulating the proceedings before the Masters in Lunacy, which greatly improved the efficiency and cost of the process for the parties. See HL Deb 3 May 1853, series 3, vol 126, col 1025 (Lord St Leonards). For the history of lunacy administration, see TCS Keely, ‘One Hundred Years of Lunacy Administration’ (1942–44) 8 CLJ 195. 58 16 & 17 Vict c 70, s 116. 59 Lunacy Act 1890, s 108(2) (53 & 54 Vict c 5). 60 Ibid, s 117. 61 Ibid, s 120. 62 Ibid, s 124.

464 Chantal Stebbings that estate so that it followed the same limitations as the Sefton estate. This would result in a reduction in, though not the destruction of, his interest. The problem lay in De Prerogativa Regis. While that statute clearly declared the Crown’s jurisdiction over lunatics, it then proceeded to restrict it. The Act, the first statute to limit the royal prerogative over persons of unsound mind, provided that the lands and tenements of lunatics were to be ‘safely kept without Waste and Destruction … to be delivered unto them when they come to right Mind; so that such lands and tenements shall in no wise be aliened ’. In other words, the statute expressly forbade the disposition of any of the lunatic’s lands. This was in line with the essential nature of lunacy in law: as lunatics were by definition able to recover, their lands and tenements were to be preserved and restored to them undamaged and entire should they regain their sanity. The object of De Prerogativa Regis was the preservation of lunatics’ land, to maintain them while they were insane and to ensure it returned to them if, as the law presumed was possible, they recovered. It was thus argued in Sefton that its effect was to prevent the court from alienating any part of Charles’s real estate. It was an express prohibition, couched in wide and unambiguous terms. In the Sefton case, it was a crucial and potentially fatal provision, because the property in question was real and not personal estate. The making of the order would involve the giving up by Charles of an interest in real estate. There was, therefore, an express statutory provision limiting the delegated power of the Lord Chancellor in lunacy, and it made the judges doubt that they could legitimately direct that the order be made. The questions before the court were whether the prohibition in De Prerogativa Regis prevented any alienation whatsoever of a lunatic’s land; and, if so, whether there existed any wider inherent jurisdiction under which the court could act; alternatively, whether there existed any statutory provision in the modern lunacy code which enabled it to order an alienation of property.

H. THE DECISION OF THE COURT

The court decided unanimously in favour of the next of kin, and made an order that Charles’s committee accept the devise of the Sefton estate on the conditions laid down in his father’s will and to effect the resettlement of the Croxteth estate. Lord Lindley MR said he was ‘tolerably clear’ that the court had the jurisdiction to make the order and, furthermore, that it ought to exercise it. The court held that it possessed the authority to make the order and that as it was acting under its original inherent jurisdiction, the prohibition on alienation in De Prerogativa Regis did not prevent this. Furthermore, the proposed act did not come within any of the provisions of the modern statutory code for lunacy, though that was of no importance in view of the scope of the inherent jurisdiction.

Re Earl of Sefton 465 In giving judgment for the next of kin and authorising the making of the order to perform the condition, Lord Lindley MR laid down three principles which he stated were ‘elementary and beyond dispute’;63 three principles which stood entirely outside either the statute De Prerogativa Regis or the Lunacy Act 1890. These were, first, that a lunatic could accept a gift, bequest or devise of property absolutely; secondly, that he could do so upon condition if to do so was for his benefit; and, thirdly, that in such a case it was the duty of his committee to do all that was necessary to preserve the estate by performing the conditions if he could. He gave no legal authority for these principles, other than observing they were ‘perfectly well settled’64 and stood outside the statutory law. Accepting without hesitation that, on general principles, Charles was capable in law of accepting a devise with an onerous condition if it was for his benefit to do so, the court proceeded to hold that he could do so even if it meant the giving up of some interest in real property. Lindley MR saw no reason, on general principles, why that should make any difference at all, and furthermore held that the statute De Prerogativa Regis did not prevent him doing so. The authorities revealed a strict and narrow construction of the statute, an interpretation that was well settled, the decisions going to the extent that there was no power to alienate a lunatic’s real property even if to do so was clearly for his benefit, for example to raise money to pay debts in extreme cases of imminent arrest or actual imprisonment. Lindley MR found this ‘rather a narrow construction’,65 but neither he nor Chitty LJ thought that they were bound by it. The modern lunacy legislation, which expressly provided for the selling and mortgaging of land to save a lunatic from imprisonment, enabled the courts to avoid the effect of the old, strict judicial construction of De Prerogativa Regis. Not being bound by such precedents, the court was legitimately able to avoid any undesirably narrow construction. It was impossible for Charles to safeguard the whole of his landed property. If he did not comply with the condition of the devise to him of the Sefton estate, he would lose the entire estate. Complying with the condition meant alienating a small proportion of the Croxteth estate. In other words, a very large part of Charles’s two landed estates could be retained by him only if he sacrificed a very limited part of one of them. To hold that the alienation of a small portion of the lunatic’s lands in order to safeguard a much larger portion was forbidden under the statute De Prerogativa Regis was to introduce a construction of unprecedented strictness. In a typically clear and well-structured judgment, Lindley MR showed his customary pragmatism and good sense. He did not wish to press for a narrow construction beyond what was absolutely necessary. He 63 64 65

[1898] 2 Ch 378, 384 (Lindley MR). Ibid. Ibid, 385.

466 Chantal Stebbings believed he would be making a ‘bad precedent’66 were he to take the statute to mean that he had to sacrifice a large estate simply because the only way the lunatic could retain it was to part with a small portion of another estate. To do so, he said, was ‘an abuse of the Act’ because it was not being carried out so as to fulfil its real objective.67 Indeed, it would defeat its object.68 Similarly, Collins LJ held that a narrow construction would defeat rather than carry out the purpose of the Act, and Chitty LJ put it thus:69 I deal with the real estate of the lunatic as a whole, and, in order to keep the greater, the better, and more valuable property for the lunatic, I think it is consistent with the language of the statute, and the true force and effect of it, that there should be jurisdiction in the King, and in those who are entrusted with the sign manual, to throw away the worse and less valuable part of the whole estate.

The court thus looked to its inherent jurisdiction for its authority to act. It was arguable that De Prerogativa Regis did not declare in full the delegated jurisdiction in lunacy, but that the court had a general inherent jurisdiction to do anything on behalf of a lunatic that was necessary to preserve the lunatic’s estate for his benefit. Certainly case law revealed the exercise of a wide general jurisdiction in this respect by the court, not based on any power given by express statutory provision in the lunacy legislation. It confirmed that the court could elect on behalf of a lunatic;70 that the court could direct the execution of a deed, specifically a settlement on the marriage of a lunatic’s daughters;71 that it could bind the reversionary interest of a lunatic;72 and that it could act generally for the lunatic’s benefit, for example to make allowances to relations.73 The court had shown itself willing to alter the property of a lunatic, ‘as he would have done if in his senses’,74 namely, what a reasonable man would do in those circumstances. The lunacy jurisprudence seemed to allow the court to order that the estate in Sefton be disentailed and resettled. Direct authority was not strong. Indeed, there was a striking and surprising paucity of authority on the specific point at issue, whether addressing the inherent jurisdiction or the statutory one, a point made by counsel in the case when he observed that ‘such a direction must have been given over and over again at chambers, because numerous cases must have occurred in which it was required’.75 There was just one authority directly in point, but it was an Irish case that 66 67 68 69 70 71 72 73 74 75

Ibid, 386. Ibid, 386. (1898) 14 TLR 466, 467. [1898] 2 Ch 378, 389 (Chitty LJ). Oxenden v Lord Compton (1793) 2 Ves Jun 69, 30 ER 527. Re Drummond (1836) 1 My & Cr 627, 40 ER 516. Wilder v Pigott (1882) 22 Ch D 263. Re Beridge (1884) 50 LT 653. Ex parte Grimstone (1771) 2 Ves 74, 75n; 30 ER 527. (1898) 78 LT 765, 766.

Re Earl of Sefton 467 was very briefly reported,76 and the other authorities were indirect, obiter or merely general assumptions of an authority to act.77 Nevertheless, with the broad inherent jurisdiction, unlimited other than with respect to its exercise for the benefit of the lunatic and accordingly going beyond the cases expressly set out in the lunacy legislation, the court said it had no need to look to any statutory provision giving an express power to deal with the lunatic’s property. The specific provisions raised by counsel for both sides were addressed by the court, but only to dismiss them, because Lindley MR was not prepared artificially to force the case before him into the statutory regime. The proposed disposition did not come under any of the provisions of the Lunacy Act 1890. It was not a case of sale or exchange; the court was not being asked to exercise its jurisdiction for the maintenance of the lunatic, nor in order to pay his debts, or indeed for any of the purposes contemplated by the Lunacy Act 1890. The case could be made to come within the provisions only by ‘unduly straining’ the language.78 Collins LJ said that he would have to ‘[twist] them from their natural meaning’ to do so.79 In particular, the Lunacy Act 1890, section 124 was held to be an enabling clause, not a disabling one, addressing subsidiary acts to be done when the court was making orders under the Lunacy Act 1890 and so not applicable in this case. It existed to remedy a possible defect regarding the court’s jurisdiction to order subsidiary acts to be done when exercising a limited statutory jurisdiction. The specific statutory provisions did not prevent the court from doing the same thing under its wider inherent jurisdiction. Where the court had jurisdiction, it had the right to give effect to that jurisdiction by directing that the necessary conveyances should be made. And whereas section 128 appeared to be clear in giving the court jurisdiction to make the order requested in Sefton,80 and tempting as it was to do so to achieve the desired result, Lindley MR said that81 we should be making a bad precedent and setting a bad example … and our decision would come back upon us, and we should have it thrown in our teeth and have it said, ‘You did this before; do it again,’ when perhaps we ought not to do it.

And so, despite authorities that were less than robust, the court was unanimous in holding that it had the jurisdiction, quite apart from the Lunacy Act 1890 and despite the provision in De Prerogativa Regis, to make the order

76

Re Marriott (1808) 2 Molloy 516. As in A-G v Marquis of Ailesbury (1887) 12 App Cas 672, 683 (Lord Selborne). 78 [1898] 2 Ch 378, 387 (Lindley MR). 79 Ibid, 391. 80 Only mentioned by counsel in the report at (1898) 78 LT 765, 766. Indeed, in the course of argument, Lindley MR observed that under that authority the court would have ‘no difficulty’ in electing for a lunatic: (1898) 78 LT 765, 766. 81 Ibid, 768. 77

468 Chantal Stebbings that Charles, through his committee, should comply with the condition, resettle the Croxteth estate and take under the devise. That jurisdiction, it said, was its inherent, original and unlimited jurisdiction delegated from the Crown.82 It had nothing to do with the statutory jurisdiction.

I. THE SIGNIFICANCE OF THE CASE

The case of Re Earl of Sefton is a landmark case in the jurisdiction of the Lord Chancellor in lunacy. Its significance is intimately connected with its contemporary social and political context. The nineteenth century saw a very significant increase in the number of individuals recognised by the law as insane. There were several reasons for this, but principally it was due to an increasingly ageing population and to a wide range of social problems which resulted from the rapidly changing, and in many cases deteriorating, conditions of life brought about by rapid industrialisation. The commercial and industrial expansion of the early nineteenth century resulted in the trebling of the population in less than a century, a migration from the countryside to the towns and fundamentally new working practices. These in turn resulted in crowded towns, slum dwellings with few (if any) amenities, disease and epidemic caused by the absence of sanitary arrangements, dangerous working conditions in mines and factories, and the ever-present and increasing problem of pauperism.83 It also resulted in a breakdown of supportive family networks. It was these conditions that were subsequently identified as constituting the prime cause for the growth in the number of individuals with mental afflictions. In 1845 there were some 25,000 individuals officially recorded as insane. By 1883 the number had risen to 77,000, and just after the Sefton case the number stood at 124,000.84 The great majority were pauper lunatics. The scale of the problem demanded a robust response, and in keeping with the solution of the Victorian state to all such challenges in the field of social welfare, it took the form of strong centralised intervention by the State into the matter of lunacy. The response followed the usual Benthamite pattern of reforming legislation in the wake of intensive official empirical investigations, where the problem of lunacy was subjected to a detailed

82 Note that after the Mental Health Act 1959 the inherent jurisdiction lay dormant. This is because, although it was not abolished, it could be exercised only by mandate under the sign manual, and it was decided that no mandate would be conferred after the Act: Jennings (n 41) 423. 83 D Fraser, The Evolution of the British Welfare State (London, Macmillan, 1973) 51–55; WC Lubenow, The Politics of Government Growth (Newton Abbott, David and Charles, 1971) 69–106. 84 Report, Feeble-Minded (n 13) 159.

Re Earl of Sefton 469 scrutiny by various Select Committees and Royal Commissions.85 The legislation which resulted constituted just one aspect of the new English administrative state. There were two aspects to the intervention of the state in lunacy. The first was the creation of a bureaucratic organ of regulation, namely, the Lunacy Commission.86 This marked the real beginning of official intervention in the regulation of the mentally ill, as the Lunacy Commission was formed to supervise the care of the insane in England. It addressed essentially the certification, detention and protection of the persons of the insane, irrespective of their property. The Commissioners visited all lunatics in asylums, hospitals, licensed houses and workhouses, and in criminal, naval and army asylums, as well as single lunatics, to ensure the laws were obeyed, and scrutinised all reception orders and their supporting medical evidence. The history of provision for the mentally ill in the modern era is one of increased legislative regulation effected through such organs of central government. The legislative programme aimed to end abuse, ensure no individual was improperly detained and provide accommodation for pauper lunatics. The bureaucratic and judicial authorities were fundamentally different in founding principles, functions, cultures and objectives, and there was undoubtedly considerable tension between them. In themselves, however, these are not central to this chapter because the Lunacy Commissioners did not impinge on the jurisdiction of the Lord Chancellor. They had no involvement with the property of any lunatic, with such matters being left to the judicial authority. What was significant in the context of the Sefton case was the second aspect of state intervention in lunacy. That was the nature and scale of the legislation which expressed it. The growth in statute law was a Victorian phenomenon. It was in this period that legislation flourished, because it was the only practicable form in which interventionist reforms could be promulgated uniformly, speedily and effectively. Indeed, the lists of all the statutes enacted in the 600 years from 1235 to 1836 take up the same number of pages as those for the reign of Victoria alone. In the field of lunacy law, these preferences resulted in an unprecedented modern legislative expression of the ancient delegated jurisdiction of the Lord Chancellor in lunacy. The outcome for the Lord Chancellor as a judge in lunacy was that his inherent jurisdiction addressing the designation of property-owning individuals as lunatics and the management of their property was potentially

85 See generally AV Dicey, Lectures on the Relation between Law and Public Opinion in England during the Nineteenth Century, 2nd edn (London, Macmillan and Co, 1914) 126ff; D Roberts, ‘Jeremy Bentham and the Victorian Administrative State’ (1959) 2 Victorian Studies 193. 86 See generally DJ Mellett, ‘Bureaucracy and Mental Illness: the Commissioners in Lunacy 1845–90’ (1981) 25 Medical History 221.

470 Chantal Stebbings under threat. It was challenged by a clear shift of power from an exclusively judicial control to an executive control, embodied in the emergence of a powerful bureaucratic organ with a new responsibility for lunatics, and by a programme of legislation which was directed towards giving statutory expression to his own personal jurisdiction in lunacy, a jurisdiction the scope of which was admittedly unclear and unstated. By the time the Sefton case was heard in 1898, the Lord Chancellor’s inherent jurisdiction had been under threat from bureaucratic jurisdiction since 1845. Furthermore, the context was one which would give the judges cause for concern. Not only was there the creation of the Lunacy Commission with extensive powers in 1845, but it was clear that there existed a growing realisation within the legal system that an efficient judicial authority in lunacy matters was a matter of urgency. The jurisdiction in lunacy was a serious matter, deciding on a person’s sanity and, in consequence, on legal status and on the ability to marry, to execute deeds, to own and manage property, and make decisions as to personal care. It was peculiar, inefficient, slow, expensive and in some respects anomalous. It was highly technical, suited only to the wealthy, and lacking uniformity, continuity and transparency. These procedural problems drew the lunacy jurisdiction into the debates as to the reform of the Court of Chancery, and its public perception was damaged as a result. The lunacy jurisdiction also suffered from the Victorian legislature’s preference for organisation, order, classification and efficiency, which in turn led to a hostility towards special jurisdictions. The Judicature Commissioners in the latter years of the nineteenth century wanted to address the overlapping, conflicting, uncertain or anachronistic jurisdictions which made a litigant’s life a misery, and to propose reforms which would ensure the speedy, economical and satisfactory dispatch of judicial business. They sought a more rational, organised, uniform and consistent system. Within this turbulent context, there was no agreement even within the judicial authority as to how a judicial regime of lunacy law should best be framed and implemented. In the early years of the twentieth century there was considerable debate as to the desirability of amalgamating the Lunacy Commission and the judicial authority in lunacy, or whether one jurisdiction could somehow be engrafted on the other. It was also debated whether the jurisdiction in the Lord Chancellor should be transferred to the Chancery Division of the High Court, in the interests of efficiency and economy. There was not even general agreement as to whether lunacy was to be regarded as a matter of policing or of public health. The response of the court in Sefton suggests that the judges in lunacy did perceive these developments as a threat, and that as a result they took steps to defend their position and unambiguously to reaffirm the existence, scope and depth of their inherent jurisdiction in this field. The judges could have adopted an alternative response, as in the case of railway legislation,

Re Earl of Sefton 471 where they made it quite clear that they wanted nothing to do with railway law.87 But in that case it was a new jurisdiction which was largely administrative in nature. In lunacy, the subject matter was one of the most ancient branches of the Lord Chancellor’s jurisdiction and concerned matters of property, an aspect of law which was jealously guarded by the courts. This context explains the decision of the court in Sefton and asserts its importance. It clarified the relationship between the ancient inherent jurisdiction of the Lord Chancellor in lunacy and the growing body of statutory powers expressing his jurisdiction. First, the court in Sefton affirmed its position through its interpretation of the statute law. It avoided the traditional strict English approach to statutory interpretation and instead adopted a liberal approach, looking to the overall purpose of the legislation. The statute De Prerogativa Regis was a prohibiting one, and a narrow construction would have prevented any alienation of even the smallest portion of real property, even if was for the clear benefit of the lunatic, because it would reduce the total amount of his lands. The unprecedented wide interpretation of the statute ensured that the court’s inherent jurisdiction was not inhibited. Similarly, the court construed the Lunacy Act 1890 very narrowly indeed, in order to show that it did not apply in its terms to the situation then before it. Secondly, the court held that the Lunacy Act 1890 was merely declaratory of the ancient jurisdiction, that it was not exhaustive and that it did not limit the inherent jurisdiction of the court. It was an enabling Act and was not restrictive, and it did not supersede the inherent jurisdiction.88 It affirmed that there still existed an inherent and vigorous jurisdiction in the judges in lunacy, derived from the royal prerogative, of which only parts had been given statutory expression. It existed apart from the express legislative powers, and it was not limited or curtailed by those express powers. In speaking about this ‘wider jurisdiction’, Lindley MR observed that its limits ‘fortunately have never been so accurately laid down as to bind the court to the very narrow limits to which the words [of an Act89], unless very general indeed, would confine its jurisdiction’.90 It followed from that— and it actually occurred in the Sefton case itself—that where the statutory jurisdiction was inadequate in some way, the inherent jurisdiction could be called into play, and so ‘by hook or by crook almost any transaction which is for the patient’s benefit can be sanctioned’.91

87 See C Stebbings, Legal Foundations of Tribunals in Nineteenth Century England (Cambridge, Cambridge University Press, 2006) 54–55. 88 Jennings (n 41) 422. 89 Words included in 67 LJ Ch 518, 523. 90 (1898) 78 LT 765, 768 (Lindley MR). 91 Jennings (n 41) 422.

472 Chantal Stebbings And, thirdly, the court strongly defended its own inherent jurisdiction. In so doing, it affirmed its position as the natural and most effective protector of a lunatic’s property, a reputation that it widely enjoyed.92 It tacitly accepted that the protection of the person of lunatics might be a responsibility that the bureaucratic organ could more effectively undertake, but equally it affirmed that in the field of property holding, the protection afforded by the Lord Chancellor was unsurpassed. And in so doing it implicitly recognised the current debate in lunacy law regarding the absence of any legal protection for the property of poorer lunatics, and reinforced an awareness that a significant growth in the number of individuals officially recognised as insane demanded clear and robust provision for the safeguarding of their property. Sefton was a key case in establishing the scope and depth of the inherent jurisdiction, and clarifying the problematic relationship between it and the statutory code. It went some way to drawing the line between them, and reaffirming the scope of the inherent jurisdiction. Furthermore, the adoption of an unprecedented liberal approach to the interpretation of an ancient disabling statute, the narrow interpretation of modern enabling statutes and the affirmation of an inherent jurisdiction in lunacy that was limited only by the need to exercise it for the benefit of the lunatic, constituted an effective response to the perceived threat to the Lord Chancellor of losing his lunacy jurisdiction to the state apparatus. Whether or not the state intended to diminish the role of the lunacy judges through its programme of interventionist legislation, the case reveals that a threat was perceived and actively responded to. The case of Sefton emphasises the independence and resistance of the Victorian judiciary. In the following year the Law Quarterly Review congratulated the court for eschewing ‘a narrow technicality’, and praised its ‘wise independence of judgment’ for preferring ‘to break the statute in the letter and fulfil it in the spirit’. ‘If lunacy has any consolations,’ it continued, ‘one of them must surely be the lunatic’s knowledge that his mundane affairs are in such excellent keeping’.93

92 93

Minutes, Lunacy Law (n 10) q 7551. (1899) 57 LQR 4.

16 Nocton v Lord Ashburton (1914) JAMES EDELMAN

A. BACKGROUND

(1) The Protagonists

T

HE TWO PLAYERS in the drama which became Nocton v Lord Ashburton were Francis Denzil Edward Baring, the fifth Baron Ashburton, and William Nocton. Francis Baring was a banker. At the age of 23, he succeeded to the title of Baron Ashburton, and took his seat in the House of Lords in 1899. He came from a family of bankers. His great-, great-, great-grandfather, John Baring, had founded the London merchant house of John & Francis Baring & Co, later known as Baring Brothers. From 1762 until 1995 Baring Brothers was one of England’s oldest and most prestigious finance houses.1 William Nocton was a solicitor hailing from Essex. He was a partner in the distinguished firm Broughton, Nocton and Broughton, which practised from Great Marlborough Street in London. Nocton was well known in Essex and served as the High Sheriff of the county in 1908. The Baring family, who owned Langham Manor in Essex, were clients of Nocton. Nocton had a history of engaging in personal transactions with the Baring family. The most significant was in relation to the stunning Langham Manor in the county of Essex, an estate with a history dating back to Phin the Dane in 1066, which the Baring family had owned since 1830. In 1894, Nocton purchased Langham Manor from the Baring family.

(2) The Transaction The transaction between Nocton and Lord Ashburton that was central to the litigation had its genesis in a venture between Nocton and Lord 1 In 1995 the bank was destroyed by the rogue trades of Nick Leeson, and sold to ING for £1.

474 James Edelman Ashburton’s brother. On 15 January 1903, Lord Ashburton’s brother, the Honourable Alexander (‘Alick’) Baring MP, agreed to purchase a freehold in Church Street, Kensington for £60,000. He intended to develop it. He entered into the purchase on behalf of himself and Nocton, and they agreed that all profit and loss would be divided between themselves in equal shares. Nocton invited Lord Ashburton to join the venture, but Lord Ashburton declined. On 24 June 1903 the purchase was completed. The purchase price was obtained from Parr’s Bank, which took a mortgage over the Kensington property and also over other property owned by Baring. On 10 February 1904, Baring entered a conditional sale of the Kensington property to builders, Holloway and Douglas, for £80,000. One of the conditions of the sale was that Holloway and Douglas would obtain a loan of £65,000 at 5 per cent subject to a mortgage of the Church Street property. Another condition was that the vendors, Baring and Nocton, would lend Holloway and Douglas a further £20,000 with a second mortgage over the Church Street property. On 3 May 1904, Nocton wrote to Lord Ashburton, proposing that Lord Ashburton should advance £65,000 to Holloway and Douglas. Nocton strongly encouraged Lord Ashburton to make the loan. He said that Lord Ashburton could borrow the money at 4 per cent and lend to Holloway and Douglas at 5 per cent or 5.5 per cent, gaining a margin of 1 per cent or 1.5 per cent as well as £500 commission from Holloway and Douglas for the loan. Nocton rhapsodised about the credit and substance of Holloway and Douglas, ‘shrewd men of business’, emphasising that Holloway enjoyed the confidence of the late Sir Blundell Maple.2 Nocton then said that the worst scenario was that if things went wrong then Lord Ashburton would end up with: (a) the Kensington property and all buildings on it for only £65,000; (b) a personal liability of Holloway and Douglas as well as anyone to whom they had sublet the property.

Nocton said that he would not mind, in this event, if Lord Ashburton stepped in for the £65,000 plus the value of the buildings. He concluded by saying that there was ‘no particular risk but a little bit to be made’. Lord Ashburton agreed, subject to obtaining a satisfactory valuation which was duly provided. Nocton’s partners were unhappy when they discovered that Nocton was about to become involved in such a large transaction with one of his clients. The partners immediately wrote to Lord Ashburton and urged him to 2 Sir Blundell Maple (1845–1903) was a baronet, a well-known businessman, racehorse owner and breeder.

Nocton v Lord Ashburton 475 withdraw from the transaction, explaining that the profit was inadequate in light of the risk; they reiterated that Nocton had a large financial interest in the property; they pleaded that Lord Ashburton obtain independent advice. Lord Ashburton ignored them, borrowed the money and made the loan as Nocton had suggested. On 26 September 1904, the Kensington property was sold to Douglas and Holloway for £80,000. Lord Ashburton was granted a first mortgage to secure the £65,000. Lord Ashburton gave his bankers (the Economic Life Assurance Society) a mortgage over other properties he owned, and also gave them a sub-mortgage of his mortgage of the Kensington property. Alexander Baring was granted a second mortgage to secure £15,000 which he contributed, and as a partner in the project, Nocton had a share in the second mortgage granted to Alexander Baring. Douglas and Holloway began to develop the Kensington property into six blocks. The development was to be financed by leases over two of the blocks to a builder named Harry Johnson. However, after only two of the blocks were completed, Johnson was declared bankrupt. Desperately seeking funds so that the development could continue, Nocton wrote to the Economic Life Assurance Society and asked for a further loan of £20,000, or for a release of the security on the first block (Block A) to enable it to be sold. Nocton asserted that he had no doubt that Lord Ashburton would agree to this, but said that he wanted an agreement from the Economic Life Assurance Society first. The Economic Life Assurance Society agreed to release its security over Block A after it obtained a favourable survey which focused particularly on the value of Lord Ashburton’s other properties which also secured its loan. Nocton later wrote to Lord Ashburton, explaining that the Economic Life Assurance Society had obtained a favourable survey and had agreed to release its security. Nocton implored Lord Ashburton also to release his security. Nocton did not enclose a copy of the survey; neither did he mention that the survey focused upon Equitable Life’s security over others of Lord Ashburton’s properties. Further, Nocton failed to mention the possibility that Lord Ashburton’s remaining security over the Kensington property would be inadequate for the debt; neither did he remind Lord Ashburton that the release of Lord Ashburton’s security would benefit Nocton personally since Nocton had a share of the second mortgage of Alexander Baring, which would become a first mortgage after the releases from Lord Ashburton and Equitable Life. Lord Ashburton agreed to the release and entered into a deed of release on 28 December 1905. On 26 September 1909, Douglas and Holloway defaulted on the mortgage debt. On 10 March 1911, Lord Ashburton commenced an action against Nocton and all the parties interested in the Kensington property, including the Equitable Life Assurance Society.

476 James Edelman (3) The Claim Only the action against Nocton proceeded to trial. At the heart of Lord Ashburton’s claim was paragraph 33 of the statement of claim, which read as follows: The said Block A was in fact the most valuable part of the plaintiff’s said security and when the same was so released as aforesaid the property remaining subject to the plaintiff’s said mortgage was wholly insufficient as a security for the said sum of 65,000l. The defendant Nocton well knew when he advised the plaintiff to execute the said release that thereby the plaintiff’s security would be rendered insufficient and his said advice was not independent advice and was not given in good faith but was given in his own personal interest without regard to the interest of the plaintiff to the intent that thereby he might get the benefit of a first charge upon the said Block A for the sum of 15,000l secured by the said second mortgage of the 26th day of September 1904 to one moiety whereof he was entitled as aforesaid. The defendant Nocton in advising the plaintiff to execute the said release allowed the plaintiff to believe that he was advising the plaintiff independently and in good faith and in the plaintiff’s interest. The plaintiff in executing the said release had no independent advice and acted entirely upon the advice of the defendant Nocton and with full confidence in him.

(4) The Lower Courts The trial judge, Mr Justice Neville, had recently decided another case involving Nocton and Lord Ashburton. In that case, letters which Lord Ashburton had written to Nocton were subpoenaed from Nocton’s clerk. The letters would probably have been privileged. The clerk attended court but no call was made upon the subpoena. In a serious breach of duty the clerk gave the letters to Pape who copied and returned them. Neville J ordered that Pape be restrained from using the copies except for the purposes of his bankruptcy proceedings (in which Lord Ashburton, as creditor to the tune of £139,000, was opposing his discharge). His decision was upheld on appeal and the injunction expanded.3 The trial judge in Nocton v Lord Ashburton, Neville J, was, therefore, not a stranger to either party. He considered that paragraph 33 of the Statement of Claim was a plea of fraud. He heard evidence from both Lord Ashburton and Nocton but concluded that no fraud had been established. He considered that Nocton ‘fell far short of the duty which he was under as a solicitor’ and that Nocton would probably have given different advice if he had not been personally interested in the transaction. However, he held that Nocton was not fraudulent, and since the claim was pleaded as one of fraud it must fail.

3

Lord Ashburton v Pape [1913] 2 Ch 469.

Nocton v Lord Ashburton 477 The Court of Appeal disagreed. The Court found that in the circumstances Nocton had acted fraudulently. The Court of Appeal directed an enquiry as to damages before the official referee. At the subsequent inquiry as to damages, it was found that the diminution in the value of the security was £21,000, and this was ordered together with loss of rents of £3,789.4

(5) The House of Lords In the House of Lords, five Law Lords sat on the case: Viscount Haldane LC, Lord Dunedin, Lord Atkinson, Lord Shaw of Dunfermline and Lord Parmoor. The leading speech was delivered by the Lord Chancellor, Viscount Haldane. Lord Atkinson agreed with the Lord Chancellor. Lord Shaw also agreed and delivered a short additional speech. Lords Dunedin and Parmoor delivered separate speeches. Their Lordships unanimously upheld the decision of the Court of Appeal, although (again unanimously) not on the basis of fraud, as the Court of Appeal had decided the case. On the issue of fraud, all their Lordships were of the same opinion. As Viscount Haldane explained, the trial judge had seen and heard the witnesses. His view was consistent with the evidence and he should not have been overturned on this point.5 Having so concluded, there were two options left to the House of Lords if their Lordships were to find against Nocton based on wrongdoing: either they could find that Nocton was liable for ‘mere negligence’, or they could find that Nocton was liable on some other basis including breach of fiduciary duty. In the leading speech, Viscount Haldane suggested that this other basis could be ‘a third form of procedure to which the statement of claim approximated very closely, and that is the old Bill in Chancery to enforce compensation for breach of a fiduciary obligation’.6 He found the breach of fiduciary duty to be Nocton’s misrepresentation. In the other substantive speech, Lord Shaw was more comfortable basing liability on the negligence of Nocton in a relationship akin to contract.

B. LIABILITY FOR MISSTATEMENTS PRIOR TO NOCTON V LORD ASHBURTON

In order to understand the difficulty facing the House of Lords in holding that Nocton was liable for a negligent misstatement, it is necessary to consider the law in relation to misstatements prior to the decision. Before 1889, the nature of an action for misrepresentation and the elements required to be 4 5 6

The Times, 31 March 1913, 3. Nocton v Lord Ashburton [1914] AC 932, 945. Ibid, 946.

478 James Edelman proved in such an action, both at common law and in equity, were uncertain. Both common law and equity recognised actions for compensation arising from misrepresentation. However, the common law courts generally treated the requirements of proof differently from the equity courts. In a line of cases in equity, it was held that an action for compensation could succeed if a misstatement was made, however innocently, without reasonable grounds. At common law, however, it was established that a claimant would succeed only by proving that the defendant had knowledge of the falsity of the misstatement or was reckless as to its truth.

(1) Development of Liability for Misrepresentations at Common Law The pivotal case at common law was Pasley v Freeman.7 That case expanded the scope of the action on the case for deceit from cases involving statements warranting a fact which induced the defendant’s contract with the claimant.8 In Pasley, the defendant represented to the claimant that a third party’s credit was good. The defendant knew that it was not. The claimant entered a contract with a third party in reliance upon the defendant’s misrepresentation and suffered loss. The defendant resisted the claim for misrepresentation on the basis that no decision had recognised liability for misrepresentation unless the defendant induced the claimant to contract with him. By a majority (Grose J dissenting) this argument was rejected. In finding that the defendant was held liable for damages for misrepresentation generally, Buller J relied upon the defendant’s knowledge of the falsity of the statement. For the next century, this remained the dominant view. The requirement of actual fraud meant that the defendant had to know of the untruth of a statement, or be reckless as to its truth.9 There were two concerns with the decision in Pasley. The first was that it was too broad and that it circumvented the Statute of Frauds, making one man a guarantor of another without a written document.10 In 7

Pasley v Freeman (1789) 3 TR 51, 100 ER 450. Furnis v Leicester (1619) Cro Jac 474, 79 ER 404; Leakins v Clissel (1663) 1 Sid 146, 82 ER 1022. For discussion, see CM Reed, ‘Derry v Peek and Negligence’ (1987) 8 Journal of Legal History 64; and M Lobban, ‘Contractual Fraud in Law and Equity c 1750–c 1850’ (1997) 17 OJLS 441. 9 Bree v Holbech (1781) 2 Doug 654, 656; 99 ER 415, 416; Tapp v Lee (1803) 3 Bos & P 367, 127 ER 200; Early v Garrett (1829) 9 B & C 928, 109 ER 345; Foster v Charles (1830) 6 Bing 396, 130 ER 1333; Corbett v Brown (1831) 8 Bing 33, 131 ER 312; Ormrod v Huth (1845) 14 M & W 401; Glamorganshire Iron & Coal Co v Irvine (1866) 4 F & F 947, 176 ER 861; Weir v Bell (1878) 3 Ex D 238; Westfield v Davidson (1887) 3 TLR 362. See Reed (n 8) 68. 10 In Evans v Bicknell (1801) 6 Ves Jun 174, 186; 31 ER 998, 1004-5, Lord Eldon LC said: ‘Suppose, a man asked, whether a third person may be trusted, answers, “You may trust him; and if he does not pay you, I will.” Upon that the plaintiff cannot recover; because it is a verbal undertaking for the debt of another. But if he does not undertake, but simply answers, “You may trust him: he is a very honest man, and worthy of trust,” then an action will lie.’ 8

Nocton v Lord Ashburton 479 1828, the result in Pasley was reversed by Lord Tenterden’s Act so that misrepresentations about credit were not actionable unless they were in writing.11 In Lyde v Barnard Baron Alderson explained the reason for the legislation: the cases since Pasley12 had raised a well founded complaint in the profession, as having in fact virtually repealed the Statute of Frauds, by which a guarantee was required to be in writing, and that the object Lord Tenterden had in view was to place both on the same footing, and to provide that a written document should be equally required in both.

The other objection to Pasley was the opposite. It was that the doctrine was too narrow. In the century following Pasley there was a powerful minority view at common law that a misrepresentation ought to be actionable even if it had been made carelessly, not fraudulently.13 The minority view almost prevailed. Lord Kenyon later regretted his decision in Pasley, admitting that at the time of the case he ‘was not then so well versed in the critical form of actions’.14 Lord Abinger’s dissent in one case, favouring liability for negligent misrepresention,15 persuaded two judges of the majority in a later case to change their minds and to support this expansion of liability.16 A decision of Jessel MR in 1882 in the Court of Appeal almost resolved the question in favour of liability for negligent misstatement.17 The decision was followed three times by the Court of Appeal,18 until one of those decisions, Peek v Derry, was appealed to the House of Lords and the Pasley requirement of fraud was reinstated. (2) Development of Liability for Misrepresentations in Equity Moving from the common law to equity, exactly the same conflict took place. Equity had long recognised that it had a precisely concurrent

11

Statute of Frauds Amendment Act 1828 (Lord Tenterden’s Act) s 6. Lyde v Barnard (1836) 1 M & W 101, 107; 150 ER 363, 366. See also Baron Gurney at 1 M & W 103, 150 ER 364: ‘[T]here has been but too much reason to fear that innocent persons have been the victims, not merely of intentionally false, but of unintentionally exaggerated statements of conversations.’ 13 Eg Shrewsbury v Blount (1841) 2 Man & G 475, 507; 133 ER 836, 850 (Maule J). 14 Haycraft v Creasy (1801) 2 East 92, 103; 102 ER 303, 308–09. 15 Cornfoot v Fowke (1840) 6 M & W 358, 377–78 (Lord Abinger dissenting from Rolfe, Alderson and Parke BB). 16 Smout v Ilbery (1842) 10 M & W 1, 10; 152 ER 357, 361 (Alderson B delivering the judgment of the court which included Rolfe J). Parke B remained of the view that fraud must be proved: Moens v Heyworth (1842) 10 M & W 147, 157; 152 ER 418, 424. 17 Smith v Chadwick (1882) 20 Ch D 27. Overturned by the House of Lords on different grounds: (1884) LR 9 App Cas 187. 18 Matthias v Yetts (1882) 46 LT (NS) 497; Peek v Derry (1887) 37 Ch D 541; Cann v Wilson (1888) 39 Ch D 39. 12

480 James Edelman jurisdiction with the common law in cases of misrepresentation.19 For some time after Pasley it appeared that the courts of equity would take the same approach as the common law. In Evans v Bicknell,20 a bill for fraud against the defendant was dismissed, and Lord Eldon spoke of the test for fraud in equity as ‘either distinct fraud, or that gross degree of negligence, which this Court looks at as fraud with regard to the consequences attaching to it’.21 Lord Eldon explained that the ‘gross negligence’ of which he spoke was simply evidence from which fraud might be inferred.22 This view of Lord Eldon which generally required fraud was soon controversial. In Burrowes v Lock,23 a claim was brought against the executor of an estate who had been asked by the claimant whether the residuary legatee had made any loans against the security of his entitlement. The claimant explained that he was proposing to make a loan to the legatee secured by an equitable assignment of the legacy. The executor replied that no prior security had been given. This was wrong. Sir William Grant MR held that the executor was liable because the executor had once known the truth of the statement even though it had since been forgotten. By the mid-nineteenth century, therefore, dissent from the Pasley requirement of fraud had fomented in equity just as it was developing at common law. The leading case following Burrowes was Slim v Croucher.24 There, the defendant had misrepresented to a lender information about a borrower’s entitlement to the grant of a lease. The lender relied on the information and made a loan to the borrower. The defendant claimed that he had simply forgotten the true facts. The case was brought in equity before the Lord Chancellor, Lord Campbell, who sat with two Lord Justices of Appeal. The lender sought an award from the defendant to make good the loss. The court rejected the defendant’s argument that ‘this is a demand for damages’ and the claim should have been brought at common law.25 It was reiterated that instances of fraudulent misrepresentation involved concurrent jurisdiction at common law and equity.26 More difficult was the meaning of fraud. The Lord Chancellor referred to Burrowes v Lock, saying that although Lord Eldon had used the words ‘if he knows it to be false’, those words really meant ‘[if he] makes a misrepresentation as to what he ought to have 19 Colt v Woollaston (1723) 2 P Wms 154, 156; 24 ER 679, 680; Metropolitan Bank v Heiron (1880) 5 Ex D 319, 343; Boston Deep Sea Fishing & Ice Co v Ansell (1888) 39 Ch D 389, 367–68. ‘Where there is a claim for damages on the ground of fraud … it is immaterial whether it is framed or considered as an action in tort or a claim for equitable relief’: LA Sheridan, Fraud in Equity (London, Pitman and Sons, 1956) 36. 20 Evans v Bicknell (1801) 6 Ves Jun 174, 31 ER 998. 21 Ibid, 181–82; 1003. 22 Ibid, 188; 1006: ‘negligence so gross as to be evidence of an intention of fraud’. 23 Burrowes v Locke (1805) 10 Ves 470, 32 ER 927. 24 Slim v Croucher (1860) 1 De G F & J 518, 524; 45 ER 462, 465. 25 Ibid, 524; 465. See too Burrowes v Lock (1805) 10 Ves 470, 475; 32 ER 927, 929. 26 Slim v Croucher ( n 24) 523; 464.

Nocton v Lord Ashburton 481 known, and what he did at one time know, although he alleges that at the particular time he had made the representation he had forgotten it’.27 The decision in Slim v Croucher became known as imposing damages liability for ‘constructive fraud’ or ‘innocent mistake’.28 It was consistent with other cases in equity which held that a person who makes a misrepresentation upon which the claimant relies is required to fulfil the representation in order to avoid loss to the representee.29 The decision in Slim v Crowcher was also consistent with the established rule in equity that a contract could be rescinded if it had been induced by any misrepresentation, even if made wholly innocently.30 Leading equity texts embraced the expanded liability for misrepresentation in equity.31 As equity’s reach expanded there was, nevertheless, some discontent with allowing liability for misstatement in the absence of fraud. This was particularly the case as long as the dominant common law position required fraud. One answer to these objections may have been that the common law no longer always insisted on fraud, at least by the mid-nineteenth century. Another answer was the alleged superiority of equity courts. As Sydney Smith put it in 1859:32 The common law jurisdiction is cribbed and confined in its operation in respect to fraud, and does not penetrate beyond the surface, while equity extends its reach to meet almost every variety of legal subterfuge … and tracks a covinous defendant into the profoundest recesses of his lair.

But it was not long before the House of Lords purported to resolve the division of views within both common law and equity.

(3) Apparent Reconciliation in Derry v Peek Against the background of common law cases and equity cases which had begun to depart from the Pasley requirement of fraud, the matter finally came before the House of Lords in 1889 in Derry v Peek.33 In that case, the defendant promoters had issued a prospectus inviting subscriptions for shares in a tramway company. The claimant invested, relying upon statements in the prospectus that the company had the right to use ‘steam or mechanical motive power instead of horses’. Although the defendants 27

Ibid, 525; 466. Ramshire v Bolton (1869) 8 LR Eq 294, 301 (Sir Richard Malins VC). 29 Re Ward (1862) 31 Beav 1, 54 ER 1037. 30 Hitchcock v Giddings (1817) 4 Price 135; Reese River Silver Mining Co v Smith (1869) LR 4 HL 64; Redgrave v Hurd (1881) 20 Ch D 1. 31 HA Smith, The Principles of Equity (London, Stevens & Sons, 1882) 140, describing liability as based upon ‘negligent ignorance’. 32 JS Smith, A Treatise on the Principles of Equity (London, Sweet & Maxwell, 1856) 159. 33 Derry v Peek (1889) 14 App Cas 337. 28

482 James Edelman honestly believed their statement to be true, it was incorrect. The right to use steam power was conditional upon approval by the Board of Trade, and the Board of Trade subsequently refused to consent. The value of the claimant’s shares plummeted. The trial judge dismissed the claim because the defendants had honestly believed in the truth of their statement. The Court of Appeal allowed the appeal, finding that a maker of a statement was required to have reasonable grounds to believe in its truth. Since the defendants did not have reasonable grounds to believe in the truth of the statements made in their prospectus, they were found liable. The matter then came before the House of Lords. Counsel before the House of Lords referred to cases such as Slim v Croucher and Evans v Bicknell, and argued that making an untrue statement without reasonable grounds should be sufficient to amount to deceit at common law. The House of Lords disagreed. Lords Bramwell and Herschell (with whom Lord Watson agreed and with whose analysis of authority Lord Halsbury agreed) delivered the two most detailed speeches. Lord Bramwell deplored any use of authority and simply asserted that merchants could not tolerate liability for careless statements. In the words of Lord Bramwell, the duty is to speak ‘what is believed to be the truth’:34 ‘[T]hat there is “a right to have true statements only made,” I cannot agree, and I think it would be much regretted if there was any such right. Mercantile men … would indeed cry out.’35 Lord Herschell, after consideration of much more authority, spoke to similar effect:36 For if there be a right to have true statements only made, this will render liable to an action those who make untrue statements, however innocently. This cannot be meant. I think it must be intended to make the statement of the right correspond with that of the alleged duty.

The House of Lords therefore held that the duty was simply to make only statements which the representor ‘honestly believe[d]… to be a true and fair representation of the facts’. Since this duty had not been infringed, the decision of the Court of Appeal was overturned and the defendant was not held liable.37 Following Derry v Peek, the rules as to what was fraudulent at common law and in equity became uniform. In the absence of fraud, neither equity nor common law allowed an action for compensatory damages for misrepresentation even if the representation were made without reasonable grounds.38 With the way that equity had developed immediately prior to 34

Ibid, 351. Ibid, 350. 36 Ibid, 362. 37 Ibid, 376 (Lord Herschell). 38 Low v Bouverie [1891] 3 Ch 82; Elkington & Co v Hurter [1892] 2 Ch 452; Gilchester Properties Ltd v Comm [1948] 1 All ER 493. 35

Nocton v Lord Ashburton 483 Derry v Peek, it is not surprising that Viscount Haldane was reported to have said that all of Lincoln’s Inn thought the decision in Derry v Peek to be wrong.39 Indeed, with the way that the common law had developed immediately before Derry v Peek, one might expect that most of the Temple would have thought it wrong as well. The decision in Derry v Peek was rapidly reversed by legislation, which stipulated that a director was liable for misstatements in a prospectus unless the director had reasonable grounds to believe, and did believe, that those statements were true.40 But in all other contexts fraud was thought to be a necessary element of the misrepresentation claim. Leading equity texts condemned Slim v Croucher as no longer representing the law since Derry v Peek.41

C. THE DEVELOPMENT OF THE LAW IN NOCTON V LORD ASHBURTON

(1) The Lord Chancellor’s Speech (Lord Atkinson Concurring) Viscount Haldane’s decision was the leading decision. Lord Atkinson concurred entirely. Lord Dunedin agreed and added only a few additional remarks mainly relating to jurisdiction of the courts of equity.42 Lord Shaw also agreed before adding his own remarks.43 A month before the decision in Nocton v Lord Ashburton, Frederick Pollock claimed that Viscount Haldane had told him that in order to minimise the consequences of Derry v Peek, ‘the Lords are going to hold that it does not apply to the situation created by a positive fiduciary duty such as a solicitor’s, in other words, go as near as they dare to saying it was wrong, as all in Lincoln’s Inn thought at the time.’44 In his leading speech, Viscount Haldane was true to his word. The point of distinction with Derry v Peek was indeed a fine one. Although it might have been possible to impose liability based on some wholly separate duty,

39

See text to n 44. Directors Liability Act 1890. Ironically, in the debate in the House of Lords, Lord Herschell robustly defended the Bill against proposed amendments by the Lord Chancellor, Lord Halsbury LC, which would weaken the effect of the Bill: HL Deb, 5 August 1890, vol 347, cols 1864–86. 41 T Snow (ed), White and Tudor’s Leading Cases in Equity, 7th edn (London, Sweet & Maxwell, 1897) 451; WJ Whittaker (ed), White and Tudor’s Leading Cases in Equity, 8th edn (London, Sweet & Maxwell, 1910) 478. 42 Nocton (HL) (n 5) 965. 43 Ibid, 965. 44 MD Howe (ed), Holmes–Pollock Letters: The Correspondence of Mr Justice Holmes and Sir Frederick Pollock, 1874–1932 (Cambridge, Mass, Harvard University Press, 1967) 215 (letter dated 20 May 1914; Nocton was decided on 19 June 1914). 40

484 James Edelman such as Nocton’s duty not to put himself in a position of conflicting duty (to Lord Ashburton) and self-interest, this was not the basis for Viscount Haldane’s decision. Viscount Haldane distinguished Derry v Peek only on the basis that the negligence in Nocton v Lord Ashburton had occurred in the context of a fiduciary relationship. Viscount Haldane’s decision developed his own obiter dicta a year earlier in the Scottish case of Dick v Alston.45 There, Mrs Dick lent her fortune to her husband’s firm, in which a solicitor, Alston, was personally interested (as a creditor). Alston acted for her in a number of transactions, including ones related to her loan, but he failed to advise her against making the loan. When the firm became insolvent, Mrs Dick sued Alston. Mrs Dick’s claim was dismissed because Alston was not engaged to act for her in relation to that transaction. However, in the course of dismissing the appeal to the House of Lords and absolving Alston from liability, Viscount Haldane LC explained that it was ‘well settled’ that there were three ways in which a solicitor might be held liable for a transaction of his client. These were as follows: (a) ‘a claim for negligence—that is to say, for damage arising from a breach of duty to give proper advice or to exercise proper skill’; 46 (b) where the solicitor has obtained a benefit from the transaction then the solicitor cannot keep the benefit unless the client has obtained independent advice; 47 (c) where a solicitor has entered a bargain with the client and the client seeks rescission of the contract.48

In Nocton v Lord Ashburton,49 Viscount Haldane again referred to these three routes. However, describing the first (negligence50), he suggested that a claim in equity which merely asserted negligence, although once permissible,51 was later demurrable for want of equity. However, Viscount Haldane considered the presence of a fiduciary relationship between Nocton and Lord Ashburton, and the personal benefit derived by Nocton, sufficient for ‘jurisdiction to scrutinize his action’.52 Having brought Nocton within the jurisdiction of equity, Lord Ashburton was able to succeed on the basis that Nocton had made a ‘misrepresentation in breach of fiduciary duty’.53 45

Dick v Alston [1913] SC (HL) 57. Ibid, 57–58. The Lord Chancellor explained that this lack of care was readily found where the solicitor had a conflict of interest and duty. 47 Ibid, 58. Referring to the undue influence case of Rhodes v Bate (1865) LR 1 Ch 252. 48 Bank of Montreal v Stuart [1911] AC 120. 49 Nocton (HL) (n 5) 956. 50 Arising in the context of a contractual relationship. 51 Although Viscount Haldane cited no examples, see Floyd v Nangle (1747) 3 Atk 567, 26 ER 1127 and Dixon v Wilkinson (1859) 4 De G & J 508, 523; 45 ER 198, 203, discussed in JD Heydon, ‘Are the Duties of Company Directors to Exercise Care and Skill Fiduciary?’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Lawbook Co, 2005) 185, 200, fn 82. 52 Nocton (HL) (n 5) 956. 53 Ibid, 958. 46

Nocton v Lord Ashburton 485 It did not matter that the action brought was one which also could have been brought for negligence at common law (based upon the contractual undertaking), because once the court of equity had assumed jurisdiction the action could be brought: it ‘was really an action based on the exclusive jurisdiction of a Court of Equity over a defendant in a fiduciary position in respect of matters which at law would also have given a right to damages for negligence’.54 In ordering Nocton to pay compensation, Viscount Haldane explained that he would be ‘sorry to be thought to lend countenance to the idea that recent decisions have been intended to stereotype the cases in which people can be held to have assumed such a special duty’ to take care in making representations.55 He remarked that the ‘special duty’ which gave rise to Nocton’s liability might arise from ‘an implied contract at law’56 or a ‘fiduciary obligation in equity’.57 Although Lord Ashburton’s claim relating to the release of his security succeeded, his claim relating to Nocton’s inducement of him to enter into the 1904 mortgage failed. Both were instances of negligence in the context of their relationship, and both were actionable as a breach of contractual duties of care and skill as well as breach of fiduciary duty in equity. However, as Viscount Haldane explained, the claim based upon Nocton’s earlier carelessness was barred by the Statute of Limitations (common law) and acquiescence (in equity).58

(2) Lord Dunedin’s Speech Lord Dunedin agreed with the Lord Chancellor. However, he delivered a short additional speech which focused upon the jurisdiction of the courts of equity. Lord Dunedin immediately sidelined Derry v Peek by suggesting that, at common law, there would have been an action for negligence in this case. He treated Derry v Peek as requiring only proof of mens rea in an action where fraud was alleged.59 Viscount Haldane had considered that Nocton v Lord Ashburton had only been pleaded as a case of fraud, and it

54

Ibid, 957. Ibid, 948. 56 By ‘implied contract’, Viscount Haldane must have meant a genuine contract implied between the parties which included an undertaking to take care and skill. However, Viscount Haldane did not distinguish between such genuine contracts, implied by conduct, and cases which would today be regarded as part of a category of unjust enrichment. In Sinclair v Brougham [1914] AC 398, 415–16, four months before his decision in Nocton, Viscount Haldane had referred to obligations to make restitution as arising quasi ex contratu and involving a fiction of attributed promise. 57 Nocton (HL) (n 5) 955. 58 Ibid, 958. This point had been conceded in argument: ibid, 960 (Lord Dunedin). 59 Ibid, 963. 55

486 James Edelman was too late to amend to plead negligence at common law.60 Lord Dunedin said that he would have been prepared to read the statement of claim more broadly, as alleging negligence at common law, in breach of the contractual undertaking to take reasonable care.61 Nevertheless, he also agreed with the other solution, namely, that courts of equity used ‘fraud’ in a much broader sense, to encompass any wrongful breach of duty.62 However, like Viscount Haldane, Lord Dunedin that a claim for mere negligence might have been met with a demurrer for want of equity.63 But such a rule did not apply to persons in a fiduciary relationship. In such cases, the ‘fiduciary position imposes on him the duty of making a full and not a misleading disclosure of facts known to him when advising his client’.64 The misrepresentation by a fiduciary to his principal was a breach of duty in equity.65

(3) Lord Shaw’s Speech Although Lord Shaw agreed generally with Viscount Haldane, he was less circumspect in relation to Derry v Peek. Lord Shaw did not express concern with the jurisdiction of equity to deal with the issue of liability for a negligent breach of duty. His Lordship considered that although the claim was pleaded as fraud, all the facts relevant to a claim for negligence were also alleged.66 Lord Shaw did not bother to insist on a fiduciary relationship before the misrepresentation could become actionable in equity. Instead, he relied directly on Burrowes v Lock, and the line of authority from equity which had generally been considered to have been overruled in Derry v Peek. Lord Shaw relied heavily on the fact that in one of the speeches in Derry v Peek67 Lord Hershell had not expressly overruled the equity cases in that line of authority but had merely mentioned the line of authority ‘for the purpose of putting it aside’. Lord Shaw therefore concluded that Derry v Peek was authority only for the proposition that liability for a negligent misrepresentation would be denied only if there was no duty to take care.68 Lord Shaw relied upon argument made by Sir Roundell Palmer (later Lord Selborne LC) in Peek v Gurney,69 that ‘there was such a proximate relation between [the plaintiff] and the person making the representation

60 61 62 63 64 65 66 67 68 69

Ibid, 963. Ibid, 965. Ibid, 963. Ibid, 963. Ibid, 965. Ibid, 965. Ibid, 968. Derry v Peek (n 33) 360. Nocton (HL) (n 5) 971. Peek v Gurney (1873) LR 6 HL 377.

Nocton v Lord Ashburton 487 as to bring them virtually into the position of parties contracting with each other’.70 In other words, the circumstances between the parties were such that Nocton had impliedly undertaken to take care. Lord Shaw said:71 It is admitted in the present case that misrepresentations were made; that they were material; that they were the cause of loss; that they were made by a solicitor to his client in a situation in which the client was entitled to rely, and did rely, upon the information received. I accordingly think that that situation is plainly open for the application of the principle of liability to which I have referred, namely, liability for the consequences of a failure of duty in circumstances in which it was a matter equivalent to contract between the parties that the duty should be fulfilled.

Lord Shaw asserted that liability in Nocton arose simply because ‘it was a matter equivalent to contract’.72 This echoed earlier words of Lord Blackburn in a Scottish appeal in Brownlie v Campbell,73 where Lord Blackburn said of the equity cases such as Burrowes v Lock that ‘if they do not absolutely amount to contract, come uncommonly near it’. Lord Shaw was, of course, a Scottish Law Lord, having been appointed to the House of Lords in 1909 from his position as Lord Advocate of Scotland. His background was not immaterial: in Scotland, contracts could be enforced in the absence of consideration. On Lord Shaw’s approach there was not much left of the reasoning, nor even the result, in Derry v Peek. Applied directly to that case the result was indefensible: the promoters had made misrepresentations; they were material; they were the cause of loss; and they were made in a situation in which the claimant was entitled to rely, and did rely, upon the information received.

(4) Lord Parmoor’s Speech The speech by Lord Parmoor was the least reasoned and the most dismissive of Derry v Peek. Lord Parmoor stated that the question before their Lordships was simply whether the pleadings had sufficiently asserted negligence74 and, if so, whether a person could be liable for negligence in the absence of mens rea.75 In a single paragraph he concluded that negligence had been sufficiently raised because no new evidence was needed to establish the case, and that fraud was not required. In reasoning which was

70 71 72 73 74 75

Nocton (HL) (n 5) 971–72. Ibid, 972. Ibid. Brownlie v Campbell (1880) LR 5 App Cas 925, 953. Nocton (HL) (n 5) 977. Ibid, 976.

488 James Edelman hardly perspicacious he brushed aside Derry v Peek, asserting that all that the House of Lords had concluded in that case was that an action for deceit required proof of deceit: [T]hat case decides that in an action founded on deceit, and in which deceit is a necessary factor, actual dishonesty, involving mens rea, must be proved. The case in my opinion has no bearing whatever on actions founded on a breach of duty in which dishonesty is not a necessary factor.76

If Lord Shaw had left only a shell of reasoning in Derry v Peek, Lord Parmoor had obliterated all but the trail.

D. BACKGROUND TO THEIR LORDSHIPS’ RELIANCE ON BREACH OF FIDUCIARY DUTY

As we have seen, in the century preceding Derry v Peek the law in relation to negligent misstatement was in a state of considerable flux. Derry v Peek appeared to resolve this uncertainty, only to be brushed aside by the House of Lords in Nocton v Lord Ashburton. As we have also seen, Viscount Haldane, in the leading speech, and Lord Dunedin, took the most care to distinguish Derry v Peek on the basis that it was inapplicable where the misrepresentation was made in the context of a fiduciary relationship. This section of the chapter considers the historical treatment of fiduciary relationships, and the approach taken by Viscount Haldane and Lord Dunedin.

(1) Two (Overlapping) Uses of ‘Fiduciary’ Prior to Nocton v Lord Ashburton The reliance by Viscount Haldane and Lord Dunedin on the circumstance of a fiduciary relationship as a situation in which negligent misrepresentations were actionable in equity was not wholly novel.77 However, the Chancery Bill for breach of fiduciary duty was not as old as Viscount Haldane suggested, particularly in the context of misrepresentation. Equity courts began to speak of ‘fiduciary duties’ only in the nineteenth century. The concept of a fiduciary duty which then existed was also a very loose one. It was generally used in two different ways. The first use of the label ‘fiduciary’ was in relation to persons who had the management of property in which another was interested. The fiduciary duties (and liabilities) in these cases concerned the obligations of management of the asset. Fiduciaries in this context were said to be guardians, tenants for life, mortgagees, joint tenants, partners, directors, agents

76 77

Ibid, 978. Slim v Croucher (1860) 1 De G F & J 518, 524; 45 ER 462, 465.

Nocton v Lord Ashburton 489 and solicitors.78 One of the earliest cases to use the label ‘fiduciary duties’ in this sense was Docker v Somes.79 In that case, Lord Brougham LC explained that an ‘attorney, guardian, or other person standing in a like situation’ who speculates with a client’s money is treated as a trustee for the purpose of making him accountable. The Lord Chancellor explained that this remedy aimed to discourage breach by stripping gains if gains were made from the use of the entrusted funds, or by charging the fiduciary for losses incurred. Secondly, ‘fiduciary’ was sometimes used in a much looser sense to describe various relationships of influence or confidence, whether or not they involved custody of the principal’s assets. The precise duty owed in each case would vary; the focus in these fiduciary cases was upon the influence exercised, or trust reposed, in relationships such as parent/child, or guardian/ward or solicitor/client.80 As late as 1977, in his magisterial work, Fiduciary Obligations,81 Dr Paul Finn (as his Honour then was) treated undue influence and breach of confidence as core fiduciary doctrines, consistently with these early authorities.82 In modern law, these two doctrines are generally not considered to be doctrines of fiduciary law.83 However, there still remains a corpus of obligations, often in relationships involving trust and confidence, which are considered to be fiduciary without the necessity for any custody of assets. The relationship of solicitor/client is one of these. (2) Two Common Remedies against Custodial Fiduciaries The remedial focus of courts in the first category of fiduciaries, namely custodial fiduciaries, was on the liability of the fiduciary to account for 78 A Underhill, The Law Relating to Trusts and Trustees, 1st edn (London, Butterworths, 1878) 77–79. The relationship of banker/client was not fiduciary; the banker did not manage money for the client but merely owed a personal debt, and the banker was entitled to profit from the receipt: Foley v Hill (1848) 11 HL Cas (Cl) 28, 9 ER 1002. 79 Docker v Somes (1834) 2 My & Keen 655, 665; 39 ER 1095, 1099. 80 J Smith, A Treatise on the Principles of Equity (London, Sweet & Maxwell, 1856) 669 and 682–83; J Smith, A Manual of Equity Jurisprudence as Administered in England (London, Stevens and Norton, 1855) 63–66; J Griffith (ed), Snell’s Principles of Equity, 2nd edn (London, Stevens and Haynes, 1872) 388–89. Snell’s Equity maintained this view immediately prior to Nocton v Lord Ashburton: A Brown (ed), Snell’s Principles of Equity, 16th edn (London, Stevens and Haynes, 1912) 421. 81 PD Finn, Fiduciary Obligations (Sydney, Lawbook Co, 1977). 82 Ibid, 78. Doubted by WMC Gummow in a review [1978] 2 University of New South Wales Law Review 408, 410. 83 Independence of duties of confidence from fiduciary duties: Arklow Investments Ltd v Maclean [2000] 1 WLR 594, 600; Indata Equipment Supplies Ltd v ACL Ltd [1998] FSR 248, 262; RP Meagher, JD Heydon and MJ Leeming, Meagher, Gummow and Lehane’s Equity, Doctrines & Remedies, 4th edn (Sydney, Butterworths, 2002) para 41-035; J McGhee (ed), Snell’s Equity, 32nd edn (London, Sweet & Maxwell, 2010) para 7-065. Independence of undue influence from breach of fiduciary duty: Meagher, Gummow and Lehane, above, para 15-100; Snell’s Equity, above, para 7-070. For a general discussion of the independence of these two duties, see M Conaglen, Fiduciary Loyalty (Oxford, Hart Publishing, 2010) 236–44.

490 James Edelman the assets under his control. Different types of account could be ordered. One type was an account of administration in common form. This form of ‘common account’ had originated at common law in claims against a bailiff or receiver. But by the mid-nineteenth century the accounting procedure had almost disappeared from the common law.84 The reason for this, as Lord Hardwicke explained, was the cumbersome procedure at law.85 But this common account was not unusual in equity, particularly against custodial fiduciaries. The common account required that the defendant account for the fund received and what had become of it.86 If a proper disbursement could not be given, that entry was falsified and the fiduciary would be required to restore that sum to the fund. With modern eyes, the best way to understand the common account and order that the fund be restored is that this was equity’s equivalent of a common law claim for debt.87 Separate from the common account was the bill brought against a custodial fiduciary for an account on the basis of wilful default.88 The bill for an account for wilful default involved an inquiry into receipts and disbursements of a trustee, to determine whether the trustee should be charged for any loss to the trust. It required proof of at least one instance of wrongdoing,89 and it encompassed both deliberate and careless breaches of trust.90 Once that was proved, the fiduciary would be required to account for funds as if they had been employed in the manner they should have been. It is now commonly recognised that this wilful default accounting

84 E Bullen and S Leake, Precedents of Pleadings (London, Stevens and Sons, 1848) 62–63: ‘The above forms are in actions of Account, a form of action now seldom adopted. This action lies by the common law against a bailiff or receiver.’ 85 Ex parte Bax (1751) 2 Ves Sen 388, 388; 28 ER 248, 250 (Lord Hardwicke): at common law, ‘when the auditors have taken the account, and on charging and discharging the items, issues may be joined; and so many issues then may be tried; actions at law therefore for accounts are so few, because so long time is required.’ 86 Read’s Case (1603) 5 Co 33b, 34a; 77 ER 103; Pybus v Smith (1790) 1 Ves 189, 30 ER 294. 87 ‘Equitable debt’: Ex parte Adamson (1878) 8 Ch App 807, 819; Ex parte Kelly & Co (1879) 11 Ch D 306, 311; Webb v Stenton (1881) 11 QBD 518 at 530. See especially S Elliott, Compensation Claims against Trustees (unpublished DPhil thesis, University of Oxford, 2002) and S Elliott, ‘Remoteness Criteria in Equity’ (2002) 65 MLR 588. See also the discussion by C Mitchell and S Watterson, ‘Remedies for Knowing Receipt’ in C Mitchell (ed), Constructive and Resulting Trusts (Oxford, Hart Publishing, 2010) 115, 124; and J Edelman, ‘Money Awards of the Cost of Performance’ (2010) 4 Journal of Equity 122. 88 Partington v Reynolds (1858) 4 Drew 253, 255–56; 62 ER 98, 100 (Kindersley V-C): ‘There are two different modes of accounting … and accordingly there are two different forms of decree in use to compel him to account … They proceed on totally distinct grounds. The one supposes no misconduct [common account]; the other is entirely grounded in misconduct.’ See also TH Haddan, Outlines of the Administrative Jurisdiction of the Court of Chancery (London, W Maxwell, 1862) 229–42. Detailed discussion in Elliott thesis (n 87). 89 Sleight v Lawson (1857) 3 K & J 292; 69 ER 1119; Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] 1 Ch 539, 546. 90 JH Stannard, ‘Wilful Default’ [1979] Conv 345; Re Chapman [1896] 2 Ch 763.

Nocton v Lord Ashburton 491 is, in substance, a liability to compensate for loss arising as a result of the fiduciary’s failure to act reasonably (ie negligence).91

(3) Remedial Responses for Loss Caused by Non-custodial Fiduciaries In cases where the fiduciary did not have custody of the assets of another, the equity courts did not usually speak in terms of accountability. The negligent fiduciary was simply held liable for losses caused. Awards of compensation have been available in equity since the Middle Ages, with the earliest statute, in the reign of Richard II, explicitly enabling the Chancellor to award damages.92 In his compiled Chancery precedents from 1559–1646, Tothill listed 11 cases in the courts of Chancery where damages were awarded to compensate for loss.93 One common instance of compensation for loss suffered by a fiduciary’s actions involved cases of misrepresentation where equity courts assumed jurisdiction. A good example is Peek v Gurney.94 That case was brought as a bill in Equity to recover compensation for loss suffered due to deliberate misstatements made by company promoters in a company prospectus.95 In an appeal to the House of Lords, Lord Chelmsford stated that the loss could be recovered in equity just as it could be recovered at common law. But the action failed because the misstatements were not made to the claimant: the claimant had not received the prospectus from the defendant company directors as a subscriber but only as a subsequent purchaser of shares on the market. Speaking of the remedy, Lord Chelmsford said:96 It is a suit instituted to recover damages from the respondents for the injury the Appellant has sustained by having been deceived and misled … It is precisely analogous to the common law action for deceit. There can be no doubt that Equity exercises a concurrent jurisdiction in cases of this description, and the same principles applicable to them must prevail both at Law and in Equity.

91 Iliffe v Trafford [2001] All ER (D) 306 (Dec) [9] (Hart J); Armitage v Nurse [1998] Ch 241, 252 (Millett LJ): ‘A trustee is said to be accountable on the footing of wilful default when he is accountable not only for money which he has in fact received but also for money which he could with reasonable diligence have received. It is sufficient that the trustee has been guilty of a want of ordinary prudence.’ 92 17 Ric II c 6 (1393). For the history of the medieval jurisdiction of Chancery awards of damages until the mid-nineteenth century reforms see PM McDermott, ‘Jurisdiction of the Court of Chancery to Award Damages’ (1992) 108 LQR 652. 93 (1559–1646) Toth 51–52; 21 ER 121. 94 Peek v Gurney (n 69). See also Schroeder v Mendl (1877) 37 LT 452, 454. 95 Peek v Gurney (n 69) 387: ‘[T]he prospectus was not framed, in the terms in which it was issued, carelessly or inconsiderately, but designedly and after deliberation.’ 96 Ibid, 390 and 393. See also Ramshire v Bolton (1869) 8 LR Eq 294 and Slim v Croucher (n 24), 524; 465 (Lord Campbell LC).

492 James Edelman As we have seen above, it is now commonly recognised that the account on the basis of wilful default was a liability to compensate for losses suffered. It was simply a different procedural mechanism to reach the same result as that which was reached directly in non-custodial fiduciary cases of compensating for loss.

(4) Compensation for Losses Caused by either Custodial or Non-custodial Fiduciaries We have seen that the language of ‘wilful default’ accounting against a custodial fiduciary concealed exactly the same exercise as the process of finding a non-custodial fiduciary liable to compensate a principal for losses caused by the fiduciary’s breach. In fact, this more direct route—explicitly recognising the liability as one to compensate for loss—was sometimes taken by courts even in cases of negligence liability of custodial fiduciaries. This was the approach in an early instance of compensation for losses caused by a fiduciary, Charitable Corporation v Sutton.97 In that case a bill was brought against members of a committee (the equivalent of directors) of the Charitable Corporation, which engaged in lending secured by pledge. The defendants were held liable for crassia negligentia for a variety of breaches in neglecting the business of the Corporation. Closer in time to Nocton v Lord Ashburton was Re Salmon.98 In that case, a trustee had made an authorised investment of trust funds, taking a mortgage over property. But the investment was made without due care, and when the property was sold it realised a significant loss. The Court of Appeal held that ‘the liability of the trustee in such a case is to make good the loss occasioned to the trust estate by the improper investment’.99

E. VISCOUNT HALDANE’S AND LORD DUNEDIN’S TREATMENT OF FIDUCIARY DUTY

(1) The Fiduciary Duty of Care in Their Speeches As we have seen, Viscount Haldane and Lord Dunedin were concerned that a general claim for negligence against a solicitor would have been demurrable in equity without some additional fact. It is true that in 1875 the ViceChancellor had allowed a demurrer in relation to a claim for negligence by

97 98 99

Charitable Corporation v Sutton (1742) 2 Atk 400; 9 Modern 349. Re Salmon (1889) 42 Ch D 351. Ibid, 371 (Fry LJ). See also Smethurst v Hastings (1884) 30 Ch D 490, 498.

Nocton v Lord Ashburton 493 a solicitor in failing to check for defects in a title being offered as security,100 but this did not apply to all negligence claims in equity. Negligence by a trustee was generally actionable, and in relation to negligent misstatements equity courts had long rejected claims that there was no jurisdiction merely because an action might also have been brought at common law.101 Viscount Haldane and Lord Dunedin could easily have based the jurisdiction in equity upon the long line of pre-Judicature Act cases concerning misrepresentations in equity. One might speculate that the reason that this route was not taken was because it might have run headlong into the objection that the House of Lords would be directly contradicting its own decision in Derry v Peek; and unlike Lords Shaw and Parmoor, Viscount Haldane and Lord Dunedin were too circumspect to take such a direct route. For this reason, they chose to distinguish Derry v Peek on the basis that the negligence was by a fiduciary in relation to his principal. There is some support for this speculation in the course of oral argument. When Jenkins KC rose to respond, he was immediately told by Viscount Haldane that the Lords were unlikely to disagree with Neville J’s rejection of fraud by Nocton. So Jenkins KC immediately focused his fire on negligence: ‘[T]he judgment of the Court of Appeal can be supported on the footing of negligence.’102 He then explained that such a dereliction of duty by a fiduciary had commonly been described in equity as ‘fraud’. At this point he was immediately stopped by the court. Viscount Haldane was satisfied. Viscount Haldane reiterated his point very shortly after Nocton v Lord Ashburton in Robinson v National Bank of Scotland Ltd.103 In that case, the claimant sought damages from a bank which he alleged had made misrepresentations concerning the creditworthiness of a principal debtor, which induced the claimant to enter into a contract of suretyship. The representations were honestly made by the defendant bank to another bank which conveyed them to the claimant. The House of Lords held that in the absence of dishonesty, no action could be brought against the defendant bank. However, Viscount Haldane (with whom Lord Kinnear and Lord Atkinson agreed) emphasised that a duty to be careful might arise in other circumstances:104 I think the case of Derry v Peek in this House has finally settled in Scotland, as well as in England and Ireland, the conclusion that in a case like this no duty to be careful is established. There is the general duty of common honesty, and that duty of course applies to the circumstances of this case as it applies to all other circumstances. But when a mere inquiry is made by one banker of another, who

100 British Mutual Investment Company v Cobbold (1875) LR 19 Eq 627 (Sir Charles Hall VC). 101 Above at n 54. 102 Nocton (HL) (n 5) 943. 103 Robinson v National Bank of Scotland Ltd [1916] SC (HL) 154. 104 Ibid, 157 (emphasis added).

494 James Edelman stands in no special relation to him, then, in the absence of special circumstances from which a contract to be careful can be inferred, I think there is no duty excepting the duty of common honesty to which I have referred. In saying that I wish emphatically to repeat what I said in advising this House in the case of Nocton v Lord Ashburton, that it is a great mistake to suppose that, because the principle in Derry v Peek clearly covers all cases of the class to which I have referred therefore the freedom of action of the courts in recognising special duties arising out of other kinds of relationship which they find established by the evidence is in any way affected. I think, as I said in Nocton’s case, that an exaggerated view was taken by a good many people of the scope of the decision in Derry v Peek. The whole of the doctrine as to fiduciary relationships, as to the duty of care arising from implied as well as expressed contracts, as to the duty of care arising from other special relationships which the courts may find to exist in particular cases, still remains, and I shall be sorry if any word fell from me which suggests that the courts are in any way hampered in recognising that the duty of care may be established when such cases really occur.

(2) The Consideration of Remedies for Breach of Fiduciary Duty Turning to the remedial award for Nocton’s negligent misstatement, Viscount Haldane upheld the decision of the Court of Appeal that Nocton was required to compensate Lord Ashburton for his losses. However, he questioned whether the measure of compensation could have been put on a different basis:105 The proper mode of giving relief might have been to order Mr Nocton to restore to the mortgage security what he had procured to be taken out of it, in addition to making good the amount of interest lost by what he did. The measure of damages may not always be the same as in an action of deceit or for negligence. But in this case the question is of form only, and is not one which it is necessary to decide. I am not sure that such an order would have been more merciful to Mr Nocton than the order for an inquiry as to damages which was actually made. At all events, Mr Nocton’s advisers did not at any time object and ask for the other alternative and it is too late to ask for it now.

Lord Dunedin spoke in similar terms.106 This obiter dictum of Viscount Haldane has been relied upon in many subsequent cases for the proposition that equity has a jurisdiction to compensate for losses. However, two points should be noted. First, as we have seen, there was nothing new about the proposition that equity could compensate for losses. As Dr Finn explained, Viscount Haldane had simply ‘forcefully reaffirmed’ this jurisdiction.107

105 106 107

Nocton (HL) (n 5) 958. Ibid, 965. Finn (n 81) 167.

Nocton v Lord Ashburton 495 Secondly, had the point been necessary to decide, there is a good case, as Viscount Haldane and Lord Dunedin suggested, for finding Nocton not merely liable to compensate for losses he caused to Lord Ashburton by his negligent misrepresentation but also accountable for a common account of administration as a custodial fiduciary. The case was not argued on this basis, but it might have been alleged that Nocton had received the mortgage funds from Lord Ashburton and was accountable for them. Nocton would not have obtained a discharge from his accountability if Nocton’s use of the funds for the 1904 mortgage had not occurred with the fully-informed consent of Lord Ashburton concerning Nocton’s interest. If such an argument had been made then the claim based on the 1904 mortgage would not have been statute barred.108 And, as explained above,109 this liability in the nature of an equitable debt might not have been the same as the enquiry as to common law damages. But since such a claim was not made, this point was not considered and, consistently with all the preceding cases which focused only on the losses caused by misrepresentations, Nocton’s liability was to compensate for the losses caused.

