What is Trust Law? - Justin Santiago
The law of trusts deal with trusts, an equitable device used by the settlor to split the rights over his or her money or property into legal and equitable rights. The legal rights are held by the trustee on behalf of the beneficiary who holds the equitable rights (the right to enjoy the benefits of the money or property).
The equitable rights created by the trust enables the beneficiary to enforce the trust in his own name, although he was not a party to the original agreement evading the doctrine of privity. This is why the trust is only recognised by equity not the common law which requires the doctrine of privity in any agreement.
In Westdeutsche Landesbank Girozentrale v Islington Borough Council, Lord Browne-Wilkinson, conveniently identified the relevant principles of trust law which can be summarised as follows:
(i) equity operates on the conscience of the owner of the legal interest;
(ii) the owner of the legal interest cannot be a trustee of the trust property until aware of the facts alleged to affect his conscience;
(iii) in order to establish a trust there must be identifiable trust property (
(iv) once the trust is established, a trust beneficiary has an equitable proprietary interest in the trust property enforceable against subsequent holders other than the bona fide purchaser of the legal interest.
Rights which the settlor had prior to the creation of the trust are vested in their entirety in the trustee. But he is not free to use those rights for his own benefit in the way he could if no trust existed. At the same time new rights are created in the beneficiary of the trust, which enables him to hold the trustee to account for his exercise of those rights : DKLR Holding Co (No 2) Ltd v Commissioner of Stamp Duties.
It should be noted that if, at any time, the full legal title and equitable title are held by a single individual, a merger has happened, which means the titles have fully merged such that the individual has full ownership of the property and the trust is over. The beneficiaries are also entitled to terminate the trust by directing the trustees to transfer the legal title to them, provided that they have attained the age of majority and are mentally sound.
A settler can declare himself trustee of property for someone (settler and trustee can be the same person), a settler can also convey property to a trustee on trust for himself (settler and beneficiary can be the same person). A trustee can also be one of several beneficiaries. A beneficiary can declare a trust of the equitable title which is called a sub-trust.
Express trusts are a species of trusts that have been created specifically and are associated with the traditional meaning of a trust. An express trust is created when a settlor effectively exercises his powers of ownership to do so. A power is the capacity to change or create rights, duties or other powers. An express trust can be testamentary which is set out in a person’s will or it can be inter vivos which is created by the settlor when alive.
An express trust has to fulfill the substantive requirements, be properly constituted, adhere to the formalites and there must be a valid disposition.
There are variations of express trusts :-
Sub trust - a beneficiary may create a trust of his interest in favour of another. In this situation the original beneficiary adopts the role of the settler and trustee for the benefit of another.
Trust of a promise – a legal fiction designed to make a promise between 2 parties the subject matter of a trust for the benefit of a 3rd party which can enforce the promise – Les Affreteurs Reunis v Walford. The courts have undermined the device by insisting upon strict proof of an intention to create a trust of a promise – Re Schebsman.
A bare trust - when the trustee holds property for a beneficiary on no specific trust terms but to do as the beneficiary dictates. Bare trustees are often called nominees. Most common example of a trust of this kind is the trust upon which a solicitor holds his client’s purchase moneys prior to completion of the sale of land.
There are trusts which arise through the courts :-
Statutory Trust – legislature has thought it convenient to use the trust device as a cure for certain problems. If I attempt to convey a title to land to Fred and Joe as tenants in common, statute provides that the effect of my action is to convey the title to Fred and Joe as joint tenants on trust for themselves as tenants in common : S34(2) LPA 1925.
There are also trusts that arise by operation of the law namely constructive and resulting trusts :-
Constructive Trust – a trust constructed by the court rather than by the individual right holder. An example is Aluminium Industrie Vaasen B.V. v Romalpa Aluminium Ltd n the case of reservation of title clauses sellers retain equitable title and to make the company to which the goods were supplied a trustee of the goods until the seller has been fully paid.
Resulting Trust – any situation in which A conveys rights to B which B for whetever reason then holds on trust for A.
About Me
- Justin Santiago TEP
- Justin Santiago, BAppSc (Hons), MBA, LLB (Hons) comes from a journalism, market research, intellectual property and strategic communications consulting background. He has recently obtained his Trust and Estate Professional (TEP) title and is embarking on a mission to promote the concept of The Global Citizen.
Tuesday, March 3, 2009
Sunday, March 1, 2009
Trust Maxims
Trust Maxims - Justin Santiago
•1 Equity regards as done that which ought to be done.
•2 Equity will not suffer a wrong to be without a remedy
•3 Equity delights in equality
•4 One who seeks equity must do equity
•5 Equity aids the vigilant, not those who slumber on their rights
•6 Equity imputes an intent to fulfill an obligation
•7 Equity acts in personam.
•8 Equity abhors a forfeiture
•9 Equity does not require an idle gesture
•10 One who comes into equity must come with clean hands
•11 Equity delights to do justice and not by halves
•12 Equity will take jurisdiction to avoid a multiplicity of suits
•13 Equity follows the law
•14 Equity will not aid a volunteer
•15 Between equal equities the law will prevail
•16 Between equal equities the first in order of time shall prevail
•17 Equity will not complete an imperfect gift
•18 Equity will not allow a statute to be used as a cloak for fraud
•19 Equity will not allow a trust to fail for want of a trustee
1. Equity regards as done that which ought to be done.
Problems may sometimes arise because, through some lapse or omission, cover is not in force at the time a claim is made. If the policyholder has clearly been at fault in this connection, because, for example, he has not paid premiums when he should have, then it will normally be quite reasonable for an insurer to decline to meet the claim. However, it gets more difficult if the policyholder is no more at fault than the insurer. The fair solution in the circumstances may be arrived at by applying the principle that equity regards that as done which ought to be done [See para 1, above]. In other words, what would the position have been if what should have been done had been done?
Thus, in one case, premiums on a life policy were overdue. The insurer' s letter to the policyholder warning him of this fact was never received by the policyholder, who died shortly after the policy consequently lapsed. It was clear that if the notice had been received by the policyholder, he or his wife would have taken steps to ensure the policy continued in force, because the policyholder was terminally ill at the time and the cover provided by the policy was something his wife was plainly going to require in the foreseeable future. Since the policyholder would have been fully entitled to pay the outstanding premium at that stage, regardless of his physical condition, the insurer (with some persuasion from the Bureau) agreed that the matter should be dealt with as if the policyholder had done so. In other words, his widow was entitled to the sum assured less the outstanding premium. In other similar cases, however, it has not been possible to follow the same principle because there has not been sufficiently clear evidence that the policy would have been renewed.
Another illustration of the application of this equitable principle was in connection with motor insurance. A policyholder was provided with cover on the basis that she was entitled to a ' no claims' discount from her previous insurer. Confirmation to this effect from the previous insurer was required. When that was not forthcoming, her cover was cancelled by the brokers who had issued the initial cover note. This was done without reference to the insurer concerned, whose normal practice in such circumstances would have been to maintain cover, but to require payment of the full premium until proof of the no claims discount was forthcoming. Such proof was eventually obtained by the policyholder, but only after she had been involved in an accident after the cancellation by the brokers of the policy. Here again, the fair outcome was to look at what would have happened if the insurer's normal practice had been followed. In such circumstances, the policyholder would plainly have still had a policy at the time of the accident. The insurer itself had not acted incorrectly at any stage. However, in the circumstances, it was equitable for it to meet the claim.
2. Equity will not suffer a wrong to be without a remedy
When seeking an equitable relief, the stronger hand is that which has been wronged. The stronger hand is that hand which has the capacity to ask for a remedy. In equity, this form of remedy is usually one of Specific Performance or an Injunction. These are superior remedies to those which are administered at common law such as damages.
3. Equity delights in equality
Where two persons have an equal right, the property will be divided equally. Thus Equity will presume joint owners to be tenants in common unless the parties have expressly agreed otherwise. Equity also favours partition, if requested, of jointly-held property.
4. One who seeks equity must do equity
In order to receive some equitable relief, the party must be willing to complete all of their own obligations as well. Moreover, the defense of "unclean hands" lies whenever the conduct of a plaintiff in equity has been iniquitous. Snidely Whiplash would not be tossed out of a court of law, but his equity suits would almost certainly turn out badly.
5. Equity aids the vigilant, not those who slumber on their rights
Vigilantibus non dormientibus aequitas subvenit.
