equitable assignment vs declaration of trust

Equitable Assignment: Everything You Need to Know

An equitable assignment is one that does not fulfill the statutory criteria for a legal assignment, but is binding and upheld by the courts in the interest of equability, justice, and fairness. 3 min read updated on September 19, 2022

An equitable assignment is one that does not fulfill the statutory criteria for a legal assignment, but is binding and upheld by the courts in the interest of equability, justice, and fairness.

Equitable Assignment

An equitable assignment may not appear to be self-evident by the law's standard, but it presents the assignee with a title that is protected and recognized in equity. It's based on the essence of a declaration of trust; specifically, essential fairness and natural justice. As long as there is valuable consideration involved, it does not matter if a formal agreement is signed. There needs to be some sort of intent displayed from one party to assign and the other party to receive.

The evaluation of a righteous equitable assignment is completed by determining if a debtor would rationally pay the debt to another party alleging to be the assignee. Equitable assignments can be created by:

• The assignor informing the assignee that they transferred a right to them
• The assignor instructing the other party to release their obligation from the assignee and place it instead on the assignor

The only part of an agreement that can be assigned is the benefit. Generally speaking, there is no prerequisite for the written notice to be received or given. The significant characteristic that separates an equitable assignment from a legal assignment is that most of the time, an equitable assignee may not take action against a third party. Instead, it must rely on the guidelines governing equitable assignments. In other words, the equitable assignee must team up with the assignor to take action.

The Doctrine of Equitable Assignment in Wisconsin

In Dow Family LLC v. PHH Mortgage Corp ., the Wisconsin Supreme Court issued in favor of the doctrine of equitable assignment. The case was similar to many other foreclosure cases, except this one came with a twist. Essentially, Dow Family LLC purchased a property and the property owner insisted the mortgage on the property had been paid off. However, in actuality, it wasn't. 

Prior to the sale, the mortgage on the property was with PHH Mortgage Corp. When PHH went to foreclose on the mortgage, Dow Family LLC contested it. There was one specific rebuttal that caught the attention of the Wisconsin Supreme Court. The official mortgage on record was with MERS, an appointee for the original lender, U.S. Bank.

Dow argued that PHH couldn't foreclose on the property because the true owner was MERS. Essentially, Dow was stating that the mortgage was never assigned to PHH. Based on this argument, PHH utilized the doctrine of equitable assignment.

Based on a case from 1859, Croft v. Bunster, the court determined that the security for a note is equitably assigned when the note is assigned without a need for an independent, written assignment. Additionally, Dow contended that the statute of frauds prohibits the utilization of the doctrine, mainly because it claimed every assignment on a property must be formally recorded.

During the case, Dow argued that the MERS system, which stored the data regarding the mortgage, was fundamentally flawed. According to the court, the statute of frauds was satisfied because the equitable assignment was in accordance with the operation of law. Most importantly, the court avoided all consideration regarding the MERS system, concluding it was not significant in their decision. 

The outcome was a major win for lenders, as they were relying on the doctrine specifically for these types of circumstances.

Most experts agree that this outcome makes sense in the current mortgage-lending environment. This is due to the fact that it is still quite common for mortgages to be bundled up into mortgage-backed securities and sold on the secondary market.

Many economists claim that by not requiring mortgages to be recorded each time a transfer is completed, the loans are more easily marketed to investors. Additionally, debtors know who their current mortgage company is because the new lender must always notify the current borrower in order to receive payment. It was determined that recording and documenting the mortgage merely provides a signal to the rest of the world that the property owner secures a debt.

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Topic 5 Equitable assignment of legal property

Equity and trusts (070517 ), university of technology sydney.

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Equity & Trusts 70517

Disclaimer: these notes have been prepared as a substitute for a lecture,, and as a guide to self-study for students enrolled in the uts:law subject, 70517 equity & trusts. they should not be relied upon for any other purpose., last updated: 23 march 2020., equitable assignment of legal property, topic 1 - history and nature of equity, topic 2 - unconscionable dealing and undue influence, topic 3 - equitable estoppel, topic 4 - equitable estates and interests, topic 5 - equitable assignment of legal property, topic 6 - equitable assignment of equitable property.