F. THE AFTERMATH OF NOCTON V LORD ASHBURTON

(1) Negligent Misrepresentation Without a Fiduciary Relationship Nocton v Lord Ashburton was a watershed case in the history of equity. But it was initially seen only as creating a limited sphere of actionability for loss caused by non-fraudulent misstatements. Leading equity texts either did not even mention Nocton,110 or simply considered it an exception to Derry v Peek in cases of a recognised relationship: ‘[T]his does not prevent the possibility of an equitable remedy based on the relation of the parties.’111 In other words, Nocton v Lord Ashburton, understood in context, was simply a decision that Derry v Peek meant negligent misrepresentations were not 108

Burdick v Garrick (1870) LR 5 Ch 233. See the discussion of the account of administration in common form, at the text to n 84. 110 The 8th edn of Sir Arthur Underhill’s The Law Relating to Trusts and Trustees (London, Butterworths, 1926) makes no mention of Nocton. Neither does the 9th (1939), 10th (1950), 11th (1959), 12th (1970), or 13th (1979). The first mention occurs in the 14th edn (1987) at 733, where the editor (Professor Hayton, as he then was, editor since the 13th edition) discusses the case only for the proposition that equity did not make awards of damages although it awarded compensation. 111 D Browne (ed), Ashburner’s Principles of Equity, 2nd edn (London, Butterworth and Co, 1933) 289 (this quotation was apparently inserted at a late stage into the page proofs). This was also the treatment of Nocton by Snell’s Equity, even after the decision in Hedley Byrne & Co Ltd v Heller & Partners Ltd which appeared to pass unnoticed in the 26th edition: R Megarry and P Baker, Snell’s Equity, 26th edn (London, Sweet & Maxwell, 1966) 613: ‘[A]n action may lie against a solicitor for loss sustained by his client through a misrepresentation made to his client in breach of this duty [of due care and skill] without fraudulent intent.’ 109

496 James Edelman generally actionable. Such a proposition was entirely unremarkable in an era when a majority of the Court of Appeal in Heaven v Pender112 had, in 1881, held that there was no general duty of care at common law.113 As we have seen, for a long time it was thought that Derry v Peek settled the state of knowledge required for an action for misrepresentation.114 In Candler v Crane, Christmas & Co,115 a majority of the Court of Appeal refused a claim based on negligent misrepresentation on the basis that negligent misrepresentations were actionable only if they were made in the context of a contractual or fiduciary relationship between the claimant and defendant. In a powerful dissent, Lord Denning MR relied upon Nocton v Lord Ashburton for having exposed the fact that ‘all that is to be deduced from (though not decided by) Derry v Peek is that in the particular circumstances of that case there was no duty to be careful’.116 Lord Denning contrasted those who were ‘timorous souls … fearful of allowing a new cause of action’ with ‘bold spirits who were ready to allow it if justice so required’.117 The reader of the law reports is left in no doubt as to which camp Lord Denning considered himself to belong and, in contrast, the camp to which he considered the majority to belong. After the rejection of Heaven v Pender in 1932 by Donoghue v Stevenson,118 the path was clear for Derry v Peek to be confined as Lord Denning MR had envisaged, and as Lords Shaw and Parmoor had presaged in Nocton v Lord Ashburton. In 1964, the House of Lords unanimously adopted this broad view of liability for negligent misstatement in the absence of contractual or fiduciary relationships. The House of Lords drew heavily upon Nocton v Lord Ashburton and suggested that Derry v Peek did not exclude forms of liability for wrongful misrepresentations apart from those occurring in contractual and fiduciary relationships. The obiter dicta in Hedley Byrne & Co Ltd v Heller & Partners Ltd119 established that where a duty to take care existed, a merely negligent wrongful misrepresentation was actionable. Three years after the Hedley Byrne case, section 2(1) of the Misrepresentation Act 1967 took liability a step further. The legislation introduced liability to make compensation for an innocent misrepresentation which induced a contract, accompanied by a defence if the representor could 112

Heaven v Pender (1882) LR 11 QBD 503. Rejecting Sir Baliol Brett MR’s minority view (ibid at 509) that a duty of care arose ‘whenever one person is by circumstances placed in such a position with regard to another that every one of ordinary sense who did think would at once recognise that if he did not use ordinary care and skill in his own conduct with regard to those circumstances he would cause danger of injury to the person or property of the other’. 114 Heskell v Continental Express Ltd [1950] 1 All ER 1033, 1042. 115 Candler v Crane, Christmas & Co [1951] 2 KB 164. 116 Ibid, 177. 117 Ibid, 178. 118 Donoghue v Stevenson [1932] 1 AC 562, 576 (Lord Buckmaster). 119 Hedley Byrne and Co Ltd v Heller & Partners Ltd [1964] AC 465. 113

Nocton v Lord Ashburton 497 prove that he had reasonable grounds to believe, and did believe, that the statement was true. The legislation established a duty to make reasonable statements in contractual negotiations, and declared that damages were to be assessed as if the statement had been made fraudulently. No longer was it necessary to reach beyond common law fraud to find liability for negligent misrepresentation as ‘equitable fraud’. Now it was possible to reach beyond liability for negligent misrepresentation at common law to find liability for innocent misrepresentation by a new fiction of ‘statutory fraud’. With the recognition by the common law that negligent misrepresentations were actionable, it might have been thought that there was no longer any need to rely upon a fiduciary relationship in order to succeed for misrepresentation. This final step was taken 80 years after the decision in Nocton v Lord Ashburton. In 1996, the core basis upon which Derry v Peek was sidelined by Viscount Haldane was rejected by the Court of Appeal. In the Court of Appeal, Millett LJ declared that negligence by a fiduciary is not a breach of fiduciary duty.120 Strong voices cried out in objection to this.121 The approach of Millett LJ may not yet be the last word.122 But, on another view, the rejection of the fiduciary reasoning in Nocton v Lord Ashburton, whilst still preserving the conclusion, may simply be the first step in eradicating the use of ‘fiduciary’ as a label which expresses a conclusion, not a process of reasoning. If a ‘fiduciary duty’ eventually comes to be understood as a loose reference to particular duties which are expressed or implied into a voluntary undertaking then the label might no longer be needed at all. The question will simply be whether the duty asserted was voluntarily assumed by the defendant’s conduct generally, including the defendant’s acceptance of any particular office.123

120 Bristol & West Building Society v Mothew [1998] Ch 1, 17, relying upon the Western Australian decision in Permanent Building Society v Wheeler (1994) 14 ACSR 109, 157. Approved in Hilton v Barker Booth and Eastwood (a firm) [2005] UKHL 8, [2005] 1 WLR 567 [29]. Slightly earlier, but to the same effect, Henderson v Merrett Syndicates Ltd (No 1) [1995] 2 AC 145, 205 (Lord Browne-Wilkinson). This is consistent with the insistence in Australia that fiduciary duties are proscriptive, not prescriptive: Breen v Williams (1996) 186 CLR 71, 92−93 (Dawson and Toohey JJ), 113 (Gaudron and McHugh JJ), and 137−38 (Gummow J); Pilmer v Duke Group Ltd (in liq) [2001] HCA 31, 207 CLR 165 [74]; Friend v Brooker [2009] HCA 21, (2009) 239 CLR 129 [84]−[85]. Cf Bofinger v Kingsway Group Ltd [2009] HCA 44, (2009) 239 CLR 269 [35]. 121 Heydon (n 51); J Getzler, ‘Am I My Beneficiary’s Keeper? Fusion and Loss-Based Fiduciary Remedies’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Lawbook Co, 2005) 239. 122 Pitt v Holt [2011] EWCA Civ 197, [2011] 3 WLR 19 [127], concluding that ‘[t]he trustees’ duty to take relevant matters into account is a fiduciary duty’, but there will be no breach if the trustees rely on apparently competent advice. The distinction, if it exists, between such a breach of fiduciary duty and negligence is remarkably fine. 123 See J Edelman, ‘When Do Fiduciary Duties Arise?’ (2010) 126 LQR 302. For indications that this may be the future development of fiduciary doctrine, see Galambos v Perez [2009] SCC 48, [2009] 3 SCR 247; F & C Alternative Investments (Holdings) Ltd v Barthelemy [2011] EWHC 1731 (Ch) [225]; John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19, (2010) 241 CLR 1 [88].

498 James Edelman (2) The Consequences of the Gambles by the Players in the Nocton Saga The background and subsequent conduct of the players in Nocton v Lord Ashburton revealed a series of gambles. Every one of them failed. The Kensington property investment was not the first transaction between Nocton and his client, Lord Ashburton. Prior to the Kensington transaction, in 1894, Nocton had borrowed heavily to purchase the Langham Estate in Essex from Lord Ashburton’s family. As a result of losing the litigation with Lord Ashburton, an interim receiver was appointed over Nocton’s lands in the county of Essex, including Langham Manor, to recover the judgment debt.124 Nocton’s gambles with Lord Ashburton had spectacularly failed. The Economic Life Assurance Society, which had lent the money to Lord Ashburton for the Kensington investment in 1904, grew rapidly over the next century. It was acquired by Alliance Assurance in 1912. After several mergers, by 1996 it was Royal Insurance and Sun Alliance. In the 1990s, following complaints about its treatment of discretionary bonuses contrary to the reasonable expectations of policyholders, a rival insurance company, Equitable Life, decided to litigate the issue. It defended a test case and sought a declaration that it had acted lawfully. It funded the claim of the test claimant, Alan Hyman. It did not insure against losing the litigation. On 20 July 2000, the House of Lords held that Equitable Life had acted unlawfully. Equitable Life collapsed.125 Royal Insurance and Sun Alliance made provision for losses of £1.2 billion. In August 2002, Royal Insurance and Sun Alliance’s life assurance business was closed with the loss of 1,200 jobs. Lord Ashburton’s grandson, Alexander, the sixth Baron Ashburton, followed in the family business and became a managing director of Barings Bank. At the time of Alexander’s death, the rogue trader, Nick Leeson, began a series of gambles which destroyed the Barings Bank four years later. The property in Church Street, Kensington, in which Lord Ashburton invested, was eventually developed as a commercial premises. Located opposite is the gambling store, Ladbrokes.

124 See the discussion in the writ of elegit proceedings which followed the decision of Neville J: Lord Ashburton v Nocton [1915] 1 Ch 274, 275. 125 An enquiry found that it was the author of its own misfortune by payments to policyholders which had left it ‘under-funded to the extent of £4½ billion in the summer of 2001’: The Rt Hon Lord Penrose, Report of the Equitable Life Inquiry (London, 2004) ch 19, para 82. The figure of £4.5 billion was the expectation which Equitable Life had created for policyholders rather than any actual entitlement.

17 Regal (Hastings) Ltd v Gulliver (1942) RICHARD NOLAN

A. INTRODUCTION

A

LMOST 70 YEARS have passed since the House of Lords’ decision in Regal (Hastings) Ltd v Gulliver,1 and over 40 years since it figured so prominently in Boardman v Phipps,2 yet little is known about the very strange course of the proceedings in Regal. At first instance, and in the Court of Appeal, Regal was argued and decided as a case at common law for negligence, money had and received, or misfeasance. It was not treated as a case in equity, let alone a leading case in equity, until it reached the House of Lords. Yet the facts found by the trial judge make it as plain as could be that Regal was a case where the defendant directors had material conflicts of duty and interest. Strangely, these conflicts were never presented in argument as the basis for a decision. Instead, the House of Lords ultimately decided the case by applying in a perfectly orthodox fashion the principle that a fiduciary may not make an unauthorised profit out of his position. And the highly unsatisfactory course of the proceedings demonstrates the need for this principle to support the rules governing a fiduciary’s conflict of duty and interest, and the goals served by those rules. The directors in Regal were far from the innocent victims of harsh law rigidly applied. In order to establish and understand these points, it is vital to go back into the records of the case—the pleadings and other documents, and the judgments of the High Court and the Court of Appeal—which are still preserved in the Library of the House of Lords. The judgments of the High Court and the Court of Appeal in Regal have never been reported,

1 Regal (Hastings) v Gulliver [1942] 1 All ER 378, [1967] 2 AC 134n (HL). Citations in subsequent footnotes are to the Official Reports. 2 Boardman v Phipps [1967] 2 AC 46 (HL).

500 Richard Nolan despite the importance of the case.3 Yet to read a final appellate decision in isolation from the proceedings and judgments in the lower courts is to invite misunderstanding, and all the more so in a case such as Regal where House of Lords reversed the decisions of both the High Court and the Court of Appeal. The exigencies of wartime may account for the lack of reporting. The writ which began the Regal case was issued on 15 December 1939, just over three months into the Second World War, and the case was heard in war-torn London. Indeed, the oral judgment of the High Court in Regal was interrupted by an air raid.4 Yet the connected case of Luxor (Eastbourne) Ltd v Cooper is reported at all of its stages, in the King’s Bench Division, the Court of Appeal and the House of Lords.5 But whatever the explanation for this lack of reporting, and it is unlikely ever to be known, facts come before judgments, whether reported or unreported; and the facts of Regal merit careful examination.

B. FACTS

The plaintiff company, Regal, owned and operated a freehold cinema in Hastings. Regal was part of a group that ran several cinemas on the South Coast of England in the 1930s. (My mother, who was growing up in Sussex at that time, was a regular patron of the Regal in Littlehampton.) Together, these cinemas were known as the Bentley Circuit, after Mr Walter Bentley, who was the leading light in the business, managing director of Regal and its majority shareholder. In 1935, as the threat of another war in Europe was growing, business was still good for Regal, and it wished to acquire leases of two other local cinemas, the Cinema de Luxe, Hastings, and the Elite Cinema in

3 It appears that the judgment of the Court of Appeal in Regal was examined by the Supreme Court of Canada in Peso Silver Mines Ltd v Cropper [1966] SCR 673, 682–83, (1966) 58 DLR (2d) 1, 8–9 (Cartwright J). But that is the only reference to a consideration of the earlier proceedings discovered so far. Some other prominent equity cases have suffered a similar fate of much comment based on limited and inadequate reports. Two such are Jacobus Estates Ltd v Marler (1913) 114 LT 640n (HL) and Nocton v Lord Ashburton [1914] AC 932 (HL). In Jacobus, even the decision of the House of Lords itself is inadequately reported. Again, the full text of the pleadings, arguments, judgments and speeches in those cases are available in the Appeal Books of the House of Lords. 4 See the judgment of Wrottesley J, reported in the documents put before the House of Lords (the ‘Appeal Book’), 77. The sang-froid of the judge and the reporter is beautifully illustrative of the times. There is simply an italicised insertion within the judgment: ‘At this point an air raid warning sounded and the Court adjourned.’ After that, the judgment resumed with the words: ‘I think when the interval occurred I had reached the point that ...’ The court kept calm and carried on. 5 Luxor (Eastbourne) Ltd v Cooper [1939] 1 All ER 623 (KBD); [1939] 4 All ER 411 (CA); [1941] AC 108 (HL).

Regal (Hastings) Ltd v Gulliver 501 St-Leonards-on-Sea. Mr Bentley had been looking to sell his interests in the business for a couple of years before that, but no acceptable deal had yet materialised.6 So Regal intended to run all three cinemas when the acquisition of the two new leases was first mooted, but the possibility of selling all the cinemas (including the Cinema de Luxe and the Elite) was always, and explicitly, a possibility.7 The directors of Regal did not want to expose the company to the risks of running the Cinema de Luxe and the Elite, so it formed a subsidiary company, Hastings Amalgamated Cinemas Ltd (‘Amalgamated’), with a nominal capital of 5,000 £1 shares, to take a lease of those two cinemas.8 As the speeches in their Lordships’ House make clear, the original scheme was for only 2,000 of these shares to be issued and paid up in cash (others were to be issued for services rendered), but the owner of the cinemas declined to grant a lease to Amalgamated if it only had a cash capital of £2,000. There were two possible ways forward which were acceptable to the lessor of Cinema de Luxe and the Elite. One possibility was for the directors of Regal to guarantee the rent payable by Amalgamated in respect of the two cinemas. Unsurprisingly, the directors were loath to do this, and they certainly had no duty to offer such a guarantee. The other possibility was to put £5,000 cash capital into Amalgamated. Though it later became a matter of some dispute, it was held that Regal could not afford to put more than £2,000 into Amalgamated. So four of Regal’s directors and its solicitor each subscribed for 500 shares in Amalgamated, and the fifth director found some outsiders to take up another 500. This would provide a total of £5,000 in cash capital for Amalgamated: £2,000 from Regal, plus six tranches of £500. At the time these arrangements were being made, London and Southern Super Cinemas Ltd made an offer to acquire the freehold of the Regal Cinema in Hastings and the Luxor Cinema in Eastbourne, as well as the two leasehold cinemas in Hastings once they had been acquired by Amalgamated.9 The motivation for that offer may well have been the sudden death, on 11 September 1935, of Mr Walter Bentley, which would have sent a signal to other cinema operators that the businesses would likely be put up for sale.10 In the event, this offer was considered by the boards of both Regal and Hastings Amalgamated on the same day—2 October 1935—and at

6

Appeal Book, 72C–E (Wrottesley J). Appeal Book, 73E–74D (Wrottesley J); Case for the Appellants in the House of Lords, [10]–[14]. 8 Appeal Book, 74B–C, 76D–77A (Wrottesley J). 9 Appeal Book, 79E–81E (Wrottesley J); Case for the Appellants in the House of Lords, [28]–[30]. These negotiations later formed the subject matter of Luxor (Eastbourne) Ltd v Cooper [1941] AC 108. 10 Appeal Book, 80C–E (Wrottesley J). The directors of Luxor were the same individuals as the directors of Regal. 7

502 Richard Nolan the same meetings the boards passed the necessary resolutions to capitalise Amalgamated as described above.11 On 7 October 1935, Amalgamated acquired leases of the Cinema de Luxe and the Elite,12 and the next day, the offer from London and Southern was accepted, subject to contract, by the solicitor acting for both Regal and Amalgamated.13 However, just over two weeks later, on 24 October 1935, the shares in Regal, together with the 3,000 shares in Amalgamated which were not owned by Regal, were sold to another bidder, Oxford & Berkshire Cinemas Ltd.14 The directors had apportioned part of the total consideration received from Oxford & Berkshire to the sale of shares in Amalgamated,15 and this apportionment meant that each defendant made a profit of £1,402 1s 8d from the sale of his 500 shares in Amalgamated.16 Under its new owners, Regal sued its five former directors and its former solicitor. The action against the solicitor, Mr Garton, failed, as he had purchased shares in Amalgamated with the consent of Regal’s board. The action against four of the directors (Messrs Bobby, Griffiths, Bassett and Bentley) succeeded finally in the House of Lords, having failed in both the High Court and the Court of Appeal. These four were the directors who had taken the shares in Amalgamated on their own behalf. The fifth and final director, Mr Gulliver, did not take shares for his own benefit but as nominee for others, so the House of Lords held that he had made no profit personally for which he could be accountable to Regal.

C. THE STRANGE COURSE OF PROCEEDINGS: PLEADINGS, COUNSEL AND ARGUMENTS

The clearest indication that there was something very odd about the start of the proceedings in Regal comes, ironically, at the very end of those proceedings, in the final speech given by Lord Porter.17 He noted that Regal’s pleaded case was never drawn as a claim for an account of profits in equity,

11 Appeal Book, 82B–84E (Wrottesley J); Case for the Appellants in the House of Lords, [31]–[32]. 12 Case for the Appellants in the House of Lords, [35]. 13 Ibid, [35]. 14 This is the name given to the purchaser company in the Regal case itself, but in the related case of Luxor (Eastbourne) Ltd v Cooper (n 9) 133, Lord Wright appeared to indicate that the sale was made to a company called ‘Union Cinemas Ltd’. Lord Wright might, perhaps, have been referring to the company that bought Luxor (Eastbourne) Ltd, though he in fact made no distinction between Luxor and Regal. 15 Appeal Book, 83–84, 89–90 (Wrottesley J); 108–09, 115 (Lord Greene MR); Case for the Appellants in the House of Lords, [36]. 16 Case for the Appellants in the House of Lords, [36]–[37]. 17 Regal (n 1) 157–58. There is also a hint in the speech of Lord Russell, ibid, 143.

Regal (Hastings) Ltd v Gulliver 503 but as three common law claims. The prayer for relief in the statement of claim in fact made three alternative claims: (a) a claim for damages for negligence of £8,142 10s;18 (b) a claim for £8,412 10s as money had and received by the defendants to the plaintiff’s use; and (c) a claim of £8,412 10s damages for misfeasance against the sixth defendant, the solicitor Mr Garton.19 It is hardly surprising, therefore, that the trial of the case in 1940 was listed and heard in the King’s Bench Division, rather than the Chancery Division. The whole tenor of the case, before it reached the House of Lords, was that of an action at common law. Viscount Sankey noted that ‘[a]s to the duties and liabilities of those occupying such a fiduciary position, a number of cases were cited to us which were not brought to the attention of the trial judge.’20 What in fact happened was stranger still. Neither the High Court nor the Court of Appeal cited any authority whatsoever: a reader will search the judgments in those courts in vain for the name or facts of a single authority. In both the King’s Bench Division and in the Court of Appeal, Regal was decided on its facts and in accordance with what must have been taken as clearly settled principle. It is a reminder in the strongest terms, if one were needed, of just how the course of a case, and the law it considers and creates, is shaped by the way the case is presented and argued by counsel. Counsel for Regal at trial was the appropriately named leading advocate, and former Labour Attorney-General, Sir Patrick Hastings KC. Beatrice Webb described him as ‘an unpleasant type of clever pleader and political arriviste, who jumped into the Labour Party just before the 1922 election, when it had become clear that the Labour Party was the alternative government and it had not a single lawyer of position attached to it’.21 His Conservative former friends were no kinder.22 But whatever his political beliefs, and even if his political motivations were base, they at least serve to remind us that we should not view the past through rose-tinted spectacles. More significantly, perhaps, and though he was seen as a ‘lawyer of position’, even by his critics, it is fair to say that he was not a Chancery lawyer: his famous cases involved mainly crime, fraud, libel.23 All of these require great forensic skill and mastery of cross-examination, but not much knowledge of equity.

18

This figure may well be a misprint in the prayer for relief, instead of £8,412 10s. Lord Porter’s summary of the claims (Regal (n 1) 157–58) is slightly misleading in regard to the third claim, which was a claim for misfeasance only against Mr Garton, not against all the defendants. There was also an irrelevant fourth additional claim for £233 15s against Mr Garton for money had and received to the use of the plaintiff. 20 Regal (n 1) 137. 21 N and J Mackenzie (eds), The Diary of Beatrice Webb, Volume 4 (1924–1943) (London, Virago, 1985) 19–20. 22 P Hastings, The Life of Patrick Hastings (London, Cresset Press, 1959) 114. 23 Ibid. 19

504 Richard Nolan How much use Sir Patrick could make of his skills as an advocate in a case such as Regal was limited by the facts, the pleadings and the law. The state of company law at the time also limited the scope for success in a pleaded case of negligence. In 1935 when the events at issue happened, and equally in 1940 when they were under investigation at trial, the standard of care and skill expected of directors was taken to be the very relaxed standard established in Re Brazilian Rubber Plantations & Estates Ltd24 and Re City Equitable Fire Insurance Co25: in the performance of his duties, a director did not need to exhibit a greater degree of skill than might reasonably be expected from someone with his knowledge and experience. Indeed, this standard began to rise only decades later.26 The low threshold of liability meant that it was very difficult—in practical terms, impossible—to show the directors had been negligent in failing to obtain better terms for Regal in the acquisition of the Cinema de Luxe and the Elite Cinema. Given this concatenation of the facts, the pleadings and the law, the case of negligence as advanced by Sir Patrick Hastings was doomed to fail. And fail it did. The action for money had and received fared no better. The trial judge, Wrottesley J, took the view that the claim for money had and received could succeed on proof of fraud—that is, if the defendants were shown to have made their respective profits ‘corruptly’. This was fatal to the claim for money had and received. First, there was an express refusal by the trial judge to find fraud as a matter of fact.27 Secondly, the pleaded case did not allege fraud, which precluded any finding of fraud, though it was left to the Court of Appeal to re-assert this rule.28 Leading counsel for the defendants at trial were Mr AT Denning KC, Mr Wynn Parry and Mr Cartwright Sharp KC, with Mr TF Davis appearing for the fifth defendant, Harry Bentley. It is not often realised that Lord Denning, as he later became, appeared for Mr Gulliver both in the High Court and the Court of Appeal, before wartime duties took him elsewhere so that he could not appear in the case before the House of Lords. Clearly, the defendants thought it worthwhile to retain very eminent counsel, as they might when faced with the reputation of Sir Patrick Hastings on the other side, though they could not then have realised quite what prominent careers on the bench lay before both Mr Denning and Mr Wynn Parry. Both of them surely would have seen the weakness of the plaintiff’s arguments:

24

Re Brazilian Rubber Plantations & Estates Ltd [1911] 1 Ch 425. Re City Equitable Fire Insurance Co [1925] Ch 408. 26 See Norman v Theodore Goddard [1991] BCLC 1028 (Ch D); Re D’Jan of London Ltd, Copp v D’Jan [1994] 1 BCLC 561 (Ch D); Equitable Life v Bowley [2003] EWHC 2263 (Comm), [2004] 1 BCLC 180 (QBD); and, now, Companies Act 2006, s 174. 27 Appeal Book, 94 (Wrottesley J, summing up). 28 Appeal Book, 119 (du Parcq LJ). The slightly earlier comments of du Parcq LJ (on the same page) about the absence of fraud were cited in the House of Lords by Viscount Sankey: Regal (n 1) 136. See now CPR 16 PD 8.2. 25

Regal (Hastings) Ltd v Gulliver 505 one may have become a judge of the King’s Bench Division, but he was most certainly aware of equitable doctrine; the other became a judge of the Chancery Division. But neither of them had to point out to the plaintiff, or to the court, the inadequacies of Sir Patrick’s presentation of the case. In the Court of Appeal and the House of Lords, Sir Patrick Hastings’ place was taken by Mr AT Miller KC. But only in the House of Lords was Regal’s argument founded squarely on breach of fiduciary duty: counsel for Regal set out in extenso the authorities on breach of fiduciary duty for the first time only in their written Case for the House of Lords.29 One other point emerges clearly from that written case, which, if better known, would have served to quiet much of the speculation in subsequent years. Regal’s case ‘was not a case of an investment being offered to Regal from some outside source and bona fide rejected by Regal’.30 This point was explicitly made in reaction to a part of the judgment of Lord Greene MR in the Court of Appeal, where he made the following remarks:31 To say that the Company was entitled to claim the benefit of those shares [in Amalgamated] would involve this proposition: Where a Board of Directors considers an investment which is offered to their company and bona fide comes to the conclusion that it is not an investment which their company ought to make, any director, after that Resolution is come to and bona fide come to, who chooses to put up the money for that investment himself, must be treated as having done it on behalf of the Company, so that the Company can claim any profit that results to him from it. That is a proposition for which no particle of authority was cited; and goes, it seems to me, far beyond anything that has ever been suggested as to the duty of directors, agents, or persons in a position of that kind.

Regal’s case, in other words, as presented in the House of Lords, where questions of fiduciary duty were finally and explicitly in issue, never even purported to comprehend facts such as those later at issue in Peso Silver Mines Ltd v Cropper;32 and the alleged contradiction between the two cases is at most apparent, not real.33 The case for Regal was in fact put much more narrowly: this was a case where the directors’ profit stemmed from two key facts which made the profit attributable to their position in a sufficiently direct and close fashion 29 Case for the Appellants in the House of Lords, [44]–[48]. The question of liability of the directors for profits was rather briefly canvassed in the Court of Appeal (Appeal Book, 111 and 115–17, Lord Greene MR), but the treatment of the issue is without any authority and is deeply problematic for other reasons, namely, the mischaracterisation of the case as involving simply the rejection of an opportunity by Regal that could consequently be taken by the directors (see below and the text to n 31), and the confusion of liability for the directors’ profits with some breach of a duty, owed to Regal, to acquire the shares in Amalgamated (addressed in the text to n 62 and following). 30 Case for the Appellants in the House of Lords, [46]. 31 Appeal Book, 116; Case for the Appellants in the House of Lords, [45]. 32 Peso Silver Mines Ltd v Cropper [1966] SCR 673, (1966) 58 DLR (2d) 1. 33 See further the text to n 136 and following.

506 Richard Nolan as to render them accountable to the company for the profit.34 The two facts were as follows. First of all, ‘[i]t was only because the Respondents [defendants] controlled both Regal and [Hastings] Amalgamated that they were able to allot shares in [Hastings] Amalgamated as they were minded’,35 and so were able to sell those shares at a profit. Secondly, it was vital to the defendants that Regal remained involved in the transactions (the capitalisation of Amalgamated and the acquisition of the leases of the Cinema de Luxe and the Elite Cinema) through which the defendants made their profits. The purchase price for the shares in Regal and Amalgamated was calculated on the basis that the freehold cinema owned by Regal was worth £77,500 as a going concern, free from encumbrances, and the cinemas leased at a rack rent by Amalgamated were worth £15,000 on the same basis.36 The leases of the Cinema de Luxe and the Elite Cinema held by Amalgamated, to which £15,000 value was ascribed, had, however, been acquired only a few days before the share sale for no capital premium: they were simply rack rental leases.37 It is hard, indeed impossible, to see how such an uplift in capital value of £15,000 over a few days could be achieved other than by the leases becoming part of a wider set of valuable business assets—including, crucially, Regal’s assets.38 So the notion that Regal concerned the bona fide rejection of an opportunity followed by the directors’ own personal and profitable realisation of that opportunity is misplaced and confusing. To represent the case in those terms—as a case where there was simply an opportunity to subscribe for 3,000 shares in Amalgamated, which was rejected by Regal but taken by Regal’s directors and solicitor to their profit—is simply wrong. Other factors— including the directors’ control of both Regal and Amalgamated, as well as the continued involvement of Regal in the scheme—were necessary, indeed crucial, causes of the profits in question. Lord Russell alluded

34 Regal (n 1) 153 (Lord Macmillan). The requirement of a close connection between position and profit importantly serves to constrain the scope of the ‘no unauthorised profits’ rule, and so goes to meet some of the concerns about overly broad application of the rule. See generally in this regard, M Conaglen, Fiduciary Loyalty (Oxford, Hart Publishing, 2010) 209. 35 Case for the Appellants in the House of Lords, [46]. 36 Appeal Book, 83–84, 89–90 (Wrottesley J); 108–09, 115 (Lord Greene MR); Case for the Appellants in the House of Lords, [36]. This apportionment is very similar to the division of the total consideration in the earlier proposal to sell the cinemas themselves (rather than shares in the companies that owned them) to London & Southern Super Cinemas Ltd: Regal (n 1) 142 (Lord Russell). 37 Re-amended Statement of Claim, [8]. 38 Lord Russell, like the trial judge and the Court of Appeal, took a benign—perhaps overly benign—view of this apportionment and its propriety: Regal (n 1) 142. But that does not affect the point made here, that even if £15,000 is properly attributable to the leases held by Amalgamated, that value could only have arisen because those leases were now, but not previously, operated in conjunction with Regal’s assets.

Regal (Hastings) Ltd v Gulliver 507 to this point, but unfortunately without spelling out the reasons as clearly as they appear from the background documentation to his decision:39 In his judgment Lord Greene MR, stated that a decision adverse to the directors in the present case involved the proposition that, if directors bona fide decide not to invest their company’s funds in some proposed investment, a director who thereafter embarks his own money therein is accountable for any profits which he may derive therefrom. As to this, I can only say that to my mind the facts of this hypothetical case bear but little resemblance to the story with which we have had to deal.

And there is, in fact, another good reason why Regal is very different from Peso. This is an issue raised in the pleadings of Regal but never developed in any of the judgments: the question of authorisation for the directors to make the profit. But before considering this omission, there is the matter of what was said in the various judgments.

D. THE UNREPORTED JUDGMENTS

The first and most striking point is the wrong turn taken right at the start of Wrottesley J’s judgment:40 [I]n order to succeed the Plaintiff Company must show that the Defendants both ought to have caused and could have caused the Plaintiff Company to subscribe for these shares and that the neglect to do so caused a loss to the Plaintiff Company. Short of this, if the Plaintiffs [sic] can establish that though no loss was made by the Company yet a profit was corruptly made by the Directors and the Solicitor, then the Company can claim to have that profit handed over to the Company, framing the action in such a case for money had and received by the Defendants to the Plaintiffs’ use.

It is hardly surprising, as noted earlier, that the directors escaped liability for negligence, given the state of directors’ duties of care and skill at the time (quite aside from whether Regal was able to subscribe for the shares). It is equally unsurprising that a claim against the directors for money had and received also failed, as fraud had to be shown to establish a common law entitlement to the directors’ profits as money had and received to the plaintiff’s use, and fraud—that the directors made the profits ‘corruptly’— was neither pleaded nor proved.41 Wrottesley J certainly did not think that the directors had been negligent in failing to investigate other sources of finance which would have put Regal in funds to subscribe for 5,000 shares in Amalgamated rather than

39 40 41

Regal (n 1) 152–53. Appeal Book, 71C–D. See also Appeal Book, 111 (Lord Greene MR). See the text to nn 24–28.

508 Richard Nolan 2,000. The facts, however, were more equivocal than might be supposed. Wrottesley J was very ready to accept the directors’ contention that funding from Luxor (Eastbourne) Ltd, a connected company, would have been inappropriate, as Regal and Luxor had no community of commercial interest, operating in markets (Hastings and Eastbourne) which were so far apart.42 But surely, even in the 1930s, towns just 18 miles apart were not in utterly different commercial worlds. And there was clearly enough community of interest from the perspective of a potential purchaser of cinema businesses that, at the very same meeting where the board of Amalgamated rejected the idea of finance from Luxor, it was noted that the company’s business was being marketed jointly with those of Regal and Luxor.43 Similarly, the judge was willing to dismiss the possibility of bank funding for Regal (even though none was ever sought) on the evidence of Regal’s bank manager, and to dismiss the evidence of a chartered accountant called as witness for Regal;44 and the point was thought so clear by the Court of Appeal that it questioned whether there had really been any need to hear from the bank manager.45 The baleful influence of negligence reasoning may be discerned distinctly in two other ways. First, the fact that Regal was held unable to afford more than 2,000 shares in Amalgamated necessarily implied that the directors could not have failed in their duties of care and skill by failing to cause Regal to purchase all 5,000 issued shares in Amalgamated.46 Indeed, seen from this perspective, the directors (and Mr Garton) had positively acted in Regal’s best interests by purchasing the balance of 3,000 shares, because that was the only plausible means of ensuring that Amalgamated was in a position to satisfy the landlord of the Cinema de Luxe and the Elite Cinema as to its financial position and so acquire a lease of each those cinemas.47 (It was held—rightly—that the directors had no duty to give a guarantee of rents payable under those leases, which was the only other viable way of satisfying the landlord.48) The second influence of negligence reasoning is that the actions of various directors are said to have inflicted no recoverable loss on Regal. Notwithstanding that these directors clearly were, at times, oblivious to the fact that their duty to act in the best interests of the company meant the best interests of all shareholders in the company,49 and they did not distinguish adequately between the various interests of different

42 43 44 45 46 47 48 49

Appeal Appeal Appeal Appeal Appeal Appeal Appeal Appeal

Book, Book, Book, Book, Book, Book, Book, Book,

83E–G. 83–84 (Wrottesley J). See also Luxor (Eastbourne) Ltd v Cooper (n 9). 89B–E, 90G, 94B. 112–13 (Lord Greene MR). 112, 114–15 (Lord Greene MR). 87 (Wrottesley J). 113–14 (Lord Greene MR). 85, 90 (Wrottesley).

Regal (Hastings) Ltd v Gulliver 509 companies,50 no liability resulted from these slips. The tacit assumption is that, in the circumstances, loss was the gist of the action. And, of course, in so far as the action was a claim for negligence, that would be entirely correct.51 The trial judgment also preserves an interesting contrast to the duties of Regal’s directors: that was the duty of Mr Harry Bentley, one of the defendant directors, as administrator of his late father’s estate. Harry Bentley’s father, Walter Bentley, had been the leading light in Regal until his death on 11 September 1935, shortly before the material events in the case. Initially, Harry Bentley was opposed to the proposal that directors of Regal should personally take shares in Amalgamated and allocate a value of £15,000 to the leases that were to be acquired by Amalgamated when apportioning the price London & Southern proposed to pay for all the four cinemas it wished to acquire from Regal, Amalgamated and Luxor (Eastbourne) Ltd.52 He objected that ‘the allocation will give the Directors and the Solicitor a personal advantage which rightly belongs to the Company [ie, Regal] and which will cause a serious loss to his father’s estate’.53 This objection was later withdrawn, when Harry Bentley had apparently been advised by his lawyers that it was his best course of action as administrator of his father’s estate to participate in the share issue by Amalgamated.54 Indeed, Wrottesley J thought that Harry Bentley ‘did no more than his duty as Administrator in falling in with the proposals of those other Directors’.55 Now it is logically and legally consistent to say, on the one hand, that the directors had taken sufficient action to discharge their duty to Regal to investigate the opportunity for the company to subscribe for another 3,000 shares in Amalgamated, but, on the other hand, that Harry Bentley still had a duty as administrator of his late father’s estate to pursue the like opportunity to subscribe for 500 shares in Amalgamated. Nevertheless, that consistency does depend crucially on the directors having made sufficient, if ultimately unsuccessful, efforts on behalf of Regal to acquire and pay for the 3,000 shares. It is impossible not to wonder whether a little more effort by the directors might have been in order when lawyers were firmly advising one of them that he should pursue the opportunity in another capacity.

50

Appeal Book, 88 (Wrottesley J). See also the text to n 27 and following. C Walton (ed), Charlesworth & Percy on Negligence, 12th edn (London, Sweet & Maxwell, 2010) [1-34], [5-01]–[5-41]. 52 Appeal Book, 85–86 (Wrottesley J). 53 Appeal Book, 86D (Wrottesley J), quoting from a letter of 3 September, 1935, written by solicitors (Messrs Bulcraig & Davis) on behalf of Harry Bentley. See also the Re-amended Statement of Claim, [11]. 54 Appeal Book, 89, 91 (Wrottesley J). 55 Appeal Book, 91C. 51

510 Richard Nolan The High Court also considered the case for Regal on the basis that the directors had ‘corruptly’ made their profit and should pay it over to the company.56 What the court meant by ‘corruptly’ is never spelt out, but it appeared to mean either that the directors intended to deprive the company of a profit (which was an argument going nowhere, given that fraud had not been proven),57 or that the directors (and Mr Garton) had a ‘practical certainty’ of their eventual profit at the time they bought their shares in Amalgamated.58 Notwithstanding the very tight timing of events,59 Wrottesley J did not think the directors’ profit could be treated as a ‘practical certainty’ on the fateful day, 2 October 1935, when they bought their shares in Amalgamated and committed whatever breach of duty, if any, there might be.60 This does seem, admittedly at the distance of over 70 years, a very generous finding of fact: London & Southern had made an offer for the cinemas by 2 October 1935, and, as very soon became clear, Oxford and Berkshire was interested in them; and if either transaction proceeded, the directors stood to make their profit. (It cannot be imagined that a particular profit derived from a particular purchaser had to be in mind for the profit to be a ‘practical certainty’.) So findings of fact generous to the defendants were judged by a criterion of liability that was very narrow; it was hardly surprising, therefore, that the defendants emerged unscathed. All very different from the House of Lords, where questions of good faith or ‘corrupt’ behaviour were irrelevant to the defendants’ ultimate liabilities.61 In the Court of Appeal, Lord Greene MR took the case in the alternative: either it was about misfeasance by the directors in failing to realise for Regal the opportunity to buy the extra 3,000 shares in Amalgamated, or else it was about the directors (and Mr Garton) having bought the 3,000 shares while acting in the matter of their office.62 Both claims, according to Lord Greene, relied crucially on the existence of a duty on the directors to acquire the 3,000 shares in Amalgamated for Regal.63 So even though the second of the alternatives looks like a claim based simply on abuse of position, it was not: it was a claim based on the directors’ failure to perform their duties and thereby profit from their failure. Lord Greene firmly followed Wrottesley J in holding that the directors no longer had

56 57 58 59 60 61 62 63

See the text to n 40. Appeal Book, 94 (Wrottesley J, summing up). See also ibid, 90F, as regards Mr Bobby. Appeal Book, 85 (Wrottesley J). See the text to n 11. Appeal Book, 87. Lord Greene MR in the Court of Appeal agreed: ibid, 107. Regal (n 1) 144 (Lord Russell). Appeal Book, 111. Ibid, 111.

Regal (Hastings) Ltd v Gulliver 511 any such duty by the time they invested in Amalgamated,64 so both claims were bound to fail. As regards the first claim, Lord Greene thoroughly investigated the financial position of Regal and concluded that the directors had made a bona fide decision to cause Regal to acquire just 2,000 shares in Amalgamated, and that terminated any duty they had in respect of the remaining 3,000 shares. Indeed, Lord Greene found the directors’ reasons very convincing. As regards the second claim, Lord Greene re-emphasised that the directors would be accountable only if they had a duty to acquire the 3,000 shares in Amalgamated for Regal at the time they in fact acquired the shares for themselves. They would still have had such a duty if, for example, they had rejected the opportunity on behalf of Regal in bad faith or dishonestly. But that was not so, and the claim failed. So, for Lord Greene, the case turned crucially on that duty, and whether the directors actually breached it: he did not see the case in terms of a conflict of duty and interest, just in terms of breach (or not) of a duty to acquire the 3,000 shares in Amalgamated. To put the point in more general terms, he did not see the case in terms of the risk of harm but in terms of the infliction of harm. That is hardly surprising given the flawed way in which the case was put to him. But it omits to address fiduciary law and its key concern, as will be seen below. Mackinnon LJ agreed with the Master of the Rolls, but chose to focus exclusively on the directors’ alleged negligence in failing to procure the 3,000 shares in Amalgamated for Regal.65 Again, it is hardly surprising that claim failed given the prior findings of fact. Du Parcq LJ confined himself to agreement with the Master of the Rolls, and to some observations on the pleading and proof of fraud.66 These, then, are the judgments which formed the flawed but inescapable background to the case when it reached the House of Lords by special leave of their Lordships.67 The whole case had been presented in the lower courts as a failure by the directors to act in a proper way. The emphasis was always on the infliction of harm, even though the harm, if inflicted deliberately or ‘corruptly’, might entitle Regal to the profits made by the directors and Mr Garton. And the findings of fact were such that the allegations of failure to act and resultant harm, let alone deliberate harm, could only fail. The case was never presented as a failure by the directors to refrain from action in certain circumstances where there was the risk of harm because of the directors’ conflict of duty and interest. Even in written arguments for the House of Lords, counsel for Regal submitted only that the directors had made a profit from their position and were therefore, and without proof 64 65 66 67

Ibid, 111–15. Appeal Book, 117–18. Appeal Book, 119–20. The Court of Appeal refused leave to appeal to the House of Lords: Appeal Book, 120.

512 Richard Nolan of bad faith, accountable in equity for that profit.68 In these circumstances, the House of Lords had to approach the case as one where liability turned simply on what the directors had actually done, albeit in good faith and without negligence:69 their Lordships had to take the case as it came before them, not as it might have been put to them. Thus it was that the decision of the House of Lords had to be founded on the directors’ abuse of their position.70 But the case could have been made very differently: there are significant omissions from the arguments as put.

E. THE STRANGE COURSE OF THE PROCEEDINGS: OMISSIONS

The most obvious omission from Regal is of more historical than practical interest. That is the omission of any argument founded on equitable principles until the proceedings before the House of Lords. Leading and easily accessible texts of the day were in no doubt of the existence of potential claims in equity on facts such as those of Regal.71 The clearest contemporaneous statement of the law, published just a year before the issue of proceedings in Regal, and following earlier such statements, is in the sixteenth edition of Palmer’s Company Law:72 Directors, as we have seen, are agents of the company, and it is a well settled rule that an agent cannot, without the knowledge and consent of his principal, be allowed to make any profit out of the matter of his agency beyond his proper remuneration.

There might well have been some considerable dispute about the strength of any such argument on the facts; but it is very hard to see why the prima facie relevance of such arguments were overlooked until so late in the day. Unfortunately, it is impossible to resolve that question at this distance in time. The Appeal Books of the House of Lords contain the best evidence of counsels’ various submissions in Regal, and the stage at which they were made; but neither the Appeal Books nor any other available evidence

68 Case for the Appellants, particularly [5], [44]–[48]. There is, at [5], a brief and entirely unparticularised suggestion that the directors placed themselves in a position of conflicting duty and interest, but this is only an addendum to the submission that the directors made a profit from their position. Furthermore, the suggestion (so far as it exists) of a conflict is not developed at all in the rest of the Case for the Appellants. 69 Regal (n 1) 136–37 (Viscount Sankey), 143 (Lord Russell) and 153 (Lord Macmillan). 70 See Conaglen (n 34) 116–17. 71 E Vinter, A Treatise on the History and Law of Fiduciary Relationship and Resulting Trusts together with a Selection of Selected Cases, 2nd edn (London, Stevens 1938) 182–90; Lord Wrenbury, Buckley on the Companies Acts, 11th edn (London, Stevens 1930) 742; A Topham, Palmer’s Company Law, 16th edn (London, Stevens 1938) 182–83, 195–97. 72 Topham (n 71) 182.

Regal (Hastings) Ltd v Gulliver 513 record why those particular submissions were made, nor why other possible submissions were omitted or even overlooked. Other important omissions persisted throughout the proceedings in Regal; and these omissions had a profound influence on the way the case came ultimately to be decided, and so on the future shape of the law. There are at least three such omissions in the arguments, and consequently in the judgments, that emerge from the much more detailed picture of the facts found both in the pleadings and in the judgments of the lower courts. Two involve significant conflicts of duty and interest. These are clear conflicts, unlike any supposed conflict between an alleged duty incumbent on the directors of Regal to arrange new finance for the company, so it could subscribe for £5,000 worth of shares in Amalgamated,73 and the directors’ self-interest in making a personal investment in Amalgamated. This supposed conflict has been the subject of much unprofitable speculation but is something of a red herring: clear findings of fact are against it.74 The third, more easily explicable, omission involves the question of authorisation for otherwise conflicted action by the directors, something raised in the original pleadings75 but not developed in written arguments or the judgments. A final, less important, omission concerns discretionary relief from liability by the court under section 372 of the Companies Act 1929,76 again something raised in the pleadings77 but not developed further in the record. The first example of such a conflict revealed by the facts of the case concerns the original capitalisation of Amalgamated. There was a proposal that a related company, Luxor (Eastbourne) Ltd, might subscribe for the 3,000 shares in Amalgamated that were to be issued in addition to the 2,000 shares issued to Regal. That proposal was very quickly dismissed in favour of what then occurred, namely, the allotment of the 3,000 shares to Regal’s directors and solicitor. The directors readily agreed that Luxor’s participation would be inappropriate, given the distance from Eastbourne to both Hastings and St Leonards-on-Sea, which meant that Luxor had no real business interest in the cinemas in those two towns which Amalgamated was to acquire.78 Now the view the directors put may well have been true—and giving effect to that view might well not have caused Regal any loss—but that is to miss the point entirely. 73 Wrottesley J considered whether Regal might have raised money by issuing some new preference shares or by borrowing (Appeal Book, 86–87). In the Court of Appeal, Lord Greene MR was scathingly dismissive of both possibilities (Appeal Book, 112–14). 74 Ibid. 75 Defence of Gulliver, [10] and [17]; Amended Defence of Bobby, Griffiths and Bassett, [4] and [14]; Amended Defence of Bentley, [4] and [17]. 76 Companies Act 1929, s 372 was the statutory predecessor at the material times of what is now Companies Act 2006, s 1157. 77 Defence of Gulliver, [18]; Amended Defence of Bobby, Griffiths and Bassett, [15]; Amended Defence of Bentley, [19]. 78 Appeal Book, 83E–G (Wrottesley J).

514 Richard Nolan The directors of Regal were under a duty to further, as they in good faith thought most appropriate, the interests of Regal when deciding how to capitalise a company, Amalgamated, which was formed by Regal and in which Regal would be the largest single shareholder.79 Yet there was a real risk that the performance of that duty might be compromised by their selfinterest, namely, their wish to invest personally in Amalgamated. It is the existence of a non-trivial risk which invokes and justifies the fiduciary rules prohibiting unauthorised conflict of duty and interest, not the realisation of that risk or the infliction of harm.80 It is no answer to say that the directors genuinely thought they were doing the right thing. That will satisfy their duty of good faith action; but it will not satisfy the objectively framed rules against conflicts of duty and interest:81 again, the very reason for the rules is that the directors’ subjective judgement may well be clouded—and not necessarily consciously clouded—by the existence of a countervailing interest, usually self-interest.82 Another, more serious, conflict of duty and interest arose from the eventual sale of the cinemas to Oxford & Berkshire Cinemas Ltd. As noted earlier,83 the total sale price was apportioned between the shares in Regal and the shares in Amalgamated on the assumption that the leases held by Amalgamated were worth £15,000 free of encumbrances, and the lease held by Regal was worth £77,500 on the same basis. It was not entirely clear where the figure of £15,000 came from. Wrottesley J accepted that it came from a Colonel Burton and his associate, acting for the originally anticipated purchaser of the various cinemas (London and Southern Super Cinemas Ltd), and that Mr Garton accepted it on behalf of the companies, though it might have been the other way around.84 Even if London & Southern did suggest the figure, it was the duty of the directors of Regal (and of Amalgamated) to consider whether it was appropriate, not just to

79 This is the general duty of the directors to do what they, in good faith, believe will best further the interests of the company, as applied to the facts. The duty is well-evidenced in case law (see the summary of this duty, and of the proper purpose doctrine, in Regentcrest plc v Cohen [2001] 2 BCLC 81 (Ch D) [120]–[125] (Jonathan Parker J). The duty is now embodied in Companies Act 2006, s 172, though with some modifications that are immaterial for present purposes. 80 Ex parte James (1803) 8 Ves 337, 345; 32 ER 385, 388 (Lord Eldon); Bray v Ford [1896] AC 44 (HL) 52 (Lord Herschell). See, generally, Conaglen (n 34) chs 4, 5 and 7(V). Contrary suggestions for reform have been made, inter alia, by Professor Langbein: ‘Questioning the Trust Law Duty of Loyalty: Sole Interest or Best Interest’ (2005) 114 Yale Law Journal 929. For cogent criticism of these suggestions, see Conaglen (n 34) 211–13. 81 Ex parte James (n 80), 345; 388 (Lord Eldon); De Bussche v Alt (1878) 8 ChD 286, 316 (per curiam); Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39 ChD 339, 369 (Fry LJ); Bray v Ford (n 80) 48 (Lord Watson), 52 (Lord Herschell). See, generally, Conaglen (n 34) 66. 82 Conaglen (n 34) chs 4 and 5. 83 See the text to n 15. 84 Appeal Book, 83–84, 89–90.

Regal (Hastings) Ltd v Gulliver 515 accept it blindly.85 That figure, even if originally suggested by London & Southern, then found its way into an agreement for sale to a rival purchaser, Oxford & Berkshire Cinemas Ltd; and it is very difficult to see how that could have occurred unless the defendants had suggested the figure when preparing the contract with Oxford & Berkshire. (Exactly what did happen is not recorded, but the connection between the original apportionment and the final contract is clear.86) Equally, and again as noted earlier, the shareholders in Amalgamated had a vital interest in this apportionment. There was, therefore, a plain conflict—or, at the very least, a real sensible possibility of a conflict—between the duty incumbent on the directors of Regal as regards the apportionment and their self-interest in the outcome of that apportionment. What is, perhaps, the strangest thing about this conflict is that Regal (and its lawyers in the case) should have been alerted to it by Harry Bentley’s objection to the original apportionment,87 even though that objection was made in the context of the offer from London & Southern and was framed as an objection to the profit the directors stood to make, rather than their conflict of duty and interest which lay behind that profit. Now the lower courts were at pains to stress the integrity and propriety of the apportionment,88 and the House of Lords, so far as it touched on the matter, was content to accept that view in Regal,89 though just over a year earlier Viscount Simon had described the apportionment in far less positive terms.90 However, once again, the mere fact that a court, after the event, believes in the directors’ integrity is no reason why the conflicts rules do not apply to what happened.91 It is worth repeating: the directors’ action based on their honest belief satisfied their duty of good faith action; but it cannot, of itself, satisfy the conflicts rules which exist to guard against the risk of clouded judgement. The conflicts rules may seem harsh as they apply to facts such as those outlined above. But it is always necessary to remember Lord Normand’s admonition,92 that the rules do not prohibit a fiduciary from making a profit per se: they prohibit him or her from making an unauthorised profit. While it may seem—indeed it may well be—unduly harsh to require a director to forgo any chance whatsoever of personal profit from circumstances

85

Appeal Book, 108–09 (Lord Greene MR). Appeal Book, 115 (Lord Greene MR). 87 See the text to n 52. 88 Appeal Book, 89–90, 108–09 (Wrottesley J). 89 Regal (n 1) 142 (Lord Russell). 90 Luxor (Eastbourne) Ltd v Cooper (n 9) 112. 91 See the cases cited in n 81 and the text to n 112. Note also RP Meagher, WMC Gummow and JRF Lehane, Equity: Doctrines and Remedies 4th edn (Sydney, Butterworths 2002) para [5-110]. 92 Dale v IRC [1954] AC 11 (HL) 27. 86

516 Richard Nolan in which he or she has a conflict of interest and duty, or where the profit stems from the director’s position as such, it is certainly not too harsh to prohibit those activities in the absence of permission.93 The conflicts rules serve to protect the fiduciary’s vulnerable principal in circumstances where the principal is at risk; but the rules also respect the principal’s autonomy by allowing the principal to waive them. Two consequences flow from this. First, there is the immediate question of why the issue of authorisation was not pursued in Regal itself. Secondly, there is the more general question of the importance of authorisation mechanisms in fiduciary doctrine. The first can usefully be addressed now. The second is better deferred until consideration of the legacy left by Regal. In the various defences of the former directors of Regal, Article 22 of the company’s articles was recited, and it was said that reference would be made to that article.94 This pleading was misconceived, for two reasons. First, the article, on its correct construction, authorised the directors to make contracts validly with the Company—that is, Regal—and participate in the profits of a contract with the Company, only provided certain procedural steps were taken. But that was irrelevant to what happened. The directors never contracted with the plaintiff, Regal, neither did they participate in the profits of a contract with Regal. The directors made a profit by first contracting with Amalgamated for the allotment and issue of shares in that company, and by subsequently selling those shares to a third party (Oxford and Berkshire Cinemas Ltd). Article 22 did not encompass or authorise any of that. The other reason why Article 22 proved irrelevant was its procedural aspects. The authorisation granted by the article would apply only if certain procedural steps were taken, the most important of which was that any director interested in a contract should not vote on any matter concerning it. Even if Article 22 had been prima facie applicable to the circumstances, it would have been impossible to use the article to validate what happened, because all the decisions about the relevant events were taken for Regal by the very directors who had a personal interest in them. In the circumstances, therefore, the only way the directors of Regal could have been released from their fiduciary duties, so as to take the opportunity to invest in Amalgamated without being accountable to Regal for it, was to seek the permission of the company in general meeting, something that never happened.95 93

See the text to n 124 and following. Amended Defence of Bobby, Griffiths and Bassett, [4], [14]; Defence of Gulliver, [10], [17]; Amended Defence of Bentley, [4], [17]. All those pleadings indicated ([4], [10] and [4] respectively) that the articles of Amalgamated made similar provision (in fact, its Art 18), but the pleadings did not state that reference would be made at trial to the articles of Amalgamated. 95 Regal (n 1) 150 (Lord Russell). 94

Regal (Hastings) Ltd v Gulliver 517 The final, and less notable, omission in the proceedings was the complete failure to pursue any claim for discretionary relief from liability under section 372 of the Companies Act 1929. All the directors had, in their respective defences, raised the possibility of relief under section 372. Of course, in the High Court and the Court of Appeal, there was no need to address section 372, as the directors were not held liable in the first place. There is no clue why the claim for relief was not even pursued in the House of Lords. Maybe there was some doubt as to whether the section operated to allow the possibility of relief from liability to account for profits, rather than compensate for losses, a question that persisted until the decision, decades later, in Coleman Taymar Ltd v Oakes.96

F. THE IMPLICATIONS OF REVISITING REGAL: CORRECTING SOME MISUNDERSTANDINGS

The initial reaction to Regal was muted. Contemporaneous notes in the Law Quarterly Review and the Conveyancer and Property Lawyer were not critical of their Lordships’ decision in the case, neither do they appear surprised by it.97 The case did not even earn a note in the Cambridge Law Journal or the Modern Law Review. Indeed, Regal seemed to lead a rather quiet life until the decision of the House of Lords in Boardman v Phipps.98 But after that, Regal became a very prominent case, and the subject of much criticism.99 The directors of Regal were not the hapless victims of an unjust rule. They had quite deliberately put themselves in situations where their duty and self-interest were plainly in conflict. These conflicts were not as apparent in the case as they should have been because the case was not at all well argued for Regal in the High Court and the Court of Appeal, and in the House of Lords only a salvage operation was possible: the proceedings in the Lords were, after all, an appeal not a re-hearing. Wrottesley J found the very facts which constituted the conflicts: there is no question here of illegitimate departure from the facts as found at trial. What happened, rather, was a failure to marshal those facts into the appropriate submissions which could then have led to a judicial decision that actionable conflicts of duty and interest had indeed occurred.

96

Coleman Taymar Ltd v Oakes [2001] 2 BCLC 749 (Ch D). (1942) 58 LQR 434 and (1942) 6 Conv 287. 98 Boardman v Phipps (n 2). According to Westlaw and Lexis searches, Regal was cited just nine times in the 24 years before the decision of the House of Lords in Boardman in late 1966. 99 The leading critic of Boardman, and consequently Regal, was Professor Gareth Jones, ‘Unjust Enrichment and the Fiduciary’s Duty of Loyalty’ (1968) 84 LQR 472. This criticism of these cases is itself controversial, because it proceeds by reference to the norms of unjust enrichment. 97

518 Richard Nolan Such misplaced criticism demonstrates the dangers that flow from the poor, or incomplete, reporting of cases, particularly those that come to be leading cases. There may well be good reasons for the lack of reporting at the time. The United Kingdom was in the middle of the greatest war in history, and law reporting was not, perhaps, as assiduous as in better days. Also, the decisions of the High Court and the Court of Appeal in Regal did not appear to develop the law. There was neither citation nor discussion of any authority in any of the judgments below the House of Lords, just the application to the facts of what were taken to be clear principles. Important points had been omitted from the arguments and the judgments. All this would tend to suggest that the judgments were not worth reporting (particularly at a time well before the easy electronic dissemination of information) because they were principally concerned with allegations of fact. But it is harder to justify the continuing failure to report the lower decisions—and thus obscure the wealth of highly informative material they contain—once the case had reached the House of Lords, and certainly once the case became a key authority in Boardman v Phipps.100 If the Official Reports could print the decision of the House of Lords in Regal as a note to Boardman, it is a shame that they did not publish the judgments of the lower courts in Regal. The Regal litigation also emphasises some features of a case law system that commentators often overlook, perhaps because they make the system seem much less robust than is comfortable. The selection of counsel has a great impact on the way a case is presented, and consequently on what propositions of fact and law come to be decided by a court. This is unavoidable, but should be borne in mind: it is one of the reasons why cases should never be read in the same way as statutes. All texts depend on their respective contexts, but cases even more so than statutes. And yet it has been the fate of Regal to be addressed very much divorced from its context. Another feature of the case law system is the importance of a judge’s background and knowledge. It is, again, comforting to believe that any judge, given the assistance of counsel, can entirely satisfactorily dispose of any case. But that requires an astonishing knowledge on the part of the judge, and no slips from counsel. The probability of serious error in such circumstances is much greater than in a system that recognises the reality of expertise. This is not to criticise the judge, however: he or she has to decide whatever case is heard in front of him or her. Rather, it shows the continued need for specialised divisions within a court, or even specialist courts, while leaving open the flexibility of transfers from one forum to another where that proves appropriate.

100

Boardman v Phipps (n 2).

Regal (Hastings) Ltd v Gulliver 519 Lastly, Regal has been criticised as effectively allowing the purchasers of the companies to obtain a rebate of the purchase price: the directors had to pay Regal the profits made by selling their shares in Amalgamated, and this meant that the directors, as vendors, got less in return for their shares and the purchaser got shares in Regal that were more valuable because of the monies received by the company from the directors. But there is no reason why the general law of fiduciary duties should be distorted by the effects of corporate personality. Regal should not be denied a claim just because its shareholders changed. If the purchasers bought an asset, a company, that was more valuable than the vendors thought, because the company had claims against the vendors (or some of them), so be it. The vendors can always protect themselves by appropriate indemnities or provisions for adjustments to the consideration monies. And let it not be forgotten, the vendors, rather than the purchasers, are in a much better position than the purchasers to know what claims the company has and take action accordingly. In short, sympathy is wasted on the directors of Regal. They were in an undoubted conflict of duty and interest, and they were in a position to protect themselves from the consequences of that fact through the terms of the sale of Regal to Oxford & Berkshire Cinemas Ltd. After all, the directors could simply have refused to sell their shares in Amalgamated unless those terms were acceptable, and the purchasers clearly would not have bought the shares in Regal without also acquiring the directors’ shares in Amalgamated.

G. THE IMPLICATIONS OF REVISITING REGAL: UNDERSTANDING THE LAW

A full re-examination of Regal makes it clear that, even given generous findings of fact, the case involved significant conflicts of interest, and not just abuse of position.101 That is not how the case is commonly seen, however. It has been described as ‘the apotheosis of a strict no-profit rule which is not dependent on a conflict requirement’.102 Neither is it how the House of Lords decided the case, given the way counsel presented it. The speeches of their Lordships rest clearly on the principle that no one shall make an unauthorised profit from his fiduciary position, rather than a prohibition on similarly unauthorised conflicts of duty and interest.103 Viscount Sankey did re-state the rule governing conflicts of duty and interest,104 and Lord Wright seems to have had the conflicts rule on his

101 102 103 104

See above, section E. E Ferran, Company Law and Corporate Finance (Oxford, OUP, 1999) 190. Conaglen (n 34) 116–17. Regal (n 1) 137, and see Conaglen (n 34) 116–17.

520 Richard Nolan mind;105 but their decision was founded on the prohibition of unauthorised profits, not the conflicts rules. Nevertheless, there were clear conflicts of interest inherent in the findings of fact made by Wrottesley J at trial of the case; and the influence of these conflicts is latent in their Lordships’ reasoning. The fact that the House of Lords need not have relied on the no-profit principle if the conflicts of duty and interest in the case had been clearly identified and put to the House raises the more general question of whether there is any need for, or justification of, a rule prohibiting profits made by a fiduciary from his or her position, as distinct from the rule governing conflicts of duty and interest. (Obviously, if a fiduciary makes profits from assets subject to the fiduciary relationship, he or she is accountable for them as a steward of those assets, quite independently of any prohibition on profits made from a fiduciary position.106) The irony is that while this question remains generally important within fiduciary doctrine, it has now been answered, and in the negative, by section 176(4) of the Companies Act 2006 so far as the law of directors’ duties is concerned—the area of law immediately at issue in Regal itself. Section 176(4) itself may change the law as articulated in Regal, but it should not actually have changed the result in the case had the facts been presented so as to highlight the conflicts which actually existed. But it is possible (though rare) to conceive of a case where no conflict exists between a fiduciary’s duty and self-interest, and yet the fiduciary still makes a profit from his or her position. Is it appropriate that if the fiduciary is not a director, there should be liability? Or is it better to align the general law of fiduciary duties with section 176(4), a possibility still open in Australia without the necessity (unlike in England) of a final appellate court departing from its own previous (or inherited) jurisprudence?107 Some have suggested than the prohibition of unauthorised profits arising from a fiduciary’s position is the historical key to fiduciary duties, rather than the prohibition on unauthorised conflicts of duty and interest.108

105

Regal (n 1) 154, and see Conaglen (n 34) 116–17. See eg Brown v IRC [1965] AC 244 (HL), and cases as old as Rushworth’s Case (1676) 2 Freem Chy 13, 22 ER 1026. 107 As regards Australian law, see Chan v Zacharia (1984) 154 CLR 178, 204–05 (Deane J); Warman International Ltd v Dwyer (1995) 182 CLR 544, 559 (joint judgment of the Justices). In England, the Supreme Court has inherited, for want of a better word, the jurisprudence of the House of Lords, but the Supreme Court possesses the power to depart from decisions of the House of Lords and its own previous decisions: Supreme Court, Practice Direction 1.1.6, adopting (inter alia) the Practice Statement of 1966. 108 J Getzler, ‘Rumford Market and the Genesis of Fiduciary Obligations’ in A Burrows and Lord Rodger (eds), Mapping the Law (Oxford, OUP, 2006) 577. The argument does have difficulty in explaining why such profits should be prohibited without either relying on the prohibition of conflicts, or making sweeping—but notoriously vague—appeals to subjective morality. 106

Regal (Hastings) Ltd v Gulliver 521 If the legacy of such history still endured, the abolition of the prohibition on unauthorised profits would surely be of paramount concern. Whatever the merits of that position in explaining the early history of fiduciary duties, it is as clear as anything in a subject as hotly contested as this, that the modern foundation of fiduciary duties is the prohibition on unauthorised conflicts of duty and interest.109 The law might or might not have ultimately originated in the prohibition of profits, but if it did, it has moved on and found a new actuating principle.110 In other words, it is right now to regard the conflicts rules as central, and the profit rule as peripheral. But in that case, is there any reason to justify retention of the profit rule in general fiduciary law? The course of the Regal litigation provides the best answer. The rule prohibiting a fiduciary from making an unauthorised profit is a very necessary buttress to the rules governing a fiduciary’s conflict of duty and interest. The starting point of any justification of the rule prohibiting unauthorised profits must therefore be the justification of the conflicts rules themselves. That is an enormous subject which has generated much controversy and many different views; and space does not allow a full airing of those views here.111 It is doubtful that every possible application of fiduciary duties can be justified by one single principle unless the principle is expressed in vague and conclusory terms, for example that fiduciary duties are justified by reference to the reasonable expectations of the parties. What follows is an effort to be more specific, albeit at the risk of omission. The conflicts rules are duties that remove specified conduct from the realm of the permissible, because it would tend to jeopardise performance of a task that has been undertaken by a person or, occasionally, imposed on him or her. Some tasks that are simple and closed can quite adequately be controlled by specific duties to act or to refrain from action in stated circumstances. Such rules, however, are very ill-suited to controlling tasks where the person performing the task has a measure of discretion as to how that is done. For example, it is exceptionally difficult to stipulate specifically for the conduct to be undertaken by a trustee managing a trust fund or a by director managing a company without abolishing the managerial freedom the trustee or director was meant to have: there are so many different circumstances that may arise in the course of conducting the undertaking, and so many different, unobjectionable ways of performing the undertaking.112 At first sight, it would appear that the law could use broad, open-textured,

109

See Conaglen (n 34) 120–25. Indeed, the very enactment of Companies Act 2006, s 176(4) is itself evidence of this policy choice. 111 See the full treatment in Conaglen (n 34) ch 9. 112 R Cooter and B Freedman, ‘The Fiduciary Relationship: Its Economic Character and Legal Consequences’ (1991) 66 New York University Law Review 1045. 110

522 Richard Nolan open-ended positive duties (for example, a duty to act in someone else’s best interests) in order to control managers without unduly limiting their discretion. However, such rules would be very difficult to apply, and uncertain in their application: bad faith must be specifically pleaded;113 to plead bad faith without good prima facie evidence can have severe consequences for counsel,114 and bad faith is difficult to prove.115 This sort of broad duty would, therefore, be correspondingly likely to inhibit managerial activity generally. In short, such a duty would be ineffective against the wrongdoer, but might also inhibit the dutiful. Consequently, English law has instead quite rationally concluded that it is more efficient to allow the manager’s discretion to stand, rather than to direct it, but to forbid certain conduct that is inherently risky, human nature being what it is.116 Now in a case such as Regal, conflicts of duty and interest undoubtedly existed, but they were not easily or well identified in the course of the litigation. As a case is decided on facts pleaded by one party and either admitted by the other or determined by the court, a failure to allege and argue the facts necessary to demonstrate a profit made in conflict of duty and interest would result in the case being dismissed on that ground, and the profit retained by the fiduciary. There are two responses to this: what might be called the ‘purist’ and the ‘realist’ approaches. The purist response essentially says ‘so be it’: if it is difficult or impossible to identify a conflict then the claim should fail as there is no reason why the making of a profit from position alone should be stigmatised, as compared to the making of a profit in a situation where the vices of conflicts are evident. This was the position taken by Lord Upjohn in Boardman v Phipps.117 The realist response is essentially that ‘when a fiduciary has made an unauthorised profit out of his fiduciary position there will commonly or ordinarily be a conflict between duty and interest’,118 so that ‘the likelihood of there being a conflict in such circumstances is treated as sufficient justification for equity to prohibit all unauthorised profits, without requiring strict proof in every case that there was a conflict’.119 So the rule against unauthorised profits is, on this view,

113

CPR 16 PD 8.2. The Bar Standards Board’s Code of Conduct, para 704(c). See also Medforth v Blake [2000] Ch 86, 103 (Scott V-C). 115 See Ex parte James (n 80) (Lord Eldon). 116 See further, R Nolan, ‘The Legal Control of Directors’ Conflicts of Interest in the United Kingdom: Non-Executive Directors Following the Higgs Report’ (2005) 6 Theoretical Inquiries in Law 363, 372–73, republished in J Armour and JA McCahery (eds), After Enron: Improving Corporate Law and Modernising Securities Regulation in Europe and the US (Oxford, Hart Publishing, 2006) 367. 117 Boardman v Phipps (n 2) 128–29, as regards the principle, and 129–34, as regards the application of the principle to the facts of the case. 118 Conaglen (n 34) 120. 119 Ibid, 120–21. 114

Regal (Hastings) Ltd v Gulliver 523 a deliberately over-inclusive rule fully justified by the paramount need to prohibit unauthorised conflicts of duty and interest. Any over-inclusivity requires proper justification, however. The conflicts rules themselves have been criticised as too wide in their ambit; so much more so, then, the no-profits rule.120 All these rules seek to counteract the risk that harm may be done, rather than redress harm that has been done.121 Their prima facie application is therefore justified by evidence that there is a real risk of harm. That risk is inherent in the very formulation of the conflicts rules, that there must be a real possibility that a fiduciary might prefer his interest over his duty, and in the very fact that a profit has been made by the fiduciary from his office. But the risk is clearly there in cases covered by the no-profits rule: and Regal is an excellent example of just such a case, as has been shown. Vitally, however, operation of the rules is mitigated to an appropriate level by the curative effect of consent.122 Consent is the key issue. The best justification for the realist approach, therefore, lies in seeing the rule as a penalty default, like the prohibition of conflicts of duty and interest itself.123 Both rules in fact allow a fiduciary to make a profit, even where the fiduciary has a conflict of duty and interest or makes the profit from his or her position, but only if the fiduciary makes full and frank disclosure to the principal and the principal consents.124 In other words, the risks inherent in both types of case are not sufficient to warrant an absolute prohibition, but they are enough in each case to warrant strict procedural regulation, even though the risks addressed by the rule against unauthorised profits are less clearly visible than the risks addressed by the rule against conflicts of duty and interest. Such a justification for prohibiting a fiduciary from making an unauthorised profit from his or her position has force, however, only if the 120 Professor Gareth Jones wrote a classic critique (above n 99). More recent critiques are summarised in Conaglen (n 34) 208–13. These critiques have some, albeit obiter, support in authority: Murad v Al-Saraj [2005] EWCA Civ 959, [2005] WTLR 1573 [82]–[83] (Arden LJ) and [121]–[122] (Jonathan Parker LJ). 121 See, generally, Conaglen (n 34) ch 4. 122 It is not appropriate to mitigate application of the rules by allowing the fiduciary to prove that what he did in prima facie violation of the rules was in fact beneficial to the fiduciary’s principal. The fiduciary almost invariably is at an informational advantage vis-à-vis his principal, so it is far too easy for the fiduciary to portray his own actions as proper. This operates to the disadvantage of that principal in particular, and weakens the protection afforded by the rules in general where, ex hypothesi, there is a real risk of harm that warrants control. Contra, Langbein (n 80). 123 As regards penalty defaults, see eg I Ayers and R Gertner, ‘Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules’ (1989) 99 Yale Law Journal 87; M Whincop, ‘Of Fault and Default: Contractarianism as a Theory of Anglo-Australian Corporate Law’ (1997) University of Melbourne Law Review 187. 124 See eg Regal (n 1) 150 (Lord Russell); Peso Silver Mines Ltd v Cropper (1965) 56 DLR (2d) 117 (British Columbia CA) 139 (Norris JA); New Zealand Netherlands Society v Kuys [1973] 1 WLR 1126 (PC); Guinness plc v Saunders [1990] 2 AC 663 (HL).

524 Richard Nolan mechanisms for gaining the principal’s consent are workable and realistic: if the means of obtaining consent are too difficult, the prohibition comes in substance, if not in form, to be absolute, and consequently hard to justify. The way in which consent is given therefore becomes a vital issue which deserves much more attention, even though that is not a simple matter given that consent mechanisms vary from one fiduciary relationship to another. In many fiduciary relationships, where the principal is sui juris and a single person (or a few persons jointly) it is easy to obtain the principal’s consent: the fiduciary simply has to make full and frank disclosure of material information to the principal and receive consent (or not). But the process for gaining consent is more complex in two key situations where the fiduciary is not usually dealing with such an easily identifiable principal: the trustee of a trust when, as is so often the case, the beneficiaries are not all sui juris; and the director of a company. It is usual in express trust deeds to provide mechanisms for consent to be obtained otherwise than from the beneficiaries, commonly from disinterested trustees or from some third party such as a protector. In any professionallydrawn trust instrument, it would be highly unusual not to find such provisions—they exist as standard in common and influential precedents.125 And even if no such provision exists, it is now easier to apply to court for an order in its inherent administrative jurisdiction for the requisite consent.126 In the light of these facts, the rule against unauthorised profits does not seem too strict, though there may well still be scope for improving the ways in which trustees can seek consent where their beneficiaries are not all sui juris and the trust instrument makes no suitable provision. The case of company directors is now exceptional as they are governed by statutory duties127 rather than general fiduciary law, even though the relevant statutory duties are still to be interpreted with reference to general fiduciary law.128 Those statutory duties now have their own specific regimes stipulating how consent may be given for a director to act in what would otherwise be a breach of duty,129 though these consent regimes are not

125 See eg Lord Millett (ed), Encyclopaedia of Forms & Precedents, 5th edn (London, Butterworths, 2010 re-issue) vol 40(1), paras [1855], [3825], [4903]; J Kessler and L Sartin, Drafting Trusts and Will Trusts: A Modern Approach, 10th edn (London, Sweet & Maxwell, 2010) 566 (as recommended by the Society of Trusts and Estates Practitioners). 126 CPR 64 PD 64A.1A. 127 Companies Act 2006, Pt 10, ch 2. 128 Companies Act 2006, s 170(4). 129 Companies Act 2006, ss 175(4)–(6), 180(4), 232(4). Broadly, a company’s board may be empowered to relieve a director of the company from his or her duty under Companies Act 2006, s 175 (conflicts of duty and interest in directors’ dealings with third parties); but authority relieving the director from his or her duty under Companies Act 2006, s 176 (receipt of benefits by a director from third parties in consequence of his or her position) should come from the members of the company. It is highly doubtful that a company’s articles can alter this position: see n 131 below.

Regal (Hastings) Ltd v Gulliver 525 without their own problems.130 Company law, therefore, can no longer be used to judge whether general fiduciary law is too strict in prohibiting unauthorised profits. There is just one indication in company law of policy dissatisfaction with the general rule prohibiting a fiduciary from making unauthorised profits out of his or her fiduciary position. That is section 176(4) of the Companies Act 2006. Section 176(4) restricts the operation of the statutory prohibition (on the receipt of benefits by a director from third parties in consequence of his or her position) to situations where there is a reasonable possibility of a conflict of duty and interest. The prima facie prohibition in section 176, like the fiduciary rule prohibiting unauthorised profits, would be very strict—most likely too strict—if it were not limited in some way. But consent mechanisms are far preferable to a narrowing of the cause of action in situations where, ex hypothesi, the company is at a severe informational disadvantage vis-à-vis the company which the director can exploit. The restriction in section 176(4) would simply not have been necessary or warranted if there were a generally workable way for a director to gain consent to depart from his or her duty under the section: as things stand, the better view is that a director must seek any such consent from the company’s members,131 which is not at all practicable other than in companies that are very closely held. In summary, the existence of the rule prohibiting a fiduciary from making an unauthorised profit from his position—the great legacy of Regal, though a great irony too, as the case involved clear unauthorised conflicts of duty and interest—is justifiable, given the consent mechanisms which mitigate the operation of the rule. The purist position (to do without the rule) is undoubtedly elegant and, as such, tempting. The case for the realist position, however, is well-made by the strange course of the Regal litigation itself, where conflicts of duty and interest would undoubtedly have gone

130 G Morse (ed), Palmer’s Company Law, looseleaf edn (London, Sweet & Maxwell, December 2010 release) paras [8.2909]–[8.2910], [8.3001]–[8.3008]. 131 Companies Act 2006, s 180(4)(a). A company’s articles may make provision for dealing with a director’s conflicts of interest (Companies Act 2006, ss 180(4)(b), 232(4)); and that must surely extend to authorising receipt and retention of a benefit arising from the director’s action in accordance with such authority if the authority is to have any practical utility. But it is doubtful whether the articles can authorise, or make provision for authorising, acceptance or retention of a benefit which falls only within s 176, and not s 175 (such as a bribe or a commission), even though Companies Act 2006, s 176(4) means that accepting the benefit must be reasonably capable of giving rise to a conflict if any liability at all is to be established under s 176. See Companies Act 2006: Explanatory Notes (DTI 2006) [302], [344]–[346]. The contrary view is that while Companies Act 2006, s 176 itself does not allow a company’s board to authorise a director to accept a benefit from a third party, the company’s articles can still confer the necessary power on its board: Morse (ed) (n 130) paras [8.3007]–[8.3008]. But the uncertainty of the law alone is enough to inhibit the creation of sensible mechanisms, when they are appropriate, for a board of directors to authorise one of its members to depart from what would otherwise be his or her duty under s 176.

