Ubi Jus Ibi Remedium Assignment Of Deed

BY MEENAKSHI MENON, NUALS

INTRODUCTION

A breach of contract occurs when one party has not performed its promise in accordance with the terms of the contract. The very intention of filing a lawsuit for a breach of contract is to seek the appropriate remedy for the same. As defined in Black’s law dictionary a remedy is “the means by which a right is enforced or the violation of a right is prevented, redressed, or compensated. The word “remedy” in a legal context has virtually the same meaning in a medical context, namely, to cure. In a legal context, a remedy cures the violation of a legal right. Common law provides two types of remedies i.e. legal remedy and equitable remedy.[i]

 The practice of granting equitable remedies came about to compensate for the inadequacies of the common law courts which could not grant remedy if the affected party wanted the performance of the contract or wanted to prevent the commission of a wrong threatened. As the maxim ‘ubi jus ibi remedium’ goes, the principle that wherever there is a wrong there will be a remedy is the basis of granting equitable remedies as opposed to legal remedies which provides damages or compensation. When we look at the history of equitable remedies, its evolution and the current status it can be seen that there are aspects of uncertainty and the courts discretion play an important role. But from the end of the 17th century throughout the 18th century and till the end of the 19th century equity became the force that moulded the progress of law. According to Holdsworth even though equitable remedies like specific performance has been unnamed and unregistered it has been spotted from the early times, he brings out this aspect that has been showcased in the Shakespearean play ‘Merchant of Venice’ where Shylock is denied specific performance of his contract, the debate is still alive as to whether it was fair to him. [ii]

ORIGIN OF EQUITABLE REMEDIES

As is well-known, England and most of her former colonies operate under a common law system. Very briefly, this means that in the absence of a statute or other legislation or regulation, judges have the authority to decide what the law is on a particular issue. Subsequent courts addressing the same issue are then bound by the previous court’s decision, which is known as a precedent. In order for this system to develop in an organised fashion, precedent was rigidly applied; if the facts of the case were more or less the same as a precedent, the precedent governed the case before the court. Fairly early on (in the Middle Ages) cracks began to develop in the system A separate system, known as equity, began to develop parallel to the common law system (and continued to develop over the course of several hundred years). The two separate court systems that resulted were empowered to award different types of remedies. Courts of law could award damages, i.e. money, to compensate a person for the loss he or she had suffered. In those rough days of the 13th century it was the king and king alone in his council who had the wide discretionary powers to do justice among his subjects but by 1384 the king passed all these duties to the chancellor. The Chancery Court, which was the court of equity, could award remedies that would restore equilibrium and lead to a just and fair result between the parties. In order to eliminate problems that arose from these differences, the separate courts were, for all practical purposes, merged in the 19th century. However, the classification of rules and remedies as legal or equitable survives. This is so because the system of precedents that characterizes the common law system requires that decisions and remedies be based on earlier cases, and so judges and lawyers still need to make these distinctions in the argumentation and decision processes. The courts have determined are a variety of equitable remedies, but the principal remedies are: Injunction, Specific performance, Account of profits, Rescission, Declaratory relief, Rectification, Equitable estoppels, Subrogation[iii]. The most popular ones were injunctions and specific performance.

ORIGIN OF SPECIFIC PERFORMANCE

 At common law contract is a ‘personal agreement’ between two parties, and because of the personal nature and character of the relationship thus evolved, in the eyes of the common law, either of the contracting parties may unilaterally decide to breach the contract. The only remedy provided at common law, for such course of conduct is payment of damages by the guilty party to the innocent party. Whether damages are adequate for the wrongful act is not within the consideration of the common law. On the contrary Courts of Equity deemed such a course in many instances inadequate for the purposes of justice; and, considering it a violation of moral and equitable duties, they did not hesitate to interpose, and require from the conscience of the offending party a strict performance of what he could not, without manifest wrong or fraud, refuse. Therefore, the position in equity was that the court, in the exercise of its equitable jurisdiction, will in certain circumstances compel parties to a contract freely entered into, to perform their obligations according to the terms of the contract and to respect the sanctity of the contractual relationship created by their acts. The Equity courts in England invented the remedy of specific performance to give effect to contracts relating to immovable property. They found that in some cases it was more appropriate to award compensation instead of or in addition to a decree for specific performance. To confer upon equity jurisdiction to decree compensation Lord Carin’s Act was passed in 1858[iv]. If equity had not interfered in this way, it would have been possible in many cases for parties to a contract to buy off their duties under the contract to the detriment of innocent parties.[v]. In Wolverhampton Corp v Emmons [1901] 1 KB 515 the plaintiff acquired land for an improvement scheme and sold part of it to the defendant, who covenanted to demolish houses on it and build new ones. The demolition was carried out and plans for new houses approved. The defendant then refused to continue. It was held that specific performance would be ordered since the defendant’s obligations were precisely defined by the plans, and damages would be inadequate because the defendant had possession of the site, and the plaintiff could not get the work done by employing another contractor.

Specific performance was granted in cases where damages will be insufficient because something about the contract is unique, the court will award specific performance. In Nutbrown V. Thornton[vi] Specific performance was ordered of a contract to supply machinery which could not be readily obtained elsewhere. Another element that can be traced in the way specific performance is granted is that courts discretion is of foremost importance. It has been broadly stated that the extraordinary remedy of specific performance is not a matter of right in either party, but is a matter of discretion in the court. This discretion, however, is not an arbitrary or capricious discretion, but a sound and reasonable discretion, which is governed as far as possible by established principles of equity, and which grants or withholds relief according to the circumstances of each particular case when the established principles do not furnish any exact measure of justice between the parties.”[vii]. Another important case we come across where specific performance was awarded was Beswick v Beswick[viii] where a nephew promised his Uncle to pay an annuity to his Aunty in consideration of the Uncle transferring the goodwill of the business to the nephew. The Aunty was not a party to the contract. The court held that it could be specifically enforced by the Uncle’s personal representative (the Aunty) against the nephew. Damages would have been purely nominal as the promisee or his estate had suffered no loss. The nephew would have been unjustly enriched by being allowed to retain the entire benefit of the uncle’s performance without performing his own promise. Here we see that the court has decided the case using its own discretion on the basis of equity and fair play even though she is a third party in the contract.

