(v) Property incapable of assignment
•    Are any rights not assignable? Eg, Contracts for personal services? Bare rights to litigate?
•    Distinguish the fruits of litigation from the bare right to litigate: Glegg v Bromley [1912] 3 KB 474
•    Is there, any longer, a prohibition on “maintenance” and “champerty”?

Maintenance: You should not fund litigation for someone else if you if you do not have an interest in it.
Champerty: You should not agree to divide the spoils if damages are obtained from the litigation.

Glegg v Bromley [1912]
Facts:    Mrs G was a plaintiff in litigation. She executed a deed assigning to her husband, for value, any interest or sum of money (damages) she may become entitled to by virtue of the verdict. She won £200 pound but went bankrupt. She claimed that she had alienated the property to her husband before becoming bankrupt and therefore creditor couldn’t claim the money.

Held:    It was a valid assignment. Important to consider the subject matter of the assignment, which was the money that might be acquired from the action. This was not a presently existing chose in action but future property identified by reference to an existing chose in action (the right to litigate). Equity will regard the assignment of future property as valid so long as there is consideration. As soon as the property comes into existence, the beneficial ownership will attach.

Assignment of the fruits of the litigation did not offend the maintenance or champerty principles.

Trendtex Trading Corp v Credit Suisse [1981]
Facts:     T was a Swiss company, which contracted to supply cement to an English Co for shipment to Nigeria. Nigerian purchaser organised payment by letter of credit issued by Central Bank Nigeria (CBN). Ships were held up and cement solidified, so CBN refused to honour the letter of credit. T sued CBN in England for damages. Before the appeal was heard, T assigned its ‘right of action’ (right to litigate) against CBN for consideration to Credit Suisse (CS) who was a major creditor of T and was funding the litigation. CS then assigned the right of action to a third party for greater consideration than what it provided T, and the third party then settled the action. T claimed its own assignment to CS was invalid because it offended the principle of maintenance.

Court of Appeal: “Where a cause of action arises out of a right which was itself assignable, the cause of action equally remains assignable ... it is not a ‘bare’ right to litigate but itself a right of property.” Where a person or party has a genuine pre-existing financial interest in maintaining the solvency of a plaintiff, then such a person could support the plaintiff’s litigation without being guilty of maintenance or champerty. – per Oliver J.

House of Lords: Supported Oliver J’s approach, but found the assignment by CS to 3rd party invalid. Had it been in English jurisdiction, the court would have found T’s action for relief invalid (i.e. T’s assignment to CS was valid)
The court should look at the totality of the transaction. If the assignment is of a proprietary right and the cause of action is ancillary to that right or the assignee has a genuine commercial interest in taking the assignment and enforcing it for his own benefit, the assignment should not be struck as an assignment of a bare right to litigate or as savouring of maintenance. – Per Roskill LJ
Here, it was legitimate for CS, to which T was indebted, to take an assignment of the cause of action as a means of receiving payment of T’s debt. CS’s interest was considered to arise independently of the arrangement to maintain the action. CS was also deemed to have a genuine commercial interest in the suit.
       
(B) Dealings with Equitable Interests

Dealings with equitable interests
Distinguish between:
•    An assignment of a subsisting equitable interest
•    A declaration of trust
•    A direction to trustees to hold on trust for another
•    A direction to trustees to transfer to another
•    An agreement for value to assign

The principles for validity differ, depending on the form of the dealing intended by the transferor. A failure to effect the intended dealing will not be rescued by equity presuming an alternative form: Milroy v Lord.

Distinguish a “mere revocable mandate” or authority:

Comptroller
of Stamp Duties (Vic) v Howard Smith (1936)
Held:    “[A] voluntary disposition of an equitable interest may be effected by the communication to the trustee of a direction, intended to be binding on him, thenceforward to hold the trust property upon trust for the donee. But it must be a direction and not a mere authority revocable until acted upon. Such an authority is not in itself an assignment. It may, it is true, result in a transfer of an equitable interest. For the trustee acting upon it may make an effectual appropriation of the trust property to the new beneficiary or may acknowledge to him that he holds the trust property thenceforward on his behalf. If the authority contemplates or allows such a method of imparting an equitable interest to the donee, the action of the trustee may be effectual to bring about the result. But, in such a case, it is not the donor’s expression of intention which per se constitutes the assignment.” (per Dixon J).

The requirement of writing
Conveyancing Act 1919 (NSW) s 23C

S23C(1): Subject 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, r by the person’s agent thereunto lawfully authorised in writing, or by will, or by operation of the law.
(b)    A declaration of trust respecting any land or 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
(c)    A disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person’s will, or by the person’s agent thereunto lawfully authorised in writing.
 
PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241
Section 23C applies to dispositions of subsisting equitable interests in personal property (and not only interests in land).

(ii) Contracts for value to assign

Conveyancing Act 1919 (NSW) s 23C(2): “This section does not affect the creation or operation of resulting, implied or constructive trusts.”

•    Should a contract for valuable consideration to assign an equitable interest in property be in writing pursuant to s23C(1), or is the requirement of writing dispensed with pursuant to s23C(2) in the context of a creation of a constructive trust, where the vendor becomes a constructive trustee for the purchaser of the property?

Oughtred v IRC [1960] AC 706 (HOL)
Facts: Trustees held a parcel of 200,000 shares for Mrs O for life, and remainder to Peter (her son). Mrs O made an oral agreement to sell a second parcel of 72,700 shares to Peter, in exchange for his remainder equitable interest in the 200,000 shares. Mrs O transferred the 72,700 to Peter and thereby became the absolute beneficial owner of the shares. Then Mrs O and Peter instructed the trustees to transfer the legal interest in the 200,000 shares to Mrs O. Tax authority argued this disposition in favour of Mrs O was liable for payment of ad valorem stamp duty on basis that the oral agreement between her and Peter amounted to a disposition within s23C(1)(c) and had to be in writing.

Issue: What stamp duty was payable on the transfer of the 200,000? Ad valorem duty on the full market price? Or nominal duty only, because no value had passed (Mrs O was already entitled to the beneficial interest in the shares and she argued that she merely acquired legal title).

Held: Bare majority found in favour of the taxing authorities

Lord Denning: The oral agreement was ineffective to dispose of Peter’s reversionary equitable interest because of the requirement of writing in s23C(1)(c) (s23C(2) did not do away with this requirement). Even if the oral agreement was effective, the subsequent written transfer from the trustees to Mrs O attracted ad valorem stamp duty.

Lord Jenkins: Found that the transfer from the trustees to Mrs O was a dealing in property and attracted the ad valorem stamp duty under the relevant stamp duty legislation. Even if the earlier oral agreement created a constructive trust (i.e. Peter holds equitable interest on constructive trust for Mrs O) the subsequent legal transfer attracted ad valorem stamp duty.

Lord Radcliffe (Dissent): The oral agreement created a constructive trust with the consequence that the writing requirement in s23C(1)(c) did not apply because of s23C(2).

Lord Cohen (Dissent): Relevant documentation was not an instrument transferring an equitable interest; hence it is not liable to ad valorem stamp duty.

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