Once the party knows they have been wronged, they must act relatively swiftly to preserve their rights.
Equity favours the vigilant, and those who "sleep on their rights" may be deprived of equitable remedies. This maxim is often displaced by statutory limitations, but even where a limitation period has not yet run, equity may apply the doctrine of "laches", an equitable term used to describe delay sufficient to defeat an equitable claim.
Alternatives:
•Delay defeats equity
•Equity Aids the Vigilant, Not Those Who Sleep on Their Rights
6. Equity imputes an intent to fulfill an obligation
Generally speaking, near performance of a general obligation will be treated as sufficient unless the law requires perfect performance, such as in the exercise of an option. Text writers give an example of a debtor leaving a legacy to his creditor equal or greater to his obligation. Equity regards such a gift as performance of the obligation so the creditor cannot claim both the legacy and payment of the debt.
7. Equity acts in personam.
Basically, the act is against the person, and not their property in rem.
Equity asserts jurisdiction over the person of the defendant, and enforces its orders against him or her by contempt or other means.
8. Equity abhors a forfeiture
Today, a mortgagor refers to his interest in the property as his "equity." The origin of the concept, however, was actually a mirror-image of the current practice. At common law, a mortgage was a conveyance of the property, with a condition subsequent, that if the grantor paid the secured indebteness to the grantee on or before a date certain (the "law" day) then the conveyance would be void, otherwise to remain in full force and effect. As was inevitable, debtors would be unable to pay on the law day, and if they tendered the debt after the time had passed, the creditor owed no duty to give the land back. So then the debtor would run to the court of equity, plead that there was an unconscionable forfeiture about to occur, and beg the court to grant an equitable decree requiring the lender to surrender the property upon payment of the secured debt with interest to date. And the equity courts granted these petitions quite regularly and often without regard for the amount of time that had lapsed since the law day had passed. The lender could interpose a defense of laches, saying that so much time had gone by (and so much improvement and betterment had taken place) that it would be inequitable to require undoing the finality of the mortgage conveyance. Other defenses, including equitable estoppel, were used to bar redemption as well. This unsettling system had a negative impact on the willingness of lenders to accept real estate as collateral security for loans. Since a lender could not re-sell the property until it had been in uncontested possession for years, or unless it could show changed circumstances, the value of real estate collateral was significantly impaired. Impaired, that is, until lawyers concocted the bill of foreclosure, whereby a mortgagee could request a decree that unless the mortgagor paid the debt by a date certain (and after the law date set in the mortgage), the mortgagor would thereafter be barred and foreclosed of all right, title and equity of redemption in and to the mortgaged premises. To complete the circle, one needs to understand that when a mortgagor fails to pay an installment when due, and the mortgagee accelerates the mortgage, requiring immediate repayment of the entire mortgage indebtedness, the mortgagor does not have a right to pay the past-due installment(s) and have the mortgage reinstated. In Graf v. Hope Building Corp., 254 NY 1 (1930), the New York Court of Appeals observed that in such a case, there was no forfeiture, only the operation of a clause fair on its face, to which the mortgagor had freely assented. In the latter 20th Century, New York's lower courts eroded the Graf doctrine to such a degree that it appears that it is no longer the law, and that a court of conscience has the power to mandate that a default be excused if it is equitable to do so. Of course, now that the pendulum is swinging in the opposite direction, we can expect courts to explain where the limits on the newly-expanded equity of redemption lie...and it is probably not a coincidence that the cases that have eroded Graf v. Hope Building Corp. have been accompanied by the rise of arbitration as a means for enforcing mortgages. See, generally, Osborne, Real Estate Finance Law (West, 1979), Chapter 7.
9. Equity does not require an idle gesture
Also: Equity will not compel a court to do a vain and useless thing. It would be an idle gesture for the court to grant reformation of a contract and then to deny to the prevailing party an opportunity to perform it as modified.
10. One who comes into equity must come with clean hands
For example, if you desire your tenant to vacate, you must have not violated the tenant's rights.
For instance, in Riggs v. Palmer (1889) 115 N.Y. 506, a man who had killed his grandfather to receive his inheritance quicker (and for fear that his grandfather may change his will) lost all right(s) to the inheritance.
IN D&C Builders v. Rees (1966) a small building firm did some work on the house of a couple named Rees. The bill came to 732 pounds, of which the Rees had already paid 250 pounds. When the builders asked for the balance of 482 pounds, the Rees announced that the work was defective, and they were only prepared to pay 300 pounds. As the builders were in serious financial difficulties (as the Rees knew), they reluctantly accepted the 300 pounds 'in completion of the account'. The decision to accept the money would not normally be binding in contract law, and afterwards the builders sued the Rees for the outstanding amount. The Rees claimed that the court should apply the doctrine of equitable estoppel, which can make promises binding when they would normally not be. However, Lord Denning refused to apply the doctrine, on the grounds that the Rees had taken unfair advantage of the builders' financial difficulties, and therefore had not come 'with clean hands'.
11. Equity delights to do justice and not by halves
When a court of equity is presented with a good claim to equitable relief, and it is clear that the plaintiff also sustained monetary damages, the court of equity has jurisdiction to render legal relief, e.g., monetary damages. Hence equity does not stop at granting equitable relief, but goes on to render a full and complete collection of remedies.
12. Equity will take jurisdiction to avoid a multiplicity of suits
Thus, "where a court of equity has all the parties before it, it will adjudicate upon all of the rights of the parties connected with the subject matter of the action, so as to avoid a multiplicity of suits." Burnworth v. Hughes, 670 P.2d 917, 922 (Kan. 1983). This is the basis for the procedures of interpleader and the more rarely used bill of peace.
13. Equity follows the law
Equity will not allow a remedy that is contrary to law. The court of Chancery never claimed to override the courts of common law. In story on equity 3rd English ed. 1920 pg.34,"where a rule, either of the common or the statute law is direct, and governs the case with all its circumstances, or the particular pint, a court of equity is a 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. as per Cardozo C.J in Graf v. hope building corporation, 254 N.Y 1 at 9 (1930)
14. Equity will not aid a volunteer
Basically, the person involved in the action must have a real interest in the issue. Equity will not assist if the common law requirements for a gift are not met. The exception is if the doctrine of estoppel applies.
This maxim is similar to equity will not complete an imperfect gift.
15. Between equal equities the law will prevail
Equity will provide no specific remedies where the parties are equal, or where neither has been wronged.
16. Between equal equities the first in order of time shall prevail
This maxim operates where there are two or more competing interests, one legal and the other equitable. Where the claims of both parties are fair and meritorious, precedence will be given to the legal interest. This maxim was developed in connection with interests in lands. When a purchaser acquires property bona fide without notice of a defect in the vendor’s title, the equities are equal and the legal estate will prevail. If the purchaser takes title with notice of the defect, the earlier title, if valid, will prevail. The force of this maxim has largely been displaced by legislated systems of land title registration. Goes back to the Earl of Oxford Case.
17. Equity will not complete an imperfect gift
If a donor has made an imperfect gift, ie lacking the formalities required at common law, equity will not assist the intended donee. A subset of equity will not assist a volunteer.
Note the exception in Strong v Bird (1874) LR 18 Eq 315. If the donor appoints the intended donee as executor of his/her will, and the donor subsequently dies, equity will perfect the imperfect gift.
18. Equity will not allow a statute to be used as a cloak for fraud
19. Equity will not allow a trust to fail for want of a trustee
•1 Equity regards as done that which ought to be done.
•2 Equity will not suffer a wrong to be without a remedy
•3 Equity delights in equality
•4 One who seeks equity must do equity
•5 Equity aids the vigilant, not those who slumber on their rights
•6 Equity imputes an intent to fulfill an obligation
•7 Equity acts in personam.
•8 Equity abhors a forfeiture
•9 Equity does not require an idle gesture
•10 One who comes into equity must come with clean hands
•11 Equity delights to do justice and not by halves
•12 Equity will take jurisdiction to avoid a multiplicity of suits
•13 Equity follows the law
•14 Equity will not aid a volunteer
•15 Between equal equities the law will prevail
•16 Between equal equities the first in order of time shall prevail
•17 Equity will not complete an imperfect gift
•18 Equity will not allow a statute to be used as a cloak for fraud
•19 Equity will not allow a trust to fail for want of a trustee
1. Equity regards as done that which ought to be done.
Problems may sometimes arise because, through some lapse or omission, cover is not in force at the time a claim is made. If the policyholder has clearly been at fault in this connection, because, for example, he has not paid premiums when he should have, then it will normally be quite reasonable for an insurer to decline to meet the claim. However, it gets more difficult if the policyholder is no more at fault than the insurer. The fair solution in the circumstances may be arrived at by applying the principle that equity regards that as done which ought to be done [See para 1, above]. In other words, what would the position have been if what should have been done had been done?
