MODULE 2:GENERAL PRINCIPLES OF EQUITY II
Unit 1 Maxims of equity
Unit 2 Priorities
Unit 3 Assignment of choses in action
Unit 4 Conversion and reconversion
Unit 5 Election
Unit 6 Satisfaction
UNIT 1 MAXIMS OF EQUITY
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main content
3.1 Particular Maxims
3.1.1 Equity will not suffer a wrong to be without a remedy
3.1.2 Equity follows the law
3.1.3 Where there is equal equity, the law shall prevail
3.1.4 Where the equities are equal, the first in time prevails
3.1.5 He who seeks equity must do equity
3.1.6 He who comes to equity must come with clean hands
3.1.7 Delay defeats equities or equity aids the vigilant and not the indolent
3.1.8 Equality is equity
3.1.9 Equity looks to the intent rather than to the form
3.1.10 Equity looks on that as done which ought to be done
3.1.11 Equity imputes an intention to fulfil an obligation
3.1.12 Equity acts “in Personam”
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignments
7.0 References / Further Reading
1.0 INTRODUCTION
In the last module, we considered the history of equity, how the doctrines of equity were intro- duced into Nigeria, the relation between Equity and Common Law and the nature of equitable rights. In this unit, we will consider the maxims of equity. These are guidelines of the jurisdiction of Equity which have been developed throughout its history. They should not be regarded as rigid formulae for the application of equitable rules, but rather as a collection of general principles which can be moulded or adapted to suit the circumstances of the individual case.
The maxims have two main purposes:
(i) To show the historical development of equitable rules and procedure; (ii) To guide the application of those rules at the present and in the future.
Furthermore, as far as the study of equity is concerned, they are a convenient and meaningful way of classifying equitable principles and the many varied areas in which they are to be found. Since many of the maxims overlap, each should not be considered in isolation from the others.
2.0 OBJECTIVES
By the end of this unit you should be able to:
(i) List the maxims of equity; and
(ii) Explain each maxim of equity.
3.0 MAIN CONTENT
3.1 PARTICULAR MAXIMS
There are twelve generally accepted maxims. They are as follows:
- Equity will not suffer a wrong to be without a remedy
- Equity follows the law
- Where there is equal equity, the law shall prevail
- Where the equities are equal, the first in time prevails
- He who seeks equity must do equity
- He who comes to equity must come with clean hands
- Delay defeats equities or equity aids the vigilant and not the indolent
- Equality is equity
- Equity looks to the intent rather than to the form
- Equity looks on that as done which ought to be done
- Equity imputes an intention to fulfil an obligation
- Equity acts “in Personam”
We will now consider each one of the maxims in detail.
3.1.1 Equity will not suffer a wrong to be without a remedy
This maxim is at the root of all equitable jurisdiction. It should not be interpreted as meaning that every moral wrong was remedied by Equity. It means that, in certain circumstances, where the Common Law failed to recognise a right or to provide a remedy for a wrong, Equity would not stand by and see a party suffer an injustice, but would grant a remedy, provided it was suit- able for judicial enforcement. The operation of the maxim may be seen in relation to the three types of equitable jurisdiction; original, concurrent and auxiliary.
Original jurisdiction - Trusts
At Common Law, the trustee was the absolute owner of the trust property and could deal with it as he pleased; the rights of the beneficiaries were not recognised. Equity, however, conceiv- ing this to be a wrong, compelled the trustee to hold the property for the benefit of the benefici- aries, whose rights Equity enforced not only against the trustee but also against any transferee from him with notice of the trust.
Concurrent jurisdiction - Equitable Remedies
At Common Law, the only remedy for a breach of contract was damages. Where this remedy would be insufficient for the plaintiff (e.g. in the case of breach of a contract for the sale of land), Equity would grant specific performance. Thus compelling the defendant to perform the contract. Similarly, where damages would be insufficient redress for a tort (e.g. nuisance), Eq- uity would grant an injunction to restrain further invasion of the plaintiff’s rights.
Auxiliary jurisdiction - Equitable Procedure
The Common Law courts had no power to order discovery of documents in the possession of a party to an action; the Court of Chancery did make such orders, without which many wrongs would have been remediless. Another example of the maxim is equitable execution. At Com- mon Law, a judgment creditor could not levy execution on any property of the judgment debtor in which the latter had only an equitable interest. Thus, for instance, an equity of redemption or a beneficial interest in a trust could not be touched at Common Law.