Topic 7 - Fiduciary Obligations

Topic 8 - Accessorial Liability for Breach of Fiduciary Duty or Trusts

Topic 9 - Tracing / Account of Profits

Topic 10 - Equitable Compensation

Topic 11 - Constructive Trusts

Topic 12 - Resulting Trusts

Topic 13 - Express Trusts

Topic 14 - Duties, Powers, Rights and Liabilities of Trustees; Rights of

Beneficiaries, these notes are to assist in your self-study of topic 5: equitable, assignment of legal property.

Last created/updated: 23 March 2020.

1. Introduction:

By the time you have read through this topic guide you should be able to answer the, following broad question: ‘when will an attempt to dispose of a legal property right be, recognised in equity, notwithstanding that the disposition is not recognised at law’, as we reach an understanding of how to answer that question, we also consider some more, specific questions, including:, 1. what is the distinction between a presently existing property right, and ‘future, property’ (i. a property right that does not yet exist at the time of an attempted, disposition), 2. by what means (i., by what types of dealing) is it possible to convey property, rights if a has a property right, and wants to transfer that right to b, or simply to, make sure that b can enjoy that right, what steps can a take to make that happen, 3. if a property right can be transferred at law so long as the transferor (a) complies, with some formal requirements (such as putting their intentions in writing, or, registering certain official forms), will the transfer be recognised in equity if those, formalities are not completed, before we answer these questions, let’s recall what we already know about property rights., (be sure you have understood the material presented for topic 4.), 2. types of property:, 2 real property, we are already familiar with real property through our studies in real property. real, property includes land, and interests in land. and we already know that our legal system, requires that transactions dealing with interests in land need to be in writing to be, enforceable at law., take the time now to look up the conveyancing act 1919 (nsw). find s 54a (dealing with, agreements to convey), and s 23c(1)(a). copy them into your notes here, and read them, carefully. use the austlii website as a quick reference to nsw legislation., also, refresh your memory of the requirements of the real property act 1900 (nsw) ss 40-, 42. what formalities are required to convey a legal interest in torrens title real estate.

Later in our studies in Equity & Trusts we will consider the case of Farah Constructions Pty Ltd v Say- Dee Pty Ltd (2007) 230 CLR 89. In that case, an allegation was made that the information available from a local council about a development proposal was a form of property. There is was held (at 143-144) that information is not property, although note that trade secrets can be assigned and held on trust: Smith Kline & French Laboratories (Aust) Ltd v Department of Community Services and Health (1990) 22 FCR 73 at 121 per Gummow J. We als o know that some property rights are created by statute to protect novel inventions (patents) and creative works (copyright and designs).

Although a party’s rights under a contract are generally assignable (the right to enforce a contract is a chose in action), not all contractual rights are assignable. For example, contracts for personal service (especially employment contracts) are not assignable. If an employer decides to sell the enterprise to another owner, the new owner will need to enter into new employment contracts with the employees of the enterprise, if the new owner wants to keep the staff employed in the business: see Nokes v. Doncaster Amalgamated Collieries Ltd [1940] AC 1014.

Also, parties to a contract may themselves stipulate that the ri ghts or obligations under the contract cannot be assigned. They may wish to be sure that they will only be dealing with their original contract partner. Such contractual stipulations have been upheld: see Linden Gardens Trust v. Lenesta Sludge Disposals [1994] 1 AC 85.

A bare right to litigate can also not be assigned (e., the right to sue in tort for compensation, or for unliquidated damages for breach of contract, and the right to bring an action in equity are not assignable). Historically, this was because of a policy-based concern against ‘champerty and maintenance’ of law suits. There are exceptions. A purported assignment of the fruits of litigation has been held to be assignable as future property (more of that further on in these notes). So for example, in Glegg v. Bromley [1912] 3 KB 474, an assignment of the eventual proceeds of litigation was held to be valid. Also in Trendtex Trading Corp v. Credit Suisse [1980] 3 All ER 72 assignment of the right to bring proceedings was recognised where the assignee had a genuine commercial interest in the outcome of the case.