526 Richard Nolan unremedied were it not for the rule. The profits in Regal were in fact an entirely accurate signal of latent conflicts, and the course of the proceedings was equally a warning that such conflicts are not always properly identified and presented. The realist position allows a rule that is deliberately overinclusive, to guard against the risks of latent or unarticulated conflicts. But it must never be forgotten that the breadth of the rule is mitigated, and adequately mitigated, by consent mechanisms, as indeed is the apparent (though in all events lesser) harshness of the rule against unauthorised conflicts of duty and interest.132 One final point is worthy of note, though it is more of historical interest because section 175 of the Companies Act 2006 now governs the point. Even before the introduction of that section, a company’s board could use its powers of management under the company’s articles to authorise a director to make a profit to the exclusion of the company, subject always to such procedural constraints as stipulated by those articles or the general law, for example in relation to voting by directors with a personal interest (or countervailing duty) in the decision.133 If the company validly used such power to decline the opportunity to make the profit, an individual director would no longer be under any duty with regard to it, and so could not suffer from a conflict of duty and interest with regard to it.134 But this is not what happened in Regal, something Lord Russell was at pains to point out.135 Such facts did arise, however, in Peso Silver Mines Ltd v Cropper.136 The Supreme Court of Canada accepted the law in Regal, but the court distinguished Regal on its facts. The defendants in Peso had acted entirely in good faith in connection with the board’s decision not to pursue an opportunity; and they could therefore arrange for their own company to take the opportunity perfectly lawfully and they could keep the resulting profits. There was, in fact, no need to distinguish Regal in that way. Indeed, it is a rather odd distinction: as has been seen, the lower courts were unwilling to find that the directors acted in anything but good faith, and the House of Lords took the case on that basis. There is a much more basic difference between Regal and Peso. The facts of Peso involved simply the valid rejection of a

132

See further Conaglen (n 34) 211–13. See, eg, Table A (1929) reg 72; Table A (1948) reg 84; Table A (1985) (SI 1985/805) regs 70 and 85 et seq. These (and similar) articles were not struck down by any of the applicable statutory provisions governing the exclusion or modification of directors’ duties and liabilities: Companies Act 1929, s 152 (the first such operative provision), Companies Act 1948, s 205, Companies Act 1985, s 310 (original) or ss 309A–309C (as amended): Movitex Ltd v Bulfield [1988] BCLC 104 (ChD). See now Companies Act 2006, s 232, especially sub-s (4). As regards the general law, see Colin Gwyer & Associates Ltd v London Wharf (Limehouse) Ltd [2003] 2 BCLC 153 (ChD) [92]–[95] (Leslie Kosmin QC). 134 Even the Company Law Review misunderstood this: Final Report, para [3.22]. Compare Meagher, Gummow and Lehane (n 91) [5-120]. 135 See the text to n 39. 136 Peso Silver Mines v Cropper (n 32). 133

Regal (Hastings) Ltd v Gulliver 527 business opportunity by the company, so that it could subsequently be taken perfectly lawfully by a director acting in his personal capacity. In Peso, the power to take that decision was vested in the board, subject to procedural constraints, and was duly exercised by the board in good faith. In Regal, authority (if any) had to come from the general meeting as residual holder of power in the company.137 All of Regal’s directors were interested in the relevant opportunity, and thus could not pass a board resolution that would effectively waive the opportunity and so allow the directors to take it for their own benefit.138 Furthermore, Regal’s articles did not specifically allow (or make provision to allow) its directors to put themselves in a position where duty and interest might conflict in any way other than making (or being interested in) a contract with the company.

H. CONCLUSIONS

The history of Regal is, therefore, a strange one. It was pleaded and argued in a very unsatisfactory fashion. It began life as a case argued at common law, focused on loss caused by actions in which there were inadequately pleaded hints of bad faith. Only in the House of Lords did it become an equity case, let alone a leading case in equity. The citation and use of authority by the courts was utterly absent until the case reached the House of Lords. Indeed, the whole approach to the law by the King’s Bench Division and the Court of Appeal is astonishing; and that is not an anachronistic criticism: the authorities examined in the case itself, when it reached the House of Lords, were well-established before the 1940s and quite clear enough to call into question the lower courts’ treatment of the law. The trial judge was very generous to the defendants in his findings of fact, and the Court of Appeal, though it had much less latitude to revisit the facts, was clearly well-disposed to the directors. That is significant in some ways and not in others. It should lay to rest the historical myth of courts determined to stigmatise directors; but the law has to be understood on the facts as found.

137 Regal (n 1) 150 (Lord Russell). As regards the residual powers of the general meeting, see Barron v Potter [1914] 1 Ch 895. 138 Art 22 of Regal’s articles disenfranchised a director in any board decision on a contract with the company in which he was interested, subject to immaterial exceptions. Neither Regal’s express articles, nor the provisions of Table A (1929) incorporated into its articles by reference, disenfranchised directors on a decision to waive an opportunity to contract with a third party (such as Amalgamated) and thereby allow the directors to contract with the third party for their own benefit. However, as a matter of general principle, a board resolution to that effect passed by directors in conflict of duty and interest would be ineffective to preclude a subsequent claim by Regal: see now Colin Gwyer & Associates Ltd v London Wharf (Limehouse) Ltd [2003] 2 BCLC 153 [92]–[95] (Leslie Kosmin QC).

528 Richard Nolan The legacy of Regal is, if anything, stranger. The case has become widely understood as standing for a harsh and inflexible rule prohibiting fiduciaries from making any profit from their respective offices, with, so far as company directors are concerned, the sole and scant possibility of seeking permission from the members of the company in general meeting. In fact Regal was a case where there were clear and vital conflicts of duty and interest, rather than just abuse of position; but those conflicts were not articulated and argued as they should have been. And any consent to the conflicts of duty and interest inherent in those transactions—or to any profit made by the directors from the transactions and by virtue of their position—would have to have come from the members of company simply because all of the directors were interested in the relevant transactions. Nevertheless, the House of Lords responded to the inadequate presentation of the case by adopting and applying the strict rule that a fiduciary shall not make any unauthorised profit from his or her position. The consequence of that was decades of criticism and eventual statutory relaxation of the strict rule, in so far as company directors are concerned, by section 176(4) of the Companies Act 2006. The criticism, at least, might have been reduced or avoided if Regal had been better understood. And the strictness of the rule would have been better mitigated by consent mechanisms, which were not precluded in Regal either by doctrine or policy, rather than by narrowing the scope of the rule itself through section 176(4) of the Companies Act 2006. The skewed course of the proceedings in Regal has indeed had some significant and enduring consequences.

18 National Anti-Vivisection Society v Inland Revenue Commissioners (1948) JONATHAN GARTON

A. INTRODUCTION

I

N NATIONAL ANTI-VIVISECTION Society v Inland Revenue Commissioners,1 the House of Lords shaped the landscape of the modern charitable sector by confirming that one effect of the rule that a purpose must benefit the public in order to be charitable is that such a purpose cannot also be political. This chapter seeks to place the decision in its socio-historical context—the prohibition on political purposes emerged as a doctrine of charity law in the first half of the twentieth century despite earlier authority to the contrary—and to reevaluate the correctness of the ruling in light of the fact that, whilst it has attracted considerable attention over the years, arguments on both sides have tended to fall somewhat wide of the mark. Specifically, the chapter argues four points. First, none of the justifications for the prohibition provided by the majority of the House withstands scrutiny. These were that the court cannot judge whether a change in the law will be for the public benefit, that to do so would usurp the legislature and that the Attorney-General as parens patriae of charities cannot enforce political trusts. Secondly, attempts to explain the rule by reference to the tax reliefs that come with charitable status do not work either. Thirdly, the customary criticisms of the rule—that the court is in some cases able to judge the public benefit or otherwise of a specific change in the law, therefore political purposes that are otherwise charitable and objectively meritorious should be recognised as charitable—do not go far enough. There are compelling reasons for thinking that an otherwise charitable purpose should never cease to be charitable merely because it is also political; 1

National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31.

530 Jonathan Garton thus there should be no need for the court to pass judgment on the benefits or otherwise of a particular change in the law. Lastly, it ought to be possible to abolish the prohibition without compromising the public benefit requirement that underpins the legal definition of charity in the common law world.

B. THE EMERGENCE OF THE ANTI-VIVISECTION MOVEMENT

The National Anti-Vivisection Society was founded as the Victoria Street Society, after the location of its London premises, in December 1875 by the Irish social reformer Frances Power Cobbe, amongst others.2 Its original object was3 to awaken the conscience of mankind to the iniquity of torturing animals for any purpose whatever; to draw public attention to the impossibility of any adequate protection from torture being afforded to animals under the present law; and so to lead the people of this country to call upon Parliament totally to suppress the practice of vivisection.

The Society’s founding was timely: earlier the same year, a Royal Commission had been established in response to increasing public concern about live animal experimentation.4 This was the culmination of a shift in social values regarding animals and their welfare throughout the late eighteenth and nineteenth centuries, as they gradually stopped being seen merely as a useful commodity and became viewed as ‘human companions, possessing individual identities and characteristics’.5 With this came the increasing belief that animals ought to be treated with dignity and care. Partly this came from religious quarters, with the publication of works such as Humphry Primatt’s A Dissertation on the Duty of Mercy and Sin of Cruelty to Brute Animals,6 which argued that it was a sin to cause any animal pain or deprive it of happiness, and John Wesley’s sermon, The General Deliverance,7 in which he professed belief in an animal afterlife (indeed, the Society itself was founded on explicitly Christian principles), but similar sentiments suffused the secular intellectual word. One of the

2 As to the Society’s other founders, whose number included churchmen and members of the literati, see D Tacium, ‘A History of Antivivisection from the 1800s to the Present’ (2008) 31 Veterinary Heritage 1. 3 National Anti-Vivisection Society (HL) (n 1) 32. 4 H Kean, Animal Rights: Political and Social Change in Britain since 1800 (London, Reaktion, 1998) 13. 5 Ibid, 13. 6 H Primatt, A Dissertation on the Duty of Mercy and Sin of Cruelty to Brute Animals (London, T Cadell and J Dodsley, 1776). 7 Delivered 30 November 1781.

National Anti-Vivisection Society v IRC 531 earliest supporters of animal rights was Jeremy Bentham, who in 1789 wrote:8 The day may come when the rest of the animal creation may acquire those rights which never could have been witholden from them but by the hand of tyranny. The French have already discovered that the blackness of the skin is no reason a human being should be abandoned without redress to the caprice of a tormentor. It may one day come to be recognised that the number of the legs, the villosity of the skin, or the termination of the os sacrum are reasons equally insufficient for abandoning a sensitive being to the same fate. What else is it that should trace the insuperable line? Is it the faculty of reason or perhaps the faculty of discourse? But a full-grown horse or dog, is beyond comparison a more rational, as well as a more conversable animal, than an infant of a day or a week or even a month, old. But suppose the case were otherwise, what would it avail? The question is not, Can they reason? nor, Can they talk? but, Can they suffer?

The gradual emergence of a more enlightened attitude towards animals was reflected in the legislation enacted by successive Parliaments. The Cruel Treatment of Cattle Act 1822 may fairly be regarded as the first modern piece of animal welfare legislation, and made it an offence wantonly and cruelly to beat, abuse or ill-treat a range of farm animals including horses, cattle and sheep,9 protection that was subsequently extended to dogs and all other domestic animals by the Cruelty to Animals Act 1835. This also prohibited the organised baiting or fighting of any animals, and provided for a range of specific protections relating to their care, carriage and slaughter. The Cruelty to Animals Act 1849 repealed and re-enacted these earlier Acts in a revised form, and was in turn extended by the Cruelty to Animals Act 1854, which inter alia clarified the definition of ‘animal’ for the purposes of legislation as including any domestic animal, whether or not of the kind of species listed by way of example in the 1849 Act, thus avoiding the limiting operation of the ejusdem generis rule.10 These general Acts were supplemented with a handful of provisions which targeted more specific mischief: for example, the Knackers Act 1844, which regulated the use of slaughterhouses, making it an offence wantonly or cruelly to beat, ill-treat, abuse, wound or torture any animals kept therein; and the Poisoned Flesh Prohibition Act 1864, which made it illegal to place out poisoned meat in order to kill dogs or other animals. It is perhaps surprising in light of all this that the National AntiVivisection Society was founded as late as it was. The Society for the Protection of Animals (later the RSPCA) had condemned animal experiments since its founding in 1824, but Hilda Kean suggests that the delayed 8 J Bentham, An Introduction to the Principles of Morals and Legislation (London, T Payne & Son, 1789) XVII.6 n 122. 9 Cruel Treatment of Cattle Act 1822, s 1. 10 Cruelty to Animals Act 1854, s 3.

532 Jonathan Garton outcry regarding the practice in England was partly because a lack of effective anaesthetics until the middle of the century meant that most experiments were conducted on reptiles rather than mammals, and partly because such opposition as there was had focused on the supposedly more outrageous acts performed by English scientists’ French and Italian counterparts.11 Nevertheless, it is clear that as the century progressed, so too did opinion among a certain section of the educated middle-classes, neatly evidenced by the numerous references to vivisection which may be found in the literature of the time. In his literary periodical All the Year Round, for example, Charles Dickens wrote: Man may be justified—though I doubt it—in torturing the beasts, that he himself may escape pain; but he certainly has no right to gratify an idle and purposeless curiosity through the practice of cruelty...12

while in the Fortnightly Review Lewis Carroll observed The hapless animal suffers, dies … but the man whose sympathies have been deadened, and whose selfishness has been fostered, by the contemplation of pain deliberately inflicted, may be the parent of others equally brutalised and so bequeathe a curse to future ages.13

By the 1870s, the practice of vivisection in England had become a public issue. Experiments in London were now routinely carried out not just on reptiles but on mammals, many of which were stolen family pets. Further, the evidence was available in the city streets for all to see, as ‘dogs and cats brutalized at St Bartholomew’s Hospital were dogs and cats “straying in the street at night”’.14 There was also a growing concern that, because vivisection was carried out behind the closed doors of the hospital or medical school, scientists would be tempted to move away from animal experimentation towards human experimentation in their thirst for knowledge. Kean also suggests that social activists found something particularly unsettling about the fact that vivisection was the preserve of the middle class and, moreover, practised not just by doctors and surgeons in hospitals and colleges but by the gentleman scientist in the comfort of his home laboratory.15 Against this backdrop, the Royal Commission’s First Report was published in January 1876 and led to the enactment of the Cruelty to Animals Act 1876. The Act imposed a regulatory framework on all medical, physiological and scientific experiments ‘calculated to give pain’ conducted on

11

Kean (n 4) 96. C Dickens, ‘Inhumane Humanity’, All the Year Round (17 March 1866) 238, 240. 13 L Carroll, ‘Some Popular Fallacies about Vivisection’ (1875) 23 The Fortnightly Review 847, 850. 14 Kean (n 4) 98. 15 Ibid, 100–02. 12

National Anti-Vivisection Society v IRC 533 living vertebrates.16 The carrying on of such experiments was criminalised except when performed under a licence:17 (a) for ‘the advancement by new discovery of physiological knowledge or of knowledge which will be useful for saving or prolonging life or alleviating suffering’;18 (b) ‘for the purpose of testing a particular former discovery alleged to have been made for the advancement of such knowledge [where] such testing is absolutely necessary for the effectual advancement of such knowledge’;19 or (c) where necessary for the ‘purposes of justice’ in a criminal trial.20 Licensed experiments themselves were subject to a number of restrictions. Experiments for the purpose of developing or practising surgical skills were forbidden.21 They could not be performed without administering sufficient anaesthetic to prevent the animal feeling pain,22 unless insensibility to pain would undermine the object of the experiment.23 If the animal was seriously injured, or there was a likelihood of continuing pain, then it had to be euthanised before the anaesthetic wore off,24 although this could be delayed where the object of the experiment demanded it.25 Equally significant, the Act curtailed the use of the plant derivative urari, better known as the South American arrow poison ‘curare’, which was commonly used in vivisection and which causes muscle paralysis but without numbing pain receptors; although its use was not outlawed outright, it was deemed not to be an acceptable anaesthetic for the purposes of the Act.26 Further restrictions applied to experiments on dogs, cats, horses, asses and mules,27 possibly reflecting not just their favoured position as domesticated animals but also that these were animals that, once they had served their scientific purpose, were often released into the streets to become the visible face of vivisection. The Act also appears to be sensitive to concerns regarding the glorification of the potential spectacle of vivisection: public exhibitions of experiments were absolutely prohibited, and experiments could be used to ‘illustrate’ a lecture in a medical school or elsewhere only if this was

16 17 18 19 20 21 22 23 24 25 26 27

Cruelty to Animals Act 1876, ss 2, 22. Ibid, s 3(2). Ibid, s 3(1). Ibid, s 3(4). Ibid, s 12. Ibid, s 3(6). Ibid, s 3(3). Ibid, s 3(2). Ibid, s 3(4). Ibid, s 3(3). Ibid, s 3(4). Ibid, s 5.

534 Jonathan Garton ‘absolutely necessary’ for the education of those in attendance.28 However, the reality was that much of the early antipathy towards anti-vivisection centred on concerns that its practice went on behind closed doors.29 The Cruelty to Animals Act 1876 remained in force for over a century,30 surviving the scrutiny of a second Royal Commission on Vivisection, which sat from 1906 to 1911. Throughout that time the National Anti-Vivisection Society campaigned for legislation to secure the total abolition of vivisection and for the repeal of the Act, just as it continues to campaign for the repeal of successor legislation today. However, whilst the total suppression of vivisection has remained its main object, the Society’s council passed a resolution in February 1898 stating that that this did not prevent it from campaigning for ‘lesser measures having for their object the saving of animals from scientific torture’.31 This resolution would lead to the departure of many of its key players, including Frances Power Cobbe, who left to establish the British Union for the Abolition of Vivisection.

C. LEGAL RESPONSE

Initially, the Society, along with other anti-vivisection campaign groups, was deemed to be charitable. In Re Douglas,32 Kay J held that the Society was one of a number to which property could validly be distributed under a testamentary discretionary trust for ‘charities, charitable societies and charitable institutions’,33 although there was no argument by counsel on this point, and in Special Commissioners of Income Tax v Pemsel,34 Lord Halsbury LC referred to anti-vivisection societies when illustrating the breadth of charitable purposes in English law.35 Then, in Re Foveaux,36 a testatrix in 1895 left £300 of consolidated stock to the Society and others in the exercise of a special power under her mother’s will to appoint personalty to any charitable purpose. Chitty J considered a number of cases in which the prevention of cruelty to animals was held to be a charitable purpose for the benefit of the public,37 and reasoned that if the prevention of cruelty to

28

Ibid, s 3(1). Kean (n 4) 102–03. 30 The Act was repealed by the Animals (Scientific Procedures) Act 1986, which implemented a tightened regulatory regime for vivisection and remains, as amended, in force today. 31 National Anti-Vivisection Society (HL) (n 1) 32. 32 Re Douglas (1887) LR 35 Ch D 472. 33 Ibid, 477. 34 Special Commissioners of Income Tax v Pemsel [1891] AC 531. 35 Ibid, 550. 36 Re Foveaux [1895] 2 Ch 501. 37 See eg University of London v Yarrow (1857) 1 De G & J 72, 44 ER 649; Re Vallance (Seton, 5th edn 1141); Re Douglas (n 32). 29

National Anti-Vivisection Society v IRC 535 animals in general is charitable then so too is the prevention of a particular form of cruelty to animals.38 He considered it debatable whether vivisection itself amounted to cruelty, as this was a moral question on which ‘men’s minds may reasonably differ and do in fact differ’,39 but concluded that the court should take a neutral stance and the Society, ‘whether right or wrong’ in its opinions,40 was charitable in purpose. Re Foveaux was cited on this point with approval by Swinfen Eady LJ in Re Wedgwood,41 where a trust for the protection and benefit of animals was upheld as tending to ‘promote public morality by checking the innate tendency to cruelty’ of man.42 It was approved by the Irish Court of Appeal in Re Cranston43 and by the Ontario Court of Appeal in Re Gwynne,44 and a similar conclusion as to the charitableness of the New England AntiVivisection Society was reached by the United States Federal Court in Old Colony Trust Co v Welch.45 Yet the Society’s charitableness was never really beyond doubt. Chitty J himself described it as being ‘near the border line’,46 and when Re Douglas was before the Court of Appeal, each of their Lordships specifically refrained from making a decision on the point, as the validity of the bequest did not require it.47 Even if Re Foveaux was good law at the time it was decided, its continued correctness was questioned in 1929 by Russell LJ in Re Grove-Grady,48 who suggested that anti-vivisection societies might no longer be charitable ‘in the light of later knowledge in regard to the benefits accruing to mankind from vivisection’,49 although the point was not explored in any detail and the comment was obiter. The House of Lords adopted a similar view to Russell LJ when, in 1947, it handed down its judgment in the National Anti-Vivisection Society case.50 The case involved an appeal by the Crown from a decision of the Inland Revenue Commissioners that the Society was ‘a body of persons established for charitable purposes only’ for the purposes of the Income Tax Act 1918, section 37, and hence exempt from income tax. The Commissioners considered the objects of the Society, together with the 1898 resolution clarifying its position with regard to campaigning for measures short of the total suppression of vivisection, and heard evidence

38 39 40 41 42 43 44 45 46 47 48 49 50

Re Foveaux (n 36) 507. Ibid, 507. Ibid, 507. Re Wedgwood [1915] 1 Ch 113, 122. Ibid, 122 (Lord Cozens-Hardy MR). Re Cranston [1898] 1 IR 446. Re Gwynne (1912) 5 DLR 713. Old Colony Trust Co v Welch (1938) 25 F Supp 45 (DC Mass). Re Foveaux (n 36) 507. Re Douglas (n 32) 486 (Cotton LJ), 488 (Lindley LJ) and 488 (Bowen LJ). Re Grove-Grady [1929] 1 Ch 557. Ibid, 582. National Anti-Vivisection Society (HL) (n 1).

536 Jonathan Garton from the Society’s director and treasurer, Dr Fielding-Ould, together with various scientists speaking as witnesses for the Crown, which was arguing against the Society’s charitable status. The Commissioners rejected Dr Fielding-Ould’s evidence that vivisection was not the main concern of the Society, and that the Society did not object to vivisection where the increase in scientific knowledge outweighed the suffering of the animal in question,51 but accepted in its entirety the evidence provided by the Crown witnesses. This was that vivisection enabled the testing of vaccines and drugs (including those for malaria, yellow fever, typhus, diphtheria, beriberi and scurvy) and had led to the discoveries of vitamin D and insulin.52 Their conclusion was that53 any assumed public benefit in the direction of the advancement of morals and education was far outweighed by the detriment to medical science and research and consequently to the public health which would result if the society succeeded in achieving its object, and that on balance, the object of the society, so far from being for the public benefit, was gravely injurious thereto, with the result that the society could not be regarded as a charity.

However, the Commissioners considered that, despite the evidence before them, they were bound by Re Foveaux and Re Wedgwood to hold that the Society was charitable.54 The escape route offered by Russell LJ’s obiter comments in Re Grove-Grady was noted but not taken, on the ground that Re Foveaux had only been doubted by the Court of Appeal and not overruled.55 The Crown also argued that, even if the Society was otherwise charitable, it fell foul of the prohibition of political purposes, as the repeal of the Cruelty to Animals Act 1876 and the enactment of a new Act prohibiting vivisection was part of its main purpose. Although there was no explicit reference to this in the Society’s objects clause, the Commissioners agreed with this analysis on the facts, rejecting Dr Field-Ould’s evidence that the Society had no political activities and that it did not seek a change in the law but ‘merely hoped to educate public opinion so that cruelty might be mitigated’.56 Again, though, they found themselves constrained by Re Foveaux, and by the fact that Chitty J’s recognition of the Society’s charitable status was in spite of his acknowledgment that the repeal of the 1876 Act was ‘undoubtedly’ part of its object.57

51

Ibid, 32–33. National Anti-Vivisection Society v Inland Revenue Commissioners [1946] KB 185, 188–89 (CA). 53 National Anti-Vivisection Society (HL) (n 1) 34. 54 Ibid, 34. 55 Ibid, 34. 56 National Anti-Vivisection Society (CA) (n 52), 188. 57 National Anti-Vivisection Society (HL) (n 1) 34–35. 52

National Anti-Vivisection Society v IRC 537 On appeal by the Crown to the High Court, Macnaghten J reversed the Commissioners’ decision. His judgment is unreported, but from comments made in the subsequent appeals we can glean that Macnaghten J did not follow Re Foveaux and found that on the evidence accepted by the Inland Revenue Commissioners the Society’s object, if successful, would be ‘gravely injurious to the community’ and as such could not be charitable.58 A majority of the Court of Appeal agreed and held that Chitty J’s neutral stance as to the correctness of the Society’s purpose in light of conflicting evidence in Re Foveaux amounted to an abdication of the court’s role as the judge of whether a particular organisation’s purpose amounted to a charitable purpose in the eyes of the law. The majority had no such inhibitions: Mackinnon LJ was ‘abundantly satisfied’ that the Society’s purpose did not tend to the public benefit because it would cause a positive detriment by hindering scientific advancement,59 and felt that no body of sensible men could think otherwise,60 while Tucker LJ held that the evidence as to the merits of vivisection ‘was all one way and stood uncontradicted and unchallenged’.61 Both judges accordingly held that Re Foveaux was incorrectly decided and ought to be overruled, although Mackinnon LJ considered this unnecessary as in his opinion the question before Chitty J—namely, whether it had been proved on the evidence that the purpose of the Society was beneficial to the community—had been one of fact not law.62 In the minority, Lord Greene MR refused to accept that the benefit to the public from the Society’s object tending to the prevention of cruelty to animals had to be weighed against any loss of benefit to the public that would result,63 and held that the Society was charitable under the fourth head of Pemsel.64 The justification given for this was that it would enable a purpose previously held charitable by the court to be challenged on the basis of new evidence as to its social effects. His Lordship argued that once a purpose had been held charitable, it could not subsequently be held not to be charitable, as this would have significant practical ramifications for existing charities.65 Having decided that the Society’s purpose prima facie fell within Pemsel, Lord Greene then held that there was no question of it breaching the rule against political purposes, as its aim of securing the repeal of the Cruelty to Animals Act 1876 was acceptable as being merely ancillary to its main object.66 However, his justification for this hints that a political

58 59 60 61 62 63 64 65 66

National Anti-Vivisection Socity (CA) (n 52) 193 (Lord Greene MR). Ibid, 208. Ibid, 209. Ibid, 215. Ibid, 212. Ibid, 205–06. Pemsel (n 34). National Anti-Vivisection Society (CA) (n 52) 206. Ibid, 207–08.

538 Jonathan Garton purpose which was more than merely ancillary might also be acceptable:67 ‘A charitable institution must surely be at liberty to achieve its object by the most efficient and practical means, which may well be legislation.’ Neither majority judge considered the issue of whether the Society’s object breached the rule against political purposes, but it was unnecessary for them to do so, as the rule is relevant only if the object in question is otherwise prima facie charitable. By a four to one majority, the House of Lords affirmed the Court of Appeal’s decision and held that the Society was not a body of persons established for charitable purposes, and that Re Foveaux should be overruled, because the abolition of vivisection did not tend towards the public benefit and so was not a charitable purpose under the fourth head of Pemsel. Lord Simonds, with whom Viscount Simon and Lord Normand agreed,68 held that it was not only appropriate but essential for the court to weigh the benefits and detriments of a purpose in the balance when considering its charitableness, and make a decision as to public benefit accordingly:69 It is to me a strange and bewildering idea that the court must look so far and no farther, must see a charitable purpose in the intention of the society to benefit animals and thus elevate the moral character of men but must shut its eyes to the injurious results to the whole human and animal creation.

Lord Wright went further, considering that not only was the scientific evidence in favour of vivisection accepted by the Inland Revenue Commissioners such that no reasonable person could deny it, but that there was no benefit of any real substance in the Society’s purpose that needed to be outweighed:70 [T]he assumed or alleged benefit is indirect and problematical. There is clearly no general consensus of opinion or understanding against the practice of vivisection which has been permitted by Parliament as regulated under the Act of 1876. That Act has stood all these years substantially without any serious attack. It seems that people’s moral feelings are not weakened nor their objections to cruelty to animals reduced by the existence of the Act. If they think about it at all they think of the immense and incalculable benefits which have resulted from vivisection: if that involves some measure of pain at times to some animals, notwithstanding the Act, they feel that it is due to a regrettable necessity. … What it seems to do however is to destroy a source of enormous blessings to mankind. That is a positive and calamitous detriment of appalling magnitude. Nothing is offered by way of counterweight but a vague and problematical moral elevation.

67 68 69 70

Ibid, 208. National Anti-Vivisection Society (HL) (n 1) 40 (Viscount Simon) and 75 (Lord Normand). Ibid, 65. Ibid, 47.

National Anti-Vivisection Society v IRC 539 Accordingly, Re Foveaux was confirmed as having been incorrectly decided. However, the focal point of the majority speeches was the finding that, even if the abolition of vivisection had prima facie been a charitable purpose under the fourth head, the Society would still not have been charitable as its main object was political and therefore fell foul of the rule against political purposes as laid down in Bowman v Secular Society.71 In that case, Lord Parker held that a trust for the alteration of the law is never valid, even if it would otherwise be considered charitable, for the court cannot determine whether a change in the law would be for the public benefit.72 In the instant case, one of the main objects of the Society was to secure the repeal of the Cruelty to Animals Act 1876 and the enactment of a new Act prohibiting all vivisection. The majority advanced a number of justifications for the prohibition of political purposes, which are considered below. In the minority, Lord Porter held that the Society’s object was charitable because it fell within an established category of charitable purpose, the protection of animals, and this could not be displaced by the fact that its achievement would be ‘gravely injurious to the public benefit’.73 Whereas the majority was happy to engage with the evidence and pass judgment thereon, he preferred the neutral approach adopted by Chitty J in Re Foveaux on the basis that there was no satisfactory way of deciding how much weight to attribute to the different considerations on either side.74 Regarding the prohibition of political purposes, he agreed with the majority’s finding that the repeal of the 1876 Act was part of the Society’s main object, but denied that this meant that the Society’s main object was political in the sense intended by Lord Parker in Bowman because it was not ‘purely’ political:75 [I]n the case of members of an antivivisection society a conceivable though a very unlikely way of effecting its purpose would be to persuade mankind to cease from experiments on animals, and it is possible that its members would prefer success by that means, though I have no doubt they would frankly admit that they saw no possibility of such an event.

On this basis, despite the fact that the reality (on the facts) was that the Society intended to bring about the repeal on an Act of Parliament and this formed the core of its object, Lord Porter held that it did not have a political purpose for charity law purposes.

71 72 73 74 75

Bowman v Secular Society [1917] AC 406. Ibid, 442. National Vivisection Society (HL) (n 1) 56. Ibid, 59. Ibid, 55.

540 Jonathan Garton D. THE PROHIBITION ON POLITICAL PURPOSES

Despite Lord Porter’s comments, it could never have been in doubt that the National Anti-Vivisection Society had a political purpose. Although the precise meaning of ‘political purpose’ in charity law remained unclear until McGovern v Attorney-General,76 when Slade J defined it as being a purpose which aims to secure a change in the law, or a reversal of government policy, in England or abroad, or which promotes a particular political party, it is self-evident that seeking the replacement of the Cruelty to Animals Act 1876 with legislation prohibiting vivisection was a political purpose. There is also nothing controversial in the idea that the court might legitimately consider whether, on balance, the detriment that would be likely to result from the pursuit of a purpose would outweigh its benefits, with the result that it cannot be said to be charitable. Public benefit, whether concerned with the charitable nature of a purpose or with benefiting a suitable cross-section of the community, is a matter which can only be decided objectively by the court on the basis of the evidence before it, and it is clear that the settlor’s opinion as to whether a purpose enures to the public benefit is immaterial. In Re Hummeltenberg,77 which concerned a legacy for the purpose of establishing a training college for mediums, counsel for the executors argued that the court did not need to form an opinion on the issue of public benefit as it was the opinion of the testator, so long as this was rational, moral and not contrary to law, which was determinative.78 Russell J dismissed this argument outright:79 So far as the views so expressed declare that the personal or private opinion of the judge is immaterial, I agree; but so far as they lay down or suggest that the donor of the gift or the creator of the trust is to determine whether the purpose is beneficial to the public, I respectfully disagree. If a testator by stating or indicating his view that a trust is beneficial to the public can establish that fact beyond question, trusts might be established in perpetuity for the promotion of all kinds of fantastic (though not unlawful) objects, of which the training of poodles to dance might be a mild example.

In that case, the only evidence as to the efficiacy of mediumship presented to the court consisted of ‘vague expressions of opinions and belief’ held by the members of the societies,80 and so public benefit was not established. This approach was subsequently approved by the Court of Appeal in Re Grove-Grady,81 before the majority gave its decision in the National

76 77 78 79 80 81

McGovern v Attorney-General [1982] Ch 321. Re Hummeltenberg [1923] 1 Ch 237. Ibid, 238–39. Ibid, 242. Ibid, 241 (Russell J). Re Grove-Grady (n 48) (CA) 572 (Lord Hanworth MR) and 588 (Russell LJ).

National Anti-Vivisection Society v IRC 541 Anti-Vivisection Society case. It does not follow that there must be a consensus on whether a particular purpose provides a public benefit,82 but ‘a court is not performing its duty if it treats a hypothesis as a proved fact and proceeds to draw inferences from it’.83 However, what is less obvious is whether there was previously an established principle to the effect that a purpose which fell under one of the Pemsel heads of charity could not be a charitable purpose because it was also political. Although there is some earlier authority suggesting a prohibition of political purposes, there was nothing to bind the House in the National Anti-Vivisection Society case, as all but Bowman were decisions of lower courts and Bowman is obiter on the point. The earliest reported case appears to be De Themmines v De Bonneval,84 in which the Court of Chancery held that a trust to promote principles critical of the existing law was void as being contrary to public policy. It was cited in support of the prohibition on political purposes by Lord Parker in Bowman,85 but there was no explicit reference to political purposes in the judgment of Sir John Leach MR, and it is arguable that the trust was void because the purpose in question—the dissemination of a book advocating the supremacy of the Pope over sovereign States in ecclesiastical matters—was contrary to public policy, rather than because it was incompatible with the existing law. In any event, it remains a decision of a lower court. Two other High Court cases held that a trust to promote a political purpose per se is not charitable,86 namely, Re Jones87 and Bonar Law Memorial Trust v Inland Revenue Commissioners,88 both of which concerned trusts to promote Conservative Party principles, but this is clearly not the same as saying that an otherwise charitable purpose ceases to be charitable if it is also political in nature.

82 Ibid (CA) 572 (Lord Hanworth MR): ‘The test is to be applied from evidence of the benefit to be derived by the public or a considerable section of it; though a wide divergence of opinion may exist as to the expediency, or utility, of what is accepted generally as beneficial.’ 83 Gilmour v Coats [1949] AC 426 (HL) 452 (Lord Du Parcq). However, compare Re Watson [1973] 1 WLR 1472, 1483, where a testamentary trust established to publish and distribute religious writings was upheld as charitable, despite expert evidence that the writings in question lacked intrinsic theological merit, on the basis that the court ‘assumes’ public benefit of trusts for religious purposes in the absence of evidence to the contrary. Re Watson was followed in Re Le Cren Clarke [1996] 1 WLR 288, which involved a trust to carry on faith healing, and by the Charity Commission in the Sacred Hands Spiritual Centre’s Application for Registration as a Charity, 5 September 2003, which considered that a spiritualist church that met the legal definition of religion had ‘the necessary public benefit’ as there was no evidence to the contrary (this decision is published online at ). Following the implementation of the Charities Act 2006, s 3(2), and now the Charities Act 2011, s 4(2), it is no longer to be presumed that any given purpose tends to the public benefit. 84 De Themmines v De Bonneval (1828) 5 Russ 288, 38 ER 1035. 85 Bowman v Secular Society (n 71) 442. 86 Previously, Stirling J had refrained from expressing an opinion on whether a trust to further Conservative Party principles was charitable: Re Scowcroft [1898] 2 Ch 638, 641. 87 Re Jones (1929) 45 TLR 259. 88 Bonar Law Memorial Trust v Inland Revenue Commissioners (1933) 17 TC 508.

542 Jonathan Garton More directly on point are the decisions of the High Court in Inland Revenue Commissioners v Temperance Council of Christian Churches of England and Wales89 and of the Court of Appeal in Re Hood,90 which held that the promotion of temperance through legislative reform is not charitable, although the promotion of temperance per se is charitable. Again, though, these cases were not binding on the House. In Bowman, as we have already noted, Lord Parker in the House of Lords stated that a trust for a change in the law is void, but this comment was strictly obiter. The case concerned the validity of a bequest to a company limited by guarantee, the Secular Society, the memorandum of association of which included a variety of purposes, most inherently political (such as the abolition of religious tests and observances for the legislature, executive and judiciary) but others not (such as the promotion of secularism in general), and turned on whether the Society’s purposes were lawful such that it was a valid company capable of receiving property. Lord Parker considered that if the intention of the testator had been for the company to receive property on trust for its purposes then this trust would fail, as many of its purposes were political, but he explicitly rejected this interpretation on the facts, holding instead that on a true construction the Society took the property in question as an outright gift.91 Although the National Anti-Vivisection Society case was heard at a time before the House decided that it could overrule its past decisions,92 Bowman was in no way binding upon it. Given that the House was not bound by precedent to recognise any rule to the effect that an otherwise valid charitable trust—ie one that had an exclusively charitable purpose and demonstrable public benefit—would fail if it had a political purpose, we might expect that their Lordships would have offered convincing justifications for the rule. The majority gave three reasons for their decision: (a) the court’s inability to judge the public benefit of a change in law; (b) the inappropriateness of the court’s usurping the legislature; and (c) the problem of requiring the Attorney-General to enforce a political trust. Each is fallacious. Our main concern must lie with the dictum of Lord Parker in Bowman, which was cited with approval by each of the majority judges in the

89 Inland Revenue Commissioners v Temperance Council of Christian Churches of England and Wales (1926) 136 LT 27. 90 Re Hood [1931] 1 Ch 240, 250 (Lord Hanworth MR) and 252 (Lawrence LJ). 91 Bowman v Secular Society (n 71) 441. 92 Practice Statement (Judicial Precedent) [1966] 1 WLR 1234.

National Anti-Vivisection Society v IRC 543 National Anti-Vivisection Society case93 and was clearly instrumental in their Lordships’ reaching the conclusion that they did:94 [A] trust for the attainment of political objects has always been held invalid, not because it is illegal, for everyone is at liberty to advocate or promote by any lawful means a change in the law, but because the court has no means of judging whether a proposed change in the law will or will not be for the public benefit, and therefore cannot say that a gift to secure the change is a charitable gift.

Public benefit in this context refers to the common law requirement that for a purpose to be charitable, it must not only fall within the spirit and intendment of the list of charitable purposes contained in the Preamble to the Statute of Charitable Uses 1601 but must, conceptually,95 be one which benefits the public. To the extent that an inability to determine public benefit is the stumbling block preventing a charitable purpose that is also political from being valid, we may say a number of things. The traditional criticism levelled is that the court ought to be perfectly able to judge whether a change in the law would be for the public benefit, for this is what it is to be a judge in the common law tradition. The position was summed up neatly by Leslie Sheridan 40 years ago:96 Granted that a judge must decide cases on the basis of the law as it stands, he does not have to approve the eternal correctness of all our law. … Nothing could be more stultifying of the legal system than the judges always sticking to precedent, never breaking new ground, taking no notice of changing social conditions, applying a rule in 1972 solely because there is a precedent of 1372.

The reality is that of course the court has on more than one occasion shown that it is capable of judging whether a change in the law would be for the public benefit, and two examples from both ends of the spectrum should suffice by way of illustration:97 in the National Anti-Vivisection Society case itself, as we have seen, the change in the law sought by the Society was

93 National Anti-Vivisection Society (n 1) 61 (Lord Simonds, with whom Viscount Simon concurred), 50 (Lord Wright) and 77 (Lord Normand). 94 Bowman v Secular Society (n 71) 442. 95 It is another matter whether in practice a charity pursues its conceptually beneficial purpose in such a way as to meet the further requirement, confusingly also referred to as public benefit, that if access to its benefits is in any way restricted then an ‘appreciably important’ section of the public must still be able to enjoy them: Verge v Somerville [1924] AC 496 (HL) 499 (Lord Wrenbury). 96 LA Sheridan, ‘Charity versus Politics’ (1973) 2 Anglo-American Law Review 47, 57. See too LA Sheridan, ‘The Political Muddle—A Charitable View’ (1977) 19 Malaya Law Review 42, 65; CEF Rickett, ‘Charity and Politics’ (1982) 10 New Zealand Uinversity Law Review 169, 172. 97 See also F Gladstone, Charity, Law and Social Justice (London, Bedford Square Press, 1982) 100–01, who wonders, in the context of a community association’s campaign to procure the construction of a pedestrian crossing, ‘how many old-age pensioners would need to be knocked down before a court could judge that [the] crossing would be for the public benefit’.

544 Jonathan Garton found on the evidence to be ‘greatly to the public disadvantage’;98 whilst Slade J in McGovern v Attorney-General would later describe Amnesty International’s three main objects—securing the release of prisoners of conscience, opposing the detention without trial of prisoners of conscience and political prisoners, and opposing the death penalty, torture and inhumane treatment of all prisoners—as ‘philanthropic purposes of an excellent character’,99 despite the fact that they necessitated changes to the laws or the government policies in jurisdictions where relevant abuses occurred. However, an important aspect of Lord Parker’s dictum has hitherto been overlooked. When read in the light of the House’s comments in the National Anti-Vivisection Society case that the court must weigh the benefits and detriments of a purpose in the balance when considering whether it is for the public benefit, the implication is that the court is capable of judging on the evidence whether a purpose is charitable if pursued outside the political arena, but incapable of judging whether the same purpose is charitable if pursued through political action. This means we may conceive of a situation where the court can say that a society established for a particular purpose tends towards the public benefit (and is therefore charitable) because it seeks to effect that purpose through non-political means, but it is unable to say whether another society established for the same purpose, but which it seeks to effect politically, is pursuing that purpose for the public benefit (and is therefore not charitable). If the purpose is the same in both cases, and if the end result is the same if either society is successful, then why does the public benefit, or rather the court’s ability to judge the public benefit, disappear? If we assume no other variables then the only logical conclusion is that there must be something about the political process itself that has the potential to introduce a detriment capable of outweighing the public benefit otherwise inherent in a given purpose—potential here being key, as we know that there is nothing in the political process that necessarily outweighs the public benefit of an otherwise charitable purpose, for this would mean that a political purpose is not, on balance, for the public benefit, and Lord Parker’s dictum is clear: the court cannot say either way whether a political purpose is for the public benefit. This is difficult, not least because Lord Simonds100 and Lord Wright101 both make it clear in their speeches that it is not the process but the end result—the change in the law—that is the problem. They both endorse

98 99 100 101

National Anti-Vivisection Society (HL) (n 1) 65 (Lord Simonds). McGovern v Attorney-General (n 76) 329. National Anti-Vivisection Society (HL) (n 1) 62. Ibid, 50.

National Anti-Vivisection Society v IRC 545 the following passage from the first edition of Tyssen on Charitable Bequests:102 It is a common practice for a number of individuals amongst us to form an association for the purpose of promoting some change in the law, and it is worth our while to consider the effect of a gift to such an association. It is clear that such an association is not of a charitable nature. However desirable the change may really be, the law could not stultify itself by holding that it was for the public benefit that the law itself should be changed. Each court in deciding on the validity of a gift must decide on the principle that the law is right as it stands.

Furthermore, the broader charity law ramifications of the argument that the potential for detriment to result merely from the political process itself prevents the court from taking a decision as to public benefit are troubling. There would appear to be two ways in which this could, arguably, happen: (a) if the political resources used could have been better used for other purposes; or (b) if the political process itself results in some unintended problem or externality. Regarding the former, if a purpose is to be achieved by a change in the law, we can accept that there is time for only a limited number of Bills to be debated in any given Parliament, and the courts clearly cannot say whether time devoted to one Bill would be better spent considering another. Similarly, a change in government policy would require the attention of some Ministry or other that might be better spent on other matters. (Although we should note that a charitable purpose that sought to prevent a change in the law would not necessarily involve parliamentary time yet, according to Re Hopkinson,103 this would still fail for being political.) But if this is where public benefit potentially falters then we have a problem, for every charitable purpose, political or otherwise, requires resources of some kind, and those could always be used elsewhere. If we were to assess every potential charitable purpose on the basis that the resources that will be devoted to it—whether donations, endowments, fees, volunteer time and effort, or something else—might possibly be better spent on something else, this would require a radical re-evaluation of what it means to be charitable in English law as no purpose could ever be said definitely to tend to the public benefit. Who could say in objective terms whether the relief of poverty was a more appropriate use of charitable resources than the advancement of education, or the advancement of animal rights than the advancement of

102 AD Tyssen, The Law on Charitable Bequests, 1st edn (London, Sweet & Maxwell, 1888) 177. 103 Re Hopkinson [1948] 1 All ER 346.

546 Jonathan Garton health or the saving of lives? (All are, of course, charitable purposes long accepted by the courts as being for the public benefit.) Even if such a determination were possible, it would clearly not be a desirable one to make. One of the more compelling arguments for the existence of the charitable sector (and organised civil society more broadly) is its ability to provide a diverse range of public and quasi-public goods and services, such as social welfare, healthcare and education, to those minority groups whose needs or preferences cannot be met by State provision or the private market.104 In the case of the former, this is an inevitable result of the State’s inability in any heterogeneous society to satisfy the needs and preferences of each of its citizens when providing public services;105 in the case of the latter, the difficulties inherent in evaluating the quality of public and quasi-public goods in a meaningful and timely fashion are such that there is a strong disincentive to entrust their provision to institutions designed to maximise profit for shareholders.106 In these circumstances, charities, being free from the constraints of majority government and profit maximisation, are well-placed to provide these goods and services, and ought to be able to do so in varying quantities and at varying levels of quality, depending on the collective preferences of those citizens willing to fund them. Regarding the suggestion that participation in the political process itself may result in some unintended problem or externality, such negative consequences will of course always be possible, regardless of the value of the change in the law or government policy, for example, if the change was secured as the result of a high-profile campaign involving shock tactics or polemic, such that it brought the charitable sector generally into disrepute and had a depressive effect on donation levels. Again, though, the possibility of a charitable purpose being carried out in a way that causes negative side-effects is in no way limited to political action. The independent school may, in advancing education, provide the opportunity for a teacher to abuse a pupil; the church, in advancing religion, may discourage a sick believer from seeking life-saving medical treatment in favour of prayer; the soup kitchen may, in relieving poverty, accidentally poison its diners. Yet

104 See generally J Garton, The Regulation of Organised Civil Society (Oxford, Hart Publishing, 2009) 46–70. 105 See T Levitt, The Third Sector: New Tactics for a Responsive Society (New York, AMACOM, 1973) 49. 106 See generally H Hansmann, ‘Economic Theories of Nonprofit Organization’ in W Powell (ed), The Nonprofit Sector A Research Handbook (New Haven, Conn, and London, Yale University Press, 1987) 27; H Hansmann, ‘The Role of Nonprofit Enterprise’ in S RoseAckerman (ed), The Economics of Nonprofit Institutions: Studies in Structure and Policy (New York, OUP, 1986) 57; S Rose-Ackerman, ‘Altruism, Ideological Entrepreneurs and the Non-Profit Firm’ (1997) 8 Voluntas 120, 124; L Salamon, ‘Partners in Public Service: The Scope and Theory of Government-Nonprofit Relations’ in Powell (above) 109; D Easley and M O’Hara, ‘Optimal Nonprofit Firms’ in Rose-Ackerman (ed) (above) 88.

National Anti-Vivisection Society v IRC 547 no one seriously suggests that these institutions are not, or should not be, charitable for these reasons. More specifically, no one suggests that these institutions’ purposes are no longer charitable merely because they could potentially be carried on in a problematic manner. It is no longer true, if it ever was, that the specific activities an institution carries on in pursuit of its purposes are not a relevant factor in determining charitable status, as these can throw light on ambiguous objects (ie ones that could be pursued in a charitable or non-charitable manner),107 or can expose an institution’s true purposes where these are not accurately reflected in its objects clause,108 but the court and the Charity Commission must draw the line at declaring otherwise charitable purposes void on the basis that their pursuit might lead to detrimental side-effects. Where the risk of harm is realised, this ought to be dealt with as a matter of the sound governance of the charity; where the risk has yet to be realised, this should not be a factor determining charitable status. Lord Wright suggests that a second justification for the prohibition is that if the court were to recognise political purposes as charitable then this would usurp the functions of the legislature.109 The idea is not pursued in any detail, and it is clear that approving as charitable an organisation with political objects would not in reality involve the court stepping on the shoes of Parliament. There are several reasons for this. First, the decision whether to grant an organisation with political objects charitable status is, in itself, unlikely to be determinative of whether the organisation in fact goes on to pursue those objects. Unless structured around a testamentary purpose trust, which would fail if denied charitable status,110 its trustees would still be free to carry on its political objects, though there may be resource implications in failing to obtain charitable status. Secondly, even if a charity were to campaign for a change in the law as a result of a decision of the court, it would not follow that Parliament must respond by effecting that change, as Francis Gladstone observes:111 Apart from anything else, granting charitable status to such trusts is not at all the same thing as actually granting the reforms they seek. There is no guarantee that they will be successful; and if they are, it will be because they have convinced

107 See eg Navy Health Ltd v Federal Commissioner of Taxation (2007) 163 FCR 1 [25] (Jessup J). 108 See eg Southwood v A-G [2000] WTLR 1199 [4], where the activities of a trust ‘redolent with the flavour of charity’ revealed that its true purposes were not charitable. 109 National Anti-Vivisection Society (n 1) 50. 110 Although an inter vivos purpose trust would also fail, the settlor would of course be in a position to select an alternative vehicle, such as a company or a society, to carry out the desired objects. 111 Gladstone (n 97) 102.

548 Jonathan Garton public opinion and Parliament of the need for reform, not because the judiciary has usurped the prerogative of Parliament.

Thirdly, it is fallacious to suggest that by granting charitable status to an institution campaigning for a change in the law, the court itself is advocating that change: in the spirit of Voltaire, the court could permit a charity to pursue a purpose in a manner of which it does not necessarily approve, so long as the purpose is otherwise charitable and there is public benefit. Furthermore, just as we have argued that two charities with the same broad purpose might seek to achieve it through different means and with different effects in the interests of the diversity of organised civil society, so too might two charities legitimately take different positions on the desirability or otherwise of a proposed change in the law; allowing one to pursue its object by campaigning for the change would not prevent the court from allowing the other to pursue the same object by campaigning against it.112 Neither charity would be able to claim the ‘approval’ of the court. Additional support is lent to this argument if we contrast the court’s attitude towards political trusts following the National Anti-Vivisection Society case with its long-standing attitude towards religious trusts, where it has no problem recognising the validity of trusts without approving or disapproving of any particular set of religious beliefs:113 [A] gift for the advancement of ‘religion’ is a charitable gift; and … in applying this principle, the Court does not enter into an inquiry as to the truth or soundness of any religious doctrine, provided it be not contrary to morals, or contain nothing contrary to law. All religions are equal in the eye of the law … , the Court does not set up its own opinion. It is enough that it is not illegal, or contrary to public policy, or opposed to the settled principles of morality.

Thus, in Thornton v Howe,114 Sir John Romilly MR held that a trust for the printing and dissemination of the writings of Joanna Southcote was

112

See Rickett (n 96) 171. O’Hanlon v Logue [1906] 1 IR 247, 259 (Lord Walker LC). See also Nelan v Downes (1919) 23 CLR 546 (HCA) 550 (Barton J): ‘[A]ll religions are on an equal footing…’; Gilmour v Coats [1949] AC 426 (HL) 457 (Lord Reid): ‘[S]ince diversity of religious beliefs arose and became lawful the law has shown no preference in this matter to any church and other religious body. Where a belief is accepted by some and rejected by others the law can neither accept nor reject, it must remain neutral…’; Neville Estates v Madden [1962] Ch 832, 853 (Cross J): ‘As between different religions the law stands neutral, but it assumes that any religion is at least likely to be better than none.’; Re Orr (1917) 40 OLR 567; Re Knight (1937) 2 DLR 285 (Ont SC); Syndicat Northcrest v Amselem [2004] SCC 47, [2004] 2 SCR 551 [67] (Iacobucci J): ‘In my view, when courts undertake the task of analysing religious doctrine in order to determine the truth or falsity of a contentious matter of religious law, or when courts attempt to define the very concept of religious “obligation” … they enter forbidden domain. It is not within the expertise and purview of secular courts to adjudicate questions of religious doctrine.’; Application for Registration as a Charity by the Church of Scientology (England and Wales), Decision of the Charity Commissioners, 17 November 1999, 12. 114 Thornton v Howe (1862) 31 Beav 14, 54 ER 1042. 113

National Anti-Vivisection Society v IRC 549 charitable, despite his personal view that she was ‘a foolish, ignorant woman, of an enthusiastic turn of mind’ whose writings contained ‘much that … is very foolish’.115 In his words:116 [T]he Court of Chancery makes no distinction between one sort of religion and another. They are equally bequests which are included in the general term of charitable bequests. Neither does the Court, in this respect, make any distinction between one sect and another.

If the beliefs in question are religious then, so long as they are not illegal,117 contrary to public policy118 or ‘subversive of morality’,119 the court will not prefer one religion to another and will recognise a trust to advance those beliefs as charitable. There is no reason why a similar position of neutrality could not be adopted in relation to political charitable purposes without needing to declare them void. The final argument against political purposes in the National AntiVivisection Society case, hitherto largely overlooked, is that if a political trust were to be upheld as charitable and its trustees defaulted or acted in breach of trust, this might place the Attorney-General, who has jurisdiction at common law to enforce charitable trusts, in a difficult position. In the words of Lord Simonds,120 is it for a moment to be supposed that it is the function of the Attorney-General on behalf of the Crown to intervene and demand that a trust shall be established and administered by the court, the object of which is to alter the law in a manner highly prejudicial, as he and His Majesty’s Government may think, to the welfare of the state?

Such a situation, the argument goes, would clearly give rise to a conflict of interest, and there would be strong incentive for the Attorney-General either to refuse to exercise his discretion to intervene121 or to mount an ineffectual action for the sake of form. In other cases, where the object of the charitable trust was to advocate maintaining the status quo, the AttorneyGeneral would presumably happily pull out all the stops to hold the trustees to account. The same line of reasoning could be applied today with regard to enforcement by the Charity Commission.122 This argument has been 115

Ibid, 18–19; 1044-45. Ibid, 19–20; 1045. 117 O’Hanlon v Logue (n 113). 118 Ibid. 119 Thornton v Howe (n 114) 20; 1045. 120 National Anti-Vivisection Society (HL) (n 1) 62–63. 121 Note Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 228 CLR 168 [179], where by implication Callinan J contemplates a similar situation, given that he argues that there would be no such conflict where a charity’s objects are in line with those of the State. 122 As to the Commission’s powers relating to the administration of charitable trusts, see the Charities Act 2011, Pt 6. 116

550 Jonathan Garton largely ignored by critics of the prohibition, but it can be easily dismissed: it overlooks the simple fact that charities are already free to pursue their purposes in ways that might conceivably bring them into conflict with the views of the government of the day—the activities that a charity carries out do not require State approval and, save where they reveal something about the true nature of the institution’s purposes,123 do not come under meaningful scrutiny. So whilst it is true that the Attorney-General and the Charity Commission might have an incentive to enforce certain political purposes over others, so too do they have a similar incentive with other charitable purposes under the current law. There is a further argument for the prohibition on political purposes, put forward by the Woodfield Committee as part of its review of charity regulation in the 1980s,124 which holds that public money ought not to be spent on political lobbying, and so the various tax reliefs that attach to charitable status ought not to extend to institutions with political purposes. This justification is notably absent from the speeches of the House in the National Anti-Vivisection Society case, though a number of commentators have suggested that it lies at the heart of the court’s approach.125 One response to this argument could be to query whether it is correct to say that tax relief should never be granted to lobby groups or political parties, given their essential role in the democratic process. These institutions are essentially vehicles for the dissemination of the views of particular interest groups, and it is trite to observe that such dissemination is of benefit not only to members of the groups in question but also to the wider public: it encourages the tolerance of minority ideas by the majority,126 facilitates specialist involvement in ‘problem identification and agenda-setting’,127 and helps to create a marketplace of ideas (ideas which should be robust, as participants in the political arena must defend, rethink and finesse their views in light of criticism as a matter of routine)128 which can inform public debate in general and policymakers in particular.129 The potential political voices of the charitable sector ought to be particularly valuable when we

123

See text to nn 108–09. Woodfield Committee, Charities: A Framework for the Future (1989, Cm 694) 11. 125 See eg Rickett (n 96) 176; P Luxton, ‘Charitable Status and Political Purpose’ [1995] New Law Journal (Charities Supplement) 24, 28; Perri 6 and A Randon, Liberty, Charity and Politics: Non-Profit Law and Freedom of Speech (Aldershot, Dartmouth, 1995) 152; GLLH Griffiths, ‘The Art of the Possible’ [1996] New Law Journal (Charities Supplement) 30; A Sprince, ‘Political Activity by Charitable Organisations’ (1997) 11 Trust Law International 35, 35. 126 Perri 6 and Randon (n 125) 132–33. 127 J Saidel, ‘Dimensions of Interdependence: The State and Voluntary-Sector Relationship’ (1989) 18 Nonprofit and Voluntary Sector Quarterly 335, 342. 128 E Barendt, Freedom of Speech (Oxford, Clarendon Press, 1987) 9. 129 6 and Randon (n 125) 135. 124

National Anti-Vivisection Society v IRC 551 consider that, by definition, the causes they would be championing would be ones that tend towards the public benefit:130 The groups under discussion have as a common characteristic some recognized charitable purpose as their end. Only the means used to achieve those ends are being brought into question. On this basis they are immediately distinguishable from the economic pressure group which seeks private gain or preferred treatment, the hate group which seeks antisocial ends, or the political party or group in support of a candidate which seeks political position and power.

Stephen Swann, whilst acknowledging the potential value in granting tax relief to political parties,131 has cautioned against an increase in the political freedom afforded to charities on the basis that their expertise lies in their ability to ‘deliver welfare services to effect the redistribution of resources or provide public goods’ and not in political advocacy.132 However, this reveals a fundamental misunderstanding about the nature of charities and organised civil society, because the reasons why charities and other civil society organisations (CSOs) are particularly suited to the provision of public goods and to the redistribution of wealth are the same reasons why other CSOs, such as political parties, are particularly suited to lobbying. It was suggested above that CSOs have a strong presence in the field of public and quasi-public goods because the State cannot meet the needs and preferences of every citizen and the private market cannot readily overcome the difficulties inherent in evaluating these goods.133 We must say more about these difficulties now. Public goods are those goods and services that: (a) cost the same to provide for many as to provide for few to enjoy; and (b) cannot be restricted such that they cannot be enjoyed by those who do not pay for them. Potentially charitable public goods include clean air, the preservation of endangered species,134 and even national security.135 Whereas the quality of most private goods can be evaluated satisfactorily once they have been provided, because the user now has experience of the product or service, the same is generally not true of public goods: by definition, their effects extend beyond merely for those who fund them, making an accurate assessment

130 E Clark, ‘The Limitation on Political Purposes: a Discordant Note in the Law of Charities (1960) 46 Virginia Law Review 439, 453. 131 S Swann, ‘Justifying the Ban on Politics in Charity’ in A Dunn (ed), The Voluntary Sector, the State and the Law (Oxford, Hart Publishing, 2000) 167. 132 Ibid, 166–67. 133 See text to nn 105–07. 134 Both of which would be charitable as being for the advancement of environmental protection or improvement: Charities Act 2011, s 3(2)(i). 135 A trust to promote the efficiency of the armed forces of the Crown is charitable in England and Wales: Charities Act 2011, s 3(2)(l).

552 Jonathan Garton as to quality virtually impossible.136 Some are also, by their nature, incompatible with evaluation because their benefits may not become apparent for many years.137 If a for-profit institution was charged with providing a public good, evaluation problems would make it difficult to believe that it would not charge artificially high prices or compromise quality in order to maximise profit for its shareholders.138 Accordingly, if the State does not provide a particular public good at that level and quality which suits you, your preferred service provider ought to be a non-profit institution such as a charity or other CSO. This ought to be immune to the corrupting influence of profit,139 and whilst it may be susceptible to other pressures that could compromise service quality,140 this is no more true than of a for-profit firm. In short, charities and CSOs are more trustworthy service providers than the private market in circumstances where it is impossible or extremely difficult to evaluate the quality of a particular service in a timely fashion. This trustworthiness also explains why charities have significant presence in fields which involve quasi-public goods, such as education and healthcare – these are not public goods (it does not cost the same to provide them to many as to provide them to few, and it is straightforward to prevent people from enjoying their benefits) but are analogous, as their complex nature makes them hard to evaluate even post-purchase.141 So too does it explain their dominance in those fields involving the redistribution of wealth— essentially any in which services are funded by donations—as donors are rarely able to assess the uses to which their donations are put.142 What Swann and those who advocate a more limited welfare provider role for charities overlook is that political advocacy is itself a quasi-public good. Any benefits that flow from the advocacy of a particular viewpoint or cause cannot be excluded from those who share the viewpoint or will profit from the cause but who do not contribute to the advocacy costs, and those

136

See Garton (n 104) 50. Ibid. 138 See Hansmann (1986) (n 106) 62; D Young, ‘Alternative Models of GovernmentNonprofit Sector Relations: Theoretical and International Perspectives’ (2000) 29 Nonprofit and Voluntary Sector Quarterly 149, 154. 139 Non-profit distibution is required of charities by law (Re Smith’s Will Trusts [1962] 1 WLR 763) and is generally taken by theorists as being one of the key structural characteristics of the paradigm CSO: see L Salamon and H Anheier (eds), Defining the Nonprofit Sector: A Cross-National Analysis (Manchester and New York, Manchester University Press, 1997) 39–42. See also J Kendall and M Knapp, ‘A Loose and Baggy Monster: Boundaries, Definitions and Typologies’ in J Davis Smith, C Rochester and R Hedley (eds), An Introduction to the Voluntary Sector (London and New York, Routledge, 1995) 18. 140 On which see A Ortmann and M Schlesinger, ‘Trust, Repute and the Role of Non-Profit Enterprise’ (1997) 8 Voluntas 97. 141 See Garton (n 104) 68–69. 142 Ibid, 69–70. 137

National Anti-Vivisection Society v IRC 553 advocacy costs ought to be unrelated to the number of people involved.143 The nature of advocacy is also such that it will often be difficult to evaluate its successes and failures. If we wish to persuade the Government to make a change in the law, lobby to that effect and the change is made, it does not follow that our lobbying was causally significant; if the change is not made, it does not necessarily call into question the quality of our lobbying: unless we are given reasons for a particular government decision, we are reduced to guesswork. Where the aim of advocacy is to affect public opinion in general, sheer numbers render evaluation hopeless. For these reasons, if we think that charities and other CSOs are suited to providing those goods and services where evaluation is difficult or impossible, we ought to consider them ideal vehicles for political advocacy. The benefits do not stop there. Permitting charities to have political purposes would also tend to the public benefit by contributing towards the accountability of government.144 As they have a proven ability to develop expertise in their chosen fields,145 charities are well positioned to evaluate government policies and act as a ‘watchdog’,146 providing a ‘valuable check and balance’ on the actions of the State.147 This can take effect through formal mechanisms such as government consultation processes,148 but charities may also provide a critical commentary on government activity to the public and thereby ‘prod’ the Government into rethinking or justifying a particular policy decision.149 The result should be150 a constant flow of citizen inputs to the state, which, being continually reminded of what its citizens want, finds it difficult to wander too far from those wishes … [and] discovers itself having to accommodate conflicting voices in such ways that it cannot surrender to any one voice or small coterie of voices.

143 Although one can conceive of situations where it may cost more, not less, to advocate effectively the views of few rather than many, as those whose opinion it is hoped will be swayed may be more inclined to disregard views held by few. 144 See Saidel (n 127) 342; Young (n 138) 155–56. 145 See eg L Salamon, ‘Of Market Failure, Voluntary Failure, and Third-Party Government: Towards a Theory of Government-Nonprofit Relations in the Modern Welfare State’ in S Ostrander and S Langton (eds), Shifting the Debate: Public/Private Sector Relations in the Modern Welfare State (New Brunswick, NJ, Transaction, 1987) 44; S Morris, ‘Defining the Nonprofit Sector: Some Lessons from History’ (2000) 11 Voluntas 25, 27. 146 P Lloyd, ‘The Relationship Between Voluntary Associations and State Agencies in the Provision of Social Services at the Local Level’ in H Anheier and W Seibel (eds), The Third Sector Comparative Studies of Nonprofit Organisations (Berlin and New York, Walter de Gruyter, 1990) 244. 147 NCVO Charity Law Reform Advisory Group, For the Public Benefit? (London, NCVO, 2001) para [2.2.5]. 148 See Saidel (n 127) 342. 149 Young (n 138) 151. See also J Jenkins, ‘Nonprofit Organizations and Policy Advocacy’ in Powell (ed) (n 106) 307. 150 H Blair, ‘Donors, Democratisation and Civil Society: Relating Theory to Practice’ in D Hulme and M Edwards (eds), NGOs, States and Donors: Too Close for Comfort (Basingstoke and London, MacMillan, 1997) 23, 29.

554 Jonathan Garton This would in turn facilitate pluralism and citizen involvement,151 particularly in the case of membership charities: providing minority groups with the opportunity to represent their interests would enable the otherwise marginalised to mobilise and play an active part in civic affairs.152 To the extent that the limited case law prior to the National AntiVivisection Society case had established any meaningful prohibition of political purposes for charitable trusts, there are thus compelling reasons for thinking that if the House of Lords had been of a mind to tolerate greater political action by charities then it would have been a simple matter to overrule that case law and hold that there is significant conceptual public benefit inherent in pursuing a charitable purpose through political means.

E. THE WAY FORWARD

When the House of Lords confirmed the prohibition of political purposes in the National Anti-Vivisection Society case it relied on scant authority, none of which was binding on it, and unconvincing justifications which fail to withstand serious scrutiny. In doing so, the House missed an important opportunity to recognise the numerous benefits of a politically active organised civil society with charities beating at its heart. The case continues to limit the extent to which charities can engage with political issues in England to this day: the prohibition of political purposes has survived numerous attempts to modernise the sector by Parliament and the Charity Commission,153 including the codification of the common law definition of ‘charity’ in the Charities Acts 2006 and 2011.154 However, it may be that there is hope for the future. In December 2010, the High Court of Australia declined to follow the House of Lords in the National Anti-Vivisection Society case, and one of its own earlier judgments,155 when holding in Aid/Watch Incorporated v Commissioner

151 See H Anheier, ‘Foundations in Europe: a Comparative Perspective’ in A Schlüter, V Then and P Walkenhorst (eds), Foundations in Europe: Society Management and Law (London, Directory of Social Change, 2001) 69; Blair (n 150) 28; A Dunn, ‘Shoots among the Grassroots: Political Activity and the Independence of the Voluntary Sector’ in A Dunn (ed), The Voluntary Sector, the State and the Law (Oxford, Hart Publishing, 2000) 144; S Klingelhofer and J Kendall Frye, Global Perspectives on Not-for-Profit Law (Washington, DC, International Center for Not-for-Profit Law, 1997) 1. 152 Blair (n 150) 28. 153 The Commission’s current position is to allow charities to engage in limited political activity where this is in furtherance or support of a (non-political) charitable purpose: Charity Commission, CC9 Speaking Out: Guidance on Campaigning and Political Activity by Charities (London, Charity Commission, November 2010) D1. 154 Charities Act 2006, s 2. 155 Royal North Shore Hospital of Sydney v A-G (1928) 60 CLR 396.

National Anti-Vivisection Society v IRC 555 of Taxation156 that there is no longer a prohibition of political purposes in Australia. In the earlier case, Dixon J held obiter that ‘any purpose which is contrary to the established policy of the law cannot be the subject of a good charitable trust’.157 However, the position was never as clear-cut as in England: Dixon J appeared to draw a distinction between this and a trust where ‘the main purpose … is agitation for legislative or political changes’,158 observing that it is merely difficult (ie not impossible) to find public benefit in the case of the latter,159 which later enabled Santow J in Public Trustee v A-G to suggest that it is acceptable for a charitable purpose to require a change in the law if that change is ‘consistent with the way the law is heading’.160 In reaching its decision, the majority in Aid/Watch Incorporated specifically recognised the public benefit inherent in charities campaigning for changes in both the law and government policy on the ground that ‘[c]ommunication between electors and legislators and the officers of the executive, and between electors themselves, on matters of government and politics is “an indispensable incident” of [the Australian] constitutional system’.161 The High Court also noted that upholding a charitable trust with a political purpose did not require the court to ‘adjudicate the merits of any particular course of legislative or executive action or inaction which is the subject of advocacy’.162 We can only hope that, in the very unlikely event of a similar case coming before it in the near future, the Supreme Court will also recognise the strength of the arguments for political engagement, and the weakness of the reasoning in the National Anti-Vivisection Society case, and make a similar departure from precedent.

156 AID/Watch Incorporated v Commissioner of Taxation [2010] HCA 42, (2010) 241 CLR 539. 157 Royal North Shore Hospital of Sydney (n 155) 426. 158 Ibid 426. 159 Ibid 426. 160 Public Trustee v A-G (1997) 42 NSWLR 600, 607. 161 (2010) 241 CLR 539 [44]. 162 Ibid [45].

19 National Provincial Bank Ltd v Ainsworth (1965) ALISON DUNN*

A. INTRODUCTION

T

HERE ARE A number of reasons why it might be thought curious to treat the House of Lords’ decision in National Provincial Bank v Ainsworth1 as a landmark case in Equity that ranks alongside the other cases in this volume, many of which did much to establish the nature and extent of the equitable jurisdiction. The Ainsworth decision did not strike any new accord on the role and purpose of Equity in the legal system, progress the development of equitable rights, or determine the duties of trustees or other fiduciaries. Indeed, rather than taking Equity forward, the case did the very reverse: it rolled Equity back. In Ainsworth the House of Lords halted the growth of a nascent equitable doctrine, the ‘deserted wife’s equity’, overruling a line of Court of Appeal decisions which had creatively cultivated this new concept. But it is precisely that limitation that makes the Ainsworth case a key authority, setting several boundary markers from which subsequent cases have taken their bearings.2 This chapter will argue, first, that despite the rhetoric of Equity’s childbearing capabilities, the House of Lords’ decision in Ainsworth firmly confines the creativity of Equity within defined limits, in which the sanctity of property principles shape the circumstances in which new rights can occur (if they can be created at all). Secondly, we shall see that the Ainsworth decision is a pivotal case in the broader continuum of Equity’s intervention into the field of family property, which began in the nineteenth century

* I am grateful to Jonathan Garton and Ian Dawson for their comments on an earlier draft of this chapter. 1 National Provincial Bank Ltd v Ainsworth [1965] AC 1175 (HL). 2 It is, perhaps, fitting that it was Lord Denning who reminded us that originally a landmark was a stone placed upon land as a boundary marker, and that a landmark case is similarly ‘like stones which mark the boundaries of principles’ and from which we take our bearings: Lord Denning, Landmarks in the Law (London, Butterworths, 1984) vi.

558 Alison Dunn and remains ongoing in the twenty-first. The House of Lords’ rejection of rights for deserted wives in Ainsworth was the catalyst for the pursuit of more structured-based rights within the rules of trusts and estoppel, both of which operate within the boundaries of certainty set by the property law rules and which have shifted the focus of this area away from a purely welfare-based approach. In this context the Ainsworth decision reinforced a rule-based property law solution that arose irrespective of the status of the parties. In limiting welfare as a principle for protection, moreover, Ainsworth provides a contemporary reminder of the limitation of Equity’s intervention in matters of personal vulnerability.

B. THE AINSWORTH CASE

The Ainsworth litigation arose out of what was becoming in this period an increasingly typical situation of marriage breakdown. Gordon Ainsworth purchased the matrimonial home (124 Milward Road, Hastings) in 1956 and became the sole registered proprietor. Just over a year later he deserted his wife Marjorie and their four children. Mrs Ainsworth and the children remained in occupation of the matrimonial home. In 1961, on the basis of her husband’s adultery, she was granted a decree of judicial separation, along with custody of the couple’s children. Mrs Ainsworth also obtained an order for permanent alimony against her husband, to include child maintenance, maintenance for herself and rent-free accommodation. In addition to owning the matrimonial home, Mr Ainsworth was also the sole registered proprietor of a property occupied by his mother (13 Devonshire Road, Hastings) and in which he often resided after deserting his wife, and a further property (7 Bank Buildings, Hastings) in which he operated his business, a car dealership. In 1958, after deserting his wife, Mr Ainsworth obtained a £1,000 loan from National Provincial Bank Ltd (‘the bank’), secured by a charge on the matrimonial property. The same bank also had separate loans charged on Mr Ainsworth’s other two properties. By 1959 Mr Ainsworth owed just short of £6,000 across the three mortgages. In an arrangement with the bank and to further secure the loans, Mr Ainsworth incorporated his car dealership as Hastings Car Mart Ltd (‘the company’) and conveyed both the matrimonial home and the business property to the company. All monies owed personally by Mr Ainsworth to the bank were discharged by a loan from the bank to Hastings Car Mart Ltd. The new loan was secured in favour of the bank by charges on the properties now owned by the company, with Mr Ainsworth acting as guarantor. The charges were registered in Land Registry. In November 1961 the bank called in the outstanding debt of just over £2,000 on the loan to the company. A second notice was served in April 1962, informing the company that unless the notice was complied with, the

National Provincial Bank Ltd v Ainsworth 559 bank would exercise its power to sell 124 Milward Road, the matrimonial property in which Mrs Ainsworth still resided. The other properties owned by the company had already been sold but had not fully discharged the debt. Following failure to comply with the second notice, the bank sought possession of the matrimonial property. This action for possession was resisted by Mrs Ainsworth on the basis that, as a deserted wife, she had rights binding on the bank. The bank’s action for possession of the matrimonial property raised two principal issues. The first was whether Mrs Ainsworth, as a deserted wife, had a right which was capable of binding the bank. The second connected issue was whether the right of a deserted wife was capable of being an overriding interest under section 70(1)(g) of the Land Registration Act 1925, which protected ‘the rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where inquiry is made of such person and the rights are not disclosed’. At first instance the case was decided in the bank’s favour,3 but this decision was overruled on appeal (Russell LJ dissenting).4 The majority of the Court of Appeal, led by Lord Denning MR, found that the rights of Mrs Ainsworth as a deserted wife were capable of binding a purchaser with notice and that, under section 70(1)(g) of the 1925 Act, her ‘equity’ bound the bank as an overriding interest. This entitled Mrs Ainsworth to continued possession of the matrimonial home until ordered to leave by a court.5 On appeal to the House of Lords the decision of the Court of Appeal was reversed and the emergent case law which had established the binding effect of the ‘deserted wife’s equity’ (notably the earlier Court of Appeal decision in Bendall v McWhirter)6 was overruled. The House of Lords held that the right of a deserted wife was no more than a personal right against her husband, that such rights were not capable of binding third parties and that, for the purposes of overriding interests, section 70(1)(g) of the Land

3

National Provincial Bank Ltd v Hastings Car Mart Ltd [1964] Ch 9 (Ch D). National Provincial Bank Ltd v Hastings Car Mart Ltd [1964] Ch 665 (CA). 5 At the same time the Court of Appeal also considered a second appeal, National Provincial Bank Ltd v Hastings Car Mart Ltd (No 2) [1964] Ch 665. In an application by Mrs Ainsworth under Matrimonial Causes (Property and Maintenance) Act 1958, s 2 to have the disposition of the matrimonial home to her husband’s company, Hastings Car Mart Ltd, set aside, Hewson J had confirmed a report of the Divorce Division registrar that Mr Ainsworth’s conveyance of the matrimonial home to his company had been an attempt to defeat the rights of his wife to alimony. In light of Hewson J’s decision, Mrs Ainsworth went back to the Chancery Division asking that Cross J not enforce his earlier decision in favour of the bank, ie because the sale had been set aside the bank’s charge would have no effect. This application was refused by Cross J on the basis that the setting aside of the sale by Hewson J had no effect on the bank’s charge. Mrs Ainsworth’s appeal to the Court of Appeal was dismissed on the same reasoning that setting aside the sale would not invalidate the bank’s charge over the matrimonial home. Transactions made in good faith before the sale was avoided would continue to have effect. 6 Bendall v McWhirter [1952] 2 QB 466. Also overruled were Street v Denham [1954] 1 WLR 624 and Jess B Woodcock & Sons v Hobbs [1955] 1 WLR 152. 4

560 Alison Dunn Registration Act 1925 required a right in reference to the land. Holding no more than a personal right against her husband, the deserted wife could not, therefore, have an overriding interest binding on the bank under this section.

C. THE DESERTED WIFE’S EQUITY AND THE HOUSE OF LORDS

The issue of whether wives were entitled to remain in the matrimonial home upon desertion first came to the attention of Lord Denning in 1947, in a case in which he gave judgment in open court in order that it be reported.7 Over the course of the next five years he steadily developed the concept of the ‘deserted wife’s equity’, culminating in the seminal case of Bendall v McWhirter.8 There the Court of Appeal came to consider whether a trustee in bankruptcy could gain possession of property solely owned by the husband, in which a deserted wife remained. The conclusion arrived at by the majority of the court centred on the fact that a trustee in bankruptcy could have no better title than the person bankrupt, and therefore took title subject to all equities and liabilities binding on the husband. It was held that since the husband required an order under section 17 of the Married Women’s Property Act 1882 to gain possession against the deserted wife, the trustee in bankruptcy would likewise be so restrained. The trustee could be in no better position than the husband, in whose shoes the trustee stood. Denning LJ in the minority, however, branched out in a direction uncharted by other members of the court,9 and approached the issue from the angle that the deserted wife had a right in property, an ‘equity’, subject to which the trustee in bankruptcy took. This ‘equity’ was likened to the common law principle authorising a deserted wife to pledge her husband’s credit for necessaries,10 the need for the home being ‘the most obvious’ of such requirements.11 Denning LJ based the ‘equity’ he accorded to the deserted wife upon certain obiter statements of Lord Goddard in

7 H v H (1947) 63 TLR 645. See also Stewart v Stewart [1948] 1 KB 507; and Lord Denning, The Due Process of Law (London, Butterworths, 1980) 207. 8 Bendall (n 6). The submission that a purchaser with notice took title subject to the possession of a deserted wife had been rejected earlier by Roxburgh J in Thompson v Earthy [1951] 2 All ER 235, discussed further below. 9 Viz Somervell and Romer LJJ. The majority view was accepted in Bradley-Hole v Cusen [1953] 1 All ER 87 and Ferris v Weaven [1952] 2 All ER 233. The observations of Lord Denning MR were applied in Silverstone v Silverstone [1953] 1 All ER 556, Savage v Hubble [1953] EGD 150, Street (n 6), and Jess B Woodcock (n 6), and were accepted as correct in Westminster Bank Ltd v Lee [1955] 2 All ER 883 and Churcher v Street [1959] 1 All ER 23. 10 See, eg, Manby v Scott (1659) 1 Sid 109, 82 ER 1000. 11 Bendall (n 6) 476 (Lord Denning MR).