However when a suitor’s right to the remedy of specific performance is not absolute, a court can decline to grant it. However, before a court may take such a course it must examine the contract together with all of the circumstances revealed by the evidence and from the entire situation. Then the court shall determine whether the case presents equitable grounds for denying specific performance. If a denial of specific performance is made then the court must find its justification in established equitable principles and not in the chancellor’s personal views concerning justice. The main reason the court takes such a stand is that it is undesirable and impractical in the administration of justice to grant an order for specific performance. An order is unlikely in cases where the contract is for personal services or if the contract would require constant supervision by the court. [ix]. The courts did not grant this remedy when the losses or hardships sustained by the defendant would be well in excess of the loss suffered by a successful claimant.[x]. In Johnson v. Humphrey[xi] it was said that the court did not grant specific performance of a contract whose terms are inconclusive, uncertain or ambiguous..

For, it is not within the jurisdiction of the court to make a contract for parties. However, where the alleged inconclusiveness or uncertainty can be understood by reference to the context of the agreement, specific performance of the agreement may be granted.[xii]. While this was the pattern being followed by the courts in granting specific performance we can also see that there were cases in which order of injunction was passed by the court

ORIGIN OF INJUNCTIONS

It can be seen that with regard to the award of injunction, the starting point for the merger was the Common Law Procedure Act of 1854 which empowered the Common Law Courts to grant injunction in certain cases; and common injunctions were grantedto restrain proceedings opposed to equity and finally the Judicature Acts, 1873-75 which abolished the old system of courts and in its place, created the Supreme Court of Judicature with power to administer law and equity. By 1191 the provisions of section 16 of the Act of 1873 the Supreme Court of Judicature was vested with all the jurisdiction hitherto exercised by both the common law and the Chancery Courts. Section 25(8) of the Act specifically provides that ‘the High Court may grant… an injunction … by an interlocutory order in all cases in which it appears to the court to be just or convenient so to do … either unconditionally or on such terms and conditions as the court thinks just.’  [xiii]. In Isenberg v.  East India House Co.  (1863) 3  and  Smith v. Smith[xiv] it can be seen that the court has issued a mandatory injunction whereby a party is compelled to restore things to the condition in which they were at the time the plaintiff’s complaint was made or before the defendant committed the act complained of. The general trend was to favour the grant of prohibitory rather than mandatory injunction. For a long period, most injunctions were prohibitory both in form and substance. Such judicial attitude could have been for the reasons of history and convenience or the reason could be that the remedy of injunction is essentially restrictive.  Secondly it was much easier to restrain a party from doing an act than to compel him to perform a positive act, since the Court of Equity will not grant a remedy, the enforcement of which will require the supervision of the court. Thus, the general restrictive character of injunction and the drastic effect of mandatory injunction in particular favoured the disinclination of the court to grant mandatory injunction. In one of the early cases in England, Lumley v Wagner[xv] the court issued a prohibitory injunction against the defendant, she had contracted to sing for the plaintiff in his theatre for three months and, at the same time, not to sing elsewhere during this time without the plaintiff’s consent. A third party, Gye, offered the defendant a larger sum to sing for him. The court stated that they had no power to make the defendant sing at the plaintiff’s theatre. However, the court could persuade her to do so by preventing her singing elsewhere by imposing an injunction to that effect. If and when mandatory injunction is granted, greater caution is exercised, and for a long period of time a mandatory injunction was always granted in negative terms when it was obvious that its effect was positive. Later on in the case of  Davies v. Gas Light and Coke Co.[xvi] it was said that distinction in principle between granting a prohibitory injunction restraining a party from interfering with a right and granting a mandatory injunction in a positive term, compelling a party to grant a right is limited. The merits of an injunction are the overriding consideration; whether an injunction is mandatory or prohibitory in form or substance is of little significance provided the effect of the order does not impose an impossible or unenforceable or unlawful obligation.[xvii] Another case where it was held that defendant could be restrained by injunction from breaking the second undertaking which was not to act or sing for anybody else for two years without the plaintiff’s written consent, was Warner Bros v Nelson [1937].

Both the action for specific performance and injunction depend on the facts and circumstances of each case. In determining each case, the equities of each fact situation are of paramount importance. It was thought appropriate if it resulted in more perfect and complete justice. Therefore, one coming to a court seeking equitable remedies must show that there is equity and good conscience in support of his/her claims to relief.

EVOLUTION OF EQUITABLE REMEDIES IN INDIA

In India the courts of justice are courts of both law and equity and so many refinements which beset this kind of jurisdiction as administered by the courts of chancery could be got rid of in our country but still the inherent difference between the two great classes of relief remained and there remained the fact that the former of these namely specific relief though more exact was more delicate and more difficult to administer and that it required more skill and care on the part of the judge. Some guidance of the legislature was therefore necessary for him and hence the specific relief act 1877. It embodies the equitable principles which have so long continued to govern the exercise of that remedial justice one peculiar to the court of chancery but now by recent legislation applicable by all courts alike in England. The specific relief act is pre -eminently an embodiment of English jurisprudence. its author was a practical English lawyer who derived his materials from the jurisprudence in which he has been trained. The act codifies those rules of equity and good conscience by which our courts in India have been bound to govern themselves[xviii]. In India, the common law doctrine of equity had traditionally been followed even after it became independent in 1947. However it was in 1963 that the “Specific Relief Act” was passed by the Parliament of India following the recommendation of the Law Commission of India in its ninth report on the act, the specific relief bill 1962 was introduced in loksabha in june 1962 and repealing the earlier “Specific Relief Act” of 1877. Under the 1963 Act, most equitable concepts were codified and made statutory rights, thereby ending the discretionary role of the courts to grant equitable reliefs. With this codification, the nature and tenure of the equitable reliefs available earlier have been modified to make them statutory rights and are also required to be pleaded specifically to be enforced. Further to the extent that these equitable reliefs have been codified into rights, they are no longer discretionary upon the courts or as the English law has it, “Chancellor’s foot” but instead are enforceable rights subject to the conditions under the 1963 Act being satisfied. Nonetheless, in the event of situations not covered under the 1963 Act, the courts in India continue to exercise their inherent powers in terms of Section 151 of the Code of Civil Procedure, 1908, which applies to all civil courts in India. There is no such inherent powers with the criminal courts in India except with the High Courts in terms of Section 482 of the Code of Criminal Procedure, 1973. Further, such inherent powers are vested in the Supreme Court of India, in terms of Article 142 of the Constitution of India which confers wide powers on the Supreme Court to pass orders “as is necessary for doing complete justice in any cause of matter pending before it”.