The Court of Chancery thus evolved a procedure whereby equitable execution could be levied on the equitable interest. This was done by the appointment of a receiver of the equitable inter- est, supplemented in appropriate cases by an injunction restraining the judgement debtor from disposing of the interest.
Limits to the maxim
The maxim must not be taken too widely. First, there are many wrongs which cannot be reme- died in Equity any more than at Common Law. Thus, for instance, ‘unfair’ trade competition which does not come within the definition of any Tort cannot be remedied either at law or in Equity. Secondly, even where Equity does provide a remedy, it may stop short of applying it in certain defined situations. For instance, although specific performance is a general remedy for breach of contract where damages would be inadequate, there are some instances where dam- ages would not be adequate and yet specific performance will not be granted.
Thus, contracts for personal services and contracts requiring the constant supervision of the court cannot be specifically enforced. It may thus be said that the application of the maxim is limited by what is realistic, practicable and convenient for the court.
3.1.2 Equity follows the law
Equity never challenged the Common Law as the basis of all the laws of the land. Indeed, Eq- uity could not have existed without the Common Law, since the Chancellor originally merely interfered here and there in order to do justice between the parties where the Common Law failed to provide a remedy. It was only later that Equity developed into a distinct body of rules and principles. Most of these principles would be meaningless if divorced from the rules of Common Law on to which they are engrafted and supplement.
Thus, for instance, whilst regarding the beneficiaries under a trust as the equitable owners of the property, Equity never denied the legal title of the trustee and, therefore, stops short of en- forcing the trust against a bonafide purchase of the legal estate from the trustee without notice of the trust, thereby acknowledging the paramountcy of the legal estate.
(i) Equity adopted the Common Law doctrine of estates. Any estate or interest known at law (e.g. fee simple, fee tail and life interest) can exist as an equitable interest under a trust.
(ii) Equitable interests devolve on intestacy in the same way as legal estates, so that the eldest son takes all the land as heir, to the exclusion of his younger brother and sisters.
(iii) Equity follows the Common Law rules governing joint tenancies.
(iv) Equity follows the Common Law rules relating to mistake in the formation of contracts (whilst supplementing these by means of equitable remedies).
But where Common Law rules were archaic or excessively rigid, Equity refused to follow them. Thus, for instance, the technical rules relating to legal contingent remainders were never applied to equitable interests; nor was there escheat of equitable interest on intestacy.
The meaning of the maxim may be summed-up by saying that Equity has never disturbed Common Law rules, nor claimed to override them. Equity only interferes where there is some important circumstance disregarded by the Common Law and where the lack of a remedy at law will cause injustice to a party. Thus, wherever equitable principles are at variance with le- gal ones, this is due not to Equity’s denial of the validity of the legal rule, but rather to Equity’s assertion that a gap exists in the law which it is Equity’s duty to fill.
3.1.3 Where there is equal equity, the law shall prevail
This maxim governs the position where there are competing interests in property, one of which is a legal interest, the other equitable. Where the claims of both parties are equally fair and meritorious, precedence will be given to the legal interest. The operation of the maxim may be seen in the following hypothetical illustration:
A acquires an equitable charge over Blackacre (worth N4million) as security for a loan of N1.5 million. B later takes a legal mortgage of Blackacre (still worth N4million), also to secure a loan of N1.5 million. B had no notice of A’s equitable charge when he lent the money, and now the value of Blackacre has dropped to N2 million. Here B is entitled to be paid the full amount of his loan (N1.5 million) from the proceeds of sale of Blackacre. A must be content with what is left (N500,000.00), since B’s legal estate takes priority over A’s equitable interest.
If, on the other hand, before he lent the money, B had received notice of A’s equitable charge, B would not gain priority over A, and the position would be reversed, since there would not be equal equity. Equity will not allow the carelessness or imprudence of B in lending the money, knowing of a prior charge on the property, to defeat the interest of A, the innocent party.
3.1.4 Where the equities are equal, the first in time prevails
This maxim concerns priority between two competing equitable interests in property. The gen- eral rule is that equitable interests rank according to the order of their creation. A well-known example is Cave v. Cave (1880) 15 Ch. D. 639. In this case, a sole trustee in breach of trust used trust money in the purchase of land, and had the land conveyed to his brother. The brother then mortgaged the land to A by way of legal mortgage, and then to B by way of equitable mortgage. Neither A nor B having notice of the trust.