Thus, in one case, premiums on a life policy were overdue. The insurer' s letter to the policyholder warning him of this fact was never received by the policyholder, who died shortly after the policy consequently lapsed. It was clear that if the notice had been received by the policyholder, he or his wife would have taken steps to ensure the policy continued in force, because the policyholder was terminally ill at the time and the cover provided by the policy was something his wife was plainly going to require in the foreseeable future. Since the policyholder would have been fully entitled to pay the outstanding premium at that stage, regardless of his physical condition, the insurer (with some persuasion from the Bureau) agreed that the matter should be dealt with as if the policyholder had done so. In other words, his widow was entitled to the sum assured less the outstanding premium. In other similar cases, however, it has not been possible to follow the same principle because there has not been sufficiently clear evidence that the policy would have been renewed.
Another illustration of the application of this equitable principle was in connection with motor insurance. A policyholder was provided with cover on the basis that she was entitled to a ' no claims' discount from her previous insurer. Confirmation to this effect from the previous insurer was required. When that was not forthcoming, her cover was cancelled by the brokers who had issued the initial cover note. This was done without reference to the insurer concerned, whose normal practice in such circumstances would have been to maintain cover, but to require payment of the full premium until proof of the no claims discount was forthcoming. Such proof was eventually obtained by the policyholder, but only after she had been involved in an accident after the cancellation by the brokers of the policy. Here again, the fair outcome was to look at what would have happened if the insurer's normal practice had been followed. In such circumstances, the policyholder would plainly have still had a policy at the time of the accident. The insurer itself had not acted incorrectly at any stage. However, in the circumstances, it was equitable for it to meet the claim.
2. Equity will not suffer a wrong to be without a remedy
When seeking an equitable relief, the stronger hand is that which has been wronged. The stronger hand is that hand which has the capacity to ask for a remedy. In equity, this form of remedy is usually one of Specific Performance or an Injunction. These are superior remedies to those which are administered at common law such as damages.
3. Equity delights in equality
Where two persons have an equal right, the property will be divided equally. Thus Equity will presume joint owners to be tenants in common unless the parties have expressly agreed otherwise. Equity also favours partition, if requested, of jointly-held property.
4. One who seeks equity must do equity
In order to receive some equitable relief, the party must be willing to complete all of their own obligations as well. Moreover, the defense of "unclean hands" lies whenever the conduct of a plaintiff in equity has been iniquitous. Snidely Whiplash would not be tossed out of a court of law, but his equity suits would almost certainly turn out badly.
5. Equity aids the vigilant, not those who slumber on their rights
Vigilantibus non dormientibus aequitas subvenit.
Once the party knows they have been wronged, they must act relatively swiftly to preserve their rights.
Equity favours the vigilant, and those who "sleep on their rights" may be deprived of equitable remedies. This maxim is often displaced by statutory limitations, but even where a limitation period has not yet run, equity may apply the doctrine of "laches", an equitable term used to describe delay sufficient to defeat an equitable claim.
Alternatives:
•Delay defeats equity
•Equity Aids the Vigilant, Not Those Who Sleep on Their Rights
6. Equity imputes an intent to fulfill an obligation
Generally speaking, near performance of a general obligation will be treated as sufficient unless the law requires perfect performance, such as in the exercise of an option. Text writers give an example of a debtor leaving a legacy to his creditor equal or greater to his obligation. Equity regards such a gift as performance of the obligation so the creditor cannot claim both the legacy and payment of the debt.
7. Equity acts in personam.
Basically, the act is against the person, and not their property in rem.
Equity asserts jurisdiction over the person of the defendant, and enforces its orders against him or her by contempt or other means.
8. Equity abhors a forfeiture
Today, a mortgagor refers to his interest in the property as his "equity." The origin of the concept, however, was actually a mirror-image of the current practice. At common law, a mortgage was a conveyance of the property, with a condition subsequent, that if the grantor paid the secured indebteness to the grantee on or before a date certain (the "law" day) then the conveyance would be void, otherwise to remain in full force and effect. As was inevitable, debtors would be unable to pay on the law day, and if they tendered the debt after the time had passed, the creditor owed no duty to give the land back. So then the debtor would run to the court of equity, plead that there was an unconscionable forfeiture about to occur, and beg the court to grant an equitable decree requiring the lender to surrender the property upon payment of the secured debt with interest to date. And the equity courts granted these petitions quite regularly and often without regard for the amount of time that had lapsed since the law day had passed. The lender could interpose a defense of laches, saying that so much time had gone by (and so much improvement and betterment had taken place) that it would be inequitable to require undoing the finality of the mortgage conveyance. Other defenses, including equitable estoppel, were used to bar redemption as well. This unsettling system had a negative impact on the willingness of lenders to accept real estate as collateral security for loans. Since a lender could not re-sell the property until it had been in uncontested possession for years, or unless it could show changed circumstances, the value of real estate collateral was significantly impaired. Impaired, that is, until lawyers concocted the bill of foreclosure, whereby a mortgagee could request a decree that unless the mortgagor paid the debt by a date certain (and after the law date set in the mortgage), the mortgagor would thereafter be barred and foreclosed of all right, title and equity of redemption in and to the mortgaged premises. To complete the circle, one needs to understand that when a mortgagor fails to pay an installment when due, and the mortgagee accelerates the mortgage, requiring immediate repayment of the entire mortgage indebtedness, the mortgagor does not have a right to pay the past-due installment(s) and have the mortgage reinstated. In Graf v. Hope Building Corp., 254 NY 1 (1930), the New York Court of Appeals observed that in such a case, there was no forfeiture, only the operation of a clause fair on its face, to which the mortgagor had freely assented. In the latter 20th Century, New York's lower courts eroded the Graf doctrine to such a degree that it appears that it is no longer the law, and that a court of conscience has the power to mandate that a default be excused if it is equitable to do so. Of course, now that the pendulum is swinging in the opposite direction, we can expect courts to explain where the limits on the newly-expanded equity of redemption lie...and it is probably not a coincidence that the cases that have eroded Graf v. Hope Building Corp. have been accompanied by the rise of arbitration as a means for enforcing mortgages. See, generally, Osborne, Real Estate Finance Law (West, 1979), Chapter 7.
9. Equity does not require an idle gesture
Also: Equity will not compel a court to do a vain and useless thing. It would be an idle gesture for the court to grant reformation of a contract and then to deny to the prevailing party an opportunity to perform it as modified.
10. One who comes into equity must come with clean hands
For example, if you desire your tenant to vacate, you must have not violated the tenant's rights.
For instance, in Riggs v. Palmer (1889) 115 N.Y. 506, a man who had killed his grandfather to receive his inheritance quicker (and for fear that his grandfather may change his will) lost all right(s) to the inheritance.
IN D&C Builders v. Rees (1966) a small building firm did some work on the house of a couple named Rees. The bill came to 732 pounds, of which the Rees had already paid 250 pounds. When the builders asked for the balance of 482 pounds, the Rees announced that the work was defective, and they were only prepared to pay 300 pounds. As the builders were in serious financial difficulties (as the Rees knew), they reluctantly accepted the 300 pounds 'in completion of the account'. The decision to accept the money would not normally be binding in contract law, and afterwards the builders sued the Rees for the outstanding amount. The Rees claimed that the court should apply the doctrine of equitable estoppel, which can make promises binding when they would normally not be. However, Lord Denning refused to apply the doctrine, on the grounds that the Rees had taken unfair advantage of the builders' financial difficulties, and therefore had not come 'with clean hands'.
11. Equity delights to do justice and not by halves
When a court of equity is presented with a good claim to equitable relief, and it is clear that the plaintiff also sustained monetary damages, the court of equity has jurisdiction to render legal relief, e.g., monetary damages. Hence equity does not stop at granting equitable relief, but goes on to render a full and complete collection of remedies.
12. Equity will take jurisdiction to avoid a multiplicity of suits
Thus, "where a court of equity has all the parties before it, it will adjudicate upon all of the rights of the parties connected with the subject matter of the action, so as to avoid a multiplicity of suits." Burnworth v. Hughes, 670 P.2d 917, 922 (Kan. 1983). This is the basis for the procedures of interpleader and the more rarely used bill of peace.
