Equity

Front 1

What are the maxims of Equity?

Back 1

Equity looks on as done that which ought to be done.
Equity follows the law.
He or she who comes to equity must have clean hands.
He or she who seeks equity must do equity.
Equity does not allow a statute to be made an instrument of fraud.
Equality is equity.
Equity acts in personam.
Equity will not assist a volunteer.
Equity looks to intent not form.
Equity will not suffer a wrong to be without a remedy.
Where the equities are equal, the first in time prevails.
Where the equities are equal, the law prevails.
Equity aids the diligent and not the tardy.

Front 2

What does Kirby think of Equity?

Back 2

Kirby noted a reluctance to expand the equitable doctrines and remedies (eg Yerkey v Jones), a “needless hardening of equity’s arteries”. Also reluctance to expand fiduciary relationships (eg his dissent in Pilmer) in Breen v Williams – which is “particularly disappointing” De Hepburn.

HCA is also very resistant to theories of unjust enrichment in the context of restitutionary remedies (Farah) – overturned Court of Appeal decision that imposed a constructive trust – they needed some kind of mistake/duress/illegality, if not this was a significant departure and a “radical change”. Gummow explained that theory should come from judicial decisions. Kirby notes that yes, that’s true but it is not surprising that people will try to reduce the wilderness of single case instances, and consolidate the principals behind it. This can help re-classify case decisions and explain what they stand for and what underpins them.

Front 3

What does it mean to be specific? What are the requirements of the plaintiff? What are the reasons for this requirement?

Back 3

P needs to define not only what the information conveyed was, but also what part of that information was not common knowledge (Mason J in O’Brien v Komesaraff). The issue here was that the information was too general.

Courts are “careful to ensure that the plaintiff gives full and proper particulars of all the confidential information on which he intends to rely in the proceedings” (Laddie in Ocular Science). If not, there is potential for abuse of the system, as P creates difficulty for D to address the claims.

In determining whether information is specific enough, consider the burden on the plaintiff (not given much weight), the link between pleadings and the remedy, the ability of the defendant to meet the case and the potential for harassment and abuse of process.

Front 4

What are examples of confidential information?

Back 4

Examples include
- Genetic material (Franklin);
- A concept for a TV program (Talbot)
- Photographs of a private event (Hello! – importance was not the description/general information, but the commercial value (eg ability to control pics, photographs differ from the substance of what they are. UK));
- Design of a product (Saltman Engineering); (even if it can be reverse engineered)
- Information about a trade position (Coco);

Front 5

What are the elements of breach of confidence?

Back 5

Information must be specific and definable.

Information must have the necessary “quality of confidence”.

Circumstances import the duty (and obligation has been imposed expressly or can be inferred from the circumstances).

There must be unauthorised use of the information.

(Coco v Clark, revised in Smith)

Front 6

What is the relationship between privacy and confidentiality?

Back 6

The mere fact that information is not common knowledge, or that it existed solely on private property, does not entail that it is confidential (Lenah).

If the disclosure or observation of information or conduct would be highly offensive to a person of ordinary sensibilities, then it will be confidential (Lenah).

There is no separate right to privacy in Australia. Information may be confidential if there is a reasonable expectation of privacy (Jane Doe – not yet supported by higher courts). Breach of privacy fits in with the same structure (Giller).

Gleeson in Lenah said confidence was better bc might be confused with free speech/hard to define. Callinan thinks it could happen. Gummow/Hayne leave the possibility open but only for natural persons.

Front 7

Does it matter how information is located?

Back 7

If information is not confidential, the way it is located does not matter (Gleeson in Lenah). However, security measures imply the intention of confidentiality (Hello).

Front 8

Does information lose its quality of confidence if it enters the public domain?

Back 8

Information may be distributed amongst a group of people beyond the holder of information without becoming public if it is communicated with the expectation of confidence (Jane Doe).

Information may be published in some medium that is not significant, publicly available or authoritative without losing quality of confidence (AFL) – especially if the sources are not reliable.

Information does not need to be intended to be kept confidential forever (Hello).

If information is so general that it could never have be confidential, it does not have the necessary quality of confidence (Talbot).

Front 9

Does information need to be commercial?

Back 9

Non-commercial information can be protected if it has the necessary characteristics. Cultural information (Foster) and personal information (Giller) can be confidential. It can also be a mix of commercial and personal (Douglas v Hello) – in this situation, personal information was given commercial value.

Front 10

What are the circumstances that will import the duty?

Back 10

Equitable duty to respect the confidentiality of confidential information arises where the recipient of the information knows or ought to know that the information is confidential (Coco).

Circumstances are more critical than the manner in which it is disclosed. However, knowledge may be imputed from the circumstances of the discovery.

For example –
- commercial relationships (Coco)
- information obtained through trespass (Franklin)
- when there are restrictions governing the publication to which the distributor is subject (Lenah)
- when it is obvious the information is confidential (Douglas, Giller)

Front 11

What if there is no relationship between the confider and recipient?

Back 11

If acquired by chance, if the information appears to be confidential, the requirement of knowledge will be satisfied (Spycatcher). There is no need for an existing relationship if the circumstances make it obvious (Franklin).

Front 12

What is the relevance of the confider’s intention?

Back 12

The confider’s intention is not sufficient to establish a duty of confidence (Smith Kline). P tried to argue that the information was only given for a limited purpose. However, in the interest of commerciality, it was clear that the purpose of the information was beyond the limited purpose Smith Kline described, and there was no consensus.

Front 13

What constitutes breach of the duty?

Back 13

Unauthorised use of the information, or use contrary to the owner’s restrictions will breach the duty (Coco).

When information is for a limited purpose, P needs to show that the use is outside the permitted scope (Castrol).

Front 14

Is threatened use of confidential information enough?

Back 14

Yes, if it breaches the obligation (Smith Kline)

Front 15

Is detriment required for a breach of confidential information?

Back 15

“Substantial concern” is sufficient to ground an action for breach of confidence (Deane in Moorgate). The obligation of conscience is to respect the confidence, not merely refrain from causing detriment to P (Gummow J in Smith Cline.