4. Dispositions of property rights

There are several ways in which a property owner may deal with or dispose of their interest in property.

a) A may assign property to B, as a gift (i. without requiring any consideration from B). This is an assignment by gift. b) A may assign property to B for value (i. requiring consideration from B). This is an assignment for value. c) A may declare that A holds A’s property on trust for B, so that while A retains legal ownership of the property, B holds the beneficial interest in that property. This is a declaration of trust. d) Prior to an actual conveyance of the property, A may enter into an agreement with B, to transfer the property to B. If this is a promise of a gift, unsupported by consideration, B will not acquire any rights until the conveyance is perfected. If, however, A’s agreement is supported by executed consideration, equity will recognise that A is conscience-bound to honour that agreement so that B acquires an equitable interest in the property. This is an agreement to assign for value. (More of this later in these notes at x). e) A may give a revocable mandate to C, instructing C to take the necessary steps to convey A’s property to B. A ‘revocable mandate’ is an instruction that can be withdrawn before it has

been acted upon. Of course, once it has been acted upon, the property will pass to B, but it will be C’s actions in perfecting the transfer according to A’s instructions that cause the conveyance to B to take place.

ARE YOU CONFUSED YET? Don’t worry, we are going to explain all of these methods of disposing property, and when these methods will create equitable interests in property, in the following sections. Before we consider the methods of disposition in detail, we need to remember that when we are dealing with legal property, there are often formalities to follow in order to effect a disposition recognised at law.

5. Legal formalities for effective dispositions of property at law

5 Interests in real property

Did you take the time (suggested at 2 above) to check the provisions of the Conveyancing Act 1919 (NSW), and the Real Property Act 1920 (NSW) dealing with the writing and other formal requirements for effecting a conveyance of interests in Real Property in NSW? Remembering those formal requirements is important, because a conveyance of an interest in real estate will not be effective at law until those formalities are completed.

Note particularly the Conveyancing Act, s 23C(1).

Section 23C(1)(a) and (b) of the Conveyancing Act 1919 (NSW) provide:

23C Instruments required to be in writing

(1) Sub ject to the provisions of this Act with respect to the creation of interests in land by parol:

(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent thereunto lawfully authorised in writing, or by will, or by operation of law,

(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person’s will ...

[We consider 23C(1)(c) in Topic 6, when we consider dispositions of equitable interests in property.]

5 Legal requirements for valid transfer of a debt or chose in action

First – note that s 12 of the Conveyancing Act 1919 (NSW) does not apply to the assignment of certain choses in action such as patents, copyright, trademarks, life insurance policies and marine insurance policies, and company shares which are covered by separate legislation: Patents Act 1990 (Cth) s 14; Copyright Act 1968 (Cth) ss 196-197; Trade Marks Act 1995 (Cth) ss 106-111; Life Insurance Act 1999 (Cth) ss 200-203; Marine Insurance Act 1909 (Cth) ss 56-57; Corporations Act 2001 (Cth) s 1071B and 1072F (a replaceable rule). Wherever a specific statute deals with the transfer of property rights regulated by that statute, the statutory rules prevail.

Conveyancing Act, section 12: ASSIGNMENTS OF DEBTS AND CHOSES IN ACTION

Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if

‘I hereby assign to you my right to receive royalties under my publishing contract with P’, then A is purporting to assign a presently existing right.

What more would A need to do, to comply with s 12 to make this assignment effective at law? YES! A, or B would need to give notice to the publisher, so that the publisher knows who to pay the royalties to when they arise, since the presently existing right to receive royalties has now been assigned from A to B.