13. Equity follows the law
Equity will not allow a remedy that is contrary to law. The court of Chancery never claimed to override the courts of common law. In story on equity 3rd English ed. 1920 pg.34,"where a rule, either of the common or the statute law is direct, and governs the case with all its circumstances, or the particular pint, a court of equity is a 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. as per Cardozo C.J in Graf v. hope building corporation, 254 N.Y 1 at 9 (1930)
14. Equity will not aid a volunteer
Basically, the person involved in the action must have a real interest in the issue. Equity will not assist if the common law requirements for a gift are not met. The exception is if the doctrine of estoppel applies.
This maxim is similar to equity will not complete an imperfect gift.
15. Between equal equities the law will prevail
Equity will provide no specific remedies where the parties are equal, or where neither has been wronged.
16. Between equal equities the first in order of time shall prevail
This maxim operates where there are two or more competing interests, one legal and the other equitable. Where the claims of both parties are fair and meritorious, precedence will be given to the legal interest. This maxim was developed in connection with interests in lands. When a purchaser acquires property bona fide without notice of a defect in the vendor’s title, the equities are equal and the legal estate will prevail. If the purchaser takes title with notice of the defect, the earlier title, if valid, will prevail. The force of this maxim has largely been displaced by legislated systems of land title registration. Goes back to the Earl of Oxford Case.
17. Equity will not complete an imperfect gift
If a donor has made an imperfect gift, ie lacking the formalities required at common law, equity will not assist the intended donee. A subset of equity will not assist a volunteer.
Note the exception in Strong v Bird (1874) LR 18 Eq 315. If the donor appoints the intended donee as executor of his/her will, and the donor subsequently dies, equity will perfect the imperfect gift.
18. Equity will not allow a statute to be used as a cloak for fraud
19. Equity will not allow a trust to fail for want of a trustee
Friday, February 27, 2009
Occupier's Liability
If the courts were to take a very broad view of what the occupier `ought reasonably' to protect against, the occupier would be liable simply on the basis that both the trespasser and the danger were reasonably forseeable. - Justin Santiago
The law governing the duty owed by an occupier to a trespasser was left unaltered by the 1957 Act. Historically there was no duty owed to a trespasser and was only liable if it could be proved that he had done some act intending to harm the trespasser or with reckless disregard for the trespasser’s safety – Robert Addie & Sons v Dumdreck. This was altered in BRB v Herrington where it was held that trespassers were owed the common duty of humanity.
Under the Occupiers Liability Act 1984 – S1(1)(a) duty is owed by an occupier to persons other than visitors, in respect of injury on the premises by reason of any danger due to the state of the premises or things done or omitted to be done on them
A duty arises if three separate conditions are satisfied S1(3) :-
a. he is aware of the danger and has reasonable grounds to believe that it exists
b. he knows or has reasonable grounds to believe that the other is in the vicinity of the danger concerned or that he may come into the vicinity of the danger and
c. the risk is one which in all the circumstances of the case, he may reasonably be expected to offer the other some protection
Standard of care S1(4) - owes a duty to take such care as is reasonable in all the circumstances of the case to see that the trespasser does not suffer injury on the premises by reason of the danger concerned – what constitutes reasonable care will vary according to the circumstances
The duty owed may be discharged when warning of a danger is given S1(5)
If the courts were to take a very broad view of what the occupier `ought reasonably' to protect against, the occupier will be liable simply on the basis that both the trespasser and the danger were reasonably forseeable. This reasoning led to concerns that the 1984 Act represented a “trespasser's charter”. The House Of Lords decision in Tomlinson v Congleton Borough Council 2003 was therefore broadly welcomed as a reintroduction of common sense. The central theme of the Lords' ruling is that the cause of the claimant's injury was his own folly, not something that the defendants did or failed to do. The danger of the lake was obvious, and the authority had erected signs to that effect, and had directed its park staff to eject people from the lake if they were found there. There could be no dount that the claimant had known of the danger, and that he must therefore have been deemed to have accepted it voluntarily.
Two points brought up by Lord Hoffman : the first is the social value of the activities which would have to be prohibited in order to reduce or eliminate the risk from swimming. And the second is the question of whether the council should be entitled to allow people of full capacity to decide for themselves whether to take the risk.
Social Value
The Court of Appeal made no reference at all to the social value of the activities which were to be prohibited. The majority of people who went to the beaches to sunbathe, paddle and play with their children were enjoying themselves in a way which gave them pleasure and caused no risk to themselves or anyone else. This must be something to be taken into account in deciding whether it was reasonable to expect the council to prevent people from using the beaches or to deprive people form using the beach in a harmless way.
Free will
The second consideration, namely the question of whether people should accept responsibility for the risks they choose to run, is the point made by Lord Phillips of Worth Matravers MR in Donoghue v Folkestone Properties Ltd[2003] QB 1008, 1024, para 53 :
Mr Tomlinson was freely and voluntarily undertaking an activity which inherently involved some risk. By contrast, Miss Bessie Stone (Bolton v Stone [1951] AC 850), to whom the House of Lords held that no duty was owed, was innocently standing on the pavement outside her garden gate at 10 Beckenham Road, Cheetham when she was struck by a ball hit for six out of the Cheetham Cricket Club ground. She was certainly not engaging in any activity which involved an inherent risk of such injury.
I think it will be extremely rare for an occupier of land to be under a duty to prevent people from taking risks which are inherent in the activities they freely choose to undertake upon the land. If people want to climb mountains, go hang-gliding or swim or dive in ponds or lakes, that is their affair. Of course the landowner may for his own reasons wish to prohibit such activities. He may be think that they are a danger or inconvenience to himself or others. Or he may take a paternalist view and prefer people not to undertake risky activities on his land. He is entitled to impose such conditions, as the Council did by prohibiting swimming. But the law does not require him to do so.
My Lords, as will be clear from what I have just said, I think that there is an important question of freedom at stake. It is unjust that the harmless recreation of responsible parents and children with buckets and spades on the beaches should be prohibited in order to comply with what is thought to be a legal duty to safeguard irresponsible visitors against dangers which are perfectly obvious. The fact that such people take no notice of warnings cannot create a duty to take other steps to protect them. I find it difficult to express with appropriate moderation my disagreement with the proposition of Sedley LJ, ante, p 62B-C, para 45, that it is "only where the risk is so obvious that the occupier can safely assume that nobody will take it that there will be no liability". A duty to protect against obvious risks or self-inflicted harm exists only in cases in which there is no genuine and informed choice, as in the case of employees whose work requires them to take the risk, or some lack of capacity, such as the inability of children to recognise danger (Herrington v British Railways Board [1972] AC 877) or the despair of prisoners which may lead them to inflict injury on themselves: Reeves v Comr of Police of the Metropolis [2000] 1 AC 360.
So this appeal gives your Lordships the opportunity to say clearly that local authorities and other occupiers of land are ordinarily under no duty to incur such social and financial costs to protect a minority (or even a majority) against obvious dangers. On the other hand, if the decision of the Court of Appeal were left standing, every such occupier would feel obliged to take similar defensive measures.
Two other differences should be noted between the duty of care to lawful visitors and that to trespassers. First, the 1984 Act only applies to personal injury. The 1957 Act is not so limited. This means that, in effect, the occupier carries no liability for damage to a trespasser's property, however expensive. Secondly, the 1957 Act allows that a visitor may waive his protection under the Act by a clear disclaimer, subject to the provisions of the Unfair Contract Terms Act 1977. The 1984Act makes no such statement. It is not entirely clear why a person is allowed to waive his responsibility to lawful visitors, but not to trespassers. It could be that, in practice, the 1977 Act would prevent any effective waiver anyway. Alternatively, the duty of care to a trespasser is so low that it would unjust to allow the occupier to lower it still further by a disclaimer. Another argument is that, while it would be possible to get a lawful visitor to express his agreement to the terms of a disclaimer, it is not clear how one would get a trespasser to do so.
The law governing the duty owed by an occupier to a trespasser was left unaltered by the 1957 Act. Historically there was no duty owed to a trespasser and was only liable if it could be proved that he had done some act intending to harm the trespasser or with reckless disregard for the trespasser’s safety – Robert Addie & Sons v Dumdreck. This was altered in BRB v Herrington where it was held that trespassers were owed the common duty of humanity.