National Provincial Bank Ltd v Ainsworth 561 Bramwell v Bramwell12 regarding the need for a section 17 order for possession, the grant of which lay in the discretion of the court. Denning LJ, taking that discretion, could find ‘no valid distinction’ between the right of a deserted wife and a contractual licence, and held that the ‘equity’ of the deserted wife acted as a clog or fetter on the property.13 Whilst the court as a whole emphasised that the right of the wife was purely personal and did not amount to an equitable or legal interest, cases subsequent to Bendall v McWhirter did much to extend the ambit of this ‘equity’, going so far as to hold that it bound not just a trustee in bankruptcy, but also a purchaser who acquired the fettered property with notice of the deserted wife’s right.14 Bendall v McWhirter and case law in favour of establishing such rights for deserted wives were not uncontroversial, involving as they did the creation of an entirely new right with the potential to bind third parties. The so-called ‘deserted wife’s equity’ prompted public as well as academic and judicial disfavour.15 Indeed a number of judges in courts below had expressed doubts about the nature, extent and cogency of this ‘equity’.16 As more cases arose, the courts came to grapple, often unsuccessfully, with questions as to the juridical nature of the right, when it arose, whether it applied to a deserted husband or encompassed constructive desertion, what constituted requisite notice and the extent of the knowledge required for a third party to be bound.17 Nevertheless, although case law prior to the Ainsworth litigation had established that the deserted wife could have a right binding on third parties, such as assignees, a trustee in bankruptcy or one who took with notice, the courts had stopped short of determining

12 Bramwell v Bramwell [1942] 1 KB 370, 374. Lord Goddard’s doubt that a husband could recover possession of the matrimonial home from his wife had centred on the fact that such an action would make the wife a trespasser with the action lying in tort. At the time of the decision, and until the Law Reform (Husband & Wife) Act 1962, a husband was restricted from suing his wife in tort. 13 Bendall (n 6) 478 (Lord Denning MR). Lord Denning reached this conclusion by analysing the contemporary judicial decisions on the binding effect of contractual licences upon third parties. 14 See Street (n 6). It was recognised that the right would cease on death or divorce: Bendall (n 6); Vaughan v Vaughan [1953] 1 All ER 209. 15 Public ire was evident in contemporary correspondence to Lord Denning, including this: ‘Dear Sir, You are a disgrace to all mankind to let these women break up homes and expect us chaps to keep them while they rob us of what we have worked for and put us out on the street. I only hope you have the same trouble as us. So do us all a favour and take a Rolls and run off Beachy Head and don’t come back’: HR O Box 14, cited in E Heward, Lord Denning: A Biography (London, Weidenfeld & Nicholson, 1990) 52. 16 Notably Harman LJ in Campbell Discount Co Ltd v Bridge [1961] 2 WLR 596, 605, in Rock Permanent Benefit Building Society v Kettlewell [1956] EGD 315, and earlier in Barclays Bank Ltd v Bird [1954] 2 WLR 319, 321. See also Bradley-Hole (n 9) 306 (Jenkins LJ). 17 For a resumé of the problems created by the ‘equity’ and a call for the House of Lords to ‘blow away the whole uncertain structure’, see RE Megarry, ‘Deserted Wife’s Right to Occupy the Matrimonial Home’ (1952) 68 LQR 379.

562 Alison Dunn that a deserted wife’s right amounted to an equitable interest or bound a purchaser without notice. Neither had the cases addressed the position of a deserted wife in a matrimonial home to which title was registered; the decided cases had all concerned unregistered land and could not assist on the question of whether the deserted wife had a right that could amount to an overriding interest. In approaching these issues the House of Lords focused first upon the nature and ambit of a wife’s rights in the matrimonial property, emphasising that such rights are difficult to quantify in character or extent, are ‘incapable of precise definition’ and are provisional upon circumstances.18 All agreed, however, that the wife’s rights had their genesis in and were dependent upon her marriage status. That status accords an obligation upon the spouses to live together and for the husband to maintain his wife. These rights are personal ones and limited in extent, there being nothing arising from the marriage status per se or the obligation to support a wife which could afford her specific rights in the matrimonial home.19 Moreover, given the origins of the rights in the marriage status, the deserted wife’s rights were no different in quality from those of a wife who had not been abandoned by her husband. A wife’s rights came into effect upon marriage, not desertion.20 Secondly, foreshadowing the House of Lords’ later decision in Pettitt v Pettitt,21 the point was made obiter that the case law which had developed the deserted wife’s rights in the decade preceding this decision, had done so on a broad but erroneous interpretation of the court’s discretion under section 17 of the Married Women’s Property Act 1882. Section 17 permitted a judge to make orders ‘as he thinks fit’ in relation to title and possession of matrimonial property as between a husband and wife, and was, in the view of the Law Lords, merely procedural. The discretion afforded by the Act could not be utilised to create or confer new rights upon the parties, nor to disturb established rights in property.22 Thus, the fact that the wife, upon exercise of the judge’s discretion under section 17, could obtain an injunction against ejection as against her husband, could not turn her personal right

18 Ainsworth (HL) (n 1) 1233 (Lord Upjohn), 1224 (Lord Hodson) and 1247 (Lord Wilberforce). 19 See Lloyd’s Bank Ltd v Oliver’s Trustee [1953] 1 WLR 1460, and Ainsworth (HL) (n 1) 1220–21 (Lord Hodson), 1228 (Lord Upjohn), and 1244–47 (Lord Wilberforce). 20 Ainsworth (HL) (n 1) 1222 (Lord Hodson) and 1233 (Lord Upjohn). Cf two earlier Chancery Division cases: Lloyds Bank v Oliver’s Trustee (n 19) and Barclays Bank Ltd v Bird (n 16). 21 Pettitt v Pettitt [1970] AC 777, where the court held that Married Women’s Property Act 1882, s 17 was a procedural provision only: 793 (Lord Reid), 798–99 (Lord Morris), and 807–08 (Lord Hodson). Lords Hodson and Upjohn sat in both House of Lords cases. 22 Ainsworth (HL) (n 1) 1220–21 (Lord Hodson), 1235–36 (Lord Upjohn) and 1245–46 (Lord Wilberforce). This point had been made in Newgrosh v Newgrosh (1950) 210 LT Jo 108 (Buckhill LJ), Rimmer v Rimmer [1953] 1 QB 63, 68 (Evershed MR), and Cobb v Cobb [1955] 2 All ER 969, 700 (Romer LJ), the last cited with approval by Lord Upjohn.

National Provincial Bank Ltd v Ainsworth 563 into a proprietary one.23 As Lord Upjohn emphasised, the remedy available did not affect the nature and quality of the right it protects.24 To allow it to do so would involve the creation of new rights, different in nature, quality and extent from those personal rights between a husband and wife.25 Whilst a number of judges in the courts below had also taken a procedural interpretation of the 1882 Act, an influential minority led by Lord Denning had carved out of the provision a more extensive discretionary role for the court, using section 17 as a mechanism through which to achieve flexible and justice-based outcomes for the deserted wife.26 That broader role had become an open door for the incremental development of the right, extending it from a purely personal right between the marriage partners into one which was capable of binding third parties. This incremental development had taken a number of different routes in the case law, but common to each was the device of allying a lesser established right (that of the deserted wife) to a more established one (such as a licence, a rent restriction or an ‘equity’), and so directly or by analogy attaching to the lesser right the same attendant characteristics, nature and consequences of the more developed right. Within this approach the role of the injunction became, as Sir Raymond Evershed noted, ‘a phenomenon of the age’,27 in the sense that an injunction available to protect a personal right of occupation by extension became more broadly invoked to restrain third parties. Through this process the binding effect of such diverse entities as irrevocable licences, rent restrictions and equities came to imbue (and so enlarge) the personal right of the deserted wife, leaving the area with nothing less than a ‘chaotic interplay of legal ideas’.28 This approach received short shrift from the House of Lords, with Lords Hodson and Wilberforce describing the analogies and alliances as

23

See, eg, Lee v Lee [1952] 2 QB 489n. Ainsworth (HL) (n 1) 1228 (Lord Cohen) and 1236 (Lord Upjohn). A point also made by Russell LJ in his dissenting judgment in the Court of Appeal (n 4). 25 Ainsworth (HL) (n 1) 1249–50 (Lord Wilberforce). 26 See, eg, Lord Denning MR in H v H (n 7) 646, Hine v Hine [1962] 1 WLR 1124, 1127 (‘[T]he jurisdiction of the court over family assets under s 17 is entirely discretionary. Its discretion transcends all rights, legal or equitable, and enables the court to make such order as it thinks fit. This means, I understand it, that the court is entitled to make such order as appears to be fair and just in all the circumstances of the case.’), and Appleton v Appleton [1965] 1 All ER 44; cf Romer LJ in Cobb (n 22), discussed in Ainsworth (HL) (n 1) 1235–36 (Lord Upjohn). Post-Ainsworth, Lord Denning returned to a wider interpretation of s 17 in Jansen v Jansen [1965] 3 All ER 363, 366, giving little credence to the Law Lords’ obiter remarks. The broader concept of ‘family assets’ was later dismissed, inter alia by Lord Upjohn in Pettitt (n 21) 817. 27 Sir R Evershed, ‘“Equity Is Not To Be Presumed To Be Past the Age of Child-Bearing”’ (1953) 1 Sydney Law Review 1, 12. 28 O Kahn-Freund, ‘Matrimonial Property—Some Recent Developments’ (1959) 22 MLR 241, 262. 24

564 Alison Dunn ‘unhelpful’ or without foundation.29 The licence approach was refuted, inter alia, on the basis that the wife was not and could not be described as a licensee, rendering redundant any analogy to an irrevocable licence.30 There was, of course, a fair amount of artificiality in presuming a bargain between husband and wife in terms of a licensor/licensee relationship, and notwithstanding restitution of conjugal rights, it could not be tenable to ascribe to a deserted wife a binding equity on the basis that such a contract could be specifically performed.31 Moreover, as Lord Wilberforce emphasised, the binding effect of contractual licences was unsettled in the face of cases such as King v David Allen32 and Clore v Theatrical Properties33 and subsequent case law including Errington v Errington & Woods.34 Lord Denning’s extension of the licence theory in the Court of Appeal below and in Bendall v McWhirter,35 which posited that the deserted wife held a licence coupled with an ‘equity’ which bound a third party with notice, was equally dismissed by the House of Lords. Although Lord Parker in Sinclair v Brougham36 had been willing to recognise that a personal equity could eventually create rights in property, the case law that had allowed an ‘equity’ to have binding effect had either concerned equities in relation to 29 Ainsworth (HL) (n 1) 1223 (Lord Hodson). In rejecting the various theories that had been established in the case law surrounding the rights of the deserted wife, some of the Law Lords expressed doubts about the use of labels such as ‘licensee’ and ‘equity’ without any clear identification of what those concepts meant (eg Ainsworth (HL) (n 1) 1232 (Lord Upjohn)). The need to be clear about the terminology and the usefulness of labels has remained a concern in subsequent Equity cases in other areas, eg Lord Nicholls’s rejection of ‘unconscionability’ as a concept for determining accessory liability in Royal Brunei Airlines v Tan [1995] 2 AC 378 (PC). 30 Ainsworth (HL) (n 1) 1222–23 (Lord Hodson), 1232 (Lord Upjohn) and 1250–51 (Lord Wilberforce). On the development of the licence, see Hurst v Picture Theatres Ltd [1915] 1 KB 1, Winter Garden Theatre (London) Ltd v Millennium Productions Ltd [1948] AC 173 through to Errington v Errington & Woods [1952] 1 KB 290, where a contractual licence was found to bind third parties except those without notice of the right. 31 The order for specific performance giving rise to the binding equity, see London Borough of Hounslow v Twickenham Garden Development Ltd [1971] Ch 233 and Errington (n 30). 32 King v David Allen [1916] 2 AC 54, 61 (Lord Buckmaster LC) emphasising the personal nature of a contractual licence. See Ainsworth (HL) (n 1) 1251 (Lord Wilberforce). 33 Clore v Theatrical Properties [1936] 3 All ER 483. 34 Errington (n 30). Although the House of Lords did not decide the point on the binding effect of contractual licences, they were later effectively dismissed as a result of the Lords’ comments and comments made obiter by the Court of Appeal in Ashburn Anstalt v Arnold [1989] Ch 1, 22 (Fox LJ). For discussion, see HR Wade, ‘Licences and Third Parties’ (1952) 68 LQR 337, RJ Smith, ‘Licences and Constructive Trusts—“The Law Is What It Ought To Be”’ [1973] CLJ 123. 35 Ainsworth (CA) (n 4) 686, and Bendall (n 6) 488; see also Lord Denning in Errington (n 30) 299 and Binions v Evans [1972] Ch 359. Their Lordships also rejected the majority view in Bendall v McWhirter on the basis that to accord the deserted wife with rights in the property binding upon the trustee in bankruptcy would be to put her is a better position than a wife who had not been deserted and who would not be able to claim against the successor in title. 36 Sinclair v Brougham [1914] AC 398 (HL) 441–42 (discussing the right to trace in equity).

National Provincial Bank Ltd v Ainsworth 565 land (rather than a personal right), and so were properly property interests or ancillary to a property interest, or concerned circumstances in which a right of ownership could be established or assumed, like the right to trace of which Lord Parker spoke.37 Allowing the deserted wife an ‘equity’ carved out of her marital status, with its attendant personal right to be supported by her husband, was not sufficiently attached to property per se to fall within the remit of the existing authorities. Moreover, whilst the rent restriction cases were closest in terms of analogy, Lord Wilberforce pointed out that these too could not withstand scrutiny. True, in those cases a deserted wife of a lessee had been held to have a right binding upon third parties, but crucially, this was due to the fact that the wife’s occupation was not separated from that of her husband. Rather than the wife asserting her own rights to possession, the husband as lessee was deemed to remain in possession of the property through his wife despite his desertion.38 Given that the deserted wife did not have rights in her own regard, such cases could not be taken as being similar either in nature or extent. Underlying their Lordships’ approach throughout was the view that the deserted wife’s rights were no more than personal rights. The personal nature of the wife’s rights had been established by Roxburgh J in Thompson v Earthy,39 though later ignored in cases such as Bendall v McWhirter.40 In approving the judgment of Roxburgh J in Thompson, the Law Lords established that if the right of the deserted wife was no more than a personal right, whether described as an ‘equity’ or not, it could have no effect upon a third party. Indeed, the notion that an ‘equity’ per se could bind third parties was forcibly attacked. As Lord Upjohn explained, for an equity to bind a purchaser it must be ‘ancillary to or dependent upon an equitable estate or interest in the land … a mere equity naked and alone is … incapable of binding successors in title even with notice; it is personal to the parties’.41 Lord Upjohn had earlier touched on the difference between equities amounting to interests in the land and mere equities, when sitting in the Chancery Division in Westminster Bank Ltd v Lee,42 and here further emphasised that a mere equity, not being an equitable interest in the land, was shorn of any characteristic that could make it an enduring right capable 37 Authorities such as Jones v Smith [1954] 1 WLR 1089 and Barnhart v Greenshields (1853) 9 Moo PC 18, 14 ER 204, were ones in which the equities binding on purchasers were properly equitable interests, not mere personal rights; see Reeves v Pope [1914] 2 KB 284 and discussion in Ainsworth (HL) (n 1) 1237–38 (Lord Upjohn). 38 Eg Old Gate Estates Ltd v Alexander [1949] 2 All ER 822 and Middleton v Baldock [1950] 1 All ER 708. The only circumstances in which such possession ceased was where the husband had done all he could to give up possession, eg by removing all his furniture and returning the keys to the landlord; see Taylor v McHale [1948] EGD 299. 39 Thompson (n 8). 40 Bendall (n 6). 41 Ainsworth (HL) (n 1) 1238 (Lord Upjohn). 42 Lee (n 9), citing Phillips v Phillips (1862) 4 De G F & J 208, 45 ER 1164.

566 Alison Dunn of affecting a purchaser with or without notice. The precise distinction between different types of equity and equitable rights and the priorities between them has not always been easy to apply in practice, leaving at least one commentator to remark upon the ‘murky fog’ that remained post-Ainsworth.43 Though perhaps hard to apply in practice, Ainsworth’s distinction between different types of equity and attendant rights was significant as putting down a boundary marker as to their creation, status and binding effect. Indeed, the consequence of Lord Upjohn’s incursion in this field has been to set in motion a wider but never fully resolved debate as to the difference between mere equities, equities and equitable interests, and how to recognise them.44 This has led to numerous attempts at categorisation—from Everton’s latent/patent rights, Neave and Weinberg’s defined/undefined equities, to Wallace and Grbich’s broader-based distinction between established/frontier rules—to get at the root of the difference and to typologise the ‘equity’ into the lexicon of binding rights.45 What is clear is that an equity is not a right of property per se (and therefore neither enforceable outwith the original parties nor assignable), but it may bind a third party in limited circumstances, that is where it attaches to an interest, such as an equity of redemption, or where the right gives rise to enforcement of a (often discretionary) remedy such as rescission or rectification.46 In this latter respect, though, the simple existence of a remedy to protect a mere equity, such as specific performance or an injunction, will not transform it into anything larger. To do so, in the words of Lord Wilberforce, would be ‘clearly fallacious’ since ‘what is relevant is the nature of the right, not merely the remedy which exists for its enforcement’.47 Lord Wilberforce further endorsed that a right in property was one which ‘must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence and stability’.48 He concluded 43 AR Everton, ‘“Equitable Interests” and “Equities”—In Search of a Pattern’ (1976) 40 Conveyancer and Property Lawyer 209, 209. For discussion on determining the difference in practice, see eg RE Megarry, ‘Mere Equities, the Bona Fide Purchaser and the Deserted Wife’ (1955) 71 LQR 480 and PD White, ‘The Illusion of the Mere Equity’ (1965–1967) 5 Sydney Law Review 499. 44 For comparison see the decision of the High Court of Australia in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in Liquidation) (1965) 113 CLR 265. 45 See Everton (n 43), M Neave and M Weinberg, ‘The Nature and Function of Equities (Part I)’ (1978–1980) 6 University of Tasmania Law Review 24; J Wallace and Y Grbich, ‘A Judge’s Guide to Legal Change in Property: Mere Equities Critically Examined’ (1979– 1980) 3 University of New South Wales Law Journal 175. 46 Eg CJ Davis, ‘Floating Rights’ (2002) 61 CLJ 423, 459–60; M Pawlowski and J Brown, ‘Mere Equities and Third Parties in Leasehold Law’ (2010) 14 Landlord and Tenant Review 100, 100. 47 Ainsworth (HL) (n 1) 1253. 48 Ibid, 1247–48 (Lord Wilberforce). Lord Wilberforce’s dictum on property has been accused of being circular, see J-P Hinojosa, ‘On Property, Leases, Licences, Horses and Carts: Revisiting Bruton v London & Quadrant Housing Trust’ [2005] Conveyancer and Property Lawyer 114, 118.

National Provincial Bank Ltd v Ainsworth 567 that the right of a deserted wife ‘has none of these qualities, it is characterised by the reverse of them’.49 The instability of the wife’s personal rights was of a further particular concern in the context of the policy of the 1925 property legislation in safeguarding the easy alienation of property unencumbered by rights which are hard to ascertain or to investigate. It was their Lordships’ view that to allow the wife’s rights to bind a third party with notice would mean that the problems facing a potential purchaser in investigating title to land would be too ‘overwhelming’.50 The argument that justice between the parties would create a wider consequential injustice to third parties is a familiar one.51 A decade earlier, when sitting in the Chancery Division, Upjohn J in Westminster Bank Ltd v Lee52 had expressed concerns about discoverability, and held in the context of unregistered land that the mere presence of a wife in the property was not sufficient to put a purchaser on enquiry as to whether the wife was deserted as per the principle in Hunt v Luck53 and the requirements of notice in section 199 of the Law of Property Act 1925. But concern remained about what would put a purchaser on enquiry or constitute reasonable enquiries. The majority of the Court of Appeal in Ainsworth had not been so daunted by the requirement of notice in unregistered land, in particular the potential for a purchaser to be fixed with constructive notice upon failure to make reasonable enquiries under section 199.54 The House of Lords retreated from this view, concerned that such enquiry and discoverability of rights of deserted women represented formidable obstacles for a purchaser in terms of expediency and security when investigating title and the rights of occupiers.55 Whether a wife was deserted could be determined only by the asking of such personal questions that, in the Law Lords’ view, were unreasonable to require of a purchaser. The concern of the House of Lords in Ainsworth, as it had been in the High Court, was not just with discoverability and the ‘grave injustice to innocent purchasers’ that the deserted wife’s rights would bring if they

49

Ainsworth (HL) (n 1) 1247–48 (Lord Wilberforce). Ibid, 1250 (Lord Wilberforce). 51 See, eg, Re Sharpe (A Bankrupt) [1980] 1 WLR 219, 224 and 226 (Browne-Wilkinson J), and discussion in D J Hayton, ‘Equity and Trusts’ in JL Jowell and JPWB McAuslan (eds), Lord Denning: The Judge and the Law (London, Sweet & Maxwell, 1984) 90. 52 Lee (n 9). Earlier still, see Harman J in Barclays Bank Ltd v Bird (n 16) 321, where he put forward the view that the effect upon creditors would be ‘detrimental to the public interest’. 53 Hunt v Luck [1901] 1 Ch 45. 54 On the facts of Ainsworth, the bank was unaware of Mr Ainsworth’s desertion of his wife, though the bank had not made inquiries of the possession of the matrimonial home. The address used by the bank to contact Mr Ainsworth had been his business premises, and the address listed in his company’s memorandum of association and the guarantor document was the property inhabited by his mother (13 Devonshire Road). 55 Ainsworth (HL) (n 1) 1234–35 (Lord Upjohn) and 1248–49 (Lord Wilberforce). 50

568 Alison Dunn endured on the land as a proprietary right.56 The Law Lords were also troubled by the effect upon commercial lending that could result from assimilating the traditional public/private distinction between family circumstances and business practices.57 In Westminster Bank Ltd v Lee, Upjohn J had expressed his unease with bringing ‘thousands of business transactions into the area of domestic life and ties’,58 and those concerns were felt in the House of Lords too.59 The effect could come at different levels: first, in terms of transaction costs for discoverability; and, secondly, in legal fees and the attendant uncertainty in seeking to curtail the right of the deserted wife to remain in the property given that her right to remain, if enforceable, existed until she was ordered to leave by a court. There was, of course, a wider point. If discoverability makes lending upon matrimonial property a less commercially viable proposition, the public pay the price through higher fees, punitive terms or simply inaccessibility to credit for those without sufficient capital safeguards to make a loan a feasible one for a lender. As Lord Browne-Wilkinson was later to note in Barclays Bank plc v O’Brien,60 there is public interest in ensuring that the lending of money on security remains an attractive economic proposition for lenders and so to ensure the flow of capital to those who require it. Lord Upjohn emphasised in Ainsworth that ‘persons should be able freely and easily to raise money on the security of their property’.61 Indeed, in later debate on the Matrimonial Homes Bill, Lord Hodson reinforced his desire to ensure the commercial viability of mortgages for the many thousands of poor people who required easy access to affordable credit. For Lord Hodson this was of greater public interest simply on the basis of the numbers affected, mocking Lord Denning as one who ‘moves us to tears every time he mentions a deserted wife’ even though there were proportionately fewer such women than the poor who required assistance to purchase a home with the aid of a mortgage.62 Of course, the House of Lords’ concern with the potential effect of the deserted wife’s equity upon banking practices was overstated. In reality, rather than making mortgages commercially unworkable, the market was more likely to have adjusted to a new level in procedures and practices, as it was later to do following the House of Lords’ decisions in Barclays 56 Ainsworth (Ch D) (n 3) 17 (Cross J). See also the dissenting judgment of Russell LJ in the Court of Appeal (n 4). 57 Ainsworth (HL) (n 1) 1230 (Lord Upjohn). Or as Kahn-Freund termed them, the internal and external relations of spouses, O Kahn-Freund, ‘Recent Legislation on Matrimonial Property’ (1970) 33 MLR 601, 610. 58 Lee (n 9) 22 (Upjohn J); Megarry (n 43) 483. 59 Ainsworth (HL) (n 1) 1233–34 (Lord Upjohn) and 1248 (Lord Wilberforce). 60 Barclay’s Bank plc v O’Brien [1994] 1 AC 180 (HL) 188. 61 Ainsworth (HL) (n 1) 1233–34. 62 HL Deb 28 June 1966, vol 275, cols 627–57. See also Lord Derwent HL Deb 07 July 1966, vol 275, cols 1184–1219.

National Provincial Bank Ltd v Ainsworth 569 Bank v O’Brien63 and Williams & Glyn’s Bank Ltd v Boland.64 In the latter case Lord Scarman counselled the courts against flinching in the face of arguments on the effect of decisions upon the banking industry.65 Indeed in Ainsworth, as the Court of Appeal was prepared to recognise, the signs had been there for an astute banker to be put on enquiry that there might have been marital desertion.66 But that is not where the policy lay. At a point in the century when mortgages were becoming more commonplace and homeownership was on the rise, at a point when wives were safeguarded neither through legal/beneficial ownership nor in the mortgagee/mortgagor relationship, the House of Lords placed its boundary marker not with protection of the wife through recognition and development of her right but with protection of commerce against uncertain discoverability. That choice over priority cemented the policy of the 1925 property legislation for safeguarding third parties through certain discoverability. A connected and more pressing concern in terms of discoverability was the position in registered land. Here the potential effect of the ‘deserted wife’s equity’ upon a purchaser would be compounded not by the requirement of notice, but by the operation of section 70(1)(g) of the Land Registration Act 1925, which allowed a right of those in actual occupation to bind a purchaser irrespective of notice where it amounted to an overriding interest.67 Cross J in the High Court in Ainsworth had been struck by the fact that were this to be the case, the ‘ridiculous consequence’ would arise where a deserted wife had greater protection in registered land than was available in unregistered title, her right binding without notice.68 This was not an avenue that the House of Lords was prepared to permit, albeit overlooking the fact that such inconsistencies already abounded between unregistered and registered land for right holders.69 Agreeing with the dissenting judgment of Russell LJ in the Court of Appeal, the House of Lords held that the rights capable of being an overriding interest under section 70(1)(g) of the Land Registration Act 1925 were rights in reference to the land, that

63 O’Brien (n 60); and see also the later House of Lords’ decision in Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 (undue influence). 64 Williams and Glyn’s Bank v Boland [1981] AC 487 (HL). 65 Ibid, 510. For a critique of the arguments against protecting the mortgage industry, see L Fox, Conceptualising Home: Theories, Laws and Policies (Oxford, Hart Publishing, 2007) 88–92. 66 See n 54. Mr Ainsworth did not live in the matrimonial home, neither was he contactable there. 67 See now schs 1(2) and 3(2) to the Land Registration Act 2002. 68 Ainsworth (Ch D) (n 3) 16. 69 The operation of Land Registration Act 1925, s 70(1)(g) was a primary source of inconsistency, allowing unregistered minor interests to become overriding when coupled with actual occupation, a process that had no comparable counterpart in unregistered land, Land Charges Act 1972, s 4 holding sway.

570 Alison Dunn is, property rights ‘capable of enduring through different ownerships’.70 It neatly followed that the deserted wife did not fall within this section given that her rights were no more than personal.71 Without more, the ‘deserted wife’s equity’ could not be enforceable beyond the marriage partners inter se. Although a convenient solution, the authority to disregard lesser rights for the purposes of section 70(1)(g) was not entirely clear,72 but the effect of the Lords’ decision has been to set in stone the characteristics of the requisite right for an overriding interest under this section and its counterpart in later legislation. The House of Lords’ focus upon discoverability in this time period was indicative of the growing association between the business and family spheres as the use of mortgages as a source of capital and purchasing power became more commonplace. For an early House of Lords decision involving the position of mortgagees, the ascendancy of third parties was significant in the laying down of a marker in the question of priority. But the difficulties of recognising when a right arises and its discoverability for third parties are secondary concerns to the primary issue of whether the right can exist at all. Concerns with discoverability should not obscure the more fundamental question of whether the deserted wife’s right can arise and be capable of having binding effect. It is with regard to that primary issue that questions may be raised as to the consequences of the House of Lords’ decision. Indeed, the Law Lords’ concern with distinguishing equities and the discoverability of rights and interests raises an intrinsic point about the willingness of the judiciary to utilise Equity’s creative strength and the circumstances in which they might be disposed to do so. Arguably, the ‘deserted wife’s equity’ was not an equity in the sense used by Lord Upjohn and Lord Wilberforce, not because it did not have the necessary characteristics, but because the Law Lords were not prepared to recognise it as such. Despite Lord Wilberforce’s bald assertion that none of the criteria for a right applied to the ‘deserted wife’s equity’, sufficient of the conditions could have been recognised within the right. When placed within the context of the marital covenant, the rights of the deserted wife are definable, are capable of assumption, and may be assumed to arise on marriage and be enforceable thereafter. There are obviously questions surrounding permanence and stability in terms

70 Ainsworth (HL) (n 1) 1228 (Lord Cohen); see also 1226–27 (Lord Hodson) and 1249–50 (Lord Wilberforce). There have been difficulties in applying this approach in subsequent case law; for discussion see L Tee, ‘The Rights of Every Person in Actual Occupation: An Enquiry into Section 70(1)(g) of the Land Registration Act 1925’ [1998] CLJ 328. 71 Had the House of Lords decided otherwise it would have permitted a personal interest to become a proprietary one in all but name through the operation of Land Registration Act 1925, s 70(1)(g). 72 An analogous provision for allowing lesser rights to bind as interests in land could be seen through the upgrading provisions of Law of Property Act 1925, s 62.

National Provincial Bank Ltd v Ainsworth 571 of reparation of a broken marriage and the court’s ability to order a wife to leave the marital home, but even so, the right can be seen to have a degree of permanence and stability. Similarly, Lord Upjohn’s concern with making an equity enforceable only where it was ‘ancillary to or dependent upon an equitable estate or interest’ was deemed not to apply to the ‘deserted wife’s equity’ because the right between marital partners does not attach to specific property. Yet given that the deserted wife’s rights directly concerned a right to be maintained, the right narrowly interpreted could be said to be dependent on identifiable property (the matrimonial home) out of which that maintenance may be satisfied. It is not such a reach to attach the right of the wife to the matrimonial home, or even more boldly to classify it as a form of ‘floating equity’ which arises on marriage and crystallises on the matrimonial property on desertion. Criticisms, of course, may be made of taking such an approach, and for many it would be seen as too ‘roguish’,73 as indeed had been Lord Denning’s artificial creation of the deserted wife’s right. But despite the difficulties inherent in the right, the point is that it would not have strained credibility to afford it the potential to exist and to be binding on those who take the property with notice. That the House of Lords did not do so is not necessarily because it could not so act. The broader issue here, then, is whether a more creative application of Equity could have been pursued by the House of Lords, and whether its decision, with a focus upon the strictures of the property framework, effectively circumscribed the ability to recognise new equitable rights. Whilst there has certainly been creative use of Equity in the past, with the development of quite innovative and extensive rights which have had serious consequences for third parties and for lenders (not least the creation of the equity of redemption or the running of the burden of restrictive covenants with the land), doubts existed in this period over the ability of the courts so to act following the Judicature Acts 1873–75.74 That the Law Lords were not willing to flex Equity’s innovative muscles and took the safer and more certain course in Ainsworth, appeared to cement the view that the role of Equity was now one of ‘refinement’ of the common law rather than innovation in its own right.75 Indeed, whilst there have been creative developments in the last century in terms of equitable rights in shared property and the circumstances in which those rights have been recognised, those developments have largely fitted the Ainsworth mould in what Bagnall J was later to 73 SW Singer (ed), The Table-Talk of John Selden, 2nd edn (London, John Russell Smith, 1856) 50. 74 Evershed (n 27). 75 Ibid, for the refinement argument. For a more positive assessment of equity’s role and of Evershed’s views, see Lord Neuberger MR, ‘Has Equity Had Its Day?’, Hong Kong University Common Law Lecture, 12 October 2010, published online at (accessed 25 August 2011).

572 Alison Dunn term childbearing ‘by precedent out of principle’.76 But, as noted by Wylie, a distinction exists ‘between recognising the possibility of creating new rights, but applying first of all stringent criteria, and setting up such stringent criteria that the creation of new rights is made practically impossible’.77 On balance Ainsworth falls into the former category precisely because it left open the possibility of the development of new rights, requiring only that creation take place within the acceptable format of property rules, a format thereafter pursued persistently and vigorously in the constructive trust and proprietary estoppel case law.78 The ‘protean quality’79 of the ‘equity’ and the elasticity between the categories of equities, mere equities and equitable interests assists in this regard, and whilst the desire to formalise the concept is inevitable in a legislative system requiring certainty, its continued flexibility post-Ainsworth weighs the balance between Wylie’s two categories. Even so, if Ainsworth has not been the death knell to equity’s innovation that some anticipated, it is worthwhile remembering that to allow creation of new rights through stringent rules as opposed to setting up stringent rules so that creation is effectively out of the question, becomes a distinction without a difference if the approach taken towards evolution is exercised at too cautionary a level. The decision of the House of Lords in Ainsworth demonstrated such caution through its formalist approach to a property rights-based framework, an approach that became entrenched in subsequent case law.80 That cautionary effect, which has only recently started to thaw,81 has been the case’s less recognised but more lasting legacy.

D. THE BROADER CONTEXT AND THE CONSEQUENCES OF THE AINSWORTH DECISION

Whilst overall the broad consensus was that the rejection of the ‘deserted wife’s equity’ by the House of Lords in Ainsworth returned clarity and

76 Cowcher v Cowcher [1972] 1 WLR 425, 430. This also explains why some rights have not survived, such as Lord Denning’s ‘new model constructive trust’, see Eves v Eves [1975] 1 WLR 1338. 77 JCW Wylie, ‘The End of the Deserted Wife’s “Equity”’ (1965) 16 Northern Ireland Legal Quarterly 521, 538. 78 The licence, for example, came to be utilised by the courts as a backdoor method by which to impose a constructive trust upon the parties, thereby obviating any objection that interests under that licence could not be proprietary; see, eg, Binions (n 35). 79 Neave and Weinberg (n 45) 36. See also discussion of Wallace and Grbich (n 45). 80 See particularly Pettitt (n 21), Gissing v Gissing [1971] AC 886 (HL) and subsequent case law on determining interests in family property. Writing extra-judicially, Lord Millett has spoken of the fossilisation of equity in this period: P Millett, ‘Equity—The Road Ahead’ (1995) 9 Trust Law International 35, 35. 81 See Baroness Hale in Stack v Dowden [2007] 2 AC 432 (HL), but note even here the approach is predicated on property-based intentions. For discussion, see N Piška, ‘Intention, Fairness and the Presumption of Resulting Trust after Stack v Dowden’ (2008) 71 MLR 120.

National Provincial Bank Ltd v Ainsworth 573 principle to this area of law,82 the problem of the deserted wife remained. The procedural focus of the House of Lords preserved the sanctity of property rights but at the expense of affording protection to the deserted wife (and consequently to her children who were also in need of a home).83 In refusing to interfere with established property principles, the Law Lords were not obtuse as to the effect the court’s decision would have on a wife’s vulnerability in the matrimonial property. Though unrepentant in his decision,84 Lord Cohen (and also Lord Wilberforce) repeated calls that had been made in the lower courts for Parliament to act.85 Some two years later the equitable result that Lord Denning had set out to achieve in Bendall v McWhirter86 was secured through legislative reform via the Matrimonial Homes Act 1967, section 2.87 This Act, introduced by Baroness Summerskill as a Private Members’ Bill,88 overcame the procedural difficulties that concerned the House of Lords by utilising existing property law principles under the Land Charges Act 1925 and the Land Registration Act 1925 (now Acts of 1972 and 2002 respectively).89 It enabled either spouse to register his or her personal right of occupation of the matrimonial home against the name or the title of the land owner, such registration serving as notice to third parties who would subsequently take the property subject to the spouse’s right.90 That right, which arises on marriage, is not immutable but will be determined on divorce or through a court order, and it is both void as against a trustee in bankruptcy and void against a purchaser for non-registration. Although doubts initially existed as to the viability of this registration requirement, especially in terms of contradicting the mutual 82

Eg Wylie (n 77) 534; but cf Heward (n 15) 55–57. For some commentators this was the most ‘intolerable’ aspect of the Ainsworth decision: eg OM Stone, ‘The Matrimonial Homes Act 1967’ (1968) 31 MLR 305, 306. 84 HL Deb 14 June 1966, vol 275, cols 20–53 (Lord Cohen). 85 Ainsworth (Ch D) (n 3) 18 (Cross J), Ainsworth (CA) (n 4) 699 (Russell LJ) and Ainsworth (HL) (n 1) 1228 (Lord Cohen) and 1259 (Lord Wilberforce); and see Lord Lloyd on the need to remedy the injustice caused by the Ainsworth decision: HL Deb 14 June 1966, vol 275, cols 20–53. Legislative reform had also been recommended by the Home Office, Royal Commission on Marriage and Divorce (Cmd 9678, 1956), paras 644, 671, 685 and 698. 86 Bendall (n 6). 87 Earlier attempts to introduce a similar Bill were not supported (see HL Deb 14 June 1966, vol 275, cols 20–53 (Baroness Emmet)). The Matrimonial Homes Act 1967 was amended in 1983 and has now been replaced by the Family Law Act 1996, ss 30–33 (as amended by the Civil Partnership Act 2004). 88 Baroness Summerskill first raised the issue in the House of Lords less than a fortnight after the Ainsworth decision. She was encouraged by the Lord Chancellor Lord Gardiner to introduce a Bill, see HL Deb 25 May 1965, vol 265, cols 820–08. 89 A form of registration had earlier been recommended by the Royal Commission (n 85) paras 665–66 and 685. 90 Such so-called ‘home rights’ entail a right to occupation with leave of the court, or, if already in occupation, a right not to be evicted or excluded by the spouse or civil partner except by leave of the court. These rights must be protected by registration as a Class F land charge in unregistered land (Land Charges Act 1972, ss 2, 4) or as a notice in registered land (Land Registration Act 2002, ss 29, 34). 83

574 Alison Dunn trust between the marriage partners,91 it has nevertheless proved to be a central mechanism for protection for both spouses and, since its inception, has been extended to include civil partnerships under the Civil Partnership Act 2004. Here, then, we see a significant comprehensive and inclusive legislative outcome from the decision of the House of Lords in Ainsworth, prompted by initial innovative equitable incursions to protect the non titleowning wife. It was, as Lord Denning later commented, ‘a good result’.92 Beyond that immediate legislative consequence, the decision of the House of Lords in Ainsworth was also significant for prompting a causal shift in the focus of the courts onto protection of the non-legal title-owning spouse via the creation of beneficial rights in the property, and as a consequence impelled the development of jurisprudence in this field. If the objection to protecting the deserted wife was that her interests were no more than personal and, as such, could not be accommodated within a doctrinal property rights system, and in the absence of bespoke protection for spouses in terms of defined ‘family property’ or ‘community of goods’ rights,93 then carving out a more secure proprietary interest became the order of the day. Indeed, perhaps seeing change in the wind, shortly before the House of Lords’ decision in Ainsworth, Lord Denning MR in Appleton v Appleton94 was developing the idea that a spouse not on the legal title of the matrimonial property could nevertheless acquire a proprietary interest in it via actions outwith an express agreement. That and other cases were just the beginning of a now burgeoning case law, a ‘silent revolution’95 that half a century later sees little sign of diminishing. The extent to which a party could acquire an equitable interest giving rise to beneficial ownership of matrimonial property, or more broadly shared family property, through resulting and constructive trusts or proprietary estoppel, came to exercise the courts in the intervening 50 years, spurred on by the explosion in home ownership, plurality of social relationships and an ease of access to financial structures, such as the mortgage.96 Indeed, a survey carried out on behalf of the 91 See HL Deb 14 June 1966, vol 275, cols 20–53 (Lords Wilberforce and Denning) and Midland Bank v Cooke [1995] 4 All ER 562, 575 (Waite LJ). 92 Denning (n 7) 222. 93 Whilst Lord Denning talked of ‘family assets’, there was no legal concept in English law such as a ‘homestead right’ or a concept of ‘community property’ as was freely employed in other jurisdictions. This highlighted the limitations of family law in relation to family property, and it reinvigorated a debate begun by the Royal Commission a decade earlier as to ownership of assets during marriage and on dissolution; see Royal Commission (n 85), Law Commission, Family Property Law (Working Paper No 42, 1971) and Law Commission, Family Law: 1st Report on Family Property: A New Approach (Law Com No 52, 1973). 94 Appleton v Appleton [1965] 1 All ER 44. See earlier Rimmer (n 22) and the postAinsworth decision of the House of Lords in Gissing (n 80) 904 (Lord Diplock). These cases are all discussed by John Mee in ch 21 of the present volume. 95 Denning (n 7) 227. 96 The case law in this field is voluminous. Key cases include Pettitt (n 21), Gissing (n 80) esp 904–05 (Lord Diplock), Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982]

National Provincial Bank Ltd v Ainsworth 575 Law Commission less than a decade after the House of Lords’ decision in Ainsworth suggested that the legal profession’s attention to the position of spouses in the matrimonial home and the legislative developments under the Matrimonial Homes Act 1967, as well as the doubt that existed over what amounted to a sufficient contribution for acquisition of a beneficial interest, almost certainly had a causal effect upon the rapid growth of joint legal ownership of the matrimonial home in the late 1960s and early 1970s.97 Over the longer term, then, in halting one nascent equitable doctrine, the decision in Ainsworth became a catalyst to push forward for redress not just for deserted wives, but also for both spouses and eventually any cohabiting partner through other property right-based avenues, as well as acting as a catalyst to joint ownership. This development speaks to a broader theme evident from the Ainsworth decision, and which anchors the case as part of a longer-range continuum of Equity’s provision of rights over property to women. This provision stretches back to Equity’s early interventions in ameliorating strict common law rules and forward to contemporary protection to beneficial ownership of family property. The common law’s treatment of the married woman had long been one of constraint. Upon entering the marriage a woman was divested of her individuality and freedom at law, and notionally compensated by the security of the married state.98 In respect of property rights, the common law decreed that a married woman’s property would pass to the ownership or control of the husband: her moveable property became his absolutely, choses in action could be the husband’s if he recovered them, and a woman’s freehold property came under the husband’s absolute control.99 Against the strict formalism of these common law rules Equity intervened, first, through the creation of the ‘separate use’, which allowed equitable title to remain with the woman.100 This was further protected by the ‘restraint upon anticipation’, which prevented a woman’s property rights under the separate use being manipulated for her husband’s gain, by

QB 133, Burns v Burns [1984] Ch 317, Grant v Edwards [1986] 1 Ch 638, Lloyds Bank plc v Rosset [1991] 1 AC 107, Oxley v Hiscock [2005] Fam 211, and Stack (n 81). 97

JE Todd and LM Jones, Matrimonial Property (London, HMSO, 1972) 82–83. In which the husband had a responsibility to support his wife: Strathmore v Bowes (1788) 2 Cox Eq Cas 28, 33; 30 ER 14, 17; Elliot v Cordell (1820) 5 Madd 149, 156; 56 ER 852, 855. 99 For a detailed account see CS Kenny, The History of the Law of England as to the Effects of Marriage on Property and the Wife’s Legal Capacity (London, Reeves & Turner, 1879). 100 This being the purpose of the device, see Cooper v MacDonald (1877) 7 Ch D 288, 293 (Jessel MR). Initially consent was needed from the husband who had legitimate expectations under the common law to the wife’s property, but eventually the use developed to the point where Equity could compel the husband to fill the trustee’s shoes: see Bennet v Davis (1725) 2 P Wms 316, 24 ER 746; Parker v Brooke (1804) 9 Ves 583, 32 ER 729; Wassell v Leggatt [1896] 1 Ch 554. 98

576 Alison Dunn restricting her powers of alienation.101 Finally Equity created the ‘equity to a settlement’, which, on action by a husband to recover his wife’s property, gave the court discretionary power to make the grant subject to a condition that provision was made for the woman out of her property.102 The success of these equitable interventions was consequent upon the fact that they operated within the property law framework and upon the law’s principles but managed to defeat the same.103 Just as concern over protection for deserted wives led to legislative reform, so too did these other earlier equitable interventions have a legislative result. Whilst important devices in their own right as a means of establishing the independence of married women with regard to their property, these interventionary mechanisms were not applied universally. In particular, they failed to afford protection to all married women, particularly women of no substance and women who, after the Industrial Revolution, were employed outside the home.104 The strictness of the common law and the partial protection offered by Equity to women with existing rights in property before marriage eventually came to be seen as enforcing a social and legal gap between the classes.105 Following pressure for reform, these equitable developments became part of the legislative panoply of provisions in the Married Women’s Property Acts of 1870–93, Acts which offered broader protection to propertied women and ‘married women in the humbler classes of life’,106 that is, women who fell outwith Equity’s protective remit in being without property and who entered the married state. The development of the rights of the deserted wife by Lord Denning in the 1950s and the resultant Matrimonial Homes Act 1967 mirrored and were the twentieth-century counterpart of this earlier equitable intervention.107

101 See Brandon v Robinson (1811) 18 Ves 429, 34 ER 379; Jackson v Hobhouse (1817) 2 Mer 483, 35 ER 1025; Tullett v Armstrong (1839) 1 Beav 1, 23; 48 ER 838, 847–48; WG Hart, ‘The Origin of the Restraint upon Anticipation’ (1924) 40 LQR 221. The restraint upon anticipation was eventually abolished by the Law Reform (Married Women and Tortfeasors) Act 1935, s 2, and the Married Women’s (Restraint on Anticipation) Act 1949, s 1. 102 See Tanfield v Davenport (1638) Tothill 114; Osbond v Morgan (1851) 9 Hare 43, 434–35. Eventually this right developed so that a woman could assert it in her own right, see Elibank v Montolieu (1801) 5 Ves 737, 31 ER 832. 103 See Sturgis v Champneys (1839) 5 My & Cr 97, 105; 41 ER 308, 312 (Cottenham LC). 104 Kahn-Freund (n 57) 605. 105 Ibid, and see JS Mill, The Subjection of Women (London, Longmans, Green, Reader & Dyer, 1869). 106 Lord Cairns LC, second reading of the Married Women’s Property Bill HL Deb 21 June 1870, vol 202, col 600. He went on to comment that ‘the Bill would do for the poor what the Court of Equity did for the rich’. For discussion of reform, see S Staves, Married Women’s Separate Property in England 1660–1833 (Cambridge, Mass, Harvard UP, 1990) and V Ullrich, ‘The Reform of Matrimonial Property in England during the 19th Century’ (1977) 9 Victoria University of Wellington Law Review 13. 107 Just as the Married Women’s Property Acts 1870–93 encompassed Equity’s approach in the context of social change, so too did the Matrimonial Homes Act 1967 act as a similar response to social pressure to protect the wife, in this case a wife predominantly without

National Provincial Bank Ltd v Ainsworth 577 But as Ainsworth highlights, Equity’s development of new rights in this last century was less immediately successful than that in the nineteenth century, because the rights that had been created contradicted established common law principles of security and sanctity of property rights, rather than working within the existing system. As a point of distinction, those women assisted by Equity in the nineteenth century had existing property rights that could be protected in a way that the deserted wife did not. As a result, enforcing the rights of a deserted wife could not obviously be accommodated within established property law without causing broader hardship to third parties such as a purchaser or lender, and from this a movement was made forward to beneficial ownership of the matrimonial home through trusts and estoppel. The retreat from the ‘formless’ rights of the deserted wife by the House of Lords in Ainsworth108 also serves as a timely reminder of the limits of Equity in affording welfare-based protection to vulnerable parties. Underlying Lord Denning’s development of the rights of the deserted wife was a concern with the ‘parlous plight’ of a wife who had been abandoned by her husband, often, though not exclusively, as a consequence of the husband’s adultery.109 Tied up with this concern for the vulnerability of the deserted wife was a more moralistic concern with the deserting husband’s disregard for the sanctity of marriage.110 Evident here is the moral fundamentalism of Lord Denning’s conservative approach to women,111 albeit that his judicial decisions resulted in many beneficial advances towards equality of treatment for women.112 In a decade leading up to legislative reform on

earning power. This has been posited as a 19th-century crisis of production versus the 20th-century crisis of consumption; see Kahn-Freund (n 57) 605. 108

Ainsworth (HL) (n 1) 1224 (Lord Hodson). Sir A Denning, The Changing Law (London, Stevens & Sons Ltd, 1953) 87. 110 See in particular Lord Denning’s judgment in Bendall (n 6) 484, where he urged that ‘no civilised community could tolerate such a cynical disregard of the married state’. In assessing the individual circumstances, however, the court appeared to remain conscious of the actions of both parties, and attempted to mediate therein. The ‘equity’ was voidable where the wife had committed adultery, see Short v Short [1960] 3 All ER 6, Middleton (n 38), and see also Churcher (n 9) 29 (Roxburgh J). In Silverstone (n 9) Pearce J made a conscious attempt to find the fairest outcome, going so far as to arrange for a court welfare officer to visit the husband and wife so that a reconciliation might be explored. 111 MDA Freeman, ‘Family Matters’ in Jowell and McAuslan (eds) (n 51) 109. Freeman quotes from Lord Denning’s 1960 Eleanor Rathbone Memorial Lecture in The Equality of Women (Liverpool, University of Liverpool Press, 1960), in which he displayed trenchant views on the potential dissolution of society as a result of gender equality. Lord Denning also made clear his views on the importance of Christian marriage as a foundation for family life: Denning (n 7) 201. 112 Consider, eg, the development of concepts such as ‘family assets’ and the discretion in apportioning assets on divorce (see Pettitt v Pettitt [1968] 1 WLR 443 (CA), Watchel v Watchel [1973] Fam 72), or the extended rights to cohabitees as members of a tenant’s family for the purpose of the Rent Acts (Dyson Holdings v Fox [1976] QB 503). During his period as Master of the Rolls, Lord Denning spearheaded progressive leaps in equity jurisprudence 109

578 Alison Dunn equal pay and sex discrimination, concern with the economic vulnerability of women had become a worldwide issue.113 The legal, social and fiscal vulnerability of the abandoned spouse will be evident in any age, but for the wife was particularly acute in the 1950s and 1960s. In an age which saw the beginnings of an erosion of traditionalist values and attitudes towards the family, rising divorce rates and ultimately a liberalisation of divorce laws,114 this was a period in which wives tended not to be in circumstances which would allow them to establish financial independence or housing security. Whilst there was a rise in numbers of women going out to work and earning a separate income, wage rates in this period were insufficient to afford independent housing. The post-war housing shortage also meant that there was a dearth of affordable housing, and for a deserted wife (and her children) the possibility of homelessness was a real one.115 Against this background, wives’ vulnerability was addressed directly by Lord Denning within the case law as a process of welfare-based discretionary justice to prevent a husband from ‘taking advantage of his own wrong’.116 Whilst the House of Lords acknowledged both the common law duty of the husband

across a number of fronts: the contractual licence, resulting and constructive trusts, and proprietary estoppel, as well as issues relating to remedies and formalities in the creation of a trust. See, eg, DHN Food Distributors Ltd v Tower Hamlets [1976] 1 WLR 852, Hussey v Palmer [1972] 1 WLR 1286, Binions (n 35), Amalgamated Investment Ltd v Texas Commerce Bank Ltd [1982] QB 84 and Quennell v Maltby [1979] 1 WLR 318. 113 The Commission on the Status of Women, set up in 1946 under the auspices of the UN, had a mandate to promote women’s rights in political, economic, civil, social and educational fields (ECOSOC Resolution establishing the Commission on the Status of Women. E/RES/2/11, 21 June 1946). It drafted a Convention on the Political Rights of Women which was adopted by the General Assembly on 20 December 1952 (General Assembly Resolution 640(VII)), before turning to the issue of discrimination in marriage, creating three international agreements on women’s rights: the Convention on the Nationality of Married Women (General Assembly Resolution 1040 (XI), 29 January 1957), Convention on Consent to Marriage, Minimum Age for Marriage and Registration of Marriages (General Assembly Resolution 1763 A (XVII), 7 November 1962), Recommendation on Consent to Marriage, Minimum Age for Marriage and Registration of Marriages (General Assembly Resolution 2018 (XX), 1 November 1965). For discussion see UN, The United Nations and the Advancement of Women 1945–1996 (UN, 1996). In putting forwarded the Matrimonial Homes Bill, Baroness Summerskill admitted to being influenced by the work of this Commission, see HL Deb 14 June 1966, vol 275, col 20. 114 The first divorce explosion had been post-World War II and led to a demand for easier divorce, see Royal Commission (n 85). Fundamental change in divorce law was introduced by the Divorce Reform Act 1969 (in force from 1971), which introduced the concept of irretrievable breakdown as a ground for divorce. In 1961 there were 2.1 divorces per 1,000 married persons, and this had risen to 6.0 in 1971; see Law Commission, Facing the Future. A Discussion Paper on the Ground for Divorce (Law Com No 170, 1988), App A, 46. 115 Ainsworth (HL) (n 1) 1241 (Lord Wilberforce). If a woman was evicted from the matrimonial home, her only alternative might be to seek local authority support for financial and housing needs. 116 Ainsworth (CA) (n 4) 683 (Lord Denning MR). Also accepted was the emotional cruelty which could occur in permitting a husband to sell the matrimonial home to his new partner over the head of his wife, as occurred for example in Street (n 6).

National Provincial Bank Ltd v Ainsworth 579 to support and maintain his wife, and her vulnerability on desertion, their Lordships remained conscious that such ‘social considerations of humanity’117 could not override broader concerns against affording unprincipled, discretionary or ‘palm tree justice’118 and undermining the security of established principles of property law. Those twin concerns have both characterised the intersection of equity and rights in family property,119 and despite Lord Denning’s approach they have historically militated against Equity being able to operate solely status-based welfare jurisdictions. In this context the decision in Ainsworth is as important for what it did not do (afford protection for a vulnerable wife) as for what it did achieve (securing the sanctity of property principles). Indeed the House of Lords’ treatment of the deserted wife’s equity is an instructive reminder of why Equity’s jurisdictions in such diverse areas as parens patriae rights over wardship120 and the Lord Chancellor’s personal jurisdiction over persons of unsound mind121 could not survive within the Court of Chancery in circumstances where they sought to operate outside of protection of established property rights. We see in those jurisdictions, as we see with the termination of the deserted wife’s equity (later echoed by the abrogation of Lord Denning’s attempt to create a ‘new model’ constructive trust over family property based principally on justice and good conscience122) and the success of the Equity’s nineteenth-century 117

Ainsworth (HL) (n 1) 1242 (Lord Wilberforce). Ibid, 1221 (Lord Hodson) and 1249–50 (Lord Wilberforce). 119 See A Bottomley, ‘Women, Family and Property: British Songs of Innocence and Experience’ in M Maclean and J Kurczewski (eds), Families, Politics and the Law: Perspectives for East and West Europe (Oxford, Clarendon Press, 1994) 261. 120 For wardship, for example, whilst the parens patriae doctrine embraced all the children in the realm, protection was afforded only if the child had some property which might be administered by the court. See, eg, Re Willoughby (1885) 30 Ch D 324; Johnstone v Beattie (1843) 10 Cl & F 42, 93; 8 ER 657, 678; Hope v Hope (1854) De GM & G 328, 332; 43 ER 534, 537; and Re H’s Settlement (1909) 2 Ch 260. It is arguable that the focus was brought to bear not upon the child as child, but the child as heir: see Eyre v Countess of Shaftesbury (1722) 2 P Wm 103; Wellesley v Duke of Beaufort (1827) 2 Russ 1, 38 ER 236. It was not until the property qualification was removed by the Law Reform (Miscellaneous Provisions) Act 1949 that the protection was afforded solely on welfare concerns. After the 1949 Act the welfare and social considerations rapidly expanded the wardship jurisdiction, making it unmanageable within Chancery, and it was removed to the Family Division of the High Court in 1970: see Latey Committee, Report of the Committee on the Age of Majority (Cmnd 3342, 1967) para 194. 121 The protection of ‘ideots and lunaticks’ was a personal jurisdiction of the Lord Chancellor which was administered through the Court of Chancery and which arose as a result of the Statute de Praerogativa, 17 Ed II st.1. Although concern with welfare was evident, the jurisdiction operated on a property criterion. This jurisdiction was eventually removed to the Court of Protection, where it took on a much more welfare-based operation: see Re Holmes (1827) 4 Russ 182, 187; 38 ER 774, 777; FW Maitland, ‘The “Praerogativa Regis”’ (1891) 6 English Historical Review 367; R Jennings, ‘Jurisdiction in Lunacy: The New Look’ (1960) 23 MLR 421. See too Chantal Stebbings’ discussion in ch 15 of the present volume. 122 Eves (n 76) 1341 (Lord Denning); see also Lord Denning’s judgments in Heseltine v Heseltine [1971] 1 WLR 342 and Hussey v Palmer [1972] 1 WLR 1286. Such developments 118

580 Alison Dunn jurisdiction of married women’s property, that Equity’s jurisdictions tend to flourish where the vulnerable party has established and defined property rights to protect.

E. CONCLUSION

Maitland’s description of Equity as being an institution of ‘great elasticity and generality’123 is certainly borne out by its case law. Landmark cases in Equity often involve interplay between the formalism of the common law and the fluidity of Equity. Sometimes they involve a battle between adherence to strict rules (common law or equitable) and the need to be more pragmatic in adapting to changing social circumstances.124 Occasionally they cause hardship between parties to create a broader regulatory fairness.125 They almost always also show the ascendancy of established property rights over and above status-based welfare concepts protecting vulnerability per se.126 To a greater or lesser extent, the National Provincial Bank Ltd v Ainsworth litigation has elements of all of these features. In particular it shows the choices made about the prevalence and priority of protections that Equity affords, and reveals how discretionary-based equitable concepts such as Lord Denning’s ‘deserted wife’s equity’ are limited by the circumstances in which the rights arise. The Court of Appeal’s discretionary-based approach allowing flexibility to achieve a just outcome for the deserted wife is set against the more conservative procedural approach of the House of Lords, the latter providing certainty and externally-faced justice through rigidly applied rules. Despite the general view of Equity as one in which good morals, ethical justice, duties and reason hold sway,127 the location of its operation is often within tightly construed property principles. There creativity can occur, but as Ainsworth reminds us, it has to be creativity within already accepted boundaries of property rights. Ainsworth’s boundary markers from which subsequent case law have taken their lead are set at a broader if cautious concern for adherence to clear, certain rules which take as their priority the protection of purchasers and the public interest in securing commercial lending.

were halted by the Court of Appeal in Burns v Burns [1984] 1 All ER 244, though flexibility in determining issues of quantification remain extant; see Stack (n 81). 123

FW Maitland, Equity (Cambridge, CUP, 1923) 23. Eg McPhail v Doulton [1971] AC 424 (HL). As Waite LJ has noted, ‘Equity has traditionally been a system which matches established principle to the demands of social change’: Midland Bank (n 91) 575. 125 Eg Boardman v Phipps [1967] 2 AC 46 (HL). 126 Eg Foskett v McKeown [1997] 3 All ER 392 (CA); cf [2001] 1 AC 102 (HL). 127 DR Pound, Jurisprudence, vol 1 (St Paul, Minn, West Publishing Co, 1959) 407. 124

20 Boardman v Phipps (1967) MICHAEL BRYAN

A. INTRODUCTION

B

OARDMAN V PHIPPS1 is one of those decisions which define attitudes to the application of fiduciary standards. It has never been doubted that an honest fiduciary must occasionally, like Admiral Byng, be shot pour encourager les autres,2 but the proposition that an honest fiduciary whose breach of duty materially benefited the principal will be held accountable for his own gains from the breach has understandably not been enthusiastically received. The issues which divided the House of Lords have also divided the academic commentators, one of whom has forcefully argued that the decision ‘created rather than prevented unjust enrichment’.3 The controversies surrounding the decision have never been quietened and perhaps never will be. At least equity and trusts teachers can be grateful. Few decisions so effectively and unfailingly stir up tutorial discussion; even students ignorant of the issues intuitively take sides for Boardman or for the disgruntled beneficiary. Why is Boardman v Phipps such a controversial decision? The question is hard to answer because Boardman is not a ‘single issue’ case. It raises a series of questions that are distinct in that they can be answered without reference to the others, but are connected in the sense that most do not arise at all but for the answer given to a logically anterior question. Was Boardman v Phipps a case on unauthorised conflicts of interest or unauthorised profit-making, or both? Were the fiduciary prohibitions applied

1 Phipps v Boardman [1964] 1 WLR 993; [1964] 2 All ER 187 (Wilberforce J); [1965] Ch 992; [1965] 2 WLR 839; [1965] 1 All ER 849 (CA); affd sub nom Boardman v Phipps [1967] 2 AC 46; [1966] 3 WLR 1009; [1966] 3 All ER 721 (HL). 2 For the simile, see G Jones, ‘Unjust Enrichment and the Fiduciary’s Duty of Loyalty’ (1968) 84 LQR 472, 487. Admiral Byng was court-martialled and shot in 1757 for losing the island of Minorca to the French, prompting Voltaire’s remark in Candide that ‘in this country, it is wise to kill an admiral from time to time to encourage the others’. 3 JH Langbein, ’Questioning the Trust Law Duty of Loyalty: Sole Interest or Best Interest?’ (2005) 114 Yale Law Journal 929, 955. See also Jones (n 2) 486.

582 Michael Bryan too strictly to Boardman and Tom Phipps? Whose consent, if any, to their purchase of the shares was required, and was effective consent in fact given? Should a proprietary constructive trust have been imposed over the shares? Should the defendants have been awarded ‘liberal remuneration’ for the work undertaken for the trust, and what are the consequences of the award of remuneration for other cases of fiduciary delinquency? The legacy of Boardman v Phipps includes not only questions without agreed answers but also a mythology. Among the myths is the view that Boardman and his co-defendant, Tom Phipps, were accountable as agents of the Phipps trust. Another is that they only lost the case because they failed to obtain the consent of one of the trustees, the testator’s widow, who was senile and incapable of understanding their plans for improving the profitability of the trust property. Yet another is that Tom Phipps was held accountable only because he chose to stand by Boardman and to submit to the equitable relief awarded against his co-defendant. In addition to the mythology there are obscurities on important questions, such as whether a proprietary constructive trust was ordered. The mythology surrounding Boardman v Phipps has impeded an understanding of some of the important issues raised by the decision. The aim of this chapter is to reconstruct the facts and to show how the facts shaped the arguments so that the controversies generated by the case may be better understood, even if they cannot be settled satisfactorily. Many of the misconceptions and doubts surrounding the decision are easily removed by a careful reading of the first-instance judgment of Wilberforce J, whose findings were not challenged on appeal and whose orders were upheld. Most academic writing on Boardman v Phipps has sided with the defendants and the dissenting speeches in the House of Lords. If this chapter has any conclusion, it is that there is more to be said for the majority speeches than has usually been conceded by the academic commentators. B. THE FACTS: A NORTHAMPTONSHIRE TALE4

Charles William Phipps was ‘a prominent manufacturer in Northampton’.5 When he died in 1944 he left his residuary estate, subject to an annuity for his widow, on trust to be divided between his four children, his three sons 5 3 taking a 18 share each and his daughter a 18 share. The greater part of the residuary estate comprised a minority shareholding in Lester and Harris, a 4

Taken from the findings of Wilberforce J at [1964] 2 All ER 187. [1965] Ch 992, 1011 (Lord Denning MR). The case focused on Phipps’s textile manufacturing interests in Nuneaton, Coventry and Toowoomba in Queensland, Australia. The family also had extensive brewing interests in the Northampton Brewery Company (Phipps NBC). Phipps NBC was bought out by Watney Mann in 1960. The Phipps NBC trade mark was subsequently sold to purchasers who began marketing Phipps IPA draught beer in 2008. See M Brown with B Wilmott, Brewed in Northants (Longfield, Brewery History Society, 2010). 5

Boardman v Phipps 583 private textile company, its articles containing restrictions on the transfer of its shares. The trustees were Fox, who was an accountant active in the administration of the trust, the testator’s widow and his daughter, Mrs Noble, the last two also being beneficiaries. The will establishing the trust was in simple form, and the powers conferred on the trustees were those set out in the Trustee Act 1925. That Act limited investment to the ‘Chancery list’ investments prescribed by section 1. Put briefly, the trustees could not invest in equities but were confined to so-called ‘safe’ government securities and investment on first mortgage. However, the trust instrument authorised retention of the shares in Lester and Harris, as well as in a larger textile company managed by the Phipps family, provided that retention was prudent. Thomas Boardman was a solicitor who advised the Phipps family on the administration of the will trust. He was described by Wilberforce J as a man of ‘conspicuous ability, energy, clarity of mind and persistence’.6 These qualities were demonstrated before he became involved in the affairs of the Phipps trust, and were to be further manifested in his career subsequent to the case.7 After consulting with Fox and one of the beneficiaries, Tom Phipps, Boardman decided in 1956 that the accounts of Lester and Harris were unsatisfactory. The steps he then took fell into three phases. In the first phase Boardman and Tom decided to attend the Annual General Meeting of Lester and Harris with a view to having Tom elected as a director. Fox was informed of the plan but not formally asked to approve it, although the evidence clearly showed that he would have approved, if asked. Mrs Noble was also kept informed, but no attempt was made to inform the testator’s widow who suffered from senile dementia and was unable to understand trust affairs. The plan failed, the chairman of Lester and Harris refusing to accept the motion to appoint Tom a director. Boardman and Tom next set about purchasing the company’s shares in their own names. The only trustee consulted in this phase was Fox. He made clear that there was no question of buying the shares with trust money. The trustees were unable to purchase additional shares because: (a) the purchase was not authorised by the investment clause; (b) no court would have approved the purchase: sinking more trust money into a badly-managed company was obviously imprudent; and

6

[1964] 1 WLR 993, 996. Thomas Gray Boardman (1919–2003). Northamptonshire Yeomanry, 1938–56. Lieutenant-Colonel. MC 1944. Solicitor 1947. Partner, Phipps & Troup, Northampton. Chairman, Chamberlain Phipps 1958–72. MP (Cons) for Leicester South-West (later Leicester South) 1967–74. Minister for Industry, Department of Trade and Industry 1972–74. Chief Secretary to the Treasury 1974. President, Association of British Chambers of Commerce 1977–80. Created Baron Boardman 1980. Honorary Treasurer, Conservative Party, 1982–83. Chairman National Westminster Bank 1983–89. 7

584 Michael Bryan (c) there was anyway no money available to buy the shares. Boardman and Tom succeeded in obtaining acceptances of some shares, although not enough to enable them to control the company.

Phase two involved protracted and complex negotiations between Boardman and Tom, on one side, and the directors of Lester and Harris, on the other. In the course of the discussions the former suggested that the company might be divided between the Phipps’s interests and the interests of the other shareholders. The negotiations led nowhere. The significance of this phase was that Boardman and Tom represented themselves as acting for the trust when they had no authority to do so. By this means they obtained a great deal of information about the management and finances of the company which they utilised in phase three. In phase three Boardman and Tom made a higher offer of £4 10s a share for the purchase of shares held by the directors, which was accepted. Similar offers were then made to other shareholders. The purchase, combined with earlier share purchases and the trust’s original shareholding, gave them control of the company. It was financed by loans raised by Boardman and Tom in the financial markets. Of the trustees, only Fox was aware of the details of the negotiations and the ultimate offer for the shares. Mrs Noble was reassured that no trust money had been employed in the purchase of the shares. She was not otherwise kept informed of the course of the negotiations, neither had she expressed any wish to be kept informed. The testator’s widow died before phase three was initiated. A consequence of her death was that the testator’s children, including Tom and his brother, John, became absolutely entitled to the trust property. Boardman and Tom sold off the Australian and Coventry operations of Lester and Harris and reorganised its Nuneaton factory. The company was able to make capital distributions to shareholders totalling £5 17s 6d a share, after which the shares were still worth more than £2 a share. The shareholders, who of course included Boardman and Tom, made considerable profits out of the transactions. John Phipps, one of the beneficiaries, was not kept informed of the course of the negotiations or of the later steps taken to reorganise Lester and Harris. The first contact Boardman made with John was a letter written on the day he made the offer to buy the directors’ shares. The letter asked John whether he had any objection to Boardman’s personal interest in the purchase, and also for John’s consent to having the voting rights on the trust shares exercised as one block with Boardman’s and Tom’s shares. The letter was followed by a meeting between Boardman and John. Wilberforce J found that Boardman had not made adequate disclosure of his plans to John either in his letter or at the meeting. John was under the impression that Lester and Harris was going to be reorganised, not (to use a contemporary term) ‘assetstripped’. John was never given an opportunity to assess Boardman’s plans, although he enjoyed the benefits of their successful execution.

Boardman v Phipps 585 John claimed that in phase one Boardman and Tom had acted ‘as agents for the trustees and that, by reason of their position as agents, they were then and ever since had remained in a fiduciary relationship with the trustees and beneficiaries’.8 The opportunity to purchase the shares from the directors of Lester and Harris was alleged to have arisen out of the agency relationship. The relief sought was:9 5 (a) a declaration that the defendants held 18 of the shares they had purchased as constructive trustees for the plaintiff; (b) an account of the profits made by the defendants from these holdings; and (c) an order that the defendants transfer to the plaintiff the shares held on 5 constructive trust for him and 18 of the profit found to have been made on taking the account.

Wilberforce J held that the defendants had acted in breach of fiduciary obligation in purchasing the shares. He made the declarations sought in a), and ordered an inquiry into the profits made under b), intimating that the profit assumed the deduction of expenditure. An inquiry was also ordered into an allowance, to be assessed on a ‘liberal scale’, for the ‘work and skill’ of the defendants. No orders were made under the third head of relief claimed pending the outcome of the inquiries.10 The Court of Appeal affirmed the orders made by Wilberforce J, though for different reasons.11 The House of Lords, Viscount Dilhorne12 and Lord Upjohn dissenting, dismissed the appeal, although again the reasons given differed from those given in the courts below.

C. WHAT WAS THE BREACH OF FIDUCIARY OBLIGATION?

(1) Agents and Intermeddlers Any analysis of Boardman v Phipps has to overcome an initial difficulty that the judgments at all levels failed to identify the precise basis on which Boardman and Tom Phipps were held accountable. It was never definitively stated whether the defendants were accountable because they had placed themselves in a position of conflict of interest; because they had made a 8

[1964] 1 WLR 993, 1005–06. [1964] 2 All ER 187, 188. The relief claimed is more fully set out in this report than at [1964] 1 WLR 993, 1005. 10 [1964] 2 All ER 187, 208. 11 [1965] Ch 992; [1965] 2 WLR 839; [1965] 1 All ER 849 (CA). 12 Viscount Dilhorne of Towcester (1905–80) also has a Northamptonshire connection to Boardman v Phipps. As Sir Reginald Manningham-Buller he had been MP (Con) for Daventry, later South Northamptonshire, from 1943 until his elevation to the Woolsack in 1962. He was Solicitor-General 1951–54, Attorney-General 1954–62, Lord Chancellor 1962–64. He was later appointed a Lord of Appeal in Ordinary. 9

586 Michael Bryan profit from their fiduciary position; or because they had acted in disregard of both fiduciary prohibitions. The case is admittedly not unique in this respect. Dr Matthew Conaglen has remarked, following an extensive review of the authorities, that ‘[e]xamples could be multiplied of how difficult it is to determine whether cases were decided on the basis of contravention of the conflict principle or of a separate profit principle.’13 The breach of the conflict principle will often simultaneously be a breach of the profit principle. Moreover, as Dr Conaglen demonstrates, the relationship between the conflict and the profit principles has never been authoritatively settled. Is the profit principle simply a specific application of the conflict principle,14 or is it a distinct fiduciary obligation, albeit one that will often overlap with the conflict principle?15 A logical starting point for ascertaining the basis of the decision in Boardman v Phipps is the statement of claim, not least because the structure of Wilberforce J’s judgment is faithful to the ordering of the pleadings.16 The claim alleged that Boardman and Tom Phipps had profited from their position as agents. It averred that the initial investigation into the affairs of Lester and Harris had been made by Boardman and Tom Phipps as agents of the trustees and that, by reason of their position as agents, ‘they were then and ever since remained in a fiduciary relationship with the trustees and the beneficiaries’.17 It next stated that the opportunity to buy the shares could have been profitably exploited by Boardman and Tom only because of their position and actions as agents of the trustees and beneficiaries. The defence denied the existence of the agency relationship, but Wilberforce J found that the facts supported the claim and gave judgment on that basis. From the plaintiff’s perspective the framing of the claim in terms of agency had two advantages. First, the proposition that Boardman and Tom Phipps were agents of the trustees and the beneficiaries meant that John Phipps could claim to be one of the principals to whom the agents’ fiduciary obligations were directly owed. In contrast, if the defendants were agents of the trustees only, the latter would have been solely entitled to the unauthorised profits. This may not, though, have been a significant consideration since John Phipps, as a beneficiary absolutely entitled to a share of the trust fund,18 would presumably have been entitled to claim his share of the defendants’ profits from the trustees by invoking the rule in Saunders v Vautier.19

13

M Conaglen, Fiduciary Loyalty (Oxford, Hart Publishing, 2010) 116. As Lord Upjohn maintained: [1967] 2 AC 46, 123. 15 This was the preferred analysis of Lord Cohen who identified both a conflict of interest ([1967] 2 AC 46, 103–04) and the exploitation of a profit-making opportunity (ibid, 102–03). 16 [1964] 1 WLR 993, 1005. 17 Ibid (emphasis added). 18 John Phipps’s share of the trust fund vested in possession only after the testator’s widow died in 1958. 19 Saunders v Vautier (1841) Cr & Ph 340, 41 ER 482. 14

Boardman v Phipps 587 A second reason for sounding the case in agency was that it provided the only analytical framework for holding Tom Phipps accountable to his brother. Judgments in the Court of Appeal and House of Lords developed an alternative basis for holding Boardman accountable by focusing on his role as solicitor to the trustees. But Tom Phipps was accountable to his brother, John, only if it could be shown that he was acting as John’s agent in the negotiations for the purchase of shares. This is an important point. A reading of some of the House of Lords speeches conveys the misleading impression that Tom Phipps selflessly agreed to associate himself with the equitable liability visited on Boardman even though he had not himself acted in breach of any fiduciary obligation.20 The cause of the misapprehension may have been the refusal of the defendants’ counsel at the appeal hearings to distinguish Tom’s legal position from Boardman’s. But it is clear from Wilberforce J’s judgment, explicitly upheld on this point by Lord Cohen21 in the House of Lords, that Tom was accountable on the basis of having exploited his position as agent to the trustees and to the beneficiaries to make a personal profit.22 The agency analysis of the defendants’ liability was forensically attractive to the plaintiff, but it was a weak peg on which to hang fiduciary accountability. None of the recognised methods of establishing an agency relationship had been satisfied.23 This point was emphasised by Lord Denning in the Court of Appeal. He noted that there was nothing in the correspondence or meetings between the parties to suggest that the defendants had been appointed agents for the trust, and that the incapacity of the testator’s widow would in any event have precluded any such appointment.24 Moreover, the purpose of agency is to create or affect legal relations

20 See in particular Lord Upjohn at [1967] 2 AC 46, 125. Lords Hodson and Guest refer to Tom Phipps as a ‘co-adventurer’ without clarifying the meaning of the term: [1967] 2 AC 46, 106 and 114. 21 Lord Cohen (1888–1973) provided the ‘swing vote’ in Boardman v Phipps. At the Bar he was the leading company lawyer of his generation. He was appointed a judge of the Chancery Division in 1943, to the Court of Appeal in 1946 and to the House of Lords in 1951. As chairman of the Company Law Amendment Committee he was largely responsible for the reform provisions of the Companies Act 1948. He retired as a Lord of Appeal in Ordinary in 1960, but continued to sit in the House of Lords by invitation. Boardman v Phipps was his last case. His entry in the ODNB was written by Lord Wilberforce: R Wilberforce, ‘Cohen, Lionel Leonard, Baron Cohen (1888–1973)’, Oxford Dictionary of National Biography (Oxford, OUP, 2004); published online at , accessed 25 August 2011. Of Boardman v Phipps it states that ‘his four colleagues being equally divided it fell to him, much to his anxiety, to give the casting decision’. 22 Lord Cohen expressly upheld Wilberforce J’s finding that Tom Phipps occupied a fiduciary position as agent ([1967] 2 AC 46, 104) although deprecating (at 100) the use of the term ‘self appointed’ agent. 23 In other words, express or implied agreement, apparent authority, estoppel or ratification by the principal: P Watts and FMB Reynolds (eds), Bowstead and Reynolds on Agency, 19th edn (London, Thomson, 2010) Arts 3 and 33. 24 [1965] Ch 992, 1017. See also Pearson LJ at 1028: ‘There was no suggestion of an agency contract to be entered into between the trustees and the defendants.’

588 Michael Bryan between the principal and third parties, but nothing that Boardman or Tom Phipps did could have bound the trustees or beneficiaries.25 The so-called agency relationship recognised by Wilberforce J and the majority judges in the House of Lords imposed liabilities on the defendants, but it could not have altered the legal relationship of the supposed principals or conferred any rights on the agents.26 The only occasions on which the defendants acted as true agents of the trust was in representing its interests at annual general meetings of Lester and Harris for which authority had been given by the trustees (but not by the beneficiaries) to represent the trust and to try, in the event unsuccessfully, to have Tom Phipps elected a director. Nothing they did thereafter could have bound the trustees and beneficiaries of the Phipps trust. For Viscount Dilhorne the defendants were agents only for the purpose of representing the trust at annual general meetings of the company. Once that limited agency had come to an end there was no justification for imposing fiduciary liability on the defendants on the basis of agency.27 But this was not, and should not be, the end of the story. A suggestion made by Lord Denning in the Court of Appeal now becomes relevant. Wilberforce J had described the defendants as ‘self-appointed agents’.28 Analogising from cases of intermeddling, either with the estate of a deceased person as an executor de son tort, or with the collection of rents as a purported bailiff, Lord Denning held that persons who assume the authority of an agent which they do not possess will be held accountable on the basis of the authority they have assumed.29 ‘There are many cases in the books where a person has assumed to have authority when in truth he has none. It has always been held that he is accountable just as if he had in fact the authority which he assumed.’30 Although the majority judges in the House of Lords employed the language of agency, it was this version of agency— intermeddler’s liability—which was in substance invoked in order to hold the defendants accountable. Boardman v Phipps should be recognised as a decision on intermeddler’s liability, arising where a person assumes the authority of an agent that he does not possess. It was never a case on true agency, classically defined in Bowstead and Reynolds as ‘the fiduciary relationship which exists between

25 E McKendrick (ed), Goode on Commercial Law, 4th edn (London, LexisNexis Butterworths, 2009) 179. 26 A point identified by G McMeel, ‘Philosophical Foundations of the Law of Agency’ (2000) 116 LQR 387, 396. 27 [1967] 2 AC 46, 87. 28 [1964] 1 WLR 993, 1007. 29 [1965] Ch 992, 1017–18. Reliance was placed on Stamford’s Case (1574) 2 Leo 223, 74 ER 496; Read’s Case (1605) 5 Co Rep 33b, 77 ER 103; Gawton v Lord Dacres (1590) 1 Leo 220, 74 ER 201; Lyell v Kennedy (1889) 14 App Cas 437. 30 [1965] Ch 992, 1017.