Front 16

What about government secrets?

Back 16

The government department would have to show real evidence of detriment to succeed. Real threat of embarrassment should not be sufficient (Gummow)

Front 17

Is public interest a defence? What are the requirements for public interest?

Back 17

It must be a serious, critical issue – for example, a health crisis (Castrol).

D must articulate what the public interest is and then show that it can only be achieved by disclosure of the private information (AFL).

There has been recent discussion of constitutional freedom of political communication.

No public interest in administration of the Act in Kumar, but there was public interest in in giving interest to the authorities.

Front 18

Does the defence of public interest operate as a “stand-alone” defence or does it relate to the “obligation of confidence element”?

Back 18

Gummow in Smith Kline - not so much a rule of law, looking at the obligation of confidence element and overruling it on an adhoc basis.

Front 19

What are the possible remedies for breach of confidence?

Back 19

Injunction is the key remedy.

Other awards include –
- orders for destruction andor delivery of goods (Franklin)
- equitable compensation
- equitable damages
- account of profits
- CT has not been awarded in Australia, but has in Canada.

Front 20

What is the springboard doctrine?

Back 20

A person who receives information in confidence will not be allowed to use it as a springboard for activities detrimental to the party who provided the information, even though all other aspects of the product have been published or can be ascertained by actual inspection by any member of the public (Terrapin v Builders Supply)

Front 21

What are the steps for a fiduciary question?

Back 21

Establish the fiduciary relationship.

Determine the scope of that relationship.

Establish if any breach has occurred.

Any defences available?

Assess any available remedies against the fiduciary.

Is any third party involved?

Front 22

What are the accepted categories of fiduciary relationships?

Back 22

- trustee-beneficiary
- director-company
- agent-principal
- solicitor-client
- partner-partner
- employeremployee
- bankruptcy trustees-creditors

Front 23

What about factual or non-standard categories?

Back 23

To establish the relationship, P must prove on a factual basis that a fiduciary duty exists.

An analogy may be drawn with an accepted category.

Fiduciary relationships have been recognised between joint venturers (UDC v Brian), artist-aboriginal tribe (Bulun Bulun) and bank manager-customer (Commonwealth Bank v Smith).

Front 24

What is the test for finding a fidicuary duty?

Back 24

Mason J in Hospital Products (dissent, adopted in later cases) – critical features is that the fiduciary “undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense”. The fiduciary has a “special opportunity” to use the power or discretion to the “detriment” of the “accordingly vulnerable” fiduciary. The use of “for”, “on behalf of” and “in the interests of” signify a representative character”.

In this situation, Goodman was the custodian of the goodwill of the product.

Front 25

What about a doctor-patient relationship?

Back 25

There is no broad fiduciary relationship between a doctor and patient so as to create a duty to disclose patient records. It may be possible to allege a proscriptive duty in relation to the traditional obligation of fiduciaries (Breen v Williams).

Gummow J – the doctor-patient relationship is fiduciary only to the extent that it would be a breach of duty for the doctor to make unauthorised profit or to create a possibility of conflict between the doctor and his patient. Anything further should be governed by general law

Front 26

What are the indicia are used to find a fiduciary duty?

Back 26

Vulnerability, reliance and undertaking (Douglas J in Quince v Varga).

Front 27

What does it mean to have a representative element?

Back 27

It needs to be something more than mere reliance (Breen) – though reliance is necessary (Hospital Projects).

Front 28

What are examples of vulnerability?:

Back 28

o The presence of some special skill that cannot be independently assessed (Breen);
o The trusting of intimate personal information (Breen);
o The significance of the impact of the decision (Breen);
o The inequality of bargaining power (Breen);

o The ability to unilaterally exercise discretion which may affect the party (Hospital Products);

o The lack of information given to the other party (Quince);
o The possession of the party’s property (Quince).

Front 29

Can a fiduciary relationship co-exist with other forms of legal relationship between the parties?

Back 29

Yes. In Quince v Varga, there was a contractual loan but M was acting like a fiduciary agent (eg trustee) for Varga.

Front 30

Are joint venturers a new “accepted category” or is it fact-specific?

Back 30

Joint venturers are not an accepted categories. However, if they are so much like a partnership to be analogous to one, the ad-hoc relationship will be fiduciary (Brian). The difference is that joint ventures are a single project.

The fiduciary relationship can exist even though parties never reach consensual terms, if they are negotiating at closer than arms length negotiations. The substance of their agreement and negotiations must show they are embarking on the conduct of the joint venture (Brian).

Front 31

What if fiduciary characteristics exist but other things get in the way?

Back 31

It doesn’t follow that fiduciary characteristics lead to a fiduciary relationship. The court has ultimate discretion – for example, in Habib, they considered the regard to national interest and the suitability of legislation to deal with the issue of Commonwealth protecting citizens.

Front 32

What kind of interests can be covered by fiduciary obligations?

Back 32

To find the subject matter of the fiduciary relationship, we look at the character of the venture or the undertaking of the relationship (Birtchnell). Equity looks at the substance, rather than form (Birtchnell).

Front 33

Does a fiduciary always have to subordinate their own interests?

Back 33

No. In Hospital Products, Mason J argued that the conflict rule could not be “usefully applied” in the “absolute terms in which it had been stated”, meaning that they could act in their own interests to a certain degree. They could not act in a way that made a situation of conflict of interests. They had to act bona fide and reasonable, having “due regard” for the relationship. They could prefer their own interests, but could not disregard the interests of USSC.

Front 34

What is the scope of a fiduciary relationship in relation to future duties?

Back 34

Fiduciary relationships have boundaries and are “free to act in their own interests in all matters outside those boundaries” (Bryson JA in Blythe v Norwood). In this situation, the solicitor was unaware that he would be paid out through the loan document mortgage. In circumstances where there is no knowledge of the potential impact in his favour, fiduciary duties do not extent so far as to require disgorgement of the indirect benefit (Mason J in Blythe v Northwood)

However, judges seem influenced by the lying of the borrower, as it was “ornamented with falsehoods”. No element of profit or advantage because when he was paid by ACG, they had sufficient resources.

