THE LAW OF EQUITY NOTES PART 1

*DISCLAIMER*

The notes below are adapted from the Kenyatta University and UoN Teaching module and the students are adviced to take keen notice of the various legal and judicial reforms that might have been ocassioned since the module was adapted. the laws and statutes might also have changed or been repealed and the students are to be wary and consult the various statutes reffered to herein

TOPICAL OUTLINES

1.     Historical Origin and Development of Law of Equity in England

2.     Maxims of Equity

3.     Equitable Remedies include Injunctions, Specific Performance Etc.

4.     Application of Equity in Kenya -

The Nature, Historical Origin & Development Of Law Of Equity In England

DEFINITION OF EQUITY

Equity has an ordinary meaning and a technical meaning.

In the ordinary sense, equity means fairness, justice, morality, fair play, equality etc.  We are talking about doing good, doing what is morally right.

In a legal sense equity it is the branch of the law which, before the Judicature Act of 1873 came into force, was applied and administered by the Court of Chancery. A litigant asserting some equitable right or remedy must show that his claim has “an ancestry founded in history and in the practice and precedents of the court administering equity jurisdiction.

In the technical sense equity refers to a body of rules and some authors have defined equity as that which is not the common law. They distinguish equity from the common law.  It is regarded as a body of rules that is an appendage to the general rules of law.

To understand why equity is not common law, we must delve into the history of how equity evolved.   There was only the common law in England originally there was only one body of law.  Common law is to be found in case law that developed over the years and was administered by the king’s justices.  There were 3 courts then, the Kings Bench, the Court of Common Pleas and the Exchequer.

The Kings Bench got its name from a practice where the king would sit with his judges in “banco” or on the bench and they would hear civil and criminal cases in which the King had an interest. 

The Court of Common Pleas dealt with civil cases brought by one individual against another individual.

The Exchequer dealt with cases affecting the royal revenue, matters to do with taxes for example would be dealt with here.

Under the Common law system there was the writ system.  Under the writ system a person could only get redress for their grievance if there was a writ disclosing the cause of action.

Apart from the writ system there was also the doctrine of precedence.  At this point in time, i.e. 12^th century it was felt that the common law system was very rigid.

There was a statute that restrained the Chancellor from issuing new types of writs on his own initiative but because of the Provisions of Oxford of 1258 the Chancellor could not issue any new writs and all this added to the rigidity of common law.  At this time there were some defendants who were very strong and at times they would defy the courts’ orders and the Plaintiffs would be intimidated.  Those were medieval dark ages.  Due to all these factors, plaintiffs were not able to have all their grievances addressed and therefore those aggrieved would go and implore the King.  The King would then exercise the extra judicial powers if there was no remedy available or if the writ was not recognised as a cause of action.  Where there was a failure to administer the available remedy, the King could also exercise extra judicial powers. 

This practice continued with people continuing to petition the King and this gave rise to establishment of the Court of Chancery which developed as a separate court from the 3 common law courts.  At that time the jurisdiction of that court was not well defined, the court was headed by the Chancellor as the King had requested the Chancellor to handle those cases and the Chancellor would exercise his powers based on the notion of conscience.  If he felt a case required intervention he would then provide remedy.  There was a theory about conscience, or a notion of conscience that was supposed to be based on rules of natural justice.  It was difficult because what would shock the conscience of one Chancellor would not necessarily shock another chancellor.

As time went on and Chancellors began to issue remedies in similar cases, some body of rules developed, at that point a phrase referring to the Chancellor’s foot was coined which was ‘equity is as long as the chancellor’s foot’ which meant that equity was what the chancellor decided was equity.    Over time a body of rules called Equity developed.

The Chancellors also provided a remedy where there was a common law rule but it was too harsh and if applied to the letter the harshness would be unjust.  The Chancellors would provide a remedy to mitigate the harshness of common law. What would happen was that if it was possible to amend the common law rule to mitigate the harshness, that common law would be modified. 

But if the common law rule was too rigid, equity would leave it alone and would instead develop a new rule.  It has been said by scholars that in this instance, equity came to fill in the gaps left by common law.  In this second instance equity was seen as aiding and supplementing the common law.  Authors talk about equity coming in to supplement the common law and not to supplant the common law.

The reason why Equity is distinct from common law is because Equity appears at a later stage of legal development and that is why we define it as that which is not the common law since it developed separately and came after the common law.

There came a time when equity became systematised because over the years you would have chancellors looking at previous decisions to find similarity and something akin to following precedent developed.  More judicial officers were appointed to help the chancellors and a court of Appeal was developed to help the Chancellors.  Systematisation led to rigidity.  Those rules of equity became as fixed as those of the common law and became stereotyped.

Lord Eldon who in the case of Gee V. Pritchard stated that

 “the doctrines of this court ought to be as well settled and made as uniform almost as those of the common law, laying down fixed principles, but taking care that they are to be applied according to the circumstances of each case.  I cannot agree that the doctrines of this court are to be changed with every succeeding judge.  Nothing would inflict on me greater pain, in quitting this place, than the recollection that I had done anything to justify the reproach that the equity of this court varies like the Chancellor’s foot.”

He was asking that a balance be struck to avoid inconsistency.

When the new body of rules came into existence, it meant that whatever claim one had in equity had to be accommodated by equity and not every wrong could be accommodated by equity and because of this, the Court of Appeal said in

Re Diplock [1948] Ch. 465 at 481

“If the claim being made did exist, ‘it must be shown to have an ancestry founded in history and in the practice and precedents of the courts administering equity jurisdiction.  It is not sufficient that because we may think that the ‘justice’ of the present requires it, we should invent such jurisdiction for the first time.”  as at 1948 the court was saying that they were not going to invent jurisdiction.

Jessel in Re National Funds Assurance Co.  in this case a great equity Judge justifiably made the paradoxical remark: ‘this court is not as I have often said a court of conscience but a court of law’ this was as at 1878 and so looking at the picture from the 13^th Century, this shows that this had ceased to be a court of conscience and had become a court of law.

By this time there were four court systems and people found themselves being tossed from one court to another and this was disadvantageous and inconvenient to the litigants.  The common law courts had power to award damages while the court of chancery had power to award injunction and specific performance.  The court of equity had no power to award damages so there was a lot of rivalry between common law courts and courts of chancery.  The Earl of Oxford where the dispute was resolved with equity rules by the king.

“Equity is not a computer.  Equity operates on conscience but is not influenced by sentimentality.”

The courts began to mitigate their disadvantages by themselves to save the parties the expenses of shuttling between the two courts.  The Common Law Procedure Act of 1854 gave the Common Law Court a limited power of granting injunctions something that was previously the preserve of the courts of Chancery.  By the Chancery Amendment Act of 1858 the Court of Chancery was given power to award damages, this is the two courts mitigating each other’s disadvantages by applying each others rules and complementing each other.

A merger of the two courts eventually happened made possible by the Judicature Act of England of 1873 and 1875.  By virtue of these two Acts all the courts were amalgamated into one Supreme Court of the Judicature which had two divisions, the Court of Appeal and the High Court.  The High Court had 5 divisions

a.       The Queens Bench

b.      Common Pleas

c.       Exchequer

d.      Chancery

e.       Probate Divorce and Admiralty which dealt with disputes involving the high seas.

In 1880 there was an Order in Council which reduced the divisions to 3

a.       The Queens Bench encapsulating the original kings or queens bench, the court of common pleas and the exchequer;

b.      The Court of Chancery

c.       Probate Divorce and Admiralty.

There was an Act called the Administration of Justice Act of 1970 which occasioned further changes and Probate, Divorce and Admiralty became the Family Division.

Matters dealing with Admiralty were now taken to a division within the Queens Bench.

In 1981 the Supreme Court Act of 1981 affirmed those divisions.  This arrangement was such that the Supreme Court was directed to apply both common law and equity but they were now administered in the same court.

Pollock said in a book called leading cases done into English that the courts that were manifold dwindled to diverse divisions of one court the Supreme Court.

The dominant view was that this was not a merger of the rules but a merger of the courts and the rules remained distinct.

Our court system both the Courts of Appeal and the High Court administer both common law rules and equity but yet we have different divisions i.e. family division, children’s court, anti corruption etc.  the Kenyan court system derived from that system.

Audi alteram partem in Buganda  do not decide the girls case until you’ve heard the boys case.

Nemo judex in causa sua proverb  a monkey does not decide an affair of the forest.

Categories of Tort:

Nominate torts  - damnum sine injuria - damages not recognised by the law of court

Injuria sine damnum - recognised by the law of tort  -

Equity came in to mitigate injustice by providing remedy that was not available in common law.

Principles of justice and conscience are the basis of equity jurisdiction, but it must not be thought that the contract between law and equity is one between a system of strict rules and one of broad discretion.  Equity has no monopoly of the pursuit of justice.  As Harman L.J. has said, equitable principles ‘are rather too often bandied about in common law courts as though the Chancellor still had only the length of his own foot to measure when coming to a conclusion.

Until the Judicature Act of 1873, the Court of Chancery had almost exclusive equity jurisdiction; rules of equity were not enforced in the common law courts.  If a defendant to a common law action had an equitable defence to it, he had to go to Chancery to obtain an injunction to stay the proceedings in the common law court and then start a new action in chancery to establish his equitable rights. 

In the medieval period the Chancellor was the most important person in the country next to the King himself: One very important function of Chancery was to issue the royal writs which began an action at law.  By varying existing writs or invention new ones, the Chancellor could have some influence on the development of the law;  a limited influence however, for the decision to issue a writ (now called a claim form in Civil Procedure Rules 1998) did not create a new form of action.  The litigant could not proceed without it; but the common law court could still decide that the writ disclosed no claim recognised by the law.

A claimant could only sue at common law if his complaint came within the scope of an existing writ.  In the 13^th century the available writs covered very narrow ground.  Even if the claim came within the scope of an existing writ, it may have been that for some reason, such as the power and influence of the defendant, his opponent could not get justice before a common law court.

The chancellor would give or withhold relief, not according to any precedent, but  according to the effect produced upon his own individual sense of right and wrong by the merits of the particular case before him.  No wonder Seldon could say that ‘Equity is a roguish thing.  For law we have a measure …. Equity is according to the conscience of him that is Chancellor, and as that is longer or narrower, so is equity.  ‘Tis all one as if they should make the standard for the measure a Chancellor’s foot.’

The Chancellor’s jurisdiction was  against the person; in personam, and directed to the conscience of the individual in question.

Equity-Lecture 2

Maxims of Equity

These maxims of equity are statements which embody rules of equity. They are only guidelines. They are not applied strictly in every case. But they help us to understand what the rules of equity are. No logical sequence and they often overlap. You can have two maxim that actually says the same thing. You can have one equity which is the exact opposite of another maxim:

1. He who seeks equity must do equity

2. He who comes to equity must come with clean hands

3. Equity is equality (Equality is equity)

4. Equity looks to the intent or substance rather than the form

5. Equity looks upon as done that which ought to be done

6. Equity imputes an intent to fulfill an obligation

7. Equity acts in personam

8. Equity will not assist a volunteer (Equity favours a purchaser for value without notice)

9. Equity will not suffer a wrong to be without a remedy (Where there is a wrong there is a remedy for it) Ibi just ibi remedium

10. Equity does not act in vain

11. Delay defeats equity

12. Equity aids the vigilant and not the indolent (Vigilantibus non dorminentibus jura subveniunt)

Equity follows the law

Where there is equal equity the law shall prevail

Where the equities are equal the first in time shall prevail

He who seeks equity must do equity

This maxim means that a person who is seeking the aid of a court of equity must be prepared to follow the court's directions, to abide whatever conditions that the court gives for the relief. And this is most commonly applied in injunctions. The court will normally impose certain conditions for granting the injunction.

Examples:

Illegal loans. An old case, though overtaken by law, is still important to illustrate this maxim: Lodge v National Union Investment Company Ltd 1907] I Ch. 300.This is a case in which B had borrowed money from a money lender, M, and B mortgaged some securities to M for the loan. It turned out that M was not a registered money lender by law(the Money Lenders Act of England). B sued M for delivery of his securities (back to him). And here the court refused to grant the order unless B first repays the loan. Today a court cannot enforce an illegal action, such as this one was.