It was held that:
(i) A’s legal mortgage took priority over the equitable interests of the Beneficiarie (“where there is equal equity the law shall prevail”), but
(ii) The interests of the beneficiaries had priority over B’s mortgage, since they were earlier in time (“where the equities are equal, the first in time prevails”)
There are occasions, however, where the equities are not equal. Thus, for instance, where the holder of the prior equitable interest has been guilty of fraud or gross negligence, he will be postponed to a later equitable incumbrancer. In Rice v Rice (1854) 2 Drew. 73, a vendor con- veyed land to the purchaser without receiving the purchase money, yet signed a conveyance containing a receipt for the money. It was held that the vendor’s equitable lien for the unpaid purchase-money was postponed to a subsequent equitable mortgagee with whom the purchaser had deposited the title deeds, the mortgagee having no notice of the lien. Compare with Ayo- rinde v. Scott, CCCHCJ/2/72, p.149.
The maxim does not apply where there are successive assignments or mortgages of an equita- ble interest in pure personalty; for under the rule in Dearle v. Hall (1828) 3 Russ. 1, priority is here determined not by the order in which the assignments were created, but by the order in which the successive assignees gave notice of their assignments to the debtor, trustee or other person liable to pay.
3.1.5 He who seeks equity must do equity
The basis of this maxim is that if the plaintiff seeks an equitable remedy or wishes to obtain any equitable relief, he must be prepared to act fairly towards the defendant. The following ex- amples may be given:
The doctrine of election
Where a donor by deed or will gives his own property to E and in the same instrument purports
to give E’s property to X, E will not be able be able to claim the whole of the gift to him unless he allows the gift to X to take effect. See Snell, Principles of Equity, 26th ed., (1960) pp. 532-542.
Notice to redeem a mortgage
If a mortgagor wishes to exercise his equitable right to redeem, he must give reasonable notice of his intention to the mortgagee.
Consolidation of mortgages
This is the right of a person in whom two or more mortgages are vested to refuse to allow one mortgage to be redeemed unless the other(s) are also redeemed. This may be seen from a hypo- thetical illustration: X has made two loans of N2,000 to Y, the first loan being secured by a mortgage of Blackacre (worth N3,000). The second by a mortgage of Whiteacre (also worth N3,000). If the value of Blackacre subsequently decreased to N1,000 while Whiteacre in- creased to N5,000, it would be unfair to allow Y to redeem Whiteacre and leave Blackacre un- redeemed. Equity will thus allow X to consolidate and will not permit Y to redeem Whiteacre unless he is prepared to redeem Blackacre also.
Illegal loans
The application of the maxim to illegal loans is exemplified by the case of Lodge v. National Union Investment Co. (1907) 1 Ch. 300. X borrowed money from Y, a moneylender and mort- gaged certain securities to him. The contract was illegal and void since the moneylender was not registered under the English Moneylenders Act 1900. When X sued Y to recover the securi- ties, it was held that an order for delivery up would only be made if X were prepared to “do eq- uity” by repaying the amount of the loan.
In Kasumu v. Baba-Egbe (1956) AC 539, however, both the West African Court of Appeal and the Privy Council declined to follow Lodge’s case. The facts were that the plaintiff mortgaged leasehold land to the defendant, a licensed moneylender as security for a loan. The money- lender had kept no book recording the transaction as required by section 19 of the Nigerian Moneylenders Act (Cap. 136, Laws of Nigeria 1948), the agreement was therefore unenforce- able under that section. The plaintiff instituted proceedings claiming possession of the property, cancellation of the mortgage, and delivery up of the title deeds.
It was held that he could so recover. The principle in Lodge’s case was not applicable to a transaction declared unenforceable by section 19 of the Moneylenders Act. The Act in enacting that no loan which failed to satisfy the statutory requirements was to be enforced, meant that no court of law was to recognise the lender as having any right to recover his money. To impose terms of repayment as a condition for making the order sought by the plaintiff would be in di- rect conflict with the policy of the Act. Accordingly, the plaintiff was entitled to recover the property without having to repay the loan.
3.1.6 He who comes to equity must come with clean hands
This maxim means that a plaintiff who seeks an equitable remedy or other equitable relief must show that his past conduct in the transaction has been fair, honest and above board. It may be distinguished from the previous maxim in that it refers to behaviour prior to the suit, as op- posed to future conduct.
Illustrations
(i) A tenant whose lease has been forfeited for non-payment of rent cannot expect equitable relief against forfeiture if he has been using the premises for immoral purposes. See Gill v. Lewis (1956) 2 QB 1 at pp. 13, 14, 17.