Front 35

What are some examples of activities that will be within the scope of fiduciary duty?

Back 35

Activities done in the course of management (Regal) or in similar business ventures (Birtchnell).

Front 36

What constitutes a breach of the fiduciary duty?

Back 36

A fiduciary entering a transaction where they have a personal interest or interest to another party conflicting, or that may possibly conflict, with the interests of those whom they are bound to protect (conflict rule) or a fiduciary who makes a profit out of a fiduciary position without the informed consent of the principal (profits rule).

Front 37

What is the test for a breach of the conflicts rule?

Back 37

A breach of the conflict rule requires a “real, sensible possibility” of conflict , as seen by a “reasonable man looking at the facts of the case” (Lord Upjohn Boardman).

This protects fiduciaries from the “fallibility of human nature” (Consul per Gibbs J).

Front 38

What are examples of duty-interest conflict?

Back 38

Duty-interest breaches have been treated strictly (Keech v Sandford – better to let the lease run out than allow the trustee to have the lease on refusal to renew). In Chan v Zacharia, the lease was held to be part of the partnership property (rebuttable presumption that the renewed lease was obtained by use of the fiduciary relationship for partners, irrebutable for trustees as in Keech). This extends to where the partnership is dissolved in the course of liquidation (this resulted in a CT).

If a solicitor has a personal interest and gives poor advice to a client based on his personal interest, the client can receive equitable compensation (Nocton v Lord Ashbutron).

Front 39

What are examples of duty-duty conflict?

Back 39

Concurrent duties will result in a breach of the conflicts rule, unless there is fully formed consent (Farrington v Rowe).

In Pilmer, Kirby argues that accountants should not be considered merely contracted agents or tortfeasors who can walk around doing whatever they want – they should be fiduciaries.

With subsequent duties, Millett L in Bolkiah held that the fiduciary relationship comes to an end with the “termination of the retainer”. The only requirement is the “continuing duty to preserve the confidentiality of information”.

In this situation, KPMG’s Chinese Wall was held to be insufficient, even though they used different people, different servers, a different office and often work with highly confidential information. One of the reasons was the high rotation of workers through and as the area is difficult, partners and managers often share information with each other. Physical segregation is not sufficient and due to the ad hoc nature of the wall, it was insufficient. They must show there is NO risk.

Spincode disagrees with Bolkiah, and states that you cannot act against a former client in a manner you acted for them previously (Spincode). The obligation of loyalty persists even when the solicitor no longer acts for the client

Front 40

What are examples of remedies given for breach of the profits rule?

Back 40

Injunction (Bolkiah), equitable compensation (Nocton), account of profits (Hospital Products) and rescission.

Front 41

When will a fiduciary breach the profits rule?

Back 41

A fiduciary “must account” for any benefit or gain obtained or received in circumstances where a conflict or significant possibility of conflict existed, or profit that was obtained or received by use of reason of his position or opportunity or knowledge resulting form (Deane J in Chan v Zacharia).

Front 42

What are some examples of the profits rule?

Back 42

- a partner diverting a business opportunity (Chan v Zacharia)
- a secret profit not disclosed to a joint venturer (UDC v Brian)
- exploitation of knowledge gained in a fiduciary capacity (Regal Hastings, Boardman v Phipps)
- a bribe (Reid)
- a ponzi scheme (Sinclair)

Front 43

What are remedies for breach of the profits rule?

Back 43

Account of profits (personal remedy – the principal is an unsecured creditor) or proprietary remedies of constructive trust or an equitable lien.

Front 44

When does a fiduciary obligation end?

Back 44

The fact that dealings are completed will ordinary demonstrate that any associated interest or duty is at an end (Pilmer). In Chan, it survived the dissolution of the partnership as the relationship still required good faith in winding up the affairs as specified in the agreement.

In Bolkiah, Millett L stated that solicitors are relinquished from their obligation when the retainer runs out. Spincode disagreed – “duty of loyalty” persists, even when solicitor no longer acts for the client and you cannot act against a former client in a matter you acted for them previously (Brooking J).

Front 45

What are the defences to breaches of fiduciary duty?

Back 45

A person to whom fiduciary duties are owed may consent to, excuse or ratify a breach of duty, after material facts have been sufficiently disclosed.

Front 46

What qualifies as sufficient disclosure and informed consent?

Back 46

In QLD Mines v Hudson, divestment of an opportunity by the defendant was constructed as either fully-formed or consent OR that the activity was outside the scope of the relationship. There was no real possibility of conflict and they had enough information.

Consent must be “fully informed” and they must be capable of giving consent – ie, not senile (Boardman v Phipps).

Front 47

Who can consent to a breach of duty by the Directors?

Back 47

Not the Board – it must be the shareholders (Regal Hastings).

Front 48

When is a third party liable for a remedy arising out of another person’s breach of fiduciary duty?

Back 48

- knowing assistance
- knowing receipt
- acting in concert for mutual benefit
- tracing

Front 49

What is the knowledge on the Baden scale?

Back 49

1. Actual knowledge
2. Wilfully shutting eyes to the obvious
3. Wilfully or recklessly failing to make enquiries an honest or reasonable person would make.
4. Knowledge of circumstances that would indicate facts to honest or reasonable person (sufficient for 3P – Grimaldi)
5. Knowledge of circumstances that would put an honest or reasonable person on equity (not sufficient for 3P).

Front 50

What is knowing receipt?

Back 50

1. Third party received trust or fiduciary property.
2. Third party “knew, or had reason to know, of the cirucmstances constituting the breach of the trust” (Grimaldi).

An example in Quince – wife and son were involved in the establishment of the CHT and that Quince’s money had been paid into its account, and the limitations of him as a bankrupt. They should have known that Quince’s funds were the only source of available funds, and at least turned a blind eye to the fraud.