Contrast that case with the case of  Kasumu v Baba Egbe ,1956] AC 539. Another case: Barclays v. Prospect Mortgages Ltd [1974]  2 All ER 672. Said  Lodge did not lay a principle for all time.

Another example--consolidation- we say that  mortgagee  has lent money to a mortgagor has given two mortgages.--on two properties. Under each mortgage there is a loan. And they could have been issued at different times.

A third illustration:  notice to redeem a mortgage before the due date. He is required to pay notice to lender or pay the interest remains. Last example: equitable estoppel. Promisory estoppel. By words or conduct, a representation of promise.

Equity will preclude the promisor from resigning from the promises. An example from a land lord-tenant relationship. Assume the lease comes to an end to leave the promises in the states in which he found them on excluding fair wear and tear. He can only avoid doing equity if he  gives notice that he is not putting up a new flat and therefore he will require painting.

There is also proprietary estoppel --one person conducts himself in such a way that : proprietary estoppel arises where one person (a) knowing that another person B is acting under some mistaken belief that  B has some  right to A's property passively or actively encourages B's act. So B is the person who is mistaken. A is the person who owns ..such as improving the property, under the mistaken belief that he has an interest/right to A's property. A gets to know this, of B's mistaken belief. But he does not correct B. And equity provides here that A will be estoppeled: he will be excluded from denying B's interest in the property. An example is the case of Inwards v Baker, (1965) 2 QB 29 where B has incurred some expenditure in developing some property.

He who comes to equity must come with clean hands

Take the case of a tenant and a landlord and this tenant defaults in paying rent. The lease will be forfeited. A right of re-entry by the landlord where the lease is deemed to be forfeited. That is the common law position.

Equity gave relief against forfeiture if the tenant was willing to pay the rent that was outstanding. And therefore the lease could continue. But relief could only be given if the tenant had clean hands, i.e. had not breached other terms. The case that illustrate this point is Gill v Louis [1956] 2 QB. The tenant had used the premises for a purpose that was not allowed under the lease.

This scenario was summed up in another case: He who has committed inequity shall not have equity. This phrases in the Jones v. Lenthal (1669) 1 Ch, Ca 154). There is a limit to this rule. In some cases the court has the discretion whether to apply that maxim. Limit to the extent that maxim can be applied. the limit is this: It is not all unclean hands that will deny a plaintiff his remedy. The conduct must be relevant to the relief being sought.

Duchess of Argyll v Duke of Argyll [1967]

Contrast with  Loughvan v L (1934) 292 US. Justice Brandeis said equity does not demand that its suitors shall have lead blameless lives. We are not concerned with issues of morality. If the breach is a trifle, a small matter, a minor breach, then that in itself should not deny the plaintiff the remedy.

Besant v. Wood [1979) 12 Ch. D. 605.

Hooper v Bromet (1904) 90 Lt 234.

The first maxim deals with now/future, the second deals with conduct in the past.

Equity is equality (Equality is equity)

1. Presumption  of tenancy in common where there is

-   purchase in unequal shares. Say two people have unequal shares, there is presumption of tenancy in common

-   purchase in equal shares: severance of joint tenancy. To avoid  injustice, to achieve equality, there will be assumption of tenancy in common.

-   partnership property. Say five partners in a law firm and one of the partners dies. His shares go to his heir: There is presumption that the partners hold a tenancy in common.

It applies to a situation where two or more people are entitled to the same property and there is no other basis for division. Those who are entitled to property should have certainty and fairness of equal division. Equity in this sense does not mean literal equality but proportionate equality.

It applies to the division of property; where there are rival claimants to property and there is no formula for sharing it out, i.e. no will. And so the law steps in and it establishes certain rules that will guide the court. And the first rule is in relation to a presumption of a tenancy in common. That is equity will make a presumption to joint tenancy as opposed to a common tenancy.

[Tenancy in common is a tenancy by two or more persons, in equal or unequal undivided shares, each person having an equal right to possess the whole property but no right of survivorship.

Joint tenancy is a tenancy with two or more co-owners who take identical interests simultaneously by the same instrument and with the same right of possession. A joint tenancy differs from a tenancy in common because each joint tenant has a right of survivorship to the other’s share

(In some states in the US, this right must be clearly expressed in the conveyance - otherwise, the tenancy will be presumed to be a tenancy in common).

Right of survivorship is a joint tenant’s right to succeed to the whole estate upon the death of the other joint tenant.]

Joint tenancy: In certain circumstances the children could inherit, that is, equity will make a presumption of a tenancy in common to avoid injustice.

2. Equal division. Equality is equity. In general the maxim will be applied whenever property is to be distributed between rival claimants and there is no other basis for division.  Where the following are involved. For example husband and wife who operates a joint bank account; each spouse may deposit or take out money. Upon divorce, the maxim applies. They share 50-50. The authority is that equity does not want to concern itself with the activities of a husband and wife - to go into the bedroom and make deep inquiries. Hence equal division. If children are involved, that may be considered.

Another example relates to trusts. How do you divide the property? Say there are three beneficiaries, in unequal shares. Then one of the beneficiaries passes away, i.e. one of the shares fails to vest. What should accrue to the surviving beneficiaries? Redistribute equally, applying the rule “Equity is equality”. Re Bowers S.T. [1942] Ch. 97 discusses this formula.

Another illustration: copyright. You have a situation where you’ve two people and the author bequeaths the scrip to one person and the copyright to another person.  Cannot utilize the manuscript without the copyright. Each requires the other. Where that is situation, the proceeds will be divided equally between the two. The case that illustrates this is Re Dickens.

-Husband and wife. E.g. after a divorce the court has refused to dissect meticulously the joint bank account into which the husband and wife paid their income, and upon which they both drew, and instead divided the balance equally between them. See Jones v Maynard. The principle does not apply while they are still living together, for then their rights in a joint bank account are not meant to be attended by legal consequences (See Gage v King, and each will be sole beneficial owner of any property which he or she buys with money drawn from the joint account, subject to any contrary intention.

The rule of equality has been applied in relation to club property as between the members of a club which has ceased to exist(see Re Sick and Funeral Society of St. John’s Sunday School); and in relation to commission as between two estate agents who have been instructed in the sale of the same property (See Hampton & Sons v Garrad Smith (Estate Agents Ltd).

It has also been applied when an author bequeaths the manuscript of a work to A and the copyright to B, and the publication of the work is made possible only by using the manuscript, prima facie the proceeds of sale of the copyright will be divided equally between A and B (See Re Dickens).

The maxim also appears to be responsible for the decision that where property has been settled in unequal shares with a provision that any share which fails to vest shall accrue to the other shares by way of addition, accruer prima facie takes place in equal shares and not in the proportions laid down by the settlor for the original shares (see Re Bower’s S.T.), even though equality is attained only at the price of altering the proportions prescribed by the settlor.

When to go for proportionate equality or literal equality: It depends. That is answer to every legal question.

Equity looks to the substance or intent rather the form

This maxim makes a distinction between matters of substance and matters of form. Equity will give priority to substance (intention) as opposed to form, if there is a contradiction. This maxim is normally applied to trusts. There have been cases where the court has inferred a trust even where the word trust does not appear.

Another illustration is the remedy of rectification of contract, where equity looks to the intention, where intention matters.

EQUITY LECTURE 3

4.    EQUITY LOOKS TO THE INTENT OR SUBSTANCE RATHER THAN FORM

This maxim lies at the root of the equitable doctrines governing mortgages, penalties and forfeitures.  Equity regards the spirit and not the letter.

Courts of Equity make a distinction in all cases between that which is a matter of substance and that which is a matter of form; and if it finds that by insisting on the form, the substance will be defeated, it holds it to be inequitable to allow a person to insist on such form, and thereby defeat substance.  Thus if a party to a contract for the sale of land fails to complete on the day fixed for completion, at law he is in breach if his contract and will be liable for damages  e.g. for delay.  Yet in equity it will usually suffice if he is ready to complete within a reasonable period thereafter, and thus the other party will not be able to avoid performance.

Another aspect of this maxim is shown by equity’s impatience with mere technicalities.  Equity was never much impressed by a deed, and it will refuse to decree specific performance of a voluntary agreement even if it is made by deed and so enforceable at law.

5.       EQUITY REGARDS AS DONE THAT WHICH OUGHT TO BE DONE

This maxim has its most frequent application in the case of contracts.  Equity treats a contract to do a thing as if the thing were already done, though only in favour of persons entitled to enforce the contract specifically and not in favour of volunteers.  Agreements for value are thus often treated as if they had been performed at the time when they ought to have been performed.  For example a person who enters into possession of land under a specifically enforceable agreement for a lease is regarded in any court which has jurisdiction to enforce the agreement as if the lease had actually been granted to him.  Walsh v. Lonsdale the agreement for lease was as good as the agreement itself.

Souza Figuerido v. Moorings Hotel - held an unregistered lease cannot create any interest, right or confer any estate which is valid against third parties.  However, it operates as a contract inter parties, it is valid between the parties and can be specifically enforced.  The tenant in this case was therefore liable to pay rent in arrears.

6.       EQUITY IMPUTES AN INTENT TO FULFIL AN OBLIGATION

If a person is under an obligation to perform a particular act and he does some other act which is capable of being regarded as a fulfilment of this obligation, that other act will prima facie be regarded as fulfilment of the obligation.

For example suppose that a husband covenants with the trustees of his marriage settlement to pay to them the sum of £50,000, to be laid out by the trustees in the purchase of lands in the county of Devon which are to be settled upon the trusts of the settlement.  In fact, the husband never pays the money to the trustees, but after the marriage purchases lands in Devon for £50,000, and has them conveyed to himself in fee simple; and he then dies without bringing the lands into settlement.  The purchased lands are in equity presumed to have been purchased by the husband in pursuance of his covenant, and as being in fact his performance of that covenant, so that they become subject to the trusts of his marriage settlement.  It is on this maxim that the doctrines of performance and satisfaction are founded.

7.       EQUITY ACTS IN PERSONAM

This maxim which is descriptive of the procedure in equity, is of less significance now than formally.

This is a maxim which is descriptive of procedure in equity, is the foundation of all equitable jurisdiction.  Courts of law enforced their judgments in rem, e.g. by writs of ‘fieri facias or elegit’ but the originally equitable decrees were enforced by Chancery acting against the person of the defendant (ie by imprisonment) and not in rem against the property involved in the dispute.  Later equity invented the alternative method of sequestrating the defendant’s property until he obeyed the decree.  These methods can still be used where necessary, but other and more convenient methods are often available today.  So

a.       The court can often make a vesting order, by virtue of which property will become transferred to some other person (eg where the court appoints a trustee and it is necessary that the trust property should be vested in him.

b.      Where the court orders a person to execute a document (eg where specific performance is decreed against a vendor or land), the court can appoint some person to execute it on his behalf.  Where appropriate, common law writs of execution can be used to enforce equitable decrees.   Although the maxim has lost much of its importance, it is responsible for the general rule that English court has jurisdiction in equitable matters, even though the property in dispute may be situated abroad, if the defendant is present in this country = PENN V. BALTIMORE (the Defendant was ordered to perform a contract relating to land in America).  But there must be some equitable right arising out of contract, trust or fraud.

8.       EQUITY WILL NOT ASSIST A VOLUNTEER

Equity favours a purchaser for value without notice.  A volunteer is a person who has not paid consideration.  Exception to the application of this maxim is in Trust.

9.       EQUITY WILL NOT SUFFER A WRONG TO BE WITHOUT A REMEDY

Ibis jus ibi remedium” if there is a wrong, there is a remedy for it.

He who seeks solace in the arms of equity will not go away broken hearted.

Each party has his or her share at the table of equity.

No wrong should be allowed to go unredressed if it is capable of being redressed by equity.

Not all moral wrongs should be redressed by equity.

The maxim must be taken as referring to rights which are suitable for judicial enforcement, but were not enforced at common law owing to some technical defect.  Its meaning can be best explained by taking a few examples of the cases in which the court has acted upon it.