(ii) An equitable tenant under an agreement for a lease cannot expect to obtain a decree of specific performance of the legal lease if he has been in breach of the covenants to be con- tained in that lease. See Coastworth v. Johnson (1886) 54 LT 520.
(iii) Where an infant beneficiary, by fraudulently representing himself to be of age, obtained from the trustees a sum of money to which he was not entitled until he came of age, neither he nor his assigns could compel the trustees to pay the sum over again when he attained his majority. See Overton v. Bannister (1844) 3 Hare 503.
It is important to note that the maxim does not refer to any conduct of the plaintiff other than that which is connected with the transaction in question. As one American Judge put it: “Equity does not demand that its suitors shall have led blameless lives.” See Brandeis J. in Loughran v. Loughran, 292 US 216 at 229 (1934). It is only conduct which has “an immediate and neces- sary relation to the equity sued for” that will bar the plaintiff’s claim. See Dering v. Winchelsea (1787) 1 Cox Eq. 318 at 319, 320.
SELF ASSESSMENT EXERCISE 1
Explain the maxim “He who comes to equity must come with clean hands”.
3.1.7 Delay defeats equities or equity aids the vigilant and not the indolent
It is a general principle of Equity that a person will not be granted an equitable remedy if he has been guilty of undue delay in bringing his action. Such delay is known as “laches”. A court of Equity “has always refused its aid to stale demands, where a party has slept upon his right and acquiesced for a great length of time. Nothing can call forth this court into activity, but con- science, good faith, and reasonable diligence; where these are wanting, the court is passive, and does nothing.” Per Lord Camden LC in Smith v. Clay (1767) 3 Bro.C.C 639 n. at 640 n.
The doctrine of laches does not apply to cases governed by the Statutes of Limitation such as claims to redeem or to foreclose mortgages of land, or a claim by a beneficiary against a trustee for a non-fraudulent breach of trust. Wherever the Statutes apply, no delay short of the limita- tion period will bar the claim.
Application of the doctrine
The principles governing the doctrine of laches were stated in the well-known dictum of Lord Selborne in Lindsay Petroleum Co. v. Hurd (1874) L.R. 5 P.C. 221 at 239, cited with approval by the Privy Council in Nwakobi v. Nzekwu (1964) 1 WLR 1019. The doctrine applies
“where it would be practically unjust to grant a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has though perhaps not waving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted.”
Further, it was emphasised by Ademola , CJN in Fagbemi v. Aluko (1968) 1 All NLR 233 at 237, that “in considering the equitable doctrine of laches, the court does not act only on the delay by the plaintiff, but must also consider (1) acquiscence on the plaintiff’s part and (2) any change of position that has occured on the defendant’s part.” Thus there will be laches where the plaintiff has so acted as to induce the defendant to alter his position in the reasonable belief that the claim has been abandoned, or where the delay amounts to evidence of an agreeement by the plaintiff to abandon his right.
In Aganran v. Olushi (1907) 1 NLR 66, land held by a family under customary law was sold in 1902 to the defendants by certain members of the family whose assent was necessary to the va- lidity of the sale. The sale was therefore voidable by the plaintiff. The plaintiff took no steps to set aside the sale until 1905, when he commenced the present action. The court found (i) that the plaintiff had at one stage agreed, for a consideration, to ratify the sale (though he subsequently resiled from his promise); (ii) that the defendants had at one stage sued as owners of the land to eject trespassers, and the plaintiff knew of this but did not interfere; (iii) that the defendants had erected houses on the land and the plaintiff did nothing to stop them.
It was held that all these circumstances, coupled with the three-year delay in bringing the action, amounted to lashes, and the plaintiff had lost his right to set aside the sale. Winkfield J. at p. 68 said: ‘I think that the actions of the plaintiff amounted to an expression of intention or a promise not to exercise the right which he possessed.’