Knowledge from the circumstances can be taken from little bits and pieces (Grimaldi). It is not sure if information can be aggregated from syndicates – in Bell, they did not need to decide this.

Front 51

What is receipt?

Back 51

Actual receipt. When a bank account is in credit, and the bank accepts the money, they are not “receiving it”.

Having control of the property as a trustee is receipt (Quince v Varga).

Front 52

What is trust or fiduciary property?

Back 52

This is anything that is the subject of the fiduciary obligation. Information is not property (Barnes v Addy). In Bell, it was suggested that corporate property subject to fiduciary responsibilities of the company’s directors is fiduciary, including trade secrets that could possibly be property for the purposes of knowing receipt. Important is whether it can be held on trust.

Front 53

Why is restitution the wrong approach for knowing receipt?

Back 53

It is very confusing. It seems to abandon the notice test for the first limb because it doesn’t depend on P proving that D had any notice.

Also, the liability is really wide. The daughters and wife in Say-Dee did not have any knowledge. Not even an “unjust factor” was required. Ignorance should not be a reason for restitution.

Front 54

What is knowing assistance?

Back 54

There must be a primary breach of fiduciary duty. D must “assist” in the breach, with knowledge of the “dishonest and fraudulent design” of the fiduciary.

Front 55

What is “dishonest and fraudulent design”?

Back 55

This is non-trivial or non-excusable breach of trust or fiduciary duty. This includes not only breaches of trust, but also breaches of fiduciary duty – but any breach of trust of trust or breach of fiduciary duty relied on must be dishonest and fraudulent (Farah, applying Consul). Not all breaches are dishonest and fraudulent – it must be understood in reference to equitable principles (Gibbs J in Consul).

There needs to be some kind of dishonest and fraudulent factor – for example compare Keech and Boardman (Bell)

Front 56

What remedies are available for third parties who are liable?

Back 56

Third party can be liable as a constructive trustee for any losses incurred or accountable – note that this is a personal liability.

Where trust property or traceable proceeds is received and kept, CT may be proprietary.

Front 57

What will specific performance be available?

Back 57

An order for specific performance is available unless:

- continued supervision of the court is necessary to ensure the fulfilment of the contract (Williamson)
- it doesn’t ensure that obligation is brought to a close (Williamson)
- performance of the contract is impossible
- the contract is for personal services
- damages would be an adequate remedy

Front 58

What types of injunctions are there?

Back 58

Injunctions can be permanent or temporary (interlocutory or interim), ex parte or inter parte, mandatory or prohibitive. Atkins is an example of an interlocutory injunction.

Front 59

What is required before an injunction can be awarded?

Back 59

Injunctions are only available to support legal or equitable causes of action (Lenah). They are not available at large.

Front 60

What is required for an interim injunction?

Back 60

Gleeson in Lenah Game Meats said a plaintiff must show:

- a serious question to be charged
- that he will suffer irreparable damage if the injunction is not granted and
- balance of convenience favours granting an injunction (include factors such as delay, effect on third parties, whether compensation would be adequate and commercial factors)

Front 61

Can specific delivery of a property be used in conjunction with a prohibitive injunction?

Back 61

Yes, in Franklin v Giddins, delivery of a material obtained in breach of confidence was ordered.

Front 62

Can a court order enforce a negative stipulation?

Back 62

Lumley – a singer was not allowed to sing anywhere else except the place she contracted herself to sing at. This has been criticised and the court seems to be turning away from this – for example, in Atlas Steels, enforcing the negative stipulation would cause the defendant to “starve”, resulting in an indirect enforcement of the positive obligation.

Front 63

What is a declaration?

Back 63

A declaration is a final statement of the rights of the party. This can only be sought by a person with a “real interest” in the issue. There must be an “immediate legal controversy (SC rules 23.05). It can be sought without consequential relief (SC rules 23.05) and for future activities (Cth v Sterling Nicholas (this was not hypothetical because they would have gone ahead if they were allowed).

Front 64

What is rescission?

Back 64

Parties are restored to the position they were in prior to contract.

Front 65

When is rescission available?

Back 65

Rescission is flexible. It is only available for what the position would have practically been (Vadasz – couldn’t cast aside all of the guarantee unless he showed he would not have entered if he knew about it). If P has received some benefit, he must return it as part of rescission (Maguire v Makaronis). If literal rescission cannot be awarded, courts can order pecuniary remedy – it is unclear if these are “pecuniary rescission” or simply equitable compensation (McKenzie v McDonald).

Front 66

What is account of profits?

Back 66

Court may order pecuniary remedies to right an equitable wrong, directing the money generated from an equitable wrongful act to the injured party. The value is taken from the time that it is taken.

Front 67

When is account of profits available?

Back 67

Breach of confidence, breach of fiduciary duty or breach of trust. Fiduciary must account for profits and benefit obtained when there is conflict or possible conflict or by reason of the fiduciary position (Regal (Hastings)).

Front 68

How accurate must an account of profits be?

Back 68

It does not need to be mathematically exact and can be a reasonable approximation. Generally a fiduciary will be required to render an account of the profits made within the scope and ambit of the duty (Warman v Dwyer – in this situation, it was two years of net after-tax profits, considering a year of what they would have earned, and a year for the contacts that Dwyer had).

Front 69

What if more than one remedy is available to P?

Back 69

P can choose what remedy he wants to use.

Front 70

When must P elect what remedy they wish to receive?

Back 70

They do not need to elect any time before judgment, but once an election made it is final (Warman v Dwyer). P cannot get compensation and profits from the same defendant from the same breach.

Front 71

What if P waits for the profits to go up?

Back 71

That is not allowed.

Front 72

What if there are multiple defendants?

Back 72

The measure of remedy may be different for each defendant (Michael Wilson v Nicholls).

Front 73

What is equitable compensation?

Back 73

Equitable compensation is equity’s “loss recovery” remedy.

Front 74

Is it ever possible to obtain both account of profits and equitable compensation?