Enforcement of trusts: It was on this maxim that the court of Chancery based its interference to enforce uses and trusts.  Where A conveyed land to B to hold to the use of, or on trust for C, and B claimed to keep the benefit of the land for himself, C had no remedy at law.  Yet such an abuse of confidence was most distinctly a wrong, and a wrong capable of easy redress in a court of justice.

The auxiliary jurisdiction:      Again, to this maxim may be traced the origin of the auxiliary jurisdiction of the Court of Chancery, by virtue of which suitors at law were aided in the enforcement of their legal rights.  Without such aid these rights would often have been “wrongs without remedies”.  For instance, it was often necessary for a claimant in a common law action to obtain disclosure of facts resting in the knowledge of the defendant, or of deeds, writings or other things in his possession or power.  The common law courts, however, had no power to order such disclosure, and recourse was therefore had to the Court of Chancery, which assumed jurisdiction to order the defendant to make disclosure on his oath.

Formerly a Lessor was not entitled to disclosure of documents in an action brought to forfeit the lease, as the court leans against penalties and forfeitures.  This restriction of the normal rule has now been abrogated.

10.     EQUITY DOES NOT ACT IN VAIN:

The court of equity is shy and does not want to be embarrassed by granting remedies that cannot be enforced or issuing orders that cannot be obeyed by the Plaintiff.

11.     DELAY DEFEATS EQUITY  OR EQUITY AIDS THE VIGILANT AND NOT THE INDOLENT:   Vigilantabus, non dormientibus, jura subveniunt

A court of equity has always refused its aid to stale demands, where a party has slept on his right and acquiesced for a great length of time.  Nothing can call forth this court into activity, but conscience, good faith, and reasonable diligence; where these are wanting, the Court is passive, and does nothing.  Delay which is sufficient to prevent a party from obtaining an equitable remedy is technically called “laches”.

This maxim, however, has no application to cases to which the Statutes of Limitation apply either expressly or, perhaps, by analogy.  There are thus three cases to consider-

(a)     equitable claims to which the statute applies expressly;

(b)     equitable claims to which the statute is applied by analogy; and

(c)     equitable claims to which no statute applies and which are therefore covered by the ordinary rules of laches.

(a)     Express Application of the statute.  Originally the statute applied only to courts of common law.  but then several statutory provisions were enacted which were in terms applicable to equitable claims.  Thus the Real Property equity must be brought within the same time as if it were a legal claim, and the Trustee Act 1888 limited the time within which an action must be replaced by the Limitation Act.  The principal equitable claims so regulated are as follows:

(i)      Claim by cestuis que trust to recover trust property or in respect of any breach of trust;

(ii)     Claims to the personal estate of a deceased person;

(iii)    Claims to redeem mortgaged land.

(iv)    Claim to foreclose mortgages of real or personal property.

(b)     Application of the statute by analogy:  where a claim is not expressly covered by any statutory period but is closely analogous to a claim which is expressly covered, equity will act by analogy and apply the same period.  This is so not only where equity, exercising a concurrent jurisdiction, gives the same relief as was available in a court of law and to which there is a limitation period prescribed; it applies also where equity affords wider relief than available to a claim for damages for fraud or fraudulent breach of contract is applicable by analogy to a claim to account as constructive trustee.

(c)     Claims outside statute.  The principles which equity applies to cases not covered by a statutory period have been stated thus:

“Now the doctrine of laches in courts of equity is not an arbitrary or a technical doctrine.  Where it would be practically unjust to give a remedy, either because the party has by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material.”

12.                          Equity follows the law;

The Court of Chancery never claimed to override the courts of common law.  “Where a rule, either of the common or the statute law, is direct, and governs the case with all its circumstances, or the particular point, a court of equity is as much bound by it as a court of law and can as little justify a departure from it.  It is only when there is some important circumstance disregarded by the common law rules that equity interferes.  “equity follows the law, but not slavishly nor always.”

13.Where there is equal equity the law shall prevail;

This maxim forms the basis of the rules on priority and can be contrasted with the maxim where the equities are equal the first in time shall prevail.

14.Where the equities are equal, the first in time shall prevail;

EQUITY  Lecture  4                                                                                

EQUITABLE REMEDIES

Remedies in Equity have 3 features

1.       They are discretionary;

2.       They act in personam

3.       They are only granted where the common law remedy or damages are inadequate.

1.  Discretion:      the court will exercise discretion in some instances.  The court will look at the conduct of the Plaintiff and on the basis of that it can refuse to grant remedy to the plaintiff. (he who seeks equity must do equity, he who comes to equity must come with clean hands, delay defeats equity).   Equitable remedies are discretionary.  Adequacy of the common law remedy.  If it is found that damages at common law will adequately compensate the Plaintiff, equity will not grant a remedy.

2.  Equity acts in Personam - the remedies are granted against a particular person, they are directed at a person.

Penn v. Lord Baltimore (1750) 1 Vs

In this case specific performance was ordered of an agreement relating to the boundaries of land in America, the defendant being in England.  The court decreed specific performance of an English agreement relating to the boundaries between Pennsylvania and Maryland, despite the inability of the court to enforce its remedy in rem.

Richard West & Partners (Inverness Ltd) v. Dick [1969]

In Gilligan v. National Bank Limited - inadequacy of the common law remedy

Justice Barton said “a remarkable feature of equity is the ability and willingness of equity to grant elastic remedies which were not obtainable at law”.  In this quote one can discern two characteristics of equity, discretion and granted in personam.

SPECIFIC PERFORMANCE:

Specific performance is an order of the court requiring the Defendant to carry out his obligations under an instrument (contract) according to its terms.  Specific performance is a discretionary remedy.

The general rule is that specific performance will be granted where the common law remedy of damages is inadequate.  Equity will not interfere if damages will grant a Plaintiff full compensation.  If damages will put the Plaintiff in the position he would have been in had the instrument been performed, equity will not interfere.

There are cases where the court will not grant specific performance even if the remedy of damages is inadequate. The court will take into account special circumstance surrounding a case where the Plaintiff has been denied specific performance even though the damages are inadequate.  The court will look into the conduct of the Plaintiff and this is done in the courts discretion.  The decision whether or not to grant specific performance will be made by the court.  This is the discretionary nature of equity.

That discretion however is to be exercised on well settled principles. There are certain rules in equity that govern the exercise of discretion.

Penn and Richard West are cases on specific performance where the courts acted in personam,   the courts granted orders remedies in favour of the Plaintiff.  Only the parties to a contract can sue or be sued for specific performance.  If it is a land matter it is only the seller and the buyer who can be sued.

When does a third party become joined?

The general rule is that only parties to a contract can be sued or sue for specific performance.  A third party can be enjoined in a suit for specific performance where it is shown that he was not a bona fide purchaser for value without notice i.e. when he has contributed to the breach by one party.

Ensuring Observance of the Court’s Order for Specific Performance

Tito v. Waddell (No. 2) 1977

If the court cannot ensure that the order will be observed by the Defendant, then the court will not grant specific performance.  (Equity does not act in vain)  if the order cannot be enforced, specific performance will not issue.

Specific Performance is granted for the enforcement of positive contractual obligations.  This means that for example in a lease, you find obligations on the part of the tenant and then there are the obligations to be observed by the Landlord so you find that the obligations of the landlord become the tenant’s rights.  Specific performance will only apply to positive obligations. For example if the tenant is supposed to keep the premises in a state of repairs and is not supposed to sublet the premises, specific performance will issue to enforce the keeping of the premises in a state of repairs but will not issue to allow the tenant to sublet the premises.

The defendant is ordered to take positive steps to remedy a wrong or to do something that he has failed to do in law. Matters for specific performance are heard and determined before the specific performance is issued unlike an injunction which can be issued on an interlocutory basis.  Section 16 of the Government’s Proceedings Act Cap 40 Specific Performance cannot issue against the Government.  One can only sue the government for a declaration but one cannot get an injunction or specific performance.  The rule that an injunction cannot issue against the government is currently being challenged in court at the moment.

TYPES OF CONTRACT

1.       CONTRACTS THAT ARE SPECIFICALLY ENFORCEABLE:

There are certain kinds of contracts where it is recognised as a general rule that specific performance will be granted.  These are the specifically enforceable contract.

(i)      Contract related to land:        This is the most common type of contract where parties apply for specific performance.  It could be any type of contract as long as it relates to land. Land has a fixed location and no two pieces of land are alike, each piece of land is unique and special and it is thus accepted as a general rule in equity that damages will not be adequate compensation to a purchaser, a mortgagee or chargee etc.  It is for this reason that we say that contracts related to land are specifically enforceable.

(ii)     Contract related to Personalty/Chattels - the rule is that the court will not grant specific performance unless it is shown that the chattel that is the subject matter of the contract is an article of unique value.   The reasoning is that because the chattel is a rare commodity or unusual beauty etc damages will not be adequate.

There are several cases where courts granted specific performance because the chattels were of unique value.

Falcke v. Gray

Purchase of two china jars apparently worth 200 pounds

Thorn v. Commissioners. Of Public Works - subject matter of the contract was a stone from the Old West Minister Bridge in England which was deemed to be a very special item.

Philips v. Lamdin - the subject matter was a door in a house (Adam door)  it was a door of unique value

Behnke v. Bede Shipping Co.  It was a ship of unique and peculiar value to the Plaintiff.

Sky Petroleum v. VIP Petroleum

There was a contract in this case between the plaintiff and the defendant.  Under this contract the Plaintiff was to buy all the petrol for its garages from the defendant and the defendant was to supply the plaintiff with all its requirements for the petrol.  The defendant alleged breach and he purported to terminate the contract in November 1973.  This was at a time when petrol supplies were limited.  The result of this was that the Plaintiff had little prospect of finding an alternative supply of fuel.  And so an interlocutory injunction was granted to restrain the defendant from withholding the supplies of petrol.  The judge in this case acknowledged that it amounted to specific performance.  But the judge held that the court had jurisdiction to order specific performance of a contract to sell chattels even though they were not specific or ascertained where the remedy of damages was inadequate. Further the usual rule that specific performance was not available to enforce contracts for the sale of chattels was well established but it was based on the adequacy of damages and was therefore not applicable to the present case because in the present case the plaintiff might be forced out of business if the remedy was not granted.

The court in this case is looking at special circumstances since in 1973 petrol was scarce.  The court could not order the defendant to pay damages as no amount of money would help the plaintiff who needed specific performance to force the Defendant to supply the petrol. It is the uniqueness of the case that made the court exercise its discretion in ordering for specific performance. 

In Cohen v. Roche the article was an ordinary commodity of commerce and the court refused to grant specific performance.  The articles in question were a set of 8 Hepplewhite Chairs.  There was a contract to deliver specific or ascertained goods within the meaning of Sale of Goods Act Section 52 of Cap 31.  the Court argued and said that these were ordinary articles of commerce and that damages would be adequate.  Whenever one talks of adequacy of damages, one has to relate it to the discretionary nature of the court to order specific performance.

A CONTRACT TO PAY MONEY TO A THIRD PARTY

The court has recognised if the court is to pay money to a third party, then discretion is called for

Beswick v. Beswick (1968)  - two people in the contract and the contract was for payment of money to the wife of one of the parties.  Case was unique because she was suing as an administratrix.

CONTRACT TO SECURE LOAN AND MONEY IS LENT BEFORE MORTGAGOR EXECUTES THE MORTGAGE DEEDS

In a situation like this the mortgagee can obtain an order of specific performance ordering the mortgagor to execute the mortgage instrument.  Usually the banks will rely on the loan agreement as there is a clause in the loan agreement that the mortgagor when called upon to do so shall sign the mortgage.

Where a contract is with a company to take up and pay for debentures (document by which a company acknowledges a debt) - this contract is specifically enforceable against the company.

CONTRACTS THAT ARE NOT SPECIFICALLY ENFORCEABLE

1.       A Contract requiring constant supervision.  Such a contract is not specifically enforceable because equity does not act in vain.  The court will not grant specific performance if the contract requires constant supervision as it may be difficult for the court to ensure supervision.  A case to illustrate this point is

Ryan v. Mutual Tontime Westminister Chambers

Some tenants had leased a block of flats with the term that there would be a resident porter with specified duties.  But the porter got a job as a chef in a neighbourhood café and would delegate his duties to someone else not recognised under the lease.  The tenants applied for specific performance but the court refused to make the order on the basis that supervision would be impracticable.