Boardman v Phipps 589 two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom manifests assent so to act or so acts pursuant to the manifestation’.31 In Boardman v Phipps none of the trustees and beneficiaries had assented to the defendants acting for them,32 and Boardman’s dealings were predicated on the absence of any such assent. Agency de son tort is as different from true agency as trusteeship de son tort differs from express trusteeship. A source of confusion pervading the judgments is the failure to distinguish between the concepts. As Professor Edelman has noted, fiduciary relationships are not confined to established categories, such as trustee and beneficiary, director and co-director, and agent and principal.33 Most34 are manifestations of a voluntary undertaking made by one person to another.35 Agency is one application of the fiduciary concept, but other cases of undertaking to act in the interests of another so as to affect the other’s legal or practical interests can also be characterised as fiduciary. The study of the law of fiduciary obligations has been dominated by analysis of recognised nominate categories of fiduciary relationship; but they do not cover the entire field, and Boardman v Phipps is one of those cases where fiduciary obligations were imposed even though the relationship fell outside the established categories. Intermeddlers de son tort—whether they intermeddle as purported agents, trustees, executors or bailiffs—are accountable as fiduciaries to the persons on whose behalf they have purported to act not because they are agents but because they have voluntarily assumed responsibility for dealing with another’s property or business affairs. Like other fiduciaries, intermeddlers are not permitted to make a profit on their own account.

(2) Conflicts of Interest The plaintiff’s statement of claim did not expressly allege a conflict of interest, and the suggestion that Boardman had placed himself in a position of conflict between his personal interest in purchasing the Lester and Harris shares and his duty to give disinterested advice to the trustees appeared

31

Bowstead and Reynolds (n 23) Art 1(1). The testator’s widow lacked capacity to assent. 33 J Edelman, ‘When Do Fiduciary Duties Arise?’ (2010) 126 LQR 302, 310–11. 34 Query whether partnerships and partnership-like business structures such as joint ventures can be accommodated within an ‘undertaking’ model of fiduciary obligations: United Dominions Ltd v Brian Pty Ltd (1985) 157 CLR 1. 35 The consensual analysis of fiduciary obligations is also supported by economic analysis of trusts and fiduciary obligations as excludable default rules: FH Easterbrook and DR Fischel, ‘Contract and Fiduciary Duty’ (1993) 36 Journal of Law and Economics 425; JH Langbein, ‘The Contractarian Basis of the Law of Trusts’ (1995) 105 Yale Law Journal 625. 32

590 Michael Bryan for the first time, almost as an afterthought, in Lord Denning’s judgment in the Court of Appeal.36 The conflict identified by Lord Denning related to the restrictions imposed on the transfer of the Lester and Harris shares. The articles of association entitled existing shareholders to a right of preemption: no shares could be sold to a non-shareholder so long as a shareholder was prepared to buy them at ‘fair value’. Lord Denning considered that when the directors of Lester and Harris were negotiating to sell their shares to Boardman and Tom Phipps, Boardman might have been asked by the trustees, as existing shareholders in the company, to advise on an application to the court to exercise the right of pre-emption. ‘This would, if necessary, be another ground of liability on Boardman, for he placed himself in a position where there was a conflict between his duty to advise an application to the court and his interest to acquire the shares himself.’37 In the House of Lords Lord Cohen identified conflict of interest as one basis for holding Boardman accountable, the other being the so-called agency argument already discussed. Lord Hodson and Lord Guest placed greater emphasis on Boardman’s conflict of interest.38 None of the speeches attached any weight to the restrictions on share transfers. Lord Cohen emphasised the fact that Lester and Harris was a private company, but for the different purpose, considered in the next section of the chapter, of showing that Boardman’s opportunity to buy the shares came from his position as self-appointed agent for the trustees since there was no possibility of buying the shares on the open market.39 For the majority judges the conflict was between Boardman’s duty to advise the trustees generally on the purchase of additional shares in the company, including advising on any application to the court to authorise the purchase, and his personal interest in acquiring the shares. The conflict argument has justifiably come in for special criticism. From the plaintiff’s standpoint it had two drawbacks by comparison with the agency analysis. First, even if Boardman had placed himself in a position of conflict between interest and duty, Tom Phipps was unaffected by the

36 The argument of Raymond Walton QC, for John Phipps, in the Court of Appeal placed greater emphasis on Boardman’s fiduciary obligations as solicitor to the trustees than on the duties of Boardman and Tom Phipps as agents: see [1965] Ch 992, 1009: ‘It was most important that he was a solicitor and the trust solicitor. He was naturally in a fiduciary position.’ The switch to the conflict argument was probably a response to weaknesses in the agency argument exposed in the Court of Appeal. 37 [1965] Ch 992, 1020. 38 [1967] 2 AC 46, 103 (Lord Cohen), 111–12 (Lord Hodson), and 115 (Lord Guest). The speeches of Lords Hodson and Guest raise interpretative problems. Some passages treat the ‘no conflict’ rule as though it were interchangeable with the ‘no profit’ rule. The first part of Lord Hodson’s judgment is directed to unauthorised profit-making, while the final two paragraphs at 111–12 answer the point that the conflict of interest had not been pleaded by the plaintiff. 39 Ibid, 100–01.

Boardman v Phipps 591 conflict and therefore could not be held accountable on this ground. Lords Hodson and Guest attempted to paper over this crack by insisting that Tom was a ‘co-adventurer’ who had joined in Boardman’s plans for purchasing the shares and had not attempted to disassociate himself afterwards from Boardman’s liability. This is true, but it does not establish Tom’s liability on the basis of an identified conflict of interest. It was never alleged, for example, that Tom had knowingly or dishonestly assisted Boardman in exploiting the latter’s conflict of interest so that he could be held liable as an accessory to Boardman’s breach. Secondly, assuming the existence of Boardman’s conflict of interest, it was not a conflict that affected the plaintiff. The majority speeches in the House of Lords never explained why Boardman was accountable to the plaintiff for this breach. The duty which was said to have come into conflict with Boardman’s self-interest was his duty to advise the trustees, if requested, on the purchase of additional shares. Such a duty might have been owed to the trustees; it could never have been owed to the plaintiff, a beneficiary of the trust. The only judge who adverted to the point, albeit obliquely, was Lord Hodson, who concluded his speech by asserting that Boardman ‘was in a fiduciary position vis-à-vis the trustees and through them vis-à-vis the beneficiaries’.40 The notion that Boardman owed fiduciary obligations to the beneficiaries by virtue of (or ‘through’) the obligations owed to the trustees is inconsistent with the precept that parties dealing with a trust deal with the trustees as principals, and not as agents for the beneficiaries.41 The trustees might have negotiated with Boardman as agents of the beneficiaries, but no evidence was adduced of any such agency agreement. In the absence of agreement, any duty Boardman owed to advise on the purchase of additional shares was owed to the trustees as principals and not to the beneficiaries. But there is a simpler objection to the conflict argument. As Professor Paul Finn has pointed out, Boardman had no duty to advise the trustees on the purchase of shares unless consulted, and if consulted, could have declined to advise on the basis of the conflict.42 Lord Upjohn underlined this point when he remarked in dissent ‘[t]here is no such thing as an office of being solicitor to a trust’.43 Boardman was under no standing retainer to advise the trustees on legal matters affecting the administration of the trust. He had also not

40 Ibid, 112. Contrast Lord Upjohn, dissenting, at 125–26: ‘Whether [Boardman] was ever in a fiduciary capacity to [the plaintiff] was not debated before your Lordships and I do not think it matters.’ 41 There is an exception where a third party’s contract with the trustee expressly provides that the third party will look to the trust fund, and not the trustee, for payment: Parsons v Spooner (1846) 5 Hare 102, 67 ER 845. The exception was not relevant here. 42 P Finn, Fiduciary Obligations (Sydney, Law Book Co, 1977) 244–46. 43 [1967] 2 AC 46, 126. Lord Guest’s speech is uncertain on this point, referring to Boardman variously as ‘solicitor to the trust’ (at 113) and ‘solicitor to the trustees’ (at 115).

592 Michael Bryan been retained to advise the trustees on the purchase of the shares. In the absence of a retainer Boardman’s only potential liability was for unauthorised use of information in an action for breach of confidence.44 The majority speeches glossed over the absence of a retainer by pointing out that the trustees ‘were in the habit of consulting [Boardman] if they wanted legal advice’45 and that ‘as a historical fact [the trustees] did employ and look to him to advice at all material times’.46 But a past history of advice-giving cannot by itself justify imposing on a solicitor a present duty to advise a client; and without the identification of a present duty to advise, Boardman had not placed himself in a position of conflict of interest.47 It was not just that there was no ‘real sensible possibility of conflict’ on the facts of Boardman v Phipps, as Lord Upjohn insisted;48 there was no conflict at all because Boardman, at the time of purchase, owed no relevant duty to the trustees. The standard explanations of Boardman v Phipps, in terms of the defendants being held accountable on the basis of profiting from their position as agents of the trust, or because Boardman had placed himself in a position of conflict of interest (a conflict with which his co-defendant, Tom Phipps, associated himself), therefore miss the mark. The defendants were not agents and Boardman was under no duty with which his personal interest in buying shares in Lester and Harris could come into conflict. What remains is the imposition of accountability on the uncommon but not unprecedented basis of the defendants having intermeddled with the administration of a trust as agents de son tort. This leads on to the next issue which divided the House, that of determining the proper scope of an intermeddler’s fiduciary obligations.

D. DEFINING THE SCOPE OF THE DEFENDANTS’ FIDUCIARY OBLIGATIONS: TRUST PROPERTY AND THE BENEFICIARIES’ BEST INTERESTS

A view sometimes expressed is that little purpose is served by examining the differences between the majority and minority House of Lords speeches in Boardman v Phipps since the division of opinion, although vigorously expressed, related not to the law but to the application of the law to 44 Ibid 129 (Lord Upjohn). See also Bolkiah v KPMG [1999] 2 AC 222, holding that a solicitor’s unauthorised use of confidential information relating to a former client is a matter for the law of confidential information, while misuse of information of a currently retained client may constitute a breach of fiduciary obligation. 45 [1967] 2 AC 46,103 (Lord Cohen). 46 Ibid 106 (Lord Hodson). 47 Previous advisory practice might, however, provide the basis of an action for breach of confidence where the solicitor received confidential information which he later used for his own advantage. See above, n 44. 48 [1967] 2 AC 46, 124.

Boardman v Phipps 593 the facts.49 There is something to be said for this view, since the area of disagreement mostly50 related to the scope of any fiduciary relationship binding on the defendants, and ascertaining the proper scope of the relationship is typically a question of fact. On the other hand, the majority’s holding that the defendants’ purchase of shares in Lester and Harris constituted a breach of fiduciary obligation was based on a finding that the information obtained by the defendants which enabled them to buy the shares was trust property, and that they had profited from exploitation of this trust property. This finding raises a controversial question of law. For the purposes of examining the scope of the defendants’ fiduciary obligations it is first necessary to determine whether information can be trust property and, if it can, to consider how the rule prohibiting unauthorised use of trust property applied to the information acquired by the defendants. But before either question can be answered, some general remarks are warranted on the scope of an intermeddler’s fiduciary obligations. The scope of a fiduciary relationship based on the notion of a voluntary undertaking to act in the interests of another depends on the nature and extent of the undertaking given by the fiduciary. The undertaking may be express or implied.51 It may cover the whole subject-matter of the contractual or other relationship between the fiduciary and the principal, or it may cover only some aspects of the relationship.52 Where the fiduciary relationship is based on intermeddling, the judicial tendency has been to construe the scope of the relationship broadly since no contract or other instrument circumscribes the application of equitable principles. This point was made by Lord Guest in distinguishing Aas v Benham,53 where a partner was permitted to use information obtained in the course of partnership activity for purposes outside the scope of the partnership: That ... was a case of partnership where the scope of the partners’ power to bind the partnership can be closely defined in relation to the partnership deed. In the present case the knowledge and information obtained by Boardman was obtained in the course of the fiduciary position in which he had placed himself.54

49 RP Meagher, DJ Heydon and M Leeming (eds), Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies, 4th edn (Sydney, LexisNexis Butterworths, 2002) para [5-065]; Pilmer v Duke Group Ltd [2001] HCA 31, (2001) 207 CLR 165, [79]. 50 Viscount Dilhorne’s dissent related principally to the existence of fiduciary obligations, and not to their scope, since on his view of the facts no agency relationship existed at the relevant times. See the text to n 27. 51 Kelly v Cooper [1993] AC 205 (PC) 213–14. 52 New Zealand Netherlands Society ‘Oranje’ Incorporated Ltd v Kuys [1973] 1 WLR 1126 (PC) 1130 (Lord Wilberforce); Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41, 97–98 (Mason J). 53 Aas v Benham [1891] Ch 244 (CA). 54 [1967] 2 AC 46, 117. A course of dealings between the parties can modify the scope of the fiduciary obligations indicated by the partnership deed: Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384.

594 Michael Bryan The intermeddler’s fiduciary obligations will usually extend to all agency, trust or executorship activities undertaken by the intermeddler in the absence of any agreement between the intermeddler and the person on whose behalf he purports to act. Nevertheless, however broadly the undertaking is typically construed, it was still necessary for the majority judges in Boardman v Phipps to determine the limits of intermeddling and to define when Boardman and Tom Phipps were acting as agents de son tort, as opposed to acting on their own account.

(1) Information as Property: Exclusivity and Exchange Value For Lords Hodson and Guest, the scope of the defendants’ fiduciary obligations was defined by reference to the information they had received in the course of negotiating with the directors of Lester and Harris and which enabled them to purchase the directors’ shares. The information was characterised as trust property which the defendants were not allowed to exploit for personal advantage.55 Lord Cohen’s approach to this issue was more fact specific: information is not ordinarily property, but the information in this case related to the valuation and control of a private company whose shares could not be easily traded. The defendants had acquired valuable information about the company by representing that for all purposes except the actual purchase of the shares that they were acting for the trust. They were therefore liable to account for the profits made from the use of the knowledge and information. The ‘information as trust property’ aspect of the majority’s reasoning has been condemned on the ground that it wrongly characterises information as property.56 The critics side with Lord Upjohn, who in an oft-cited passage rejected the proprietary status of information:57 [I]nformation is not property at all. It is normally open to all who have eyes to read and ears to hear. The true test is to determine in what circumstances the information has been acquired. If it has been acquired in such circumstances that it would be a breach of confidence to disclose it to another, then courts of equity will restrain the recipient from communicating it to another … [I]n the end the real truth is that it is not property in any normal sense but equity will restrain its transmission to another if in breach of some confidential relationship.

On this analysis information does not possess the quality of what is sometimes termed ‘excludability’ to entitle it to proprietary protection.58 Equity has long protected confidential information within relationships 55 56 57 58

[1967] 2 AC 46, 107 (Lord Hodson) and 115 (Lord Guest). Jones (n 2) 484–85. [1967] 2 AC 46, 127–28. K Gray, ‘Property in Thin Air’ (1991) 50 CLJ 252.

Boardman v Phipps 595 of confidence, and contemporary privacy jurisprudence has extended that protection in the area of personal information. But information differs from true intellectual property in that, unlike a patent for example, it confers no protection from independent discovery.59 All this is true: information is not, in law, property. But the argument perhaps misses the point made by the majority judges for whom the critical issue was not the legal characterisation of the information obtained by the defendants but its economic commodity value. Lord Hodson made this point most clearly. He agreed that information was not property but went on: ‘We are aware that what is called “know-how” in the commercial sense is property which may be very valuable as an asset.’60 Lord Cohen’s analysis also emphasises the exchange value dimension of the information in question. On the other side of the other argument, one of the reasons Viscount Dilhorne gave for rejecting the claim was that the information was well known to the active trustee and therefore had no special exchange value.61 There are contexts in which the law recognises the commodity value of information even though it is not property. For example, a trade secret is property divisible among creditors under bankruptcy legislation.62 The context in which the property question arose in Boardman v Phipps was the prohibition of unauthorised dealings with trust property. The prohibition is strict and the sanctions for breach include ordering the restoration of the misappropriated property to the trust. The need for precision in identifying the property subject to the prohibition requires the adoption of a narrow definition of property that excludes information and other varieties of ‘soft property’. For this reason the information in Boardman v Phipps should not have been treated as trust property. The property analysis undertaken by the majority judges was unfortunate, not just because it was premised on an incorrect characterisation of information as property, but because it has provided support for the suggestion, rejected below, that a trustee who can show that he has dealt with trust property in the best interests of the beneficiaries should not be held accountable for breach of fiduciary obligation. Moreover, the analysis was unnecessary. As other passages in the majority judgments make clear, even if the information in Boardman v Phipps was not in law property, the onus would still have rested on the defendants to show that their profits had not been made from unauthorised intermeddling in the trust’s affairs. 59 Independent discovery includes reverse engineering: Mars UK Ltd v Teknowledge Ltd [1999] EWHC 226 (Pat), [2000] FSR 138. For the argument that intellectual property is not a property right in law because it does not confer a right in relation to a specific thing, see B McFarlane, The Structure of Property Law (Oxford, Hart Publishing, 2008) 134–36. 60 [1967] 2 AC 46, 107. 61 Ibid 92. 62 Re Keene [1922] 2 Ch 475 (CA).

596 Michael Bryan (2) Rules and Presumptions in the Law of Fiduciary Obligations There is what has been termed an ‘irrebuttable presumption’63 that a trustee who has made a profit from the use of trust property has made it from use of his fiduciary position, and must account for the profit unless he can show that the application of the trust property was authorised by the terms of the trust instrument, by the informed consent of the beneficiaries or by court order. Alternatively, it is said that ‘no further inquiry’ will be undertaken into transactions involving the trust property entered into by a trustee for the trustee’s personal account before holding the trustee accountable.64 The application of this ‘presumption’ by the majority in Boardman v Phipps is a contentious aspect of the case and invites a discussion of the role of rules, presumptions and the burden of proof in defining the scope of fiduciary obligations. The onus of proof, sometimes formulated as a rebuttable presumption, rests on a fiduciary to prove that any profit made was not made from an unauthorised exploitation of his fiduciary position.65 Placing the burden on the fiduciary serves a useful purpose. It is equity’s response to what economists have termed the ‘agency problem’. A consequence of the separation of management of property from its beneficial ownership under a trust and in other agency relationships is that the beneficiary cannot monitor the trustee’s honesty effectively, and the opportunities for trustee misappropriation are correspondingly high.66 As Lord Eldon stated in Caffrey v Darby, ‘it may be impossible to detect undue motives’.67 Because the risk of detection is low, equity imposes stringent disgorgement remedies, namely the account of profits and the constructive trust, to deter misappropriation. It also reverses the burden of proof, so that the onus rests on the fiduciary to show that any profit was not derived from exploitation of the fiduciary position. Reversing the burden of proof is equity’s response to the problem of information imbalance.68 Since the principal cannot properly monitor the agent’s activities, the burden is placed on the agent to justify his actions. If he has made a profit, he must show that the principal consented to his

63 Chan v Zacharia (1984) 154 CLR 178, 201. Cf Re Biss [1903] 2 Ch 40 (CA) 56 (Collins MR): the presumption ‘is one of law and cannot be rebutted’. 64 Langbein (n 3) 931, citing the Uniform Trust Code 2000 § 802 comment, 7 ULA 230 (Supp). 65 The burden of proof also rests on a trustee where the trust has incurred a loss: Caffrey v Darby (1801) 6 Ves Sen 489, 31 ER 1159. 66 J Stiglitz, ‘Principal and Agent’ in J Eatwell, M Milgate and P Newman (eds), The New Palgrave: A Dictionary of Economics, vol 3 (London, Macmillan, 1987) 966; R Cooter, ‘The Fiduciary Relationship: Its Economic Character and Legal Consequences’ (1991) 66 New York University Law Review 1045, 1047; A Duggan, ‘Exemplary Damages in Equity: A Law and Economics Perspective’ (2006) 26 OJLS 303. 67 Caffrey v Darby (1801) 6 Ves Jun 489, 496; 31 ER 1159, 1162. 68 Duggan (n 66).

Boardman v Phipps 597 dealings or that the profit was made outside the scope of the agency. The information imbalance is redressed by the agent providing full information to the principal so that the latter can take the final decision to authorise the fiduciary’s course of action. Alternatively, in the case of trustees, the court’s authorisation of the proposed course of action may be sought, a facility that is particularly important if a beneficiary is under a legal disability and cannot consent. Presumptions of wrongdoing are unfashionable these days, and it has been suggested that developments in civil procedure and evidence, including improved discovery procedures, have weakened the presumption of fiduciary disloyalty.69 It is said that the court can look at all the facts ‘in the round’ without regard to the allocation of burden of proof. To do so, the argument runs, will not undermine the basis of the law of fiduciary obligations in deterrence. The suggestion is only superficially attractive. Robust adjectival procedures no doubt make it easier for parties to substantiate or refute claims of breach of fiduciary obligation once legal proceedings have been initiated. But deficiencies in court procedures which prevent the full facts of fiduciary wrongdoing from coming out are only part of the agency problem. The other part is that the principal may be unsure whether the agent has committed a breach of duty and therefore whether the costs of bringing a suit against the fiduciary should be incurred. A rule which ex ante places an obligation on the agent to justify the obtaining of a personal benefit gives the agent an incentive to make full disclosure of his dealings; it also gives the principal an incentive to investigate possible agent malfeasance in cases where the principal is unsure whether to incur the costs of investigation. The placing of the onus of proof is not simply a matter of equity curial procedure; it underpins the basic principle that an agent must justify any profit-making activity to the principal or to the court before pursuing it. The allocation of burden of proof reflects judicially-sanctioned norms of conduct binding on fiduciaries outside, as well as inside, the courtroom, and its abolition would aggravate the agency problem. The reversal of the burden of proof applies to a fiduciary who exploits for himself an opportunity for profit-making which should have been exploited for the benefit of the principal. The burden resting on the fiduciary is high, but he may succeed in discharging it by showing that the opportunity was not one which he was under a duty to pursue on behalf of the principal.70 When, however, we turn to the ‘irrebuttable presumption’ that a trustee who obtains a profit or advantage from use of trust property

69 Murad v Al-Saraj [2005] EWCA Civ 959 [82] (Arden LJ), discussing the principle that a court will not investigate what the principal would have done if the breach of duty had not occurred. 70 Aas v Benham [1891] 2 Ch D 244 (CA) is an example of a fiduciary, a partner in a shipbroking firm, who succeeded in discharging the burden of proof.

598 Michael Bryan has obtained it by use of his fiduciary position, the trustee cannot defend himself by showing that his use of the trust property fell outside the scope of his fiduciary obligations. An application of trust property is always within the scope of a trustee’s fiduciary obligations. The only defence open to a trustee is to show that the use had been authorised either by the terms of the trust instrument or by the court. Lord Upjohn’s dissent was in substance an attack on the ‘irrebuttable presumption’. He criticised it on two grounds. One, specific to Boardman v Phipps, was the argument that the knowledge and information obtained by the defendants did not constitute property and therefore did not attract the application of the presumption. The ‘information as property’ argument has already been discussed.71 The other ground was that the presumption was not irrebuttable; in Lord Upjohn’s opinion it could be rebutted by a trustee showing that his dealings with the trust property not only caused no harm to the trust but actually benefitted it. The second ground has recently been supported by Professor John Langbein who, in a sustained critique of the ‘sole interests of the beneficiary’ rule, has argued that a trustee should be allowed to show that a transaction not in the sole interests of the beneficiaries was nonetheless prudently undertaken in the best interest of the beneficiaries.72 To term the prohibition on the unauthorised use of trust property for profit-making as an ‘irrebuttable presumption’ is misleading, not just because an irrebuttable presumption is a contradiction in terms, but because it implies that the rule is adjectival when in fact it is firmly grounded in the enforcement of property rights.73 It also has nothing to do with the agency problem. The rule is based on the simple proposition that the trustee is not beneficial owner of the trust property and therefore cannot deal with it otherwise than in accordance with the terms of the trust instrument, the terms of trustee legislation or with judicial approval. A trustee who deals with trust property makes use of someone else’s property. A trustee who ‘improves’ trust property without authority is like a friend who takes away and repairs one’s car without permission: both, from the best of motives, interfere with property rights. It is not a defence to an action of conversion that the property has been improved by the converter;74 and where social 71

See the text to n 55. Langbein (n 3) 982. 73 A point made by RC Nolan, ‘Conflicts of Interest, Unjust Enrichment, and Wrongdoing’ in WR Cornish et al (eds), Restitution: Past, Present and Future (Oxford, Hart Publishing, 1998) 87, 100–01. 74 Though contrast the controversial decision of Greenwood v Bennett [1973] 1 QB 195 (CA), which recognises a right of restitution, enforceable by equitable lien, for unrequested improvement of chattels. J Edelman, ‘The Meaning of Loss and Enrichment’ in R Chambers et al (eds), Philosophical Foundations of the Law of Unjust Enrichment (Oxford, OUP, 2009) 229, analyses Greenwood as an example of the recipient’s inferred desire for the improvement to be made. This may be correct, but the line between inferred desire and unauthorised but beneficial interference with property rights can be very fine. 72

Boardman v Phipps 599 policy favours payment for unrequested improvements, this result is usually achieved by legislation.75 Whether information is, or ought to be, property for the purpose of this rule is, as we have seen, a controversial question.76 There is a strong case, based on legal certainty, for confining the prohibition on unauthorised use of trust property to recognised tangible and intangible property rights and not extending it to the conceptually amorphous category of exchange value property. But, accepting for present purposes the majority conclusion that information (or, at any rate, the information in issue in Boardman v Phipps) is property, it would be wrong for equity to diminish the beneficiary’s proprietary entitlement by allowing a trustee who deals with the property the protection of a ‘best interests’ defence. Professor Langbein’s critique of Boardman v Phipps concludes that the House of Lords has sent trustees a message: Thou shalt not create value for thy trust beneficiary in circumstances in which there may be actual or potential benefit to thyself. In such cases, the deterrent effect of the sole interest rule contravenes the purpose of the rule, which is to benefit the beneficiary.77

A first impression is that this is a powerful indictment of a much-criticised decision. But the notion of ‘benefit to the beneficiary’ is a specialised one in trusts law. Trustees are not under an absolute duty to benefit their beneficiaries. They are under a duty to benefit the beneficiary in accordance with the terms of the trust instrument. If, for example, the trust instrument expressly restricts the investments in which the trustees must invest, the trustees must not invest in unauthorised investments simply because in their view, and in the opinion of reasonable trustees, such investments would be more beneficial to the trust than those prescribed by the settlor.78 The trustee’s duty to benefit has to be read down to mean ‘benefit in accordance with the terms of the trust instrument’. To construe the term ‘benefit’ more broadly, even in cases where to do so would be manifestly in the best economic interests of the beneficiaries, is to allow the trustee, not the settlor, to define the nature of the benefit which the beneficiaries are to receive under the trust.

75 Eg, North American legislation entitling mistaken improvers of neighbour’s land to payment, discussed by RJ Sutton, ‘What Should be Done for Mistaken Improvers?’ in PD Finn (ed), Essays on Restitution (Sydney, Law Book Co, 1990) 241. 76 See the text to n 55 above. See also Nolan (n 73) 101, for the argument that exchange value or ‘soft property’ should not be property for this purpose. 77 Langbein (n 3) 955. 78 Unauthorised investment can be adopted by the beneficiaries if they have legal capacity (Re Jenkin’s and Randall’s Contract [1903] 2 Ch 362 (Ch D)), but, as in the case of beneficiary consent to what would otherwise constitute a breach of fiduciary obligation, this qualification shows that the duty to benefit is limited by the duty on the part of trustees to obtain authorisation or ratification if they wish to pursue advantages not contemplated by the trust instrument.

600 Michael Bryan Of course in some cases the terms of the trust instrument might be so limited that the trustees cannot benefit the beneficiaries on any sensible meaning of the word ‘benefit’. There are also cases where a trustee who conscientiously exercises the limited powers conferred by the trust instrument cannot prevent significant economic loss to the trust. The exiguous powers conferred on the trustees by the will trust in Boardman v Phipps limited the power of investment to securities listed in the Trustee Act 1925,79 so that if the trustees had sold the trust’s shareholding in Lester and Harris, they could not have reinvested the proceeds in ordinary shares. But the trustee legislation also contains provisions designed to assist trustees who need to overcome limitations in the trust instrument.80 Section 57(1) of the Trustee Act 1925 enables the court in cases of ‘expediency’ to confer powers on trustees that the trust instrument did not give them.81 Alternatively, the court may exercise its inherent salvage and emergency jurisdiction to authorise trustees to deal with the trust property where a situation has arisen which was not foreseen by the settlor. In Re New,82 a scheme for the reorganisation of a company was upheld in the exercise of this jurisdiction. It was assumed by those judges in Boardman v Phipps who considered the point that an application to the court to authorise the purchase of additional shares in Lester and Harris would have failed. The purchase of shares in a badly-managed company would, without more, almost certainly be regarded as imprudent.83 Moreover, the trust could not have afforded the purchase. But that should not have been the end of the matter. A court might have been convinced that a plan to reorganise Lester and Harris along the lines actually pursued by Boardman was expedient for the trust, balancing the risk of failure of the plan against the almost certain prospect of underperformance by the trust if no plan was approved. A material consideration would have been that no trust money was risked in the implementation of the plan. Whether such an application would have succeeded can only be a matter for speculation. What is not speculative, however, is that the general policy of trusts law is to encourage trustees and their advisers to seek advance

79

Trustee Act 1925, s 1. See M Conaglen, ‘The Strictness of Fiduciary Accounting and the Importance of Authorisation Mechanisms’ (2011) 70 CLJ 548. 81 The more generous provisions of the Variation of Trusts Act 1958 would have been inapplicable in Boardman v Phipps since the classes of beneficiary on whose behalf the court approves a variation under the Act would not have included the beneficiaries of the Phipps trust. 82 [1901] 2 Ch 534 (Ch D). But note Re Tollemache [1903] 1 Ch 457 (Kekewich J) and 955 (CA), where Re New was said to be the ‘high water-mark’ of the emergency jurisdiction. See also Riddle v Riddle (1952) 85 CLR 202, where the equivalent New South Wales legislation was held to authorise investment in shares which were not authorised by the terms of the trust instrument. 83 See eg [1967] 2 AC 46, 119 (Lord Upjohn). 80

Boardman v Phipps 601 approval for any course of action which might involve a breach of trust.84 It is preferable for trustees to go early than go late to the court. A policy of encouraging trustees and their advisers to have the risks of pursuing a plan assessed by a court, and if necessary have additional powers judicially conferred in advance of implementing the plan, is surely preferable to one that allows the trustees to proceed without prior approval but permits them to escape accountability, in the event of later litigation, by showing that they had, notwithstanding their breach of duty, acted in the best interests of the beneficiaries. The ‘best interests’ defence, advocated by Lord Upjohn and Professor Langbein, would do justice to Boardman and Tom Phipps, although even those talented exponents of trust reconstruction should arguably have explored the possibility of the trustees making an advance section 57 application. But the availability of the defence might encourage less able but more optimistic trustees to pursue risky and ill-judged strategies to maximise the economic value of their trusts. In the event of failure of their schemes, the ‘best interests’ defence would not protect them from the consequences of their folly. But meanwhile trusts will have incurred losses which might have been prevented by a timely application to the court. Perhaps the most convincing justification for the adoption of a ‘best interests’ defence is that the advance approval procedures entail publicity, delay and expense, whereas the ‘best interests’ defence would avoid these wellknown drawbacks to litigation, at least in those cases in which the results achieved by the trustees were so favourable to the beneficiaries as to make legal challenge inconceivable.85 It is hard to assess the litigation costs of judicial advance approval procedures, as they currently operate.86 But if there are deficiencies in the present law, the quality of trust administration will be better served by the strengthening of existing advance approval procedures than by the introduction of a new ‘best interests’ defence of uncertain scope. E. INFORMED CONSENT

One of the misconceptions entertained about Boardman v Phipps is that the only reason why Boardman and Tom Phipps were held accountable for their dealings with the trust property was that they had failed to obtain the 84 The statutory relief from personal liability conferred by Trustee Act 1925, s 61 was inapplicable to the facts of Boardman v Phipps since it applies only to trustees and not to their agents. The provision would also not have relieved against the constructive trust imposed. A little-noticed requirement of s 61 is that the trustee must seek relief not only for the breach of trust, but also for omitting to obtain the directions of the court. This underlines the point that a trustee is generally expected to apply to the court before embarking on a course of action. Failure to do so is itself a matter calling for relief. 85 Langbein (n 3) 967–68. 86 Applications under the Trustee Act 1925, s 57 are held in private: J Martin, Hanbury and Martin’s Modern Equity, 17th edn (London, Sweet & Maxwell, 2005) 640. See also the discussion of CPR Part 64, PD 64A, para 1A 1, in Conaglen (n 80).

602 Michael Bryan consent of one of the trustees, the testator’s widow, who was senile and incapable of giving her informed consent. The image of Boardman as the unlucky fiduciary, caught out by an over-technical application of fiduciary principles, partly stems from this misconception. In fact the infirmity of the widow, who had died before the defendants purchased their shares, was not the ground on which the defence of informed consent failed. We have seen that the statement of claim alleged that the defendants were the agents of the trustees and beneficiaries in obtaining knowledge and information about Lester and Harris, and had made a profit from the unauthorised use of the information. At trial the plaintiff’s submission was that, as one of the principals to whom the fiduciaries owed their obligations, he had not been given sufficient information about the defendants’ dealings to enable him to give his informed consent. Following a detailed review of correspondence and meetings between Boardman and the plaintiff, Wilberforce J held that the plaintiff had not been kept fully informed of Boardman’s plans.87 Wilberforce J’s findings on the informed consent issue were not challenged on appeal.88 In the Court of Appeal, Lord Denning drew attention to Mrs Phipps’s condition for the different purpose of showing that she did not possess legal capacity to appoint Boardman an agent of the trust.89 In the House of Lords, Lord Cohen noted that while Boardman kept the other trustees informed of his plans, he had not thought it necessary to consult Mrs Phipps in view of her incapacity. Boardman could not therefore claim to have consulted all the trustees about his intentions.90 Neither judge, however, held that the failure to inform Mrs Phipps was the rock on which the ‘informed consent’ defence foundered. It had been sunk earlier at trial by Wilberforce J’s finding that Boardman’s disclosure to the plaintiff of his dealings had been less than complete. The question of informed consent was not considered by the dissenting judges since they held that the defendants had not acted in breach of fiduciary obligation. For Viscount Dilhorne the issue was particularly straightforward, since on his analysis the defendants had not acted in a fiduciary capacity at all except for the occasions on which they had acted as the trust’s agents at annual general meetings. Their purchase of shares did not have to be validated because it did not arise out of a fiduciary relationship.91

87 [1964] 1 WLR 997, 1012–17. Specifically, Wilberforce J found (at 1017) that the plaintiff should have been given the opportunity to brief his own expert to examine Boardman’s plans. 88 [1965] 1 Ch 992, 1023 (Pearson LJ); [1967] 2 AC 46, 100 (Lord Cohen). 89 [1965] 1 Ch 992, 1017. 90 [1967] 2 AC 46, 97. See also Lord Guest, ibid at 113. In a letter to the plaintiff, Boardman claimed that he had consulted the trustees. 91 Ibid, 93.

Boardman v Phipps 603 F. ACCOUNTING AND CONSTRUCTIVE TRUSTEESHIP

One of the controversies surrounding Boardman v Phipps which, if anything, has intensified over the years since the House of Lords decision was handed down concerns the imposition of a proprietary remedy, the constructive trust, over the shares purchased by Boardman and Tom Phipps. The decision has become the focus of debate on the availability of proprietary relief over what Sir Roy Goode has termed ‘deemed agency gains’, being property which a fiduciary was under a duty to acquire for his principal but which he has acquired for himself.92 A preliminary question is whether a constructive trust was in fact ordered in Boardman v Phipps. The judgments have been subjected to close semantic inquiry on this point in some later decisions,93 but it is an easy question to answer. The harder question, on which critical opinion remains divided, is whether a constructive trust should have been imposed over the Lester and Harris shares the defendants had purchased. Wilberforce J’s judgment makes clear that a constructive trust over the Lester and Harris shares was claimed and awarded. The relief sought was a declara5 tion that the defendants held a 18 share of the shares they had purchased on constructive trust for the plaintiff; an account of the profits made from the shareholdings, being the proceeds of capital distributions paid to shareholders on sale of the Lester and Harris properties; and an order that the defendants 5 transfer to the plaintiff the shares to which he was entitled, as well as 18 of the 94 profits assessed on taking the account. Wilberforce J granted the declaration of constructive trust and ordered the account of profits to be taken, but no order to transfer the shares to the plaintiff was made pending the assessment of the amount due to the plaintiff under the account.95 Moreover, the imposition of the constructive trust was conditioned on the plaintiff paying the defendants the price of the shares held on trust for him.96 Although the speeches in the House of Lords spoke indifferently of the defendants’ liability to constructive trusteeship and of their liability to account, the judgment of Wilberforce J was upheld. It is reasonable to assume that the House of Lords speeches were directed to both the constructive trust and the defendants’ liability

92 R Goode, ‘Proprietary Restitutionary Claims’ in Cornish et al (eds) (n 73) 63. Cases, such as the bribe cases, in which the principal claims a constructive trust over property to which he never held title and which are not deemed agency gains, are even more contentious: Att-Gen for Hong Kong v Reid [1994] 1 AC 324 (PC); Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2010] EWHC 1614 (Ch), [2011] WTLR 839, affd [2011] EWCA Civ 347, [2011] Bus LR 1126; Dyson Technology Ltd v Curtis [2010] EWHC 3289 (Ch). 93 Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch); Sinclair (n 92). 94 See text to n 9 for its terms. The orders are taken from [1964] 2 All ER 187, 188. 95 Ibid 208. 96 Ibid. Repayment of the defendants’ expenditure on the shares was considered separately from the liberal allowance awarded to the plaintiff, discussed below at section G.

604 Michael Bryan to account, even though particular passages refer to one or other of these modes of equitable relief. The more difficult question is whether a constructive trust over the shares should have been imposed on the facts of Boardman v Phipps. The imposition of a constructive trust over deemed agency gains is well established by authority going back at least as far as Keech v Sandford.97 But the application of the line of authority by the majority judges in Boardman v Phipps was automatic. There was no suggestion that the constructive trust was an alternative to the personal remedy of account; only that the remedies could be applied in combination. As Richard Calnan remarks of Boardman v Phipps in his recent book, Proprietary Rights and Insolvency, ‘the remedy granted was the remedy asked for’.98 The constructive trust is a discretionary remedy, but the nature and extent of the discretion is unsettled. It is uncertain, for example, whether the discretion relates solely to the recognised equitable bars to relief, such as hardship, delay and the clean hands principle, or whether there is a broader principle that the constructive trust will not be imposed where it would be unconscionable to do so. Jurisdictions which have embraced the ‘remedial’ constructive trust have elected for the broader principle. There is, however, a sense in which a proprietary constructive trust is always remedial, whether or not a jurisdiction has adopted the remedial constructive trust, in that a court must in the exercise of its discretion consider personal relief as an alternative to the proprietary order.99 The speeches in Boardman v Phipps contribute nothing to the debate except insofar as the assumption that a constructive trust will be imposed automatically over identified property acquired in breach of obligation implies a narrow perception of the available discretion. In the opinion of the majority judges, a constructive trust will be awarded provided that there is traceably identifiable property over which the trust can be imposed and unless there are recognised equitable bars to relief. The availability of proprietary remedies is usually discussed in the context of the priority the remedy confers on the claimant in the event of the legal titleholder’s insolvency.100 In that context experience with the 97 Keech v Sandford (1726) Sel t King 61, 25 ER 223. See J Getzler, ‘Rumford Market and the Genesis of Fiduciary Obligations’ in A Burrows and Lord Rodger (eds), Mapping the Law (Oxford, OUP, 2006) 577; S Cretney, ‘The Rationale of Keech v Sandford’ (1969) 33 Conv 161; A Hicks, ‘The Remedial Principle of Keech v Sandford Reconsidered’ [2010] CLJ 287. 98 R Calnan, Proprietary Rights and Insolvency (Oxford, OUP, 2010) 352. 99 The discretion is perhaps most clearly seen in proprietary estoppel cases: Dodsworth v Dodsworth (1973) 228 EG 1115 (CA); Giumelli v Giumelli [1999] HCA 10, (1999) 196 CLR 101; S Bright and B McFarlane, ‘Personal Liability in Proprietary Estoppel’ [2005] Conv 14. 100 Goode (n 92); E Sherwin, ‘Constructive Trusts and Bankruptcy’ [1989] University of Illinois Law Review 297; A Burrows, ‘Proprietary Restitution: Unmasking Unjust Enrichment’ (2001) 117 LQR 412; Hicks (n 97); P Watts, ‘Constructive Trusts and Insolvency’ (2009) 3 Journal of Equity 250.

Boardman v Phipps 605 remedial constructive trust has highlighted a paradox: although the primary advantage of the constructive trust is that it entitles the beneficiary to the trust property to the exclusion of the trustee’s unsecured creditors and subsequent secured interest holders, the very fact that the trust confers priority is a compelling reason for withholding its imposition.101 The potency of the constructive trust has become the primary reason for not imposing it. No insolvency considerations were identified in Boardman v Phipps. The significance of the decision, remedially, is that it draws attention to the noninsolvency justifications for imposing a constructive trust. Since the common law only exceptionally orders the specific restitution of property,102 the constructive trust, along with the resulting trust, has become the law’s principal vindicatory remedy. Whether it enforces the plaintiff’s expectations, as in some proprietary estoppel cases,103 effects restitution for unjust enrichment104 or secures for the claimant the fruits of the defendant’s wrongdoing, as in Boardman v Phipps, the constructive trust gives effect to the claimant’s subjective preference for specific property. This includes the desire to exploit the investment value of the property, as well as the desire to derive enjoyment from its use. The remedy is also more convenient to administer in many cases than the account of profits: the recovery of a specific thing may be less costly than proof and recovery of its value.105 In Boardman v Phipps it was almost certainly easier to impose a constructive trust than to assess the value of lightly-traded shares in a recently reorganised private company for the purposes of ordering an account of profits. It is likely that the imposition of a constructive trust meant that Boardman and Tom Phipps lost effective control of Lester and Harris. This in turn meant that the defendants would have had to bargain with the claimant for the repurchase of the shares subject to the constructive trust if they were needed to reconstitute the majority shareholding and to ensure continuity

101 The paradox is apparent from the recent High Court of Australia decision in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19, (2010) 241 CLR 1. 102 The action for the specific recovery of land is the only common law example. Specific delivery-up was permitted in claims to detinue by s 78 of the Common Law Procedure Act 1854. See now Torts (Interference with Goods) Act 1977, s 3(1)(a) and (b). Specific delivery is sparingly ordered: Howard E Perry & Co Ltd v British Railways Board [1980] 1 WLR 1375, 1382–83 (Megarry V-C). 103 Dillwyn v Llewelyn (1862) De GF & J 517, 45 ER 1285; Pascoe v Turner [1979] 1 WLR 431 (CA); Thorner v Major [2009] UKHL 18, [2009] 1 WLR 776. 104 Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 715 (Lord Browne-Wilkinson). 105 LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 (SCC) 49 (La Forest J). The constructive trust will not, however, invariably be easier to administer than an account of profits, particularly if enforcement of the trust requires co-operation between parties which is unlikely to be forthcoming: Chameleon Mining NL v Murchison Metals Ltd [2012] FCAFC 6 at [510].

606 Michael Bryan of effective management.106 Like the injunction, the constructive trust is an important bargaining chip in negotiations for control of shared resources. In this respect the trust will, unless it has been imposed over a depreciating asset, place the beneficiary in a stronger bargaining position in buy-out negotiations than the award of an account of profits which limits the beneficiary to the sum assessed after the account has been taken. These non-insolvency advantages of the constructive trust are significant, but they do not outweigh the insolvency policy considerations which have dominated debates on proprietary relief. The authorities on constructive trusts cannot be neatly divided between ‘two party’ cases, such as Boardman v Phipps, where the constructive trust operates as a vindicatory remedy giving effect to the claimant’s subjective preferences, and ‘three party’ cases, such as Chase Manhattan Bank NA v Israel-British Bank (London) Ltd107 involving insolvent defendants or defendants against whom significant third party creditor claims have been made. Every ‘two party’ case is potentially a ‘three party’ case. In every case in which a constructive trust is imposed in order to effectuate a plaintiff’s preferences, the entitlements of creditors, of which the court may not necessarily be aware, are actually or potentially engaged. The question for English law, as for the law of all common law countries, is to establish clear criteria for the award of constructive trusts and other proprietary relief. The debate has so far been conducted on either/ or terms: disgorgement relief in cases of breach of fiduciary obligation should either be proprietary or personal. But there are intermediate positions meriting investigation. One, suggested by the recently promulgated Third Restatement of Restitution, is to award the beneficiary or principal a proprietary remedy but to limit relief in cases where creditors have made claims on the fiduciary. For example, a constructive trust claimant will not be allowed to claim more than her loss where an innocent defendant has realised consequential gains which could not have been captured by the plaintiff in a personal claim for unjust enrichment.108 Moreover, a constructive trust claimant will not be allowed to obtain a profitable recovery by way of a constructive trust at the expense of adequate provision for the defendant’s creditors and dependants.109 The practical effect of these restrictions is to make the equitable lien, not the constructive

106 Cf G Calabresi and AD Melamed, ‘Property Rules, Liability and Inalienability: One View of the Cathedral’ (1972) 85 Harvard Law Review 1089. Whether the defendants would have wanted to repurchase the shares is doubtful. The asset sales and capital distributions suggest that the defendants’ primary aim was to wind up the company once its principal assets had been sold off. 107 Chase Manhattan Bank NA v Israeli-British Bank (London) Ltd [1981] Ch 105. 108 American Law Institute, Restatement of the Law Third: Restitution and Unjust Enrichment (St Paul, Minn, American law Institute, 2011) §50(4) and §56(4). 109 Ibid, §61(1).

Boardman v Phipps 607 trust, the effective proprietary remedy in cases where creditor interests are at stake.110 Another intermediate strategy is for the law to develop more effective procedures for identifying potential creditor interests in constructive trust litigation.111 It is in the nature of adversarial litigation for solutions to be presented as diametrically opposed alternatives. So, in this context, debate has become simplified to the question: Should the claimant be awarded a proprietary remedy, or is personal relief sufficient? But constructive trust litigation, which often presents ‘polycentric’112 problems affecting the interests of parties not before the court, sometimes requires the fashioning of relief which is neither wholly proprietary nor wholly personal.

G. ALLOWANCES FOR SKILL AND EFFORT

A fiduciary who is accountable for a profit made by the commission of a breach of fiduciary obligation may be awarded an allowance or remuneration to reflect work or skill applied in making the profit. In Boardman v Phipps, Wilberforce J awarded Boardman and Tom Phipps a ‘liberal allowance’ for the work and skill they had contributed to the making of the profit for which they were accountable.113 For some commentators the decision to hold the honest and enterprising fiduciaries accountable is defensible only because they were awarded an allowance. The award was critical for Boardman, both as a solicitor and as an aspiring politician, not just because it reduced the payments for which he was accountable but because the allowance amounted to judicial endorsement of the strategy he had pursued to enhance the value of the trust property. It meant that he could pursue his political career without the stain that otherwise attaches to the character of a fiduciary who had committed a breach of obligation. As Lord Guest emphasised: ‘I do not for one moment suggest that there has been anything dishonest or underhand in what Boardman did. He has obtained a clean certificate below and I do not wish to sully it.’114 No fiduciary is entitled to an allowance as of right; the award is discretionary. The allowance is distinguishable from other deductions which will automatically be made in taking the account. The concept of profit ‘refers

110 The tracing rules already provide for some balancing of beneficiary and creditor interests, for example by the application of the ‘lowest intermediate balance’ rule: James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62 (Ch D). 111 A strategy adopted by the High Court of Australia in John Alexander’s Tennis Clubs (n 101) [131] and [137]. 112 J Jowell, ‘The Legal Control of Administrative Discretion’ [1973] PL 178, 213. 113 [1964] 2 All ER 187, 208. 114 [1967] 2 AC 46, 115.

608 Michael Bryan not to the gross value of receipts but to the margin of receipts over costs’.115 Although there may be a small margin of discretion, insofar as a doubtful expense claimed by a dishonest fiduciary will be disallowed whereas an honest fiduciary may be given the benefit of the doubt,116 the exercise of matching receipts against costs is, generally speaking, a mechanical one. The defendants in Boardman v Phipps were entitled, for example, to be reimbursed their expenditure in buying their shares.117 The assessment of the profit, after deductions have been made, precedes the exercise of discretion to award an allowance. An allowance is an example of counter-restitution because it qualifies the restitution a fiduciary must make to the principal. It recognises the fact that the principal has been enriched, in skill and effort, by the fiduciary’s actions in making the profit.118 Equitable rescission provides the best-known example of counter-restitution, where a claimant exercising a right to rescind a voidable contract will be ordered to return benefits received under the contract to the defendant as a condition of being allowed to rescind.119 The equitable allowance differs from rescission in how it accomplishes counterrestitution. The duty to make counter-restitution in rescission imposes a condition on the exercise of the plaintiff’s right to restitution: a plaintiff who cannot make counter-restitution is, at least in theory, debarred from obtaining restitution so that the voidable contract remains enforceable.120 The equitable allowance, on the other hand, does not operate as a condition on obtaining relief. The allowance simply reduces the quantum of restitution the fiduciary must make to the principal once it is proved that he has profited from the breach. No single theory explains all the cases in which equitable allowances have been awarded. In his comprehensive survey of the authorities and literature on equitable allowances, Dr Matthew Harding has identified three principal

115 R Grantham and C Rickett, Enrichment and Restitution in New Zealand (Oxford, Hart Publishing, 2000) 466. For a discussion of the deductions made in taking an account for infringement of a patent, see Dart Industries Inc v Décor Corp Pty Ltd [1993] HCA 54, (1993) 179 CLR 101. 116 Colburn v Simms (1843) 2 Hare 543, 560; 67 ER 224, 231. 117 [1964] 2 All ER 187, 208. 118 M Harding, ‘Justifying Fiduciary Allowances’ in A Robertson and TH Wu (eds), The Goals of Private Law (Oxford, Hart Publishing, 2009), 341, 358, fn 73, rejects a counterrestitutionary analysis, partly because he considers that it has difficulty drawing a distinction between the honest and dishonest defendant. But fault-based distinctions are not uncommon in the law of restitution: see G Virgo, ‘The Role of Fault in the Law of Restitution’ in Burrows and Rodger (eds) (n 97) 83. 119 A Burrows, The Law of Restitution, 3rd edn (Oxford, OUP, 2011) 569–70. 120 Erlanger v The New Sombrero Phosphate Co (1878) 3 App Cas 1218, 1278 (Lord Blackburn). In practice substitutive counter-restitution will almost always be available in equity: D O’Sullivan, S Elliott and R Zakrzewski, The Law of Rescission (Oxford, OUP, 2008) paras 18.50–18.74.

Boardman v Phipps 609 justifications.121 The first is causative: allowances are a means of identifying profit that is not sufficiently causally connected to the fiduciary’s breach of obligation.122 The second is that the allowance operates as a remoteness of damage rule in equity, so that profits accruing from the fiduciary’s work and skill are held to be too remote to be recoverable.123 Dr Harding’s preferred justification is desert: the fiduciary’s deserving conduct outweighs the application of deterrent policies to the particular fiduciary. Boardman v Phipps is a classic example of the application of the concept of desert to the award of an allowance.124 The insistence that the allowance must be awarded on a ‘liberal scale’ suggests that the award reflected moral and not causative considerations. Dr Harding’s aim is to identify the most convincing theoretical justification for awarding an allowance; he is not concerned to justify allowances awarded in particular cases. As he concedes, not all awards of allowances in the cases can be justified in terms of desert.125 Moreover, by applying the notion of ‘desert’ to Boardman, we must be prepared to accept that his conduct was deserving even though he might have taken other steps, not necessitating a breach of fiduciary obligation, to make the Phipps trust profitable. Nevertheless, given that findings of breach of fiduciary obligation have reputational, as well as economic, consequences, there are good reasons for applying the notion of moral worth to the award of an allowance. Questions of causation more appropriately belong to the process of quantifying the profit, preceding the exercise of the discretion to make an allowance. It is at that stage that the court may have to apportion the profit, taking into account the extent to which the profit was made from use of the principal’s property or from exploiting a business opportunity which should have been made available to the principal.126

H. CONCLUSION

Many of the arguments about the merits of Boardman v Phipps are based on misunderstandings about what the case actually decided. This chapter has tried to remove some of the misconceptions: the defendants never were

121

Harding (n 118). A view supported by G Virgo, ‘Restitutionary Remedies for Wrongs: Causation and Remoteness’ in C Rickett (ed), Justifying Private Law Remedies (Oxford, Hart Publishing, 2008) 301, 310. 123 Grantham and Rickett (n 115) 486–87. 124 ‘It seems to me that it would be inequitable now for the beneficiaries to step in and take the profit without paying for the skill and labour which has produced it’: Phipps v Boardman [1964] 2 All ER 187, 208. 125 Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd 1 (QSC); Warman International Ltd v Dwyer (1995) 182 CLR 544; Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433. 126 Warman International Ltd v Dwyer (1995) 182 CLR 544, 561. 122

610 Michael Bryan the plaintiff’s agents, and only in a very limited sense were they the agents of the trustees, although they undoubtedly owed fiduciary obligations to the plaintiff. Tom Phipps was held accountable in his own right and not just as ‘co-adventurer’ with Boardman. The role of the testator’s widow, whose consent to the defendants’ dealings was never obtained, has mesmerised commentators even though she died before the critical event, the purchase of shares, had occurred. It was the defendants’ failure to keep the plaintiff in the picture that in the final analysis proved fatal. Finally, a constructive trust was imposed, although its application was postponed until the accounting process had been completed. Sympathy for Boardman and Tom Phipps is understandable. They were ahead of their time in applying sophisticated capital reorganisation methods to a family trust while hampered by a trust instrument which conferred inadequate powers of administration. In policy terms the decision is a salutary reminder of the precept that fiduciary law should incentivise wealth maximisation as well as deter misappropriation. Lord Cottenham is said to have deemed any man who accepted a trusteeship a second time fit only for a lunatic asylum.127 Any perception that equitable principles are overdeterrent in their application will discourage responsible individuals from becoming trustees even once. Equitable principles which deter conscientious and enterprising professionals from taking on the demanding role of trustee, or of adviser to trustees, emasculate a vital social and economic institution. The answer to any over-zealous application of fiduciary principles is not, however, to be found in permitting the trustee to plead that he was acting in the best interests of the beneficiary, or to declare that the principle of Boardman v Phipps will not be applied where it would be unconscientious to do so.128 The uncertainty inherent in equitable lingua franca such as ‘best interests’ and ‘unconscientious’ invites exploratory litigation, with the attendant increase in costs and legal certainty, as well as the danger of potential dilution of appropriately stringent fiduciary standards. The agency problem, to which fiduciary principles are a response, will be aggravated, not solved, by the adoption of such suggestions. The preferable approach is to improve the advance-approval procedures with which trustees must comply if they intend to employ a risky but potentially beneficial strategy which might involve committing a breach of trust. Trustees and their advisers should be encouraged to apply for the necessary legal protection before taking a commercial risk with trust property; this is surely preferable to taking the risk and seeking judicial absolution after the breach has occurred.

127 Law Times, 17 June 1854, cited in G Moffat, Trusts Law: Text and Materials, 3rd edn (London, Butterworths 1999) 330. 128 Chan v Zacharia (1984) 154 CLR 178, 204 (Deane J).

21 Pettitt v Pettitt (1970) and Gissing v Gissing (1971) JOHN MEE*

A. INTRODUCTION

T

HE PETTITTS, HAROLD JOHN and Hilda Joy, and the Gissings, Violet Emily and Raymond Clifford, came from another time. The Pettitts married in 1952. The Gissings were born around the start of the First World War and married in 1935. The disputes over the ownership of the family homes of the Pettitts and the Gissings were resolved by the House of Lords 40 years ago (Pettitt v Pettitt, the older of the decisions, being delivered a little over a year before Gissing v Gissing).1 The generation of ‘young couples’ setting up home after the Second World War,2 whose likely intentions Lord Diplock tried to establish in Gissing, has largely passed away. However, the ‘common intention’ analysis which emerged from Gissing, although recently condemned by the Supreme Court of Canada as ‘doctrinally unsound’,3 has proven to be remarkably durable and still governs certain disputes between the grandchildren of the Pettitt and Gissing generation. It is true that the advent of legislative reform has meant that many, but not all, matrimonial property disputes are now dealt with on the basis of a statutory discretion.4 However, disputes between unmar-

* I wish to thank Mary Donnelly for her comments on an earlier draft of this chapter. Thanks also to Charles Mitchell and Nick Piška. 1 Pettitt v Pettitt [1970] AC 777 was decided on 23 April 1969 and Gissing v Gissing [1971] AC 886 on 7 July 1970. 2 Gissing (HL) (n 1) 909. Note also Diplock LJ’s reference in Ulrich v Ulrich and Felton [1968] 1 WLR 180 (CA) 188 to ‘the ordinary young couples of today’. 3 Kerr v Baranow 2011 SCC 10, [2011] 1 SCR 269 [25] (Cromwell J). 4 Note the Matrimonial Proceedings and Property Act 1970, later consolidated in the Matrimonial Causes Act 1973. Section 37 of the 1970 Act, which deals with the issue of improvements made by spouses to the family home (central to Pettitt), remains in force: see n 25 below.

612 John Mee ried cohabitants continue to be decided on the basis of the rules of equity.5 The common intention doctrine is also regularly invoked in respect of disputes between other family members, and even in the commercial context. Since Gissing and Pettitt remain important authorities in the modern law, many aspects of their impact might be considered in the present chapter. However, consistently with the aim of examining the ‘landmark’ status of the cases, it has been chosen to focus on a theme which links them to the body of (post-war) cases which preceded Pettitt and also to the post-Gissing case law on the common intention analysis. The question which will be pursued here is whether it is possible under the common intention analysis to base a remedy on a common intention which, on the evidence, has not been proven to exist between the parties. The idea of ‘imputing’ a non-existent common intention to the parties was raised by the minority in Pettitt, but appeared to have been rejected decisively by the majority in that case and by a greater majority in Gissing. Nonetheless, the issue resurfaced in Stack v Dowden, where Lord Walker stated that of all the questions to be asked about ‘common intention’ trusts as they emerge from Pettitt v Pettitt and Gissing v Gissing, the most crucial is whether the court must find a real bargain between the parties, or whether it can (in the absence of any sufficient evidence as to their real intentions) infer or impute a bargain.6

Thus, Lord Walker reopened one of the few issues which had been regarded as definitively settled by Pettitt and Gissing, suggesting moreover that there was no real difference between the key concepts of ‘inference’ and ‘imputation’. In her leading speech in Stack, to which Lord Walker regarded his own speech as merely ‘a sort of extended footnote’,7 Baroness Hale also countenanced the imputation of common intention, referring to ascertaining ‘the parties’ shared intentions, actual, inferred or imputed’.8 The more recent case of Jones v Kernott9 allowed the Supreme Court to ‘revisit’ Stack and to provide ‘some clarification’.10 As part of this exercise, in which it is difficult not to see an element of damage limitation, it was

5 The Law Commission has recommended reform: Cohabitation: The Financial Consequences of Relationship Breakdown (Law Com No 307, July 2007). However, it is not proposed to act on these proposals during the current parliamentary term: written statement by Parliamentary Under-Secretary of State, Ministry of Justice (Jonathan Djanogly), House of Lords, 6 September 2011. For an argument that, in the circumstances, radical judicial law reform would be undemocratic, see J Mee, ‘Burns v Burns: The Villain of the Piece?’ in S Gilmore, J Herring and R Probert (eds), Landmark Cases in Family Law (Oxford, Hart Publishing, 2011) 175, 187–97. 6 7 8 9 10

Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432 [17]. Ibid [15] (Lord Walker). Ibid [60]. Jones v Kernott [2011] UKSC 53, [2011] 3 WLR 1121. Ibid [1] and [2] (Lord Walker and Lady Hale).

Pettitt and Gissing 613 made clear what was meant by the idea of ‘imputed’ common intention. In Stack v Dowden, Lord Neuberger had suggested that11 [a]n imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had no such intention. Imputation involves concluding what the parties would have intended, whereas inference involves concluding what they did intend.

This view of the meaning of imputation was apparently accepted by all five judges in Jones v Kernott.12 There was less agreement in Jones, however, on the meaning of ‘inference’. The conventional view has been that, even if there was no express common intention, it might be possible to ‘infer’ the existence of a genuine common intention from the conduct of the parties. However, Lord Walker and Lady Hale, with the agreement of Lord Collins, took an expansive view of this process, emphasising its ‘objective’ nature.13 In his seminal speech in Gissing, Lord Diplock had regarded the process as ‘objective’ to the extent that ‘the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words or conduct’.14 However, Baroness Hale referred in Stack to ‘what the parties must, in the light of their conduct, be taken to have intended’,15 suggesting a crucial shift from what the parties actually took each other to have intended to what the court in retrospect takes the parties to have intended. The tenor of the judgments of Lord Walker and Lady Hale, and Lord Collins, in Jones, and their assertion that there may be little practical difference between inference and imputation,16 suggests that these judges would have no objection to inferring a common intention that neither party subjectively held nor reasonably took the other party to hold. This extended

11

Stack (n 6) [126]. Jones (n 9) [26]–[36] (Lord Walker and Lady Hale); [64]–[65] (Lord Collins); [73]–[75] (Lord Kerr); [79]–[84] (Lord Wilson). Strictly speaking, the proposition at the start of Lord Neuberger’s second sentence does not actually follow from his first sentence. In principle, there is no limit to the type of non-existent intentions that the law might choose to attribute to the parties. In Stack (n 6) [61], Baroness Hale suggested that the court must search was for ‘what the parties must, in the light of their conduct, be taken to have intended’. This suggested the possibility of another form of imputation, whereby the court would attribute to the parties, on some unexplained basis, the intention which on an ‘objective’ view of their conduct they should be ‘taken’ to have had. However, as is explained in the paragraph of text following this footnote, it emerged from Jones that this (still obscure) process is regarded as leading to an inferred intention. 13 Jones (n 9) [34]. 14 Gissing (HL) (n 1) 906. 15 Stack (n 6) [61]. 16 Jones (n 9) [34] (Lord Walker and Lady Hale). See also ibid [66] (Lord Collins), stating the point in more categorical terms. Contrast ibid [67] (Lord Kerr); [89] (Lord Wilson). See further J Mee, ‘Jones v Kernott: inferring and imputing in Essex’ [2012] Conv 166, 174–77. 12

614 John Mee vision of inference was not accepted by Lord Kerr17 or Lord Wilson,18 and seems very difficult to defend. It is beyond the scope of the present chapter to address the interesting questions surrounding the proper scope of inference, except to the extent that they are relevant to the debate concerning the extent to which imputation is permissible. The chapter is structured as follows. It begins, in part B, with a brief ‘walk’ through Pettitt and Gissing, to prepare the ground for the analysis which follows. Then the discussion turns, in part C, to a consideration of the ‘imputed common intention’ approach of Lord Diplock in Pettitt, and the broadly similar approach of Lord Reid in the same case. It will be seen that, despite Lord Diplock’s attempts to clothe his approach in doctrinal respectability by invoking aspects of the law of contract, these approaches resemble in many ways the more overtly discretionary approaches favoured in the case law prior to Pettitt (which were decisively rejected by all the judges in Pettitt). In part D, consideration is given to Lord Diplock’s inferred common intention approach in Gissing, which has formed the basis of the modern law. It will be argued that, in his seminal speech in Gissing, Lord Diplock did not envisage the imputation of admittedly false common intentions; his analysis did not involve a legal fiction ‘used with a complete consciousness of its falsity’19 because his Lordship insisted that he was in the business of inferring the existence of genuine common intentions. It will be noted, however, that a doctrine which institutionalises an implausible willingness to infer (ostensibly genuine) common intentions based on certain contributions by a claimant, may come close in practice to one which openly envisages the imputation of fictional common intentions. Lastly, in part E, the discussion turns to consider the extent to which the imputation of common intention is envisaged in the cases which have subsequently developed Lord Diplock’s analysis in Gissing, in particular Stack v Dowden and Jones v Kernott. In this context, it is important to bear in mind a key distinction, which was identified by Lord Diplock in his speech in Gissing. This distinction, which has come to prominence in the later case law, is between ‘the primary, or threshold question’—was there a common intention that the beneficial interests in the property would differ from the legal interests?—and ‘the secondary, or consequential, question—“what was the common intention of the parties as to the extent of their respective beneficial interests?”’20 It will be seen that, following Stack and Jones, the modern law appears to embrace imputation in respect of the question

17

Ibid [72]–[75]. Ibid [89]. 19 N Piška, ‘Constructive Trusts and Constructing Intention’ in M Dixon (ed), Modern Studies in Property Law: Volume 5 (Oxford, Hart Publishing, 2010) 203, 222, quoting L Fuller, Legal Fictions (Stanford, CA, Stanford University Press, 1967) 9–10. 20 Oxley v Hiscock [2004] EWCA Civ 546, [2005] Fam 211 [47] (Chadwick LJ). 18

Pettitt and Gissing 615 of quantifying the share to which the claimant will be entitled (but not in respect of the threshold question of whether there is a common intention that the beneficial interests will differ from the legal title). However, as is argued in this chapter, the invocation of ‘imputation’ in Stack and Jones does not actually indicate any significant departure from the law as it had previously developed in cases such as Oxley v Hiscock,21 and it seems that the modern law may be stated without any need to use the language of imputation.

B. PETTITT AND GISSING

Although the speeches in Pettitt and Gissing reveal a range of opinion as to the extent to which equity could provide a remedy in matrimonial property disputes, the claims in both cases were unanimously rejected by the House of Lords. Pettitt concerned a claim by a husband based on improvements he had made to a family home which was in his wife’s sole name. The husband ‘had done work of internal decoration and had built a wardrobe: he had done much work in the garden including the building of an ornamental well and a brick side wall’.22 The Court of Appeal had reluctantly upheld his claim23 on the basis that the facts were indistinguishable from those in Appleton v Appleton,24 where Lord Denning MR’s Court of Appeal had found in favour of the claimant. The House of Lords, however, overruling Appleton, had no qualms about rejecting the claim.25 In Gissing, the family home had been purchased in the husband’s name for £2,695. The claimant wife had paid £220 for furnishings and for the laying of a lawn. She had also worked outside the home while the mortgage (and another loan associated with the purchase) was being repaid, and had used her earnings to pay for clothes for herself and for the son of the marriage, as well as for ‘various extras’ for the family. The majority of the Court of Appeal, giving judgment prior to the decision of the House of Lords in Pettitt, found that the wife was entitled to an equal share in

21

Oxley (n 20). Pettitt (HL) (n 1) 805 (Lord Morris). 23 [1968] 1 WLR 443. 24 Appleton v Appleton [1965] 1 WLR 25 (CA). For discussion of Appleton and other CA authorities on improvements pre-dating the House of Lords’ decision in Pettitt, see J Tiley, ‘The More than Handy Husband’ (1969) 27 CLJ 81. 25 As part of the legislative response to the decision in Pettitt, s 37 of the Matrimonial Proceedings and Property Act 1970 was enacted. This section declares that a spouse who contributes in money or money’s worth towards improvements shall, if the contribution is of a substantial nature (and subject to any contrary agreement, express or implied), acquire a share or an enlarged share in the relevant property. The section was extended to engaged couples by the Law Reform (Miscellaneous Provisions) Act 1970, s 2(1). The Civil Partnership Act 2004, s 65 is in similar terms. 22

616 John Mee the beneficial interest because the house in question qualified as a ‘family asset’ to which special rules applied.26 Again, the House of Lords had no hesitation in overturning this decision and holding that the claimant was not entitled to any share in the home. In light of the comparative weakness of the claims at issue, the interest of the cases lies not in the application of doctrine to the facts of the cases themselves but rather in the fact that in each case, as Lord Reid explained in Gissing, ‘much wider questions have been raised than are necessary for the decision of the case’.27 Together the two cases mark, or at least appear to mark, a decisive departure from the previous body of case law related to matrimonial property disputes. The emphasis in Pettitt was on establishing that no special rules are applicable in this area of the law. This involved confirming that, as had been pointed out obiter by Lord Upjohn in National Provincial Bank v Ainsworth,28 section 17 of the Married Women’s Property Act 1882 does not give the court a wide discretion to alter property rights as between the spouses.29 It also involved rejecting the so-called ‘family assets’ doctrine whereby, according to Lord Denning MR in the Court of Appeal in Gissing,30 where a couple, by their joint efforts, get a house and furniture, intending it to be a continuing provision for them for their joint lives, it is the prima facie inference from their conduct that the house and furniture is a ‘family asset’ in which each is entitled to an equal share.

All the members of the House of Lords in Pettitt were agreed upon the rejection of the family assets doctrine and of the discretionary interpretation of the Married Women’s Property Act 1882, section 17. However, Lord Reid and Lord Diplock favoured an approach which would have preserved important aspects of these discredited doctrines. Both judges would have been willing to focus on what the spouses, or reasonable people in their shoes, would have agreed (an approach described by Lord Diplock as turning on ‘imputed’ common intentions). The majority of the House of Lords in Pettitt, however, found this approach unacceptable. Lord Morris insisted that31 [i]n reaching a decision the court does not and, indeed, cannot find that there was some thought in the mind of a person which was never there at all. … The Court does not devise or invent a legal result. … [T]here is no power in the Court to

26

[1969] 2 Ch 85 (CA). Gissing (HL) (n 1) 895. 28 National Provincial Bank v Ainsworth [1965] AC 1175 (HL) 1234–36. This case is discussed by Alison Dunn in ch 19 of the present volume. 29 For a statement of the contrary view, see Hine v Hine [1962] 1 WLR 1124 (CA) 1127–28 (Lord Denning MR): the court’s discretion ‘transcends all rights, legal and equitable’. 30 Gissing (CA) (n 26) 93. 31 Pettitt (HL) (n 1) 804–05. 27

Pettitt and Gissing 617 make a contract for the parties which they have not themselves made. Nor is there power to decide what the Court thinks that the parties would have agreed had they discussed the possible breakdown or ending of their relationship.

The same view was taken by Lord Hodson,32 and by Lord Upjohn33 (who vigorously defended the application of the traditional purchase money resulting trust). Thus, while rejecting the doctrines which the lower courts had developed since the Second World War, the House of Lords in Pettitt did not signal any alternative new departure in doctrinal terms. Contemporary commentators regarded the decision as leaving the law in confusion,34 although arguably it would be more accurate to regard the case as establishing the unyielding position that a claimant who could not establish a claim under the traditional purchase money resulting trust, or succeed under the (then not very well developed) doctrine of proprietary estoppel, would be left with no remedy at all. When Gissing reached the House of Lords not long after Pettitt, there was no recognised Chancery lawyer on the panel,35 and in terms of the possibility of identifying a new direction for the development of the law (for those Law Lords so inclined) there was the problem that Pettitt had seemed to rule out most options.36 The speeches in Gissing were neither long nor impressive (and, according to Lord Walker and Lady Hale in Jones v Kernott, ‘were singularly unresponsive to each other’37). In a very short speech, Lord Reid adhered to the view he had expressed in Pettitt.38 Lord Morris reiterated his contrary view that ‘[t]he court cannot ascribe intentions which the parties never in fact had’39 and had little that he wished to add to his remarks in Pettitt. Viscount Dilhorne clearly took the same position as Lord Morris on the impermissibility of imputation.40 Lord Pearson’s speech is more difficult to interpret. Following the approach of Lord Upjohn in Pettitt, he emphasised that if the claimant was to succeed, ‘it must be on the basis that by virtue of contributions made by her towards the purchase of the house there was and is a resulting trust in her favour’.41 32

Ibid, 810. Ibid, 816. 34 S Cretney, ‘No Return from Contract to Status’ (1970) 32 MLR 570, 571; J Tiley, ‘Family Property Rights—Contribution and Improvement’ (1969) 27 CLJ 191, 196: ‘[M]ore delphic than the oracle, who at least had the advantage that her ambiguities were uttered in only one voice.’ 35 As noted by J Tiley, ‘Family Property—No Community Yet’ (1970) 28 CLJ 210, 210; Lord Browne-Wilkinson, ‘Constructive Trusts and Unjust Enrichment’ (1996) 14 Trust Law International 98, 99. 36 Note that there was some discussion in argument in Pettitt of ‘the doctrine of unjust enrichment’ but Lord Reid did ‘not think that that helps’: Pettitt (HL) (n 1) 795. 37 Jones (n 9) [28]. 38 Gissing (HL) (n 1) 895. 39 Ibid, 898. 40 Ibid, 900. 41 Ibid, 902. 33

618 John Mee In respect of such a claim, the starting point would be the presumption of resulting trust. This presumption could, however, be rebutted by evidence showing ‘some other intention’, and the question of what intention the parties had was ‘a question of fact’. Lord Pearson expressed the view that it was unlikely that the parties would enter into any agreement, and he continued as follows:42 On the other hand, an intention can be imputed: it can be inferred from the evidence of their conduct and the surrounding circumstances. The starting point, in a case where substantial contributions are proved to have been made, is the presumption of a resulting trust, though it may be displaced by rebutting evidence. It may be said that the imputed intent does not differ very much from an implied agreement. Accepting that, I still think it is better to approach the question through the doctrine of resulting trusts rather than through contract law.

In this passage Lord Pearson uses the word ‘imputed’, at first glance appearing to indicate support for the position of Lord Diplock in Pettitt. However, it seems clear, really beyond any doubt, that Lord Pearson was not using the word ‘imputed’ in the same sense as Lord Diplock in Pettitt. It has been suggested in later cases that Lord Pearson was simply using the word as a synonym for ‘inferred’.43 This is supported by the fact that Lord Pearson immediately followed the word with a full colon and the explanatory phrase ‘it can be inferred from the evidence of their conduct and the surrounding circumstances’. In fact, judging from the context of his remarks and his repeated references to the resulting trust doctrine, it seems most probable that Lord Pearson had in mind simply the operation of the presumption of resulting trust.44 The longest speech in Gissing (running to only eight pages) was given by Lord Diplock. As will be discussed in more detail later in this chapter, it seems clear that he accepted that the idea of imputation had been ruled out in Pettitt, thus ensuring that there was a majority against imputation in Gissing too (even without counting Lord Pearson, who almost certainly rejected imputation in the sense in which it had been championed by Lord Diplock in Pettitt). Lord Diplock’s speech is notable because it set out a new analysis based on giving effect to the actual common intentions of the parties, as expressed by them or to be inferred from their conduct. Viscount Dilhorne was the only judge to express agreement with this ‘common intention’ approach,45 although he did not concur formally with 42

Ibid. Stack (n 6) [105] (Lord Neuberger) (compare ibid [22] (Lord Walker); Kernott v Jones [2010] EWCA Civ 578; [2010] WLR 2401 (CA) [77] (Rimer LJ). 44 Note the discussion, text to nn 96–102, of whether the operation of this presumption may usefully be regarded as involving imputation. 45 See Gissing (HL) (n 1) 900–01. Compare Jones (n 9) [28] (Lord Walker and Lady Hale), appearing to understate somewhat the extent of Viscount Dilhorne’s engagement with Lord Diplock’s analysis. 43

Pettitt and Gissing 619 Lord Diplock’s speech and it is not clear that he agreed with all aspects of the analysis which Lord Diplock advanced.46 Lord Reid, whose views in Pettitt had been close to those of Lord Diplock in that case, adhered in Gissing to the views he had expressed in Pettitt and gave no indication that he agreed with the new approach which Lord Diplock set out in Gissing, appearing in fact to indicate some uncertainty as to what legal position the speeches of his colleagues were establishing.47 While support for Lord Diplock’s approach was, therefore, far from overwhelming in the case itself, from this somewhat unpromising start it has become clearly established as the orthodox approach in this area of English law. From a practical perspective, this seems to have occurred primarily because no alternative line of doctrinal development was identified in Pettitt and Gissing (and, arguably, because the extravagance of Lord Denning’s subsequent attempts to develop a ‘constructive trust of a new model’ made Lord Diplock’s less radical approach appear in a more attractive light).48 Even though there have since been two further House of Lords decisions in the area, Lloyds Bank Plc v Rosset49 and Stack v Dowden, and one decision of the Supreme Court, Jones v Kernott, Lord Diplock’s speech in Gissing has remained an important aspect of the doctrinal picture.

