Future Property in Equity - Essay Example

Title: Assignment of Future Property in Equity Customer Inserts His/her Name Customer Inserts Name of Tutor Customer Inserts Grade/Course (Date) Introduction In assignment of future property in equity, the type of assignment is important to consider. It is therefore important to distinguish between a legal and an equitable assignment. An equitable assignment gives the assignee an equitable interest in the property while it is a legal assignment; the assignee obtains a legal interest in the property (Watt 2009, P. 30). The nature of the assignee’s interest is crucial in determining the rights of the parties if there are competing interests to the property. Future property refers to property that is not in existence or even though it exists, it is not yet in the ownership of the person who has been assigned. It is important to note that there can be a valid assignment of future property in equity but there can never be any assignment of future property at law (Dobbs 2007, P. 95). Courts of equity can contemplate an assignment of property to be acquired in the future but it would be impossible for common law courts to contemplate such a possibility. Discussion Equity treats an assignment of future property as a contract to assign the property in the future and will compel specific performance of the contract. The beneficial interest of the future property passes to the assignee immediately the assignor acquires the property. The doctrine of specific performance is relied upon to ensure performance of the equitable contract in assignment of future property in equity. In Holroyd V. Marshall(1862) 10 H.L.C. 191, Lord Westbury L.C ruled that assignment of future property in equity can only be effective if at the date on which the property that is the subject of the assignment came into the hands of the assignor, specific performance could have been decreed(Grattan 2009, P. 76). Lord MacNaghten disputed Lord Westbury’s declaration in Tailby V. Official Receiver (1888) 13 App Cas. 523, when he held that Lord Westbury’s ruling was incorrect and would result in great inconvenience. Lord MacNaghten argued that the doctrine of equitable assignment is independent and distinct from the doctrine of specific performance (Spry 2011, P. 114). In Holroyd V. Marshall (1862) 10 H.L.C 191, the appellants had purchased machinery and accessories in a mill belonging to a certain gentleman by the name Taylor who was experiencing financial difficulties but had agreed to resell the machinery for 5000 pounds. Taylor did not possess the required money and the property was transferred to a third party to hold it as trustee for Taylor until the appellants demanded the required money. If when the appellants demanded payment, Taylor paid the money with interest, the trustee would hold the property for him absolutely but if Taylor defaulted, the trustee was to sell the property and use the proceeds acquired from the sale to pay the appellants. (Kok 2010, P. 232). In the case, the existing machinery and the machinery to be acquired in the future were to be used as security for the payment of the purchase price and the interest arising from the sale of the machinery on credit. Taylor acquired the machinery under the agreement but made no conveyance to the appellants but neither did the appellants perform any act amounting to taking formal possession of the equipment. Taylor fell into further financial difficulties and agents of the respondent levied execution against the machinery on behalf of two judgment creditors. Consequently, the appellants brought an action against Marshall claiming that there had been an effective equitable assignment of the new machinery to the trustee and that the interest of the assignee were superior to those of the judgment debtors. The court of first instance ruled in favour of the appellants, but the decision was reversed on appeal. In the court of appeal, lord Campbell ruled that there existed an equitable assignment between Taylor and Holroyd but for the interests of Holroyd to take priority over those of the judgment creditors they would have to perfect their title by taking possession of the machinery. Holroyd only had an equitable right to have the machinery assigned to them and such an equitable right could not defeat the legal rights of the judgment creditor to the property. The appellants had no right in law or equity other than to ask for specific performance (Kok 2010, P. 235). An assignment refers to the immediate transfer of an existing, vested or contingent proprietary right from the assignor to the assignee. An equitable assignment was defined in Noman V FCT (963) 109 CLR 9 as the recognition of the transfer of property even though some formal requirements of the law such as registration have not been completed (Keeton 2008, P. 83). Equity overlooks failure to comply with the statutory requirements stipulated by the law. Several maxims of equity enable the assignment of future property and the consequential enforcement of equitable interests. They include: Equity regards as done that which ought to be done; Equity will not assist a volunteer; and Equity will not perfect an imperfect gift (Gresley & Calvert 2010, P. 123). Assignment of future property is made enforceable by first assessing the intention of the assignor in order to determine whether there was a gift to the assignee. and second by determining the method by which the gift was to be effected. In Smith V perpetual Trustee Co Ltd (1910) 11 CLR 148, Higgins J held that there can be no assignment of future property without the intention of the assignor to pass the property to another person. (Todd 2007, P. 247). The maxim that equity will not assist a volunteer means that equity will always distinguish between assignments which are for value and voluntary gifts or transactions. The maxim that equity cannot perfect an imperfect gift also applies to voluntary assignments. Where a gift is assigned and it is intended by the parties that the gift will only be effective in future, then the assignee cannot be said to have any enforceable equitable interest in the property (Todd 2007, P. 238). This arises even in cases where it is not clear whether the assignee intended that he gift would take effect as a present transfer of property or of equitable interest. In cases of future assignments in property, enforcement of equitable property is only available if the assignment is construed by the assignee as a declaration of trust done by the assignor on behalf of the assignee as the beneficiary. Declaration of a trust means that the even if the property does not directly