Building Contracts:       the general rule is that specific performance will not be granted in respect of a contract to build or a contract to repair. 

The court has however developed exceptions

If three conditions are met, then that building contract will be enforceable

In Wolverhampton Corp v. Emmons

1.       The building work must be sufficiently defined by the contract and the way to do this is by having detailed building plans.  If the builder has provided everything,

2.       The Plaintiff must have a substantial interest in the performance of the contract such that damages would not compensate him for the defendant’s failure to build.  For example according to Hanbury if the building is to take place on the Plaintiff’s land, damages will normally be adequate.  The reason is that the Plaintiff can always hire another contractor to complete the work and if there is any fluctuations in cost, that can always be recovered from the Defendant as damages.

3.       The Defendant must be in possession of the land so that the Plaintiff cannot employ another person to build without committing a trespass.

When these 3 conditions are met, specific performance will then be granted.

Carpenters Estates Ltd.     Explains Wolverhampton

CONTRACT INVOLVING PERSONAL SKILL IS NOT ENFORCEABLE

The reason why this contract cannot be enforced is that the court does not have to decide in subsequent applications whether that contract has been properly performed.  We are talking of a contract where a person is to give personal services.  The court does not want to assume that burden because it is impracticable.

C.H. Giles  & Co. Ltd v. Morris.

The court does not want to force a person to remain in the relationship of employer and employee when there is indication that they no longer want to continue with that relationship.  According to Fry L.J. in the case of Francesco V. Barnum states “the courts are bound to be jealous lest they should turn contracts of service into contracts of slavery.”

CONTRACT LACKING IN MUTUALITY/CONTRACT LACKING MUTUALITY

The rule is that where specific performance is available to one party, it must also be available to the other party i.e. where it is available to a purchaser it will be available to the seller so that either party can sue or be sued.  We say in this case that there is mutuality between the parties.  Examples of circumstances where there is no mutuality is where in a contract one of the parties is a minor.  The law is that specific performance cannot be ordered against a minor.  There is no mutuality here.  The minor cannot obtain an order of specific performance the case is

Flight v. Bolland

Incapacity to enter into contract.  Where there is lack of capacity at the time of entering the contract, the contract will not be enforceable.

A type of contract that is specifically enforceable in part only, this means that there may be some matter that can be isolated from the contract (severance of the contract) and then specifically enforce them.  One will actually be enforcing the contract in part.  If those matters are dependent on one another then severance is not possible so the contract cannot be enforceable in part.

Ryan v. Mutual

Burnes v. City of London

Ogdden v. Fossick

In this case an agreement was entered into between Fossick and Ogden that Fossick should grant Ogden a lease of a coal wharf at a certain rent, and should be employed throughout the tenancy at a salary of £300 pa plus a commission on the coal sold at the wharf.  Although the first part of the agreement was typical of the kind of matter of which specific performance is decreed, this remedy was refused on the ground that it was inseparably connected with the second part of the agreement which was clearly of the kind of which specific performance is not granted.  It is an a fortiori case where the term sought to be enforced by specific performance is merely an ancillary or subsidiary term of a contract, the principal terms of which are unenforceable by specific performance.

Frith v. Frith

In that some contract, some matters may be legal while other matters may be illegal.  The legal matters can only be enforced if they are not dependent on the illegal matters but if they depend on one another the contract cannot be enforced.

Odessa Tramways

Severance General

Mohamed Hussein

D’Silva

Agreement without consideration

An agreement where the party has not provided consideration will not be specifically performed.  Equity does not aid a volunteer.  The exception is trust but the general rule is if not supported by consideration it cannot be enforced.

EQUITY Lecture 5                                                               

DEFENCES FOR AN ACTION FOR SPECIFIC PERFORMANCE

Equity will hold the defendant to the enforcement of his bargain.  The court will require the defendant to perform part of his bargain and can only depart from that rule in certain recognised instances.  Essentially the recognised instance will act as defences.

The following are defences:

1.       There is no effective contract; - this happens when the requirements of a contract or the prerequisites have not been met.

2.       The absence of writing for land transactions.  S. 3 (3) Law of Contract Act Cap 23 is echoed in this defence which is to the effect that in the case of land transaction, for there to be a proper disposition there must be a written memorandum on the contract.  Until July 2003 there was an exception to the requirement of writing.  The rule regarding that exception was that, if there was no written document but there was an oral contract coupled with part-performance, the interest in land could pass.  Note that it is not just every type of interest in land, there are some that are required by law to be registered.  In case of leases, unless it is over 12 months under ITPA and 24 months under RLA, the law requires that the lease be in writing.  Part performance can be constituted, transfers and mortgages need registration as well and therefore there must be a document in writing.  That was the position until July 2003, there were two Acts that were passed through parliament one in 1990 and the other one in 2002.  the Act passed in 1990 was Act NO. 21 of 1990 and Act No. 2 of 2002   they were both amending Section 3 so that for any matter taken to court in relation to a transaction regarding land, there must be a Memorandum in writing.  Essentially the amendment reflected in two Acts.  It does away with the doctrine of part performance so that when someone sues, the court will not accept the doctrine of part performance and there must be a Memorandum in writing.   The Attorney General passed two Gazette Notices in November 22 2002, these were Legal Notice NO. 188 and Legal Notice NO. 189.  By means of these two legal notices these two Acts came into effect and the commencement date was July 2003.  The amendments have amended S. 3(3) Laws of Contract and go on to say that documents should be signed and who will witness the signing.  This means that a Defendant can plead lack of memorandum in writing as a defence.

3.       CONDUCT OF THE PLAINTIFF: - Here the Court is saying that if the Plaintiff is guilty of some conduct that would disentitle him from getting his remedy.  He who comes to equity must come with clean hands, he who seeks equity must be prepared to do equity or equity does not aid the indolent but the vigilant.  The doctrine of laches is limited by Cap 22 and the maxim is that Equity follows delay defeats equities, or, equity aids the vigilant and not the indolent.

4.       Hardship: - The general rule is that where the Defendant pleads hardship, he may escape specific performance.  The general rule is that the Defendant will be ordered to perform his part of the bargain even if it causes him hardship. The Defendant can plead hardship but there are rules as to what hardship the court will consider, it is not just inconvenience but hardship that amounts to injustice.  If the hardship is that it will cause the Defendant injustice, it will accept the Defendant’s Defence.  There is a way of assessing the hardship.  The Court will exercise discretion in giving specific performance

Patel V. Ali (1983) Ch. 283

This is a case where the seller and her husband were co-owners of a house that they had contracted to sell.  The husband’s bankruptcy caused a long delay in completion of the sale transaction for which neither the seller nor the purchaser was to blame.  After the contract had been entered into, the seller got bone cancer and had her leg amputated.  She later delivered her second and third children.  The purchaser obtained an order of specific performance against which the seller appealed on the ground of hardship.  She spoke little English and relied on help from nearby friends and relatives.  Hence it would be hard to leave the house and move away.

The court allowed the Appeal stating that although a person of full capacity before the contract took the risk of hardship the court in a proper case could refuse to grant specific performance on the ground of hardship occasioned subsequent to the contract even if it is not caused by the Plaintiff and is not related to the subject matter of the suit.  On the facts of this case, the court held that there would be hardship amounting to injustice and therefore the appropriate remedy was damages.  This is sort of a locus classicus in specific performance.  The other one being Sky Petroleum v. VIP Petroleum here the court granted a prohibitory injunction.

Hardship to either the Plaintiff or the Defendant

Warmington v. Miller

Mountford v. Scott

Hardship to a third party

Earl of Sefton v. Tophams

Sullivan v. Henderson

Watts v. Spence.

Is financial inability to complete a contract hardship sufficient to escape specific performance.

Financial inability to complete is not hardship.

Nicholas v. Ingram [1958]  this case is of persuasive authority.

5.  FUNDAMENTAL MISTAKE:   - The mistake may be of such a nature that it precludes the consensus ad idem that is required in every contract and such a mistake is a good defence to an action for specific performance.

Webster v. Cecil (1861) 30 Beav. 62

Parties agreed on a contract where the price was £2,250 but when the seller issued a letter he mistakenly wrote £1,250 which was not the purchase price.  The seller gave notice of the error immediately he realised and so he was not compelled to specifically perform the contract.  Defence of fundamental mistake was claimed.

Malins v. Freeman (1837)

The rule is that even if the mistake is that of the Defendant himself and not in any way induced by the Plaintiff, specific performance will be refused if its imposition would cause the Defendant hardship amounting to injustice.

In this case this Defendant bid for and bought one lot at an auction believing that he was buying a totally different lot.  So when he was sued for specific performance, he pleaded hardship.  He had bid for the wrong lot being drunk.

The court refused to grant specific performance, it accepted the defence of hardship, the court stated that intoxication of the Defendant when the contract is made is a ground for refusing specific performance even though it is not induced by the Plaintiff.  It would have been a great hardship on him to compel him to take the property the court went on to say.  The court here is looking at the total picture.

Contrast that decision with

Tamplin v. James (1880) 15 Ch. D. 215

This is a case where a purchaser agreed to buy some property at an auction in the belief that two pieces of garden plots at the back of the shop formed part of the purchased property.  The particulars of sale and the reference plans exhibited at the auction described the property correctly.  The garden plots were not included in the sale as they did not belong to the vendor even though they had commonly been occupied together with the property being auctioned.  The property subject matter of the auction was an inn and a shop.

The defendant was acquainted with the property and knew that the garden plots were occupied along with the inn and shop.  However he did not look at the plans and agreed to buy in the belief that he was buying the inn and shop together with the two garden plots.  The vendor brought an action for specific performance.  The Defendant pleaded mistake as a defence.

The court held the Defendant to his bargain, he had a means of finding out the exact dimensions of the plots he was bidding for.  Equity aids the vigilant.  Specific performance was issued

Craddock v. Hunt

This case is to the effect that where the mistake is in the written record of the transaction the Plaintiff may obtain rectification and specific performance in the same action i.e. the court will be applying the maxim equity looks to the substance rather than the form.

There are two cases where the Plaintiff has contributed to the Defendant’s mistake even if unknowingly

Denny v. Hancock

Wilding v. Sanderson.

Where the mistake is that of the defendant, See the case of

Steward v. Kennedy

Van Praagh v.  v Everidge

Where there is a unilateral mistake

Mountford v. Scott

Riverlate Properties Ltd v. Paul

6.       MISREPRESENTATON BY THE PLAINTIFF

7.       MISDESCRIPTION

8.       LAPSE OF TIME/LACHES/DELAY

9.       TRICKINESS

10.     ILLEGALITY

11.     DEFECTIVE TITLE

EQUITY Lecture 6                                                                          9^th March 2004

INJUNCTIONS:

Definition

An injunction is an order of the court directing a party to the proceedings to do something or to refrain from doing a specified act.  It is granted in cases in which monetary compensation affords an inadequate remedy to an injured party.

1.       Prohibitory Injunction:

2.       Mandatory Injunction:

3.       Perpetual Injunction:

4.       Interlocutory Injunction:

5.       Quia Timet (Anticipatory)

Prohibitory Injunction is restrictive because a person is prohibited or restrained from doing a particular act.  A person can be ordered to refrain from continuing to do something if he may already have started to do the act. This is an injunction restraining the doing or continuance of some wrongful act.  These injunctions are far more common than mandatory injunctions.  Thus a court which wishes to secure removal of buildings wrongfully erected can order the defendant not to allow them to remain on the land, a form of order which seems strange in a jurisdiction which traditionally looks to substance rather than form.

Mandatory Injunction

This is an injunction to restrain continuance of some wrongful omission.  A mandatory injunction is made in a positive form, ordering some act to be done.

Divided into

(a)     Restoration Mandatory Injunctions require the defendant to undo a wrongful act, to restore the status so that the damage does not continue.

(b)     Mandatory Injunction proper - this compels the defendant to carry out some positive act to remedy a wrongful omission.

