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SECTION 1 INTRODUCTION
 
A. Concurrent administration of Equity and the common law
 
18.1.1 Singapore, being a former British colony, has inherited the common law legal system. One of the unique features of the common law model is the dualism which is inherent in the legal system. Common law legal systems are largely precedent-based and the precedents can be divided roughly by their origins, namely, Law and Equity. Equity may be defined as a body of rules, principles and remedies initially developed and administered in the English High Court of Chancery before 1873. Both branches of the law are historically distinct although both are now administered by the same courts concurrently (see section 3 of the Civil Law Act (Cap 43, 1999 Rev Ed) and section 26 of the State Courts Act (Cap 321, 2007 Rev Ed).
 
B. Reception of equity in Singapore
 
18.1.2 English principles of Equity were introduced to Singapore through the Second Charter of Justice 1826 (see R v Willans (1858) 3 Ky 16). Section 3 of the Application of English Law Act (Cap 7A, 1994 Rev Ed) stipulates that the ‘common law of England (including principles and rules of equity), so far as it was part of the Law of Singapore immediately before the commencement of this Act, shall continue to be part of the law of Singapore’ subject to modification and suitability to the circumstances of Singapore (see A. Phang (gen ed), The Law of Contract in Singapore (Academy Publishing, 2012) at p40–41).
 
C. Relationship between Law and Equity
 
18.1.3 Although there has been a merger of administration of Law and Equity, the traditional view is that there is no fusion of equitable and common law rules and principles. A familiar metaphor used to describe this state of affairs is as follows: ‘the two streams of jurisdiction, though they run in the same channel, run side by side and do not mingle their waters’ (see W. Ashburner, Principles of Equity (Butterworths, 1933), 18. Cf. United Scientific Holdings v Burnley Borough Council [1978] AC 904 at 944). However, in recent times this view has been challenged by some distinguished scholars who call for greater integration of Equity and the Law (see A. Burrows, ‘We Do This at Common Law But That in Equity’ (2002) 22 OJLS 1).
 
 
 
SECTION 2 THE CONSCIENCE OF EQUITY AND EQUITABLE MAXIMS
 
A. Equity operates on the conscience of the litigants
 
 
B. Equity is a source of legal innovation
 
 
C. Equitable maxims
 
18.2.3 Equitable maxims are not rules which can provide answers to specific legal problems. Rather, they are pithy summary statements of broad themes which underlie equitable concepts and principles.
 
18.2.4 Some significant maxims of Equity are:
Equity looks on as done which ought to be done.
Equity follows the law.
He who comes to Equity must come with clean hands.
He who seeks Equity must do Equity.
Where Equities are equal the law prevails.
Where Equities are equal, the first in time prevails.
Equity is equality.
Equity assists the diligent, not the tardy.
Equity looks to the intent, rather than to the form.
Equity will not assist a volunteer.
Equity acts in personam.
Equity will not suffer a wrong without a remedy.
Equity will not allow a statute to be made an instrument of fraud.
 
 
 
SECTION 3 EQUITABLE OBLIGATIONS
 
A. Introduction
 
18.3.1 Equity governs certain civil obligations. The most well-known are fiduciary obligations, obligations relating to confidential information, knowing receipt and dishonest assistance.
 
B. Fiduciary obligations arise from a position of trust and confidence
 
18.3.2 Fiduciary obligations are imposed upon those who are in a position of trust and confidence vis-à-vis another person. The core idea of a fiduciary duty is that a fiduciary is under an obligation to be loyal to his principal. Fiduciary obligations were first developed in the context of a trust (see Keech v Sanford (1726) 25 ER 223). Over time this concept has been extended to govern the management of other relationships like company directors and their companies, the solicitor-client relationship and the relationship between partners (see Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41).
 
(1) Identifying fiduciary relationships
 
18.3.3 Certain classes of relationships are established as being fiduciary in nature. These include:
 
(2) Identifying the content of fiduciary obligations
 
 
(3) Context is important in determining breach of fiduciary obligations
 
 
(4) Distinguishing breaches of fiduciary duties and negligence
 
18.3.7 Not all breaches of duties by fiduciaries are necessarily breaches of fiduciary obligations. A breach of fiduciary duty must be distinguished from mere incompetence. The latter does not attract equitable rules but is governed by tort principles (see Bristol & West Building Society v Mothew [1998] 1 Ch 16).
 