Back 74

Yes, if there is more than one defendant (Club of the Clubs) – in applying commonsense, Bergin J felt that there is no prohibition form making a split election.

Front 75

When is equitable compensation available?

Back 75

Equitable compensation is available for a range of equitable wrongs, including breach of fiduciary duty (Warman), estoppel (W v G), breach of confidence and breach of trust (Re Dawson).

Front 76

What are the requirements of equitable compensation?

Back 76

There must be a causal link – the “but for test” (Re Dawson, Youyang). Endorsed by La Forest in Canson, but McLachlin noted that it needed to be supplemented by a common sense test, followed in Maguire - only could get compensated to the extent that there is a sufficient connection between the breach alleged and the loss complained of.

Front 77

Is compensation for future financial losses available?

Back 77

Yes (W v G).

Front 78

Is equitable compensation usually restitutionary or compensatory?

Back 78

Restitutionary.

Front 79

Is equitable compensation available for mental and emotional distress.

Back 79

It has been available in Jane Doe (though it is unclear if it is damages or equitable compensation) and Giller v Procopets. Kneave argued that there is no need to show detriment, but only to show that interest is severely affected (as detriment isn’t required for the action itself).

Front 80

When are damages valued?

Back 80

In Mills v Ruthol, it was at the time of the original order. This is because the Palmer J felt there was no reason for the delay, besides the rising property market.

Front 81

When are LCA damages awarded?

Back 81

They will be not be awarded if injunction or specific performance would not be awarded (Williamson), unless it was available but subsequently become unavailable (Mills).

It is awarded when specific performance would be overkill, it would be oppressive to grant relief or when the injury is small, trivial and capable of being estimated in monetary terms.

It is available for mental distress (Giller).

Front 82

Are punitive or exemplary damages available?

Back 82

No – perhaps if there is perjury or some other kind of insult to the court (Harris v Digital Pulse). There is no historical basis for this.

Front 83

Should equitable compensation be informed by common law notions such as contributory negligence?

Back 83

Compensation is not diminished in cases of contributory negligence (Pilmer). There are “severe conceptual difficulties” with this because this looks at the acts of P, whilst fiduciary law looks at the obligation of the defendant to act in interests of the plaintiff.


Canadian judges have considered common law principles and tort principles and used commonsense to identify the actual loss and noted loss caused by unreasonable behaviour of the plaintiff is not caused by the breach.

Front 84

Can equitable compensation include aggravated damages?

Back 84

Yes (Giller v Procopets – damages that compensate damage to reputation). This is because aggravated damages is not for punishment – it is for the plaintiff’s loss.

Front 85

What does Keane think of equity?

Back 85

“To elide … differences in pursuit of a common standard of fair and reasonable behaviour is to fail to recognise that the rules of equity and the common law reflect radically different views of the legitimacy of human selfishness and of occasions for its control.”

He also criticised Mason’s dissent in Harris – equity is concerned with restoration, not punishment – doesn’t care about public policy.

Equity operates by way of exception to the legal order of the realm – must be kept out of ordinary commercial life. It’s more to stop the unconscionable enforcement of legal rights, not to force people to act well. Conscience is not just the state of the mind of the defendant – it also has to do with the plaintiff – both conducts read together. Conscience lies on both sides and in the court.

Front 86

What does Gummow think of equity?

Back 86

“It is from a thriving equity jurisdiction based in a thorough understanding of its principles, their necessity, and the circumstances of the individual case, that the judge-made law continues to draw much of its sustenance. Law without supporting values is ineffective because it is static.” Law must develop from the cases.

Front 87

Is loss caused solely by the plaintiff caused by the breach?

Back 87

If the plaintiff could have avoided loss by, for example, selling an unsuccessful business, and they continued to accrue loss, no compensation will be available (CBA v Smith).

Front 88

What are some factors considered when the court is exercising their discretion for determining equitable remedies?

Back 88

- delay
- unclean hands
- undue hardship for the defendant
- the effect on third parties
- whether there is an adequate CL remedy

These are raised an a defence in action.

Front 89

What is laches?

Back 89

If a plaintiff unreasonably delays in bringing the action to the court, the court may refuse equitable relief.

It may be considered evidence of acquiescence or it may make pursuit of the plaintiff’s claim inequitable (broader than acquiescence as that requires knowledge).

Front 90

When does the period of delay commence?

Back 90

Generally once P is aware of the facts upon which the right to relief is founded.

Front 91

What factors are considered in determining laches?

Back 91

- the length of delay
- the nature of acts done in the interval
- the subject matter of the claim

Baburin v Baburin – waited 19 years and one of her sons had died, the rights had been altered, the company had gone up in value, some of the property came from the son’s efforts and she was receiving dividends she would not otherwise have received. P was aware of all the facts of the transfer and deliberately chose not to seek independent advice.

Front 92

What is acquiescence?

Back 92

A representation by silence that may found an estoppel action and a waver of rights. This is knowledge of a party’s act and encouragement by conduct. Often, there is an overlap with laches.

Front 93

When is hardship relevant?

Back 93

The court has discretion to refuse a remedy when it may cause hardship to a D. Not every disadvantage or hardship is sufficient (eg financial inability) – the effect must be on the rights of the other persons that are involved and be ones that cause “material” injury to the rights. Mere speculation is insufficient. D bears the onus of proof.

Front 94

What are some considerations when looking at hardship?

Back 94

Hardship is usually a hardship existing at the date of the contract or that is some way due to plaintiff. It must be balanced against any hardship P would suffer from refusal of the remedy.

In Patel v Ali, the defendant had developed bone cancer, had an artificial leg and needed help with shopping, household duties and with the three children who were under five.

Hardship does not need to be caused by the plaintiff. However, it is only available in “extraordinary and persuasive circumstances” for resisting performance of contract of sale (Patel v Ali). Important here was the delay (more than 4 years).

Front 95

What are unclean hands?

Back 95

This arises when the plaintiff’s conduct is questionable. P doesn’t need to be blameless in all other respects, and there must be a nexus between the conduct and the current matter.