The Law of Specific Relief seeks to implement the idea of Bentham who said: “The law ought to assure me everything which is mine, without forcing me to accept equivalents, although I have no particular objection to them.” The Law of Specific Relief is in its essence, a part of the law of procedure, for Specific Relief is a form of judicial redress[xix]. In executor contracts, a suit may be brought to compel the performance of the contract by the person in default. Such relief may be either positive or negative. It is positive when a claim to the performance of it and negative when it is desired to prevent the doing of thing enjoined or under taken as not to be done. In other words, specific relief is a remedy which aims at the exact fulfilment of an obligation. It is remedial when the court directs the specific performance of contract and protective when the court makes a declaration or grants an injunction. Specific Relief Act was enacted in 1877. The Act was originally drafted upon the lines of the Draft, New York Civil Code, 1862, and its main provisions embodied the doctrines evolved by the English Equity Courts. The Specific Relief Act, 1963 is the outcome of the acceptance by the Central Government on the recommendations made by the Law Commission of India. They had in their ninth report put forth certain recommendations on the Specific Relief Act, 1877, except in regard to Section 42 which was retained A bill to repeal the Act of 1877 was introduced in Lok Sabha and was passed by the both the houses of Parliament and on 13th December, 1963 the President assented to the same.

The act as revised deals only with certain kinds of equitable remedies .The rights codified under the 1963 Act were as under;

  1. Recovery of possession of immovable property (ss. 5 – 8)
  2. Specific performance of contracts (ss. 9 – 25)
  3. Rectification of Instruments (s. 26)
  4. Recession of Contracts (ss. 27 – 30)
  5. Cancellation of Instruments (ss. 31 – 33)
  6. Declaratory Decrees (ss. 34 – 35)
  7. Injunctions (ss. 36 – 42)

The other forms of specific relief mentioned in appendix A, Forms 41-6 and 49 of the code of civil procedure and in statutes such as Transfer of property Act, Trusts Act, Partnership Act, are different in origin and nature and no advantage will be gained by including them in this Act[xx]. The subject of Specific performance is dealt in Part II, Chapter Ii of the Specific Relief Act, 1963 which may be classified under the following heads

Contracts which may be specifically enforced, Contracts which cannot be specifically enforced, Parties to an action for specific performance, Specific performance with a variation, Discretion of the Court in ordering specific performance.

The court grants specific performance in mainly two situations according to section 10 of this act firstly, if there is no standard for ascertaining the damage in such cases the contract will be enforced in specie.[xxi] And also when compensation in money is not adequate relief in facts and circumstances of case. In Ram Karan V. Govind Lal there was an agreement for the sale of agricultural land. The buyer had paid full sale consideration to the seller, but the seller even then avoided executing the sale deed as per the agreement. The buyer brought an action for the specific performance of the contract. It was held that the case is covered under Section 10(b) of the act. The act agreed to be done is in the performance, wholly or partly, of a trust, specific performance of the same may be granted at the discretion of the court.  While the general rule of equity is that the court will not compel specific performance of a contract unless it can enforce the whole contract but there are exceptions to this rule.  A contract may be specifically enforced even though the promisor had no title or imperfect title at the time of the contract. The promisor is bound to comply with the terms of the contract if he subsequently acquires the power of performing the contract. The promisee can compel the promisor to make good the contract out of the interest which the latter acquired subsequent to the contract.[xxii] Meanwhile in certain situations the contract cannot be specifically performed, when compensation is adequate, Contracts of employment, contracts of personal service, contracts involving performance of artistic skill, like contract to sing, to paint, to act, contract of authorship are ordinary examples of things requiring personal skill and therefore beyond the capacity of the judicial process to enforce their actual performance.    In Purshottam V. Purshottam  it was held that a contract to marry would fall under the category of such contracts fro which a court cannot enforce the specific performance. Courts do not interfere in contracts which are determinable in nature, for example where a contract of sale is determinable at the option of the seller within a specified period on repayment of the consideration, the other party cannot get decree of specific performance of the agreement.[xxiii] Contracts requiring the performance of a continuous duty extending over period longer than three years from the date of the contract cannot be specifically enforced, Subject to certain exceptions, the court will not enforce specific performance to build, repair, or maintain works or building