Another example of the application of the doctrine in Nigeria is Ibeziako v. Abutu (1954) 3 ENLR 24. In this case, A in 1949 was granted for value the lease of a plot of land by L. B al- leged that the same plot formed the subject-matter of a grant to him by L’s predecessor-in-title in 1942. It was held that if B could prove that A had notice of his (B’s) interest when he acquired the lease, prima facie B would be entitled to a decree of specific performance of his equitable interest to convert it into a legal estate. But since he took no steps to enforce his rights until the time of the present action in 1954, B was guilty of laches and had therefore lost whatever rights he may have had. Reynolds J. quoted a passage from Halsbury’s Laws of England (3rd ed. Vol. 14 at p.646);
In certain classes of claim, the claim to relief in Equity must be made with special promptitude. In claims for specific performance and for rescission of contracts, the special relief in Equity is only given on condition of the plaintiff coming with great promptitude … Any substantial delay after negotiations have terminated-such as a year, or probably less-will be a bar.
But the doctrine of lashes is certainly not confined to specific performance and rescission of contracts. In Ephraim v. Asuquo (1923) 4 NLR 98, for instance, the plaintiff sought to have a grant of letters of administration set aside. It was held that as nearly two years had elapsed since the grant, and the administrator had in all probability completed distribution of the estate, there had been laches, and the plaintiff’s claim failed.
Finally, it may be noted that any reasonable explanation for the delay, such as the plaintiff’s ignorance of the facts on which the claim is based, infancy or other disability of the plaintiff, or fraud on the part of the defendant, will absolve the plaintiff. Also, in actions concerning rights to land, the rights of the present plaintiff over the land will not be affected by the lashes of the predecessor-in-title. See Nwokobi v. Nzekwu (1964) 1 WLR 1019.
3.1.8 Equality is Equity
The application of this maxim may be considered under the following heads –
(i) presumption of tenancy in common; (ii) severance of joint tenancy;
(iii) equal division by the court; and
(iv) the doctrine of satisfaction.
- Presumption of Tenancy in Common
“Equity leans against joint tenancies.” Equity dislikes the joint tenancy, for in it the right of survivorship (the jus accrescendi) operates – i.e. the survivor of two joint tenants is entitled to the whole property, and the estate of the deceased tenant takes nothing. Where there are more than one joint tenants, on the death of one, the whole property vests in the survivors. This process continues until there is only one survivor, who then holds the land as a sole tenant. For a detailed account, see Megarry and Wade, Law of Real Property, 3rd ed. Pp. 403 et seq.
In a tenancy in common, on the other hand, the share of a deceased tenant passes not to the survivor but to those entitled under the deceased’s will or intestacy, for a tenant in common has a distinct share in the property which is his to dispose of as he wishes.
In three instances Equity treats joint tenants at law as tenants in common of the beneficial inter- est, so that although at law the survivor is entitled to the whole property, in Equity he will be regarded as trustee of the deceased’s share for the benefit of those entitled under the latter’s will or intestacy. These instances are:
(a) Where property is purchase in unequal shares
Where two persons, X and Y, purchase property, providing the purchase money in unequal shares, and have the property conveyed to them as joint tenants, on the death of X, Y becomes entitled to the whole property at law, but in Equity he becomes trustee for X’s estate of the share of the property proportionate to the amount advanced by X (Y being of course beneficially enti- tled to his own share).
But where the money is advanced in equal shares, Y is entitled to the whole property both at law and in Equity, for it is presumed that when two persons advance equal amounts, they intend the jus accrescendi to operate. See Lake v. Gibson (1729) 1 Eq. Ca. Abr. 290.
(b) Loan on Mortgage
Where two persons, X and Y, lend money to Z who then mortgages his property to them jointly, it is immaterial whether the amounts lent were equal or unequal; since the transaction is a loan, a tenancy in common will be implied, so that the surviving mortgage will be a trustee for the estate of the deceased mortgagee of that part of the property which is proportionate to the sum lent by the deceased.
(c) Partnerships
It is presumed that any property acquired by partners in their business is held by them as beneficial tenants in common – jus accrescendi inter mercatores locum non habet (meaning “the right of survivorship has no place in business”).
- Severance of Joint Tenancy
The term ‘severance’ is here used to describe the process whereby a joint tenancy is converted into a tenancy in common. A joint tenant may convert a joint tenancy into a tenancy in common by severance. Where there is a joint tenancy both at law and in Equity (e.g. where two joint pur- chasers advance equal amounts), Equity will readily treat the joint tenancy as severed and thus converted into a tenancy in common, thereby excluding the right of survivorship.
Any alienation of his interest by a joint tenant will bring about severance. Even an agreement to alienate suffices, provided it is made for value. See Brown v. Raindle (1796) 3 Ves. 256. Alien- ation may be by outright sale or gift or by mortgage. In Ipaye v. Aribisala (1930) 10 NLR 10, the point in issue was whether a merely equitably mortgage of his interest by a joint tenant sufficed to bring about severance.
