I – CHAPTER 4

1. EQUITABLE INTERESTS IN PROPERTY

Reading

• Parkinson, P. (ed) and Wright, “Equity and Property”, in

Parkinson, The Principles of Equity (LBC Information
Services, 2003) Ch 3
• G Dal Pont and Don Chalmers, Equity and Trusts in Australia
and New Zealand (Law Book Co, 2002) Chs 2 & 3
• Meagher, Heydon & Lehane, Equity Doctrines & Remedies
(LexisNexis Butterworths, 2002) Chs 6 & 7

4.1 Recognition of equitable interests in property

4.1.1 Equitable interests may arise in a number of situations

(a) Beneficial interest under an express trust

• Transfer of property
• Declaration of trust
• Direction to a third party to hold the property for the
benefit of another.

Cases

• Wan Naimah v Wan Mohd Nawawi [1974] MLJ 41

• Milroy v Lord (1862) 4 De GF & J 264

(b) Beneficiary’s interest under a deceased’s estate

The beneficiary’s right is not a specified right to the assets

until the assets are distributed. However, that right is capable
of assignment.

Case: Khaw Poh Chhuan v Ng Gaik Peng [1996] 1 MLJ

761

(b) Contract for sale of land

Vendor under a valid contract holds the land under a bare

trust for the benefit of the purchaser. See s 206(3) National
Land Code 1965.
 Cases

• Lysaght v Edwards (1876) 2 Ch D 499

• Borneo Housing Mortagage Finance Bhd v Time
Engineering Bhd [1996] 2 CLJ 561

(c) Beneficial interests that arise by implication of law

• Resulting trusts – automatic and presumed resulting

trusts ( see notes below under Resulting trusts, Part
III, Ch 7)
See Re Vandervell’s Trusts (No. 2) [1974] Ch 269
• Equitable lien (see Hewett v Court (1983) 149 CLR
639, and Deane J’s decision).
Under a valid contract of sale, while awaiting full
payment of the purchase price, the vendor is a
trustee of the property at equity for the purchaser.

(d) Equitable interests imposed by the courts

• Constructive trusts

(See the materials under Fiduciary relationships

(Part I, Ch 6) and Constructive trusts (Part II, Ch 8)

(e) Assignment of future property in equity

At common law, an assignment of property to be acquired in

future is void in that common law considers what a person
does not have, cannot be assigned. But equity treats such
an assignment as a contract to assign where it is made
for valuable consideration,binding the conscience of the
assignor, from the moment the contract becomes capable
of performance.

Case: Re Lind [1915] 2 Ch 345

Because the assignor’s conscience is bound in respect of

the future property, equity fastens upon the property itself,
thereby making the assignor a trustee of the legal rights or
ownership of the assignee.

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4.2 Competing Equitable Interests

4.2.1 The general principle applicable between persons having

competing equitable interests is, where their equities are in all
other respects equal, priority of time gives the better equity.

Cases

• Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113

CLR 265.
Kitto J (maksim “qui prior est tempore” applies as between
two competing equitable interests that are equal and not a
bona fide purchaser for value without notice of a prior mere
equity ).
• United Malayan Banking Corp. Bhd v Goh Tuan Laye & Ors
[1976] 1 MLJ 169
• Quah Hong Lian Neo v Seow Teong Teek & Ors [1936] MLJ
203
• Vallipuram Silvaguru v Palaniappa Chetty [1937] MLJ 59
• Goh Keng How v Raja Zainal Abidin bin Raja bin Raja
Hussein [1995] 3 MLJ 6
• Space Investments Ltd v Canadian Imperial Bank of
Commerce Trust Co. (Bahamas) Ltd 1986] 1 WLR 1072

4.2.2 However, a prior equity may be displaced or postponed by a

later equitable interest in a number of situations:

• Estoppel – the conduct of the holder of the prior interest

indicated that the earlier interest did not exist (or clothed a
third party with apparent ownership)
• waiver by the holder of the prior interest;
• the holder of the earlier equity is a volunteer and the holder
of the later equity gives consideration without notice of the
earlier equity; and
• in competing interests between assignees, priority belongs
to the pary who gives notice to the trustees.

Case: Heid v Reliance Finance Corp Pty Ltd & Anor (1984)
49 ALR 229, read the decision of Mason & Deanne
JJ.

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4.3 Management /administration of property at law and equity

4.3.2 Declaration of trusts (refer to Part II: (Trusts) Ch 3)

4.3.3 Powers and duties of trustees (refer to Part II, (Trusts) Chs 11
and 12)

4.4 Assignment of Property

Under s 4 of the Civil Law Act 1956. a statutory assignment must be

• Absolute and unconditional

• In writing
• Signed by the assignor
• Notice in writing to the debtor
• Consideration not necessary if all requirements of the statute
are fulfilled

Under common law, there cannot be an assignment to another without

the consent of the debtor, but at equity consent of the debtor is not
necessary.

Cases:

• Khaw Poh Chhuan v Ng Gaik Peng & Ors [1996] 1 MLJ 761
• Harris Adacom Corporation v Perkom Sdn Bhd [1994] 3 MLJ
504

Under s 4 of the CLA 1956, for an assignment to be valid, a written

notice must be given to the debtor, but the notice need not be ‘official’
notice. It is sufficient if information relating to the assignment (eg.
through a series of letters) is given to the debtor.