 Court can exercise discretion in the matter of decreeing specific performance. This discretion is not arbitrary, but sound and reasonable, guided by the judicial principles. Under no circumstances, the court should exercise its discretion, where it would be improper. Mere on the ground that the contract is unenforceable court can’t refuse relief to any party. The discretion of the court is to decide whether enforcement of the contract in the present circumstances is fair and if the contract is fair and reasonable character of the plaintiff has been good then the discretion of the court has no application[xxiv]. In Satya Narayana V. Yelloji Rao[xxv] the Supreme Court has observed that discretion referred in Section 22 of the Specific Relief Act cannot be defined as it is not possible or desirable to lay down the circumstances under which the court will exercise discretion against the plaintiff, but at the same time the said discretion shall not be arbitrary and must be in accordance with sound and reasonable judicial principles. In Noble Resources Ltd. v. State of Orissa[xxvi] it was held that specific performance of contract would not be enforced by issuing a writ of or in the nature of mandamus, particularly when keeping in view the provisions of the Specific Relief Act, 1963 damages may be an adequate remedy for breach of contract.  It is possible for the plaintiff to claim damages in addition or substitution of specific performance while filing a suit but as under section 21 parties should plead for the same. In P.C. Verghese V. Devaki Amma[xxvii]  the apex court held  that in view of Section 22 (1)(a) of the Specific Relief Act a decree of partition and separate possession of the property can be granted in addition to a decree for specific performance. A court of equity may refuse specific performance not only for fraud but the plaintiff should not have made himself party to an illegal contract[xxviii] and also if there is a mental, physical or, legal incapacity in the plaintiff. It has also been held that it is necessary for the plaintiff to aver and prove that he has always been ready and willing to do his part of the project[xxix]. Such personal bars on granting specific performance are discussed under section 16 of the specific relief act 1963[xxx]. Also a contract to sell or let property by one who has no title to it, whether knowingly or unknowingly cannot be specifically enforced. In certain cases of fraud, misrepresentation or mistake of fact where the contract fails to bring about the desired legal result, the defendant may vary some terms in the contract which the plaintiff can elect to either enforce or choose to be payed damages.[xxxi] Also in certain cases the courts in equity and to mitigate the hardship to the vendor have directed the vendee to pay further compensatory amount. But this is not a principle of universal application. It would depend upon the  facts and circumstances of each case. Nirmala Anand V. Advent Corporation Pvt. ltd[xxxii]

Injunction in a way could be called a mode of enforcing specific performance of negative agreements. As Maitland puts it “injunction is an order made by the court forbidding a person or class of persons doing a certain act or acts of a certain class upon pain of going to prison as contemnors of court.” Section 37 of the specific relief act 1963 deals with temporary injunction. These are granted before the trial of an action. Its object is to keep things in status quo ante[xxxiii] until the question at issue between the parties is determined. They can be granted at any stage of the suit and are regulated by the code of civil procedure 1908. Permanent injunction is granted only after the plaintiff has established his right and the actual or threatened infringement of it by the defendant. It is granted only upon the decree made at the hearing and the merit of the suit. As discussed under section 39 an injunction restraining the doing or continuance of some wrongful act is known as prohibitory injunction and to restraint the continuance of some wrongful omission is called mandatory injunction. The injunctions are generally sought after the act is committed. Granting of injunction is a matter of judicial discretion for the court but must be exercised on settled principles of law to advance the cause of justice[xxxiv]. The exercise of decision is thus not arbitrary or capricious but is based on sound common sense and is regulated by well settled principles.[xxxv]. Injunctions rest on the equitable principle that he who seeks equity must do equity. If the plaintiff has acted in an unfair inequitable manner he cannot have relief[xxxvi]. The temporary injunction to restrain a breach of contract are regulated by the present rule 2 order 39 of CPC while perpetual injunctions are regulated by sections 38 to 42 of the specific relief act. The main consideration as provided by sc 38(2) is that a perpetual injunction cannot be granted to prevent the breach of contract the performance of which would not be specifically enforced. As decided in chand sultana V. Kurshid Begum if a suit is brought for specific performance and for an injunction to restrain the defendant from committing the breach of contract and the plaintiff applies for a temporary injunction to prevent a breach until the suit is disposed of the court will not grant the temporary injunction if the plaint and affidavit shows that case is not one for perpetual inunction or specific performance. Courts have also granted injunctions against the breach of patent rights, copyright and trademark[xxxvii]. In india in the case of negative covenants even if the case is not of specialized character injunctions are granted in suitable cases. In Vinod Chandra Hiralal Gandhi V. Vivekanand Mills Ltd[xxxviii] it was held that a negative covenant must be distinct and mere affirmative stipulation is insufficient to comply with such a negative term. Therefore it can be seen that even though the origin of injunctions come from the English legal system the Indian provisions of section 42 are far more ahead of the English principle in Lumney V. Wangler, it does not require a negative covenant to be express[xxxix]

Even though the most popular equitable remedies have been specific performance of contracts and granting injunctions the Specific Relief Act 1963 has recognised more of them. Recovery of Possession is dealt with in Sections 5 to 8 of Chapter II of the Specific Relief Act, any person who is lawful owner of the property can get the possession of such property by due course of law,  property may be immovable property or movable property. Then there is rectification when there exists in between the parties a complete and perfectly unobjectionable contract but the writing designed to embody it, either from fraud or mutual mistake is incorrect or imperfect and the relief sought is to rectify the writing so as to bring it into conformity with true intent, the court will rectify the writing instrument in accordance with their true intent. Rescission is also an equitable remedy, it is converse to that of specific performance. It is a right which a party to a transaction sometimes has to set the transaction aside and restored to original position. The equitable relief of cancellation of an instrument s founded upon the administration of protective justice, for the fear that the instrument maybe injuriously used by the defendant against the plaintiff when the evidence to impeach it may be lost. Declaratory decrees are also issued by courts and are those where some right is declared in favour of the plaintiff but nothing is sought to be paid or performed by the defendant. Before the Specific Relief Act of 1877 declaratory relief in India was governed by Sc. 15 of the Civil Procedure Code of 1859

CONCLUSION

A  moral  objection  to  expansion  of  the  availability  of  this  remedy  can  be  raised  on  the  ground  that  requiring  performance interferes  with  the  promisor’s liberty  more  than requiring the payment of money. If  this liberty interest takes precedence over the goals that specific performance serves, the  equitable  remedy should  be prohibited  or restricted[xl]. Under  current law,  a  promisee  cannot  obtain  specific  performance simply  by  showing breach and  the  absence of  an  adequate remedy at law; special defenses that apply only to requests for specific performance further  limit  the  availability  of  the  remedy.  These  defenses include inadequacy  of  consideration,  lack  of  security  for  the  promisee’s performance, unilateral mistake by  the promisor, and difficulty  of  supervising  performance