Front 96

What are the limitations of unclean hands?

Back 96

- the act must display an immediate and necessary relation to the equity sued for (Black Uhlans) – in this situation, the RT that was being claimed was not related to them misleading the bank.
- it will not always deny a plaintiff relief, even if P has unclean hands – the remedy is still discretionary, and the court will look at all the circumstances of the case (Argyll)
- It must be proportional to the equity sought (eg, act of adultery does not nullify the ability to enforce a breach of confidence for other details of the marriage (Argyll).

Front 97

What is required for unclean hands?

Back 97

Some kind of depravity in a legal sense and moral sense and an immediate and necessary relationship for the equity sued for. Simple causation is not sufficient – the misleading of the bank did not make contribution to the proportionate beneficial interest in the club, even though without the loan they would not own the property at all (Campbell J in Black Uhlans).

Front 98

Why would a plaintiff want a proprietary remedy?

Back 98

- increase in value
- ownership
- right to income attaching to the property
- secured creditor in defendant’s insolvency

Front 99

What are the key proprietary remedies?

Back 99

- Constructive trust – P is entitled to all or part of the property in equity and entitled to have legal ownership transferred to match the equitable right.
- Equitable lien – P has security over the property to satisfy a debt and can force a sale to recover the debt.

Front 100

What are the features of a constructive trust?

Back 100

The constructive trustee is treated as a trustee of the property and owes trustee’s duties to P in respect of that property. This is normally a holding mechanism, pending transfer of legal title to the equitable owner.

Institutional CT arises by operation of law and exists from the time the circumstances giving rise to them exist. Remedial CT can arise despite no prior property entitlement.

Front 101

Is there a difference between the institutional and remedial constructive trusts?

Back 101

Deane J in Muschinski v Dodds – in equity, there is no true dichotomy between the two notions. The constructive trust is both remedy and institution.

Front 102

When will a CT be awarded?

Back 102

Where there is a breach of fiduciary relationship (must be sufficient connection between scope of FR and the property over which CT is sought), where P has traced all of her property to D and estoppel.

Front 103

When will constructive trusts be awarded in the case of misappropriation of property or opportunity by a fiduciary?

Back 103

- Profits held on trust (Boardman v Phipps
- Shares held on constructive trust (VUT v Wilson - remedy was based on the situation – didn’t give them the invention but instead shares in the company, as the relationship between them was really bad)
- Leasehold interest held on trust (Chan v Zacharia - any property received through position of fiduciary relationship is held on CT)
- It ought not to be awarded if there are other orders capable of doing full justice (JACS)

Front 104

When will a constructive trust be awarded in the situation of a bribe or secret commission?

Back 104

- Lister v Stubbs – not the property of the principal because no one was entitled to it
- AG HK v Reid – bribe is held on trust for the person injured and fiduciary remains personally liable for the amount of the bribe if the value of the property then recovered is less than that amount
- Sinclair – UK CoA bound by Lister and disagreed with Reid – noted the impact on innocent third parties and decided to take invested profits and lump them together with the amount
- Grimaldi v Chamelon Mining – if bribe exists in original traceable form, and there is no third party involved, they will award a constructive trust. They should not be used if there are other orders capable of doing “full justice”.

Front 105

What is an equitable lien?

Back 105

Function is analogous to a mortgage. It does not depend on contract or possession. The court needs to state when it arises, who has the benefit of it, over which property and the secure what amount.

Front 106

What does it mean when we say a lien “secures an amount owing”?

Back 106

An amount owing as a debt, but in this case the debt is a judgement debt – eg an account of profits.

Front 107

What are the advantages and disadvantages of an equitable lien?

Back 107

It can allow P to gain security over an asset and get a personal remedy from D for the difference. It can support a caveat. It will allow P to order a sale if the debt is not repaid.

However, if property increases in value, P does not get the benefit of increase. If the debt is satisfied by other funds, P has no further rights. It will not allow P to go into possession.

Front 108

What are the advantages and disadvantages of a constructive trust?

Back 108

P gets the property that they want. However, this may have decreased in value and after they receive the property, they have no further rights against the defendant.

Front 109

When is an equitable lien awarded?

Back 109

An equitable lien will be awarded when third party interests result in a constructive trust causing detriment to a third party (Giumelli v Giumelli). It can be used to secure an account of profits (Warman v Dwyer) – note allowances were made for D’s skill, efforts and resources.

Front 110

How would I choose between a CT or equitable lien?

Back 110

If the asset has increased in value, I would seek a CT. If the asset has dropped in value, mixed with a defendant’s asset or there are third party interests, I would seek an equitable lien.

Front 111

What elements are required for equitable estoppel?

Back 111

Representation and assumption, reliance (reasonably) detriment and unconscionability on behalf of D in trying to resile from the representation.

Front 112

What remedy is available for an equitable estoppel?

Back 112

Remedy is flexible and discretionary. Courts appear to favour expectation relief. They also will consider third party rights.

Front 113

What is the link between elements and remedies?

Back 113

Remedy is “designed primarily to avoid the detriment which court sees as likely to flow from non-fulfilment of the assumption”, but would prefer a “generous application” (Ormiston J in Commonwealth v Clark).

Fulfilling the assumption is the outer limit (Verwayen)

Front 114

What are proprietary remedies for equitable estoppel?

Back 114

If constructive trust is too much, considering third party interests, the court may award an equitable lien used to secure a monetary award (Giumelli v Giumelli).
Preventing a departure from the assumption is the starting point, but if such a remedy would exceed the requirements of conscience or is unjust to the estopped party, it will not be awarded (Sullivan v Sullivan).
The promisee is prima facie entitled to have the promisor held to the promise. If the circumstances require, then the court will consider moulding. This is NOT on a quid pro quo basis, it’s about fulfilling the assumption and making good the detrimental reliance of the plaintiff (Donis v Donis).

Front 115

What is the status of proprietary rights in a bankruptcy?

Back 115

Generally, all debts and liabilities are provable in a bankruptcy (s82(1)) and property is divisible among creditors (116(1)). However, property held on trust is not divisible amongst other creditors.