If a contract is involved the plaintiff would be likely to go for specific performance.  However the mandatory injunction has the same consequences.

Injunctions were all couched in the same prohibitive language for example a court order would sound like this “the defendant is hereby ordered not to allow the buildings to remain on the land” as opposed to the defendant is hereby ordered to demolish the building.  The idea is to make it sound prohibitive.  Snell made a comment that for a court of equity that concerned itself more with substance than form should be so concerned as to form.

Jackson v. Normanby Brick Co. [1899]1 Ch.438

Perpetual Injunction:

A Perpetual injunction can be granted for the lifetime of the Plaintiff.  The Perpetual Injunction is so called because it is granted at the final determination of the rights of the parties.  It is not called perpetual because it will operate forever, perpetual relates to the fact that the court will finally settle the dispute between the parties.  A perpetual injunction is granted only after the claimant has established his right and the actual or threatened infringement of it by the defendant.

Interlocutory Injunction

It is also called temporary it has cousins one of which is Interim and the Ex-parte.

An interlocutory injunction is granted before the hearing of the main suit or before the determination of the main suit.  Its purpose is to maintain the status quo until the matter is finally determined.  It is quite common in relation to land matters.  An interlocutory (or interim) injunction is granted before the trial of an action; its object is to keep matters in status quo until the question at issue between the parties can be determined.  Accordingly, the claimant may obtain it without making out a case which will necessarily entitle him to a perpetual injunction.

When the plaintiff is serving the main suit, he will also serve the defendant telling him that by the time the matter comes up for hearing, he will be making an application for an interlocutory injunction.

The decision that the court makes on that motion day i.e. when it decides on the interlocutory motion, it will not be based on the merit of the case but it is left for the main hearing of the main suit.

Ex parte Injunction is granted without hearing the other party.  It will only last until the next motion day.

An interim injunction on the other hand restrains the defendant until some specified date.  After the ex parte injunction is lifted on the motion day, a plaintiff may apply for an interim injunction to last until a specified date and usually it does not last more than 14 days.  This usually gives the defendant time to go and prepare the case.

Quia Timet

This type of injunction is granted to prevent a threatened infringement of the Plaintiff’s rights.  There are signs that infringement will occur but the rights have not been infringed yet.  One applies for an anticipatory injunction (Quia Timet) in anticipation that some certain right is about to be infringed.  This also occurs where the claimant has been fully recompensed for the damage already suffered but alleges that there is a risk that further damage may occur, as where the defendant has carried on operations on his land which imperil the stability of his neighbour’s land.

For the court to grant the anticipatory injunction, the following conditions must be established.

1.       The plaintiff must show a very strong probability of a future infringement.

2.       The Plaintiff must show that the danger is imminent and

3.       the Plaintiff must show that it will cause substantial or irreparable damage and that an award of damages will not be a sufficient or adequate remedy.

4.       The Plaintiff must show that the damage will be of a most serious nature.

As far as the injunctions are concerned, you can have more than one injunction

Can a Prohibitory Injunction be perpetual?  Yes it can

Can a Prohibitory injunction be interlocutory?  Yes it can

Can a Mandatory Injunction be perpetual?  Yes it can - when the defendant is ordered to demolish buildings, he is not expected to go back and build them so the Mandatory Injunction can be perpetual.

Can Mandatory be interlocutory?  Yes it can but rarely.

Can an exparte injunction be Prohibitory - Yes it can.

Can an exparte injunction be interim?  Yes to the extent that it lasts until a specified date.

Exparte can be mandatory but rarely.

Interim can be mandatory - Yes it can, an interim can also be Prohibitory

PERPETUAL INJUNCTIONS

General Rules

The very first principle of injunction law is that prima facie you do not obtain injunctions to restrain actionable wrongs for which damages are the proper remedy.  Thus no injunction will be granted where an illegal act has been done in the past but there is no intention of repeating it, or where the injury can be adequately compensated by money.  But an injunction may be granted if an award of damages would be useless e.g because the defendant is a pauper, and many wrongs such as continuing nuisances or infringements of trade marks, demand more adequate relief than money.  Moreover, a party to a contract has a right to its performance and not merely to compensation for breach and hence an injunction will be granted to restrain breaches of negative contracts, if, however, the parties have specified a sum as liquidated damages for breach of a negative contract, the claimant cannot recover both the sum and claim an injunction.

1.       The Plaintiff must establish a right. If the party who seeks it has a cause of action which includes statutory as well as private rights of action justifiable before the court.  This general rule cuts across the board that is in relation to other branches of law.  This right can be a legal right or it can be an equitable right, if it is for mere convenience, the law does not recognise that. 

In the case of Day v. Brownrigg (1878) 10 Ch. D 294.  The Plaintiff lived in a House that he called Ashford Lodge.  The Defendant lived in a smaller house that was called Ashford Villa.  The Defendant changed the name of his residence and changed the name of his villa and called it Ashford Lodge.  The Plaintiff was unhappy about this and he sued for an injunction to prohibit the Defendant from calling his house Ashford Lodge.  The parties had lived next door to each other for a long time and the Plaintiff had used the name Ashford Lodge for 60 years.  The court held that there is no legal or equitable right to the exclusive use of the name of a private residence.  The court refused to grant the injunction.

2.  Discretion:    A party who establishes his right and its violation will be entitled to an injunction.    Although the court has a discretion whether to grant or withhold an injunction, an order to restrain the breach of a negative contract may be obtained almost as of right.  The court exercises discretion according to well settled principles in granting injunctions.  In Doherty v. Allman  the court refused an injunction to restrain ameliorating waste by a tenant under a lease with over nine hundred years left to run; Lord Cairns L.C. said: “if parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a court of equity has to do is to say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such case the injunction does nothing more than give the sanction the process of the Court to which already is the contract between the parties.  It is not then a question of the balance of convenience or inconvenience, or of the amount of damage or of injury-it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open between themselves.”  Thus a purchaser who covenants not to carry on any trade, business or calling in the premises can be restrained by the vendor from opening a school there, even though the vendor would sustain no damage.

(i)      Nominal Damage - the fact that the Plaintiff has suffered nominal damage does not mean that he should be refused a remedy.  If the court decides that you have suffered nominal damages, the court will exercise its discretion to grant an injunction. Indeed, that the damage is trifling may be ‘the very reason why an injunction should be granted.’   Armstrong v. Sheppard & Short

Behrens v. Richards

In this case, the Plaintiff had sought to restrain members of the public from using tracks on the claimant’s land situate on an unfrequented part of the coast, which use caused no damage.  The court refused to grant an injunction.

(ii)     Compliance:        Where a party claims that compliance will be difficult or impossible, the plaintiff has established a violation of his right or has established damage but the defendant says that compliance is difficult or impossible.  For instance if you are talking of a situation where the defendant has wrongfully cut down the trees, it will not be effective for the court to allow an injunction not to allow the trees to remain lying on the ground (equity does not act in vain) compliance is impossible.  Remedy will be suffered better by damages.  Attorney General v. Colney Hatch Lunatic Asylum [1868] 4 Ch. 146, 154.

(iii)    Annoyance may have ceased:  If the annoyance has ceased before the trial or if it is just temporary and not intended that it ought to be repeated, the court can exercise discretion and refuse to grant the injunction.  Barber v. Penley and Wilcox v. steel    

(iv)    The defendant can give an undertaking:  the defendant will give an undertaking to the court to abstain from the acts that are complained of by the Plaintiff.  This undertaking is equivalent to an injunction and if the defendant breaches the undertaking it is taken in the same way as a breach of a proper injunction or as contempt of court.

(v)     Order unnecessary: An injunction may also be refused where the claimant has a remedy available in his own hands, e.g. by refusing to supply goods to defendants who are dealing with them in breach of contract.

3.       Inadequacy of Damages: The courts have held that in certain circumstances damages will be inadequate and therefore the only remedy to grant is the Perpetual Injunction. 

(i) Continuing Nuisance  the nature of a continuing nuisance is that this annoyance will never cease.  There is no way of stopping it.  Martin v. Nutkin earliest reported case in perpetual injunctions.   This is a case where the Plaintiffs were annoyed by the daily ringing of a church bell at 5 in the morning.  The Parson of the church, the church wardens and others on behalf of the parish agreed to stop the ringing of that bell.  They entered into an agreement with the Plaintiffs not to ring that bell during the lives of the Plaintiffs, as long as the Plaintiffs provided the church with a new clock and bell.  The Church rang that bell in breach of the agreement and the Plaintiffs went to court seeking a perpetual injunction.  The court granted a perpetual injunction because this was a continuing nuisance.  Note this injunction is called perpetual but does not last forever, it last for the lifetimes of the Plaintiffs.  Secondly the injunction was supposed to settle that dispute once and for all.

(ii)     Infringement of Trademarks the case of Licensed Victuallers’ Newspaper Co. v. Bingham (1888) 38 Ch.D 139 and the case of Borthwick v. The Evening Post (1888) 37 Ch.D 449

4.       Conduct of the Plaintiff:  if the plaintiff is guilty of delay, he will not get a perpetual injunction, if he has come to court with unclean hands, if he is guilty of acquiescence he will not get the remedy of injunction because his conduct is wanting.  Sayers v. Collier an injunction to restrain the use of a house as a shop was refused by the court.  The court said that the same Plaintiff had bought goods from that shop and now he wanted the shop restrained.  He had acquiesced and his own conduct bound him.  He who comes into equity must come with clean hands.

5.       Locus Standi & Public Rights:  The Attorney General can obtain orders for the protection of public rights. To what extent can the attorney general obtain an injunction to restrain criminal acts?  Attorney General v. Chaudhry  this is a case where a hotel was operating without a fire certificate and therefore posing a danger to the public.  The Attorney General applied for an injunction against that hotel and it was granted.  In the case of Attorney General v. Sharp an injunction was granted against an omnibus proprietor who had been refused a licence to operate.  The operator preferred to pay the fines and continue operating.  The profits he was making daily were greater than the fines so the only way that the Attorney General could stop him was by means of a prohibitory injunction.  In AG v. Harris there were two flower sellers who used to sell flowers illegally from stalls.  They would be arrested, fined and they would be out and this continued.  The Attorney General got tired and by the time he sought a Prohibitory injunction the defendants had 237 convictions between them and the only way to stop them was by means of a Prohibitory Injunction. 

The attorney general is the protector of public rights, can an individual seek an injunction for violation of a public right created by statute?

There are 3 conditions that must be met

1.       The individual must show that the infringement of the public right has infringed some private right;

2.       The individual must also show that the infringement has inflicted special damage on him or her;

3.       The individual must show that he or she is a member of a class for whose benefit the statute was passed. 

The individual can obtain redress for infringement of a public right if they meet the 3 conditions.

Lonrho v. Shell Petroleum Ltd. (1982) A.C. 1973 

Public rights are normally asserted by the Attorney General, as representing the public.  A private person is entitled to sue in respect of interference with a public right if there is also interference with a private right of his, which case, however, does not depend on the existence of a public right in addition to the private.  Lord Diplock in the above case said that there were two classes of exception to the general rule.  The first is where on the true construction of the Act it is apparent that the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of Factories Acts and similar legislation.  The second is where the statute creates a public right (ie right to be enjoyed by all of those who wish to avail themselves of it) and a particular member of the public suffers particular, direct and substantial damage other and different from that which was common to all the rest of the public.  A mere prohibition on members of the public generally from doing what it would otherwise be lawful for them to do is not enough.

Gouriet v. Union of Post Office Workers (1978) A.C. 435

The environmental act has opened up the opportunity even for members of the public where there is environmental damage.  The rule of locus standi has been relaxed

EQUITY Lecture 7                                                                12^th March 04

INTERLOCUTORY INJUNCTIONS

There is a major difference between perpetual injunction and the interlocutory injunction.

There are 3 principles that govern the interlocutory injunction:

1.       The Prima facie Case

2.       Balance of Convenience;

3.       Irreparable injury

There is one main rule which applies in respect of Prima Facie case - a plaintiff has to show a prima facie case with a probability of success.  If the court is in doubt it will decide the matter on a balance of convenience and in deciding on the balance of convenience the court looks at the irreparable injury.

a.       Right

b.      violation-success;  that a right has been violated and that you stand a chance of succeeding;

c.       The Plaintiff must show a prima facie case for the violation of that right that is reasonably capable of succeeding.