A strict separation between legal and equitable remedies is detrimental to legal evolution is not necessary instead. the judicial system must strive to serve justice by embracing a flexible and responsive remedial approach. The retention of a division between law and equity inhibits the legal response to the demands of an evolving society. Arguments based in history no longer justify a restrictive and divided remedial jurisdiction. It is accepted that history and precedent cannot be abandoned altogether. A division between law and equity must be maintained on some level but the scope of this division needs re-evaluation. The distinction between legal and equitable rights does not in itself necessitate a division in remedies. Rather, it is time to move towards a flexible framework of remedies, which is responsive to the particular circumstances of the dispute, irrespective of the historical origins of particular measure

The concept of granting equitable remedies is in the opinion of legal practitioners following the new decisions made in this regard globally, and the considerable flexibility in the menu of remedies that can be used to enforce equity, has found a new life in the modern commercial context. Even though the potential scope of equitable remedies remains largely unknown with more issues arising regarding legal remedies it is sure to be explored in future litigation.

 BIBLIOGRAPHY

[i]Remedies, Translegal, available at http://www.translegal.com/lets/remedies-2

[ii] Mark Fortier, Shakespeare andSpecific Performance, 1 Law and Humanities, 209, 219 (2007)

[iii] Manish Singh, Difference between Equity andEquitable Remedies, available at

http://www.lealte.com/articles/Difference%20Between%20Equity%20and%20Equitable%20Remedies.pdf

[iv] Law of contracts, G.C.V. Subbarao

5Omotayo T. Abisoye, Equity and Trust I, School of Law, LAW423 available at

http://www.nou.edu.ng/NOUN_OCL/pdf/Laws/Law%20423%20equity%20and%20trust%20I.pdf

[vi]10 Ves 159 (1894)

[vii] Westpark, Inc. v. Seaton Land Co., 225 Md. 433 (1961, District Court of Maryland)

[viii][1968] AC 58.[viii]

[ix]Ryan v Mutual Tontine Assoc 1 Ch 116 (1893, Court of Chancery)

[x]Patel v Ali, 1 All ER 978 (1984, House of Lords)

[xi]  1 All ER 460 (1946, House of Lords)

[xii] Jojo v. Cole 5 WACA (1939, West African Court of Appeals)

[xiii] Available at www.lawyersclubindia.com/articles, last seen on 22/11/11

[xiv] [xiv](1875) L.R 20 Eq. 500

[xv] (1852) 1 De GM&G 604

[xvi] 1 Ch. 708 (1909, Court of Chancery)

[xvii] Pride of Derby v. British Celanese 1 Ch. 149, 181 (1953, Court of Chancery)  

[xviii] O.P.Aggarwala, The Law Of Specific Relief In India, (7th ed 1994)

[xix] Supra13.

[xx] Ibid. p 17

[xxi] Banwari Lal Agarwala v. Ram Swarup Agarwala AIR 1998 Patna, page 88

[xxii] Silla Chandre Sekharan v. Ramchadra Sahu,AIR 1964 SC 1789

[xxiii] Jawahar Sao v. Shatrughan Sonar AIR 1961 Pat 482

[xxiv]  Rajkumari v. Lachman Ram 14 CLJ 627

[xxv] AIR 1965 SC 1045

[xxvi] AIR 2007 SC 119

[xxvii] AIR 2006 SC 145

[xxviii] I.T.C. Ltd. v. George Joseph Fernandes, AIR 1989 SC 839

[xxix] N. Satyanarayana v. Vedprakash Dusaj, AIR 2003 AP 385; Ram Awadh V. Achhaibar Dubey,AIR 2000 SC 860

[xxx] B.M Gandhi , Equity, Trusts And Specific Relief, (2nd ed. 1991)

[xxxi] K. Narendra v. Riviera Apartments (P) Ltd, AIR 1999 SC 2309

[xxxii] AIR 2002 SC 2290

[xxxiii] L D Meston school society v. kasinath misra AIR 1951 ALL 558

[xxxiv] Suryanath singh v. khedu singh 1994 supp(1) SCC 561

[xxxv] Ganapatlal v. nandlal Haswani AIR 1989 MP 209

[xxxvi] Bashesharnath v. municipal committee AIR 1940 Lah 690

[xxxvii] Exite labrotories v. AA Products AIR 1989 NOC 218 (del)

[xxxviii] AIR 1967 Guj

[xxxix] Supra 30.

[xl] Alan Schwartz, The case for Specific performance, 89 The Yale Law journal 271 (1979)

Maxims of Equity

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

Meaning

Where there is a right there is a remedy. This idea is expressed in the Latin Maxim ubi jus ibi remedium. It means that no wrong should go unredressed if it is capable of being remedied by courts. This maxim indicates the width of the scope and the basis of on which the structure of equity rests. This maxim imports that where the common law confers a right, it gives also a remedy or right of action for interference with or infringement of that right.

Application and cases

In Ashby v. White, wherein a qualified voter was not allowed to vote and who therefore sued the returning officer, it was held that if the law gives a man a right, he must have a means to maintain it, and a remedy, if he is injured in the enjoyment of it.

In cases where some document was with the defendant and it was necessary for the plaintiff to obtain its discovery or production, a recourse to the Chancery Courts had to be made for the Common Law becoming ‘wrongs without remedies’.

Limitation

a)   If there is a breach of a moral right only.

b)   If the right and remedy both were in within the jurisdiction of the Common Law Courts.

c)   Where due to his own negligence a party either destroyed or allowed to be destroyed, the evidence in his own favour or waived his right to an equitable remedy.