The facts were that the plaintiff and his brother were joint tenants under a settlement of land. The deed of settlement was kept in the brother’s custody. After the death of the brother it was discovered that he had, without the consent of the plaintiff, deposited the deed with the defendant as security for a loan, thus creating an equitable mortgage of his (the brother’s) interest in the property.
The question was, did this operate to sever the joint tenancy? If the answer were in the affirmative, the brother would have become a tenant in common and the mortgage to the defendant would be a valid alienation of the brother’s interest, thus entitling the defendant to retain possession of the deed. On the other hand, if there had been no severance, the right of survivorship would operate to vest the whole property in the plaintiff, both in law and Equity, and the defendant would have no right to possession of the deed. The Divisional Court adopted the latter view, but the decision was reversed by the Full Court which held that the equitable mortgage, just as a legal one, did bring about a severance, the legal joint tenancy being converted into a tenancy in common in Equity. It made no difference that the mortgage was without the knowledge or consent of the plaintiff, for one joint tenant may validly sever without the concurrence of the other. Accordingly, the defendant was entitled to possession of the deed.
- Equal Division
Whenever there is no other fair and practicable basis upon which property may be distributed amongst two or more rival claimants, the court will apply the maxim and divide the property equally between them. This may be seen in the following examples:
(i) Where trustees fail to exercise a trust power, the court will divide the trust property equally amongst all the members of the class of beneficiaries, even though the trustees might have given unequal shares.
(ii) Where there is a settlement including a direction (a) that the fund shall be held on trust for certain persons in unequal shares and (b) that any share which fails to vest shall accrue to the other shares by way of addition, the accrue will be in equal shares and not in the proportions laid down for the original shares. See Re Bower’s Settlement Trusts (1942) Ch. 197.
(iii) Where a husband and wife divorce or separate, both having contributed to the purchase of the matrimonial home, or having operated a joint bank account, the court will not, in the absence of any contrary arrangement between the parties, inquire into what was contributed by each, but will divide the property equally between the two. See Jones v. Maynard (1951) 1 Ch. 572. The rule is applicable even where husband and wife both contribute to the running of a business. (See Landsman v. Landsman (1961) 105 S.J. 988.
- The Doctrine of Satisfaction
Equity considers that if a father has more than one child, it is unlikely that he would wish to provide for one child twice over to the detriment of the others, hence the sub-maxim “Equity leans against double portions” founded on the present maxim.
3.1.9 Equity looks to the Intent rather than to the Form
At Common Law, observance of the correct forms or proceedings in relation to any transaction was all-important. Failure to do so often rendered a transaction invalid or led to a total loss of the legal rights of a party. Conversely, if the due forms were employed in a transaction there was often no possibility of challenging its validity or tempering its rigours. Equity, however, looking to the intent rather than the form of words, considered it unfair for one party to insist on strict observance of form and thereby defeat the substance of a transaction and the true intention of the parties. This may be seen in the following examples.
(i) Time Clauses
If a party to a contract for the sale of land fails to complete on the date stipulated in the agreement, at Common Law he is in breach of contract, and the other party may repudiate the transaction. But, in Equity, time is generally not of the essence of a contract, and breach of a time
clause will not be ground for repudiation by the other party, provided the party in default is ready and able to complete within a reasonable time.
(ii) Covenants
Equity may regard a covenant as negative in substance (though positive in form) so as to enable an injunction to be granted to restrain its breach; as where an injunction was granted to enforce a “tied-house” covenant, whereby the owner of a public house agreed that a certain brewery should have the exclusive right of supplying beer to him. See Catt v. Tourle (1869) 4 Ch. App. 654.
(iii) Mortgages
In determining whether a transaction is a mortgage or not, Equity looks at the substance and not merely the form. Thus, e.g. parol evidence is admissible to show that what appears on its face to be an absolute conveyance was in fact intended to be by way of security only.
The maxim is also exemplified by Equity’s attitude to redemption of mortgages. At Common Law, if the mortgagor failed to repay the loan on the date fixed by the mortgage, he lost for ever his right to redeem the property. Equity, however, always considered a mortgage to be a mere security, and regarded the provision for repayment on the day stated in the mortgage covenant to be a mere formality. Equity thus allowed a mortgagor to redeem his property after the redemp- tion date had passed.