C. IMPLIED COMMON INTENTION IN PETTITT

This part of the chapter considers how much the approaches of Lord Reid and Lord Diplock in Pettitt had to offer in theoretical terms, a question which gains in practical importance because of the renewed debate about the legitimacy of imputation in Stack v Dowden and Jones v Kernott. Given the complications that have subsequently ensued in this area of the law, it might be thought that the majority judges in Pettitt were at fault in failing to support the relatively straightforward approach of the minority judges.50 It will, however, be concluded in this section that the minority approaches do not stand up to close scrutiny. Notwithstanding the best efforts of Lord Diplock in particular to find a distinctive theoretical basis for his approach, it does not appear possible to identify a principled distinction between the minority approaches and the completely discretionary approach that

46 Eg, Viscount Dilhorne ‘did not think that any useful purpose will be served by my expressing any views on what will suffice to justify the drawing of [the inference that a common intention existed]’: Gissing (HL) (n 1) 901. This contrasts with Lord Diplock’s detailed remarks on this issue. 47 Gissing (HL) (n 1) 897. 48 See J Mee, The Property Rights of Cohabitees (Oxford, Hart Publishing, 1999) ch 6. 49 Lloyds Bank Plc v Rosset [1991] 1 AC 107 (HL). 50 Compare the remarks of Lord Walker in Stack (n 6) [21], quoted as text to n 77.

620 John Mee had been supported by Lord Denning MR, which most observers would concede goes too far in terms of judicial law-making. In Appleton v Appleton, Lord Denning’s approach had been to ask ‘What is reasonable and fair in the circumstances as they have developed seeing that they are circumstances which no one contemplated before?’51 Lord Denning explained that he preferred this ‘simple test’ to the alternative idea, which he noted had sometimes been favoured in the case law, which was to ask ‘What term is to be implied? What would the parties have stipulated had they thought about it?’52 Lord Denning MR’s approach in Appleton may be seen as going as far as is possible in the direction of allowing the court a discretion to deal with the property dispute between the parties, in whatever way appears to be fair to the court in light of the facts at the time of the hearing. It was rejected by Lord Reid, who could see no ground for the assertion that the property rights of the parties could be different before and after the breakdown of their marriage. Rather, he felt that ‘the property rights of the spouses must be capable of determination immediately after the property has been paid for or the improvements carried out and must in the absence of subsequent agreements or transactions remain the same’.53 Lord Diplock also asserted that his approach differed from that favoured by Lord Denning MR, arguing that his own approach focused on the position at the time of the relevant transaction and that ‘[t]he circumstances of the subsequent breakdown and the conduct of the spouses which contributed to it are irrelevant to this inquiry’.54 Lord Reid believed that it was possible to give effect to the view that, even where there was in fact no agreement, we can ask what the spouses, or reasonable people in their shoes, would have agreed if they had directed their minds to the question of what rights should accrue to the spouse who has contributed to the acquisition or improvement of property owned by the other spouse.55

There is a significant ambiguity in Lord Reid’s approach. He refers to what would have been agreed by ‘the spouses, or reasonable people in their shoes’, without considering the possibility that one or both of the spouses might not be reasonable people. This issue was highlighted by Lord Neuberger in Stack v Dowden in disagreeing with what he took to be a revival of the idea of imputed intention by other members of the House of

51

Appleton (n 24) 28. Ibid. For examples of this approach, see Cobb v Cobb [1955] 1 WLR 731 (CA) 735 (Romer LJ); Fribance v Fribance [1957] 1 WLR 384 (CA) 387 (Lord Denning MR) (‘the court has to attribute an intention to them’); Hine v Hine (n 29) 1132 (Pearson LJ). 53 Pettitt (HL) (n 1) 793. 54 Ibid, 825. 55 Ibid, 795. 52

Pettitt and Gissing 621 Lords in that case. Lord Neuberger commented that an approach based on imputed intention would be uncertain because it is unclear whether one considers a hypothetical negotiation between the actual parties, or what reasonable parties would have agreed. The former is more logical, but would redound to the advantage of an unreasonable party. The latter is more attractive, but is inconsistent with the principle … that the court’s view of fairness is not the correct yardstick for determining the parties’ shares …56

There is some indication in Lord Reid’s speech that he envisaged that his proposed approach would turn on what the actual spouses would have agreed.57 However, Lord Neuberger’s point about the possibility of an unreasonable party seems an important one. What if one of the parties has such a forceful personality that, if the parties had ever discussed the matter, the other party would immediately have capitulated and agreed to some resolution which would have greatly favoured the first party? The idea of looking to a hypothetical negotiation between the actual parties also runs into difficulties on facts like those in Jones v Kernott,58 where the parties were already estranged at the time of the relevant events. The property in Jones was held in joint names at law, and it was conceded that, prior to their separation, the parties had also held the beneficial interest jointly. The claimant argued that her beneficial interest had increased because, for many years after the separation, she had paid the mortgage (as well as all the other outgoings) on the property, with the defendant concentrating on another property that he purchased in his sole name. If the court were to consider in a case like this what the parties would have agreed, what is the nature of the hypothetical implied by the use of the conditional tense? It can hardly be ‘if they had considered the possibility of their relationship ending’, since it had already ended. It would be intelligible to ask ‘What would they have agreed if they had got around to reaching an agreement?’ This, however, involves the possibly false assumption that the reason they did not reach an agreement was that they did not exert themselves to do so. In fact, the reality (if not on the facts of Jones v Kernott, then in other possible cases) might well be that they did not reach an agreement because they were unable or unwilling to agree. In such circumstances, it does not seem to make sense for the court to attempt to resolve their dispute by

56

Stack (n 6) [127]. Lord Reid emphasised the fact that it would be appropriate to give a remedy where the defendant acquiesced in the claimant’s contribution in circumstances where ‘it is reasonable to suppose that they would have agreed to some right being acquired if they had thought about the legal position’: Pettitt (HL) (n 1) 795. The use of the word ‘reasonable’ here seems to refer to the court’s approach to assessing what the actual spouses would have agreed, rather than requiring the court to consider what reasonable people in their shoes would have agreed. 58 Jones (n 9). 57

622 John Mee asking ‘What would the parties themselves have agreed if they had not been in complete disagreement?’59 Lord Reid did not offer a great deal in terms of a theoretical justification for his proposed approach. In the context of the present chapter’s consideration of the notion of imputation, it is significant to note that his Lordship did not use the word ‘impute’ in his speech in Pettitt; and in Gissing he commented that ‘[i]f the law is to be that the court has power to impute [a deemed] intention in proper cases then I am content, although I would prefer to reach the same result in a rather different way’. Lord Reid had stated earlier in his short speech in Gissing that he ‘adhere[d] to the views which I expressed in Pettitt’s case’.60 Considered together, these remarks suggest that Lord Reid’s approach in Pettitt did not turn on ‘imputed’ intention, at least in the sense envisaged by Lord Diplock in Pettitt. Lord Reid seemed to favour a more direct approach, which would move straight from a conclusion as to what the parties, or reasonable persons in their shoes, would have agreed, to a trust giving effect to that which would have been agreed.61 His Lordship did not explicitly envisage an intermediate step whereby a hypothetical agreement would be imputed to the parties. He did not elaborate in detail upon the basis, in terms of doctrine or otherwise, for making a remedy available in the manner he suggested. However, it may be that what he envisaged was a simple extension of the presumption of resulting trust. He noted: There is already a presumption which operates in the absence of evidence as regards money contributed by one spouse towards the acquisition of property by the other spouse. So why should there not be a similar presumption where one spouse has contributed to the improvement of the property of the other?62

The answer to Lord Reid’s rhetorical question seems to be that the presumption of resulting trust originated in different historical circumstances, 59 In Jones (n 9), the Supreme Court held that it was appropriate on the facts to infer a common intention, formed some time after the breakdown of the relationship, that the beneficial interests would no longer reflect the legal title. This was stated explicitly by Lord Walker and Lady Hale (ibid [48]), with whose reasons Lord Collins agreed. Neither Lord Kerr nor Lord Wilson appears to have disagreed, although they did not address the point expressly. In terms of quantification, the majority felt that it was possible to infer a common intention that the defendant’s share would crystallise on his departure from the disputed property, leaving him ultimately with a 10% beneficial share. Lord Kerr (ibid [77]) and Lord Wilson (ibid [89]) preferred to conclude that no common intention as to quantification could be inferred but that it was possible to impute an equivalent common intention. The majority would have been willing to do likewise if they had not felt that this result could be reached by inference: ibid [48] (Lord Walker and Lady Hale). The approach in the modern cases to imputing a common intention in respect of the secondary question of quantification is discussed in part F. 60 Gissing (HL) (n 1) 895–96. 61 Note also Lord Reid’s remark ibid, 896 (whether the claimant will obtain a share in the absence of discussion or agreement ‘depends on the law of trust rather than on the law of contract’). 62 Pettitt (HL) (n 1) 795.

Pettitt and Gissing 623 at a time when it was very likely that a person who paid the purchase price of property intended to gain a share in that property.63 Historical conditions have changed, so that it is questionable today whether the presumption is an accurate reflection of the likely intention of contributors (so that, in modern times, it would make more sense to put the burden of proof on a contributor to show that he was intended to obtain a share in the beneficial interest). By force of inertia the old presumption has survived in the context of contributions to the purchase price of property, but it is difficult to see why a new unrealistic presumption should be invented in the context of the making of improvements to the property of another, particularly because it is difficult to see how, in principle, the application of such a presumption could be limited to the matrimonial or quasi-matrimonial context. Overall, the failure of Lord Reid to provide a fully elaborated rationale for his approach means that, in theoretical terms, it is less interesting than that of Lord Diplock, who offered a more complex explanation for his approach. Lord Diplock began by framing the problem in terms of the spouses acting ‘in concert’ to acquire or improve the family home. He explained that he had used the neutral expression ‘acting in concert’ because ‘many of the ordinary domestic arrangements between man and wife do not possess the legal characteristics of a contract’,64 partly because of the Balfour v Balfour65 principle that such arrangements are not generally made with an intention to create contractual relations. Thus, by introducing the notion of ‘acting in concert’ and suggesting that it implied an arrangement which was close to, but not technically, a contract, Lord Diplock was giving the impression, without actually justifying this proposition, that the spouses were in a situation analogous to a contractual one, in which context it could be appropriate for the court to imply terms to fill any gap in the parties’ arrangements. His Lordship argued that, unless an actual common intention could be inferred from the parties’ conduct, the court was faced with a difficulty in ascertaining the common intention of the parties, upon which the extent of the parties’ proprietary interests should depend. He felt that the court could solve this problem by the application of ‘a familiar legal technique’ used in the contractual context:66 [T]he court imputes to the parties a common intention which in fact they never formed and it does so by forming its own opinion as to what would have been the common intention of reasonable men as to the effect of [an unforeseen event] upon their contractual rights and obligations if the possibility of the event happening had been present to their minds at the time of entering into the contract.

63 64 65 66

See the text following n 88. Pettitt (HL) (n 1) 822. [1919] 2 KB 571 (CA). Pettitt (HL) (n 1) 823.

624 John Mee In contrast to Lord Reid’s approach, it seems clear that Lord Diplock was contemplating imputing the common intention that reasonable persons would have formed. In the place of the parties, ‘there rises the figure of the fair and reasonable man. And the spokesman of the fair and reasonable man, who represents after all no more than the anthropomorphic conception of justice, is and must be the court itself.’67 Lord Diplock’s approach may be seen as implying the existence of a contract where none actually exists, rather than merely supplying reasonable terms to fill a gap in a pre-existing contract.68 This represents a problem, since the justification for enforcing implied contractual terms is the fact that the express terms of the contract are enforceable by and against each of the parties and it is necessary to fill in any gaps in order to give efficacy to the contract as a whole. If, however, prior to the process of implying terms, there is no contract in existence between the parties, it is difficult to see the rationale for enforcing the contract that has been invented for the parties. Even if one overlooks this problem, it is necessary to look more closely at what contingency the parties may be said to have overlooked. For Lord Diplock, the key point was that the parties’ separate entitlements would become important only ‘if the asset ceases to be used and enjoyed by them in common and they do not think of the possibility of this happening’.69 Keen to distinguish his approach from that of Lord Denning MR in Appleton v Appleton,70 Lord Diplock emphasised that the eventuality which had not been considered by the parties was not necessarily that the marriage between the parties might break down, since ‘[t]he family asset might cease to be needed for the common use and enjoyment of themselves and their children without the marriage breaking down at all’.71 However, it seems difficult to assert that the eventualities that might make relevant the issue of separate ownership are such that the parties could realistically be said to have failed to consider them. While it might well be that spouses would not consider the possibility that their relationship would end in acrimony, it seems odd to suggest that they would not consider the possibility of their marriage lasting happily until the death of one of them, or the possibility of their children growing up and their current home ceasing to be suitable for the spouses’ occupation. In terms of the likely intentions of spouses in general, 67 Davis Contractors Ltd v Fareham UDC [1956] AC 696 (HL) 728 (Viscount Radcliffe), quoted by Lord Diplock in Pettitt (HL) (n 1) 825. 68 As noted also by H Lesser, ‘Inter Vivos Matrimonial Property Rights in England: A Doctrinal Melting Pot’ (1973) 23 University of Toronto Law Journal 148, 165. 69 Pettitt (HL) (n 1) 822. 70 Appleton (n 24) 28. 71 Pettitt (HL) (n 1) 825. Lesser (n 68) 180 argued that ‘the only practical distinction’ between Lord Diplock’s position and that of Lord Denning MR ‘is the time at which reasonableness has to be tested’, since Lord Diplock’s approach would ignore the subsequent history of the marriage. According to Lesser, ‘[t]his affects the extent to which justice can be applied as a criterion but not its inherent appropriateness as such a criterion’.

Pettitt and Gissing 625 it seems more realistic to suggest that, while not necessarily dwelling on the ultimate reality that their marriage will eventually end in death if not in marital breakdown, they would be tacitly aware of this. This issue, together with the argument that Lord Diplock was not implying a term into an existing contract so much as inventing a contract from nothing, calls into question the persuasiveness of Lord Diplock’s attempt to categorise his approach as a conventional example of the application of a ‘familiar legal technique’. More crucially perhaps, an issue arises in respect of the process of determining what ‘reasonable spouses’ would have agreed if they had addressed their minds to the possibilities which they are said to have overlooked. Should the court’s approach be to impute the common intention that the claimant would have the share that would be fair in light of the extent of the claimant’s contribution? It may be that this is what Lord Diplock had in mind, given that he referred twice to what would be agreed by ‘fair and reasonable’ spouses.72 However, it is difficult to see how the inquiry can be limited to what would be ‘fair’ in this sense, if one is indeed implying a term to fill in a gap in the parties’ arrangements. Would reasonable persons not have agreed the term that would have been in their best interests at the time? This would bring into play a much wider range of considerations than simply the extent of each party’s contributions and the ‘fairness’ of a particular property arrangement in the zero sum game of a dispute over property in the context of a subsequent breakdown in the relationship (and, it will be recalled, Lord Diplock emphasised that the process of deciding what the parties would have agreed does not factor in, on the basis of hindsight, the prediction that the parties’ relationship is ultimately going to break up in acrimony). Thus, assuming that hypothetical reasonable parties were considering the impact of their contributions on their separate property entitlements, it would be sensible for them to take into consideration which of them was more likely to become bankrupt, whether the law would provide for the redistribution of their separate entitlements if their relationship were ever to break down (as the law would if the parties were married or in a civil partnership), the nature of their testamentary arrangements, the impact which the claimant’s acquiring a beneficial interest would have on any social welfare entitlements, and so on. Moreover, assuming that hypothetical reasonable spouses would take an interest in what would be ‘fair’ in terms of their separate entitlements, presumably they would look beyond the particular transaction in question, to take account of past (and likely future) contributions and gifts by both parties in other contexts, as well as factoring

72

Pettitt (HL) (n 1) 824 and 825.

626 John Mee in to some degree the extent of the wealth of each party independent of the particular transaction at issue. It is difficult to see what the justification would be for the law to ignore these considerations related to achieving the best outcome for the parties at the time. Surely it would not be just for the courts to require the parties to live with the consequences of an imputed intention, focused on a narrow idea of ‘fairness’ in respect of the contributions to this one transaction, which reasonable persons in the shoes of the parties would not have formed if they had addressed their minds to how to order their separate property entitlements at a time when their relationship was going well. The problem is that, if the wider considerations that have been discussed above are brought into play, what was looking like a dangerously uncertain inquiry begins to appear completely unmanageable. Moreover, it seems clear from the speeches of Lords Diplock and Reid that the property rights which would emerge from this process would take effect at once, thus potentially affecting third parties. It seems to go rather far to say that third parties should be bound by an interest which is created on the basis of an assessment—entirely unpredictable from the outside—of what would have been the optimal arrangement between the parties on the basis of the full range of relevant issues (including the question of safeguarding their position in the context of possible disputes with third parties). Lastly, to invert Lord Neuberger’s point in Stack v Dowden about a subjective approach favouring an unreasonable party,73 it should be noted that Lord Diplock’s objective approach in Pettitt would disadvantage an ‘unreasonable’ claimant or defendant. If the defendant can plausibly argue that, if the parties had discussed the issue in question, he or she would never have agreed to the claimant’s acquiring a share, what is the justification for awarding a share to the claimant on the basis of an imputed intention? Of course, it is possible to argue that it would be just to override the parties’ views as to what is fair, but probably the best vehicle for giving effect to such a view is not a theoretical model which purports to give effect to imputed intention as a mere supplement to actual intention (and which, presumably, would not substitute reasonable imputed intentions for actual intentions, however unfair, where such intentions actually existed).74 Thus, overall, it does not seem that the version of ‘imputed’ common intention favoured by the minority judges in Pettitt is compelling in theoretical terms. What these judges envisaged does not really seem all that different from the discredited pre-Pettitt discretionary approaches, since the judges seemed to equate reasonable intentions with ‘fair’ intentions, 73

See the text to n 56. Compare Jones v Kernott (n 9) [47] (Lord Walker and Lady Hale): ‘[the court] cannot impose a solution upon them which is contrary to what the evidence shows that they actually intended’; and see also ibid [86] (Lord Wilson). 74

Pettitt and Gissing 627 notwithstanding the fact that if the parties, or reasonable persons in their shoes, were to have formed a common intention at a time when their relationship was not in difficulties, they would not necessarily have focused on a narrow conception of ‘fairness’.

D. INFERRED COMMON INTENTION IN GISSING

(1) Inference Rather than Imputation This part of the chapter considers the approach of Lord Diplock in Gissing and the extent to which, if at all, he was willing to contemplate the possibility of attributing non-existent intentions to the parties. It will be argued that, on the face of his speech in Gissing, Lord Diplock did not envisage any legal fiction of this nature. Lord Diplock contemplated only the inference of a common intention from the conduct of the parties, in circumstances where there was no express common intention between them. A different view of Lord Diplock’s speech appears to have been taken by Lord Walker in Stack v Dowden.75 Lord Walker noted that Lord Diplock had used the word ‘infer’ repeatedly in his analysis in Gissing. However, in Lord Walker’s view, ‘[b]ut for the substitution of the word “infer” for “impute” the substance of the reasoning is, it seems to me, essentially the same (although worked out in a good deal more detail) as Lord Diplock’s reasoning in Pettitt v Pettitt, when he was in the minority’.76 Lord Walker went to state that77 [y]our Lordships may think that only a judge of Lord Diplock’s stature could have achieved such a remarkable reversal of the tidal flow of authority as has followed on his speech in Gissing v Gissing. But it might have been better for the long-term development of the law if this House’s rejection of ‘imputation’ in Pettitt v Pettitt had been openly departed from (under the statement as to judicial precedent made by the Lord Chancellor in 1966) rather than being circumvented by the rather ambiguous (and perhaps deliberately ambiguous) language of ‘inference.’

In Jones v Kernott, Lord Walker and Lady Hale also seemed to suggest, more obliquely, that Lord Diplock’s speech in Gissing involved imputation of a deemed intention. They did so by attributing the view to Lord Reid in Gissing that Lord Diplock’s speech in that case was about ‘an imputation of a deemed intention’ and then appearing to imply that this view was correct by going on to comment that ‘[t]his sort of constructive intention … [is] familiar in many branches of the law’.78 On the view taken in this chapter, these views of Lord Diplock’s speech represent (with respect) a serious 75 76 77 78

Stack (n 6) [17]–[21]. Ibid [20]. Ibid [21]. See Jones (n 9) [28], [29].

628 John Mee oversimplification. It seems clear that, in referring in Gissing to the inference of a common intention, Lord Diplock meant the process of deducing the existence of a genuine common intention between the parties from evidence of their conduct. Lord Diplock commented in Gissing that he had differed from the majority in Pettitt in that he felt that the court could give effect to a common intention ‘which it was satisfied that [the parties] would have formed as reasonable persons if they had actually thought about it at that time’.79 Lord Diplock conceded that ‘I must now accept the majority decision that, put in this form at any rate, this is not the law.’80 In his speech in Gissing, he abandoned the idea of imputed intention in favour of inferred intention— moving from imputing to the parties the intention which as reasonable people they would have formed, to a process of inference from the facts (building on the presumption of resulting trust) which might have broadly similar results in some cases. On this understanding, Lord Diplock’s approach in Gissing, unlike his approach in Pettitt, did not involve openly attributing to the parties an intention that they did not have. However, given the implausible nature of the inferences of fact which Lord Diplock declared himself willing to draw on the basis of the claimant’s conduct in making certain contributions, his approach might indeed result in the court attributing a non-existent intention to the parties (while maintaining that it was a genuine intention established on the basis of evidence of conduct).

(2) Inference from Conduct and the Presumption of Resulting Trust In discussing the process of inferring the existence of a common intention, Lord Diplock began by referring to the operation of the presumption of resulting trust. He considered the situation where the home has been purchased ‘without the aid of an advance on mortgage’. Lord Diplock stated that, in such a case, ‘if the rest of the evidence is neutral the prima facie inference is that [the couple’s] common intention was that the contributing

79

Gissing (HL) (n 1) 904. Ibid, 904. Lord Diplock’s use of the phrase ‘put in this form at any rate’ seems to raise a question as to the extent to which he had really resiled from the position he had stated in Pettitt. However, see ibid, 906, where, having pointed out that a person must be seen as having the intention which the other person reasonably understood him to be manifesting by his words and conduct, Lord Diplock explained that ‘[i]t is in this sense that in the branch of English law relating to constructive, implied or resulting trusts effect is given to the inferences as to the intentions of parties to a transaction which a reasonable man would draw from their words or conduct’. It seems that this limited introduction of ‘reasonableness’ into the assessment of a person’s intentions (the significance of which was overstated in Jones by Lord Walker and Lady Hale ((n 9) [34]) represents the full extent to which, in Gissing, Lord Diplock sought to retain some scope for the application of a yardstick of reasonableness in the assessment of intentions. 80

Pettitt and Gissing 629 spouse should acquire a beneficial interest in the land in the same proportion as the sum contributed bore to the total purchase price’.81 He went on to argue that, in a case where the purchase had been assisted by a mortgage, the fact that the claimant had made a cash contribution to the initial deposit and legal charges not borrowed on mortgage would also lead to a presumption that there was a common intention that the claimant should have a share in the beneficial ownership. In such a case, however, it would not ‘be reasonable to infer a common intention as to what her share should be without taking account also of the sources from which the mortgage instalments were provided’.82 Furthermore, still assuming that she had made an initial contribution, ‘it would be unrealistic to regard the wife’s subsequent contributions to the mortgage instalments as without significance unless she pays them directly’.83 Lord Diplock also suggested that even in the absence of an initial contribution, the fact that the claimant makes ‘a regular and substantial direct contribution to the mortgage instalments’ could justify the inference of ‘a common intention … from the outset that she should share in the beneficial interest’.84 Thus, in discussing the range of situations in which a common intention might be inferred from the conduct of the parties, Lord Diplock expressly built on the presumption of resulting trust as it applied in the straightforward situation of a purchase which did not involve a mortgage, arguing that certain inferences should be drawn in more complex situations, essentially because this would be ‘reasonable’ or ‘realistic’ in light of the primary inference mandated by the basic presumption of resulting trust. It is clear that Lord Diplock is describing a process that, ostensibly, involves inferring the existence of a genuine common intention from evidence of conduct. The court is concluding that the conduct of the parties is such that it proves that there must have been a prior common intention between the parties in relation to sharing the beneficial ownership—the argument is that the parties would not have acted as they did if there had not been such a prior common intention. In reality, though, people act as they do for a variety of reasons, and the plausibility of the inferences that Lord Diplock envisaged is very much open to question. For example, it is quite possible that a spouse could, at the time of the initial purchase, make a small financial contribution to the purchase price of a house which is conveyed into the sole name of his or her spouse, without there having been 81

Gissing (HL) (n 1) 907. Ibid. 83 Ibid. 84 Ibid, 908. Lord Diplock’s discussion of the process of inference from conduct concentrated on conduct in the form of the making of financial contributions. He did not expressly comment on the status of conduct in the form of caring for the children of the relationship. However, the later case law has taken the view that this conduct is not sufficient to justify the inference of a common intention. See Burns v Burns [1984] Ch 317 (CA); Mee (n 5). 82

630 John Mee a prior common intention between the spouses that the contributor would have a share in the beneficial ownership.85 In light of possible objections to his approach based on the implausibility of his suggested inferences, the presumption of resulting trust plays a key role in terms of shoring up Lord Diplock’s analysis and making it appear defensible in light of orthodox principles of equity. A crucial difficulty with Lord Diplock’s reliance on the presumption of resulting trust in the context of the inference of common intention is that what is presumed under that presumption is not a common intention between the parties that the beneficial ownership would be shared.86 Although this does not appear to be widely appreciated, the notion of ‘common intention’, with its contractual flavour, had not featured in discussion of the resulting trust prior to Gissing.87 Under the traditional purchase money resulting trust doctrine, the presumption instead relates to the unilateral intentions of the relevant contributor: ‘[I]t is the intention of the … contributor alone that counts.’88 It appears that the purchase money resulting trust doctrine was initially developed by analogy with the resulting use that arose upon a voluntary conveyance of land.89 In the latter context, it was felt by equity that a person should ‘retain’ the beneficial interest in the land unless they had intended to pass it, along with the legal title, to the donee.90 In light of the frequency with which donors intended to retain the beneficial interest in the land, equity presumed that the intention of the donor was consistent with a resulting use, unless the contrary was shown. In the purchase money context, the idea seems to have been that a person who put up all the money for a purchase in the name of another could be seen as the ‘real’ purchaser; it was as if he had acquired the ownership of the land from the vendor and then voluntarily conveyed it himself to the nominal purchaser, so as to trigger the same principle as in the case of a voluntary conveyance of the land directly from the real purchaser to the nominee (although with a trust being presumed under the purchase money doctrine instead of a use).

85

Compare the facts of Midland Bank plc v Cooke [1995] 4 All ER 562 (CA). R Chambers, Resulting Trusts (Oxford, OUP, 1997) 37. 87 It had been mentioned a few times in post-war (pre-Pettitt) matrimonial property cases in the context of the question of attributing a ‘reasonable’ common intention to parties who had not actually reached any agreement as to their respective property rights in family assets. On the modern origin of the common intention analysis, see Mee (n 48) 151–54. 88 Kerr v Baranow (n 3) [25] (Cromwell J). 89 Dyer v Dyer (1788) 2 Cox Eq Cas 92, 93; 30 ER 42, 44 (Eyre CB). See the discussion in J Mee, ‘Resulting Trusts and Voluntary Conveyances of Land 1674–1925’ (2011) 32 Journal of Legal History 215, 223–24. 90 For detailed discussion of the historical emphasis on the idea of retention, see J Mee, ‘“Automatic” Resulting Trusts: Retention, Restitution, or Reposing Trust?’ in C Mitchell (ed), Constructive and Resulting Trusts (Oxford, Hart Publishing, 2010) 207, 214–19. 86

Pettitt and Gissing 631 Some further mental adjustment was required to deal with a situation where more than one person had contributed to the purchase price, but ultimately, in this situation, each contributor was seen as the real purchaser of a fraction of the beneficial ownership of the property reflecting the proportion of the total purchase money that he or she had provided. By analogy with the treatment of the sole contributor scenario, each contributor was presumed to intend to retain the proportion of the beneficial interest of which he or she was the ‘real’ purchaser. There is no evidence that equity saw the creation of a resulting trust in this situation as depending on a ‘common intention’ between the parties that ownership would be shared, even if this might seem a more plausible basis for an equitable doctrine if one were to be developed in modern times to address the situation of joint contributors to a purchase. In fact, prior to the nineteenth century, it was unclear whether the purchase money resulting trust doctrine actually applied to a scenario where X and Y contributed to the purchase price of property taken in the name of X. In Crop v Norton,91 Lord Hardwicke had seemed to suggest that the doctrine could not apply in such circumstances, arguing that92 where a purchase is made, the purchase-money is paid by one, and the conveyance taken in the name of another, there is a resulting trust for the person who paid the consideration; but this is where the whole consideration moved from such person; but I never knew it where the consideration moved from several persons, for this would introduce all the mischiefs which the Statute of Frauds was intended to prevent.

It was not until Wray v Steele93 was decided in 1814 that the matter was settled. This aspect of the development of the purchase money resulting trust cannot be seen as consistent with the notion that it had always turned on a common intention between the contributors that the beneficial ownership would be shared. The point, then, is that the traditional presumption of resulting trust (itself very difficult to defend in modern times) went no further than attributing an intention to the contributor to obtain a share in the beneficial interest. By contrast, the inference that Lord Diplock was willing to draw was of a different nature, in that it involved the intentions of the legal owner as well as the contributor. Whether one regards the common 91 Crop v Norton (1740) 2 Atk 74, 26 ER 445; Barn CC 179, 27 ER 603; 9 Mod 233, 88 ER 418. 92 (1740) 9 Mod 233, 235; 88 ER 418, 421. See also (1740) Barn CC 179, 184; 27 ER 603, 606. It is true that it had earlier been established that where X and Y contributed unequally to the purchase of property taken in the names of X and Y, they would be presumed to take in equity, not as joint tenants but as tenants in common, in the proportions of their contributions: Lake v Gibson (1729) 1 Eq Ca Abr 290. However, this could be seen as a rule of the law of co-ownership, rather than a general rule applying to all purchase money resulting trusts. 93 Wray v Steele (1814) 2 V & B 388, 35 ER 366.

632 John Mee intention trust has having a ‘perfectionary’ function, so that it gives effect to an informal declaration of trust by the legal owner,94 or as being justified on a basis analogous to proprietary estoppel, it is clear that the legal owner and his or her intentions or representations or declarations (and their effect on the claimant) are at the heart of the analysis. In contrast, the traditional purchase money resulting trust may be seen as ‘claimant-sided’, in the sense that what matters is the intention of the contributor. In terms of plausibility, it seems much easier to draw inferences from the conduct of the contributor about that person’s intentions rather than (as Lord Diplock’s analysis requires) about the legal owner’s intentions or representations and their effect on the contributor. In other words, it may be possible to infer from the fact that X contributed to the purchase price of property that X intended to gain a share in the beneficial ownership; it is more difficult to infer from X’s conduct that the legal owner led X to believe that X would have a share in the beneficial ownership. Thus, Lord Diplock’s views on the inference of common intention seem to involve a distortion of the nature of the presumption of resulting trust. The inferences which Lord Diplock suggested should be drawn from the conduct of the parties are generally not credible95 and are only made to seem so because of his expedient of treating an expanded version of the presumption of resulting trust as an engine to generate common intentions. In the end, this point appears to be central to the power of the common intention analysis since, if a fully realistic view were to be taken, common intentions would much more rarely be found and a remedy would be available to a claimant much less frequently. Interestingly, in Jones v Kernott Lord Walker and Lady Hale insisted that ‘[t]he presumption of a resulting trust is a clear example of a rule by which the law does impute an intention, the rule being based on a very broad generalisation about human motivation’.96 Hints to this effect may also be discerned in Pettitt and Gissing.97 As the foregoing discussion suggests, there is some truth in this observation, given that Lord Diplock’s speech in Gissing harnessed the presumption of resulting trust as a mechanism for generating inferences of ‘fact’ which appear implausible, so that it may reasonably be insisted that, behind the façade of searching for genuine intention, what is really going on is the imputation of non-existent intentions. However, it is 94

See G Elias, Explaining Constructive Trusts (Oxford, OUP, 1990) 56–65. Note the remarks of Viscount Dilhorne in Gissing (HL) (n 1) 901 and contrast Lord Diplock’s comments in Pettitt (HL) (n 1) 822 (‘true inference’ in most cases which come before the courts is that the parties formed no common intention) with his approach in Gissing. 96 Jones (n 9) [29]. See also ibid [30], [31] (and see at [24] in relation to the presumption of advancement). 97 See Pettitt (HL) (n 1) 816, where Lord Upjohn suggested that the presumptions of advancement and resulting trust represented ‘the common sense of the matter and what the parties would have agreed had they thought about it’. Note also Lord Pearson’s reference to the idea of imputation in Gissing (HL) (n 1) discussed in the text to nn 41–44. 95

Pettitt and Gissing 633 also important to acknowledge that the presumption of resulting trust has traditionally operated as a means of arriving at proof of a fact in a case where evidence is unavailable,98 rather than as a mechanism for imposing a view of what it would have been reasonable for the parties to have agreed if they had, in some way, behaved differently from how they are likely to have behaved in fact.99 It is true that, where it applies (which, according to Lord Walker and Lady Hale would be rare in the domestic context)100 and is not rebutted, the presumption can lead to a finding of intention which the relevant individual ‘may never have had’.101 However, this is the case even where a fact is being found by a court, on the balance of probabilities, without the assistance of a presumption; since the available evidence may be misleading or the court may reach inappropriate conclusions on the basis of the evidence, the possibility of a mistake on the court’s part cannot be ruled out. The fact that the presumption of resulting trust is outdated, so that the inferences of fact it generates (although originally based on ‘likely intentions’)102 are no longer reliable, suggests that it is an unreliable tool in the process of inferring real intentions rather than that it is a tool for imputing fictional intentions.

E. LORD DIPLOCK’S APPROACH TO QUANTIFICATION IN GISSING

The previous parts of this chapter have suggested that Lord Diplock’s analysis in Gissing relies on implausible inferences of genuine common intentions rather than on a process of imputing fictional common intentions. This part examines whether this approach is maintained in the passages in Lord Diplock’s speech that deal with the question of quantification (and this consideration of Lord Diplock’s treatment of quantification will also prepare the ground for the discussion to follow concerning the relationship between imputation and quantification in the later case law). Lord Diplock argued that, once the court had found that a common intention to share the beneficial ownership had existed, it would not be equitable to deny a claimant any interest ‘merely because at the time the [claimant] made her contributions there had been no express agreement as to how her share in it was to be quantified’.103 According to Lord Diplock:104 In such a case the court must first do its best to discover from the conduct of the spouses whether any inference can reasonably be drawn as to the probable 98 99 100 101 102 103 104

Compare W Swadling, ‘Explaining Resulting Trusts’ (2008) 124 LQR 72, 74–79. Notwithstanding the view of Lord Upjohn in Pettitt (HL) (n 1) 816, quoted in n 97. Jones (n 9) [31]. Ibid [24] (Lord Walker and Lady Hale) (in the context of the presumption of advancement). Ibid [31] (Lord Walker and Lady Hale), quoting Lord Diplock in Pettitt (HL) (n 1) 824. Gissing (HL) (n 1) 908. Ibid.

634 John Mee common understanding about the amount of the share of the contributing spouse upon which each must have acted in doing what each did, even though that understanding was never expressly stated by one spouse to the other or even consciously formulated in words by either of them independently.

He then went on to discuss the inferences which could be drawn based on various patterns of conduct, in the form of making various types of contribution. Lord Diplock appeared to be pushing the idea of inferring the existence of a genuine common intention to the limit in suggesting that one could infer a common intention as to quantum in circumstances where ‘that understanding was never expressly stated or even consciously formulated in words by either of them independently’. It is true that the whole idea of inference from conduct involves accepting that a common intention can exist even if it was never ‘expressly stated’. However, can a common intention be said genuinely to exist if neither party ever ‘consciously formulated [it] in words’? To parse this phrase, such a common intention would have to involve an intention which was ‘formulated in words’ but not consciously (which seems hard to envisage), or else (more likely) an intention which was never formulated in words at all but somehow still existed. The latter form of ‘intention’ could presumably take the form of an assumption, upon which the person holding it never dwelt consciously but which might still have influenced the person’s conduct. One difficulty is as to how such an unarticulated assumption might be said to have been transmitted from one person to the other, so as to become a ‘common’ intention. At this point, one is reminded of Steyn LJ’s dismissal in Springette v Defoe of the possiblity of communication of an intention at ‘a sub-conscious level’ on the basis that ‘[o]ur trust law does not allow property rights to be affected by telepathy’.105 However, it seems just about possible to argue that one is dealing here with ‘the possibility of conventional, albeit subtle, forms of communication between people who know each other intimately: nonverbal cues, assumptions underlying remarks made about other matters, things not said which would otherwise have been said’.106 However, even if this type of subconscious formulation and communication of a common intention might be conceivable as a matter of logic, it is very difficult to see how its existence could be tested by the legal process. Thus, although Lord Diplock seems to be restricting himself to a requirement of a genuine common intention,107 he is drawing attention to possible forms

105 Springette v Defoe [1992] 2 FLR 388 (CA) 394. Contrast the reference to ‘subconscious intention’ by Nicholas Strauss QC, sitting as a deputy High Court judge, in Jones v Kernott [2009] EWHC 1713 (Ch), [2010] WLR 2401 (Ch) [33]. 106 Mee (n 48) 125. 107 Note his reference in this context to ‘the probable common understanding … upon which each must have acted in doing what each did’: Gissing (HL) (n 1) 908 (emphasis added).

Pettitt and Gissing 635 of genuine common intention the past existence of which, it seems, can only be guessed at. Hence, while ostensibly keeping to the idea of ‘genuine common intention’, Lord Diplock is coming close to his view in the earlier case of Ulrich v Ulrich, where, in describing the law applicable to family assets, he had said:108 Where there is no explicit agreement, the court’s first task is to infer from their conduct in relation to the property what their common intention would have been had they put it into words before matrimonial differences arose between them.

This view was expressed before the majority of the House of Lords in Pettitt had rejected Lord Diplock’s ‘imputed common intention’ approach and so seems unlikely to have been intended to be any more limited than Lord Diplock’s approach shortly afterwards in Pettitt. If one changed the phrase ‘what their common intention would have been had they put it into words’ to ‘what their common intention was although not put into words’, one would seem to have Lord Diplock’s approach in Gissing. Nonetheless, there seems to be a clear difference in principle between Lord Diplock’s approach in Gissing and his position in Pettitt. If, for example, in respect of quantification, one is looking at what reasonable parties would have agreed, it seems that there will always be an answer. However, if one is looking at what as a matter of probability these particular parties did intend in respect of quantum, then (even if one is willing to include real but subliminal intentions) one could still conclude that the parties had no common intention in respect of quantum. Lord Diplock clearly recognised this, since he stated only that the court should do its best to discover ‘whether’ any inference could reasonably be drawn as to the parties’ ‘probable common understanding’ about the extent of the claimant’s share. He went on to state that109 [i]t is only if no such inference can be drawn that the court is driven to apply as a rule of law, and not as an inference of fact, the maxim ‘equality is equity,’ and to hold that the beneficial interest belongs to the spouses in equal shares.

Although Lord Diplock’s speech has proven remarkably influential as a whole, this particular suggestion of his has not found favour in later cases. The logic behind it is questionable. The occasional application of the relevant maxim in the context of the traditional purchase money resulting trust may be seen as resolving an evidential difficulty in terms of the extent of a claimant’s contribution which is very substantial and may or may not exceed one half. In such circumstances it may indeed be necessary to use ‘an equitable knife … to sever the Gordian knot’.110 However, Lord

108 109 110

Ulrich v Ulrich [1968] 1 WLR 180 (CA) 188–89. Gissing (HL) (n 1) 908. Ainsworth (n 28) 1236 (Lord Upjohn).

636 John Mee Diplock’s suggestion was to apply the maxim as a rule of law to determine the ultimate question of the entitlements of the parties. It is not at all clear why, in a case where the claimant has made a relatively minor contribution, the award of a 50 per cent share would be justifiable. While later courts have not taken up Lord Diplock’s suggestion as to the application of the maxim that ‘equality is equity’, this part of his speech is significant for present purposes because Lord Diplock expressly contemplated that it might be impossible to infer any common intention as to the extent of the claimant’s share, apparently demonstrating beyond a doubt that he was not describing a process that, in principle, permits the court to impute a non-existent reasonable intention to the parties (even at the quantification stage).

F. IMPUTATION IN THE SUBSEQUENT CASE LAW

Having considered Lord Diplock’s approach in Gissing and having concluded that his speech did not support the idea of imputation (either in respect of the threshold question of whether a common intention exists, or in relation to the quantification issue), the discussion now turns to the role of imputation in the subsequent case law. For many years after its rejection in Pettitt and Gissing, the idea of imputation cropped up only occasionally in the case law.111 For example, in the influential case of Grant v Edwards, the only mention of imputation was Mustill LJ’s insistence that the court ‘must not impute to the parties a bargain which they never made, or a common intention which they never possessed’.112 More recently, however, references to imputation began to

111 See Hardwicke v Johnson [1978] 1 WLR 683 (CA) 688, where Lord Denning MR relied upon Lord Diplock’s views in Pettitt, without mentioning that they had been rejected by the majority of the House of Lords. See also Burns v Burns [1984] Ch 317 (CA) 322–26 (Waller LJ); and note the position taken by A Zuckerman, ‘Ownership of the Matrimonial Home—Common Sense and Reformist Nonsense’ (1978) 94 LQR 26. The ‘imputed common intention’ approach was one of the inspirations for the development in New Zealand of an approach based on ‘reasonable expectations’: Gillies v Keogh [1989] 2 NZLR 327; Mee (n 48) ch 9. 112 Grant v Edwards [1986] Ch 638 (CA) 652. In Jones v Kernott (n 9) [59], Lord Collins saw a contrast between Gissing and Lloyds Bank v Rosset (n 49) in terms of the distinction between inference and imputation. This appears to follow on from a suggestion by Lord Walker in Stack (n 6) [25] that, in concurring with Lord Bridge’s remarks in Rosset (n 49) 132–33, the House of Lords ‘was unanimously, if unostentatiously, agreeing that a “common intention” trust could be inferred even when there was no evidence of an actual agreement’. It is arguable, however, that Lord Bridge’s language here must be understood in light of his earlier comments, ibid, 132E–G. On this view, the two categories of case envisaged by Lord Bridge were (i) cases where ‘independently of any inference to be drawn from the conduct of the parties’ the parties have reached an agreement, arrangement or understanding, and (ii) cases where, in the absence of ‘an agreement or arrangement to share in this sense’ (ibid, 132F, emphasis added), ie in the absence of an express agreement or arrangement, a

Pettitt and Gissing 637 crop up in the cases again.113 After Stack and Jones, it appears to have been clarified that imputation is not permissible in respect of the first question, as to whether there is a common intention that the beneficial interests will differ from the legal title.114 However, the position appears to be different in relation to the second question, discussed at the end of the previous part of this chapter, of quantifying the claimant’s remedy where a common intention has been found to exist but no common intention as to the respective shares was expressed or may be inferred from the conduct of the parties. Following Stack and Jones, it is now appears to be settled that in the relevant situation, ‘the answer is that each is entitled to that share which the court considers fair having regard to the whole course of dealing between [the parties] in relation to the property’.115 This test may be rationalised in various ways, a number of the options having been canvassed by Chadwick LJ in Oxley v Hiscock.116 What is interesting in the present context is the argument, favoured in Jones, that this approach involves imputation, in that if the court ‘cannot deduce exactly what shares were intended, it may have no alternative but to ask what [the parties’] intentions as reasonable and just people would have been had they thought about it at the time’.117 The assumption appears to be that ‘reasonable [persons] will intend only what is fair’,118 so that it makes no difference whether the test in respect of the quantification of the parties’ shares is framed by reference to imputed reasonable intentions or by reference to what ‘the court considers fair having regard to the whole course of dealing between [the parties] in relation to the property’. There are significant problems with the references to imputation in this context. In Oxley, Chadwick LJ had referred to the idea of imputation in

common intention may be inferred from the parties’ conduct. While the previous point of interpretation is debatable, it does seem most unlikely, in light of his generally conservative approach to the common intention trust, that Lord Bridge intended to smuggle imputation in a strong sense back into the analysis. At most, it seems, he was merely referring to the operation of the presumption of resulting trust: see nn 96–102. See further Mee (n 48) 131–34. 113 See Stokes v Anderson [1991] 1 FLR 391 (CA); Midland Bank plc v Cooke (n 85); Oxley v Hiscock (n 20). 114 The possibility of imputation in relation to the first question is not mentioned in the summary of the law by Lord Walker and Lady Hale in Jones (n 9) [51]–[52] (as surely it would have been if it were permissible); and note the explicit rejection of the possibility by Lord Collins ibid [64]. Lord Wilson wished to keep this question open: ibid [84]. 115 Ibid [51] (Lord Walker and Lady Hale), quoting Oxley v Hiscock (n 20) [69] (Chadwick LJ). 116 Oxley (n 20) [69]–[71]. 117 Jones (n 9) [47] (Lord Walker and Lady Hale). See also ibid [31] (Lord Walker and Lady Hale); [72] (Lord Kerr); [84] (Lord Wilson). 118 Ibid [83] (Lord Wilson).

638 John Mee this situation as ‘artificial—and an unnecessary fiction’;119 and in Jones, Lord Kerr developed the point as follows: [I]n the final analysis, the exercise is wholly unrelated to ascertainment of the parties’ views. It involves the court deciding what is fair in light of the whole course of dealing with the property. That decision has nothing to do with what the parties intended, or what might be supposed would have been their intention had they addressed that question. In many ways, it would be preferable to have a stark choice between deciding whether it is possible to deduce what their intention was and, where it is not, deciding what is fair, without elliptical references to what their intention might have—or should have—been.120

This passage suggests that court-determined ‘fairness’ and imputed reasonable intentions are not necessarily the same thing. It will be recalled that it was argued in Part C above that if the parties had actually thought about their beneficial entitlements at a time when their relationship was going well, they probably would not have envisaged a process which would focus narrowly on the idea of fairness in relation to the acquisition or improvement of the home but would instead have looked to a much wider range of issues, not limited to the consequences of their past conduct or to ‘fairness’ in a narrow sense. This suggests that if the modern law involves quantifying the parties’ shares on the basis of an assessment of fairness in light of the whole course of the parties’ conduct in relation to the disputed property, it is inaccurate (and, therefore, confusing) to suggest that the court is implementing the solution that the parties themselves—or even reasonable persons in their shoes—would have envisaged if they had directed their minds to the matter in advance. Lord Kerr concluded that ‘imputing intention has entered the lexicon of this area of law and it is probably impossible to discard it now’.121 However, if the law is to remain as suggested by the majority in Jones, there seems to be no reason why it should not be discarded.122 It is significant that Lord Walker and Lady Hale (with whose reasons Lord Collins expressed agreement, making a majority of the Supreme Court) found it possible to summarise the law at the conclusion of their judgment without any reference to the concept of imputation.123 This suggests that the statement of the test for quantification in terms of ‘fairness in light of the whole course of dealing with the property’ is to be taken as the primary formulation. It may 119

Oxley (n 20) [71]. Jones (n 9) at [74]. 121 Ibid. 122 Lord Wilson expressed great enthusiasm for the concept of imputation in his judgment in Jones, but this seems to have been strongly connected to his desire to give ‘careful thought’ in a future case to the possibility of extending the scope of imputation beyond the secondary question of quantification to cover the primary question of whether a common intention exists that the beneficial ownership should differ from the legal ownership: ibid [84]. 123 Ibid [51]–[52]. 120

Pettitt and Gissing 639 be that future courts will concentrate on this summary, so that imputation may retreat into the background once more. A possible difficulty with dropping the reference to imputation is that this might appear to leave the relevant test without any theoretical justification at all, beyond the unsatisfying argument that the court is ‘driven’ to resort to this solution in the absence of any better alternative.124 In fact, however, when one reflects on the courts’ conviction that the answer to the quantification issue must lie in a survey of all of the parties’ conduct, it seems possible to suggest a more principled approach.125 It seems that matters would be clarified if one bore in mind that, in respect of the common intention trust, conduct may have a ‘twofold function’, in that it may be relevant both as evidence from which one is able to infer a common intention and also as evidence of detrimental reliance on that common intention.126 If one sees the underlying rationale for the common intention trust as being that the claimant has been led to act to his or her detriment on the basis of a common intention as to the sharing of beneficial ownership, the obvious option where no genuine common intention as to quantification may be inferred from the parties’ conduct is for the remedy to reflect the extent of the detriment incurred by the claimant on the basis of the relevant common intention. Thus, one would return to look at aspects of the parties’ conduct to determine the extent to which the claimant had acted to his or her detriment on the common intention. Relevant matters would include contributions to the acquisition of the purchase price, but would not necessarily be limited to this. Thus, for example, if the claimant had contributed to improvements to the house (or had acted to his or her detriment in a manner unconnected with the disputed property), this conduct might also be taken into account if it could be said that it was undertaken on the basis of the common intention. It is useful to compare the problem under discussion to those which arise in the context of proprietary estoppel remedies (notwithstanding Lord Walker’s apparent overreaction in Stack to a previous tendency in the case law to exaggerate the similarities between the common intention trust and proprietary estoppel).127 While there is much force in the argument that the remedy for proprietary estoppel should reflect the detriment incurred by the claimant (subject to an upper limit based on the expectation reasonably induced in the claimant by the defendant’s representation), this argument 124

Ibid [31] (Lord Walker and Lady Hale); [87] (Lord Wilson). See Mee (n 48) 148–51. 126 Grant v Edwards (n 112) 647 (Nourse LJ). 127 Stack (n 6) [37]. Note that earlier cases such as Stokes v Anderson (n 113) and Oxley had emphasised the analogy with estoppel in the relevant context (see also Grant v Edwards (n 112) 657–58 (Sir Nicholas Browne-Wilkinson V-C)) but, unfortunately, had overlooked the fact that the courts do not generally speak in terms of awarding the claimant a ‘fair share’ in estoppel cases. 125

640 John Mee has not been accepted by the courts to date.128 The current position appears to be that the remedy will reflect the expectation unless such a remedy would be disproportionate to the detriment incurred by the claimant.129 However, it must be understood that the situation that is now being considered is not really analogous to the standard proprietary estoppel scenario. Instead, it is similar to a proprietary estoppel situation where D promises C that C will obtain an unspecified interest in D’s land. In such a situation (assuming that C has acted to his or her detriment), it is clear that equity will not deny C a claim simply because the precise extent of the promised beneficial interest was unclear.130 However, there can be no question here of giving effect to the expectation reasonably induced by D’s representation, since this expectation is not precise. Therefore, the argument that the remedy should, in such circumstances, reflect C’s detriment is different from (and easier to make than) the more general contention that the estoppel remedy should always reflect C’s detriment rather than the expectation. The courts have been far from surefooted in relation to the question of estoppel remedies, preferring the simple option of fulfilling the expectation and appearing unconvincing when required to devise a remedy on a different basis. This proposition is illustrated by the unsatisfactory approach in Jennings v Rice, where Robert Walker LJ felt that, in a case where it was not appropriate to grant an expectation remedy, ‘the court has to exercise a wide judgmental discretion’ and identified a series of factors to be taken into account (which, it seems, might provide little guidance in many cases).131 However, writing extra-judicially, Lord Walker seems subsequently to have come to the view that it would be more appropriate to revert to a quantification of the remedy by reference to the detriment incurred by the claimant.132 In the end, it seems that in the situation under discussion, when a common intention has been found to exist but no common intention as to quantum has been expressed or can be inferred, there is really no need to resort to the imputation of a fictional common intention in relation to quantum. A remedy can be granted which reflects the extent of the detriment suffered by the claimant (or, if this is regarded as preferable, a remedy which is determined on the basis of a wide judgmental discretion which would be guided by the type of factors identified in Jennings v Rice but in which, in reality, the question of detriment would normally play a central role). This

128 For discussion of the issues, see J Mee, ‘The Role of Expectation in the Determination of Proprietary Estoppel Remedies’ in M Dixon (ed), Modern Studies in Property Law, Volume 5 (Oxford, Hart Publishing, 2009) 389. 129 Jennings v Rice [2002] EWCA Civ 159, [2003] 1 P & CR 8. 130 Compare Ramsden v Dyson (1866) LR 1 HL 129, 171 (Lord Kingsdown). 131 Jennings (n 129) [51]–[52]. 132 Lord Walker, ‘Which Side “Ought to Win”?: Discretion and Certainty in Property Law’ [2008] Singapore Journal of Legal Studies 229, 239 (‘the court will probably aim at making good the claimant’s detriment’).

Pettitt and Gissing 641 type of approach would be close to that favoured in Jones but could more satisfactorily be justified by reference to principle. Without the type of theoretical anchoring which has just been suggested, it is difficult to distinguish the modern approach from those ventured by the courts prior to Pettitt and Gissing. In Stack, Baroness Hale stated an unwillingness to ‘return to the days before Pettitt v Pettitt without even the fig leaf of section 17 of the 1882 Act’.133 However, it is not clear whether there is a substantial difference between the approach set out in Stack and Jones and the formulation put forward, more than 50 years earlier, by Romer LJ in Cobb v Cobb (also a joint names case). Romer LJ stated that134 [i]n cases of this kind one usually has no direct evidence of intention in relation to the ownership of the matrimonial home, because the parties to the marriage very seldom form one when they buy it; and the court has to attribute an intention from the course of conduct of husband and wife (including their respective contributions towards the purchase price) at the time when the home was purchased and subsequently.

G. CONCLUSION

This chapter has considered the landmark cases of Pettitt and Gissing through the prism of imputed common intention, an idea advanced by Lord Diplock in Pettitt and (on one view) implemented in a different form by him in his speech in Gissing. The conclusion has been that the common intention trust analysis, as first put forward in the speech of Lord Diplock in Gissing, did not directly involve the imputation of common intentions. Unfortunately, the notion of imputation has, following Stack v Dowden and Jones v Kernott, crept back into the modern law on the common intention trust in respect of the secondary issue of quantification. However, as argued above, it seems unnecessary to present the modern approach to quantification in terms of the imputation of a non-existent common intention. Despite the emphasis on imputation in relation to the quantification issue, it seems clear after Jones that the law does not permit imputation in respect of the first question of whether there is a common intention that the beneficial interests should differ from the legal title. This does not mean, however, that the modern doctrine will not, in practice, end up providing a remedy for claimants on the basis of non-existent common intentions. The essence of a true legal fiction is that everyone knows that it is not true. Under the ‘imputed common intention’ approach proposed by Lord Diplock in Pettitt, there would have been no pretence that the parties

133 134

Stack (n 6) [61]. Cobb v Cobb [1955] 1 WLR 731 (CA) 735.

642 John Mee actually had the ‘reasonable’ common intention which would have been attributed to them. A key difficulty with the alternative vision put forward by Lord Diplock in Gissing, a vision which triumphed in the later case law, is that it involved pretence rather than fiction, creating great potential for confusion. The approach of the majority in Jones, rejecting imputation at the first stage but arguing that inference has such a broad scope that this rejection may have little or no consequence in practice, serves to aggravate this problem. The extent of the uncertainty is illustrated by the fact that, as well as using the familiar language of inferring and imputing, Baroness Hale also referred in Stack to ‘divining the parties’ true intentions’,135 a reference that was repeated in Jones.136 One of the meanings offered by the Oxford English Dictionary for ‘to divine’ is ‘to make out or interpret by supernatural or magical insight’, and the applicable modern meaning may be ‘[t]o make out by sagacity, intuition, or fortunate conjecture (that is, in some other way than by actual information); to conjecture, guess’.137 It does seem that Lord Diplock’s common intention analysis sometimes requires the court to arrive at a conclusion as to the parties’ intentions ‘other than by actual information’, but whether this is to be achieved by guesswork, magical insight or the attribution of fictional imputed intention is not easy to discern. Forty years after Pettitt and Gissing marked a new departure in the law’s treatment of disputes over the beneficial interests in family homes, the law has yet to be clarified in full, with judges still engaged in arcane discussion about inferring and imputing common intentions which, in many cases, do not really exist. The ‘twin peaks’138 still cast their shadow over the landscape.

135

Stack (n 6) [69]. See also ibid [66]. Jones (n 9) [31] (Lord Walker and Lady Hale). 137 Oxford English Dictionary, 2nd edn (Oxford, Oxford University Press, 1989), sv ‘divine, v’. 138 Grant v Edwards (n 112) 646 (Nourse LJ). 136

22 Paragon Finance plc v DB Thakerar & Co (a firm) (1999) CHRISTIAN DALY AND CHARLES MITCHELL

A. INTRODUCTION

(1) Overview

I

N PARAGON FINANCE plc v DB Thakerar & Co (a firm),1 Millett LJ distinguished between two types of constructive trust when deciding which limitation rules should govern claims against constructive trustees. His analysis of this question has exerted a strong influence on the courts’ subsequent thinking about constructive trusts, not only in connection with limitation issues, but also in connection with deeper issues about the nature of constructive trusts and the reasons why they are imposed. In this chapter, we consider Millett LJ’s account of the limitation rules governing claims against constructive trustees from a historical perspective, and we assess his two-part classification as an aid to understanding constructive trusts. (2) The Facts Paragon concerned a series of mortgage frauds carried out in 1990. The claimant lent money to various borrowers to buy flats in a development in the London Docklands, taking mortgages over the flats to secure repayment of the loans. Unknown to the claimant, the flats had all been sold by the developer to a group of intermediate buyers who were selling them on to the borrowers at inflated prices. The borrowers immediately defaulted and the claimant incurred heavy losses when it repossessed and sold the flats. These losses were exacerbated by a crash in the residential property market at the end of 1990. 1

Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400.

644 Christian Daly and Charles Mitchell In 1994 the claimant began proceedings against two firms of solicitors who had acted both for the claimant and for the borrowers in the purchase and mortgage of the flats. The claimant alleged that the solicitors had known that the borrowers were sub-buyers at inflated prices, and had failed to tell the claimant this information in breach of contract, breach of a tortious duty of care and breach of an equitable duty of care.2 The claimant alleged that the solicitors had been negligent, but not that they had been dishonest. In 1997 it then became clear that the claimant would be unable to recover in negligence or breach of contract for losses which had resulted from the crash in the property market, following the House of Lords decision on scope of duty in South Australia Asset Management Corp v York Montague Ltd.3 However, following the House of Lords decision on remoteness of damage in Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd,4 it also became clear that these losses could be recovered if they were the direct result of fraud. The claimant therefore applied for leave to amend its pleadings to allege fraud, conspiracy to defraud, fraudulent breach of trust and intentional breach of fiduciary duty. By this time, however, six years had passed since the last relevant transaction, and the defendants opposed the application on the basis that the amendments disclosed new causes of action which were barred by limitation and which arose out of different facts from those in respect of which relief had previously been claimed.5 Giving the leading judgment in the Court of Appeal, Millett LJ disallowed the application. He held that claims based on fraud and dishonesty involve substantially different facts from claims based on negligence. He held that a six-year limitation period would apply to all of the claimant’s new causes of action. And he rejected the claimant’s argument that no statutory limitation period should apply to its claim for fraudulent breach of trust because this was a claim to enforce its rights as the beneficiary of constructive trusts that had arisen when the solicitors had obtained the mortgage monies dishonestly.

2 The last breach was identified in the claimant’s pleadings as a breach of fiduciary duty, but the essence of the claim was that the solicitors had been careless rather than disloyal. Hence, although the solicitors were fiduciaries for the claimant, the breach of duty pleaded was not a breach of fiduciary duty but a breach of the solicitors’ equitable duty of care. The significance of this distinction was clarified by Millett LJ in an unconnected case, Bristol & West BS v Mothew [1998] 1 Ch 1, 16–22. 3 South Australia Asset Management Corp v York Montague Ltd [1997] AC 191. 4 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254. 5 Contrary to the Limitation Act 1980, s 35 and RSC Ord 20, rule 5(2) and (5) (see now CPR rule 17.4); for discussion, see Law Commission Limitation of Actions (Law Com No 270, 2001) paras 2.106 ff and 5.7 ff; Goode v Martin [2001] EWCA Civ 1899, [2002] 1 WLR 1828; Fattal v Walbrook Trustees (Jersey) Ltd [2010] EWHC 2767 (Ch) [34]–[45].

Paragon Finance plc v DB Thakerar & Co 645 (3) Millett LJ’s Analysis Millett LJ made some observations about pleading fraud that have been widely quoted in later cases, holding that ‘fraud must be distinctly alleged and as distinctly proved, and … if the facts pleaded are consistent with innocence, it is not open to the court to find fraud’; also, that ‘an allegation that the defendant knew or ought to have known is not a clear and unequivocal allegation of actual knowledge and will not support a finding of fraud even if the court is satisfied that there was actual knowledge’.6 As Millett LJ said himself, however, these were already well-established propositions,7 and in this chapter we examine another part of his judgment, which has more deeply influenced the thinking of later courts. This concerned the question whether the solicitors could have been liable as constructive trustees on the amended pleadings and, if so, whether any of the proposed new claims fell within the Limitation Act 1980, section 21(1) (a), which provides that no statutory limitation period applies to an action by a beneficiary in respect of a fraud or fraudulent breach of trust to which the trustee was party or privy. Millett LJ observed that in cases where a purchase-money mortgage lender transfers the money to a solicitor with instructions to pay it over to the vendor following purchase and mortgage of the property, the solicitor generally holds this money on an express trust for the lender, with a power to apply the money in accordance with the lender’s instructions.8 If the solicitor pays the money away in an unauthorised transaction then that is a breach of the express trust,9 and no statutory limitation period applies to 6

Paragon (n 1) 407. Davy v Garrett (1878) 7 Ch D 473, 489; Belmont Finance Corp Ltd v Williams Furniture Ltd [1979] Ch 250, 268. 8 Paragon (n 1) 416, referring to his own statement to this effect in Mothew (n 2) 22. A minor puzzle is the meaning of Millett LJ’s statement in Paragon (n 1) 409, that the money would be held on a ‘resulting trust’ pending completion of the purchase and mortgage. It may be that he had in mind an ‘express resulting trust’, ie a trust which is resulting in pattern because it carries beneficial ownership back to the original legal owner, but which comes into existence by express declaration rather than by operation of law. His Lordship used the term ‘resulting trust’ to describe this kind of trust in a different context in Latimer v CIR [2004] 1 WLR 1466 [41]. See too his article ‘Equity’s Place in the Law of Commerce’ (1998) 114 LQR 214, 224, where he observed that the trust arising when a solicitor receives mortgage monies from a lender with instructions to pay them to the vendor is ‘a kind of Quistclose trust’, and his article ‘The Quistclose Trust: Who Can Enforce It?’ (1985) 101 LQR 269, where he seems to say that such trusts are always express. However his speech in Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 suggests that he changed his mind and came to think that a resulting trust might be imposed where money is transferred for a specific purpose and the transferor does not declare an express trust for himself; he also takes this position in Lord Millett ‘The Quistclose Trust—a Reply’ (2011) 17 Trusts & Trustees 7. 9 Target Holdings Ltd v Redferns (a firm) [1996] AC 421; UCB Home Loans Corp Ltd v Carr [2000] Lloyd’s Rep PN 754 [104] and [107]; Pulvers (a firm) v Chan [2007] EWHC 2406 (Ch), [2008] PNLR 9 [369]–[373]; Law Society v Habitable Concepts Ltd [2010] EWHC 1449 (Ch) [11]; Law Society v Isaac & Isaac International Holdings Ltd [2010] EWHC 7

646 Christian Daly and Charles Mitchell proceedings against him in respect of this breach if he has acted fraudulently or taken the trust property for himself. On the facts of Paragon, however, this did not assist the claimant, because the solicitors’ payments to the subvendors had all been made in accordance with the claimant’s instructions, so that the express trusts on which the mortgage monies had been held had never been breached, and indeed had been discharged according to their terms.10 To establish a fraudulent breach of trust falling within section 21(1)(a), the claimant therefore argued instead that in each case the defendant firm had committed a fraudulent breach of a constructive trust of the mortgage monies. This argument was designed to take advantage of the fact that the words ‘trust’ and ‘trustee’ include ‘constructive trust’ and ‘constructive trustee’ for the purposes of the 1980 Act.11 The argument went that the firm in each case had obtained the mortgage money by statements in the report of title that the firm had known to be untrue, and had therefore held this money from the moment of receipt on a constructive trust to return it to the claimant. This constructive trust had displaced the express trust that would have arisen in the normal way, if the firm had acted honestly, and this constructive trust had been breached because the firm had not returned the money to the claimant but had dishonestly paid it to the sub-vendors. Millett LJ began by noting the old equitable rule that in the absence of laches or acquiescence an express trustee was accountable without limit of time, and observed that this rule had been extended to take in trustees de son tort, company directors and other fiduciaries who had improperly taken their principal’s property for themselves. He stated that ‘such persons are properly described as constructive trustees,’ and that they belong to a wider category of constructive trustees who are not expressly appointed as trustees but who ‘have assumed the duties of a trustee by a lawful transaction which was independent of and preceded the breach of trust and is not impeached by the plaintiff’.12 In Millett LJ’s view, a constructive trustee falling into this category ‘really is a trustee’, who ‘does not receive the trust 1670 (Ch) [1]–[5]; UCB Home Loans Corp Ltd v Grace (Ch D, 15 December 2010); AIB Group (UK) Plc v Mark Redler & Co (a firm) [2012] EWHC 35 (Ch); Lloyds TSB Bank Plc v Markandan & Uddin (a firm) [2012] EWCA Civ 65 (where Rimer LJ stressed at [62] that a solicitor who acts honestly and reasonably when parting with the loan money to a fraudster is ‘likely to be treated mercifully by the court’ on an application for relief under the Trustee Act 1925, s 61). 10 Where a solicitor holds mortgage money on trust for a lender, and then pays it to a third party in accordance with the lender’s instructions, the lender has no claim in unjust enrichment either, since the solicitor is not enriched by the receipt of money that he takes and applies ministerially: Portman Building Society v Hamlyn Taylor Neck (a firm) [1998] 4 All ER 202, 208–09 (Millett LJ). 11 Limitation Act 1980, s 32; Trustee Act 1925, s 68(17). 12 Paragon (n 1) 408–09.

Paragon Finance plc v DB Thakerar & Co 647 property in his own right but by a transaction by which both parties intend to create a trust from the outset’, so that ‘his subsequent appropriation of the property to his own use is a breach of that trust’.13 For limitation purposes, claims against such constructive trustees were always treated in the same way as claims against express trustees (and so were never barred by passage of time), and they are still treated in the same way as claims against express trustees under the current statutory limitation regime (and so are now barred after six years unless they are claims founded on a fraud or fraudulent breach of trust to which the trustee was party or privy, or are claims in respect of a breach of trust, the proceeds of which have been retained by the trustee or were received by him and converted to his use). Millett LJ distinguished this first category of constructive trusts from a second category of constructive trusts which he said are ‘not in reality trusts at all, but merely a remedial mechanism by which equity [gives] relief for fraud’.14 He said that in cases where equity gives relief against fraud by making a defendant accountable in equity, ‘he is traditionally though I think unfortunately described as a constructive trustee’, but he ‘is not in fact a trustee at all’, because he ‘never assumes the position of a trustee, and if he receives the trust property at all it is adversely to the [claimant] by an unlawful transaction which is impugned by the [claimant]’.15 For limitation purposes, claims against constructive trustees of this second kind have always been treated differently from claims against constructive trustees of the first kind. Constructive trusts of the second kind were creatures of equity’s concurrent, rather than its exclusive jurisdiction, as they were merely remedial devices by which equity gave relief for fraud. Hence the limitation rules governing common law actions for fraud have always been applied, and still apply, by way of analogy to claims against constructive trustees of the second kind (so that they are now subject to a six-year time limit by analogy with the rule for tort claims in the Limitation Act 1980, section 2, and do not fall within the scope of section 21 because constructive trustees of the second kind are not trustees of the sort that are referred to in this section).16 13

Ibid, 409. Ibid, 409. 15 Ibid, 409. 16 It is a distinct question, that did not arise for decision in Paragon, whether claims against dishonest assistants in a breach of trust or knowing recipients of misdirected trust property fall within s 21(1)(a) where the trustee has acted dishonestly, because whether or not the defendants are themselves ‘trustees’ for the purposes of the section, claims of this kind are claims made ‘in respect of … fraud … to which the trustee was a party or privy’. The Court of Appeal gave a positive answer to this question in Central Bank of Nigeria v Williams [2012] EWCA Civ 415, approving Statek Corp v Alford [2008] EWHC 32 (Ch), [2008] WTLR 108, and disapproving Cattley v Pollard [2006] EWHC 3130 (Ch), [2007] Ch 353. This construction creates an unfortunate anomaly as it means that different limitation rules apply to defendants 14

648 Christian Daly and Charles Mitchell In conclusion, Millett LJ held that the only kind of constructive trust that could have arisen on the facts of Paragon was a constructive trust of the second kind. Hence any claim against the defendant solicitors to hold them accountable as constructive trustees must have fallen outside section 21 and must have become time-barred after six years. Hence the claimant could not add such a claim to its pleadings.

B. CONSTRUCTIVE TRUSTS AND THE LAW OF LIMITATION

(1) Millett LJ’s Historical Account In Cholmondeley v Clinton, decided in 1820, the (analogous) application of limitation statutes to equitable proceedings relating to real property was said to be a matter of ‘transcendent importance’.17 Yet more than a century later, in 1932, John Brunyate remarked that ‘the limitation of actions in equity … is one of those corners of English law which still remain a little obscure’.18 Eighty years—and two limitation statutes—later, matters have not become much clearer.19 Like Brunyate,20 we believe that the only way to make sense of the law in this area is to examine its history, and the decision in Paragon gives us an opportunity to investigate one part of this. Millett LJ’s finding in Paragon that the defendants were not trustees within the Limitation Act 1980, section 21(1) was based on an historical account of constructive trusts and the law of limitation that proceeded by the following steps. He started by noting that, in the absence of laches, express trustees were accountable to their beneficiaries without limit of time for the reason given by Lord Redesdale in Hovenden v Lord according to whether or not the trustee has been dishonest: C Mitchell, ‘Dishonest Assistance, Knowing Receipt, and the Law of Limitation’ [2008] Conv 226, 234–35. For this and other reasons, a negative answer to the same question was given by Lord Hoffmann in the Hong Kong Final Court of Appeal when construing equivalent Hong Kong legislation in Peconic Industrial Development Ltd v Chio Ho Cheong [2009] HKFCA 16, [2009] WTLR 999 [17]–[26]; and cf Panweld Trading Pte Ltd v Yong Kheng Leong [2012] SGHC 57 [82]–[87]. 17 Cholmondeley v Clinton (1820) 2 J & W 1, 151; 37 ER 527, 581. Plumer MR, Lord Eldon and Lord Redesdale all expressed the view that the question in Cholmondeley was one of the most important that had ever fallen for decision: ibid, 138; 577; subsequent proceedings: (1821) 4 Bligh 1, 40 and 83; 4 ER 721, 736 and 750. For details, see the text to n 54. 18 J Brunyate, Limitation of Actions in Equity (London, Stevens & Sons, 1932) iii. 19 The Law Commission highlighted the many shortcomings of our law of limitation, and recommended a major legislative overhaul, in a report published in 2001: Law Com No 270 (n 5). The Government accepted this recommendation in principle: Hansard, HL Debs, 16 July 2002, col 127 WA. It then did nothing for five years, before announcing in 2007 that it would consult on the content of a draft Bill: Hansard, HL Debs, 9 January 2007, col 8 WS. Two years later it announced that reform of the law would not after all be taken forward: Hansard, HC Debs, 19 November 2009, col 13 WS. 20 And W Swadling, ‘Limitation’ in P Birks and A Pretto (eds), Breach of Trust (Oxford, Hart Publishing, 2002) 319.

Paragon Finance plc v DB Thakerar & Co 649 Annesley,21 viz that they were possessed of the trust estate for, and on behalf of, the beneficiaries, and so the beneficiaries were treated as being in possession and time never ran against them in favour of the trustees. This principle was then extended to category 1 constructive trustees (‘often confusingly’ described as express trustees) but not to category 2 constructive trustees, because constructive trusts falling into the second category22 were not in reality trusts at all, but merely a remedial mechanism by which equity gave relief for fraud. The Court of Chancery, which applied the statutes of limitation by analogy, was not misled by its own terminology; it gave effect to the reality of the situation by applying the statute to the fraud which gave rise to the defendant’s liability.

Category 2 constructive trusts arose in the exercise of equity’s concurrent jurisdiction, and ‘that is why the statute was applied by analogy’.23 The Trustee Act 1888, section 8 prescribed a six-year limitation period for actions for breach of trust (except actions based on fraudulent breach of trust to which the trustee was a party, and actions against the trustee to recover trust property or its proceeds). Although the statutory definition of ‘trustee’ included a trustee whose trust arose ‘by construction or implication of law as well as an express trustee’,24 the distinction between category 1 and category 2 constructive trustees was maintained, and so section 8 applied to proceedings against the first, but not the second, category of constructive trustee.25 The basic scheme of the 1888 Act, including the statutory definition of trustee,26 was carried over into the Limitation Act 1939, section 19 and the Limitation Act 1980, section 21; and the Court of Appeal’s decision in Shephard v Cartwright27 is explicable only on the basis that the distinction between category 1 and category 2 constructive trustees continued to obtain under these statutes. Various aspects of this account call for comment. First, the general point should be made that when studying the law of limitation governing actions for breach of trust in the nineteenth century, it is often difficult or impossible to be sure whether individual cases were concerned with constructive trusts, express trusts or some other kind of trust, because the courts did not clearly distinguish between these different types of trust, and this is reflected in the language of their decisions. We shall say no more about this here. Secondly, the nineteenth-century cases do not suggest that the courts

21 22 23 24 25 26 27

Hovenden v Lord Annesley (1806) 2 Sch & Lef 607, 633–34. Paragon (n 1) 409–10. Ibid, 410. Trustee Act 1888, s 1(3). Taylor v Davies [1920] AC 636; Clarkson v Davies [1923] AC 100. Trustee Act 1925, s 68(17). Shephard v Cartwright [1953] Ch 728; reversed on a different point [1955] AC 431.

650 Christian Daly and Charles Mitchell had a clear idea of the reasons why, and the manner in which, they applied limitation statutes to equitable proceedings. Thirdly, it may be questioned whether the explanation given in Hovenden for the rule governing claims against express trustees bears up to close scrutiny. Fourthly, the historical record does not support the view that the courts consistently applied the statutes of limitation (by analogy) to category 2 constructive trustees, although there were certainly cases in which this was done. Fifthly, it is implausible that claims against dishonest assistants and knowing recipients (as they would now be called) were understood to fall within the scope of equity’s concurrent jurisdiction. Sixthly, and lastly, Shephard is consistent with the view that a category 1 constructive trustee was a ‘trustee’ for the purposes of the Limitation Act 1939, section 19, but the case says nothing about category 2 constructive trustees.

(2) Laches and the Application of Limitation Statutes by Way of Analogy Delay has operated as a bar to the enforcement of juridical rights since antiquity.28 In this country there have been many statutes of limitation. The principal statute during the seventeenth and eighteenth centuries was the Limitation Act 1623, which prescribed a 20-year limitation period for ejectment (the most common form of action to recover land) and a six-year limitation period for most types of personal action (including trespass, account and debt).29 The statute applied to particular ‘writs’ and various forms of ‘action’. Proceedings in equity, which were initiated by bill (not writ) and prosecuted in a suit (not an action),30 were not within the express terms of the statute.31 However, this did not mean that delay was irrelevant in equity.32 On the contrary, as Plumer MR explained in Cholmondeley v Clinton, ‘courts of equity have at all times, upon general principles of their own … refused relief to stale demands, where a party has slept upon his

28

Cholmondeley (n 17) 2 J & W 140–41, 37 ER 577. 21 James 1 c 16, ss 1, 3. 30 Re Richardson [1920] 1 Ch 423, 440. 31 Equity noticed and applied the statutes indirectly. Thus equity would not assist in the prosecution of legal proceedings where it was clear that such proceedings would be statutebarred: Jermy v Best (1819) 1 Sim 373, 375; 57 ER 617, 618; Widdowson v Harrington (1820) 1 J & W 533, 548; 37 ER 471, 476. 32 The point has been frequently made that equity does not countenance stale demands: Smith v Clay (1767) 3 Bro CC 646n, 29 ER 743, 744; Hercy v Dinwoody (1793) 2 Ves Jun 87, 90–91 and 92; 30 ER 536, 538 and 539; Stackhouse v Barnston (1805) 10 Ves Jun 453, 465; 32 ER 921, 925; Widdowson v Harrington (1820) 1 J & W 533, 548; 37 ER 471, 476–77; Baker v Read (1854) 18 Beav 398, 400; 52 ER 157, 158; Harcourt v White (1860) 28 Beav 303, 310; 54 ER 382, 385. 29

Paragon Finance plc v DB Thakerar & Co 651 right, and acquiesced for a great length of time’.33 Consistently with these principles, equity developed various doctrines to prevent the litigation of stale demands.34 The most important of these is the equitable doctrine of laches.35 The term ‘laches’ is used in various senses, but is most commonly used to describe ‘that degree of delay, which when coupled with prejudice to the defendant or third parties, will operate as a defence in equity’.36 The seminal conceptualisation of laches in this sense is that of Lord Selborne LC in Lindsay Petroleum Co v Hurd, where he said that37 [t]wo 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 a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.