Front 116

What impact does bankruptcy have on the pursuit of proprietary remedies?

Back 116

It gives the plaintiff the effective status of a secured creditor who has advantage over the unsecured creditors.

Front 117

What is the proper role of the constructive trust in bankruptcy?

Back 117

Sherwin: Constructive trust is a remedy of unjust enrichment. If the claimant is entitled to recover unjust gains from the defendant, she is also entitled to priority over creditors.

Bankruptcy – courts look at state law and ask whether they P would have been entitled to a constructive trust outside bankruptcy in a case between P and D. However, Sherwin feels that courts should not impose a constructive trust unless it concludes that without it, general creditors would be unjustly enriched.

An exception is if the claim is supported by equation of loss and gain (eg claimant lost and debtor gains), a tracing exercise to show that assets have been increased at the claimant’s expense and that the claimant did not extend credit voluntarily. She thinks this should limit the application of constructive trust in law. In Australia, property held on trust escapes division amongst creditors and is still liable to the secured creditor even if they are discharged from bankruptcy.

Front 118

What is tracing?

Back 118

In order to gain an equitable proprietary remedy, P must be able to identify the property in the hands of D. D may misappropriate trust funds and buy another asset. Tracing is the process that allows P to claim a proprietary right over a substituted asset (Foskett v McKeown)

Front 119

What are the requirements for tracing in equity?

Back 119

- a pre-existing proprietary right (arising out of a breach of trust or fiduciary duty)
- ability to identify the property in the hands of the defendant (property must be ascertainable – mixing is okay, property must not be dissipated, and if in the hands of a third party, they must not be a bona fide purchaser for value without notice.

Front 120

What is the difference between claiming, following and tracing?

Back 120

Lord Millet in Foskett v McKeown:
- Claiming: the thing which establishes your property right in the first place.
- Following: the process of following the same asset as it moves from hand to hand
- Tracing: the process of identifying a new asset in substitution of an old asset

Front 121

What happens when your asset is mixed with a wrongdoer’s property?

Back 121

If it is severable, for example in the case of shares, we first assume it is the wrongdoer’s shares being dissipated and the remainder can be traced (Brady v Stapleton). Re Oatway suggests that poorly invested dissipated funds belong to the wrongdoer.

In the case of severable property, a beneficial is not only entitled to the sum originally misapplied made good, but also to obtain the…resultant profit (Scott v Scott). Obiter suggested that this applies even when property is not severable and that P would be able to claim a proportionate interest in the property traced.

In the case of insurance premiums, the wronged party is able to claim the proportion (in value, not cost) of the payout that they had in the policy. Application of the principles doesn’t depend on the nature of the chose-in-action (Foskett v MeKeown).

Front 122

What if asset has flowed to an innocent third party?

Back 122

A plaintiff may be able to trace the property into the hands of persons other than the original wrongdoer, as long as they are not a bona fide purchaser for value without notice. They can trace to a volunteer. However, if the property has been mixed with the property of an innocent volunteer, it cannot be traced (Re Diplock).

Front 123

When will equity step in during assignment of property?

Back 123

- failed legal assignment
- legal property incapable of legal transfer
- transfer of equitable property

Front 124

What are the questions that need to be asked regarding assignment of property?

Back 124

1. Is the right or thing capable of assignment?
2. Does the assignor own the property (now or later)?
3. Is the property being assigned for consideration or as a gift?
4. What kind of property is (present or future, real or chattel ot chose in action, legal or equitable)?
5. What are the rules that apply for assigning that type of property?

Front 125

Is a mere personal right assignable?

Back 125

No

Front 126

Is an existing property right assignable?

Back 126

Yes

Front 127

Is a future right to property assignable?

Back 127

Yes, but only for value.

Front 128

What are some examples of present property?

Back 128

Legal – real property, shares, chattel, IP, bills of exchange, debts or other legal choses in action.
Equitable – partnership interest, beneficial interest under a fixed trust.

Front 129

What are the legal requirements for general law land?

Back 129

Deed (PLA 1958 s52(1))

Front 130

What are the legal requirements for torrens system land?

Back 130

Registration of executed instrument of transfer with duplicate CT (TLA 1958 ss27E, 40).

Front 131

What are the legal requirements for choses in possession?

Back 131

Delivery with intention of transferring legal ownership or deed of assignment.

Front 132

What are the legal requirements for shares sold off-market?

Back 132

Registration in books of company of an instrument in prescribed form (Corp Act 2001 s107B).

Front 133

What are the legal requirements for life insurance policy?

Back 133

Memorandum of transfer endorsed on policy, signed by both and registered by policy issuer (LIA 1995 s200)

Front 134

What are the legal requirements for cheques?

Back 134

Made out to “bearer” and “cash” by delivery. Made out to a person by indorsement & delivery.

Front 135

What are the legal requirements for other bills of exchange?

Back 135

Endorsement and delivery (Bills of Exchange Act 1909 ss36(3), 95)

Front 136

What are the legal requirements for debts or other legal choses in action?

Back 136

Writing signed by the transferor and notice to the debtor or other party of the transfer (PLA 1958 s134).

Front 137

What are the requirements of s134 of the PLA?

Back 137

- assignment must be absolute
- it must be in writing signed by the assignor
- express written notice must be given to the debtor (not specified by who)

Front 138

Can you assign part of a chose in action under s134?

Back 138

No, this is only assignable in equity.

Front 139

Is a right to assign affected by contractual restrictions?

Back 139

Yes (Bluebottle – tax issue, they assigned the dividends but they were still liable to pay tax as they had control of the money).

Front 140

When will equity register a voluntary transfer valid and effectual?

Back 140

When the settlor has done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him” (Milroy v Lord, per Turner LJ – he did not sign the transfer). Equity will not use the trust form to complete the imperfect gift.

Front 141

Will equity declare a trust for a failed assignment?

Back 141

Equity will not declare a trust unless the trustee has manifested the intention (Jones v Lock – he did not endorse and sign the cheque).