If the court is in doubt it should decide the matter on a balance of convenience.

Doubt is as to whether the Plaintiff will succeed as the Defendant might also have a very strong case.  Where the court is in doubt it decides on a balance of convenience.  But for the court to do this it has to decide on irreparable injury.  The essence of regarding irreparable injury is to show that the damage cannot be compensated in damages.  The plaintiff has to show that if he doesn’t get an injunction, damages in form of remedy will not compensate him.  The test of irreparable damage is that damages are inadequate.

East African Industries Ltd v. Trufoods Ltd

East African Industries Ltd and Trufoods Ltd were and are still manufacturers of fruit drinks.  East African Industries as the Appellant applied to the High Court for an interlocutory injunction wanting the court to restrain the passing off of the products of Trufoods Ltd as those of East African Industries.  The Appellant claimed that Trufoods had changed the shape of its bottles.  It had also changed the shape and design of the labels so that they resembled those of East Africa Industries and the intention was to deceive.

East African Industries were seeking for a perpetual injunction in the main case but in the interim they wanted a temporary injunction to sustain the status quo.  The matter was first dismissed in the High Court where the Judge directed his mind on the labels and not the whole picture.  This High Court Judge took Judicial notice that the majority of the customers for this product would be able to read English.  The High Court Judge concluded that most people would be able to read English and not get confused.  The judge concluded that East African industry was unlikely to succeed in the suit because no reasonable ordinary shopper would be deceived by the resemblance of the two bottles and therefore the application of the interlocutory injunction was dismissed.

East African Industries went to the Court of Appeal and Spry J. decided

“I think that a prima facie case has been shown but I am not prepared to say that the outcome is so certain one way or the other that the application ought not to be decided on a balance of convenience.  An interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury which would not adequately be compensated by an award of damages.”

The High court and balance of convenience

The High Court held that the appellant co. would not suffer irreparable harm if an injunction was refused

After this case, under the English system, those rules have been expressed in a different way so that following the case of American Cynamid the English courts coached a rule using different words.  In this case the court held that we should not rely too much on the prima facie rule since it was so strict but should try and consider the serious questions to be tried.

The American Cynamid case dealt with two companies that manufactured surgical sutures.  Both companies were American companies but the defendant co. was about to release a surgical suture which the Plaintiff company claimed infringed its patent.  Had the Plaintiff established a prima facie case with the probability of success?  It was not a hard and fast rule that the plaintiff must establish a prima facie case.  All the Plaintiff needed to prove was that there were serious questions that needed to be tried.   In all cases dealing with patent matters the court must establish the matter on a balance of convenience.    It was difficult to say for sure on the right of the parties and a balance of convenience was necessary.

What does it take to establish a prima facie case with a probability of success?   It requires the court to go to matters of the trial.  What is probability of success?  What does he look for?

It was against this background that the American Cynamid was decided.  American Cynamid was decided in 1975 and it has been argued that American Cynamid varied the Prima facie rule.  However it has been argued that this new rule does not apply in Kenya.

Approval of the Cynamid Rule by courts in Kenya.

There are other factors that the court takes into account other than prima facie and balance of convenience.  For example the case must not be frivolous or vexatious.  This rule is intended not to harass the Defendant in a situation where the suit is futile or misconceived or is an abuse of the court process.

For us to say that a suit is not all of the above, we must show that it is serious.

The court looks at the conduct of the parties

There may be conditions and undertakings.  The court can grant an interlocutory injunction with conditions.  The court can also ask one of the parties to give an undertaking usually the Plaintiff is asked to give the undertaking in damages.  i.e. a certain sum must be pledged to court so that if the Plaintiff is not successful, they can pay the Defendant damages.  The effect of not honouring an undertaking to the court is contempt of court.

Case Law -  where these rules have been applied

BAT (K) Ltd v. Cut Tobacco  - East African Industries v. Trufoods decision.

Simon Waiharu Chege - the court used prima facie standards.

Woodcrafts Ltd v. East Africa Building Society - Justice Ringera used the prima facie case standard.

Central Bank v. Uhuru Highway Development Ltd - the court emphasized balance of convenience indicating a shift towards American Cynamid.

DEFENCES FOR INTERLOCUTORY INJUNCTION

1.  Delay

2.  Acquiescence

3.  waiver

4.  Hardship

5.  Conduct of the Plaintiff;

EQUITY LECTURE 8                                                                   19.4.04                                   

RECTIFICATION

Definition

Rectification is an equitable remedy that is normally granted in a situation where a written instrument does not accord with the true agreement of the parties.  If by mistake, a written instrument does not accord with the true agreement of the parties, equity has the power to reform or rectify that instrument so as to make it accord with the true agreement.

What is rectified is not a mistake in the transaction itself (the agreement or contract), but rather a mistake in the way which that transaction has been expressed in writing.  If for example the intention or the agreement is agreed at 1.5 million as the purchase price, if the document shows a different price of 150,000 what is being rectified is the way the agreement has been translated in writing.

The mistake that has been analysed in the case of Mackenzie, where it was stated that ‘courts of equity do not rectify contracts, they only rectify instruments purporting to have been made in pursuance of the terms of the contract.”

Whiteside v. Whiteside

Evershed M.R. stated that Rectification is a discretionary remedy “which must be cautiously watched and jealously guarded.

The rules are strict and the courts are hesitant to give rectification remedy.

For remedy of rectification to apply there must be:

1.       Absence of an alternative remedy rectification will not be granted e.g

(a)     addition in instrument-collateral contract;  (

(b)     parties voluntarily agree to rectify instrument;

(c)     obvious clerical, typographical or grammatical error- court corrects as a matter of construction.

2.       Mistake

Parties must show final and genuine agreement and that the instrument failed to record it.  Oral evidence is admissible to prove agreement.  In order to show that the written instrument does not reflect what the parties agreed on.

Remedy exists to correct, not improve instrument.

Gross Mistake - can be

·   Common mistake - common to both or all parties to the instrument - rectification will be granted as a general rule.

·   Unilateral mistake - one party incorrectly records a term of the agreement; term is accepted bona fide by the other party.

·   The general rule is no rectification.

EXCEPTIONS

·   Fraud

·   Estoppel - there is no deliberate intention to defraud but the mistake is not brought to the attention of the other party.

·   Equitable election - Paget v. Marshall (1884) 28 Ch. D - the court puts defendant where he has to choose rectification or rescission.

·   Unilateral transactions e.g. Deed Poll.

Riverlate Properties Ltd v. Paul

Roberts & Co Ltd v Leicestershire

Burden of Proof of Mistake

Very high standard of proof.  Strong irrefragable evidence, strong unshakeable evidence with a high degree of conviction

There must be evidence of the clearest and most satisfactory description that will establish the mistake with a high degree of conviction and leave no fair and reasonable doubt that the deed does not embody the final intention of the parties.

Difficult in particular circumstances e.g.

·   Passage of years - Fredensen v. Rothschild - lapse of over 33 years.  Held: Time begins to run from discovery of mistake

·   Where the Plaintiff is a solicitor who drafted the instrument: Ball v Storie

Examples of instruments that the court will rectify

·   Mercantile documents e.g. policies of marine insurance.  Mackenzie v. Coulson

·   Bills of exchange

·   Transfer of shares forms

·   Conveyancing documents

·   Consent order (agreement inter parties)

·   Land Register - RLA Cap 300 Section 143 - deals

Instruments that will not be rectified

·   Memorandum and Articles of Association of a company.  These have provisions stipulating how they are to be altered or amended.

·   A Will cannot be rectified except for fraud; where there is not fraud - a codicil is prepared.

·   The Constitution. There is a special procedure for amending the constitution and courts cannot do that

·   Acts of Parliament - have a procedure for amending them;

RECTIFICATION DEFENCES

There are certain defences that can be pleaded by the defendant against an order to rectification

1.       Contract no longer capable of performance - Equity does not act in vain.  (for example where the subject matter is destroyed i.e. vegetables have perished or goods lost at sea)

2.       It cannot be granted to the prejudice of bona fide purchaser for value without notice:  Smith v. Jones.

3.       Laches or acquiescence: Beale v Kyte

·   Carelessness of P is no defence, only increases burden of proof of mistake but cannot be used as a defence to defeat a claim of rectification  -

EFFECT OF RECTIFICATION ORDER

·   No new document needs to be executed;

·   Copy of court order endorsed on instrument being rectified;

·   Decree has retrospective

EQUITY LECTURE 9                                                          20^th May 2004

RESCISSION

This is a right to rescind.  The right is available to a party to a transaction to set that transaction aside and be restored to his former position.  It is not strictly a judicial remedy.  Rather, it is effected by the act of the party entitled to rescind.  However, it is still a remedy to the extent that the assistance of the court is usually required to determine whether a party can rescind and also obtain restitution of property handed over pursuant to the transaction.

It is an equitable remedy since only a court of equity could do what was necessary to make restitution.

The plaintiff whom the court has decided has right to rescind has to take steps to rescind the contract.  All the court rules is that a party is entitled to rescind but does not order a particular contract rescinded and this is why we say that it is not strictly a judicial remedy, though one still requires the assistance of the judiciary to rescind.  This is important if property has changed hands as the only way that the property can get back is to get the court to rescind the contract.  The assistance of the court is important.

Rescission can be seen in different senses.

1.       Strict Sense.  The contract contains an inherent cause of invalidity.  This is a remedy that will arise where the contract contains an inherent cause of invalidity such as mistake, validity, lack of consent that makes the contract voidable at the suit of one of the parties.  If and when that party declares his intention not to be bound by the contract, he is said to rescind it.

2.       Loser Sense:   Includes one of the options which the innocent parties may have where a perfectly valid contract is broken by the other party.  It is a perfect contract and had each party done their party should have been concluded but where one party has broken his part of the bargain (repudiation).

WHY RESCIND?

A party may rescind a transaction due to the following.

a.       Fraudulent misrepresentation:

The party may have been induced to enter into a contract by fraudulent misrepresentation.  A fraud is proven when it is shown that a false representation has been made knowingly or without belief in its truth or recklessly or carelessly whether it is true or false.  That false statement must have been made with the intent that it should be acted upon and it must have actually been acted upon by the other party. 

b.      Innocent Misrepresentation:

A misrepresentation is innocent if the defendant believes in the truth of his assertion even if he has no reasonable ground for his belief.  See:  Derry v. Peek (1889 14 A.C. 337.  The misrepresentation is also innocent if the defendant once knew the true facts but has forgotten them.  See Low v. Bouverie (1891) 3 Ch. 82  and Hedley Byrne v. Heller (negligent misrepresentation)

c.  Constructive Fraud:

Gifts and bargains procured by undue influence and unconscionable bargains may be set aside by the victim.  Constructive Fraud may be implied in two circumstances:  It is for the court to interpret the circumstances and to declare that there is fraud.  There are two fine distinctions.

(i) Undue Influence:          This is where the person who agreed to enter into the contract was induced to do so because of the special relationship existing between him and the other party to the contract.  Special relationships in which undue influence is presumed by law include the following: parent and dependent child, religious adviser and disciple, advocate and client, doctor and patient and trustee and beneficiary. The courts have laid down rules as to when undue influence will be presumed by the court.  There is a presumption of law about relationship between a child and parent.  A parent has influence over the child.  Religious adviser and disciple, trustee and beneficiary.

(ii) Unconscionable Bargain:      This is where one of the parties has a great advantage over the other party such that the contract entered into is unconscionable.  This will occur where the party who is at a disadvantage is, for example, illiterate, unskilled or has no experience in the area in which he contracts.  Where one party is at a disadvantage, i.e. from being illiterate, lack of skill etc.  for example when one buys a car, if one is not conversant with the workings of a car one is disadvantaged if dealing with a dealer.  The starting point is that once a bargain always a bargain.

When can a bargain be said to be unconscionable?  No principle appears to exist to decide what is unconscionable.  It is a question of whatever shocks the conscience of whoever is deciding the case.