Recognition

i) The Trust Act

ii) Section 9 of CPC- entitles a civil court to entertain all kinds of suits unless they are prohibited.

iii) The Specific Relief Act- provides for equitable remedies like specific performance of contracts, injunction, declaratory suits.

2. EQUITY FOLLOWS THE LAW

Meaning

The maxim indicates the discipline which the Chancery Courts observed while administering justice according to conscience. As has been observed by Jekyll. M.R: ‘The discretion of the court is governed by the rules of law and equity, which are not to oppose, but each, in turn, to be subservient to the other.” Maitland said, “Thus equity came not to destroy the law but to fulfill it, to supplement it, to explain it.” The goal of equity and law is the same, but due to their nature and due to historic accident they chose different paths. Equity respected every word of law and every right at law but where the law was defective, in those instances, these Common Law rights were controlled by recognition of equitable Rights. Snell therefore explained this maxim in slightly different way: “Equity follows the law, but not slavishly, nor always.”

Application and cases

At common law, where a person died intestate who owned an estate in fee-simple, leaving sons and daughters, the eldest son was entitled to the whole of the land to the exclusion of his younger brothers and sisters. This was unfair, yet no relief was granted by Equity Courts. But in this case it was held that if the son had induced his father not to make a will by agreeing to divide the estate with his brothers and sisters, equity would have interfered and compelled him to carry out hi promise, because it would have been against conscience to allow the son to keep the benefit of a legal estate which he obtained by reason of his promise. This decision was held in Stickland v. Aldridge.

Equity follows the law and even if by analogy law can be followed, it should be followed.

Limitation

i) Where a rule of law did not specifically and clearly apply

ii) Where even by analogy the rule of law did not apply

Recognition

has not recognized the well-known distinction between legal and equitable interests. Equity rules in , therefore, cannot override the specific provisions of law. As for example, every suit in has to be brought within the limitation period and no judge can create an exception to this or can prolong the time-limit or stop the rule from taking effect on principles of equity. Such a decision was held in Indian Appa Narsappa Magdum case.

3. HE WHO SEEKS EQUITY MUST DO EQUITY

Meaning

The maxim means that to obtain an equitable relief the plaintiff must himself be prepared to do ‘equity’, that is, a plaintiff must recognize and submit to the right of his adversary. Scriptures of Islam also inform us to be conscientious:

“Woe to those who stint the measure:

Who when they take by measure from others, exact the full;

But when they mete to them or weigh to them, minish…”

Application and cases

This maxim has application in the following doctrines-

i) Illegal loans

ii) Doctrine of Election

iii) Consolidation of mortgages

iv) Notice to redeem mortgage

v) Wife’s equity to settlement

vi) Equitable estoppel

vii) Restitution of benefits on cancellation of transaction

viii) Set-off

i)      Illegal loans: In Lodge v. National Union Investment Co. Ltd., the facts were as follows. One B borrowed money from M by mortgaging certain securities to him. M was a unregistered money-lender. Under the Money-lenders’ Act, 1900, the contract was illegal and therefore void. B sued M for return of the securities. The court refused to make an order except upon the terms that B should repay the money which had been advanced to him.

ii)     Doctrine of election: Where a donor A gives his own property to B and in the same instrument purports to give B’s property to C, B will be put to an election, either accept the benefit granted to him by the donor and give away his own property to C or retain his own property and refuse to accept the property of A on condition. But B can not retain his property and at the same time take the property of A.

iii)    Consolidation of mortgages: Where a person has become entitled to two mortgages from the same mortgagor, he may consolidate these mortgages and refuse to permit the mortgagee to exercise his equitable right to redeem one mortgage unless the other is redeemed. The right of consolidation now exists in but after the enactment of the Law of Property Act, 1925, it can exist only by express reservation in one of the mortgage deeds.

iv)    Notice to redeem mortgage: Notice to a mortgagor to redeem one’s mortgage is an equitable right of the mortgagor.

v)     Wife’s equity to a settlement: There was a time when woman’s property was merged with that of her husband. She had no property of her own. Equity court imposed on the husband that he must make a reasonable provision for his wife and her children. But, now, Under the Law Reform (Married Women and Tortfeasors) Act, 1935, married women has full right on her property and it is not consolidated with her husband’s property.

vi)    Equitable estoppel: A promissory estoppel arises where a party has expressly or impliedly, by conduct or by negligence, made a statement of fact, or so conducted himself, that another would reasonably understand that he made a promise thereon, then the party who made such promise has to carry out his promise.

vii)   Restitution of benefits on cancellation of transaction: It is proper justice to return the benefits of a contract which was voidable, and, equity enforced this principles in cases where it granted relief of rescission of a contract. A party can not be allowed to take advantage of his own wrong.

viii) Set-off:  Where there have been mutual credits, mutual debts or other natural dealings between the debtor and any creditor, the sum due from one party is to be set-off against any sum due from the other party, and only the balance of the account is to be claimed or paid on either side respectively.

Limitation

i) The demand for an equitable relief must arise from a suit that is pending.

ii) This maxim is applicable to a party who seeks an equitable relief.

Recognition

i) Under sec 19-A of the Contract Act, 1872 if a contract becomes voidable and the party who entered into the contract voids the contract, he has return the benefit of the contract.

ii) sec 35 of the Transfer of Property Act embodies the principle of election.

iii) Sec 51 and 54 of the Transfer of Property Act.

iv) In Order 8, Rule 6 of the CPC, the doctrine of Set-off is recognized.

4. HE WHO COMES INTO EQUITY MUST COME WITH CLEAN HANDS

Meaning

Equity demands fairness not only from the defendant but also from the plaintiff. It is therefore said that “he that hath committed an inequity, shall not have equity.” While applying this maxim the court believed that the behavior of the plaintiff was not against conscience before he came to the court.