HOWEVER, what if, instead, A’s statement to B instead said: ‘I will give you any royalties I get from my publishing contract with P’. In this case, A’s apparent intention is to assign property that A does not yet hold. B will not be able to enforce this promise without consideration. A purported assignment of future property is not effective without consideration.

Future property cannot be assigned at law as it does not presently exist so it cannot be transferred immediately. Likewise, a purported assignment of future property by way of gift will not succeed in equity. This is an illustration of the maxim that ‘Equity will not assist a volunteer’.

However, future property can be assigned in Equity, if valuable consideration has been given: Tailby v Official Receiver (1888) 13 App Cas 523.

Any such bargain will be construed as ‘an agreement to assign the property when it is acquired’: Norman v. FCT (1963) 109 CLR 9 at 24 per Windeyer J. Because of another maxim, that equity regards that as done that which ought to be done, the ‘contract [to assign] would, in equity, transfer the beneficial interest’ immediately upon it being acquired: Holroyd v Marshall (1862) 10 HLC 191 at 121; 11 ER 999 at 1007. Equity acts upon the conscience of the assignor who has accepted consideration, and binds them by holding them to be a trustee of the property for the benefit of the assignee as soon as it comes into existence.

Examples of future property assignable in equity include:

a) The expectancy of a beneficiary under the will of a living person (who may live long enough to change their will!); b) Freight yet to be earned by a ship owner: Lindsay v Gribbs (1856) 52 ER 1209; c) Royalties yet to be earned: re Trytel [1952] 2 TLR 32; d) Future income, for example, salary or wages; e) Copyright in songs yet to be written: Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1; f) After -acquired chattels to be brought onto mortgaged premises: Hallas v Robinson (1885) 15 QBD 288; g) Future book debts not limited to those in any particular business: Tailby v OR (1888) 13 App Cas 523; h) Damages which the assignor might recover in litigation: Gle gg v Blomley [1912] 3 KB 474.

6 Norman v. FCT (1963) 109 CLR 9.

Take the time to read the extract of Norman v FCT in the Sourcebook at p 210-214.

Norman had purported to make a gift to his wife. He made a deed, purporting to assign to her :

x ‘all his right title and interest in and to certain interest to accrue due on loan repayable by the borrower at will’, and

x ‘all his right title and interest in and to all the dividends’ which might be declared on certain shares in public companies.

The majority held that both the interest under the loan and the dividends were “mere expectancies” or possibilities which could not be assigned without consideration. After all, the loan might have been repaid early, so that no interest would be payable, and the company may not declare any dividends.

Menzies J characterized the ‘interest which may accrue in the future upon an existing loan repayable without notice’ as having a character of a right to come into existence rather than a right already in existence.

Windeyer J however, (in dissent) characterised the right to receive interest in the future as a presently existing legal right be paid money at a future date, a nd so decided that the interest component of the assignment was a present chose in action.

6 Shepherd v. Comm. Of Taxation (1965) 113 CLR 385

Now read the extract of this case on pp 214-216 of the Sourcebook.

This was another case involving an attempt by a well-heeled taxpayer to alienate income from himself to a spouse for tax purposes. Shepherd had patented an invention and granted a licence to a manufacturer to produce it, in exchange for royalties. He purported to assign by gift to members of his fami ly, all his right title and interest in an amount equal to 90% of the income that may accrue during a period of 3 years. The case is often cited for the metaphor used by Kitto J: the right to receive royalties was the tree, while the payments themselves when they arose were the fruit. The tree is a presently existing property right, but the fruit is future property.

It doesn’t even matter if the tree is fruitless: Barwick CJ, said at 393: “That a promise might not be fruitful does not make it incapable of assignment. The fact that a present right might be barren should not alter its character as a present right.”

We saw an example of the distinction between the ‘tree’ (a presently existing right) and the ‘fruit’) future property in Topic 4. Do you recall the case of Official Receiver v Schultz (1990) 170 CKR 306? (See pp 15-16 of the Topic 4 Lecture materials.)