(iv) Penalties and Forfeitures
In determining whether a clause in a contract is a penalty or liquidated damages, Equity looks to the intent of t he parties rather than to the form of words used. Thus, the fact that the expression “liquidated damages” as used will not be conclusive of the effect of the clause, and it will be treated as a penalty if it is found that it was not a genuine pre-estimate of the loss likely to be suf- fered in the event of a breach, but merely a stipulation in terrorem to induce performance of the contract. If the clause is found to be a penalty, Equity will grant relief to the promisor by reduc- ing the amount to be paid by him to the actual loss suffered by the promise as a result of the pro- misor’s default.
On the same principle, Equity granted to a tenant relief against forfeiture of his lease for non- payment of rent. This is now a statutory right. See Section 210, Common Law Procedure Act
1852; also provided for by the various High Court Laws, viz., Lagos, Cap. 80, s.22; East, Cap. 61, s.29; North, Cap. 49, s. 20; West, Cap. 44, s.21. The court will restore the lease if the tenant pays all arrears of rent and the landlord’s costs within six months after the forfeiture.
(v) Equitable Assignment
For an assignment of a chose in action to be valid at law it must comply with the provisions of the Judicature Act 1873, section 25(6), which require it to be in writing, to be absolute, and no- tice to be given to the debtor or trustee. But an assignment which is not in the form required by the statute is quite valid in Equity. The classic dictum on this point is that of Lord MacNaghten in Brandt’s Sons and Co. v. Dunlop Rubber Co. (1905) A.C. 454 at p. 462, “the language is im- material if the meaning is plain. All that is necessary is that the debtor be given to understand that the debt has been made over by the creditor to some third person.”
(vi) Deeds
At Common Law a promise under seal is enforceable even though unsupported by consideration. Equity however, will normally refuse to grant specific performance of a purely voluntary agreement even though it is made by deed. See Jefferys v. Jefferys (1841) Cr. & Ph. 138. This is expressed in the sub-maxim, “Equity will not aid a volunteer.”
3.1.10 Equity looks on that as done which ought to be done
Two examples of this maxim may be given –
(i) Under the doctrine in Walsh v. Lonsdale (1882) 21 Ch. D. 9, one who enters into poss- ession of land under an agreement for a lease of which the court will grant specific perform- ance, is in the same position (as between himself and the landlord) as if the lease had actually been granted to him. In other words, “an agreement for a lease is as good as a lease.” The leading Nigerian case is Savage v. Sarrough (1937) 13 N.L.R. 141, the facts of which may be stated simply. The plaintiff and his brother and sister were owners of certain land and build- ings. The defendant obtained from the plaintiff’s brother a written agreement, not under seal, for a lease for five years. The plaintiff claimed recovery of possession of the property. It was held that in Equity the lease, though not under seal, must be deemed to have been effectively granted and that for practical purposes the parties were inter se in the same position as if the lease were valid at law, and that the claim for recovery of possession, therefore, failed.
(ii) The Doctrine of Conversion
If a trustee or other person is under a binding obligation to sell land and convert it into money, or to invest a sum of money, in the purchase of land, Equity regards that as done which ought to be done and treats the property as being in its converted state from the time when the duty to convert arose. See Snell, 26th ed., (1960) pp. 513-527.
In Iragunima v. R.S.H.P.D.A. (2003) 12 NWLR Pt. 834 p.427, the 2nd respondent’s vendor applied for a renewal of the lease which was assigned to him by the original lessee. The evi- dence on record shows that approval was given by the Governor for the renewal of the lease in favour of the 2nd respondent’s vendor for a term of 60 years from 1/1/64 the date the origi- nal lease expired. There was also evidence that the 2nd respondent’s vendor was called upon to pay all necessary fees relating to the new lease, that is, arears of rent from 1964-1973, the preparation, execution and registration of the new lease which he did and obtained receipts which were tendered in evidence. What remained was for the 1st respondent to execute the new lease in favour of the 2nd respondent’s vendor. This was not done. Since the 2nd respon- dent’s vendor was in possession under the agreement for a new lease for a term of 60 years from 1/1/64, he and the 2nd respondent were, in equity, in the same position with respect to their respective rights as if a lease had been granted. Consequently, he had at least an equita- ble interest in the property in dispute.
3.1.11 Equity Imputes an Intention to Fulfil an Obligation
Where a person is obliged to do an act, whether by law (in the wide sense) or by moral obliga- tion, and he does an act which could be taken as fulfilling that obligation, Equity will put the most favourable construction on his motives, and he will be deemed to have done the act in per- formance of his duty. This maxim is the foundation of the doctrines of performance and satisfac- tion.