Lord Blackburn also pursued this line of thought in Erlanger v New Sombrero Phosphate Co, where he noted that38

33

Cholmondeley (n 17) 2 J & W 151, 37 ER 581. In addition to the doctrines identified in the text, delay could generate a presumption that a claim had been satisfied or released: Pickering v Stamford (1795) 2 Ves Jun 581, 582; 30 ER 787; Jones v Tuberville (1792) 2 Ves Jun 11, 13; 30 ER 498, 499; J Fonblanque, A Treatise of Equity, vol 1 (London, Whieldon & Butterworth, 1793) 319–22. 35 On which, see JGN Darby and FA Bosanquet, A Practical Treatise on the Statutes of Limitations in England and Ireland (London, William Maxwell & Son, 1867) 195–97; W Ashburner, Principles of Equity (London, Butterworth & Co, 1902) 721–29; JM Lightwood, The Time Limit on Actions (London, Butterworth & Co, 1909) 252–72; RP Meagher, WMC Gummow and JRF Lehane, Equity: Doctrine and Remedies, 4th edn (Sydney, Butterworths LexisNexis, 2002) ch 36; J McGhee (ed), Snell’s Equity, 32nd edn (London, Sweet & Maxwell, 2010), paras 5.016–5.019. 36 Hughes v La Baia Ltd [2011] UKPC 9 [36], quoting and endorsing Meagher, Gummow and Lehane (n 35) para 36.050. It is unclear whether mere delay constitutes laches. The commentators are divided: compare Meagher, Gummow and Lehane (n 35) paras 36.005 and 36.065–36.080 and Snell (n 35) para 5.016 with Lightwood (n 35) 255–56 and 261–62. There is case law supporting the idea that mere delay can constitute laches: Hercy v Dinwoody (1793) 2 Ves Jun 87, 30 ER 536; Baker v Read (1854) 18 Beav 398, 52 ER 157; Harcourt v White (1860) 28 Beav 303, 54 ER 382; Archbold v Scully (1861) 9 HLC 360, 383; 11 ER 769, 778; Brooks v Muckleston [1909] 2 Ch 519; P & O Nedlloyd BV v Arab Metals Co (The UB Tiger) (No 2) [2006] EWCA Civ 1717, [2007] 1 WLR 2288 [61]. There is also case law inconsistent with that idea: see the authorities collected in Meagher, Gummow and Lehane (n 35) para 36.070. There is no need to resolve this issue here, but we would make two observations. First, as discussed below, equity applies statutes of limitation (by analogy) to equitable proceedings. In such cases, the disposition of the proceedings turns solely on delay: Ashburner (n 35) 701. These cases demonstrate that, at least in this context, equity is not averse to the notion that mere delay can put a claimant out of court. However, and secondly, some caution needs to be exercised in relation to the idea of ‘mere’ delay. Where delay operates as a bar it does so on identified and defensible policy grounds, and it does not operate as a bar in and of itself. Rather delay is a potential (and, in many cases, an actual) source of mischief against which the legislature and the courts seek to guard. 37 Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, 240. 38 Erlanger v New Sombrero Phosphate Co (1878) LR 3 App Cas 1218, 1279. See too Fisher v Brooker [2009] UKHL 41, [2009] Bus LR 1334 [64] and [79], where Lord Neuberger 34

652 Christian Daly and Charles Mitchell from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it.

These principles are neatly illustrated by the decision in Bonney v Ridgard.39 An executor misapplied part of the deceased’s estate, transferring it to a creditor in satisfaction of his debt. The beneficiaries under the will sought to recover the property by proceedings initiated some 30 years after the transfer (and some 20 years after the youngest of the beneficiaries attained her majority). Kenyon MR, ‘weighing the convenience with the inconvenience’, determined that delay operated as a bar to relief, emphasising the hardship that would be caused to third parties if the beneficiaries succeeded: ‘[T]he many persons through whose hands this property has passed, have relied upon the undisturbed possession, and have laid out considerable sums of money in the improvement of it.’40 Laches is equity’s general strategy relating to delay. A more specific strategy is the application of statutes of limitation to equitable proceedings by way of analogy. For example, in Smith v Clay41 the claimant filed a bill of review more than 20 years after the original decree, and in a ‘celebrated’42 judgment Lord Camden LC dismissed the bill, applying (by analogy) the 20-year limitation period applicable to writs of error. He said:43 A court of equity which is never active in relief against conscience, or public convenience, has always refused its aid to stale demands, where the party has slept upon his right and acquiesced for a great length of time. … But, as the court has no legislative authority, it could not properly define the time of bar, by a positive rule, to an hour, a minute, or a year; it was governed by circumstances. But as often as Parliament had limited the time of actions and remedies, to a certain period, in legal proceedings, the court of chancery adopted that rule, and applied [it] to similar cases in equity … And therefore in all cases where the legal right has been barred by Parliament, the equitable right to the same thing has been concluded by the same bar.

The conventional account of the doctrine stated by Lord Camden LC rests on a ‘correspondence’ principle: the statute is applied by analogy to equitable claims because there is a ‘correspondent’ legal claim that is subject to the laid particular emphasis on the question whether the defendant was prejudiced by the claimant’s conduct. 39

Bonney v Ridgard (1784) 1 Cox 145, 29 ER 1101. Ibid, 149; 1102. The judgment of Kenyon MR has been endorsed and utilised in many subsequent cases, eg, Gregory v Gregory (1815) G Coop 201, 35 ER 530 and the cases cited in n 82. 41 Smith (n 32). 42 Cholmondeley (n 17) 2 J & W 151, 37 ER 581. 43 Smith (n 32) 646n; 744. See Stackhouse (n 32) 466–67, 926; Cholmondeley (n 17) 2 J & W 141 and 151, 578 and 581; Hodle v Healey (1819) 6 Madd 181, 183–84; 56 ER 1062. 40

Paragon Finance plc v DB Thakerar & Co 653 statutory bar. For example, in Knox v Gye,44 an executor sought an account against the testator’s former partner. The House of Lords held that the sixyear limitation period applicable to legal actions for an account45 applied by analogy to equitable proceedings of the same nature,46 with the consequence that the executor’s right, which arose more than six years before the proceedings were initiated, was barred. Lord Westbury said that47 where the remedy in equity is correspondent to the remedy at law, and the latter is subject to a limit in point of time by the statute of limitations, a court of equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation. This is the meaning of the common phrase, that a court of equity acts by analogy to the statute of limitations, the meaning being, that where the suit in equity corresponds with an action at law which is included in the words of the statute, a court of equity adopts the enactment of the statute as its own rule of procedure.

The statutes of limitation have been applied by analogy to many equitable claims. It is sufficient for present purposes to identify some examples. In Barron v Martin,48 a mortgagor filed a bill to redeem a mortgage more than 20 years after the mortgagee entered into possession. Grant MR dismissed the bill on the basis that ‘twenty years possession by a mortgagee is prima facie a bar to the right of redemption’, and applied by analogy the limitation period prescribed for ejectment.49 In Re Hastings50 the claimant brought an action to recover £400 from the estate of his deceased wife. He had loaned her £400 nine years earlier, but she had never repaid the loan (or any part of it) during her lifetime.51 Kay J and the Court of Appeal held that the claim was one ‘in the nature of a simple contract’52 and applied by analogy the limitation period applicable to contractual claims, with the result that the claimant’s action was barred. The conventional account of the doctrine in Smith v Clay obscures two points. First, notwithstanding the prominence of the ‘correspondence’ principle, statutes of limitation were also applied by analogy to equitable

44

Knox v Gye (1872) LR 5 HL 656. 21 James 1 c 16, s 3. 46 Lockey v Lockey (1719) Prec Ch 518, 24 ER 232 is to the same effect. 47 Knox (n 44) 674. Lord Westbury formulated this passage on the basis that the executor could not maintain an action at law. If the executor could have done so, Lord Westbury was of the view that the bar would have been imposed ‘in obedience’ to the statute. This approach is consistent with the weak version of the ‘obedience’ theory discussed in the text to n 59. 48 Barron v Martin (1815) 19 Ves Jun 327, 34 ER 539. 49 Ibid, 331; 540. See Hodle (n 43) 183–84; 1062. 50 Re Hastings (1887) 35 Ch D 94. 51 Historically a married woman was incapable of contracting at law, but she could contract debts in respect of her separate estate in equity. See Johnson v Gallagher (1861) 3 D F & J 494, 519; 45 ER 969, 977–78. 52 Hastings (n 50) 97. 45

654 Christian Daly and Charles Mitchell proceedings on grounds other than, or at least in addition to, that principle.53 In Cholmondeley v Clinton,54 the question was whether section 1 of the Limitation Act 1623 applied by analogy to a claim by a mortgagor to recover possession of property from a person who had been in possession for more than 20 years. (The matter was tried in equity because the mortgagor had an equity of redemption, the legal estate outstanding in the mortgagee.) Plumer MR and the House of Lords answered that question affirmatively. Although there are clear references to the correspondence principle, it did not form the sole or principal ground for the decision. Plumer MR was of the view that the statute should be applied by analogy as part of equity’s general strategy of following the law55 and applying to equitable estates the same incidents applicable to legal estates, so as to ensure the ‘harmony and uniformity of the laws of real property’.56 Lord Redesdale thought that the statute should be applied to avoid frustrating its underlying purpose. He argued that if the statute was not applied to equitable estates then, given the ubiquity of such estates, ‘the whole property of the country would be in danger of being disturbed by suits without number, and the object of the statute, namely, the quieting of possession, could never be obtained’.57 The ‘obedience’ theory is the second point obscured by the conventional account. Notwithstanding that proceedings in equity were not within the express terms of the Act, there are various judicial statements to the effect that equity acted in obedience to, and not merely by analogy to, the statute. There is a strong and weak version of the theory. Lord Redesdale was the leading advocate of the strong version. He argued that since the legislature was aware of equity’s practice of applying statutes of limitation to equitable proceedings, it must have intended the limitation periods prescribed for legal proceedings to regulate equitable proceedings.58 The weak version of the theory is that equity acted in obedience to the statute in cases involving the exercise of its concurrent jurisdiction where the claim would have been barred if it had been pursued at law.59 One particular point falls to be made here. It will be recalled that Millett LJ argued that statutes of limitation were applied by analogy to category 2

53 Grant MR’s observation that statutes of limitation could be applied (by analogy) to equitable claims only where there was a ‘correspondent’ claim at law probably states the position too strongly: Stackhouse (n 32) 469; 927. 54 Cholmondeley (n 17). 55 This practice extended beyond the statute of limitations. The common law presumed from a period of 20 years’ delay that a claim to a legacy had been satisfied or released. Equity followed the law in this respect: Jones (n 34). 56 Cholmondeley (n 17) 2 J & W 148–49, 37 ER 580–81. See Hicks v Sallitt (1854) 3 De G M & G 782, 801–02; 43 ER 307, 315. 57 Cholmondeley (n 17) 4 Bligh 120, 4 ER 763. 58 Cholmondeley (n 17) 4 Bligh 119–20, 4 ER 762–63. See Hovenden (n 21) 630–31. 59 Foley v Hill (1844) 1 Ph 399, 405; 41 ER 683, 685; Knox (n 44) 673–75. For further discussion of this issue, and its practical implications, see Brunyate (n 18) 5–18.

Paragon Finance plc v DB Thakerar & Co 655 constructive trusts because they arose in the exercise of equity’s concurrent jurisdiction.60 However, it is clear from the foregoing discussion that as a matter of general principle the statutes were equally applicable by analogy to cases involving the exercise of equity’s exclusive jurisdiction. Cholmondeley v Clinton, Barron v Martin, Knox v Gye and Re Hastings are all cases in which the exclusive jurisdiction was engaged and the statutes were applied by analogy. It is odd that Millett LJ failed to emphasise this point and chose instead to isolate the concurrent jurisdiction argument.61 (3) The Hovenden Principle Given that the liability of an express trustee for breach of trust was (for some purposes at least) characterised as an equitable debt,62 it is not implausible that the statutes of limitation might have been applied by analogy to claims in respect of such a breach. In fact the analogy never obtained. The general principle was that delay did not bar claims by a beneficiary against an express trustee.63 This principle is usually attributed to the judgment of Lord Redesdale in Hovenden v Lord Annesley,64 where he offered the following explanation:65 [I]f a trustee is in possession, and does not execute his trust, the possession of the trustee, is the possession of the cestui que trust; and if the only circumstance is, that he does not perform his trust, his possession operates nothing as a bar, because his possession is according to his title.

Lord Redesdale’s statement of the principle, and, more importantly, his explanation for it—like Millett LJ’s categorisation of constructive trusts in Paragon—has been (almost) universally and uncritically followed.66 His explanation certainly has a superficial attractiveness in relation to claims to recover trust property from an express trustee. However, its explanatory force does not extend much further, because it is premised on the idea that the trustee is in possession of the trust property. This premise necessarily circumscribes the scope of operation of the principle, which does not obviously extend to a claim based on misapplication of trust property or a claim 60

See text to n 23. For further discussion, see the text to nn 87–89. 62 Holland v Holland (1869) LR 4 Ch 449. 63 Obee v Bishop (1859) 1 De G F & J 137, 45 ER 311; Brittlebank v Goodwin (1868) LR 5 Eq 545; Re Burge (1887) 57 LT 364; Re Blake (1889) 60 LT 663. 64 In fact the principle is much—at least 150 years—older: Brunyate (n 18) 50. 65 Hovenden (n 21) 633. 66 See Chalmer v Bradley (1819) 1 J & W 51, 67–68; 37 ER 294, 300–01; Christ’s Hospital v Grainger (1849) 1 M & G 460, 465; 41 ER 1343, 1345; Darby and Bosanquet (n 35) 182–83; Ashburner (n 35) 710–11; Lightwood (n 35) 68–69; contrast Swadling (n 20) 326–27. For a particularly striking application of the principle, see Lister v Pickford (1865) 34 Beav 576, 55 ER 757. 61

656 Christian Daly and Charles Mitchell based on the trustee’s negligence. In both of these cases the gravamen of the beneficiary’s complaint is that the trustee is not in possession of property that ought to be in his possession. A different explanation of the Hovenden principle might run as follows. There are two types of claim that a beneficiary may make against an express trustee: performance claims and reparation claims.67 The objective of a performance claim is to enforce the performance of the trust according to its terms: to compel performance by the trustee of his primary obligation to apply the trust property in accordance with the trust deed, either in specie or substitutively (by paying a money substitute for the relevant property). By contrast, the objective of a reparation claim is to make good a loss occasioned by the trustee’s breach of a primary obligation, such as his duty of care. Performance claims involve the assertion and vindication of pre-existing rights. They do not involve an allegation of breach of trust, or the enforcement of new rights arising from such a breach. Accordingly, it is inappropriate to apply the statutes of limitation by analogy to such claims because it is impossible to identify any breach of duty in respect of which time can run, and it is equally impossible to identify the moment from which it should start to run.68 This account is confronted by at least four obstacles. First, both Lord Redesdale and Lord Eldon were of the view that the principle stated in Hovenden, and the explanation for that principle, was not limited to claims by beneficiaries against express trustees, but also applied to claims by landlords against their tenants.69 This suggests that the principle was not attracted by the particular duties of an express trustee or the particular nature of a performance claim. Rather, the principle appears to be part of the law of adverse possession, in which case its explanatory force in the context of trusts is particularly limited. It merely operates to disable a person who enters into possession of land in the capacity of an express trustee from asserting a claim to the land adversely to his beneficiary. Its explanatory force extends no further. Secondly, although the matter is not free from doubt, it appears that the Hovenden principle applied to reparation claims.70 Claims of this type 67 SB Elliott, ‘Compensation Claims against Trustees’ (unpublished Oxford DPhil thesis, 2002). Parts of this are published as: SB Elliott, ‘Remoteness Criteria in Equity’ (2002) 65 MLR 588; SB Elliott and C Mitchell, ‘Remedies for Dishonest Assistance’ (2004) 67 MLR 16, 23–34; SB Elliott and J Edelman, ‘Money Remedies against Trustees’ (2004) 18 Trust Law International 116. See too J Edelman, ‘Money Awards of the Cost of Performance’ (2010) 4 Journal of Equity 122; D Hayton, P Matthews and C Mitchell, Underhill and Hayton: Law Relating to Trusts and Trustees, 18th edn (London, LexisNexis Butterworths, 2010) Art 85. 68 Compare Christ’s Hospital (n 66) 1 M & G 466, 41 ER 1345; Re Nisbet and Potts’ Contract [1906] 1 Ch 386, 401–02. A similar kind of argument appealed to Moore-Bick LJ in P & O (n 36) [47]. 69 Hovenden (n 21) 633; Cholmondeley (n 17) 4 Bligh 96–97, 4 ER 753–54. 70 Smith v Pococke (1854) 2 Drew 197, 61 ER 694; Bright v Legerton (1860) 29 Beav 60, 54 ER 548; (1861) 2 De G F & J 606, 45 ER 755; Brittlebank v Goodwin (1868) LR 5 Eq 545; Stone v Stone (1869) LR 5 Ch 74. See also Ashburner (n 35) 710–11.

Paragon Finance plc v DB Thakerar & Co 657 involve the assertion of a new right to compensation for losses occasioned by reason of a breach of duty. The application of the principle to claims of this type is difficult to reconcile with the account being considered. Thirdly, the operation of Lord Redesdale’s principle cannot be justified by appealing to the fact that the claims to which it was applied were performance claims. Since equity was applying the statutes of limitation by analogy, there is no reason why it should have set its face against barring performance claims because the statutes themselves were applicable to such claims.71 In fact, equity did apply the statute by analogy to performance claims, including bills for an account by a principal against a fiduciary.72 Fourthly, claims by beneficiaries against express trustees were subject to the equitable doctrine of laches or acquiescence,73 and some accounts of this doctrine emphasise the violation of the claimant’s rights or the breach of the defendant’s duty.74 If these accounts are correct then the applicability of laches and acquiescence to performance claims against trustees is inconsistent with the notion that such claims do not involve any allegation of a breach of duty. Neither Lord Redesdale’s explanation of the Hovenden rule nor the only other plausible account of that rule is satisfactory. Hence we are forced to conclude that the rule is inexplicable.

(4) Application of Limitation Statutes by Analogy to Claims against Constructive Trustees Millett LJ’s judgment in Paragon has already achieved ‘landmark’ status, and it is doubtful that anything we say here will diminish its authority. Nevertheless, it is worth noting that his analysis does not align perfectly with the older authorities. Specifically, these are inconsistent with his statement that the statutes of limitation were uniformly applied by analogy to

71

Thus actions to recover debts were subject to a statutory limitation period: n 29. Lockey (n 46); Knox (n 44). Other examples include claims to redeem a mortgage (Barron (n 48)) and claims for the payment of equitable debts (Ex parte Dewdney (1809) 15 Ves Jun 479, 496; 33 ER 836, 842). There is also some 19th-century authority supporting the application of the statute (by analogy) to claims for specific performance, but the matter was far from settled. See the cases collected in J Beatson, ‘Limitation Periods and Specific Performance’ in E Lomnicka and CGJ Morse (eds), Contemporary Issues in Commercial Law: Essays in Honour of Professor AG Guest (London, Sweet & Maxwell 1997) 9. The modern view is that the analogy does not hold. Since the common law courts are incapable of granting a coercive remedy comparable to a decree of specific performance, there is no ‘correspondence’ justifying the application of the statute by analogy: P & O (n 36) [45]–[48] and [52]. 73 Bright v Legerton (1860) 29 Beav 60, 54 ER 548; (1861) 2 De G F & J 606, 45 ER 755; Re Cross (1882) 20 Ch D 109; Rochefoucauld v Boustead [1897] 1 Ch 196; Re Taylor (1900) 81 LT 812. 74 Mills v Drewitt (1855) 20 Beav 632, 638; 52 ER 748, 750; Lightwood (n 35) 252–55. 72

658 Christian Daly and Charles Mitchell claims against category 2 constructive trustees but not to claims against category 1 constructive trustees. Millett LJ identifies company directors as category 1 constructive trustees for the purposes of the limitation rules. Various decisions support this identification. In particular, there is a series of cases in which company directors who had misapplied company property were treated as category 1 constructive trustees for the purposes of the limitation rules.75 As Lindley LJ explained in Re Lands Allotment Co,76 directors have been held liable to make good moneys which they have misapplied upon the same footing as if they were trustees, and it has always been held that they are not entitled to the benefit of the old Statute of Limitations because they have committed breaches of trust, and are in respect of such moneys to be treated as trustees.

It is clear from his extra-judicial writings that Lord Millett would categorise a constructive trust imposed on bribe monies received by a company director (or other fiduciary) as a category 1 constructive trust,77 with the result that the limitation period should not be applied by analogy. However, cases decided since Paragon have assigned such constructive trusts to category 2, with the result that the limitation period should be applied by analogy,78 and there is a historical precedent for this approach in Metropolitan Bank v Heiron.79 There, the creditor company appointed one of its directors, Heiron, to negotiate the settlement of a debt. In the course of the negotiations the debtor paid £250 to Heiron as an inducement to settle the debt on terms favourable to him. The company agreed to accept £50 from the debtor in full satisfaction of his indebtedness, in reliance on Heiron’s fraudulent misrepresentations respecting the debtor’s liquidity. The debtor subsequently informed the company of the payment to Heiron. More than six years after receipt of this information, the company initiated proceedings against Heiron. The court drew a distinction between cases where a company sought to recover money which belonged to the company before any wrongful act on the part of the director, and cases where a company sought to recover money received by a director where his position made ‘the receipt of the money a breach of duty or fraud’.80 The court accepted that the statutes of limitation did not apply (by analogy) to the former type of case, but held that they did apply to the latter type of case, with the result that the company’s action was barred.81 75 Re Exchange Banking Co (1882) 21 Ch D 519; Re Sharpe [1892] 1 Ch 154; Re Lands Allotment Co [1894] 1 Ch 616. 76 Re Lands Allotment Co (n 75) 631. 77 See the works cited at n 129. 78 See the text to nn 134–39. 79 Metropolitan Bank v Heiron (1880) LR 5 Ex 319. 80 Ibid, 325. 81 Re Sharpe (n 75) 167.

Paragon Finance plc v DB Thakerar & Co 659 A knowing recipient of misapplied property is a category 2 constructive trustee, and there is a strong line of late eighteenth- and early nineteenthcentury cases which hold, consistently with Millett LJ’s analysis, that claims against such recipients were subject (by analogy) to the statutes of limitation.82 For example, in Beckford v Wade, Grant MR explained that although delay was not a bar to the enforcement of an ‘actual direct’ trust, it was a bar to the enforcement of ‘such possible, eventual trust, as may, in case certain facts are established in evidence, be declared by a court of equity against a person, who claims to be and who prima facie is, the true owner of the estate’.83 However by the end of the nineteenth century (and certainly by the start of the twentieth) the principle propounded in these cases was significantly diminished. In Wassell v Leggatt,84 money was bequeathed to a married woman for her own separate use. The money was taken from her forcibly by her husband, and never returned to her. Almost 20 years later she initiated proceedings against the husband’s executors for a declaration that her husband was a trustee of the money, and for an order that the executors should pay her an equivalent sum from his estate. Romer J held that the husband was indeed a trustee of the money, not ‘by intent’ but by ‘inference of law’, and that his executors could not avail themselves of the benefit of the statutes of limitation.85 This decision is not an isolated example. There are a number of cases that determine (or unequivocally state) that a person who knowingly receives misapplied property cannot rely on the statute of limitations (by analogy) and must, for the purposes of the limitation rules, be treated as an express trustee.86 These cases are inconsistent with Millett LJ’s position that category 2 constructive trustees could rely by analogy on the statutes of limitation.

(5) Category 2 Constructive Trustees are ‘Creatures of Concurrent Jurisdiction’ It is surprising that Millett LJ made this point. As noted below, he considered knowing recipients and dishonest assistants to be the main (if not the only) examples of category 2 constructive trustees,87 yet the imposition of 82 Bonney (n 39); Andrew v Wrigley (1792) 4 Bro CC 125, 29 ER 812; Beckford v Wade (1805) 17 Ves Jun 87, 34 ER 34; Collard v Hare (1831) 2 Russ & M 675, 39 ER 552. 83 Beckford (n 82) 96, 37. Grant MR drew no distinction between different types of constructive trust; the only distinction he drew was between ‘actual direct’ trusts and other trusts. 84 Wassell v Leggatt [1896] 1 Ch 554. 85 Ibid, 556. 86 Soar v Ashwell [1893] 2 QB 390; Re Gallard [1897] 2 QB 8; Re Robinson [1911] 1 Ch 502; Re Eyre-Williams [1923] 2 Ch 533; Re Mason [1928] 1 Ch 385; Re Blake [1932] 1 Ch 54. Earlier cases to the same effect are noticed in Soar v Ashwell. 87 See the text to nn 109–11.

660 Christian Daly and Charles Mitchell liability for knowing receipt and dishonest assistance involves the exercise of equity’s exclusive jurisdiction. Thus if the statute was applied by analogy to category 2 constructive trustees because their conduct engaged equity’s concurrent jurisdiction, knowing recipients and dishonest assistants would be excluded from that category. Millett LJ’s reliance on this point is all the more surprising given that he clearly appreciates that the statute was applied by analogy to actions for an account where the liability to account ‘was exclusively equitable’, that is, where the liability to account arose in equity’s exclusive jurisdiction.88 There is a further difficulty. It will be recalled that Millett LJ stated that category 2 constructive trusts are ‘not in reality trusts at all, but merely a remedial mechanism by which equity [gives] relief for fraud’, and that the description of such cases as constructive trusts is a mere ‘catchphrase’ justifying ‘the exercise of equity’s concurrent jurisdiction in cases of fraud’. On this basis category 2 is a particularly insubstantial category, because deceit is the only species of fraud in relation to which equity exercises a jurisdiction concurrently with the common law.89 Lastly, we have been unable to identify a case in which a defendant charged with actual fraud in equitable proceedings has been described as a constructive trustee.

(6) Shephard v Cartwright In Shephard v Cartwright,90 a father subscribed for company shares in the names of his children, and was later paid cash in consideration for these shares, which he paid into bank accounts in their names. Using mandates from the children that were void for undue influence, he took money out of the accounts and used it for his own purposes. Many years later, after their father’s death, the children sued his executors for the missing sums. The question arose whether they could rely on the presumption of advancement to establish their ownership of the shares, and thus of the cash, and the Court of Appeal held that they could not. However, Denning LJ held that if they had been able to establish that they were the owners of the money taken from the accounts, then their proceedings would not have been out of time. On appeal, the House of Lords reversed the Court of Appeal’s decision on the advancement point, but endorsed Denning LJ’s treatment of the limitation point.91

88 89 90 91

Paragon (n 1) 415. Ashburner (n 35) 397. Shephard (CA) and (HL) (n 27). Shephard (HL) (n 27) 450.

Paragon Finance plc v DB Thakerar & Co 661 Denning LJ posited two ways in which the children might have formulated their proceedings, had they been able to establish their ownership of the cash. Which of these was open to them turned on their father’s intentions at the time when he made the withdrawals. If he had intended to use the money for himself, then the children could have brought a common law action for money had and received—presumably on the basis that they were relying on the tort of conversion, but waiving their right to a compensatory remedy and instead seeking a restitutionary remedy.92 Ordinarily an action of this kind would have been subject to a six-year limitation period running from the time of each withdrawal. However, ‘the very nature of [their father’s] dealing [would have] amounted to a fraudulent concealment from [the children] of their right of action; and [so] the period of limitation [would not have started] to run until the children discovered it’, under the Limitation Act 1939, section 26(6).93 Alternatively, if their father had not intended to use the money for himself when he withdrew the money, but had intended to apply it on behalf of the children, ‘then he was a trustee of it’ (presumably a trustee de son tort) and his subsequent conversion of the money to his own use was such that ‘the children are not bound by any period of limitation’,94 following Lyell v Kennedy95 and Soar v Ashwell.96 These cases held that no statutory limitation period would apply to actions for breach of trust against, first, the lawfully-appointed agent of an express trustee who had received trust money in an authorised transaction but subsequently misapplied it, and, secondly, a trustee de son tort. In Paragon, Millett LJ said that Denning LJ’s analysis was ‘consistent only with the survival’ of the law of limitation previous to the Limitation Act 1939, which distinguished between category 1 and category 2 constructive trustees.97 This was because ‘Denning LJ must have considered that the distinction between the two kinds of constructive trustee was still relevant after the passing of the 1939 Act, or he would not have drawn the distinction he did’, that is, between the proceedings that the children could have brought if their father had intended to take the money on their behalf and the proceedings that they could have brought if he had intended to take the money on his own behalf. Millett LJ presumably thought that in the first case the father would have been a category 1 constructive trustee, and that in the second he would have been a category 2 constructive trustee. However, this was a misreading of

92 93 94 95 96 97

Cf United Australia Ltd v Barclays Bank Ltd [1941] AC 1. Shephard (CA) (n 27) 756. See now the Limitation Act 1980, s 32(1)(b). Shephard (CA) (n 27) 756. Lyell v Kennedy (1889) 14 App Cas 437. Soar (n 86). Paragon (n 1) 413.

662 Christian Daly and Charles Mitchell the distinction drawn by Denning LJ, which did not concern different types of constructive trustee but was rather concerned with the possibilities, on the one hand, that the children might have brought an equitable claim for breach of trust and, on the other, that they might have brought a common law action for money had and received. Denning LJ’s analysis of the former claim may well have been consistent with the view that the 1939 Act imposed no statutory limitation period on claims against category 1 constructive trustees, assuming that the father would then have been a trustee de son tort, and assuming also that he would then have been a category 1 constructive trustee.98 However, Denning LJ said nothing about claims against category 2 constructive trustees, and did not think that the latter claim was a claim of this kind.

C. CLASSIFICATION OF CONSTRUCTIVE TRUSTS

(1) When is a Trust not a Trust? Millett LJ identified two reasons for distinguishing between the first and second categories of constructive trust: the first type ‘really is a trust’, while the second is not; and the first type responds to an agreement between the parties, while the second is imposed in the absence of an agreement between the parties, as a response to an unlawful transaction impugned by the claimant. Millett LJ seems to have thought that a constructive trust ‘really is a trust’ only when a beneficiary has proprietary rights in property vested in the trustee. As held in the High Court of Australia in Giumelli v Giumelli,99 a ‘real’ constructive trust therefore ‘obliges the holder of the legal title to surrender the property in question, thereby bringing about a determination of the rights and titles of the parties’. However, ‘such a trust does not necessarily impose upon the holder of the legal title the various administrative duties and fiduciary obligations which attend the settlement of property to be held by a trustee upon an express trust for successive interests.100 Rather, the order made [by the court] is akin to orders for conveyance made by Lord Westbury LC in Dillwyn v Llewelyn’.101 Most of the examples given by Millett LJ of category 1 constructive trusts conform to this pattern, namely, the trusts imposed on property held by a 98

See n 102 and text; but cf the text to n 120. Giumelli v Giumelli [1999] HCA 10, (1999) 196 CLR 101 [3]–[5]. 100 A proposition with which Millett LJ would certainly have agreed: see his comments in Lonrho plc v Fayed (No 2) [1992] 1 WLR 1, 12, and in his article ‘Restitution and Constructive Trusts’ (1998) 114 LQR 399, 404–05. 101 Giumelli (n 99) [5]; Dilwyn v Llewelyn (1862) 4 De GF & J 517, 523; 45 ER 1285, 1287. 99

Paragon Finance plc v DB Thakerar & Co 663 trustee de son tort,102 and the trusts imposed in McCormick v Grogan103 (a secret trust), Rochefoucauld v Boustead104 (where the parties agreed that the defendant would hold property for the claimant) and Pallant v Morgan105 (where the parties agreed that the defendant would acquire property for both of them). However, Millett LJ also placed some cases into his first category where the parties can never have meant the defendant to own the relevant property, although they did intend that he should control it on the claimant’s behalf. Most obviously, company directors generally control the company’s property but do not hold it on trust because the company itself is generally the owner of its property.106 It follows that a gloss is needed on Millett LJ’s statement that constructive trusts imposed on misappropriated corporate assets in the hands of a director can respond to the fact that he ‘has assumed the duties of a trustee by a lawful transaction which was independent of and preceded the breach of trust’. This must be read to mean that such constructive trusts respond to the fact that the director has agreed to prioritise the company’s interests over his own when using his power to control its property—has agreed, in other words, to assume a fiduciary duty towards the company when handling its property, although he does not hold this property on trust.107 However, care is needed to distinguish between this fiduciary duty and the fiduciary duty owed by a director when carrying on the company’s affairs in other ways, since it appears from cases decided since Paragon that the first category of constructive trust includes cases where a director has misappropriated existing corporate assets, but does not include cases where the director makes a profit by breaching his fiduciary duty in other ways (eg

102 See too Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48, [2003] 2 AC 366 [135]–[136]; Jasmine Trustees Ltd v Wells & Hind (a firm) [2007] EWHC 38 (Ch), [2008] Ch 194 [39]. 103 McCormick v Grogan (1869) LR 4 HL 82. 104 Rochefoucauld v Boustead [1897] 1 Ch 196, discussed by Ying Khai Liew in ch 14 of the present volume. 105 Pallant v Morgan [1953] Ch 43. See too Banner Homes Holdings Ltd v Luff Developments Ltd (No 2) [2000] Ch 372, 397; Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd [2004] EWHC 2547 (Ch), [2005] 2 P & CR 8 [261] (affd [2005] EWCA Civ 1355); Crossco No 4 Unlimited v Jolan Ltd [2011] EWCA Civ 1619, (2011) 4 ITELR 615. 106 The same is also true of other types of defendant who are found to owe fiduciary duties in respect of property that is owned by their principals, eg some agents and employees. 107 Cf Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347, [2011] Bus LR 1126 [34] (Lord Neuberger MR): ‘Although company directors are not strictly speaking trustees, they are in a closely analogous position because of the fiduciary duties which they owe to the company: Bairstow v Queens Moat Houses plc [2001] 2 BCLC 531, 548. In particular they are treated as trustees as respects the assets of the company which come into their hands or under their control: per Nourse LJ in Re Duckwari plc (No 2) [1999] Ch 253, 262. Similarly, a person entrusted with another person’s money for a specific purpose has fiduciary duties to the other person in respect of the use to which those monies are put.’

664 Christian Daly and Charles Mitchell by taking a bribe to act against the company’s interests). This is discussed further below.108 Millett LJ’s loose characterisation of directors in the first category as ‘real’ constructive trustees may be contrasted with his insistence that defendants in the second category cannot be ‘real’ constructive trustees, although they are fixed with a personal liability to account as constructive trustees, because this language is ‘nothing more than a formula for equitable relief’.109 His reason for making the latter assertion was that a personal liability to account as a constructive trustee may be imposed although there is no prospect of a proprietary remedy against the defendant because he never receives property that could be held on trust for the claimant. This is correct, to the extent that it applies to dishonest assistants in a breach of trust.110 However, Millett LJ was also referring to knowing recipients of misdirected trust property,111 and to the extent that his comments concerned them, they were misconceived. Millett LJ’s approach to knowing receipt seems to have been influenced by the work of Peter Birks, for whom the language of constructive trusteeship was a ‘mystifying label’ when applied to the liability of knowing recipients,112 and by Lord Nicholls’ extra-judicial statement that the ‘traditional approach 108

See the text to nn 134–39 for further discussion. A phrase taken from Ungoed-Thomas J’s judgment in Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073, 1097. However, Ungoed-Thomas J did not mean that the formula was an empty one, as Millett LJ implies, since he also said (in line with the cases cited below at n 115) that a knowing recipient ‘is made liable in equity as trustee by the imposition or construction of the court of equity … because in accordance with equitable principles applied by the court of equity it is equitable that he should be held liable as though he were a trustee’. 110 For confirmation that Millett LJ meant to refer to dishonest assistants when describing this form of liability, see Dubai Aluminium (n 102) [140]–[141]. For the High Court of Australia’s concurring view that a dishonest assistant’s liability to account as a constructive trustee is nothing more than a personal liability, see Giumelli (n 99) [4]. And for discussion of the way in which this liability is conceptualised and quantified, see S Elliott and C Mitchell, ‘Remedies for Dishonest Assistance’ (2004) 67 MLR 16; P Ridge, ‘Justifying the Remedies for Dishonest Assistance’ (2008) 124 LQR 445; C Mitchell and S Watterson, ‘Remedies for Knowing Receipt’ in C Mitchell (ed), Constructive and Resulting Trusts (Oxford, Hart Publishing, 2010) 115, 150–54. 111 As noted in DEG-Deutsche Investitions- und Entwicklungsgesellschaft mbH v Koshy (No 2) [2002] 1 BCLC 478 [288]; Nabb Brothers Ltd v Lloyds Bank International (Guernsey) Ltd [2005] EWHC 405 (Ch) [70]; Sinclair Investment Holdings SA v Versailles Trade Finance Ltd (in admin recship) [2007] EWHC 915 (Ch), (2007) 10 ITELR 58 [122]. See too JD Wetherspoon plc v Van de Berg & Co Ltd [2009] EWHC 639 (Ch) [618] (a dishonest assistant is a category 2 constructive trustee); Bagus Investments Ltd v Kastening 2010 JRC 144, 2010 JLR 355 [30] (ditto); Williams (n 16) [18]–[21] (ditto); Bell Group v Westpac (No 9) [2008] WASC 239 [9247]–[9266] (a knowing recipient is a category 2 constructive trustee); Garmonsway v Raglan Developments Ltd [2009] NZHC 488 [23] ff (ditto); Bagus (above) [30] (ditto); Goldie v Getley (No 3) [2011] WASC 132 [212] (ditto); Panweld (n 16) [88] (ditto). 112 P Birks, An Introduction to the Law of Restitution (Oxford, Clarendon Press, 1985) 80–82. See too P Birks, ‘Persistent Problems in Misdirected Money: A Quintet’ [1993] Lloyd’s Maritime and Commercial Law Quarterly 218, 236; P Birks, Unjust Enrichment, 2nd edn (Oxford, OUP, 2005) 293–95. 109

Paragon Finance plc v DB Thakerar & Co 665 to [liability for knowing receipt and dishonest assistance] involves interposing a deemed (“constructive”) trusteeship between the wrongful conduct (dishonest participation) and the remedy (liability in equity),’ and that this ‘intermediate step seems otiose and … confusing’.113 However, these comments all miss the mark, first, because trust funds continue to belong to the beneficiaries in equity when they are improperly transferred to a recipient who is not a bona fide purchaser for value without notice of the equitable interest,114 and, secondly, because in cases where the recipient’s conscience is affected by knowledge of the breach of trust while the property or its traceable proceeds are in his hands, equity will fix him with duties to account for the property that are essentially the same duties to account as those that are owed by an express trustee.115 It follows that the statement that a knowing recipient is ‘constructively liable to account as a trustee’ is not merely an empty phrase, as in fact this language exactly identifies the content of his duty and the remedial consequences of breach.116 It also follows that it is true only in an attenuated sense (if it is true at all) that ‘there is no trust’ in cases where misdirected trust property is knowingly received by a defendant. For in such cases the beneficiaries have a subsisting equitable proprietary interest in the property under the original trust, and they also have personal rights against the recipient that he should account for what he does with the property, which rights are exigible against the defendant in proceedings that may lead to an order that he should specifically or substitutively perform his obligation to return the property on demand. Indeed, the English courts have sometimes concluded that the coincidence of these proprietary and personal rights means that misdirected trust funds are held by knowing recipients on a (‘real’) constructive trust. Most recently, Lloyd LJ said this in Independent Trustee Services Ltd v GP Noble Trustees

113 Lord Nicholls, ‘Knowing Receipt: The Need for a New Landmark’ in WR Cornish et al (eds), Restitution: Past, Present, and Future (Oxford, Hart Publishing, 1998) 231, 243. 114 As held in Agip (Africa) Ltd v Jackson [1990] 1 Ch 265, 290 (Millett J) and Foskett v McKeown [2001] 1 AC 102, 129 (Lord Millett). See too Mansell v Mansell (1732) 2 P Wms 678; Re Strachan (1876) 4 Ch D 123; Banque Belge pour l’Etranger v Hambrouck [1921] 1 KB 321; Re Diplock [1948] Ch 465, 522–3; Re Montagu’s Settlement [1987] Ch 264, 272–73; Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 705; Allen v Rea Brothers Trustees Ltd [2002] EWCA Civ 85, (2002) 4 ITELR 627 [44]–[46] and [52]–[55]; Venables v Hornby [2002] EWCA Civ 1277, [2002] STC 148 [27]; Clark v Cutland [2003] EWCA Civ 810, [2004] 1 WLR 783 [30]; Pitt v Holt [2011] EWCA Civ 197, [2011] 3 WLR 19 [99]; Independent Trustee Services Ltd v GP Noble Trustees Ltd [2012] EWCA Civ 195. 115 Wilson v Moore (1834) 1 My & K 126, 146; 39 ER 629, 636; Barnes v Addy (1874) LR 9 Ch App 244, 251–52; Jesse v Bennett (1856) 6 De G M & G 609, 612; 43 ER 1370, 1371; Morgan v Stephens (1861) 3 Giff 226, 237; 66 ER 392, 397; Rolfe v Gregory (1865) 4 De G J & S 576, 578; 46 ER 1042, 1043; Gray v Johnston (1868) LR 3 HL 1, 14; Blyth v Fladgate [1891] 1 Ch 237, 351; Re Barney [1892] 2 Ch 265, 271; John v Dodwell & Co Ltd [1918] AC 563 (PC) 569. 116 Mitchell and Watterson (n 110) esp 128–31.

666 Christian Daly and Charles Mitchell Ltd,117 in a clear and careful judgment that is irreconcilable with Millett LJ’s analysis. We prefer Lloyd LJ’s view, though we note that describing liability for knowing receipt in this way creates a risk that the courts will draw the false conclusion that the beneficiaries can have an equitable proprietary interest in misdirected trust funds only if they are impressed with a new constructive trust, which may be imposed only if the recipients have unconscionable knowledge of the trustee’s breach of duty.118

(2) The First Category Millett LJ did not say whether he meant his two-part classification to be exhaustive, but in later cases the courts have often allocated constructive trust claims to one category or the other, sometimes for the purpose of applying the limitation rules, sometimes for other purposes, and the classification is a helpful aid to understanding the reasons why all constructive trusts are imposed—subject to the proviso, discussed in the next section, that both categories are understood to include ‘real’ constructive trusts. Assuming that Millett LJ is right to hold that some constructive trusts respond to intention,119 however, this still leaves some difficult questions unanswered. One is the identity of the person whose intention matters. Millett LJ thought that both parties must have intended a transfer of beneficial ownership from the trustee to the beneficiary, but this is not borne out by all of the cases he mentions—for example, a trustee de son tort may not take the trust property in the consensual manner that Millett LJ contemplated, although he does intend to act for the beneficiaries.120 Yet the conclusion that the trustee’s intention is therefore the only one that matters is not borne out by other cases, where the courts have insisted that the trust responds to the parties’ shared intentions—for example, common intention constructive trusts.121

117 Independent Trustee Services (n 114) [74]–[84], endorsing Mitchell and Watterson (n 110). See too Peffer v Rigg [1977] 1 WLR 285, 294; Metall und Rohstoff AG v Donaldson Lufkin and Jenrette Inc [1990] 1 QB 391, 473; Jyske Bank (Gibraltar) Ltd v Spjeldnaes [1999] 2 BCLC 101, 119; Independent Trustee Services Ltd v GP Noble Trustees Ltd [2009] EWHC 161 (Ch) [3]; Futter v Futter [2010] EWHC 449 (Ch), [2010] STC 982 [35]. 118 An error perpetrated in Farrow Finance Co Ltd (in liq) v Farrow Properties Ltd (in liq) [1999] 1 VR 584 [161] and Robins v Incentive Dynamics Pty Ltd (2003) 45 ACSR 244, critiqued in M Bryan, ‘Recipient Liability under the Torrens System: Some Category Errors’ in R Grantham and C Rickett (eds), Structure and Justification in Private Law (Oxford, Hart Publishing, 2008) 339, 347–49. 119 Australian authorities that take the same view include Allen v Snyder [1977] 2 NSWLR 685, 693; Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491, 510; Bathurst CC v PWC Properties Pty Ltd (1998) 195 CLR 566 [39]. 120 As noted by Mann J in Jasmine Trustees (n 102) [42]. 121 Said to belong to the first category in Banner Homes (n 105) 384.

Paragon Finance plc v DB Thakerar & Co 667 Another difficult issue is the role played by detriment.122 Some cases hold that the claimant must have suffered detriment, as it is this element that makes it unconscionable for the defendant to act in a manner contrary to the parties’ original intentions, leading to the imposition of the constructive trust. Yet in other cases this seems to be unnecessary. For example, detriment is said to be necessary in the shared homes cases, and yet it seems not to be needed under the rule in Pallant v Morgan.123 It is also noticeable that the courts have found it hard to decide whether or not some constructive trusts belong to the first category. The reason is sometimes that they have simply not understood the nature of the relevant liability, and sometimes that it is hard to know whether a relevant intention is present on the facts of a case. But in some cases, it also seems that the courts are having difficulties because the tests that they use to distinguish one kind of constructive trust from another are conceptually unstable. The first kind of problem arose in James v Williams,124 where Paragon was not cited to the court but where an executor de son tort was effectively characterised as a category 1 constructive trustee, since the Court of Appeal held that no limitation period would apply to proceedings against him. However, the defendant never took the estate with an intention that he would act altruistically for the beneficiaries, and as the New South Wales Court of Appeal later held in a case with similar facts, Nolan v Nolan,125 this meant that the constructive trust in James should more properly have been assigned to the second category. The second type of problem arose in Hughes v Lloyd,126 where a tort victim suffered brain damage when he was injured in the Hillsborough football stadium disaster. Under a settlement with the negligent police authority, he was paid damages that included an element for nursing care that had been gratuitously provided by his mother. Following Hunt v Severs,127 this portion of the damages was held for his mother on a constructive trust (and fell into her estate on her death). It was unnecessary for the judge to decide 122 Discussed in eg T Youdan, ‘Formalities for Trusts of Land and the Doctrine in Rochefoucauld v Boustead’ (1984) 43 CLJ 306; N Hopkins, ‘Acquiring Property Rights from Uncompleted Sales of Land’ (1998) 61 MLR 486; P Critchley, ‘Instruments of Fraud, Testamentary Dispositions, and the Doctrine of Secret Trusts’ (1999) 115 LQR 631; N Hopkins, ‘The Pallant v Morgan “Equity”?’ [2002] Conv 35; J Cartwright ‘Formality and Informality in Property and Contract’ in J Getzler (ed), Rationalizing Property, Equity and Trusts (London, Butterworths, 2003) 36; B Macfarlane ‘Constructive Trusts Arising on a Receipt of Property Sub Conditione’ (2004) 120 LQR 667; S Gardner ‘Reliance-Based Constructive Trusts’ in Mitchell (ed) (n 110) 63. 123 According to Chadwick LJ in Banner Homes (n 105) 396–99, followed in Cox v Jones [2004] EWHC 1486 (Ch), [2004] 2 FLR 1010 [46], although in each case the judges’ comments were obiter as the claimant suffered detriment on the facts. 124 James v Williams [2000] Ch 1. 125 Nolan v Nolan [2004] VSCA 109. 126 Hughes v Lloyd [2007] EWHC 3133 (Ch), [2008] WTLR 473. 127 Hunt v Severs [1994] 2 AC 350. See too H v S [2002] EWCA Civ 79, [2003] QB 965.

668 Christian Daly and Charles Mitchell whether this was a category 1 or category 2 case, but he noted counsel’s submission that it belonged to category 1 because all the parties to the settlement of the litigation …—the litigants, represented, as they were, by lawyers, who must be taken to have known the law, and also [the judge]—must clearly be taken to have intended that the appropriate proportion of the damages … were trust monies.128

This argument seems rather strained, but perhaps it is a fair assumption that where a tort victim is gratuitously cared for by a family member, he would wish his carer to be recompensed for her time and effort by the tortfeasor. Turning finally to the third kind of problem, we come to a series of cases in which the courts have had to decide whether a constructive trust imposed on profits made by a defendant in breach of fiduciary duty falls into the first or second category. Lord Millett himself would probably have assigned all of these cases to the first category, since in his extra-judicial writings he has consistently maintained that all such constructive trusts respond to the fiduciary’s original intention at the time when he took office to act in the principal’s best interests, and denied that such trusts respond to wrongdoing.129 This view is consistent with the fact that fiduciary duties were historically conceptualised not as duties, breach of which leads to a loss-based or gain-based award, but as disabilities which prevent fiduciaries from entering certain types of transaction130—a conception that is typified by Lord Porter’s comment in Regal (Hastings) Ltd v Gulliver that a director’s liability to disgorge secret profits ‘does not depend upon breach of duty but upon the proposition that a director must not make a profit out of property acquired by reason of his relationship to the company of which he is a director’,131 and by Megarry V-C’s comment in Tito v Waddell (No 2) that ‘what equity does is to subject trustees to particular disabilities in cases falling within the self-dealing and fair-dealing rules’.132 128

Hughes (n 126) [16]. Sir P Millett, ‘Bribes and Secret Commissions’ [1993] Restitution Law Review 7; Sir P Millett, ‘Remedies: The Error in Lister v Stubbs’ in P Birks (ed), Frontiers of Liability, vol 1 (Oxford, OUP, 1994) 51, 57–59; Lord Millett, ‘Book Review’ (2002) 2 Oxford University Commonwealth Law Journal 291, 295; Lord Millett, ‘Proprietary Restitution’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Sydney, Lawbook Co, 2005) 309, 324. 130 As observed by Len Sealy in several articles: ‘Some Principles of Fiduciary Obligation’ [1963] CLJ 119, esp 124 and 135–37; ‘Fiduciary Obligations: Forty Years On’ (1995) 9 Journal of Contract Law 37, 51–2; ‘Directors’ Duties Revisited’ (2001) 22 Company Lawyer 79, 80–81. For a different view, see M Conaglen, ‘Equitable Compensation for Breach of the Fiduciary Dealing Rules’ (2003) 119 LQR 246. 131 Regal (Hastings) Ltd v Gulliver (1944) [1967] 2 AC 134, 159. This case is discussed by Richard Nolan in ch 17 of the present volume. 132 Tito v Waddell (No 2) [1977] Ch 106, 248. See too Ex parte Bennett (1805) 10 Ves Jun 381, 385; 32 ER 893, 895; Downes v Grazebrook (1817) 3 Mer 200, 200; 36 ER 77, 77; Fawcett v Whitehouse (1829) 1 Russ & M 132, 135n; 39 ER 51, 53n; Re Bloye’s WT (1849) 1 Mac & G 488, 495; 41 ER 1354, 1358; Grand Junction Canal Co v Dimes (1850) 2 H & T 92, 100; 47 ER 1610, 1614; Franks v Bollans (1868) LR 3 Ch App 717, 718; McPherson v 129

Paragon Finance plc v DB Thakerar & Co 669 In a departure from this traditional way of thinking about fiduciary liability for unauthorised gains, a new conception emerged during the course of the twentieth century, that views a fiduciary’s liability to disgorge unauthorised gains as though this is a wrong-based liability, triggered by breach of a duty assumed by the fiduciary ‘not to promote his personal interest by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the persons whom he is bound to protect’.133 However, this new conception has not entirely superseded the old, creating uncertainty as to which idea of fiduciary duties is now correct, and as to whether the answer to this question affects the proper classification of a constructive trust imposed on profits in the hands of the wrongdoing fiduciary. An example of this phenomenon is Gwembe Valley Development Co Ltd v Koshy (No 3),134 where Rimer J held that a principal can now plead his claim in either way, and that disability- and duty-based claims are governed by different limitation rules. This was an unsatisfactory conclusion, but on appeal, while the Court of Appeal agreed that the claim could be pleaded in either way, the court also held that the same limitation rule would apply whether the claim was based on disability or breach of duty reasoning.135 However, the court also held that different limitation rules might nevertheless apply for a different reason, namely, that a different type of constructive trust would be imposed to capture profits in a fiduciary’s hands, according to whether he had ‘transferred to himself property which had previously belonged to the company, and in relation to which he had “trustee-like responsibilities” before the transaction in question,’ or whether his liability ‘arose directly out of the transaction which gave rise to [his] profits’.136 In other words, the court held that different limitation rules apply to claims

Watt (1877) 3 App Cas 254, 266; Re Canadian Oil Works Corp (1875) LR 10 Ch App 593, 601; Boswell v Coaks (No 1) (1886) LR 11 App Cas 232, 235 ff; Clare v Joseph [1907] 2 KB 369, 378–79; Bath v Standard Land Co Ltd [1911] 1 Ch 618, 634; Transvaal Lands Co v New Belgium (Transvaal) Land and Development Co [1914] 2 Ch 488, 502; Taylor v Davies [1920] AC 636, 647; Furs Ltd v Tomkies (1936) 54 CLR 583, 592; Re Bulmer [1937] Ch 499, 503; Scott v Scott (1963) 109 CLR 649; Guinness plc v Saunders (1987) 3 BCC 271, 287; and [1990] 2 AC 663, 669 (arguendo); HR v JAPT [1997] OPLR 123 [29]. 133 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41, 103. See too New Zealand Netherlands Society ‘Oranje’ Inc v Kuys [1973] 1 WLR 1126, 1129; Chan v Zacharia (1984) 154 CLR 178, 189; International Corona Resources Ltd v LAC Minerals Ltd (1987) 25 DLR (4th) 504, 647, affd [1989] 2 SCR 574; Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 206; Maguire v Makaronis (1997) 188 CLR 449, 468; United Pan-Europe Communications NV v Deutsche Bank AG [2000] 2 BCLC 461 [44]; Walsh v Deloitte & Touche Inc [2001] UKPC 58, [2002] 4 LRC 454 [13]; Lindsley v Woodfull [2004] EWCA Civ 165, [2004] 2 BCLC 131 [28]–[30]; Sinclair (CA) (n 107) [80]. 134 Gwembe Valley Development Co Ltd v Koshy (No 3) [2002] 1 BCLC 478. 135 [2003] EWCA Civ 1048, [2004] 1 BCLC 131. 136 Koshy (CA) (n 135) [119].

670 Christian Daly and Charles Mitchell against fiduciaries who have made unauthorised gains, depending on whether the claims fall into Paragon category 1 or category 2. The same analysis appears in other cases, with the courts assigning claims to recover unauthorised fiduciary gains to category 1 or category 2 according to the source of the gains.137 However, the courts have found it hard to apply this analysis consistently, and it may be predicted that they will continue to struggle, particularly in cases concerning the misappropriation of confidential information and business opportunities. This is because it is unclear when they will characterise information and opportunities as property, and yet the question whether a category 1 or category 2 constructive trust will be imposed turns on their proprietary status: profits made through the wrongful exploitation of information and opportunities will be caught by a category 1 trust if these were property that belonged to the principal,138 but a category 2 trust will be imposed if they were not, so that it can only be said that the profits were generated by abuse of fiduciary office.139

(3) The Second Category A final question relating to liability for unauthorised fiduciary gains is whether these are held on a ‘real’ constructive trust, or whether the fiduciary merely owes a personal liability to disgorge his profit. As we have said, Lord Millett would probably have assigned all these cases to the first category, and would therefore have held, consistently with the Privy

137 Category 1 cases are: Bank of Credit & Commerce International (Overseas) Ltd (in liq) v Jan, Ch D 17 November 1999; JJ Harrison (Properties) Ltd v Harrison [2001] EWCA Civ 1467, [2002] 1 BCLC 162; Miller v Bain [2002] 1 BCLC 266 [38]–[43]; Lancaster v Handle Artists Management Ltd (unreported, HHJ Hazel Marshall, 15 September 2007; online summary by counsel at ; limitation point not considered on appeal [2008] EWCA Civ 1111); Bank of Credit & Commerce International SA v Saadi [2005] EWHC 2256 (QB) [31]; Statek (n 16) [107]; Wetherspoon (n 111) [617]; Cedric Slack & Partners Ltd (in liq) v Slack [2010] EWCA Civ 204. Category 2 cases are: UCB (2000) (n 9); Halton International Inc v Guernroy Ltd [2006] EWCA Civ 801, [2006] WTLR 1241; Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (in admin) [2010] EWHC 1614 (Ch), [2011] WTLR 839, affd Sinclair (CA) (n 107); Page v Hewetts Solicitors (a firm) [2011] EWHC 2449 (Ch), Panweld (n 16) [68]. 138 See too Halton (n 137) [25] (Carnwath LJ), stating that Keech v Sandford (1726) Sel Cas t King 61, 25 ER 223 ‘might arguably be brought within [Millett LJ’s] class 1, but, if so, only because of the special nature of the property involved. As was explained in Biss v Biss [1903] 2 Ch 40, 56 …, the renewal is treated as “an accretion to or graft upon the original term arising out of the goodwill or quasi-tenant right annexed thereto”.’ 139 AD Hicks, ‘Constructive Trusts of Fiduciary Gain’ [2011] Conv 62, 66–68. For a case in which Newey J declined to bring the payment of a bribe to a fiduciary into category 1 by characterising it as diversion of an opportunity belonging to the principal, see Cadogan Petroleum plc v Tolley [2011] EWHC 2286 (Ch) [14]–[39], followed in FHR European Ventures LLP v Mankarious [2011] EWHC 2999 (Ch) [6]–[19].

Paragon Finance plc v DB Thakerar & Co 671 Council’s decision in Attorney-General for Hong Kong v Reid,140 that the principal has an equitable proprietary right to the fiduciary’s profit under a ‘real’ constructive trust that responds to the parties’ intentions. However, the precedental status of Reid was denied in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd,141 where Lewison J held that it should not be followed in light of the Court of Appeal’s earlier decision in Lister v Stubbs142 that the principal should be restricted to a personal remedy. He also held that the facts of Sinclair took the case into the second category, and followed Paragon to hold that no proprietary award should be made, because category 2 constructive trusts are not ‘real’ constructive trusts. Lewison J’s analysis was upheld by the Court of Appeal. The question whether a principal should be entitled to a proprietary remedy against a fiduciary as a matter of policy, and the relative precedental status of Court of Appeal and Privy Council decisions, are fascinating subjects. However, space does not permit us to discuss them here, and we must confine ourselves to discussing one part of Lewison J’s reasoning that was not examined by the appellate court. This turned on Millett LJ’s assertion in Paragon that category 2 trusts are not ‘real’ trusts. In Lewison J’s view, it followed from this that any claim for unauthorised fiduciary profits that fell into category 2 must necessarily be a personal claim. As we have said already, it is unclear whether Millett LJ meant his classification to be exhaustive, but if he did, his account of category 2 trusts is defective because it leaves no room for constructive trusts which ‘really are trusts’ and which are imposed on property received in an unlawful transaction impugned by the claimant. Yet the law clearly recognises such trusts. The most obvious example is the constructive trust imposed on property received by a murderer from the estate of his victim in order to prevent him from profiting from his crime.143 Another example is the constructive trust that arguably may be imposed on the proceeds of a breach of confidence or breach of privacy.144 Again, while Millett LJ rejected the claimant’s argument in Paragon that English law imposes a ‘real’

140

Attorney-General for Hong Kong v Reid [1994] 1 AC 324, 337. Sinclair (Ch) (n 137) affirmed Sinclair (CA) (n 107). A different view was taken in Daraydan Holdings Ltd v Solland International Ltd [2004] EWHC 622 (Ch), [2005] Ch D 119 [80] and [86], followed in Dyson Technology Ltd v Curtis [2010] EWHC 3289 (Ch) [182]–[189], but these cases have been overtaken by Sinclair (CA) (n 107). 142 Lister v Stubbs (1890) 45 Ch D 1. 143 Schobelt v Barber (1966) 60 DLR (2d) 519; Re Pechar (deceased) [1969] NZLR 574. Cf Rasmanis v Jurewitsch (1969) 70 SR (NSW) 407; Rosenfeldt v Olson [1985] 2 WWR 502. 144 The best example is the decision of the Supreme Court of Canada in LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14; see too Minera Aquiline Argentina SA v IMA Exploration Inc (2007) 10 WWR 648. We are not aware of an English case in which such a trust has been imposed, but there are dicta supporting the possibility in A-G v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 288, and United Pan-Europe Communications NV v Deutsche Bank AG [2000] 2 BCLC 461, 482–83. 141

672 Christian Daly and Charles Mitchell constructive trust on the proceeds of fraud, other judges have ignored this finding and have followed Lord Browne-Wilkinson’s dictum to the contrary in Westdeutsche Landesbank Girozentrale v Islington LBC.145 There are also cases which hold that a constructive trust may be imposed on an enrichment unjustly gained by a defendant at a claimant’s expense146—although it may be that Millett LJ deliberately excluded trusts arising in response to unjust enrichment from his classification because he believed that such trusts are always resulting trusts and are never constructive trusts.147 If Millett LJ’s two categories are exhaustive then the foregoing trusts all more obviously belong to the second category than to the first. But if that is right, it means that this category includes ‘real’ trusts, and that the only substantive difference between the two categories is that they respond to different legal events—intention or agreement in the case of category 1, wrongs and (possibly) unjust enrichment in the case of category 2. And if that is right, the premise of Lewison J’s argument in Sinclair falls away. Of course, it does not follow from this that Lewison J was wrong to deny that unauthorised fiduciary gains are impressed with a ‘real’ constructive trust for the principal, since he had additional reasons for reaching this conclusion that were affirmed by the Court of Appeal.148 Our point concerns a different issue, however, namely, whether the law ever imposes ‘real’ constructive trusts as a response to events other than agreement, and if so, whether Millett LJ’s second category should be understood to include such trusts. We would give a positive answer to both of these questions.

145 Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 715; followed in Niru Battery Manufacturing Co v Milestone Trading Ltd (No 1) [2002] EWHC 1425 (Comm), [2002] 2 All ER (Comm) 705 [55]–[56]; Papamichael v National Westminster Bank plc (No 2) [2003] EWHC 164 (Comm), [2003] 1 Lloyd’s Rep 341 [241]; Commerzbank AG v IMB Morgan plc [2004] EWHC 2771 (Ch), [2005] 1 Lloyd’s Rep 298 [36]; Bank of Ireland v Pexxnet Ltd [2010] EWHC 1872 (Comm) [57]; Armstrong DLW GmbH v Winnington Networks Ltd [2012] EWHC 10 (Ch) [127]–[129]. See too Twinsectra Ltd v Yardley [1999] Lloyd’s Rep Bank 438 [99] (not considered on appeal: [2002] UKHL 12, [2002] 2 AC 164), where Potter LJ held that a constructive trust arises immediately unless funds are transferred under a contract that is voidable for misrepresentation, in which case no trust arises until the claimant elects to avoid the contract. But cf Box v Barclays Bank plc [1998] Lloyd’s Rep Bank 185, 201, and Shalson v Russo [2003] EWHC 1637 (Ch), [2005] Ch 281 [111] ff, taking a more sceptical view of Lord Browne-Wilkinson’s proposition. 146 Eg Chase Manhattan Bank v Israel-British Bank (London) Ltd [1981] Ch 105 (mistake); Neste Oy v Lloyd’s Bank Plc [1983] 2 Lloyds Rep 658 (failure of consideration); Re Farepak Food and Gifts Ltd [2006] EWHC 3272 (Ch), [2007] 2 BCLC 1; subsequent proceedings [2009] EWHC 2580 (Ch), [2010] 1 BCLC 444 (failure of consideration). 147 See his comments in El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717, 734, and also in PJ Millett, ‘Tracing the Proceeds of Fraud’ (1991) 107 LQR 71, 81. Another exponent of this view is Robert Chambers: eg R Chambers, ‘Resulting Trusts’ in A Burrows and Lord Rodger (eds), Mapping the Law: Essays in Memory of Peter Birks (Oxford, OUP, 2006) 247, 263. 148 But for criticism of the judgments in Sinclair and support for Reid, see D Hayton, ‘No Proprietary Liability for Bribes and Other Secret Profits?’ (2011) 25 Trust Law International 3.

Index Administrators and executors duties and powers, 158 Advancement see Presumption of advancement Agency see also Boardman v Phipps (1967); Rochefoucauld v Bousted (1897) absence of authority, 588 absence of retainer, 592 accountability, 582, 585–90 agency de son tort, 589, 594 agency relationship, 582, 585–9 agents for the trust, 587, 592, 602 contract for sale with vendor, 434–5 conveyance of land, 434–6 deemed agency gains, 603–4 definition, 433 fiduciary concept, 589 initial agreement, 433 liability, 588 misuse of fiduciary position, 433 parole evidence, 434, 436 property held for principal, 433 property purchased from third party vendor, 434 purchase of shares, 583–5, 588, 590–2 relationship with third parties, 589 self-appointed agents, 588 unauthorised gains, 434 Agricultural tenancies see also Tenant-Right capital investment, 293–4 compensation for unexhausted improvements, 292–4 emblements, 293 Lincolnshire custom, 293 political dimension, 294 statutory regulation, 293–4 Amnesty International objectives, 544 Anti-vivisection movement see also National Anti-Vivisection Society animal experimentation, 532–3 animal rights, 531 animal welfare, 530–1, 533 British Union for the Abolition of Vivisection, 534 Charles Dickens, 532 Jeremy Bentham, 531 legislative reform, 531–4 Lewis Carroll, 532

licensed experiments, 533 public concerns, 530, 532 publicly-held experiments, 533–4 Royal Commissions, 530, 532, 534 social activism, 532 Society for the Protection of Animals, 531 Bills of exchange security for loans, 337–8 Bishop of Natal v Gladstone (1866) see also Church of England coercive jurisdiction, 305–6, 311–4, 318–20 colonial bishops appointment, 310, 315, 327 Bishop Colenso of Natal, 312–3, 316, 318, 323 Bishop Grey of Cape Town, 312–3, 315, 324 consecration, 310, 313, 319 doctrinal fitness, 323, 325 ecclesiastical jurisdiction, 312–3, 315–6, 318–9 episcopal powers, 318–9, 323 lack of jurisdiction, 312 legal status, 310–11 Letters Patent, 310, 312–7 Oath of Canonical Obedience, 313, 324 removal, 323–6 right of next presentation, 310 titular bishops, 311, 317–8, 320 contested endowment, 317, 319 creation of episcopate, 318 existence of diocese, 317–9 introduction, 305 Letters Patent appeals, 322–4 effectiveness, 316–8, 321 mistake of law, 305–6, 317, 326 validity, 317–8, 321 Privy Council jurisdiction, 324 rival churches, 326 significance, 326–8 specific performance, 305–6, 326 see also Specific performance voluntary religious associations see Voluntary religious associations Boardman v Phipps (1967) agency absence of authority, 588 absence of retainer, 592

674 Index accountability, 582, 585–90 agency de son tort, 589, 594 agency relationship, 582, 585–9 agents for the trust, 587, 592, 602 deemed agency gains, 603–4 fiduciary concept, 589 liability, 588 purchase of shares, 583–5, 588, 590–2 relationship with third parties, 589 self-appointed agents, 588 background accountability as agents, 582, 585–90 adequate disclosure, 584 asset-stripping, 584 distribution to shareholders, 584 election as director, 583 fiduciary relationship, 585 purchase of shares, 583–5, 590–2 residuary estate, 582 retention of shares, 583 trust instrument, 583, 610 trustees, 583–4, 586 breach of fiduciary duty accountability, 582, 585–90, 601, 607 advance approval procedures, 601, 610 best interests defence, 601, 610 breach of trust, 599–601 conflicts of interest, 581, 585–6, 589, 590–2 constructive trust, 596, 606 fiduciary obligations, 591–8 fiduciary standards, 581 liability as accessory, 591 purchase of shares, 583–5, 591–2, 600, 602 separate profit principle, 586 unauthorised profit-making, 581, 586, 596, 602 unauthorised use of trust property, 593, 596–600 unjust enrichment, 581, 605–6 conflicts of interest disinterested advice, 589 duty to advise, 590–2 personal interest, 589–90 transfer of shares, 590 constructive trust breach of fiduciary duty, 596, 606 control of shared resources, 606 creditors’ entitlements, 606–7 declaration of constructive trust, 603 deemed agency gains, 603–4 discretionary remedy, 604 imposition, 603–4, 606, 610 liability to account, 603–4 non-insolvency justifications, 605–6 primary advantage, 605 profitable recovery, 606

proprietary constructive trust, 582, 604 proprietary remedy, 603–4 remediable constructive trust, 605 traceable identifiable property, 604 unjust enrichment, 605–6 fiduciaries account for profits, 596–7, 607 accountability, 582, 585–90, 601 adequate disclosure, 584 advance approval procedures, 601, 610 agency relationship, 586, 589 best interests defence, 601, 610 breach of fiduciary duty, 581 breach of trust, 599–601 burden of proof, 596–7 confidential information, 594 conflicts of interest, 581, 585–6 counter-restitution, 608 deserving conduct, 609 disclosure, 597 discretionary award, 607–8 equitable allowances, 608–9 established categories, 589 exploitation of fiduciary position, 596 fiduciary obligations, 591–8, 606–7, 610 fiduciary relationship, 585–6, 588–9, 593, 602 fiduciary standards, 581 information as property, 594–5 liability, 588 misappropriation, 596 presumption of wrongdoing 596–8 purchase of shares, 583–5, 591–2, 600, 602 separate profit principle, 586 unauthorised profit-making, 581, 586, 596, 602 unauthorised use of trust property, 593, 596–600 voluntary undertaking, 589, 593 work or skill applied, 607 information as property confidential information, 594 economic commodity value, 595 exchange value, 595, 599 excludability, 594 know-how, 595 personal information, 595 proprietary protection, 594 trade secrets, 595 unauthorised use of trust property, 593–600 informed consent failure to inform, 602, 610 incapacity, 602 intermeddler’s liability, 588–9, 592–5 introduction, 581–2

Index 675 rescission, 608 shares fair value, 590 purchase, 583–5, 590–2, 600, 602 right of pre-emption, 590 transfer, 590 significance, 581–2, 609 statement of claim, 586, 589, 602 Breach of confidence breach of fiduciary duty, 489 see also Breach of fiduciary duty breach of trust, confidence or contract, 256 commercial confidences, 260–2 confidential information, 260 constructive trusts, 671 contract for secrecy, 258 contractual relationship, 257–9, 261 equitable jurisdiction, 258–9, 262 fraud in third party, 256 government information, 260–1 implied obligations, 255, 258 injunctive relief, 254–5, 257, 261 judicial treatment, 254–5 obligation of non-disclosure, 255–7, 259 personal information, 261 privacy, 264–6 protection, 236, 241 wrongful disclosure, 254, 260 Breach of fiduciary duty see also Boardman v Phipps (1967); Nocton v Lord Ashburton (1914); Re Hallett’s Estate (1879–80) accountability, 582, 585–90, 601, 607 advance approval procedures, 601, 610 best interests defence, 601, 610 breach of confidence, 489 see also Breach of confidence breach of trust, 599–601 compensation for loss, 494–5 conflicts of interest, 581, 585–6, 589, 590–2 constructive trust, 596, 606, 670–1 damages, 495 equitable jurisdiction, 494 fiduciaries common honesty, 493 custodial fiduciaries, 489–92 duties, 488, 493 duty of care, 492–4 fiduciary obligations, 591–8 fiduciary standards, 581 liability as accessory, 591 negligence, 484, 492–3 persons regarded as fiduciaries, 488–9 property management, 488 purchase of shares, 583–5, 591–2, 600, 602

relationships of influence, 489 separate profit principle, 586 unauthorised profit-making, 581, 586, 596, 602, 669–70 unauthorised use of trust property, 593, 596–600 unjust enrichment, 581, 605–6 misrepresentation, 488 see also Misrepresentation negligence, 491–4, 497 solicitor/client relationships, 489 tracing, 366, 368–9 see also Tracing trust and confidence, 489 undue influence, 489 voluntary undertakings, 49 British colonies common law rights, 314 ecclesiastical jurisdiction, 312–3, 315–6, 318–9 emigration, 313 representative self-government, 313–5, 317 royal supremacy, 320–2 transmission of common law, 311 Burgess v Wheate (1759) Crown’s claim Crown as assign, 143 entitlement, 141–2 feudal lord/tenant relationship, 136 judicial opinion, 136–44 persons entitled in equity, 136 reciprocity, 143 right of trustee, 144 tenants of legal estate, 136 termination of use granted, 143 effect of decision doctrine of tenures, 144 equitable interests under trust, 144 neither claimant entitled to take land, 144 notion of conscience, 144–6, 155 propertification of equitable rights, 144 escheat doctrine, 115–6, 118–9 see also Escheat inheritance claim, 115, 123 introduction, 115 judges advisory opinions, 128–9, 131 functions, 128 judicial assistance, 129–30 Lord Chief Justice, 125–6, 141–2 Lord Keeper of Great Seal, 125–6, 128, 130, 136, 142–4 Master of the Rolls, 124–8, 135, 136–40 separate judgments, 128, 131 three sitting judges, 127–30

676 Index law reports Blackstone’s Reports, 131 Eden’s Reports, 131–2 legal arguments accidental determination, 136 as done that ought to be done (equitable maxim), 133, 135 beneficial ownership of land, 133–4 claim of heir on mother’s side, 132–6 conveyance for no consideration, 132 conveyance from trustees, 133, 135 covenant to convey property, 133, 135 creation of use, 133–4 descent of land, 132–3 equitable interests, 135 escheat to the Crown, 133–4, 136 inheritance of trust interests, 132 last purchaser with seisin, 132, 155 no covenant to transfer fee, 135 possession of land, 134 purchase from trustees, 133 purchaser in equity, 135 legal proceedings Attorney-General as party, 123 Chancery proceedings, 123–4 complex arguments, 124 Crown’s interest, 123–4, 130 inheritance at common law, 123 Kings Bench, 123 trustees to take legal estate, 123 matters in issue assignment of lease by trustees, 121 equity of redemption, 122 fee simple, 121 grant of lease to trustees, 120–1 half-share of property, 121 life estates, 122 limitation in tail male, 121–2 marriage provisions, 121 partition of land, 121 reconveyance of property, 122 successive life estates, 121 trust estate, 122 ultimate remainder, 121 unmortgaged property, 121 vesting of security interests, 121–2 political environment judicial decisions, 119 judicial involvement, 120 political instability, 119–20 significance, 155 subsequent case developments copyhold land, 148 Crown prerogative, 147 doctrine of conversion, 148 mortgagor dies intestate, 146 personalty on trust for beneficiaries, 147 property of aliens, 147

trustee in possession, 149 trustee out of possession, 149–53 trusts of freehold estates, 146 subsequent legislation, 153–5 see also Intestate Estates Act 1884 trusts assignment of lease by trustees, 121 equitable interests, 144 escheat subject to trust, 142 grant of lease to trustees, 120–1 inheritance of trust interests, 132 right of trustee, 144 trust estate, 122 trustees to take legal estate, 123 trusts of land, 141 uses cestui que use, 136–7, 141, 142 legal estate prior to uses, 136 post-Statute of uses, 136–9, 142 pre-Statute of Uses, 136–7, 141–3 Canadian corporate law see also North-West Transportation Co Ltd v Beatty (1887) company directors breach of duty, 417 director voting as shareholder, 416 directors’ contracts, 415–6 disclosure of self-interest, 415 disqualification from voting, 415 federal structure, 399 fiduciary obligations, 411 general incorporation statute, 400, 412 legal personality, 400 modernisation, 400 oppression remedy, 411, 417, 421–2 provincial legislation, 300 representative actions, 411 self-dealing contracts, 411, 415–7 shareholder approval, 416–7 statutory regulation, 415 Case law system judicial background, 518 presentation of case, 518 respective context, 518 selection of counsel, 518 Charitable bequests administration by the Church, 162–4 advancement of learning, 192–3 advancement of religion, 192–3 bequest of personalty, 162, 165, 190 bequests to favoured clerics, 166, 171 Charitable Corporation, 165 charitable intent, 185, 188 charities as public benefit, 190 concept of charity, 162 cy-près doctrine, 163 disciplinary/redemptive charity, 167

Index 677 endowment of chantries, 162, 164 favoured corporations, 165 general gifts, 162 gifts tending to public benefit, 165, 192, 196, 199 land/income derived from realty, 165–6 liberality and benevolence, 191–3, 195–7, 199 mortmain, 160, 163, 171 see also Mortmain pious causes, 162, 163, 166 precatory bequests, 166 profligate charitable giving, 165 public dimension, 162 public subscriptions, 173, 179, 180 Queen Anne’s Bounty, 164–5 relief of the indigent, 192–3 repression of public charities, 170 social charities, 166 social entrepreneurship, 162 statutory prohibitions, 165–6 uncertain objects, 190, 192–5, 197, 198 welfare functions, 164–5 Charitable purposes abolition of vivisection, 534, 538–9 advancement of education, 545–6 advancement of health, 545 advancement of religion, 546, 548 ambiguous objects, 547 animal welfare, 545 Amnesty International, 544 charitable status, 547–8, 550 judicial decisions, 543–4 justification, 542–3 legal changes, 542–6 likely benefit, 540, 544 likely detriment, 540, 544–5 negative consequences, 546–7 philanthropic purposes, 544 preventing cruelty to animals, 534–5, 537, 539 prohibition on political purposes abolition, 550–5 arguments favouring political engagement, 555 breach of trust, 549 changes to the law, 553, 547–8 charitable status, 547–8, 550 conflict of interests, 549 emergence of doctrine, 529 justification, 554 likely benefit, 540 likely detriment, 540 meaning of political purpose, 540 political lobbying, 550–1 political trusts, 548–9 public benefit, 540–5, 551, 553–5 public expenditure, 550

tax relief, 550–1 testamentary purpose trusts, 547 promotion of temperance, 542 public benefit abolition of vivisection, 538 advancement of education, 536 advancement of morals, 536 preventing cruelty to animals, 534, 537 prohibition on political purposes, 540–5 requirement, 529, 551, 553 purpose contrary to public policy, 541–2, 549 relief of poverty, 545, 546 trusts enforcement of charitable trusts, 549–50 political trusts, 548–9 religious trusts, 548–9 validity, 548 Charities see also Charitable bequests; Charitable purposes common law definition, 554 function, 546 legal changes, 529–30 parens patriae jurisdiction, 529 political action, 554 political freedom, 551 public goods and services, 551–3, 546 tax relief, 529 welfare provision, 552 Charity law concept of charity, 162 heads of charity, 192–3, 199 Church of England see also Voluntary religious associations colonial communities, 307 Colonial Bishoprics Fund, 309–10, 315–6, 318, 320–4 colonial episcopate appointments, 310, 315, 327 confirmation services, 308 consecration, 310, 313, 319 creation of episcopate, 318 doctrinal fitness, 323, 325 ecclesiastical jurisdiction, 312–3, 315–6, 318–9 episcopal powers, 318–9, 323 existence of diocese, 317–9 expansion, 308–10, 323 government, 308 lack of jurisdiction, 312 legal status, 310–11 Letters Patent, 310, 312–7 ordination, 308 organisation, 327 public support, 309 removal of bishop, 323–6