Mrs Schultz’s presently existing equitable chose in action was her entitlement to an interest in the estate of Mrs Pereira. This was the ‘tree’. The ‘fruit’ was the proceeds she received when the estate’s administration was eventually completed and she received her inheritance.

6 Summary of future property

SO – in a case involving apparently future property first ask: Has the assignor purported to assign a presently existing right (the tree) or merely the fruit (future property)? If the assignor does not have a presently existing right to assign but a mere expectancy, this will be a future property problem. Future property is not assignable at all at law, and is only assignable in equity for value. If the assignor does have a presently existing right which may bear future fruit, interrogate the words used for the purported assignment, to see whether the intention is to assign the tree, or merely the fruit. If the words suggest an assignment merely of the fruit and not the underlying right, the assignment will not be effective at law, and will only be effective in equity if supported by consideration.

(2) Higgins J said that if the donor has done everything in his power to comply with the legal requirements , the assignment will be effective in equity. This means that the donor needs to do all acts possible for them to do, even though it may be equally possible for some other person to do the acts. For example, in the case of an assignment under the Conveyancing Act s 12, this would mean that the donor must also give notice to the debtor.

(3) Griffith CJ said that if the assignor/donor did everything that was necessary for themselves to do alone to comply with legal requirements, the assignment was effective in equity. So for example, if the donor gave a written, signed assignment to the assignee and asked the assignee to give notice to the debtor, the assignee could claim an effective assignment had taken place in equity before the notice had been given.

7.1 Corin v Patton (1990) 169 CLR 540

This case concerned an attempt by a dying woman (Mrs Patton) to leave her share of her home to her children. The property was held in a joint tenancy with her husband. She knew that if she died, her husband would acquire the whole property by right of survivorship, but she wanted to leave her interest to her children so she tried first to sever the joint tenancy and transferher interest to her brother who would hold the share on trust for her until her death. Then it would pass as part of her estate by her will to her children. She executed a memorandum of transfer and gave it to her brother. The certificate of title was held by a bank that held a mortgage over the home. She did not take any steps to acquire the certificate of title before she died, so she did not put her brother in the position that he could effect a legal transfer of the property to himself. The question for the court was, had the brother (Corin) acquired an equitable interest in the property, notwithstanding that the legal conveyance had not been completed?

Read the extract of the case on p 207-9 of the Sourcebook.

See what the court held in this case: Mrs Patton had not done everything that was necessary to put the pr oposed transaction beyond her own recall. She had not enabled him to obtain the necessary certificate of title. At any stage while she was alive, she could have changed her mind and asked for the unregistered memorandum back. So Corin did not acquire an equitable interest.

7.1 Costin v. Costin

Corin v Patton has been considered by the NSW Supreme Court of Appeal in Costin v Costin (1994) NSW Conv R 60 (20 March 1997) BC 9700845 (Butterworths Online)

Sheller JA said that the principles to be applied fromCorin v. Patton (1990) 169 CLR 540, per Mason CJ and McHugh J at 559 and Deane J at 582, were that the the test for determining whether the stage had been reached when a gift of real property under an unregistered Memorandum of Transfer was complete and effective in Equity is whether the donor had done all that was necessary to place the vesting of the legal title within the control of the donee and beyond the recall or intervention of the donor.

7 Assignment for value.

The attempted assignment in Corin v Patton was by way of gift. Different consequences flow in the case of an assignment for value. Assignment of legal property for consideration takes effect in equity immediately upon the consideration being paid or executed (if the contract to assign is specifically enforceable).

This is a case where Equity regards as done that which ought to be done. Read the extract of Holroyd v Marshall (1862) 11 ER 807 in the Sourcebook at pp 216-218. See the important statement of Lord Westbury LC: ‘A contract for valuable consideration , by which it is agreed to make a present transfer of property, passes at once the beneficial interest, provided the contract is one of which a Court of Equity will decree specific performance’.

See also Tailby v Official Receiver (1888) 13 App Cas 523.