Front 142

What does “everything…necessary to be done” mean?

Back 142

The only things left to be done to register the transfer were not to be done by the transferor (Re Rose – company didn’t register but he had already sent his part out, signed).

Griffit CJ’s soft view from Anning v Anning has been adopted – everything that was necessary for the transferor to do that only they could do. S134 is silent about who needs to give notice.

Front 143

Does the transaction need to be beyond the recall of the transferor?

Back 143

In Corin v patton, Mason CJ and McHugh J said that arming donor is sufficient, as it puts them beyond recall. Deane said that it requires the donor to do all that they alone could do AND that the transaction had to be beyond her recall.

Front 144

What if the solicitor acts for both donor or done?

Back 144

The question is whether the solicitor was acting as a an agent of the done or the donor (Marchesi). Since the solicitor was acting like an agent of the donor, holding the cheque and waiting for instruction, the transfer was not effected.

Front 145

When will legal property be effectively assigned?

Back 145

There must be delivery of possession, coupled with intention toe transfer the property right. These must coincide, but the order doesn’t matter (Re Stoneham).

Front 146

Must there be a separate act of delivery?

Back 146

No (Re Stoneham). Even if it is found later, it is still sufficient (Thomas v Times Book).

Front 147

What are assignments that are possible only in equity?

Back 147

Beneficial rights under a trust, interest in a partnership, equitable interests in land (equitable mortgage or equitable lease), equitable rights to property established by application of other assignment rules.

Front 148

What is the test for equitable assignments?

Back 148

Subject to formalities, the only requirement is that the donor make a clear expression of an immediate manifest intention to assignment the property (Norman).

Front 149

What is an immediate manifest intention?

Back 149

This can be distinguished from an intention to give a revocable mandate (Kitto in Shepard) – must be a manner binding to himself.

Front 150

What about assignment of future property?

Back 150

Equity may recognize an assignment of future property if value is given and the property is ascertainable now (Norman v FCT).

Front 151

When is property present or future?

Back 151

There is a difference between a present right to future return and future property (Shepard – fruit v tree).

Right to first 500 pounds is future property (Williams). Dividends is future property (Norman). 90% of royalties is present right to future property.

A present right to future income may be assigned (Sheperd). An attempt to assign income that has not yet accrued will fail (Williams).

Front 152

What if the contract can be unilaterally terminated?

Back 152

Then there is no present assignable right (Norman).

Front 153

What if future property has been given for value?

Back 153

Key issue is whether the property is ascertainable and referable to the contract or consideration. If A, for valuable consideration, assigns property to B and acquires property that matches the assigned property, the property vests in B as soon as A receives it and it can be identified (Tailby).

Specific performance will be available if the recipient is ready and willing to perform any outstanding obligations (Tailby).

Front 154

What are some reasons for equity to grow?

Back 154

Kirby: Reasons for equity to grow: stability v adaptability (Glass in Allen v Snyder – inevitable that it would “alter to meet the changing conditions of society”, ineffectiveness of Parliamentary reform – no time, interest, expertise.

Front 155

What is the definition of equity?

Back 155

The separate body of law, as developed in the Court of Chancery, which supplements, corrects and controls the rules of common law.

Front 156

What was the Court of Chancery? What was unique about the law it administered, and how does it differ from the common law? How does this matter in Australia?

Back 156

Originally, Lord Chancellor would listen to writs and overruled the authority of the court. As it grew, the body became to be known as the Court of Chancery. Cases would go between common law and equity court. Court of Chancery developed alongside the common law courts. It dealt with issues of conscience and natural justice.

From 17th Century, Chancellors were drawn from practising lawyers and there was a trend towards systemisation. It lost independent status between 1873 and 1875.

Front 157

What does legislation say about equity?

Back 157

29. Law and equity to be concurrently administered (1) Subject to the provisions of this or any other Act, every court exercising jurisdiction in Victoria in any civil proceeding must continue to administer law and equity on the basis that, if there is a conflict or variance between the rules of equity and the rules of the common law concerning the same matter, the rules of equity prevail.

Equitable principles prevail over common law principles (taken from Ellesmere v Coke – subjects ought not to be left “to perish under the rigor and extremity of our law”)

Front 158

How does modern equity differentiate from the common law?

Back 158

Equity’s exclusive jurisdiction is in certain causes of actions that were recognised only in the Court of Chancery, one of Equity’s distinctive features.

Equity’s second distinctive feature is in remedies, some of which are available only in equity. Others are available in relation to common law causes of action, which is equity’s auxiliary jurisdiction.

Equitable remedies are discretionary. They can be personal remedies and proprietary remedies. Equitable remedies are often specific, rather than substitutionary – for example, specific performance or proprietary remedies.

Front 159

Is there a fusion between common law and equity?

Back 159

Distinction was too inconvenient so in 1873 they con-fused the distinction and equitable causes could be litigated in common law court. However, it doesn’t mean that they are the same – it’s only a procedural change. 1883 in Victoria.

Front 160

What does everyone think about restitutionary remedies?

Back 160

Keane – farah – unjust enrichment doesn’t match up with the concept that equity is about restoration because it looks at the defendant’s windfall not their promise/injury.

Kirby: HC shouldn’t be so strict, the law is developing. It makes sense, we need to pragmatically adapt our law.

Farah judges – no way.

Front 161

What are the rules regarding a renewed lease?

Back 161

For partners, there is a rebuttable presumption that the renewed lease was obtained by virtue of the the fiduciary presumption. For trustees, this is irrebuttable (Chan v Zacharia, per Deane J).

Front 162

Does it matter if the profit was made in good faith and the transaction benefited everyone, or that the advantage could not have been exploited by the fiduciary?

Back 162

No. However, this may be relevant to remedies (Regal Hastings, Boardman).

Front 163

What is an alternative to injunctions or specific performances?

Back 163

A plaintiff may seek Lord Cairns Act damages in substitution for an injunction or specific performance (SCA 1958, s38).