Application and cases

In Highwaymen case, two robbers were partners in their own way. Due to a disagreement in shares one of them filed a bill against another for accounts of the profits of robbery. Courts of equity do grant relief in case of partnership but here was a case where the cause of action arose from an illegal occupation. So, the court refused to help them.

The working of this maxim could be seen while giving the relief of specific performance, injunction, rescission or cancellation.

Limitation

General or total conduct of the plaintiff is not to be considered. It will be seen whether he was of clean hands in the same suit he brought or not. Brandies J. in Loughran v. Loughran said that “Equity does not demand that its suitors shall have led blameless lives.”

Exception

i) If the transaction is a against public policy

ii) if the party repents for his conduct before his unjust plans are carried out.

Recognition

i)Section 23 of the Indian Trust Act- An infant can not setup a defence of the invalidity of the receipt given by him.

ii) Section 17, 18 and 20 of the Specific Relief Act, 1877- Plaintiff’s unfair conduct will disentitle him to an equitable relief of specific performance of the contract.

Distinction between maxim no. 3 and 4-

He who seeks equity must do equity

He who comes into equity must come with clean hands

i) It is applicable when both the plaintiff and the defendant have claims of equitable relief against each other.

i) It is applicable when the defendant has no separate claim to relief and the plaintiff’s conduct is unfair.

ii) It exposes the condition subsequent to the relief sought.

ii) It is a condition precedent to seeking equitable relief.

iii) It refers to the plaintiff’s conduct as the court thinks it ought to be, after he comes to the court.

iii) It refers to the plaitiff’s conduct before he   approaches the court.

iv) The plaintiff has to mould his behavior according to the impositions by the court.

iv) If the plaintiff’s conduct is unfair, it would not entitle him to the relief sought.

v) The plaintiff has an option or a choice before him either to submit to the conditions put by the court, or to get out of the court.

v) The conduct of the plaintiff snatched his choice from him. His equitable right therefore neither be recognized nor enforced.

vi) This maxim looks to the future.

vi) This maxim looks at the past.

5. DELAY DEFEATS EQUITIES

Meaning

A Latin term in this regard is “Vigilantibus, non dormentibus, jura subvenient.” which means “Equity aids the vigilant and not the indolent”. So, if one sleeps on his rights, his rights will slip away from him. Legal claims are barred by statutes of limitation and equitable claims may be barred not only by limitation law but also by unreasonable delay, called laches.

Application and cases

To cases which are governed by statutes of limitation either expressly or by analogy the maxim will not apply. Such cases fall into three categories-

i) Those equitable claims to which the statute applies expressly.

ii) to which the statute applies by analogy.

iii) Equitable claims which are covered by ordinary rules of laches.

Doctrine of laches- Plaintiff’s unreasonable delay is a weapon of defence by the defendant against the plaintiff.

In a case, the plaintiff allowed his land to be occupied by the defendant and this was acquiesced  by him even beyond the period of limitation. On a suit of the land it was decided that as the period of limitation to recover possession had expired, no relief could  be granted. Also the case of Allcard v. Skinner is worth mentioning here.

Limitation

This maxim does not apply when-

i) where the law of limitation expressly applies

ii) where it applies by analogy, and

iii) where the law of limitation does not apply but the cases are governed by ordinary rules of laches.

Recognition

The English doctrine of delay and laches showing negligence in seeking relief in a court of equity can not be imported into the Bangladeshi law in view of Article 113 of the Limitation Act, 1908, which fixes a period of one year (previously three years) within which a suit for specific performance should be brought.

Section 51 of the Transfer of Property Act embodies this doctrine but with a difference.

6. EQUALITY IS EQUITY

Meaning

Plato defined that “If you cannot find any other, equality is the proper basis.” This maxim is also explained as “equity delighteth in equality”, which means that as far as possible equity would put the litigating parties on an equal level so far as their rights and responsibilities are concerned.

Justice Fry said, “When I say equality, I do not mean equality in its simplest form, but which has been sometimes called proportionate equity.”

Application and cases

Application of this maxim can be understood from the following:

i)    Equity’s dislike for joint tenancy and presumption of tenancy-in-common

ii)   Equal distribution of joint funds and joint purchases

iii)   Contribution between co-trustees, co-sureties and co-contractors

iv) Ratable distribution of legacies

v)   Marshalling of assets

7. EQUITY LOOKS TO THE INTENT RATHER THAN THE FORM

Meaning

Common law was very rigid and inflexible. It could not respond favourably to the demand of time. It regarded the form of a transaction to be more important than its substance. It looked to the very letter of the agreement and not the intention behind it. On the other hand, Equity looks to the spirit not to the letter, it looks to the intention of parties and not to the words.

Application and cases

In case of sale of land, if a party fails to complete it within the fixed for it, he is at Common Law, in breach of the contract, but equity does not take this rigid attitude. It allows a reasonable time to the party to complete it.

The application can be seen in the following instances-

i)    Relief against penalties and forfeitures

ii)   Relief in regard to precatory trust

iii)   Relief in regard to mortgages, the doctrine of equity of redemption and the doctrine of clogs on redemptions

iv) Attitude in regard to statute of frauds.

i) Relief against penalties and forfeitures- Common Law courts insisted on the literal form of the contract that if the contract is breached, certain amount must be given as compensation, though the actual loss is not that much. Equity interpret the purpose and intent of the contract itself. The principal object of the contract is to perform it and not the compensation. The compensation is a subsidiary matter.

ii) Precatory trust- A trust is created with- (1) an intention on his part to create a trust thereby, (2) the purpose of the trust, (3) the beneficiary, and (4) the trust property. Where an author uses words such as ‘I hope’, ‘I request’ or ‘I recommend’ the first condition is missing. In cases where subsequent ingredients are found, in early days, it was held by the equity courts that he had the intention. This view is in use now but not as liberally as before.

iii) Relief in regard to mortgages- The mortgagor has a right to obtain his property back by payment of the debt and that is his right of redemption. The mortgagor’s right of redemption is guarded by courts and this has been expressed in a well-known legal maxim, “Once a mortgage, always a mortgage, and nothing but a mortgage”.

iv) Attitude in regard to statute of frauds-

Recognition

i) Sec 55 of the Contract Act- If time is the essence of the contract, and it is not performed within the stipulated time, the contract or part of it which is unperformed would be voidable. If time is not the ce, the contract will not be voidable but entitles the promisee to damages.

ii) Section 74 of the Contract Act- only a reasonable compensation can be claimed.

iii) Sec 114-A of the Transfer of Property Act- Forfeiture clauses in a lease.