Under the Occupiers Liability Act 1984 – S1(1)(a) duty is owed by an occupier to persons other than visitors, in respect of injury on the premises by reason of any danger due to the state of the premises or things done or omitted to be done on them
A duty arises if three separate conditions are satisfied S1(3) :-
a. he is aware of the danger and has reasonable grounds to believe that it exists
b. he knows or has reasonable grounds to believe that the other is in the vicinity of the danger concerned or that he may come into the vicinity of the danger and
c. the risk is one which in all the circumstances of the case, he may reasonably be expected to offer the other some protection
Standard of care S1(4) - owes a duty to take such care as is reasonable in all the circumstances of the case to see that the trespasser does not suffer injury on the premises by reason of the danger concerned – what constitutes reasonable care will vary according to the circumstances
The duty owed may be discharged when warning of a danger is given S1(5)
If the courts were to take a very broad view of what the occupier `ought reasonably' to protect against, the occupier will be liable simply on the basis that both the trespasser and the danger were reasonably forseeable. This reasoning led to concerns that the 1984 Act represented a “trespasser's charter”. The House Of Lords decision in Tomlinson v Congleton Borough Council 2003 was therefore broadly welcomed as a reintroduction of common sense. The central theme of the Lords' ruling is that the cause of the claimant's injury was his own folly, not something that the defendants did or failed to do. The danger of the lake was obvious, and the authority had erected signs to that effect, and had directed its park staff to eject people from the lake if they were found there. There could be no dount that the claimant had known of the danger, and that he must therefore have been deemed to have accepted it voluntarily.
Two points brought up by Lord Hoffman : the first is the social value of the activities which would have to be prohibited in order to reduce or eliminate the risk from swimming. And the second is the question of whether the council should be entitled to allow people of full capacity to decide for themselves whether to take the risk.
Social Value
The Court of Appeal made no reference at all to the social value of the activities which were to be prohibited. The majority of people who went to the beaches to sunbathe, paddle and play with their children were enjoying themselves in a way which gave them pleasure and caused no risk to themselves or anyone else. This must be something to be taken into account in deciding whether it was reasonable to expect the council to prevent people from using the beaches or to deprive people form using the beach in a harmless way.
Free will
The second consideration, namely the question of whether people should accept responsibility for the risks they choose to run, is the point made by Lord Phillips of Worth Matravers MR in Donoghue v Folkestone Properties Ltd[2003] QB 1008, 1024, para 53 :
Mr Tomlinson was freely and voluntarily undertaking an activity which inherently involved some risk. By contrast, Miss Bessie Stone (Bolton v Stone [1951] AC 850), to whom the House of Lords held that no duty was owed, was innocently standing on the pavement outside her garden gate at 10 Beckenham Road, Cheetham when she was struck by a ball hit for six out of the Cheetham Cricket Club ground. She was certainly not engaging in any activity which involved an inherent risk of such injury.
I think it will be extremely rare for an occupier of land to be under a duty to prevent people from taking risks which are inherent in the activities they freely choose to undertake upon the land. If people want to climb mountains, go hang-gliding or swim or dive in ponds or lakes, that is their affair. Of course the landowner may for his own reasons wish to prohibit such activities. He may be think that they are a danger or inconvenience to himself or others. Or he may take a paternalist view and prefer people not to undertake risky activities on his land. He is entitled to impose such conditions, as the Council did by prohibiting swimming. But the law does not require him to do so.
My Lords, as will be clear from what I have just said, I think that there is an important question of freedom at stake. It is unjust that the harmless recreation of responsible parents and children with buckets and spades on the beaches should be prohibited in order to comply with what is thought to be a legal duty to safeguard irresponsible visitors against dangers which are perfectly obvious. The fact that such people take no notice of warnings cannot create a duty to take other steps to protect them. I find it difficult to express with appropriate moderation my disagreement with the proposition of Sedley LJ, ante, p 62B-C, para 45, that it is "only where the risk is so obvious that the occupier can safely assume that nobody will take it that there will be no liability". A duty to protect against obvious risks or self-inflicted harm exists only in cases in which there is no genuine and informed choice, as in the case of employees whose work requires them to take the risk, or some lack of capacity, such as the inability of children to recognise danger (Herrington v British Railways Board [1972] AC 877) or the despair of prisoners which may lead them to inflict injury on themselves: Reeves v Comr of Police of the Metropolis [2000] 1 AC 360.
So this appeal gives your Lordships the opportunity to say clearly that local authorities and other occupiers of land are ordinarily under no duty to incur such social and financial costs to protect a minority (or even a majority) against obvious dangers. On the other hand, if the decision of the Court of Appeal were left standing, every such occupier would feel obliged to take similar defensive measures.
Two other differences should be noted between the duty of care to lawful visitors and that to trespassers. First, the 1984 Act only applies to personal injury. The 1957 Act is not so limited. This means that, in effect, the occupier carries no liability for damage to a trespasser's property, however expensive. Secondly, the 1957 Act allows that a visitor may waive his protection under the Act by a clear disclaimer, subject to the provisions of the Unfair Contract Terms Act 1977. The 1984Act makes no such statement. It is not entirely clear why a person is allowed to waive his responsibility to lawful visitors, but not to trespassers. It could be that, in practice, the 1977 Act would prevent any effective waiver anyway. Alternatively, the duty of care to a trespasser is so low that it would unjust to allow the occupier to lower it still further by a disclaimer. Another argument is that, while it would be possible to get a lawful visitor to express his agreement to the terms of a disclaimer, it is not clear how one would get a trespasser to do so.
Thursday, February 26, 2009
Vicarious Liability
Vicarious liability runs counter to two principles of the law of tort, namely that a person should only be liable for loss or damage caused by his own acts of omissions and secondly that a person should only be liabile when he has been at fault. Discuss.
Vicarious liability is one person’s liability for another’s act/omission which caused loss to another. An example of vicarious liability is the liability of an employer for acts by his or her employee. The burden of the liability on the employer is justified because the employer derives economic benefit so needs to bear any losses/liability incurred and it is justifiable to impose liability as he has substantially greater means and may have the necessary insurance to cover such contingencies.
Employers are vicariously liable, under the respondeat superior doctrine, for negligent acts or omissions by their employees in the course of employment.However there has to be a balance between firstly furnishing an innocent victim with recourse and secondly hesitation to foist undue burden on business enterprises.
For an act to be considered within the course of employment it must either be authorised or be so connected with an authorised act that it can be considered a mode, though an improper mode, of performing it.
Various tests have been formulated in order that this balance is achieved.
An employee has to be clearly defined under a contract of service as opposed to contract for service.Under the control test formulated in Yemen v Noakes an employee is one who is subject to the command of his master as to the manner in which he shall do his work. This test was further elaborated in Ready Mixed Concrete v Minister of Pensions which said a contract of service exists if these three conditions are fulfilled.
(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. The wage represents the consideration and if there is no consideration there is no contract of any other kind.
(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. However, it was also made clear in the judgment that, although a right of control is an important factor in determining employment status, it is not necessarily a determining factor.
(iii) The other provisions of the contract are consistent with its being a contract of service. Factors such as ownership of significant assets, financial risk and the opportunity to profit are not consistent with a contract of service.
The "Salmond Test" is used to determine if an act of an employee occurred in the course of employment and, therefore, whether the employer should be liable. This test deems an act to have been committed in the course of employment if it is either:
(a) something authorised by his employer, or
(b) an unauthorised mode of doing something authorised.
The second limb of the Salmond Test is particularly difficult to apply and the House of Lords in the U.K. has recently expressed its preference for a less technical test which was followed by the Court of Final Appeal. This new test focuses on whether the employee's act is so closely connected with his employment that it would be fair and just to hold his employer vicariously liable (Lister v Hesley Hall Limited [2002] 1 AC 215).
Ultimately, the focus of the "close connection" test is still whether or not the act of the employee in question is carried out in the course of employment. However, in determining this point, the "close connection" test appears to allow a broader and more flexible examination of the facts and circumstances of a particular employment as the court does not have to determine if the act in question is authorised, whether expressly or impliedly. The law was deemed mature enough to hold an employee vicariously liable for deliberate, criminal wrongdoing on the part of an employee overruling Trotman v North Yorkshire.