The effect of a valid equitable assignment of a legal interest in property after payment or execution of the consideration is to constitute the assignor a trustee of the property for the benefit of the assignee: Cator v Croydon Canal Co (1843) 160 ER 1149 at 1150

7 Declaration of trust.

A may declare that A holds A’s property on trust for B, so that while A retains legal ownership of the property, B holds the beneficial interest in that property. This is a declaration of trust.

It will not always be necessary for formal words creating a trust to be used, before a Court of Equity will recognise the existence of a declaration of trust. For example, see Paul v. Constance [1977] 1 All ER 195.

Constance was separated from his wife in 1965 and, without going through a divorce, moved with another woman, Paul in 1967. Constance lived in a defacto relationship with Paul until his death in 1974. In 1969 Constance had been injured at work and he received sum of compensation in 1973. Constance and Paul decided to open bank account to deposit these funds and they intended that both should have the benefit of the funds. The account was nevertheless opened in Constance’s name only. Both of them added money to the account. Tragically, Constance then died, leaving no will, so his legal wife became the administrator of his intestate estate, and was his next of kin. Ms Paul took proceedings against Mrs Constance for relief on the basis that Constance had made an oral declaration of trust for himself and Paul. C onstance had said many times that the money was as much P aul ’s as it was his.

The Court of Appeal upheld a decision that a half share in the bank account should to go to Paul. Scarman LJ held there was no need to use the word ‘trust ’; this is lawyer’s language. Ordinary people do not understand the subtleties of Equity, but they do understand their own domestic arrangements. On the evidence, a declaration of trust had been made, although the court could not pinpoint exactly when.

Note that Paul v Constance concerned a chose in action – a bank deposit. Declarations of trust of some forms of property, such as land, are required by law to be manifested in writing. Look again at s. 23C(1)( b) in the Conveyancing Act 1919 (NSW).

We will look again at the creation of equitable interests by declaration of trust in Topic 13, when we examine Express Trusts. For the time being, we will consider one question that arises out of the requirement that a declaration of trust must be manifested by a clear intention to create a trust (even if that is expressed in layman’s terms). What if a person who has made a declaration of trust in formal terms subsequently claims that they didn’t really intend to create the trust at all? Perhaps they just did it to avoid some obligation?

A very contentious case decided by the High Court of Australia a hundred years ago was CSD (Qld.) v. Jolliffe (1920) 28 CLR 178. In the light of Byrne v Kendle (which we note below) this authority is now suspect. The facts were that Jolliffe had opened a bank account in the name of himself AS

Constructive Trusts in Topic 11. Essentially, a constructive trust is a trust declared by a court, regardless of the express intentions of the parties themselves.

An e xample of an equitable interest arising from an agreement to convey property is provided by Chang v. Registrar of Titles (1976) 137 CLR 177. This case is extracted in the Sourcebook at 607-608. Read that extract for the peculiar facts that gave rise to a s ituation in which purchasers who had paid the contract price, and held a memorandum of transfer, were faced with a refusal to register the transfer. For our purposes, the case is authority for the statement:

‘It is accepted that the availability of the remedy of specific performance is essential to the existence of the constructive trust which arises from a contract of sale. It is enough to say that it has been accepted in decisions in England and Australia that at least when the purchaser has paid the purchase money the vendor becomes a constructive trustee of the property sold and that he is a trustee of property.’

7 Revocable mandate

A may give a revocable mandate to C, instructing C to take the necessary steps to convey A’s property to B. A ‘revocable mandate’ is an instruction that can be withdrawn before it has been acted upon. Of course, once it has been acted upon, the property will pass to B, but it will be C’s actions in perfecting the transfer according to A’s instructions that cause the conveyance to B to take place.

In Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614, a man was the residuary beneficiary of his deceased wife's estate. Before he received any legacy, he wrote a letter to the trustee company which was the executor and trustee of her will and also his attorney under power, requesting that the company pay out of his interest as residuary beneficiary in his wife's estate, certain gifts to named relatives. The company paid the amounts in the manner directed, but without creating any further written instruments. The Comptroller of Stamps assessed the letter for stamp duty, on the basis that the letter was a written instrument that conveyed valuable property.

