Equity and Trust

Citation(2002) 3 SAL Ann Rev 202
Published date01 December 2002
Date01 December 2002
Scope of the doctrine of Walsh v Lonsdale

12.1 In Golden Village Multiplex Pte Ltd v Marina Centre Holdings Pte Ltd[2002] 1 SLR 333 (noted by Tan Sook Yee, “Equitable Leases, Subdivision and Section 4, Planning Act”(2002) 14 SAcLJ 133), Marina Centre entered into an agreement to lease various levels of a building known as the Leisureplex, which was part of the complex known as Marina Square, to Golden Village in 1995 for 15 years. Ordinarily, such a case would have been unexceptional since lease agreements are ordinarily specifically enforceable and through the application of the doctrine of Walsh v Lonsdale(1882) 21 Ch D 9, the agreement to lease would be regarded as a lease in equity. The peculiar feature of the case that draws a second glance lies in the fact that the premises to be leased would ordinarily have had to be subdivided prior to the grant of the lease, a step which Marina Centre was not prepared to take. In the result, the form of the lease to be executed in accordance with the agreement, as annexed to the agreement itself, was not capable of registration under the Land Titles Act (Cap 157, 1994 Ed). Indeed, Golden Village explicitly agreed not to register the lease. Subsequently, when the formal lease was forwarded to Golden Village for execution, Golden Village insisted on a lease in an approved form under the Land Titles Act. When Marina Centre refused, relying on the agreement, Golden Village refused to pay rent. Golden Village further sought a declaration that the agreement was, inter alia, void and/or unenforceable.

12.2 The Court of Appeal accepted Golden Village”s submissions that the agreement was both void at law and ineffectual to pass any interest at law as incontrovertible, but was of the opinion that they were inconclusive. In particular, the submissions failed to address the respective positions of the parties in equity. Golden Village sought to address the position in equity by arguing that, as the parties had agreed that the lease to be executed was not to be in a form registrable under the Land Titles Act, the agreement was not capable of being enforced by specific performance in the sense that the

execution of a registrable lease and registration thereof could not be ordered. The Court of Appeal considered the argument totally misconceived and took the view that specific performance was not to be confined to the strict and narrow approach of actually enforcing the terms of the contract. Rather, following some dicta in Chan v Cresdon Pty Ltd(1989) 168 CLR 242, specific performance included equitable intervention by way of injunction so that the doctrine of Walsh v Lonsdale would apply to create a lease in equity even if strict specific performance was not available, provided equity would intervene by an order of an injunction to prevent a breach of contract. The Court of Appeal therefore agreed with the High Court”s decision to dismiss Golden Village”s claim for a declaration that the agreement was void and/or unenforceable.

12.3 This extension of specific performance to encompass other forms of equitable relief has a dramatic effect beyond the peculiar facts of the case. In “Equitable Leases, Subdivision and Section 4, Planning Act”, supra, at 137, it was suggested that the decision has bearings on the interests protectable by caveat under s 115 of the Land Titles Act, in particular the interest of a purchaser under a conditional contract. Given the dramatic consequences, it is regrettable that the issue was not more exhaustively examined.

12.4 On thorough examination, it will be seen that the Court of Appeal decision represents a gloss over the dicta by the Australian High Court. The precise passage relied upon by the Court of Appeal is a quotation by Mason CJ, Brennan, Deane and McHugh JJ in Chan v Cresdon Pty Ltd (at 253) of a passage in the judgment of Deane and Dawson JJ in Stern v McArthur(1988) 165 CLR 489 at 522, which in turn is a direct quote from a footnote in Jordan, “Chapters on Equity in New South Wales”, Select Legal Papers (6th Ed, 1947), at p 52, note (e). The quotation reads:

“Specific performance in this sense means not merely specific performance in the primary sense of the enforcing of an executory contract by compelling the execution of an assurance to complete it, but also the protection by injunction or otherwise of rights acquired under a contract which defines the rights of the parties.” [emphasis added]