To avoid vicarious liability, an employer must demonstrate that the employee was acting in his own right rather than on the employer's business. Factors to take into consideration whether it was a frolic or detour : Joel v Morrison, fow own benefit, whether it was wholly independent act, or was it incidental to employment or was it a prohibited conduct : Rose v Plenty.
Vicarious liability is one person’s liability for another’s act/omission which caused loss to another. An example of vicarious liability is the liability of an employer for acts by his or her employee. The burden of the liability on the employer is justified because the employer derives economic benefit so needs to bear any losses/liability incurred and it is justifiable to impose liability as he has substantially greater means and may have the necessary insurance to cover such contingencies.
Employers are vicariously liable, under the respondeat superior doctrine, for negligent acts or omissions by their employees in the course of employment.However there has to be a balance between firstly furnishing an innocent victim with recourse and secondly hesitation to foist undue burden on business enterprises.
For an act to be considered within the course of employment it must either be authorised or be so connected with an authorised act that it can be considered a mode, though an improper mode, of performing it.
Various tests have been formulated in order that this balance is achieved.
An employee has to be clearly defined under a contract of service as opposed to contract for service.Under the control test formulated in Yemen v Noakes an employee is one who is subject to the command of his master as to the manner in which he shall do his work. This test was further elaborated in Ready Mixed Concrete v Minister of Pensions which said a contract of service exists if these three conditions are fulfilled.
(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. The wage represents the consideration and if there is no consideration there is no contract of any other kind.
(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. However, it was also made clear in the judgment that, although a right of control is an important factor in determining employment status, it is not necessarily a determining factor.
(iii) The other provisions of the contract are consistent with its being a contract of service. Factors such as ownership of significant assets, financial risk and the opportunity to profit are not consistent with a contract of service.
The "Salmond Test" is used to determine if an act of an employee occurred in the course of employment and, therefore, whether the employer should be liable. This test deems an act to have been committed in the course of employment if it is either:
(a) something authorised by his employer, or
(b) an unauthorised mode of doing something authorised.
The second limb of the Salmond Test is particularly difficult to apply and the House of Lords in the U.K. has recently expressed its preference for a less technical test which was followed by the Court of Final Appeal. This new test focuses on whether the employee's act is so closely connected with his employment that it would be fair and just to hold his employer vicariously liable (Lister v Hesley Hall Limited [2002] 1 AC 215).
Ultimately, the focus of the "close connection" test is still whether or not the act of the employee in question is carried out in the course of employment. However, in determining this point, the "close connection" test appears to allow a broader and more flexible examination of the facts and circumstances of a particular employment as the court does not have to determine if the act in question is authorised, whether expressly or impliedly. The law was deemed mature enough to hold an employee vicariously liable for deliberate, criminal wrongdoing on the part of an employee overruling Trotman v North Yorkshire.
To avoid vicarious liability, an employer must demonstrate that the employee was acting in his own right rather than on the employer's business. Factors to take into consideration whether it was a frolic or detour : Joel v Morrison, fow own benefit, whether it was wholly independent act, or was it incidental to employment or was it a prohibited conduct : Rose v Plenty.
Monday, February 23, 2009
CIF, FOB
The nature of a cif contract remains unclear. Discuss. - Justin Santiago
The discussion revolves around whether a CIF contract is a sale of goods or a sale of documents pertaining to the goods or both. A CIF contract is a cost, insurance and freight contract. Under a CIF contract the seller is required to arrange the carriage of the goods and their insurance in transit, and the cost of those arrangements is included in the contract price. The seller obtains a bill of lading and a policy of insurance and forwards them to the buyer, together with an invoice for the price, and the buyer pays on receipt of the documents.
It has been argued that a CIF contract is a sale of documents in the lower courts in the case of Arnold Karberg v Blythe, Green, Jourdain and Co by Scrutton, J who said the contract was a sale of documents based on the fact goods can be paid for or sold on the strength of the documents. Support for Scrutton, J's judgement comes from the fact that a number of legal rights and liabilities are attached to the documents such as the buyer's obligation to pay against the tender of the documents or the right to reject the goods against a bad tender of documents.
However the correct definition of a CIF contract was later addressed in the same case at the level of the Court of Appeal and reiterated in Hindley & Co v East India Produce Co where it was stated that it was the contract of the sale of goods to be performed by the delivery of documents. The case of Kwei Tek Chao v British Traders it was stated there were 2 rights of rejection – rejection of documents and rejection of goods emphasised the point that two conditions needed to be fulfileed and that a cif contract meant both a sale of documents or a sale of goods. Additionally this rule is subject to the proviso that the documents tendered are strictly in conformity with the contract i.e. the goods correspond with the description.
Some cases will illustrate the duality of this definition. In Gill and Dufus v Berger – normal duty of the buyer to pay the price against the documents even though the seller has failed to perform his duty to ship conforming goods.
The rationale is that it is the buyer who will take benefit of insurance and eliminates difficult questions of proof of the actual time when the goods were lost/damaged. This is an exception to the provision on the allocation of risk is Section 20(1) in SOGA which states, "Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not."
The buyer is also protected in cases where it is physically impossible to deliver the goods. In cases like Manbre Sacharin where the goods did not exist or were destroyed before the passing of documents, the contract was invalid.
In contrast to a CIF contract, in an FOB contract, S20 of the Sale of Goods Act 1979 is applied and risk prima facie passes with property so that risk normally passes to the buyer when the goods are put across the ship’s rail – Pyrene v Scindia - the tender was at the sellers risk when it was dropped during loading prior to crossing the ship’s rail.
Risk of loss may also remain with the seller by virtue of he provisions of s32 of the Sale of Goods Act. Section 32 (3) provides that:
“where goods are sent by the seller to the buyer by a route involving sea transit under circumstances in which it is usual to insure, the seller must give to the buyer such notice as will enable the buyer to insure them during the sea transit”
If the seller fails to supply such information, the goods are at his risk during the sea transit. It has been argued that s32(3) can have no application to FOB sales because the contract requires the seller to deliver the goods “free on board” and delivery to a carrier is normally deemed to be delivery to he buyer.
In the alternative, risk may pass to the buyer prior to shipment. In Cunningham v Munro it was suggested that if the goods deteriorate because of the buyer’s delay in giving the seller shipping instructions (it is the obligation of the buyer to nominate an effective vessel and nominate the port of loading) or because the buyer induces the seller to deliver goods to the port before the goods can be loaded the buyer would be liable for such deterioration; he would be entitled to reject the goods for non-compliance with the implied conditions as to quality in the Sale of Goods Act, but would be liable to the seller in damages for the deterioration.
Risk may also remain with the seller under the following circumstances :-
1.Seller has reserved the right of disposal by retaining the bill of lading
2.Contract goods are unascertained
The discussion revolves around whether a CIF contract is a sale of goods or a sale of documents pertaining to the goods or both. A CIF contract is a cost, insurance and freight contract. Under a CIF contract the seller is required to arrange the carriage of the goods and their insurance in transit, and the cost of those arrangements is included in the contract price. The seller obtains a bill of lading and a policy of insurance and forwards them to the buyer, together with an invoice for the price, and the buyer pays on receipt of the documents.
It has been argued that a CIF contract is a sale of documents in the lower courts in the case of Arnold Karberg v Blythe, Green, Jourdain and Co by Scrutton, J who said the contract was a sale of documents based on the fact goods can be paid for or sold on the strength of the documents. Support for Scrutton, J's judgement comes from the fact that a number of legal rights and liabilities are attached to the documents such as the buyer's obligation to pay against the tender of the documents or the right to reject the goods against a bad tender of documents.
However the correct definition of a CIF contract was later addressed in the same case at the level of the Court of Appeal and reiterated in Hindley & Co v East India Produce Co where it was stated that it was the contract of the sale of goods to be performed by the delivery of documents. The case of Kwei Tek Chao v British Traders it was stated there were 2 rights of rejection – rejection of documents and rejection of goods emphasised the point that two conditions needed to be fulfileed and that a cif contract meant both a sale of documents or a sale of goods. Additionally this rule is subject to the proviso that the documents tendered are strictly in conformity with the contract i.e. the goods correspond with the description.
Some cases will illustrate the duality of this definition. In Gill and Dufus v Berger – normal duty of the buyer to pay the price against the documents even though the seller has failed to perform his duty to ship conforming goods.
The rationale is that it is the buyer who will take benefit of insurance and eliminates difficult questions of proof of the actual time when the goods were lost/damaged. This is an exception to the provision on the allocation of risk is Section 20(1) in SOGA which states, "Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not."