vest with the beneficiary; it creates an equitable interest since it vests with the trustee (Scharfman 2012, P. 77). In Anning V Anning, the court held that the construction of the nature of assignment in future is crucial to avoid instances where a person who is not a trustee may declare himself to be one. The court cannot change the construction of the nature of the arrangement to make a gift valid; It will determine the validity of the gift according to the facts and the law since equity cannot perfect an imperfect gift. The court makes no assumptions or presumptions when determining the validity of a gift (Dobbs 2007, P. 100). The equitable maxim that equity regards as done that which ought to be done applies in assignment of future property by contract. Equity treats any interest that was to be passed under a finalized contract as if the contract has been finalized even though they are some formal procedures that have not been yet fulfilled(Keeton 2008, P. 84) In voluntary assignments, the mere fact that the assignment is legal in nature does not exclude the operation of equitable principles. This caters for instances where the assignment deviates from the prescribed legal formalities. For instance under common law, property is transferable through the common law principles of conveyancing or through the title system and statutes in a particular jurisdiction (Kok 2010, P. 237). For instance under section 23C (1) of The New South Wales Conveyancing Act, assignment of an equitable interest in all properties must be in writing. Equity will step in to protect the equitable interests of a voluntary assignee even if the transaction is not evidenced in writing (Todd 2007, P. 249). In Milroy V Lord; Higgins J. held that the assignor must have done everything, obligatory or non-obligatory to perfect the gift for the assignment to be enforceable at equity. His interpretation was found to be too harsh and was not followed as a binding precedent in later judgments. Dissenting in the same case, Isaacs J ruled that if property is assignable at law, then all legal requirements must be complied with but if the property is not assignable at law, then equity applies automatically and all that needs to be proved is the intention of the assignor to transfer the property or equitable interest to the assignee. In Lysaght V Edwards(1876) 2 Ch D 499 , it was held that since equity regards as done that which ought to be done, in contracts for sale the vendor is a trustee in equity for the purchaser of the estate under sale. When the vendor stipulates the price of the property, and the purchaser indicates that he is willing to buy the property at the price indicated by the vendor, a constructive trust is created on the vendor in favour of the purchaser (Warren & Andrews 2009, P. 303). Equity provides the purchaser in an unconditional contract with beneficial future ownership that entitles the purchaser to specific performance. In Legione V Hately (1983) 152 CLR 406, Murphy J. and Gibbs C. J. held that when purchasers execute the contract and pay a deposit, the beneficial interest in the property or land passes to them subject to the payment of the full purchase price. In Haque V Haque (1965) 14 CLR 98, the justices decided that when the contract was made, beneficial interest was transferred to the purchaser. The vendor was not a mere mortgagee for the purchaser but was also a trustee who could exercise the contractual rights of the purchaser until the purchase price was paid in full (Young 2009, P. 162). Assignment of future property involves making an assignment in the present which will only come into effect as a future proprietary interest. They are certain properties that cannot be subject to future assignments such as debts or wages and salaries. The maxim that equity cannot perfect an imperfect gift makes it impossible to assign future property by way of gift. The maxim that equity regards as done that which ought to be done secures enforcement of assignment of future property (Young 2009, P. 164). Under the maxim, the assignment of future property provision of consideration is sufficient to ensure enforcement of the contract when the property comes into being in the future (Warren & Andrews 2009, P. 305). Conclusion Assignment of future property depends on the intention of the parties or how the courts interpret that intention. The assignor must intend to assign the property as and when it comes into being in the future. If the assignment seems like it is intended to assign the property in the present, the assignment will fail and will be deemed by the courts to be null and void. Assignment of future property in equity cannot be gratuitous and must be accompanied by consideration. The assignee of future property in equity only acquires proprietary rights to the property but does not acquire contractual rights which vest with the assignor. The equitable principles are meant to protect and benefit both the assignee and the assignor. References Bryan, M., & Vann, V. (2012). Equity and Trusts in Australia. Cambridge, Cambridge University Press. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=977128, pp 51-61. Dobbs, D. (2007). Dobbs law of remedies: damages, equity, restitution. St. Paul, Minn, West Pub. Co, pp 95-103 Grattan, D. (2009). Equitable assignments of future property as illustrative of the principle that equity regards as done that which ought to be done. Legal research project. Macquarie University. pp 75-86. Gresley, R. & Calvert, C. (2010). A treatise on the law of evidence in the courts of equity. Philadelphia, T. & J.W. Johnson, pp 123-128. Keeton, G. (2008). The law of trusts: a statement of the rules of law and equity applicable to trusts of real and personal property. London, Pitman, pp 82-89. Kok, S. (2010). Equitable principles. Selangor, Sweet & Maxwell, pp 232-237. Scharfman, J. (2012). Private equity operational due diligence: tools to evaluate liquidity, valuation, and documentation. Hoboken, New Jersey, John Wiley & Sons, Inc, pp 77-86. Spry, I. (2011). The principles of equitable remedies: injunctions, specific performance, and equitable damages. London, Sweet and Maxwell, pp 114-119. Todd, P., & Watt, G. (2007). Todd and Watt's cases and materials on equity and trusts. Oxford, Oxford University Press, pp 247-255. Warren, J., & Andrews, S. (2009). Equitable commerce a new development of principles as substitutes for Laws. New York, Fowlers and Wells, pp 301-309. Watt, G. (2008). Trusts and equity. Oxford, Oxford University Press, pp 29-35 Young, H. (2009). Equity: in theory and practice. Princeton, N.J., Princeton University Press, pp 162-167. Read More