12.5 A close examination of the language of Sir Frederick Jordan demonstrates quite clearly that he is distinguishing between two different types of contracts. This distinction is in turn drawn primarily from the leading case of Tailby v Official Receiver(1888) 13 App Cas 523, which is the authority cited by Sir Frederick Jordan, where Lord Macnaghten famously refused to apply principles applicable to executory contracts to cases of equitable assignments of future property. This distinction has been criticised and a convincing argument has been made out suggesting that specific performance is a requirement for the application of the maxim in all contracts: see Keeler, “Some Reflections on Holroyd v Marshall(1969) 3 Adel LR 360. Nevertheless,

even accepting the accuracy of Tailby v Official Receiver, Golden Village Multiplex Pte Ltd v Marina Centre Holdings Pte Ltd undoubtedly falls within the class of executory contracts for which specific performance (in the usual sense of enforcement of the contract) is required before the equitable maxim that “equity looks on that as done which ought to be done” can apply to grant an equitable lease to the purchaser/lessee, in this case, Golden Village. It is for this reason that “[i]f for some reason equity would not enforce specific performance, or if the right to specific performance has been lost by the subsequent conduct of the party in whose favour specific performance might originally have been granted, the vendor or covenantor either never was, or has ceased to be, a trustee in any sense at all”: see Central Trust and Safe Deposit Co v Snider[1916] 1 AC 266 at 272 per Lord Parker.

12.6 In any event, it is questionable if specific performance was unavailable in the sense that a court could or would not order the performance of the contract in specie. It is perhaps more accurate to regard the remedy of specific performance as being inadequate to create a legal lease since the contract only envisages the execution of a lease which is not capable of being registered under the Land Titles Act and registration is essential to pass legal interest under s 45(1) of the Act. If this represents the true position, then a straightforward application of the maxim that “equity looks on that as done which ought to be done” tells us that there ought to be no lease in equity. It is axiomatic by the terms of the maxim that specific enforceability by itself does not create an equitable proprietary interest. A further condition, indeed a precondition, to the effectiveness of the maxim to create property rights is that that the eventual performance of the relevant obligation will create property rights recognised by the common law (see Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (4th Ed, 2002) at p 69).

12.7 If this traditional approach were applied to the facts of the case, then no equitable lease would have arisen. This is because, if the contract were performed according to its terms, no lease at law would arise because s 45(1) of the Land Titles Act would not be satisfied. Equity, in regarding the contract as having been performed, ought to, in turn, reach the same conclusion as to the creation of a lease in equity.

Applicability of laches to actions at law

12.8 In Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd[2002] 2 SLR 1, the respondent, De Beers, purchased four penthouse units in People”s Park Complex, which was managed by the appellant management corporation, intending to convert them into 18 maisonette units. In order to obtain the approval of the management corporation to do so, De Beers agreed to pay and subsequently paid $200,000 to upgrade the lifts

and $170,000 for the maintenance of the new common areas. The intrusion of equity in the decision was in respect of De Beers” claim for restitution of the $370,000 paid on the basis that the conditions imposed by the management corporation were ultra vires and that De Beers had paid over the money under a mistake of law. The case is more obviously significant for the law of restitution than the law of equity as the abrogation of the mistake of law bar by the High Court [2001] 4 SLR 90 (reviewed at (2001) 2 SAL Ann Rev 198 at paras 12.34—12.53) was given the judicial imprimatur of the Court of Appeal.

12.9 The significance of the case to equity, however, lies in the Court of Appeal”s consideration of the equitable defence of laches in respect of De Beers” claim. The management corporation introduced no less than seven separate defences to De Beers” claim and the Court of Appeal, in affirming the abrogation of the mistake of law bar, rightly took it upon themselves to consider the significance of other possibly applicable defences (four in number) to a claim to recover money paid under a mistake of law to delineate the scope of the new rule. However, given the number of defences they had to consider, it was impossible for the court to give each defence the attention it deserved. This led to a failure to consider in depth the applicability of the defence of laches to De Beers” claim to recover money paid under a mistake of law, which is a claim at law. The orthodox view (see Syed Ali Redha Alsagoff v Syed Salim Alhadad[1996] 3 SLR 410; affirmed on appeal in Scan Electronics (S) Pte Ltd v Syed Ali Redha Alsagoff[1997] 3 SLR 13) is that the equitable defence of laches only allows a defendant to resist an equitable claim or at the very least where the plaintiff is seeking equitable relief. Yet in...

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