Conditions for statutory assignments MBF Factors Sdn v Tay Hing

Ju (T/A New General Trading [2002] 5 MLJ 536

4.4.1 Assignments in Equity

• If one or more of the requirements for a statutory assignment

is not complied with, the failed attempt at statutory legal
assignment may take effect as an equitable assignment.
• Equitable assignments apply to property assignable in
equity but not at law. eg choses in action (intangible rights
enforceable through [court] action) eg. a debt, rights of action
on a contract, shares, bonds etc.

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 Cases

• VPN Marketing (M) Sdn Bhd v Datuk Sararanan Muragan

& Anor [2010] ILNS 324.
• MBF Factos Sdn Bhd v Tay Hing Ju [2002] 2 CLJ 664 -
assignee can sue in own name in statutary assignment.
• William Brandts & Sons v The Dunlop Rubber Co [1905] AC
4 Per hard Mac Naghten
• Torkington v Magee [1902] 2 KB 427, 430

Chose in action is a known legal expression used to describe

all personal rights of property which can only be claimed or
enforced by action and not by taking physical possession.

• Public Finance Berhad v Scotch Leasing Sdn Bhd (Penerima

dilantik); Perwira Habib Bank Malaysia intervener [1996] 2
MLJ 369. Peh Swee Chin J:

The true nature of an assignment of a debt or book debt

is such that such a debt … can only be transferred by
way of assignment, and not, eg by delivery in the case of
sale of goods, or in the case of land by executing a valid
and registrable transfer according to the provisions of the
National Land Code 1956.

4.4.1.1 Form / Requirement of Equitable Assignment

• Clear intention to assign

• The act of assignment
• Consideration not necessary

Case: Malaysian International Merchant Bankers v

Malaysia Airlines System Bhd [1982] 2 MLJ 59

Held:

(a) Since the statutory notice was not given to the defendant,
as the stakeholder under s 4(3) of CLA 1956, there is no
legal assignment.

(b) However, there is an equitable assignment. Syarikat Bahagia

has clearly intended that MIMB be given an interest under
the contract with MAS and, MAS (as dfd) had knowledge
of that intention. Thus the dfd had become trustees of the
money subject to the debt.

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(c) The defendant as a debtor and ‘stakeholder’ is responsible
to pay the money to the plaintiff even if he had paid Syarikat
Bahagia earlier.

Case: Public Finance Berhad v Scotch Leasing Sdn Bhd

(Penerima dilantik); Perwira Habib Bank Malaysia
intervener [1996] 2 MLJ 369. Per Peh Swee Chin
FCJ at 380-381

(a) At common law … contractual rights, eg as to debts, were

not assignable, ie transferable to another person without
the consent of both parties to the contract conferring such
contractual rights. Equity stepped in and has long allowed
such assignment of such debts to another person who is not
privy to the contract in respect of such debts, without at all
the consent of the debtor: see eg Brice v Bannister (1878)
3 QB 569; and even without notice to the debtor. … Such
assignments as so allowed by equity are called equitable
assignment

(b) The validity of such equitable assignments is not affected

by any failure to comply with requirements as laid down in
s 4(3) of the Civil Law Act 1956, for an assignment that so
complies has been described as a statutory assignment;
being so statutory for such an assignment has the sole
intended effect of facilitating an assignee to sue in his own
name directly, irrespective of whether the chose in action is
an equitable chose in action or a legal chose in action (not,be
it noted,whether an assignment is equitable or statutory).

(e) By being a statutory assignment itself, the ‘statutoriness’

of such an assignment, ipso facto, does not prevail over
an earlier equitable assignment, and this is so even with
the added factor that the assignee involved in a statutory
assignment took the assignment for value without notice
of an earlier equitable assignment: eg see E Pfeiffer
Weikellerei-Weinenkauf GmbH & Co v Arbuthnot Factors
Ltd [1988] WLR 150

MBF Factors Sdn Bhd v Laung Hing Ju [2002] 5 MLJ 524

See also:

• William Brandts Sons & Co v The Dunlop Rubber

Company [1905] AC 4. Per Lord Macnaghten,

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 “The statute does not forbid or destroy equitable assignments or
impair their efficacy in the slightest degree.”

Note

Though not essential for a valid equitable assignment, notice may still
be desirable and necessary. Until notice is received, a third party is
not bound by the assignment and may continue to pay the assignor.
Any informal notice is sufficient, provided the fact of the assignment
is brought to the mind of the debtor or fund holder. In such cases the
debtor cannot be compelled to pay the equitable assignee.

[The ordinary principle is that a debtor who has received notice of

an equitable assignment must withhold all payments to the assignor
unless made with the consent of the assignee, for if he pays the
assignor without such consent, he will have to pay over again to the
assignee.]

Notice is also useful to prevent the operation of the rule in Dearle v

Hall (1828) 3 Russ1: 38 ER 475 which states that in cases of
successive dealings with a chose in action, priority will depend on
the order in which notice of the interest created is given to the person
affected by it and not by the order in which the assignment is created.

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