Held: the letter did not amount to an immediate assignment.

It w as meant to convey an authorisation and no more; therefore, it was not an instrument whereby property was settled or given, within the provisions of the stamp duty legislation, and was accordingly not dutiable.

The letter in question was headed—' In the estate of ’ the deceased's wife, and was expressed as follows:—

“Upon the issue of probate of the will of my late wife ... I have to request you, as executors and trustees of her will and estate and as my attorney under power, to pay out of my interest as residuary beneficiary in such estate, either in shares or money at your discretion, to the persons and institutions hereunder mentioned, the amounts set out opposite to their names or titles respectively. I desire that all such payments shall be made free of gift and stamp duty (if any) and if for any reason my interest in the said estate shall not be sufficient to make all such payments in full, then I direct that all such payments shall abate proportionately. All allotments of shares hereunder shall be made at the values placed thereon respectively in the statement of my said wife's estate as passed for duty on the issue of probate of her will by the Supreme Court of Victoria.”

Then followed the list of persons and amounts. Dixon J said:

‘As residuary legatee, the husband was not entitled to specific items of property, but to an equitable interest in the entire mass [...]. There is thus no question of an assignment of a legal chose in action. The property dealt with was simply an equitable interest. Further, there is no question of consideration. The distribution directed by the letter was by way of gift.

‘In the present case, the question is whether the document is no more than an authorization having no dispositive effect until the trustee acts upon it by distributing the shares and money. It is evident upon its face that it cannot operate as a declaration of trust by the husband constituting himself trustee for the persons and bodies intended to benefit.

‘The nature of the gifts intended, the very different character of the interest of the intending donor, the language of the request and the reference to his power of attorney, all support the view that the letter means to convey an authorization and no more. If, before probate actually issued, or before the trustee company acted under the letter, the intending donor desired to modify or recall any part of his instruction, I think he might have done so quite consistently with all that the letter expresses.

‘For these reasons I do not think it amounted to an assignment’.

See how Dixon J analysed the nature of the dealing, by looking carefully at the words used by the donor in this case. In this case, the words indicated a revocable mandate – a set of instructions that the donor could withdraw before they were acted upon – and not an immediate and irrevocable conveyance of property.

8 Voluntary assignment of legal property not assignable at law

Before we conclude our consideration of equitable assignments of legal property (and before we move on to Topic 6 dealing with equitable assignments of equitable property), we should consider the situation that applies when a person seeks to deal with part of a chose in action – for example, part of a debt, or a portion of an entitlement to receive royalties or income. Recall that the Conveyancing Act s 12 provides a legal method for assignments of whole choses in action. There is no method available at law for the recognition of an assignment of part of a chose in action. For instance, if A wants to assign to B half of the debt that C presently owes A, this can be achieved only in Equity. Indeed, prior to the enactment of provisions such as s 12, there was no legal means to assign any chose in action. Now we have a statutory method for a legal assignment of a whole chose in action, but no means of assigning partial debts, except in Equity.

Part of a chose in action cannot be assigned at law: Williams v. Atlantic Assurance Co [1933] 1 KB 81.

However, the old equitable principles still appl y to assignment of a part chose in action: see Shepherd v. FCT (1965) 113 CLR 385.

In Norman v. FCT (1963) and Shepherd v. FCT (1965) it was held that part of a chose in action was assignable in Equity, if the assignor had manifested an intention to immediately and irrevocably assign the property. So the relevant test for the purported assignment (only possible in Equity) of assignment of part of a chose in action is evidence of an intention to immediately and irrevocably assign the property.

Topic 14 - Duties, Powers, Rights and Liabilities of Trustees; Rights of Beneficiaries

If, after diligently doing the readings, and reflecting on these notes, you still

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Course : Equity and Trusts (070517 )

University : university of technology sydney.

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