2.       By impossibility of “restitution in integram”:   

A contract liable to be rescinded is generally valid until set aside, i.e. it is voidable.  A contract may cease to be capable of being set aside or rescinded where the parties cannot be restored to their original position.

3.       After completion:

Innocent misrepresentation gives no right to rescind after completion.  If it is contract for the sale of goods, the right is lost after the goods have been accepted as was held in Long v. Lloyd (1958) 1 WLRL 753

4.       By Intervention of third parties:

If the third party is a purchaser, the right is lost if such third party has acquired rights there-under for value without notice.

If the third party is a volunteer, the right to rescind is not lost.

Effect of Rescission

A person who rescinds a contract is entitled to be restored to the position he would have been in had the contract not been made.  Property must therefore be returned, possession given up and accounts taken of profits or deterioration.  However, NO damages are recoverable.

Uberimae Fidei

Contracts of utmost good faith like insurance.  Contracts that require full disclosure. Non disclosure where full disclosure is required gives a right to rescission. 

Misdescription:  if a property is misdescribed equity cannot act in vain by allowing a contract that contains a wrong description of property.  The right to rescind can also be a term of contract itself.

Limits to the use of the right or Rescission

1.       A vendor can claim that he was not able to secure a title to the property:  he is supposed to ensure that at the time he sets to enter into a contract with the other party, he must have the title and should do everything possible to have the title.  He will be compelled to do what is required.

2.       If a judicial decision has been used against him such as specific performance, the seller cannot purport to rescind the contract;

3.       If the payment of purchase price is by way of instalment,  if the buyer delays in remitting a certain instalment, the delay does not entitle the seller to rescind the contract.

The loss of the right as opposed to the limits

One can lose the right if they acquiesce, waiver, delay and laches - equitable principles can be applied to say that the party has waived their right under the contract and they thus lose the right to rescind the contract and must be compelled to complete the contract.

Affirmation - if the representee affirms the contract by express words or act, which shows an intention to affirm it, then the right to rescind the contract is lost:

The right to rescind a contract will be lost by impossibility of restitution in integram - parties are not able to go back into the state they were in before the contract was entered into.  It is impossible to take them to the original position.  Where parties cannot be restored, there cannot be rescission.  It may well be that circumstances have changed that it may well be impossible.

After completion of the contract, the right to rescind ceases to be available.  Long v. Lloyd pronounces that in a contract for the sale of goods the rights is lost after the goods have been accepted.

There are rules that govern when completion of a contract takes place.  The contract itself will stipulate when completion takes place.

Right to rescind can also be lost if there is intervention by 3^rd parties.  Where a 3rd party has interest in the property, (bona fide purchaser without notice)  the original two parties to the contract will lose right to rescind.  If the 3^rd party has paid valuable consideration equity recognises the bona fide purchaser for value without notice.

Where rescission has taken place, damages will not be recoverable.  If there were any profits accruing, accounts will be taken; if any deterioration has taken place the court will take notice and decide who is responsible for the deterioration.

Workers Trust and Merchant Bank Ltd

The privy council held that only 10% deposit was to be forfeited if rescission arose.

If the seller decides to resell the property

Dojap Investments Ltd [1993]2 WLR 702

Equity mitigates the harsh common law position of requiring that the purchaser forfeits the deposit money whatever amount but equity will only demand that only the required 10% be forfeited.

Multiple Remedies

A Plaintiff may in his suit pray for more than one remedy: See

Abdul Karim Khan v. Mohammed Roshan [1965] EA 289

The Appellant sued the Respondent on an agreement in writing whereby the Respondent agreed to sell to him an undivided half share in a property for a price which he had paid.  Subsequently, the respondent charged the property to a company and refused to complete the sale.  The Appellant claimed specific performance of the agreement, damages for breach of the contract, rescission and a return of the money paid, in alternatives.

The court held it was quite in order to put all the reliefs in the alternative.  It would have been invalid had he claimed the remedies together.

Rescission is an equitable remedy and the court has discretion  to grant it.

EQUITY LECTURE 10                                                                

REMEDY OF APPOINTMENT OF RECEIVER

This remedy is purely equitable in origin.  the receiver’s main function is to collect and preserve income, to protect property which is in danger, or on the other hand to enable a person obtain the benefits of his rights over a property, or to obtain payment of his debt, where the legal remedies are inadequate.  He may be appointed in a variety of cases e.g. by the court as an interim measure of protecting property that is in dispute. 

Outside the court where there is a statute that gives a particular entity the power to appoint a receiver.  In the case of mortgages and charges you have the RLA and the ITPA granting the mortgagee or chargee the power to appoint receivers.  The CBK Act gives authority to CBK to appoint a receiver where a commercial bank is floundering.

Appointment outside the court can be by contract.  A mortgage or a charge as contracts provide for the power to appoint a receiver.  A debenture is another document that will contain a power to appoint a receiver.

There are certain advantages that accrue from the appointment of a receiver.

1.       The receiver is supposed to protect the property and safeguard the security of the creditors and debenture holders.  He will determine who gets paid first.

2.       Expert monitoring of the company’s management and trading activities.  The trouble may be that the receiver may not have the expertise in the field of that company and it is up to him to hire the necessary experts.

3.       he makes a rapid assessment of the company’s management and trading activities.

4.       He sells the business or viable parts of it as a going concern and obtains a higher price that that which would be obtained in liquidation of the company.

DISADVANTAGES

1.  If a business is insolvent, there will be extra burdens, especially if there is no hope of recovery for that company.

2.  The staff that the receivers come in with may not have the expertise about the business that the company is involved in.  it is absolutely important that if a receiver knows he does not have the expertise to get the necessary expertise to assist in management of the company.

3.  the reputation of the company in receivership suffers greatly.  The suppliers do not want to deal with the company due to the negative publicity.  This can hamper the efforts of the company to actually recover.

4.  Even when it is a going concern, the sale as a going concern will fetch a less amount than what the company would have received had it been a going concern before being put into receivership.  When a property is sold via a public auction, the property ends up going for less than the market value.  Nobody wants to buy the assets at their real market value. 

A body corporate cannot be a receiver and neither can an undischarged bankrupt.

APPOINTMENT BY RECEIVER BY THE COURT

This provides for the situations where the courts will appoint a receiver, where the company is being wound up and the security is in jeopardy.

RECEIVER & MANAGER

STATUS OF A RECEIVER APPOINTED BY COURT

This receiver is not an agent of the company, he is not even an agent of the debenture holder, instead he is an agent of the bank.  This receiver is an officer of the court and not an agent of any of the parties.  If he makes any contracts he is personally liable but he will be indemnified by the assets of the company.

Since he is appointed by the court, he cannot sue or be sued without first going to the court.  Novation,  the rules is that the receiver is not liable for any acts or the company that existed before he became a receiver.  however this receiver can be liable by novation - a special document where someone accepts to take on some certain responsibilities.

Newhart Developments v. Co-operative Commercial Bank [1978] Q.B 814

The receiver’s remuneration is fixed by the court either by way of salary or an agreed percentage of his receipts.  Receivers rank as unsecured creditors right down the list. 

APPOINTMENT OF RECEIVER OUTSIDE COURT

Debenture Holder - There may be reference to a floating charge where some interest of a lender is identified by means of a floating charge but without isolating any particular goods but the minute the company goes into receivership the debenture crystallises.  The debenture holder will appoint a receiver where there is a specific provision in the debenture that gives power for the appointment of receiver.  The receiver has to notify the registrar of companies about his appointment so that the registrar can indicate this in the register.  The receiver must notify the registrar to notify the entire world that anybody dealing with that company is deemed to have notice that the company is under receivership.  A receiver appointed by a debenture holder, he becomes the agent of the debenture holders and the debenture holders are liable as principals to whatever contract the receiver gets into.

Since a receiver appointed out of court is a mere agent, he incurs no personal liability for acts properly done by him as a receiver.  however, in the case of a receiver of the property of a company, the Companies Act provides that the receiver is to be personally liable on any contract entered into by him in the performance of his functions to the same extent as if he had been appointed by the court.  The receiver is not personally liable on existing contracts unless he accepts them by novation.  But he has duty to ensure that if the contracts are profitable, they are performed fully and profitably.

Where a receiver is appointed out of court, the employees are not automatically dismissed and their contracts remain intact and inoperative.

EFFECT OF APPOINTMENT

Floating charges crystallise and become fixed.  The directors’ powers are suspended and the company cannot deal with the assets charged without the receiver’s consent.  However this does not prevent a director   from pursuing an action on behalf of the company if the debenture holder’s interests are not thereby threatened.

STATEMENT OF AFFAIRS

The company is supposed to submit the statement.  Section 351 of the Companies Act provides that where a receiver or manager of all substantially all of the property of the company is appointed, he must give notice forthwith to the company.;

(i)      Past and present officers of the company

(ii)     Persons who have participated in the formation and management of the company at any time within one year of the receivers appointment

Once the receiver gets the statements, he is supposed to send them to the

(i)      registrar and to the court, a copy of the statement together with the comments.

(ii)     He is supposed to give the statement of affairs to the company and in addition he has to give his own comments derived from his own observation as an expert.  

(iii)    The statement also has to be given to the debenture holder.

RULES REGARDING

The receiver has to forward to the registrar an abstract showing what he has received from the contracts that the company has undertaken.  The receipts and the payments cover 12 months.  At the end of one year, the receiver has two months to show what he has received, and what he has paid out.  If he does not disclose within this period, it becomes a criminal offence.  This is an ongoing thing, they are receipts that are made periodically and every time he receives from trading with the companies assets, where there are costs to do with valuation, where there are costs to do with advocates  i.e. certain expenses association with realisation will have to be paid first.  If the receiver has incurred a liability the money must be used to indemnify him.

Finally the principal and debts due under the debenture debt.

A receiver can exercise his freedom and to leave, he has to notify the registrar or seek directions to the court.  The company if solvent will revert to the shareholders but it the company is still insolvent, he must inform the registrar to commence the winding up process.  A receiver can also be removed by the court upon the application of an interested party.

He can also resign by giving notice to the court, the registrar and the debenture holders.

The essence of receivership is such that it can be compared with a very morbid situation as by the time a company goes under receivership, it has moved from walking freely and has gone into hospital and things have not worked, admitted but things have gotten worse, moved to HDU and on to ICU where it needs life support.  The life support by a receiver of his team but if all fails, the company will be consigned to the morgue or be liquidated.

Essentially by the time the bankers appoint a receiver, they will have given the company many chances and debts will have been rescheduled and the company will have failed to honour its obligations.

EQUITY  Lecture  11                                                                     27.4.04

Excerpts concerning receivers

Excerpt by                                                                                                

“failing firms keep receivers in business.

DECLARATION:

This is a pronouncement by the Court regarding the rights of a party to a dispute or transaction.  The court declares these rights, hence the term declaration.

Today one individual can sue another seeking a declaration.

Exception in Cap 40  - The law is set to change because there was a landmark case that was decided last week where the High Court Judge handed a decision the effect of which firstly it he said it is possible to grant an injunction against the government.   In the case of High Court Misc Civil Application No. 1609 of 2003 and it was by way of Originating Summons in the matter of Samuel Pipo Limet.  This matter deals with the Children’s Act and is between Marie Elizabeth Christian Adelaide de Brouwer V. the Attorney General as the Respondent.  This case involved a deportation order that was issued by the Minister of State and the Applicant brought an originating summons seeking the following prayers. An injunction to restrain the defendant from executing the deportation order.  The prayer in the O.S. were for the following

1.       Injunction to restrain the Defendant from executing a deportation order

2.       Declaration that the deportation order was illegal and a threat to the rights of the child.

The Applicant also filed a Chamber Summons seeking an interlocutory injunction to restrain the defendant/respondent from executing the deportation order until the main suit is heard and determined.

The O S is seeking a perpetual injunction by the chamber summons is seeking an interlocutory injunction to restrain the Defendant.  The Interlocutory Injunction was granted because the Respondent did not answer to the Chamber Summons Application.