3.1.12 Equity Acts “in Personam”
One of the most important characteristics of the jurisdiction of the Court of Chancery was that its decrees were directed in personam, i.e. against the defendant personally. Thus, Lord Ellesmere in the Seventeenth Century could justifiably claim that the controversial common injunction is- sued by the Chancellor was not an interference with the due processes of the Common Law courts, but merely a direction in personam to the individual that, on equitable grounds, he must not sue at Common Law. The maxim also meant that in property matters the Court of Chancery would act against the person of the defendant by committing him to prison for contempt if he failed to obey a decree, rather than in rem, i.e. against the property involved in the dispute.
Later Equity developed the alternative method of sequestration of the defendant’s property until he obeyed a decree, and today, whilst still retaining the powers of committal and sequestration, the court has numerous more convenient methods of enforcing its decrees. Thus, if a defendant fails to convey land to the plaintiff as ordered by a decree of specific performance, the court, in- stead of merely imprisoning him or sequestrating his property, may appoint another person to execute the transfer on his behalf; or it may make a vesting order, which has the effect of trans- ferring the property from one person to another without the need for a conveyance. Furthermore, since the Judicature Acts 1873 to 1875, equitable decrees are enforceable by any appropriate le- gal writ; thus, e.g. an order for the repayment of money can be enforced by a writ of fiery facias.
The maxim has thus lost some of its earlier importance, but its survival may be seen in the rule that the court may make an equitable decree relating to property situated outside the jurisdiction, as an exception to the general jurisdictional limits of the courts. Thus, the court may enforce a trust relating to land abroad where the trustees are present within the jurisdiction (see Rochefou- cauld v. Boustead (1897) 1 Ch. 196), or similarly, where the executors are present, administer assets abroad. See Ewing v. Orr-Ewing (1883) 9 App. Cas. 34. In the leading case of Penn v. Lord Baltimore (1750) 1 Ves. Sen.444, it was held that the English court could decree specific performance of a contract to sell land in America, since the defendant was within the jurisdiction.
This latter case was followed in Bata Shoe Co. v. Melikian (1956) 1 FSC 100, where the Supreme Court held that the High Court of Lagos had jurisdiction to order specific performance of a con- tract to assign a lease of land situated at Aba, in the then Eastern Nigeria, which was outside the jurisdiction of the Lagos Court, on the ground that the defendant resided in Lagos. Another in- teresting illustration of the maxim is afforded by Ayinule v. Abimbola (1957) LLR 41. In this case, the defendant had been employed as agent by a Lagos firm, Jones Commercial Services. After leaving his employment, he held himself out as still acting for the firm by writing from Accra, Ghana, to a firm in Germany, using his former employers’ notepaper and signing “for Jones Commercial Services.” Onyeama J. granted an injunction against the defendant restraining him from so acting in Ghana, on the ground that he was present in Nigeria. Since Equity acts in personam, it was immaterial that the acts complained of were being committed abroad.
Lastly, it is a controversial point whether the beneficiary’s right under a trust is a right in per- sonam, since the beneficiary may not only sue the trustee personally to recover the trust property or its value, but may also trace the property and recover it or its proceeds from any other person into whose hands it has come. The right to trace thus resembles a right in rem, attaching itself to the property. However, because the beneficiary has no right to trace against a bona fide pur- chaser of the property without notice of the trust, his interest cannot be said to be a full right in rem (unlike a legal interest). It has thus been suggested by many writers that these equitable rights are hybrids, being technically rights in personam, but bearing more resemblance to rights in rem.
4.0 CONCLUSION
The maxims are to show the historical development of equitable rules and procedure; and guide the application of those rules at the present and in the future.
5.0 SUMMARY
In this unit, we have considered the maxims of equity. You should now be able to explain each of the maxims and distinguish them even though they overlap.
6.0 TUTOR-MARKED ASSIGNMENT
Briefly explain the application of the maxim ‘equality is equity’.
7.0 REFERENCES / FURTHER READING
Kodilinye Gilbert (2005 Rep.) An Introduction to Equity in Nigeria; Ibadan: Spectrum Books Ltd.
Nwagbara Chigozie (2004 Rev.Ed.) Selected Cases on Land Law, Equity, Trusts, Taxation, Banking and Conflict of Laws; Lagos: CI Publications.