8. EQUITY LOOKS ON THAT AS DONE WHICH OUGHT TO BE DONE

Meaning

If someone undertakes an obligation for the other, equity courts look on it as done and as producing the same results as if the obligation had been actually performed. Equity courts therefore look to the acts of the person bound by his conscience and interpret and construe them in such a way that they amount to what ought to be done.

Application and cases

If A makes T trustee leaving 50,000 Taka to purchase a land for the use of B. T does not purchase the land and by the time, B dies leaving all immovable property to X and all movable property to Y. Now, who should get the 50,000 Taka? Equity in such cases would definitely regard the purchase of land which ought to have been made as made. The money thus goes to X.

The working of this maxim can be seen-

i) the doctrine of conversion

ii) Executory contracts

iii) doctrine of part performance

i)   Doctrine of conversion- In the case of Lachmere v. Lady Lachmere, money was taken as land. Doctrine of conversion can convert the money into immovable property and immovable property into money.

ii) Executory contracts-

(a) Assignment of future property: When an assignment of property was made for consideration equity treated it as a contract to assign. When the property came into existence in such a contract it was treated as a complete assignment. As a leading case on this point, Holroyd v. Marshall can be cited.

(b)  Agreement for a transfer: In Walsh v. Lonsdale, it was decided that an agreement for lease could be treated as a lease in equity.

iii) Doctrine of part performance: Under the equitable doctrine of part performance contracts pertaining to land were allowed to be formed by oral evidence  where one of the parties did acts of pats performance. Maddison v. Alderson is a leading case on this point.

Recognition

Many of the doctrines of English equity have taken statutory form in . Insofar as equitable assignments are concerned no equitable estate is recognized in . A transfer of future property for consideration operates as a contract to be performed in future.

i) The Transfer of Property Act- A Contracts to sell Sultanpur to B. While the contract is still in force, he sells Sultanpur to C, who has notice of the contract. B may enforce the contract against C to the same extent as against A.

ii) The Specific Relief Act- Section 12 relating to the specific performance of part of a contract also illustrates the application of the maxim.

iii) The Trust Act- Where a person acquires property with notice that another person has entered into an existing contract affecting that property, the former must hold the property for the benefit of the latter.

9. EQUITY IMPUTES AN INTENTION TO FULFILL AN OBLIGATION

Meaning

Equity considered and estimated acts of parties. Thus where a person is under an obligation to do a certain act, and he does some other act which is capable of being regarded as an act in fulfillment of his obligation. In other words a person is presumed to do what he is bound to do.

In Sowden v. Sowden, a husband covenanted with the trustee of his marriage settlement to pay to them £50,000 to be laid out by them in purchase of land in a particular area D. He, in fact, never paid the sum, but after marriage purchased the land at D in his own name, for £50,000. He died and could not bring the land into settlement. Equity courts construed that he purchased land to fulfill his obligation.

Application and cases

i) Doctrine of performance and satisfaction

ii) Ademption

iii) Doctrine of presumption of advancement

iv) Relief against defective execution of power of appointment.

i) Doctrine of performance and satisfaction- Sowden v. Sowden and Lachmere v. Lady Lachmere cases are examples of performance. Satisfaction is the donation of a thing with it is to be taken in extinguishment of some prior claim of donee. This maxim is helpful where the presumed intention of the testator is to be found out; where the intention is express the maxim has no application.

ii) Ademption- Ademption is a transfer of property which operates as a complete or pro tanto substitution for a gift previously made by the will of the donor.

e.g. X by his will leaves his daughter Y one-third of his residuary estate. Thereafter on Y’s marriage X gives Y 20,000 Taka. X dies. 20,000 Taka is an ademption -complete or proportionately to the gift of one-third share of the residuary estate of X.

iii) Presumption of advancement- When a purchase or transfer of property without consideration is made by a father or a person in loco parentis, to or in the name of a child, a presumption arises. And the presumption is that it was for the benefit of the child. Such presumption, is known as ‘advancement’. The doctrine applies to cases of parent and child, husband and wife, of mother and child and even to illegitimate child, but not to a man and his mistress.

iv) Relief against defective execution of power of appointment- A power is an authority vested in a person to deal with or dispose of property not his own. A power may be legal or equitable but after 1925 all powers of appointment are necessarily equitable.

e.g. A holds 50,000 Taka upon trust to divide among a certain class of persons. A has no option is this matter He is bound to carry out the trust. On his failing to do so, the court will see that the property is duly divided.

A defective execution will always be aided in equity under the circumstances mentioned, it being the duty of every man to pay his debts, and a husband or a father to provide for child.

Recognition

i) The Succession Act- Presumption against satisfaction is mentioned here. In Hasanali v. Popatal, a testator, who had a sum of Rs 9000 as deposit from his brother, gave to is brother a legacy of Rs 9000 and it was held that the brother was entitled to both, the legacy and his deposit. But as decided in Rajmanuar case where a will contained a clear indication that the legacy was meant as a satisfaction of the debt due to X, X could not claim both as the section explains.

ii) The Trust Act- Where a person contracts to buy property to be held on trust for certain beneficiaries and buys the property accordingly, he must hold the property for their benefit to the extent necessary to give effect to the contract. Equity thus imputes an intention to fulfill an obligation.

The doctrine of advancement does not apply in . 

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