678 Index resident bishops, 308 titular bishops, 311, 317–8, 320 Lambeth Conference, 327 ministering to native peoples, 308 Civil society organisations public goods, 551–3 redistribution of wealth, 551 Clayton’s Case payments first credited to account, 358, 366, 368–9, 384–5, 392 Coke v Fountaine (1676) background litigants, 37–8 political influences, 41–2, 46 conscience civilis et politica, 35–6, 57 forum internum, 34, 35, 57 naturalis et interna, 35–6, 56, 57 regulated/unregulated, 57 failure to report decision, 53 leases claims to leases, 33 grant of lease, 39, 43 lease held in trust, 33, 41, 43, 45 legal interests as securities, 40 litigation action for ejectment, 43–4 action on covenant to pay, 44 animus donandi, 52, 59 appeal dismissed, 54 beneficial interests, 47, 50, 53 casus pro amico, 53 Chancery litigation, 43, 47–54 claim reopened, 54–5 conveyance of freehold, 43 defendant’s interrogatories, 50–1 demurrer for want of proper parties, 47–8 demurrer to discovery, 47–8 denial of trust, 47 dismissal of plaintiff’s bill, 51 equity side of Exchequer, 43–6, 50–1 estate bill, 56 examination of witnesses, 49, 51 execution of prior decree, 46 executors’ claim, 43–4 fraud, 49–51, 54 general words doctrine, 45–6 grant of lease, 43 heirs general, 47–8 House of Lords, 54–6 judgment reserved, 50 King’s Bench, 42–3 late amendment of plaintiff’s bill, 51 lease held in trust, 41, 43, 45, 52 non-disclosure as vitiating factor, 44–6 personalty applied in case of the realty, 47

plea of prior proceedings, 54 presumption of trust, 52–3 rehearing, 50 rentcharge, 43–4, 49–53 reportable law, 54, 57, 58, 61 security for gift, 44, 48, 50–3 sequestration, 46–7 self-help, 42–3 taking possession, 44, 52–3 undue influence, 45–6, 48–9, 51, 54 unintended effects of general words, 45–6 verdict by default, 56 voluntary settlement, 52 money gifts, 40 natural justice, 51 parsimony doctrine, 37, 53, 56–7, 59 property interests estate heavily encumbered, 39 feoffees, 39 general releases, 40 lease held in trust, 41, 43, 45, 52 rentcharge, 33, 39–40, 43–4, 49–53 resettlement of freehold, 39 special releases, 40 tenant in tail in possession, 39, 48 testamentary provisions, 41 value of estate, 39 reception/reaction initially unreported, 35 treatise writers, 36–7 significance, 33–5 significance, 61 treatise writers, 61 trusts classification, 34–4, 36, 52, 56–60, 82 constructive trusts, 53, 56, 58, 82 declaration of trust, 52, 58, 82 denial of trust, 47 express trusts, 34, 52, 56, 58–60, 82 implied trusts, 34, 36, 37, 52–4, 56, 58, 82 intention to create, 54 lease held in trust, 41, 43, 45, 52 parole evidence, 60 presumptive trusts, 34, 36, 53, 82 resulting trusts, 36–7, 58–60, 82 secret trusts, 34 trust for payment of debts, 36 trusts of absolute necessity, 34, 36, 59 Colonial law see also Irish land law conquered territories, 100–1 governing law, 98–9 jurisdiction, 98–9 national law, 99 newly-settled territories, 99

Index 679 Common law action of ejectment, 13, 15 certainty, 25–6 charities charitable purposes, 543 charitable trusts, 549 definition, 554 colonial laws, 311, 314 common account, 490–1 common law courts fusion with equity, 362–3, 375 judges, 127, 130–1, 134 law reports, 131 Pennsylvania, 105 concurrent jurisdiction, 660 contractual obligations, 219, 222, 355 copyright protection, 239, 240, 245, 248–9, 251–3, 257–8, 261 credit for necessaries, 560 damages, 495 deceit, 482, 491 duty of care, 496 enforcement bonds, 29 generally, 2 escheat, 116, 140, 144 see also Escheat estoppel, 27 feoffment, 72, 144 feudal system, 144 fraud, 330, 481–3, 647 freehold covenants, 212, 222 high treason, 118 inheritance-related issues, 123, 132–5 land rights see also Earl of Oxford’s Case (1615) common law jurisdiction, 19 common law rights, 19, 24–7 descent of land titles, 163 restitution of property, 605 tanistry, 25 mandamus, 148 marriage settlement, 121 married woman’s property, 575–8 see also Married woman’s property misrepresentation, 478–80, 497 see also Misrepresentation money had and received, 507, 661–2 negligence, 485–6, 493, 499, 503 pragmatism, 146, 153 privacy, 262–3, 266 property rights, 24–6, 229–31, 239–40, 245, 575–8 relationship with Chancery, 1–3, 20–1, 27–31, 96, 138, 222 tenants see also Ramsden v Dyson (1866) tenant improvements, 297

tenant-right, 297 tenants-at-will, 287 tracing, 381, 385–7, 392 see also Re Hallett’s Estate (1879–80) use-related issues, 77 writ of error, 100 writ of inquisition, 460 Company directors see Directors Conflicts of interest directors unable to act, 412 fiduciary relationships disinterested advice, 589 duty to advise, 590–2 personal interest, 589–90 transfer of shares, 590 no-profit rule, 519–20 unauthorised, 581 Conscience civilis et politica, 35–6, 57 forum internum, 34, 35, 57 naturalis et interna, 35–6, 56, 57 notion of conscience, 115, 144–6 regulated/unregulated, 56, 58 trust law, 115, 155 Constructive trusts see also Paragon Finance plc v D B Thakerar & Co (a firm) (1999); Rochefoucauld v Bousted (1897) agreement reached before obtaining property, 4 claims against constructive trustees, 643 classification, 53, 56, 58, 82 cloaking nature of transaction, 451–2 common intention constructive trusts, 666 creation, 437, 439, 442, 449 detriment suffered, 440, 667 enforcement, 440, 442, 447, 451 equity’s concurrent jurisdiction, 649, 654–5, 659–60 equity’s exclusive jurisdiction, 660 existing provision, 76 expectant nature of acquisition, 437 evidence of trust, 72 fiduciary relationships accountability, 647–8, 664–5 actual fraud, 660 agreement of parties, 662 beneficiary with proprietary rights, 662, 665 breach of confidence, 671 breach of fiduciary duty, 596, 606 breach of trust, 664–6 control of shared resources, 606 creditors’ entitlements, 606–7 declaration of constructive trust, 603 deemed agency gains, 603–4 deemed trusteeship, 665

680 Index discretionary remedy, 604 displacing express trust, 646 existence of trust, 662–6 fiduciary duty, 663, 668–70, 672 fraud, 660–2, 672 fraudulent breach of trust, 644–7, 661–2 Hovenden principle, 655–7 imposition, 603–4, 606, 610, 643, 662–3, 666, 668, 671–2 improper transfer of funds, 665 intention of parties, 666–7, 671–2 knowing receipt, 664–6 liability to account, 603–4, 645, 664–5, 667, 670 limitation rules, 643, 647–8, 657–8, 661, 666–7 misappropriated corporate assets, 663 misdirected trust property, 664–6, 669 nature, 643 non-insolvency justifications, 605–6 personal rights, 665 primary advantage, 605 profitable recovery, 606 proprietary constructive trust, 582, 604 proprietary remedy, 603–4 recipient of misapplied monies, 659 remediable constructive trust, 605 traceable identifiable property, 604 unjust enrichment, 605–6 fraud link, 424 see also Fraud implied by law, 53 implied from documents, 56, 58 intention to create trust, 439–40, 442, 447, 450–2 mutual wills, 439 Pallant v Morgan doctrine, 439 persons assuming duties of trustee, 646–50, 658–62, 668, 670–2 proprietary remedy, 664–6, 671 “real” constructive trusts, 646, 662, 664–5, 670–2 reliance element, 440, 442, 447, 450–2 requirement for writing, 434–5 secret trusts, 439 tenant right, 292 see also Tenant right tort victims, 667–8 transfer of beneficial ownership, 666 trustee accountable without limit of time, 646–7, 649–50, 658, 661–3, 666–70 trustees de son tort, 646, 663, 666 two-part classification, 643, 646, 649, 655, 658, 666, 671–2 unjust enrichment, 672 valuable consideration, 436–9

Contract breach of contract, 241, 256 enforcement, 342 fraud, 330 see also Fraud improvident contracts, 342–3 inequality between contracting parties benefit of contract, 329 equitable relief, 331 extortionate advantage, 329 fair, just and reasonable transaction, 329, 331–2, 346 heirs, 331–2 preventive justice, 331 rebuttal, 329 unfair advantage, 340, 342 regulation, 355 unconscionable bargains, 331–3, 354–5 undue influence, 333, 354 Conversion equitable doctrine, 148 tort of conversion, 661 Copyright chattel property, 249, 250, 252 common law copyright, 240, 245, 249, 251–3, 257–8, 261 copyright-before-publication, 251–2 foreign authors, 249 incorporeal right, 249–50, 252 product of intellectual labour, 252 prohibition on copying, 240–1 property right over manuscript, 250 publication of etchings, 236–7 published works, 239 rights post-publication, 250 statutory protection, 249, 253, 261 unauthorised publication, 239–40, 263 unpublished works, 239–40, 245, 247–9, 250–3, 261 work of visual art, 236, 248 Covenants see also Tulk v Moxhay (1848) absence of notice, 221, 224 action contrary to covenant, 213 benefit of covenants, 217 burden of covenants, 210–3, 217–9 doctrine of notice, 218–20, 223 duty on covenantor, 213 enforcement, 211–4, 221–2, 224 freehold covenants, 211–2, 214, 217–8, 222 leasehold covenants, 223 personal covenants, 217, 223 positive covenants, 222 protection of covenantee, 218–20, 225, 227 restrictive covenants, 203, 204–5, 207–10, 227–31, 233 see also Restrictive covenants

Index 681 Cy-près doctrine Chancery jurisdiction, 163 charitable bequests, 163 see also Charitable bequests operation, 183–6 Declaration of trust actual declaration, 83 express, 52, 58, 75 inconsistent evidence, 78 intention to create trust, 427–8 oral declaration, 423, 426, 429–30, 432, 436, 441–2 parole declaration, 72 proof of writing, 423, 426, 442 rule of evidence, 426 settlor, 426–8 signature, 423 trust relating to land, 423 Derry v Peek (1889) see also Nocton v Lord Ashburton (1914) cause of loss, 487 company prospectus, 481 fiduciary duties, 483–4, 493–4, 497 fraud element, 485, 487 honest belief in truth of statement, 482 incorrect statements, 482 liability for misstatements, 483 negligence, 487, 493, 497 negligent breach of duty, 486 negligent misrepresentation, 495–6 Deserted wife’s equity see also Married woman’s property; National Provincial Bank Ltd v Ainsworth (1965) binding effect, 559, 561, 563, 569 clog or fetter on the property, 561 commercial transactions, 568–9 constructive desertion, 561 contractual licence theory, 561, 564 costs, 568 definable rights, 570 discoverability, 567–70 economic vulnerability, 577–80 equality of treatment, 577 equitable doctrine, 557, 560, 571–2 equitable right, 559–61 equities amounting to interest in land, 565–6 homelessness, 578 identifiable property, 571 injunctive relief, 562–3 innocent purchasers 567 judicial caution, 572 judicial discretion, 562–3 judicial disfavour, 561 licence coupled with an equity, 564 marriage breakdown, 558

marriage status, 562, 565, 570 mere equities, 565–6 occupation of matrimonial home, 558–60 overriding interest, 559–60, 562 ownership of matrimonial home, 558 personal right, 559–63, 565, 567, 574 property interests, 564, 567–8, 570, 573, 575 public interest concerns, 568, 580 purchaser with notice 559, 561, 567 purchaser without notice, 562 registered title, 562, 569 rejection of rights, 558, 572 third parties, 561, 563, 567 uncertainty, 568 Directors see also North-West Transportation Co Ltd v Beatty (1887); Regal (Hastings) Ltd v Gulliver (1942) abuse of position, 510, 512, 519 accountable for profit made, 512 authorisation to make profit, 526–7 benefits from third parties, 520, 525–6, 528 best interests of the company, 508 best interests of the shareholders, 508 breach of duty, 417 conflict of duty, 499, 511, 513–7, 519–23, 525–8 conflict of interests, 499 contract with own corporation, 393 director voting as shareholder, 416 directors’ contracts, 415–6 discharge of duty, 509–11, 514 disclosure of self-interest, 415 disqualification from voting, 415 fiduciary duties, 516 informational advantages, 525 investment decisions, 505, 507, 511, 516 liability threshold, 504 management powers, 526 negligence, 504, 507, 512 profit attributable to position, 505–7, 510 standard of skill and care, 504, 507, 508 statutory duties, 524 voting as shareholders, 393, 409, 413 Earl of Aylesford v Morris (1873) appeal absence of fiduciary relationship, 344 absence of fraud, 344 equitable intervention, 344–7 interest rates, 344, 346 presumption of fraud, 345, 347, 354 public policy, 345–7 sale of reversions, 334, 344–6 unconscionable bargains, 346 unfair advantage, 344–5

682 Index background 19th century peerage, 334–5 Aylesford family, 334–5 Lord Guernsey (Seventh Earl), 334–5, 348–53 bills of exchange, 337–8 equitable jurisdiction, 332–4, 341–2, 344–7 fraud, 330–3, 345, 347, 354 see also Fraud heirs catching bargains with heirs, 330–4, 344–5, 347 disobedient heirs, 333 expectant heirs, 331–4, 342, 345, 347, 354 family protection, 332–3, 345 fraud, 331 loans to heirs, 355–6 profligate heirs, 332 inequality between contracting parties benefit of contract, 329 comparative incapacity, 341 enforcement of contract, 342 equitable relief, 331 extortionate advantage, 329 fair, just and reasonable transaction, 329, 331–2, 346 heirs, 331–2 improvident contracts, 342–3 preventive justice, 331 rebuttal, 329 regulation of contracts, 355 unconscionable bargains, 331–3, 346, 354–5 undue influence, 333, 354 unfair advantage, 340, 342, 344–5 life estate, 329 loans collateral security, 336 interest rates on loans, 336, 338, 340, 344, 346, 355 loans against promissory notes, 335–6 money-lending, 338–9, 345, 355 unfair advantage, 340, 342 maintenance of family members, 329 mortgage against reversionary interests, 336–7 political aspects, 343 preservation of family wealth, 329–30, 333–4, 346–8, 355 property law reform, 355 public criticism, 349 public interest, 340 resettlement of estate, 329, 333, 337–8, 352, 353 significance, 354 social and political criticism, 343

strict settlement see Strict settlements Earl of Oxford’s Case (1615) background, 1–3 dispute over jurisdiction, 1–3, 32 enforcement of judgment, 29–30 equitable intervention, 29–30 estoppel, 26–7 heading, 27 land transactions Benedict Spinola, 3, 5–9, 11 capital value, 9, 14 conveyance of land, 12–3 development of land, 9–11, 18, 25–6, 28 extent of land, 4 freehold reversions, 10 leases, 4, 8 Lord Burghley, 5–9 original ownership, 3–4 provisions of indenture, 6 purchase price, 9 quiet possession, 12, 18 rental value, 9, 14 rents, 4, 5, 8, 9, 13, 14, 19 sale of land, 11–2 transaction at undervalue, 6 unencumbered title, 8, 9 value of land, 11 litigation action of ejectment, 13, 15 committal for contempt, 19, 20, 27, 28 common law jurisdiction, 19 common law rights, 19, 24, 27 Court of Wards, 13–5, 24 defendant’s demurrer, 19, 21, 24, 26, 28 equitable jurisdiction, 19, 20, 23, 24, 26–9, 31 fine conclusive against third parties, 12, 17 formalistic reasoning, 17, 18 habeas corpus, 20, 28 judicial consideration, 22, 24 jurisdictional plurality, 24 recovery of land, 24 refusal of jurisdiction, 13 refusal of rent, 21–2 statutory interpretation, 16, 17, 22, 24, 30, 31 suit for intrusion, 13 writ of error, 18 petition to Parliament, 23–4 petition to the King, 21–2 Queen as intermediary, 5, 6, 8, 12, 16–8, 22, 24 report/record mismatch, 29 significance, 3, 20, 31–2 writ of audita querela, 29

Index 683 Easements equitable easements, 229 Ecclesiastical powers charitable bequests, 162–3 see Charitable bequests descent to land, 163 endowment of chantries, 162, 164 enforcement of uses, 163 feudal dues, 164 mortmain accumulations, 163 mortmain statutes, 163, 165 probate jurisdiction, 162–3 Reformation changes, 163–4 weakening of powers, 164 Ejectment action for ejectment, 13, 15, 43–4, 274–5 Emblements agricultural tenancies, 293 equity to emblements, 286 Equitable maxims see Maxims of equity Equitable property rights see also National Provincial Bank Ltd v Ainsworth (1965); Tulk v Moxhay (1848) anti-commons, 228 attaching to an interest, 566 beneficiary of trust, 230 conceptual test, 231 consequentialist approach, 232 constructive trust, 212–3, 230, 574, 579 see also Constructive trusts covenantees, 225, 227 defined/undefined equities, 566 degree of permanence and stability, 566, 570–1 development, 557, 571–2, 577 different types, 566 duties creating personal rights distinguished, 232 duty to third party, 232 equities amounting to interest in land, 565–6 equity attached to property, 220–1, 223, 232 established/frontier rules, 566 estoppel, 558, 577 grant of common law right, 229 initial promise, 225–7, 230 judicial innovation, 225 latent/patent rights, 566 legal property rights distinguished, 226 mere equities, 565–6 policy concerns, 227, 229 protection of amenity, 227 restrictions on use, 224–5, 227–9 rules of trusts, 558, 577 sale of land, 228

security and sanctity, 573, 577, 579 successors in title, 224–6 third party bound, 217, 224, 226, 230–1, 561, 563, 566 third party interference, 219, 226 welfare-based approach, 558, 577, 580 Equity of redemption development, 26 Escheat see also Burgess v Wheate (1759) bankruptcy legislation, 118 beneficiary of escheat, 117 corporeal hereditaments, 153 Crown land, 117, 123–4, 130, 133–4, 136 doctrine of escheat, 115–6, 118–9 doctrine of tenures, 116–7, 142, 144 escheat of use, 119 escheat subject to trust, 142 estate tail, 117 estates in fee simple, 116–7 felony, 137–40 forfeiture, 118–9, 138–40, 153 incorporeal hereditaments, 118 inheritance rules, 117 inter-vivos alienation, 117 origins, 116 prerogatives, 118 property right ending, 116 propter defectum tenentis, 116, 118–9 propter defectum sanguinis, 116, 118–9 trustee in bankruptcy, 118 Estoppel common law origin, 27 equitable estoppel, 27, 558, 577 proprietary estoppel, 269, 301, 574 European Convention on Human Rights respect for private and family life, 265 Express trusts absence of laches or acquiescence, 646, 648 beneficiaries sufficiently ascertained, 158 breach of express trust, 645–6, 655, 661 claims by beneficiary, 655–6 classification of trusts, 34, 52, 56, 58–60, 82 conclusion rejected, 424, 426, 433, 451 consent mechanisms, 524 creation of express trust, 645 existence, 426–32 intention to create trust, 427–8, 442 limitation rules, 646, 648 objects defined, 158–9 oral express trust, 426–7, 430, 433, 443, 447, 451 performance claims, 656–7 performance of trust, 655–6 possession cestui que trust, 655

684 Index reparation claims, 656 three certainties, 159 trustee accountable without limit of time, 646, 648 validity, 158, 443 Family property see also National Provincial Bank Ltd v Ainsworth (1965) action for possession, 559 bank’ power of sale, 559 beneficial ownership, 574 civil partnerships, 574 commercial lending, 568, 580 constructive trusts, 574, 579 deserted wife’s equity see Deserted wife’s equity economic vulnerability, 577–80 equitable intervention, 557, 575 equities amounting to interest in land, 565–6 homelessness, 578 innocent purchasers 567 marriage breakdown, 558 married woman’s property, 575 see also Married woman’s property mere equities, 565–6 mortgages, 558, 570, 574 occupation of matrimonial home, 558 overriding interest, 559–60, 562 ownership of matrimonial home, 558 possession of property, 560–2, 567 proprietary estoppel, 574 protection for both spouses, 574 public interest concerns, 568, 580 purchaser with notice 559, 561 purchaser without notice, 562 registration of personal right of occupation, 573 requisite notice of interest, 561, 567 resulting trusts, 574 secure proprietary interest, 574 security for loans, 558 title subject to equities and liabilities, 560 transaction costs, 568 trustees in bankruptcy, 560–1 Fiduciaries see also Boardman v Phipps (1967); Breach of fiduciary duty account for profits, 596–7, 607 accountability, 187, 191, 582, 585–90, 601 adequate disclosure, 584 advance approval procedures, 601, 610 agency relationship, 586, 589 best interests defence, 601, 610 breach of fiduciary duty, 581 breach of trust, 599–601

burden of proof, 596–7 common honesty, 493 confidential information, 594 conflict of duty, 499, 521–3 conflicts of interest accountability, 581, 585–6 disinterested advice, 589 duty to advise, 590–2 personal interest, 589–90 transfer of shares, 590 counter-restitution, 608 custodial fiduciaries account based on wilful deceit, 490, 492 accounting for assets, 489–90 breach of trust, 490 common account, 490, 495 compensation for loss, 492 negligence, 484, 491–3 proof of wrongdoing, 490 deserving conduct, 609 disclosure of information, 524, 597 discretionary award, 607–8 duties, 488, 493 duty of care, 492–4 equitable allowances, 608–9 established categories, 589 exploitation of fiduciary position, 596 fiduciary obligations, 591–8, 606–7, 610 fiduciary relationship, 585–6, 588–9, 593, 602 fiduciary standards, 581 information as property, 594–5 misappropriation, 596 negligence, 484, 491–3 non-custodial fiduciaries compensation for loss, 491–2 liability for loss, 491 persons regarded as fiduciaries, 488–9 presumption of wrongdoing 596–8 property management, 488 purchase of shares, 583–5, 591–2, 600, 602 relationships of influence, 489 separate profit principle, 586 unauthorised profit, 499, 515, 519–25, 528, 581, 586, 596, 602 unauthorised use of trust property, 593, 596–600 voluntary undertaking, 589, 593 work or skill applied, 607 Floating charges effect, 228–9 Fraud see also Fraudulent solicitors action for money had and received, 661–2 actual fraud, 330, 347 causative event, 448–51 cloaking nature of conveyance, 447–8

Index 685 confidential relationships, 331 constructive fraud, 330–1 constructive trust link, 424, 450 see also Constructive trusts contracts tainted with fraud, 330 definition, 424, 447–8 denial of fraud, 424 denial of trust, 448 determined prior to issue of proof, 444 element of intention, 450–1 element of reliance, 446–7, 450–1 equitable intervention, 449 equitable relief, 330–1 existence of fraud, 441, 443–4 expectant heirs, 331 fraud exception, 424–6, 429 fraudulent breach of trust, 645–7, 661–2 land conveyed on trust, 424–5 later discovery of trust, 449 limitation rules, 645, 647, 660–1 money-lending, 332 see also Money-lending misuse of monies for own purpose, 660–1 oral trusts, 429 ownership of shares, 660 presumption of fraud, 345, 347, 354 proof of fraud, 424, 446 reliance on legal (statutory) rights, 446–7 reneging on undertaking, 449, 450, 452 requirement for writing, 442–3 self-declaration clauses, 446 statute not to be used as instrument of fraud, 423, 425, 436, 443, 446–8 Statute of Frauds conveyance of land, 435, 439, 443 oral express trusts, 443, 447 proof of fraud, 424 rule of proof, 444, 448 tort of conversion, 661 trustee de son tort, 661–2 unconscionable bargains, 331–3 Fraudulent solicitors see also Re Hallett’s Estate (1879–80) betrayal of trust, 361 disciplinary action, 361 judicial intervention, 362 mixing of funds, 361 money-broking, 360 professional negligence, 360 public concerns, 359 solicitor/client relationship, 361, 392 speculating with client money, 360 Gissing v Gissing (1971) see also Pettit v Pettit (1970) common intention actual common intention, 618–9 agreement of parties, 635

bargain between the parties, 612 beneficial interest in property, 614, 629–31, 637–8, 640, 642 common intention analysis, 611, 614, 642 common intention trust, 639, 641 communication of intention, 634 conduct of the parties, 627–9, 637, 639 deemed intention, 627 detrimental reliance, 639–40 fairness, 638 fictional common intention, 633, 638, 642 genuine common intention, 633–5 imputation, 612–4, 617–8, 627–8, 635–8, 641 inference, 612–3, 627–30, 632, 634, 636, 639 no express intention, 627 non-existent intentions, 627, 636, 641 presumption of resulting trust, 628–33 primary or threshold question, 614, 636 prior common intention, 629–30 purchase money resulting trust, 630–1, 635 quantification/imputation relationship, 633 reasonableness, 628, 635–8, 642 relevant intention, 613 introduction, 611 matrimonial property beneficial interest in property, 614, 629–31, 637–8, 640, 642 contribution to purchase price, 631–2 disputes, 611–2, 615–6 entitlement of parties, 636 family assets doctrine, 616 payment for furnishings, 615 proprietary estoppel, 632, 639–40 purchase in husband’s name, 615 spouse’s contribution, 633–6 quantification issue agreement of parties, 635 conduct of the parties, 637, 639 fairness, 638 genuine common intention, 634–5 no common intention, 637, 639–40 probable common understanding, 635 quantification/imputation relationship, 633 spouse’s contribution/share, 633–7, 639 significance, 616 subsequent case law, 636–41 unmarried cohabitants, 611–2 Grey v Grey (1677) capacity to transfer property, 79 case references, 73–5

686 Index debts conveyance to trustees, 69 immunity from debts, 70 payment of debts, 69–70 existing provision circumstance of evidence, 76–7 concept, 74 constructive trusts, 76 evidence of trust, 76 implied trust, 75–6 purchase as advancement, 75–6 relevance of intention, 75–7 resulting trust, 82 Gosfield Hall conveyance to trustees, 69 description, 64 family tree, 85 held of trust, 68 later gifts, 65, 68–70 life interest, 68–9 ownership, 63–5 purchase as advancement, 64–5, 68–70 purchase money, 64, 69 purchase on trust, 68–70 sale, 64 seizure in fee, 68 subsequent history, 84 intention ineffective intention, 79 intention to pass beneficial title, 78 introduction, 63 presumption of advancement advanced/unadvanced distinction, 77–8, 82 articulation of principle, 63 content, 78 declaration of trust, 83 default position, 79 establishment, 71 evidence of intention, 83 implied reservation, 81 lack of intention, 80–1, 83 presumption of intention, 73, 78, 83 rebuttal, 80–1, 83 retained benefit, 81 purchase as advancement, 72 purchase in name of son, 71–2 purchase in name of stranger, 71–2 resulting trusts default position, 81 existing provision, 82 presumption, 71 theory, 63 reasoning establishment of separate trust, 71 evidence of intention, 73 general principle, 71 payment of purchase price, 71

presumption of advancement, 71–3, 76 presumption of intention, 73, 78 presumption of resulting trust, 71, 73, 75 significance, 63, 83–4 trusts constructive trusts, 72, 76 declaration of trust, 71–2, 75, 78, 83 evidence of trust, 73, 76 implied trust, 72, 75–6 parole declarations, 71–3 presumptive trust, 72 purchase creating trust, 71–2 resulting trusts, 63, 71, 73, 75, 78, 80 Habeas Corpus applications, 2, 20, 28 Human rights European Convention on Human Rights, 265 right to privacy, 263–6 Implied trusts classification of trusts, 34, 36, 37, 52–4, 56, 58, 82 existing provision, 75–6 India Chancery jurisdiction, 108 conveyancing declaration of priority, 113 deeds of conveyance, 113 jurisdiction, 113 registration, 113–4 jurisdiction in personam, 108 Informational privacy see Privacy Informed consent failure to inform, 602, 610 incapacity, 602 Injunctions injunctive relief, 236, 238–9, 241, 254–5, 257, 261 perpetual injunction, 242 Intestate Estates Act 1884 see also Burgess v Wheate (1759) desmene of Crown land, 154–5 equitable estates, 153 escheat, 153 see also Escheat land registration, 154–5 last purchaser with seisin, 132, 155 real property succession, 154 Irish land law account for profits, 100 compensation for unexhausted improvements, 295, 297 contempt of court, 101 customary form of tenure, 295

Index 687 dispossession, 295 evictions, 296 fraudulent behaviour, 100 jurisdiction, 100–1 partition of land, 100 political dimension, 294, 296 quiet possession, 295 relief against annuity charged, 100 right to bequeath tenantry, 295 sale of land, 100 sequestration, 101 tenant right abolition, 298 protection, 295–7 right to alienate, 295 tenants-at-will, 295, 298 writs of error, 101–2 yearly tenants, 295 Jurisdiction comity of nations, 88–9, 111 dispute over jurisdiction, 1–3, 32 see also Earl of Oxford’s Case (1615) foreign land, 87–8 see also Jurisdiction over foreign land jurisdiction in personam, 87, 102, 107, 108, 110, 111, 114 jurisdiction in rem, 108 jurisdictional plurality, 24 lack of jurisdiction, 91–6 law of place, 109–10 lunacy alienation of real estate, 464–5 benefit of individual inquisition, 461, 465 Chancery lunatics, 456–63, 469–71 De Prerogativa Regis (1324), 461, 464–7 exercise of jurisdiction, 464 inherent jurisdiction, 459, 461, 463–4, 466–72 letters patent, 460 limits, 461 parens patriae jurisdiction, 459–61 procedural issues, 470 royal prerogative, 453, 459, 461, 464 statutory construction, 465–6 statutory jurisdiction, 453, 462–3, 465–6 parens patriae jurisdiction charities, 529 lunacy, 459–61 private status of proprietors, 96 probate jurisdiction, 162–3 restraining injunctions, 108 Jurisdiction over foreign land see also Penn v Lord Baltimore (1750) access to justice, 104

Antigua, 104 discovery, 102 equitable jurisdiction, 102–4 fraud cases, 102 Gibraltar, 104 Jamaica, 103 jurisdiction in personam, 87, 102 lack of jurisdiction, 91–6 Minorca, 104 possession of land, 87, 102, 103 Sark, 102 Scotland, 102 writ ne exeat regno, 103, 104 Laches see also Paragon Finance plc v D B Thakerar & Co (a firm) (1999) absence of laches, 646, 648 defence in equity, 651 degree of delay, 651 equitable doctrine, 651–2, 657 prejudice to defendant third parties, 651 Land transactions see Earl of Oxford’s Case (1615) Law of Property Act 1925 (s 53(1)(b)) see also Rochefoucauld v Bousted (1897) fraud exception, 449, 451 instrument of fraud, 423, 425, 436, 443, 446–8 oral declarations, 444, 449, 452 requirement for writing, 443–4, 447 rule of enforceability, 442 rule of evidence, 446 trusts relating to land, 423 uncertainty as to parties’ legal position, 445 Leading cases characteristics, 246 clarity, 246 influence and origin, 235–6, 267 points of principle, 246, 267 purpose, 245–6 status, 237 Leases acquisition, 500–2, 506, 509 agricultural leases, 293 breaking of existing lease, 11 building leases, 205 covenants binding on lease, 59 effect at law, 52 gifts, 51 lease as security, 53 lease held in trust, 32, 43, 49, 52 life leases, 295 limitation, 5 power to grant lease, 272 pre-existing leases, 10 preservation of rights, 12

688 Index purchase of lease, 18 quiet possession, 18 rack rental leases, 506 relief against leases, 54 renewal, 271–3 residential leases, 475 sub-leases, 8, 14 tenant-right holders, 273–4, 276–84, 290–2, 300–4 see also Tenant-Right taking possession, 52–3 trustees assignment by trustees, 121 grant of lease, 120–1 value of lease, 514 void leases, 9, 23 Limitation rules see also Paragon Finance plc v D B Thakerar & Co (a firm) (1999) action barred by limitation, 644 action of ejectment, 650 breach of duty, 669 breach of trust, 645–7, 649 constructive trusts, 643, 647–9, 657–8, 661, 666–7 correspondence principle, 652–4 equitable proceedings, 650–5, 657 equity’s concurrent jurisdiction, 649, 654–5 express trusts, 646, 649, 655, 659 fiduciary duties, 669–70 fraud, 645, 647, 660–1 fraudulent breach of trust, 644–7, 661–2 Hovenden principle, 655–7 laches, 650–1 new cause of action, 643 obedience theory, 654 personal actions, 650 purchase of property, 645 statutes of limitation, 650, 652–5, 657, 659 Lord Keeper of Great Seal role, 125–6 Lords Commissioners role, 126 Lunacy see also Re Earl of Sefton (1898) committee of the estate, 458–9, 465 judicial authority, 470, 472 jurisdiction, 453, 456, 458 Lunacy Commission, 469–70 lunatic/idiot distinction, 461–2 Master in Lunacy, 455, 457–9, 461 pauper lunatics, 468 proof by inquisition, 456–8, 460 property vested in the crown, 462 protection of property, 456, 458–9, 461, 463–4, 469–70 reforms, 468

royal prerogative, 453, 459, 461, 464 social problems, 468 State intervention, 468–70 statutory intervention, 469 statutory jurisdiction, 453, 462–3, 465–6 writ of inquisition, 460 Lunatics see also Re Earl of Sefton (1898) benefit of individual, 455–6, 461, 465 care and residence, 458 Chancery lunatics, 456–63, 469, 471 definition, 453 devise of property, 465 estates, 453 gifts, 465 maintenance and support, 457, 459, 461 protection of property, 456, 458–9, 460–5 unlawful detention, 460 vulnerability, 459 Married woman’s property see also Family property; National Provincial Bank Ltd v Ainsworth (1965) alteration of rights, 616 choses in action, 575 common law, 575 economic vulnerability, 577–80 equality of treatment, 577 equitable intervention, 575–7 equity to a settlement, 576 existing property rights, 577 freehold property, 575 homelessness, 578 matrimonial home, 577 moveable property, 575 powers of alienation, 576 restraint upon anticipation, 575 separate use, 575 Master of the Rolls appeals, 124 responsibility, 124 Matrimonial property see also Gissing v Gissing (1971); Married woman’s property; Pettit v Pettit (1970) agreement between spouses, 620–3, 625 beneficial interest in property, 614–6, 621, 629–31, 637–8, 640, 642 common intention actual common intention, 618–9, 623, 626 agreement of parties, 620–3, 625, 635 bargain between the parties, 612 beneficial interest in property, 614–6, 621, 629–31, 637–8, 640, 642 common intention analysis, 611, 614, 642

Index 689 common intention trust, 639, 641 communication of intention, 634 conduct of the parties, 627–9, 637, 639 contractual analogy, 623–4 deemed intention, 627 detrimental reliance, 639–40 fairness, 625–7, 637–8, 642 fictional common intention, 633, 638, 642 genuine common intention, 633–5 imputation, 612–6, 617–28, 635–8, 641 inference, 612–3, 618, 623, 627–30, 632, 634, 636, 639 judicial discretion, 616, 619–20 legal interest in property, 614 likely intentions, 624 no express intention, 627 non-existent intentions, 612, 627, 636, 641 presumption of resulting trust, 628–33 primary or threshold question, 614, 636 prior common intention, 629–30 purchase money resulting trust, 630–1, 635 quantification/imputation relationship, 633 reasonableness, 625–8, 635–8, 642 relevant intention, 613 spouses acting in concert, 623 contribution to purchase price, 631–2 disputes, 611–2, 615–6 entitlement of parties, 636 family assets doctrine, 616, 624 improvements to matrimonial home, 615 judicial discretion, 616, 619 legal interest in property, 614 marriage breakdown, 624–5 ownership of family home, 611 payment for furnishings, 615 proprietary estoppel, 617, 639–40 presumption of resulting trust, 622–3 proprietary estoppel, 632, 639–40 purchase in husband’s name, 615 purchase money resulting trust, 617–9 quantification issue agreement of parties, 635 conduct of the parties, 637, 639 fairness, 638 genuine common intention, 634–5 no common intention, 637, 639–40 probable common understanding, 635 quantification/imputation relationship, 633 spouse’s contribution/share, 633–7, 639 separate property entitlements, 624–6 spouse’s contribution, 633–6 statutory discretion, 611

Maxims of equity equality is equity, 636 equity regards as done that ought to be done, 133, 135, 434, 437, 441 statute not to be used as instrument of fraud, 423 Misrepresentation see also Nocton v Lord Ashburton (1914) breach of fiduciary duty, 484, 488 see also Breach of fiduciary duty carelessness, 479, 482, 485 common law deceit, 482 common law fraud, 497 common law liability, 478–9 compensation for loss, 478, 495 concurrent jurisdiction, 480 constructive fraud, 481 damages, 482, 493, 497 duty of care, 493–4 duty to make reasonable statements, 497 equitable fraud, 497 equitable jurisdiction, 493 fair representation of facts, 482 fiduciary relationships, 488, 496 fraud requirement, 478–81 honest belief in truth of statement, 482 innocent misrepresentation, 496–7 innocent mistake, 481 knowledge of falsity, 478 liability in equity, 479–81 negligent misrepresentation, 479, 486, 488, 495–7 proof requirements, 478 statutory fraud, 497 untrue statement without reasonable grounds, 482 written misrepresentations, 479 Misstatement see also Nocton v Lord Ashburton (1914) company prospectus, 481–3 compensation for loss, 494 duty of care, 496 fiduciary relationships, 496 knowledge of falsity, 478 negligent misstatement, 477, 479, 493–4, 496 non-fraudulent misstatements, 495 recklessness, 478 without reasonable grounds, 478 Misuse of private information see also Privacy protection, 265 undisclosed private information, 266, 267 Money lending 19th century concerns, 338–9, 345 Chancery jurisdiction, 339 disclosure of borrowings, 338 fraud, 332

690 Index legislation, 355 soliciting infants, 339 usurious contracts, 339 void transactions, 339 wealthy targets, 338 Morice v Bishop of Durham (1805) see also Ecclesiastical powers background accusations of bad conscience, 178 Anne Cracherode, 172, 176–7, 179 bequest of residue, 179–80, 189 Chancery jurisdiction, 178 claims against the estate, 180 Clayton Cracherode’s estate, 171–2, 176 Shute Barrington, 167–79 William Wilberforce, 167–70, 173–5, 180 beneficiary principle, 159–61, 201 charitable bequests see Charitable bequests express trusts beneficiaries sufficiently ascertained, 158 objects defined, 158–9 three certainties, 159 historical context abolition of slave trade, 167, 169–70, 173 free/compulsory education, 169 Poor Laws, 164, 168–9 population growth, 167 war with France, 167 introduction, 158 legal arguments absence of trust, 193 accountability as trustee, 194 accountability of fiduciaries, 187, 191 advancement of learning, 192–3 advancement of religion, 192–3 charitable intent, 185, 188 charities as public benefit, 190 cy-près doctrine, 183–6, 195–7 distribution of residue, 190 execution of trust, 195–6 existence of trust, 195–6 exploitation of mistake, 178, 181 failed charitable gift, 181–4 fidei commissum, 191 fraud, 178 general public utility, 192 gift of personalty, 190 heads of charity, 192–3, 199 instructions for distribution, 194–6 intention to benefit, 193, 197 legally valid charities, 189 liberality and benevolence, 191–3, 195–7, 199

mandatory charitable trust, 190–1 misrepresentation, 178, 181 non-charitable trusts/definite object, 188 objects considered ejusdem generis, 197 precatory obligations, 190–1 proportionate division, 194 public benefit, 192, 196, 199 relief of the indigent, 192–3 resulting trust, 158, 188, 190, 194, 196 retaining residue of deceased’s estate, 187 trust for charitable purposes, 181–2, 187 trust intention, 193–4 uncertain objects of beneficence, 181–3, 187, 190, 192–5, 197, 198 uncontrolled power of disposition, 187, 189 undue influence, 176, 178, 181 significance, 198–200 testamentary issues precatory words, 159 Roman testamentary law, 191–2 selection of beneficiaries, 159 testamentary powers, 161 testamentary property in mortmain, 160–1 testatrix’s intentions, 197 trusts anomalous purpose trusts, 200 bequest in trust, 158 charitable purposes, 160, 181–2, 187, 198–9 discretionary trusts, 200 enforcement, 159 execution of trust, 195–6 existence of trust, 196 express trusts, 158–9 gifts on trust, 198 indeterminate objects, 158–9 mandatory trusts, 190–1, 198 mixed contract/trust solutions, 200 non-charitable trusts, 188, 200 resulting trust, 158, 188, 190, 194, 196 trustees’ discretionary powers, 159 trusts of imperfect obligation, 200 void for uncertainty, 158 Mortgage fraud see also Paragon Finance plc v D B Thakerar & Co (a firm) (1999) action barred by limitation, 644 allegation of fraud, 644 breach of contract, 644 breach of equitable duty of care, 644 breach of fiduciary duty, 644 breach of tortious duty of care, 644 conspiracy to defraud, 644

Index 691 fraudulent breach of trust, 644 pleadings, 644–5 purchase of flats, 643 sale at inflated prices, 643–4 solicitors’ negligence, 644 Mortmain accumulations, 163, 165 gifts to corporations, 184 restraints, 160–1, 165 statutes, 163, 165, 198 testamentary property, 160–1, 171 National Anti-Vivisection Society charitable bequests, 534 see also Charitable bequests charitable status, 534–8 foundation, 530–1 legislative campaign, 534, 536–7, 539 objects, 534–5, 537, 539 preventing cruelty to animals, 534–5, 537, 539 prohibition on political purposes, 536–9 public benefit, 534, 536–8 suppression of vivisection, 534, 538 tax exemption, 535, 550 National Anti-Vivisection Society v Inland Revenue Commissioners (1948) see also Anti-vivisection movement; National Anti-Vivisection Society charitable purposes abolition of vivisection, 534, 538–9 ambiguous objects, 547 animal welfare, 545 charitable status, 547–8, 550 judicial decisions, 543–4 justification, 542–3 legal changes, 542–6 likely benefit, 540, 544 likely detriment, 540, 544–5 negative consequences, 546–7 prohibition on political purposes, 529, 536–54 preventing cruelty to animals, 534–5, 537, 539 public benefit, 529, 534, 536–9, 540–5, 551, 553 purpose contrary to public policy, 541–2, 549 validity of trusts, 548 introduction, 529–30 tax relief, 529, 550–1 National Provincial Bank Ltd v Ainsworth (1965) broader context, 572 consequences creation of beneficial rights, 574–5 equitable intervention, 575–7 legislative reform, 573, 575–7

property rights for women, 575 protection for both spouses, 574 registration as notice to third parties, 573 registration of personal right of occupation, 573 sanctity of property rights, 573, 577, 579 deserted wife’s equity binding effect, 559, 561, 563, 569 clog or fetter on the property, 561 commercial transactions, 568–9 constructive desertion, 561 contractual licence theory, 561, 564 costs, 568 definable rights, 570 discoverability, 567–70 economic vulnerability, 577–80 equality of treatment, 577 equitable doctrine, 557, 560, 571–2 equitable right, 559–61 equities amounting to interest in land, 565–6 homelessness, 578 identifiable property, 571 injunctive relief, 562–3 innocent purchasers 567 judicial caution, 572 judicial discretion, 562–3 judicial disfavour, 561 licence coupled with an equity, 564 marriage breakdown, 558 marriage status, 562, 565, 570 mere equities, 565–6 occupation of matrimonial home, 558–60 overriding interest, 559–60, 562 ownership of matrimonial home, 558 personal right, 559–63, 565, 567, 574 property interests, 564, 567–8, 570, 573, 575 public interest concerns, 568, 580 purchaser with notice 559, 561, 567 purchaser without notice, 562 registered title, 562, 569 rejection of rights, 558, 572 third parties, 561, 563, 567 uncertainty, 568 equitable property rights attaching to an interest, 566 constructive trusts, 574, 579 defined/undefined equities, 566 degree of permanence and stability, 566, 570–1 development, 557, 571–2, 577 different types, 566 equities amounting to interest in land, 565–6

692 Index established/frontier rules, 566 estoppel, 558, 577 latent/patent rights, 566 mere equities, 565–6 rules of trusts, 558, 577 security and sanctity, 573, 577, 579 third parties, 561, 563, 566 welfare-based approach, 558, 577, 580 estoppel equitable property rights, 558, 577 proprietary estoppel, 574 family property action for possession, 559 alteration of rights, 616 bank’s power of sale, 559 beneficial ownership, 574 civil partnerships, 574 commercial lending, 568, 580 constructive trusts, 574, 579 economic vulnerability, 577–80 equitable intervention, 557, 575 equities amounting to interest in land, 565–6 homelessness, 578 innocent purchasers 567 marriage breakdown, 558 married woman’s property, 575 mere equities, 565–6 mortgages, 558, 570, 574 occupation of matrimonial home, 558 overriding interest, 559–60, 562 ownership of matrimonial home, 558 possession of property, 560–2, 567 proprietary estoppel, 574 protection for both spouses, 574 public interest concerns, 568, 580 purchaser with notice 559, 561 purchaser without notice, 562 registration of personal right of occupation, 573 requisite notice of interest, 561, 567 resulting trusts, 574 secure proprietary interest, 574 security for loans, 558 title subject to equities and liabilities, 560 transaction costs, 568 trustees in bankruptcy, 560–1 introduction, 557–8 married woman’s property alteration of rights, 616 choses in action, 575 common law, 575 economic vulnerability, 577–80 equality of treatment, 577 equitable intervention, 575–7 equity to a settlement, 576 existing property rights, 577

freehold property, 575 homelessness, 578 matrimonial home, 577 moveable property, 575 powers of alienation, 576 restraint upon anticipation, 575 separate use, 575 significance 557, 580 Nocton v Lord Ashburton (1914) see also Derry v Peek (1889) background deed of release, 475 default on mortgage debt, 475 property development, 475 protagonists, 473 purchase of property, 473–5, 478 security for loan, 475 breach of fiduciary duty, 484, 486, 488–97 see also Breach of fiduciary duty claim absence of independent legal advice, 476 breach of fiduciary duty, 477 diminution in value of security, 477 lack of good faith, 476 loss of rents, 477 misrepresentation, 477 negligence, 477 plea of fraud, 476–7, 485–6 fiduciaries common honesty, 493 custodial fiduciaries, 489–92 duties, 488, 493 duty of care, 492–4 negligence, 484, 492–3 persons regarded as fiduciaries, 488–9 property management, 488 relationships of influence, 489 legal development breach of fiduciary duty, 484, 486 duty to take care, 486–7 equitable fiduciary obligation, 485–6 equitable jurisdiction, 485 fraud requirement, 487 matter equivalent to contract, 487 negligence/fiduciary relationships, 484–5 negligent liability, 487 plea of fraud, 485–6 proof of deceit, 488 rescission, 484 solicitor/client relationships, 484 misrepresentation, 477–84, 486, 488, 493–7 see also Misrepresentation misstatement, 478–9, 481–3, 493–4 see also Misstatement subsequent history, 498

Index 693 North-West Transportation Co Ltd v Beatty (1887) assessment conflict of self-interest, 409 director voting as shareholder, 393, 409, 413 fairness of transaction, 410 fiduciary duty, 409–10 fraud on the minority, 410 majority control, 409–10 majority decisions, 409, 418 self-dealing transactions, 410–11 shareholder authority, 411–4 shareholder duties, 414–5 shareholder votes, 414–5 background Beatty family, 393–4, 419–20 logging interests, 394 shipping interests, 395–9, 402–4, 418 Canadian corporate law see Canadian corporate law company directors breach of duty, 417 contract with own corporation, 393 director voting as shareholder, 416 directors’ contracts, 415–6 disclosure of self-interest, 415 disqualification from voting, 415 voting as shareholders, 393, 409, 413 Great Lakes Shipping, 395–8, 402–3 introduction, 393 legal proceedings coercion of minority, 393, 407, 409 costs, 408–9 fraud, 407 High Court of Ontario, 407 Judicial Committee of the Privy Council, 408–9, 411 Ontario Court of Appeal, 408 setting sale aside, 407, 408 Supreme Court of Canada, 408 unfair dealing, 407 vendor’s fiduciary position, 407 North-West Transportation Company directors, 405–6 incorporation, 400–1 shareholding, 401, 405–6 subsequent history, 418 shares director voting as shareholder, 393, 409, 413 fraud on the minority, 410 majority rule, 409, 418, 411 oppression of minority, 411 shareholder authority, 411–4 shareholder duties, 414–5 shareholder votes, 414–5 structure, 401, 405–6

The United Empire completion, 407 purchase, 404, 406–7, 410 sale set aside, 407 subsequent history, 418–9 Notice equitable doctrine of notice, 218–20, 223 Paragon Finance plc v D B Thakerar & Co (a firm) (1999) constructive trusts accountability, 647–8, 664–5 actual fraud, 660 agreement of parties, 662 beneficiary with proprietary rights, 662, 665 breach of confidence, 671 breach of trust, 664–6 claims against constructive trustees, 643 common intention constructive trusts, 666 deemed trusteeship, 665 detriment suffered, 667 displacing express trust, 646 equity’s concurrent jurisdiction, 649, 654–5, 659–60 equity’s exclusive jurisdiction, 660 existence of trust, 662–6 fiduciary duty, 663, 668–70, 672 fraud, 660–2, 672 fraudulent breach of trust, 644–7, 661–2 Hovenden principle, 655–7 imposition, 643, 662–3, 666, 668, 671–2 improper transfer of funds, 665 intention of parties, 666–7, 671–2 knowing receipt, 664–6 liability of trustees, 645, 664–5, 667, 670 limitation rules, 643, 647–8, 657–8, 661, 666–7 misappropriated corporate assets, 663 misdirected trust property, 664–6, 669 nature, 643 personal rights, 665 persons assuming duties of trustee (Category 2), 646–50, 658–62, 668, 670–2 proprietary remedy, 664–6, 671 “real” constructive trusts, 646, 662, 664–5, 670–2 recipient of misapplied monies, 659 tort victims, 667–8 transfer of beneficial ownership, 666 trustee accountable without limit of time (Category 1), 646–7, 649–50, 658, 661–3, 666–70

694 Index trustees de son tort, 646, 663, 666 two-part classification (Millett LJ), 643, 646, 649, 655, 658, 666, 671–2 unjust enrichment, 672 express trusts absence of laches or acquiescence, 646, 648 breach of express trust, 645–6, 655, 661 claims by beneficiary, 655–6 creation of express trust, 645 limitation rules, 646, 648 performance claims, 656–7 performance of trust, 655–6 possession cestui que trust, 655 reparation claims, 656 trustee accountable without limit of time, 646, 648 facts, 643–4 fraud action for money had and received, 661–2 fraudulent breach of trust, 645–7, 661–2 limitation rules, 645, 647, 660–1 misuse of monies for own purpose, 660–1 ownership of shares, 660 tort of conversion, 661 trustee de son tort, 661–2 introduction, 643–8 laches absence of laches, 646, 648 defence in equity, 651 degree of delay, 651 equitable doctrine, 651–2, 657 prejudice to defendant third parties, 651 limitation rules action barred by limitation, 644 action of ejectment, 650 breach of duty, 669 breach of trust, 645–7, 649 constructive trusts, 643, 647–9, 657–8, 661, 666–7 correspondence principle, 652–4 equitable proceedings, 650–5, 657 equity’s concurrent jurisdiction, 649, 654–5 express trusts, 646, 649, 655, 659 fiduciary duties, 669–70 fraud, 645, 647, 660–1 fraudulent breach of trust, 644–7, 661–2 Hovenden principle, 655–7 laches, 650–1 new cause of action, 643 obedience theory, 654

personal actions, 650 purchase of property, 645 statutes of limitation, 650, 652–5, 657, 659 mortgage fraud action barred by limitation, 644 allegation of fraud, 644 breach of contract, 644 breach of equitable duty of care, 644 breach of fiduciary duty, 644 breach of tortious duty of care, 644 conspiracy to defraud, 644 fraudulent breach of trust, 644 pleadings, 644–5 purchase of flats, 643 sale at inflated prices, 643–4 solicitors’ negligence, 644 overview, 643 purchase of property breach of express trust, 645–6 creation of express trust, 645 limitation period, 645 unauthorised transactions, 645 Parens patriae jurisdiction charities, 529 see also Charities lunacy, 459–61 see also Lunacy Penn v Lord Baltimore (1750) see also Pennsylvania background Delaware Peninsula, 90–1 Delaware River, 89 Duke of York’s territories, 89–90 early Dutch settlements, 90 grant of vacant land, 91 hactenus terra inculta, 89–91 Maryland boundary, 89, 91, 97, 98 William Penn’s petition, 89 Chancery litigation agreement merely voluntary, 92, 94 agreement uncertain, 93, 95 agreement unenforceable, 92–3 alienation, 92–3 consent of parties required, 92–4 contempt and sequestration, 96 lack of jurisdiction, 91–6 lack of title to sue, 91–2 mistake of original rights, 93–5 performance of covenant, 93, 95 proper parties, 91–2 specific performance, 91, 93, 107 tenure in capite, 94 tenure in socage, 94 time for performance lapsed, 92 colonial context, 88–9, 94, 107–8, 114 see also Colonial law criticisms, 88–9

Index 695 delineation of territory, 92–4, 96 disregard for foreign law, 110–1, 113–4 introduction, 87–8 jurisdiction comity of nations, 88–9, 111 foreign land, 87–8 jurisdiction in personam, 87, 92, 93, 96–7, 107, 108, 110, 111, 114 jurisdiction in rem, 108 lack of jurisdiction, 91–6 law of place, 109–10 prevention of fraud, 110 private status of proprietors, 96 restraining injunctions, 108 Mason-Dixon Line, 98 significance, 88, 96, 114 specific performance bill for specific performance, 91 defaulting vendor, 87 jurisdiction, 91, 93, 107 transfer of title to land, 87, 91 third parties creditor’s interests, 111–2 equitable rights, 112 fraudulent transactions, 112–4 protection, 112–3 purchase of land without notice, 112, 114 writ of error, 92 Pennsylvania Charter of Privileges, 106 common law courts, 105 confiscation of property, 106 Court of Equity, 105–7 equitable jurisdiction, 104–7 Governor’s powers, 105–6 Pettit v Pettit (1970) see also Gissing v Gissing (1971) common intention actual common intention, 618, 623, 626 agreement between spouses, 620–3, 625 beneficial interest in property, 614–6, 621, 637–8, 640, 642 conduct of parties, 637 contractual analogy, 623–4 detrimental reliance, 639–40 fairness and reasonableness, 625–7, 637–8, 642 imputation, 612–6, 618–26, 636–8, 641 inference, 612–3, 618, 623 judicial discretion, 616, 619–20 legal interest in property, 614 likely intentions, 624 non-existent, 612 spouses acting in concert, 623 introduction, 611–5 matrimonial property

agreement between spouses, 620–3, 625 beneficial interest in property, 614–6, 621, 637–8, 640, 642 common intention 612 disputes, 611, 615–6 family assets doctrine, 616, 624 improvements to matrimonial home, 615 judicial discretion, 616, 619 legal interest in property, 614 marriage breakdown, 624–5 ownership of family home, 611 proprietary estoppel, 617, 639–40 presumption of resulting trust, 622–3 purchase money resulting trust, 617–9 separate property entitlements, 624–6 statutory discretion, 611 significance, 612, 617 subsequent case law, 636–41 unmarried cohabitants, 611–2 Presumed trusts classification of trusts, 34, 36, 52–3, 82 Presumption of advancement advanced/unadvanced distinction, 77–8, 82 articulation of principle, 63 declaration of trust, 83 default position, 79 establishment, 71 evidence of intention, 83 implied reservation, 81 lack of intention, 80–1, 83 presumption of intention, 73, 78, 82, 83 rebuttal, 80–1, 83 retained benefit, 81 Prince Albert v Strange (1849) breach of confidence breach of trust, confidence or contract, 256 commercial confidences, 260–2 confidential information, 260 contract for secrecy, 258 contractual relationship, 257–9, 261 equitable jurisdiction, 258–9, 262 fraud in third party, 256 government information, 260–1 implied obligations, 255, 258 injunctive relief, 254–5, 257, 261 judicial treatment, 254–5 obligation of non-disclosure, 255–7, 259 personal information, 261 privacy, 264–6 protection, 236, 241 wrongful disclosure, 254, 260 breach of contract, 241, 256 breach of trust, 241

696 Index copyright chattel property, 249, 250, 252 common law copyright, 240, 245, 249, 251–3, 257–8, 261 copyright-before-publication, 251–2 foreign authors, 249 incorporeal right, 249–50, 252 product of intellectual labour, 252 prohibition on copying, 240–1 property right over manuscript, 250 publication of etchings, 236–7 published works, 239 rights post-publication, 250 statutory protection, 249, 253, 261 unauthorised publication, 239–40, 263 unpublished works, 239–40, 245, 247–9, 250–3, 261 work of visual art, 236, 248 costs, 242 criticisms of published works, 249 injunctions injunctive relief, 236, 238–9, 241, 254–5, 257, 261 perpetual injunction, 242 introduction, 235–7 privacy breach of confidence, 264–6 breach of privacy, 264 celebrity of participants, 243 common law, 262 human rights, 264–6 informational privacy, 236 misuse of private information, 265 press attention, 244 protection, 236, 243, 262–5 right to privacy, 263 unauthorised publication, 263 undisclosed private information, 266–7 unwanted disclosure, 247 public interest, 242–4, 247 significance, 246–9 successive re-presentation, 236–7 Privacy breach of confidence, 264–6 see also Breach of confidence breach of privacy, 264 celebrity of participants, 243 common law, 262 human rights, 264–6 informational privacy, 236 misuse of private information, 265 press attention, 244 protection, 236, 243, 262–5 right to privacy, 263 unauthorised publication, 263 undisclosed private information, 266–7 unwanted disclosure, 247

Private international law comity of nations, 88–9, 111 title to foreign land, 88 Property rights common law rights, 19, 24–7 equitable jurisdiction, 26 estoppel, 27 protection, 25 Proprietary claims see also Re Hallett’s Estate (1879–80) analytical framework, 374, 376 appropriate remedy, 374 claimant’s initial interest in property, 374–81 defences, 374 equitable charge, 375 equitable interest, 3745–5 equitable remedy, 375, 388 express trust, 374–5 fiduciary relationships, 376–80 nature of claim, 374 proportionate share or charge, 388–90 subsisting equitable interests, 375–6 Ramsden v Dyson (1866) equity-related issues affective and authorial qualities, 287 doctrinal strategy, 286–7 equitable intervention, 283–4, 286, 301–2 equity to emblements, 286 honour, justice, fairness, 286 injunctive relief, 284 lien for expenditure, 285 money expended on improvements, 284–5, 288–9 oral agreement acted upon by tenants, 283 part performance, 286 performance of promise, 285 profit from fraud, 284 rhetorical strategy, 286–7 right to compensation, 284–5, 289–90 socio-economic conditions, 282 specific performance, 286 tenant-right holders, 280–3 Huddersfield property issues Charter of Incorporation, 303 economic growth, 276 freehold land, 270 increased population, 272–3 increased rents, 273–4 industrialisation, 270 leasing powers, 272–3 mutual workers’ associations, 272 Ramsden Estate, 270–2, 276 renewal of leases, 271–2, 289–90 rent-roll, 271–2, 274, 277

Index 697 sale of land to Huddersfield Corporation, 303–4 tenant-right, 271–9, 283 tenants-at-will, 271–2, 274, 283, 291 polyhedron of intelligibility, 269, 270 proprietary estoppel, 269, 301 security issues 99 year leases, 275–83, 302 action of ejectment, 274–5 auction of tenant-right property, 275, 276 confiscation without compensation, 277 fair and equitable rents, 278 improving security, 273 leasing system, 273–6, 278–80, 302 Meetings at Philosophical Hall, 276–7, 279, 281, 283 moral claims, 276 Ramsden Estate Act (1867), 302–3 Ramsden Estate (Leasing Act) (1859), 279–80, 283, 302 security of tenure, 273–4, 276 tenants’ deputations, 277–8, 280, 282–3 significance, 269, 301 Tenant-Right Owners Defence Association, 281–4, 286–8, 298, 301–3 tenant-right suit see also Tenant-right absolute right to lease, 290 appeal, 290 auction of property, 275–6 Chancery jurisdiction, 288–90 equitable issues, 280–3 expenditure on improvements, 289 grant of renewable lease, 289–90 Huddersfield property, 271–9, 283 lien on land, 289 mortgage of tenant right, 289 multi-layered claim, 289 perpetual possession of land, 289 protection of property, 288 reliance on honour, 290–1 right to compensation, 289–90 tenants-at-will, 291 Re Earl of Sefton (1898) Earl of Sefton debts, 454 family background, 453–4 mental instability, 454 estate alienation of real estate, 464–5 base fee, 454, 463 destruction of interest, 464 determination of life estate, 454 devise of estate, 454, 463–5 disposition of portion of estate, 463, 465 execution of settlement, 454

legacies, 454–5 order for resettlement, 455, 466 remainders, 454 resettlement, 455, 464, 466 tenant for life, 454 tenant in tail, 454 introduction, 453 jurisdiction alienation of real estate, 464–5 benefit of individual inquisition, 461, 465 Chancery lunatics, 456–63, 469–71 De Prerogativa Regis (1324), 461, 464–7 exercise of jurisdiction, 464 inherent jurisdiction, 459, 461, 463–4, 466–72 letters patent, 460 limits, 461 parens patriae jurisdiction, 459–61 procedural issues, 470 royal prerogative, 453, 459, 461, 464 statutory construction, 465–6 statutory jurisdiction, 453, 462–3, 465–6 lunacy committee of the estate, 458–9, 465 judicial authority, 470, 472 jurisdiction, 453, 456, 458 Lunacy Commission, 469–70 lunatic/idiot distinction, 461–2 Master in Lunacy, 455, 457–9, 461 pauper lunatics, 468 proof by inquisition, 456–8, 460 property vested in the crown, 462 protection of property, 456, 458–9, 461, 463–4, 469–70 reforms, 468 royal prerogative, 453, 459, 461, 464 social problems, 468 State intervention, 468–70 statutory intervention, 469 statutory jurisdiction, 453, 462–3, 465–6 writ of inquisition, 460 lunatics benefit of individual, 455–6, 461, 465 care and residence, 458 Chancery lunatics, 456–63, 469, 471 definition, 453 devise of property, 465 estates, 453 gifts, 465 maintenance and support, 457, 459, 461 protection of property, 456, 458–9, 460–5 unlawful detention, 460 vulnerability, 459 significance, 453, 468–72

698 Index Re Hallett’s Estate (1879–80) background deposit of bonds, 364, 367 interest payments, 363 investment of trust funds, 363 marriage settlement, 363–4, 366 misappropriation of funds, 358–9, 361 priority over creditors, 366, 368 proceeds of sale, 365–6 bonds held as bailee, 367–9, 374, 378–9 fraudulent solicitors, 358–62 see also Fraudulent solicitors introduction, 357–8 judges, 362–3 payments first credited to account (Rule in Clayton’s Case), 358 precedent and principle, 391–2 proportionate share or charge asset claimed as property, 388 charge over assets, 388 misappropriated funds, 388 mixed funds, 388–90 proprietary claims analytical framework, 374, 376 appropriate remedy, 374 claimant’s initial interest in property, 374–81 defences, 374 equitable charge, 375 equitable interest, 3745–5 equitable remedy, 375, 388 express trust, 374–5 fiduciary relationships, 376–80, 392 nature of claim, 374 proportionate share or charge, 388–90 subsisting equitable interests, 375–6 significance, 358, 392 subsequent developments, 374 tracing, 357–8, 366–71, 385–7, 391–2 see also Tracing underlying principles, 358 Regal (Hastings) Ltd v Gulliver (1942) absence of cited authority, 503 background account for profit, 502 acquisition of leases, 501–2, 506 allocation of shares, 501, 506–8, 514–6 sale of shares, 502, 506, 519 subsidiary company, 501 breach of fiduciary duty, 505 case law system, 518 see also Case law system common law action, 503 directors abuse of position, 510, 512, 519 accountable for profit made, 512 authorisation to make profit, 526–7

benefits from third parties, 520, 525–6, 528 best interests of company, 508 best interests of shareholders, 508 conflict of duty, 499, 511, 513–7, 519–23, 525–8 conflict of interest, 499, 511, 513–7, 519–23, 525–8 discharge of duty, 509–11, 514 fiduciary duties, 516, 668 informational advantages, 525 investment decisions, 505, 507, 511, 516 liability threshold, 504 management powers, 526 profit attributable to position, 505–7, 510 profit corruptly made, 507, 510, 511, 668 standard of skill and care, 504, 507–8 statutory duties, 524 fiduciaries conflict of interest, 499, 521–3 disclosure of material information, 524 unauthorised profit, 499, 515, 519–25, 528 introduction, 499–500 negligence reasoning, 508 omissions from argument conflicts of interest, 513–7 discretionary relief, 517 equitable principles, 512–3 influence on final decisions, 513 significance, 500, 517 statement of claim damages for misfeasance, 503, 510 damages for negligence, 503–4, 507 money had and received to plaintiff’s use, 499, 503–4, 507 strict no-profit rule, 519–21, 528 unauthorised profit, 499, 515, 519–25, 528 unreported judgments, 507–12, 518 Religious associations see Bishop of Natal v Gladstone (1866); Voluntary religious associations Rescission counter-restitution, 608 equitable rescission, 608 quantum of restitution, 608 voidable contracts, 608 Restrictive covenants see also Tulk v Moxhay (1848) anomalous nature, 229–30 benefit from duty imposed, 229 common law influence, 231 duty on third party, 229, 231 equitable property rights, 227–9

Index 699 limitation to land, 229–30 policy concerns, 231 restrictions on use, 203, 204–5, 207–10 right in relation to party initially bound, 230 squatters, 224, 231 Resulting trusts classification of trusts, 36–7, 58–60, 82 default position, 81 existing provision, 82 intention not sufficiently specific, 78 presumption, 71, 73, 75, 78, 80 rebuttal, 78, 80 theory, 63 Rochefoucauld v Bousted (1897) agency contract for sale with vendor, 434–5 conveyance of land, 434–6 definition, 433 initial agreement, 433 misuse of fiduciary position, 433 parole evidence, 434, 436 property held for principal, 433 property purchased from third party vendor, 434 unauthorised gains, 434 analysis absolute beneficial owner, 428 absolute equitable interest, 428 analytical inconsistency, 429–30, 432–3 constructive trust, 427 contract with foreclosure procedure, 428 declaration of trust, 426, 428 equity of redemption, 425–9, 438–40 factual analysis, 427–8 inconsistency with facts, 430–1 inconsistency with judgment, 432 intention to create trust, 427–8 theoretical analysis, 428–9 constructive trust agreement reached before obtaining property, 439 analysis of case, 427 cloaking nature of transaction, 451–2 creation, 437, 439, 442, 449 detriment suffered, 440 enforcement, 440, 442, 447, 451 expectant nature of acquisition, 437 fraud relationship, 424 intention to create trust, 439–40, 442, 447, 450–2 mutual wills, 439 Pallant v Morgan doctrine, 439 reliance element, 440, 442, 447, 450–2 requirement for writing, 434–5 secret trusts, 439 valuable consideration, 436–9

declaration of trust analysis of case, 426, 428 intention to create trust, 427–8 oral declaration, 423, 426, 429–30, 432, 436, 441–2 proof of writing, 423, 426, 442 rule of evidence, 426 settlor, 426–8 signature, 423 trust relating to land, 423 disapplication thesis existence of fraud, 444–5 express trust characterisation, 442 fraud actively perpetrated, 449 inconsistent with facts, 443 inconsistent with judgment, 444, 451 proponents, 442–3 rejection, 443–5, 452 requirement for writing, 443–4 uncertainty as to parties’ legal position, 445 express trust conclusion rejected, 424, 426, 433, 451 existence, 426–32 intention to create trust, 427–8, 442 oral express trust, 426–7, 430, 433, 443, 447, 451 validity, 443 fraud causative event, 448–51 cloaking nature of conveyance, 447–8 constructive trust link, 424, 450 definition, 424, 447–8 denial of fraud, 424 denial of trust, 448 determined prior to issue of proof, 444 element of intention, 450–1 element of reliance, 446–7, 450–1 equitable intervention, 449 existence of fraud, 441, 443–4 fraud exception, 424–6 land conveyed on trust, 424–5 later discovery of trust, 449 oral trusts, 429 proof of fraud, 424, 446 reliance on legal (statutory) rights, 446–7 reneging on undertaking, 449, 450, 452 requirement for writing, 442–3 self-declaration clauses, 446 statute as instrument of fraud, 423, 425, 436, 443, 446–8 introduction, 423 land conveyed on trust, 424–5, 427 land subject to mortgage, 424–5, 427 Law of Property Act 1925 (s 53(1)(b)) fraud exception, 449, 451 instrument of fraud, 423, 425, 436, 443, 446–8

700 Index oral declarations, 444, 449, 452 requirement for writing, 443–4, 447 rule of enforceability, 442 rule of evidence, 446 trusts relating to land, 423 uncertainty as to parties’ legal position, 445 Statute of Frauds conveyance of land, 435, 439, 443 oral express trusts, 443, 447 proof of fraud, 424 rule of proof, 444, 448 trust of future property constructive trust created, 437 contract to assign, 436 declaration of trust, 436, 439–41 disposition of future property, 436, 451 intention to create trust, 439 purported assignment, 436 reliance element, 441 valuable consideration, 436–9, 441 void for uncertainty, 436 Rule in Clayton’s Case payments first credited to account, 358, 366, 368–9, 384–5, 392 Shareholders best interests, 508 director voting as shareholder, 393, 409, 413 fraud on the minority, 410 majority rule, 409–10, 418, 411 oppression of minority, 411 shareholder authority approval of contracts, 412 charter corporations, 412 deed of settlement companies, 412–4 director’s authority, 412 general meeting, 412 letters patent corporation, 412–3 shareholder duties, 414–5 shareholder votes, 414–5 Slave trade abolition, 167, 169–70, 173 Solicitors see also Fraudulent solicitors solicitor/client relationship, 361, 392, 484, 489 Specific performance see also Bishop of Natal v Gladstone (1866) contract acted upon, 305 equitable relief, 305 limits, 305– 6 mistake of law, 305–6, 326 Squatters property rights, 224, 231

Strict settlements see also Earl of Aylesford v Morris (1873) allowances, 329–30 contingent remainders, 329 equitable jurisdiction, 332–4 heirs catching bargains with heirs, 330–4, 344–5, 347 disobedient heirs, 333 expectant heirs, 331–4, 342, 345, 347, 354 family protection, 332–3, 345 profligate heirs, 332 life estate, 329 maintenance of family members, 329 patriarchal nature, 330 preservation of family wealth, 329–30, 333–4, 346–8, 355 remainders in tail, 329 resettlement, 329, 333 reversionary interests, 333 sale of reversion, 332–4 trustees, 329 Tanistry property rights, 25 Taxation power to levy taxes, 24, 25 Tenant-Right see also Ramsden v Dyson (1866) agrarian links, 291–2, 298 agricultural tenancies, 292–4 see also Agricultural tenancies Chancery protection, 292, 298 changes and developments building leases, 299 industrialisation, 298 land registration, 299 political aspects, 298–9 property law reforms, 299 socio-economic developments, 298 tenant-right system, 299–300 urbanisation, 298 constructive trust, 292 ecclesiastical context, 292 form of landholding, 292 Irish land question, 292, 294–8 see also Irish land law land reform, 290–1 renewal of leases, 292 socio-economic developments, 292, 294 Third parties creditor’s interests, 111–2 equitable rights, 112 fraudulent transactions, 112–4 protection, 112–3 purchase of land without notice, 112, 114

Index 701 Tracing see also Re Hallett’s Estate (1879–80) agency relationships, 376 assets not attributable to claimant’s value, 357 bonds held as bailee, 367–9, 374, 378–9 breach of fiduciary duty, 366, 368–9 see also Breach of fiduciary duty different rules (common law/equity), 385–7, 391–2 dishonest intent, 372 dissipation of fiduciary’s own value, 358, 366, 373 ear-marked monies, 370–1, 392 fiduciary relationships, 376–8, 381–2 mixed funds, 358, 366–9, 373, 381, 386 mixing of value, 358, 366–8 mixture invested, 371 payments first credited to account (Rule in Clayton’s Case), 358, 366, 368–9, 384–5, 392 proceeds of bonds, 366, 369 sale of goods by fiduciary, 358 timing of bank entries, 366 transfer of trust funds, 364–5, 368 trust relationships, 376–8 trustee acting rightfully, 382–4 trustees’ claims, 365–6, 368 withdrawal from mixed bank account, 358, 366, 372 Trust of future property constructive trust created, 437 contract to assign, 436 declaration of trust, 436, 439–41 disposition of future property, 436, 451 intention to create trust, 439 purported assignment, 436 reliance element, 441 valuable consideration, 436–9, 441 void for uncertainty, 436 Trusts see also Trust of future property; Trustees bequest in trust, 158 breach of trust, 241, 549 charitable purposes political trusts, 548–9 religious trusts, 548–9 validity, 548 charitable trusts, 158–9, 190–1, 198–9, 548–50 classification of trusts constructive trusts, 53, 56, 58, 82 express trusts, 34, 52, 56, 58–60, 82 implied trusts, 34, 36, 37, 52–4, 56, 58, 82 presumed trusts, 34, 36, 52–3, 82 resulting trusts, 36–7, 58–60, 82 secret trusts, 34

conscience, 115, 155 see also Conscience constructive trusts, 53, 56, 58, 72, 76, 82 see also Constructive trusts declaration of trust actual declaration, 83 express, 52, 58, 75 inconsistent evidence, 78 intention to create trust, 427–8 oral declaration, 423, 426, 429–30, 432, 436, 441–2 parole declaration, 72 proof of writing, 423, 426, 442 rule of evidence, 426 settlor, 426–8 signature, 423 trust relating to land, 423 denial of trust, 47 discretionary trusts, 158, 200, 228 enforcement, 159 escheat subject to trust, 142 establishment of separate trust, 71 evidence of trust, 73, 76 express trusts, 34, 52, 56, 58–60, 82, 158 see also Express trusts freehold estates, 146 imperfect obligation, 158, 200 implied trusts, 53, 56, 58, 72, 75–6, 82 see also Implied trusts indeterminate objects, 158–9 intention to create, 54, 193–4, 427–8 land conveyed on trust, 424–5, 427 lease held in trust, 41, 43, 45, 52 mandatory charitable trusts, 190–1, 198 non-charitable purpose trusts, 200 paroled evidence, 60 passive trusts, 26 post-Statute of Uses, 136–9, 142 precatory trusts, 158 presumptive trusts, 34, 36, 52–3, 72 private purpose trusts, 158 property held on trust, 68–70 purchase creating trust, 71–2 resulting trusts, 36–7, 58–60, 63, 71, 73, 75, 78, 81–2, 158 see also Resulting trusts trust for payment of debts, 36 trust law development, 115 trusts of absolute necessity, 34, 36, 59 trusts of land, 141 void for uncertainty, 158 Trustees assignment of lease, 121 conscience, 115, 155 conveyance from trustee, 133, 135 conveyance to trustee, 69 discretionary powers, 159 grant of lease, 120–1

702 Index negligence, 493 strict settlements, 329 see also Strict settlements taking legal estate, 123 tracing, 365–6, 368 see also Tracing trustee in bankruptcy, 118 trustee in possession, 149 trustee out of possession, 149–53 Tulk v Moxhay (1848) background area of land involved, 204–5 development opportunities, 208, 210 freehold land, 205 legal background, 210–4 Leicester Estate, 205–6, 209 partition of co-owned land, 206, 209 residential tenants, 205–6, 209 restrictions on use, 204–5, 207–10 sale of land, 206, 208–9 benefit of land, 223 covenants absence of notice, 221, 224 action contrary to covenant, 213 benefit of covenants, 217 burden of covenants, 210–3, 217–9 doctrine of notice, 218–20, 223 duty on covenantor, 213 enforcement, 211–4, 221–2, 224 freehold covenants, 211–2, 214, 217–8, 222 leasehold covenants, 223 personal covenants, 217, 223 positive covenants, 222 protection of covenantee, 218–20, 225, 227 restrictive covenants, 203, 204–5, 207–10, 227–31, 233 decision compulsory purchase, 216 condition of the land, 215–6 development of the law, 214–5, 217–24 public concern, 215–6 public ownership/control, 215–7 sale of land, 216 equitable doctrine of notice, 218–20, 223 equitable intervention, 213–4, 217–22, 232 equitable jurisdiction, 212–3 equitable property rights, 203–4, 220, 222 see also Equitable property rights equity attached to property, 220–1, 223 impact, 203 introduction, 203–4 preventative injunctions, 213–4

promise initial promise, 221, 223, 226–7 knowledge of promise, 226–7 negative promises, 222 rule against perpetuities, 223 significance, 203–4, 224–5 squatters, 224, 231 third parties third party bound, 217, 224, 226, 230–1 third party interference, 219, 226 Unconscionable bargains fraud, 331–3 protection, 331–3, 346, 354–5 Undue influence breach of fiduciary duty, 489 see also Breach of fiduciary duty protection, 333, 354 Unequal contracting parties benefit of contract, 329 equitable relief, 331 extortionate advantage, 329 fair, just and reasonable transaction, 329, 331–2, 346 heirs, 331–2 preventive justice, 331 rebuttal, 329 unconscionable bargains, 331–3 undue influence, 333 Unjust enrichment breach of fiduciary duty, 581, 605–6 constructive trust, 672 restitution, 605 Uses cestui que use, 136–7, 141, 142 enforcement, 163 legal estate prior to uses, 136 post-Statute of uses, 136–9, 142 pre-Statute of Uses, 136–7, 141–3 Usury see also Money-lending repeal of usury laws, 334, 341, 344–6 usurious contracts, 339 Voluntary religious associations see also Bishop of Natal v Gladstone (1866); Church of England Church of New Zealand, 315 Church of South Africa, 315 coercive jurisdiction, 305–6, 311–4, 318–20 doctrines, discipline, governance, 306–7, 312, 320–2, 327 endowments and property, 306–7, 316–7, 321, 323 independent churches in communion with parent church, 306–7, 315, 320

Index 703 local branches of parent church, 306–7, 320 rival churches, 326 voluntary associations, 306–7, 312 Worldwide Anglican Communion, 307, 326–8

Wards Court of Wards, 13–5, 24 Writs audita querela, 29 ne exeat regno, 103, 104 writ of error, 18, 23, 92, 100