The buyer is also protected in cases where it is physically impossible to deliver the goods. In cases like Manbre Sacharin where the goods did not exist or were destroyed before the passing of documents, the contract was invalid.
In contrast to a CIF contract, in an FOB contract, S20 of the Sale of Goods Act 1979 is applied and risk prima facie passes with property so that risk normally passes to the buyer when the goods are put across the ship’s rail – Pyrene v Scindia - the tender was at the sellers risk when it was dropped during loading prior to crossing the ship’s rail.
Risk of loss may also remain with the seller by virtue of he provisions of s32 of the Sale of Goods Act. Section 32 (3) provides that:
“where goods are sent by the seller to the buyer by a route involving sea transit under circumstances in which it is usual to insure, the seller must give to the buyer such notice as will enable the buyer to insure them during the sea transit”
If the seller fails to supply such information, the goods are at his risk during the sea transit. It has been argued that s32(3) can have no application to FOB sales because the contract requires the seller to deliver the goods “free on board” and delivery to a carrier is normally deemed to be delivery to he buyer.
In the alternative, risk may pass to the buyer prior to shipment. In Cunningham v Munro it was suggested that if the goods deteriorate because of the buyer’s delay in giving the seller shipping instructions (it is the obligation of the buyer to nominate an effective vessel and nominate the port of loading) or because the buyer induces the seller to deliver goods to the port before the goods can be loaded the buyer would be liable for such deterioration; he would be entitled to reject the goods for non-compliance with the implied conditions as to quality in the Sale of Goods Act, but would be liable to the seller in damages for the deterioration.
Risk may also remain with the seller under the following circumstances :-
1.Seller has reserved the right of disposal by retaining the bill of lading
2.Contract goods are unascertained
Sunday, February 22, 2009
The Rule in Rylands v Fletcher
The rule in Rylands v Fletcher should be abolished and absorbed within negligence or alternatively should be generously applied and the scope of strict liability extended. Discuss. - Justin Santiago
The principle of the decision in Rylands v Fletcher was expressed in the famous words of Blackburne J:
“The person who brings on his land for his own purposes, and collects and keeps there, anything liable to do mischief if it escapes, must keep it in at his peril...”'
The rule in Rylands v Fletcher applied the doctrine of strict liability into the tort and the primary justification for this was premised upon the belief that the rights of individuals should not be sacrificed in the furtherance of the public interest in cases where the acts were "one off" and therefor difficult to be liable under nuisance which requires the acts to be continuous or where it was difficult to prove that the defendant had not taken all reasonable precautions to prevent the mischief since the escape would not have been foreseeable.
The application of strict liability, that is, liability without fault is contentious because it looks at the harmful result rather than to the kind of conduct. This is very different from the traditional fault-based formulation in negligence.
However, the situation is quite a lot more complicated than it first appears, because true strict liability would be extremely burdensome. Consequently, the courts, just like in the law of nuisance, have imported fault elements into the rule in other guises. To succeed in the rule under Rylands v Fletcher, the claimant has to show that the defendant's activities amounts to a `non-natural' user of land. Clearly this will be easier if the defendant's activities are inherently unreasonable. In addition, it appears that a remoteness test applies to this tort as it does for nuisance.
In Cambridge Water v Eastern Counties Leather 1994, the House held that the concept of `non-natural user' was a valid one, and what the defendants had been engaged in did constitute a non-natural use; nevertheless, the same tests for remoteness as applied in negligence also applied to the rule. The loss suffered by the claimants was not of a type forseeable by the defendants, and the damage was therefore too remote. Under strict liability it would not matter whether the loss was foreseeable or not. So, even if the defendant's activities amount to `unreasonable user', he may still escape liability if he could not reasonably be expected to foresee the type of damage that would result.
In short, Ryands v Fletcher is not subject to an explicit test for fault as negligence is, but it has features which at least overlap with a test for fault. The main procedural difference is that the claimant does not have the burden of proving that the defendant was at fault - this is assessed by the court with regard to the reasonable user and remoteness considerations.
Whether this warrants that the rule be absorbed into negligence is debatable because under negligence there would be several more elements that may be difficult to prove by the claimants who would be deprived of the right to use their land. The rule itself, said the House of Lords in Transco v Stockport MBC, fulfilled an important social objective, in making people think very carefully about the ways they used their land.
The principle of the decision in Rylands v Fletcher was expressed in the famous words of Blackburne J:
“The person who brings on his land for his own purposes, and collects and keeps there, anything liable to do mischief if it escapes, must keep it in at his peril...”'
The rule in Rylands v Fletcher applied the doctrine of strict liability into the tort and the primary justification for this was premised upon the belief that the rights of individuals should not be sacrificed in the furtherance of the public interest in cases where the acts were "one off" and therefor difficult to be liable under nuisance which requires the acts to be continuous or where it was difficult to prove that the defendant had not taken all reasonable precautions to prevent the mischief since the escape would not have been foreseeable.
The application of strict liability, that is, liability without fault is contentious because it looks at the harmful result rather than to the kind of conduct. This is very different from the traditional fault-based formulation in negligence.
However, the situation is quite a lot more complicated than it first appears, because true strict liability would be extremely burdensome. Consequently, the courts, just like in the law of nuisance, have imported fault elements into the rule in other guises. To succeed in the rule under Rylands v Fletcher, the claimant has to show that the defendant's activities amounts to a `non-natural' user of land. Clearly this will be easier if the defendant's activities are inherently unreasonable. In addition, it appears that a remoteness test applies to this tort as it does for nuisance.
In Cambridge Water v Eastern Counties Leather 1994, the House held that the concept of `non-natural user' was a valid one, and what the defendants had been engaged in did constitute a non-natural use; nevertheless, the same tests for remoteness as applied in negligence also applied to the rule. The loss suffered by the claimants was not of a type forseeable by the defendants, and the damage was therefore too remote. Under strict liability it would not matter whether the loss was foreseeable or not. So, even if the defendant's activities amount to `unreasonable user', he may still escape liability if he could not reasonably be expected to foresee the type of damage that would result.
In short, Ryands v Fletcher is not subject to an explicit test for fault as negligence is, but it has features which at least overlap with a test for fault. The main procedural difference is that the claimant does not have the burden of proving that the defendant was at fault - this is assessed by the court with regard to the reasonable user and remoteness considerations.
Whether this warrants that the rule be absorbed into negligence is debatable because under negligence there would be several more elements that may be difficult to prove by the claimants who would be deprived of the right to use their land. The rule itself, said the House of Lords in Transco v Stockport MBC, fulfilled an important social objective, in making people think very carefully about the ways they used their land.
Nuisance
There continues to be uncertainties about the basis for suing under private nuisance - Justin Santiago
There has been a preference to sue under private nuisance because it is not based on fault and therefor is less difficult to prove. Private nuisance is the continuous, unlawful and indirect interference with a person’s use or enjoyment of land or some rights over or in connection with it and as long as all these elements are present there is a valid case. However several cases have pointed to the limitations of this definition that makes it difficult to start an action under nuisance.
Because private nuisance is a tort against land, not against the person only those with rights to the land namely an interest in land or exclusive possession can sue.
It has never really been clear what amounts to a proprietary interest in land for the purposes of nuisance, and on closer inspection it is obvious that it isn't a particular helpful concept in general – Pemberton v Southwark LBC 2000 decided that a tenant, who had reverted to being a trespasser by his non-payment of rent, but was tolerated by the landowner, had standing to sue in nuisance.
In Khorasandjian v Bush the law of nuisance could be invoked by those who had a substantial link to the land, and this would include the relatives of landowners however Hunter v Canary Wharf reinstated the proprietary interest principle stated in Malone v Laskey that the claimants must have an interest in the land and must have exclusive possession tin their own right and overturned the decision to allow occupiers with a substantial link to the landowner to sue.
Although Hunter seems clear enough, there continue to be uncertainties about who has a right to sue in nuisance. The first problem arises from those cases where the courts have accepted that it is a nuisance to prevent someone getting access to land (rather than interfering with his use of that land). These cases have mostly arisen out of the actions of pickets on industrial disputes. In both Thomas v NUM [1986] Ch 20 and Newsgroup v SOGAT [1987] ICR 187 the courts accepted that pickets caused a nuisance by preventing non-striking workers getting into their places of work. In none of these cases had the victim of the nuisance had any proprietary interest in land; at best they were licencees. However, unlike Malone, these cases concerned rights of access to land, not right of enjoyment of land, and might represent a different species of nuisance.