The case is interesting for having set the rule so far that it is possible to obtain an injunction against the government.  (this case was under the Children’s Act).

An appeal cannot be sustained regarding the interlocutory order has time to appeal has elapsed.

The position in England is that the power to make a declaration is now statutory though it emanated from equity.  See Chapman v. Michaelson [1909] Ch. 238

Jubilee Insurance Co. v. John Sementengo 

Facts of the case.

The issue arising from this case is whether the insurance company has the right to seek a declaration that an insurance that has been obtained through non-disclosure of facts and misrepresentation.  The crux of the matter was that under the insurance policy John Sementengo answered the two questions one in the affirmative and the other one none and when asked to give a record of any accident he said none while the lorry had been involved in an accident.

Non Disclosure

Is the vehicle at present in a thorough state of repairs Yes - Misrepresentation.

Give record of accident and or loss during the past five years in connection with any motor vehicle owned or driven by you, None.   None disclosure.

Sementengo is saying the suit is premature and that the insurance should wait until there is an action asking insurance to pay.  The insurance company has every right to file a suit for a declaration before any case is commenced and that it can avoid a policy.

One seeks a declaration in respect of diverse issues, not in relation to a particular matter but in many issues although there some limits as to what kind of rights will issue.

Matalinga & Others v. A-G

1.       Kenya Clinical and Medical Association seeking a declaration or fighting for the rights of categories in the medical profession.

Was this the kind of dispute that could be entertained by the court of equity

Was the allegation that the seemingly different treatment of medical officers insofar as the salaries were concerned unconstitutional?

A mandatory injunction cannot issue to a Government official and therefore could not be made against the defendant.

Is there  a right that people can entertain to say that one category of officers are as good as the qualifications of another category of government officers and therefore the two categories are entitled to the same salary.

The court can grant a declaration in respect of unconstitutional discriminatory treatment but in Matalinga’s case no such discrimination was alleged.

They are not seeking a declaration in respect of any legal rights.

What is the law that applies in Kenya vis-à-vis the contract of employment?  In relation to the law of contract, a contract of employment is that one exercise the freedom to contract and having signed that contract one has a duty to fulfil the contract.  You sign a contract you are bound by it.

A mandatory injunction cannot issue to a government official and therefore could not be made against the defendant but in the light of Ojwang and his case of issuing an interlocutory injunction against the A.G.

ACCOUNT

Defendant is being called upon to give an account as to how he has utilised some funds entrusted to him etc.  when the suit is filed for an account, the defendant has certain defences,

The defendant can say they have agreed, struck a balance etc.  that defence of settled account can be rebutted and the defendant will still be required to account.  The court can order a re-opening of the account if there is fraud or a mistake that is so fundamental to the process.

On the other hand instead of the court giving an order that the settled accounts be opened, the crux is when the court says surcharge or falsify.

Reopening of settled accounts

This is ordered if there is fraud.  But note that even if there is no fraud but there is something else, there is a fiduciary relationship between the plaintiff and defendant the court will reopen the account.  When there is a fiduciary relationship the standard of very high.

Liberty to surcharge or falsify will be ordered where there is no fraud and there is no fiduciary relationship but there is a mistake which suggests that the standard is a bit lower.   Here we are saying that there was a credit due to the plaintiff’s favour which was not taken into an account and so it should be surcharged and given to him.

On the other hand, where the defendant was erroneously given some money that he was not supposed to have the court will say that the account was falsified and will order a refund.

Delay is a rule that applies across the board in equity. 

When talking about justiciable issues, or the kind of rights that will be recognised by the court of equity for a remedy to be granted equity will not suffer a wrong to be without a remedy, ibis jus ibis remedium.

In the case of Matalinga, this kind of assumption is unwelcome, there is not share for this kind of claim in equity.  Matalinga is saying that not all wrongs can be remedied.  There is technical equity that determines when a remedy is to be granted.

Do I understand the limits to application of equitable maxims?

EQUITY Lecture 12                                                              29^th April 2004

APPLICATION OF EQUITY IN KENYA

The formula for the general reception of Equity and the English common law, doctrines of equity and statutes for general application in Kenya contains a date of reception.  That date is stated in section 3 (1) (c ) of the Judicature Act Cap 8.

It provides that:

But the common law doctrines of equity and statutes of general application shall apply so far only as the circumstances of Kenya  and its inhabitants permit and subject to such qualifications as those circumstances may render necessary.

The significance of  date of reception - any modification of English law must be incorporated in Kenya.  But note exceptions in Law of Contract Act Cap 23.  the reception date itself acts as the limit of application of English law in Kenya.  Some interpretation has been given that there may be some statutes in Kenya which when they were enacted  di not build in the limitation e.g. the Law of Contract.  Law of contract is the exception rather than the rule that we can apply post 1897 English decisions in our courts.

Note therefore that if we are saying that the 1897 Laws have not changed as at 2004, then English decisions relating to those rules will be in a sense binding on us in terms of principles under the doctrine of precedent.  Even where the English decisions have changed the 1897 decisions, lawyers will still cite the new position to persuade the court and we do not entirely disregard post 1897 decisions.

The reception clause where the words equity or doctrines of equity is used is to be interpreted in a technical sense.   Technical equity is different from ordinary meaning of equity which is fairness.

Judicature Act Cap 8, Laws of Kenya Section 3

How equity became law of the received law of Kenya from England.  The earliest provision that received law into Kenya was the East Africa Order in Council of 12^th August 1897.  the Reception clause was contained in this clause.

The reception clause therefore refers to the provision by which English law became part of Kenyan law.  Section 3 (1) provides that the jurisdiction of the High ?Court, Court of Appeal and of all subordinate courts shall be exercised in conformity with

The constitution,

The procedure and practice observed in courts of justice in England at that date - this phrase explains why our courts carry out their business the way they do, horsehair, wigs, address etc.

There is however a proviso to Section 3(1) (c ) but the common law doctrines of equity and statutes of genral application shall apply so far only as the circumstances of Kenya permit and subject to such qualifications as those circumstances may render necessary

3(2) is regarded as the repugnancy clause and says that the High Court and all subordinate courts shall be guided by ….  It is not the repugnant clause.

Ordinary meaning of equity creeps in where we talk of equity “justice and morality” ‘substantial justice’ technicalities of procedure’. All these words go towards ordinary meaning of equity.  Lolkilite Ole Ndinoni Case - limitation of customary practice.

Who decides what is just and moral, who decide that an African custom is repugnant?  Judge, based on what?  His own personal views of what is just and moral?  One can only lay down guidance. Ordinary equity creeps in where judges are influence by their own values of equity in their own sense.

What is the significance of the repugnancy clause and how does it relate to equity?

Application of African Customary Law.  this sub section provides some limitations when applying African customary law.

Limitations to the Application of Equity in Kenya

To what extent is equity applicable in Kenya.  The reception date acts as a limit.

The proviso to para C the circumstances of Kenya and its inhabitants will also limit the application of doctrines of equity in Kenya.

Busaidi v. Busaid - case concerning a widow who father left her some property when he died.  She asked her husband and her brother to manage the property on her behalf.  The profits from the investments in these properties were banked in some account one of which was held by her husband in his own name.

According to Muslim Sharia Law the wife was supposed to get a quarter and her brother in law 3 quarters.

Brother in law tried to use the doctrine of advancement which is to the effect that when you have a spouse giving the property to another property is an advancement which is a gift.  The brother in law wanted the court to declare that what the husband has was his as a result of the advancement by the wife.

Ria lodged a claim for an account.  Dissect the accounts and remove what is mine.  The court upheld the Islamic Custom.  Muslim law was applicable in this case and it was wrong to use principles of equity in order to import the presumption of advancement in Zanzibar.  The court held that the cultural background of ria and her husband was different from that in England and therefore the Muslim Benami Custom would apply.  Here the court ordered an account that all the funds that were in various accounts and all the properties given to Ria by her father should be accounted for and given back to Ria and the remainder of the husband’s estate to be divided as the Muslim Law with Ria receiving her quarter.

If there is a Kenyan statutes (local legislation) that will outs the application of equity which takes us back to Section 3(1) (a) and (b) (a) gives preference to the Constitution and (b) all other written laws.  If there is a written law that is applicable to the matter in question then equity does not apply.  (Equity follows the law).

The Kenyan statutes which constitute local legislation outs the application of equity.

Wakf Commissioners Ordinance

The understanding under Wakf is we have a situation where a Muslim has died without heirs, not even a widow.  The Wakf commissioners specially appointed to serve as trustee who are supposed to hold the property on behalf of the Muslim community. They are to hold the property to the service of God. The public trustee is using the legal doctrine and is saying that the residue of the estate should go to the wife.

The section 18(1) of Wakf Commissioners Ordinance which was to the effect that the remaining portion after the widow’s quarter should go to Wakf. 

Court held that equitable principles were excluded by yet another section  of the Mohammedan Act.  Section 4 to be precise.

Local legislation can oust the application of equity.

Our Limitation of Actions Act Cap 22 - constitutes a limitation by local legislation.  The import of this Act is to let you know that there can be no remedy after a certain time.  Equity with doctrine of Laches has not place where the statutes define the limitations of actions.  (equity follows the law).

AFRICAN CUSTOMARY LAW

It is equity that is limiting the application of customary law under the repugnancy clause.  By virtue of reference to justice and morality which refers to the ordinary meaning of equity.

How has equity qualified application of African customary law in a civil case?  Refer to Lolkilite Ole Ndinoni.  Equity limits the application of African Customary Law.

Other situations that stand to be challenged by equity as being repugnant to justice and morality

1.       Infant betrothal;

2.       Child marriages, cradle snatchers; school girl marriages;

3.       Arranged marriages- no consent.

4.       Widow inheritance;  note the provision in Section 13(1) of African Christian Marriage and Divorce Ordinance:  “Any African woman married in accordance with this ordinance… shall not be bound to cohabit with the brother … of her deceased husband.  Task force on law relating to women went out to the villages with medicine telling women in the villages that wife inheritance is bad.  But the village women said they were not complaining.  This in old days had a decent meaning the idea was about society taking care of the widow and the orphans.   This means that if the widow has no problem with being inherited, then there is no problem.

5.       Female Genital Mutilation (FGM) - Parliament has found it difficult to make this practice illegal and the only way they can eradicate this practice is by criminalising it.  It is difficult to just legislate against this practice.  The only extent to which parliament has gone is to pass a legislation to outlaw FGM in the Children’s Act there is a specific provision outlawing FGM in children.

6.       prohibition of marriage of the last born girl;

7.       Cattle Rustling;

8.       woman to woman marriages;

9.       prohibiting girls from inheriting;

10.     widow cannot inherit husband’s property;

11.     return of girl to parents for lack of payment of dowry;

12.     exorbitant dowry;

13.     Girls born out of wedlock-custody of step father, where no dowry had been paid for the deceased’s wife the children are taken away from their father;

14.     Blood money;

15.     Night-running, sorcery, witchcraft;

16.     Killing twins.

17.     Human sacrifice;

18.     Cannibalism;

19.     Keeping/worshiping of snakes

20.     wife beating - things fall apart - okonkwo-ekwefi

21.     The Concubine Ihuoma

EQUITY COMES TO THE AID OF AN AFRICAN CUSTOMARY LAW RIGHT BY PROVIDING A REMEDY:

1.       Injunction being granted on the application of a wife under customary law to stop a monogamous Christian/civil wedding;  Cap 160 has a dilemma in this case.  A woman who is supposed to be in a union of marriage that is not recognised will not be recognised during the lifetime of her husband but when the husband dies she gets recognition for purposes of inheritance.

2.       Trusts - Land cases where a trust is recognised in African customary law. Is there a case such as a customary trust.  English Trust recognising communal land as being held in trust for the community.

3.       Place of Burial - the SM Otieno case upheld the customary right of clan elders to decide on place of burial and who to bury the deceased - Umira Kager Clan.

EQUITY HAS BEEN SILENT ON SOME PRACTICES

1.       Customary practice on matrimonial property- vests in the husband and male relatives;

2.       Customary practice on status of women - decision making power, ability to transact, leadership positions within clan, village.

EQUITY IS LIKE MUSIC TO MY EARS.