Limiting who can sue to those with rights to land is contrary to Article 8 of the European Convention on Human Rights which demands respect for private and family life, and if a person occupies his home as a licencee, or even as a trespasser, it seems that he should still be able to get the protection of the Article.
Another contentious point is the requirement for the interference to be continuous which is said to distinguish nuisance from negligence which can be based on a single event. In British Celanese v Hunt Capacitors 1969, the defendant's metal foil blew onto a power line and shut off power to the claimant's plant. This was a single event, but the defendants were liable. The reasoning was that the single event followed from an ongoing state of affairs (the inadequate storage of the foil). Then, in Leakey v National Trust 1980, the defendants were held liable for a (single) landslide onto the claimant's property. Again, the reasoning was that the defendant's land was defective, and had been so for a long time.
Additionally in deciding nuisance cases, the courts have to balance the right of the claimant to use his land, with the right of the defendant to use his. Not every trivial interference will amount to a nuisance. It must be a balancing exercise between rights of the claimant and other householders : Miller v Jackson. Factors to take into consideration :-
- defendant’s conduct in light of the circumstances
- nature of the locality – Sturges v Bridgman making a disruptive amount
of noise is more likely to be unreasonable in a quiet rural area than in
an industrial zone
- abnormal sensitivity – Robinson v Kilvert
- malicious – Christie v Davey, Holleywood Silver Fox Farm v Emmet 1936, the defendant's shooting was perfectly lawful, and would not
have amounted to a nuisance had it not been done with malice.
- does not normally occur
- occurs at an unreasonable time
- objectives could have accomplished in a less intrusive manner
- dangerous
- natural nuisance recognised and the same duty of positive action on
the part of the occupier of the land was recognised – Leakey v
National Trust
Unsure what amenity interests are protected. In Tetley v Chitty 1986, noise from a go-kart track was held to be an actionable nuisance, as was the bad smell emanating form a pig farm in Bone v Seal 1975. But no action lay in the blocking of a view or prospect : AG v Doughty or prospect of TV and radio reception : Hunter v Canary Wharf.
If a loss of amenity resulting from personal discomfort can be actioned, then the courts have from time to time extended this head of liability to encompass actual personal injury. After all, it seems logical in a way that if discomfort is actionable, injury should be actionable. However, in Hunter v Canary Wharf the House of Lords doubted that personal injury could amount to a nuisance - nuisance is concerned with the rights in land, not with bodily integrity.
Although some losses of amenity value may be actionable, the courts have not accepted that all losses are so actionable. For example, in Hunter, interference with television reception was not held to amount to a nuisance. In a way this is strange, because many people would be deterred from owning land that did not obtain adequate television reception; this particular part of the Hunter decision has been rejected by some other common-law jurisdictions (e.g., in the Canadian Nor-Video case).
A further problem with the principle that loss of amenity is recoverable is that whether there is a loss of amenity will depend on what the claimant does on his land. If the defendant has the poor fortune to live next to someone who carries on a particular line of business, and the defendant's actions are deemed to reduce the amenity of the neighbouring land with respect to that business, then he will be liable. Admittedly the courts have been reluctant to impose liability where the claimant's activities are unsually sensitive to interference (e.g., Robinson v Kilvert 1889).
References
F.H. Newark in his article The Boundaries of Nuisance
There has been a preference to sue under private nuisance because it is not based on fault and therefor is less difficult to prove. Private nuisance is the continuous, unlawful and indirect interference with a person’s use or enjoyment of land or some rights over or in connection with it and as long as all these elements are present there is a valid case. However several cases have pointed to the limitations of this definition that makes it difficult to start an action under nuisance.
Because private nuisance is a tort against land, not against the person only those with rights to the land namely an interest in land or exclusive possession can sue.
It has never really been clear what amounts to a proprietary interest in land for the purposes of nuisance, and on closer inspection it is obvious that it isn't a particular helpful concept in general – Pemberton v Southwark LBC 2000 decided that a tenant, who had reverted to being a trespasser by his non-payment of rent, but was tolerated by the landowner, had standing to sue in nuisance.
In Khorasandjian v Bush the law of nuisance could be invoked by those who had a substantial link to the land, and this would include the relatives of landowners however Hunter v Canary Wharf reinstated the proprietary interest principle stated in Malone v Laskey that the claimants must have an interest in the land and must have exclusive possession tin their own right and overturned the decision to allow occupiers with a substantial link to the landowner to sue.
Although Hunter seems clear enough, there continue to be uncertainties about who has a right to sue in nuisance. The first problem arises from those cases where the courts have accepted that it is a nuisance to prevent someone getting access to land (rather than interfering with his use of that land). These cases have mostly arisen out of the actions of pickets on industrial disputes. In both Thomas v NUM [1986] Ch 20 and Newsgroup v SOGAT [1987] ICR 187 the courts accepted that pickets caused a nuisance by preventing non-striking workers getting into their places of work. In none of these cases had the victim of the nuisance had any proprietary interest in land; at best they were licencees. However, unlike Malone, these cases concerned rights of access to land, not right of enjoyment of land, and might represent a different species of nuisance.
Limiting who can sue to those with rights to land is contrary to Article 8 of the European Convention on Human Rights which demands respect for private and family life, and if a person occupies his home as a licencee, or even as a trespasser, it seems that he should still be able to get the protection of the Article.
Another contentious point is the requirement for the interference to be continuous which is said to distinguish nuisance from negligence which can be based on a single event. In British Celanese v Hunt Capacitors 1969, the defendant's metal foil blew onto a power line and shut off power to the claimant's plant. This was a single event, but the defendants were liable. The reasoning was that the single event followed from an ongoing state of affairs (the inadequate storage of the foil). Then, in Leakey v National Trust 1980, the defendants were held liable for a (single) landslide onto the claimant's property. Again, the reasoning was that the defendant's land was defective, and had been so for a long time.
Additionally in deciding nuisance cases, the courts have to balance the right of the claimant to use his land, with the right of the defendant to use his. Not every trivial interference will amount to a nuisance. It must be a balancing exercise between rights of the claimant and other householders : Miller v Jackson. Factors to take into consideration :-
- defendant’s conduct in light of the circumstances
- nature of the locality – Sturges v Bridgman making a disruptive amount
of noise is more likely to be unreasonable in a quiet rural area than in
an industrial zone
- abnormal sensitivity – Robinson v Kilvert
- malicious – Christie v Davey, Holleywood Silver Fox Farm v Emmet 1936, the defendant's shooting was perfectly lawful, and would not
have amounted to a nuisance had it not been done with malice.
- does not normally occur
- occurs at an unreasonable time
- objectives could have accomplished in a less intrusive manner
- dangerous
- natural nuisance recognised and the same duty of positive action on
the part of the occupier of the land was recognised – Leakey v
National Trust
Unsure what amenity interests are protected. In Tetley v Chitty 1986, noise from a go-kart track was held to be an actionable nuisance, as was the bad smell emanating form a pig farm in Bone v Seal 1975. But no action lay in the blocking of a view or prospect : AG v Doughty or prospect of TV and radio reception : Hunter v Canary Wharf.
If a loss of amenity resulting from personal discomfort can be actioned, then the courts have from time to time extended this head of liability to encompass actual personal injury. After all, it seems logical in a way that if discomfort is actionable, injury should be actionable. However, in Hunter v Canary Wharf the House of Lords doubted that personal injury could amount to a nuisance - nuisance is concerned with the rights in land, not with bodily integrity.
Although some losses of amenity value may be actionable, the courts have not accepted that all losses are so actionable. For example, in Hunter, interference with television reception was not held to amount to a nuisance. In a way this is strange, because many people would be deterred from owning land that did not obtain adequate television reception; this particular part of the Hunter decision has been rejected by some other common-law jurisdictions (e.g., in the Canadian Nor-Video case).
A further problem with the principle that loss of amenity is recoverable is that whether there is a loss of amenity will depend on what the claimant does on his land. If the defendant has the poor fortune to live next to someone who carries on a particular line of business, and the defendant's actions are deemed to reduce the amenity of the neighbouring land with respect to that business, then he will be liable. Admittedly the courts have been reluctant to impose liability where the claimant's activities are unsually sensitive to interference (e.g., Robinson v Kilvert 1889).
References
F.H. Newark in his article The Boundaries of Nuisance
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