(5) Causation and remoteness of loss
 
 
(6) Remedies
 
18.3.9 The remedies against a fiduciary who makes an unauthorised profit may be personal or proprietary. A fiduciary may in appropriate circumstances be made to account for an unauthorised profit or to hold a property acquired in breach of a fiduciary duty on constructive trust for the plaintiff. Furthermore, a fiduciary may be ordered to make equitable compensation to the principal for losses suffered.
 
C. Obligations in relation to confidential information
 
 
(1) Need to particularise the confidential information
 
 
(2) Remedies
 
18.3.12 Remedies for a breach of confidence include injunctions, account of profits, delivery up and possibly monetary compensation. There is also some Commonwealth authority suggesting that a court can declare a constructive trust as a remedy for a breach of confidence (see Lac Minerals v International Corona Resources (1989) 61 DLR (4th) 14. Cf. HW Tang ‘Confidence and the Constructive Trust’ (2003) 23 Legal Studies 135).
 
D. Knowing receipt: where property is transferred in breach of trust with the defendant’s knowledge
 
 
(1) Competing theories on knowing receipt
 
18.3.14 At the moment, there are three competing theories to explain liability for knowing receipt of trust property. They are:
  1. Knowing receipt is premised on the principle of unjust enrichment and hence liability is strict upon proof of receipt of trust property. 'It would be confined to restoring an unjust gain. Change of position would be available as a defence accordingly' (per Lord Nicholls, “Knowing Receipt: The Need for a New Landmark” in Restitution Past Present and Future (Cornish et. al. (eds.)) (Hart, 1998) at p244);
  2. Knowing receipt is premised on the concept of unconscionability. Nourse LJ in Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437 at 455 (noted H Tjio, “No Stranger to Unconscionability” (2001) JBL 299) said that '[a]ll that is necessary is that the recipient's state of knowledge should be such as to make it unconscionable for him to retain the benefit of the receipt'; and
  3. Knowing receipt is better viewed as equity's cousin to the common law action of conversion. It is a response to the interference with the plaintiff's equitable title (see L. Smith, 'W(h)ither Knowing Receipt?' (1998) 114 LQR 394; L. Smith, 'Unjust Enrichment, Property and the Structure of Trusts' (2000) 116 LQR 412). Since an equitable title is always susceptible to being defeated by a bona fide purchaser for value without notice, some degree of knowledge must be present before liability attaches.
(2) Position in Singapore based on unconscionability
 
  1. "The degree of knowledge required to impose liability will necessarily vary from transaction to transaction." George Raymond Zage III v Ho Chi Kwong[2010] 2 SLR 589at [32]).
  2. In situations where there is no settled practice of making routine enquiries and prompt resolution of the transaction is required, clear evidence of the degree of knowledge and faulty must be demonstrated (at [32]).
  3. Unconscionability does not mean actual knowledge. The test of unconscionability is a flexible and factually based inquiry (at [32]).
  4. In the absence of actual knowledge, a defendant may be found liable for knowing receipt if "there are circumstances... that are so unusual, or so contrary to be accepted commercial practice, that it would be unconscionable to allow a defendant to retain the benefit of receipt" (at [32]).
  5. Constructive notice in the context of knowing receipts should not be understood as the doctrine of constructive notice as developed in transactions in real estate. However, the court should not be precluded from considering "the objective circumstances and peculiar practices, if any, of each type of commercial transaction (bearing in mind the need for expediency and certainty in commerce) when assessing liability for knowing receipt" (at [39]). Thus, in certain circumstances, liability may still attach even if actual knowledge of a breach of trust is missing.
  6. Liability for knowing receipt may also be imposed if a person possessing all the relevant facts to a given matter fails to appreciate or infer their factual or legal significance (at [40]).
  7. "[C]ourts should be slow in imputing knowledge of wrongdoing when assessing the propriety of commercial transactions. In the absence of established commercial practices or obviously questionable conduct on the part of a counter-party, merchants are not ordinarily expected to make searching inquiries into their customers' source of funds. To demand such diligence in the course of ordinary commercial transactions would unduly constrict trading activities." (at [52])
E. Dishonest assistance
 
 
 
 
 
SECTION 4 EQUITABLE REMEDIES AND DEFENCES
 
A. Specific performance of a promissory obligation
 
18.4.1 Specific performance is a discretionary equitable remedy whereby the court decrees that the defendant has to perform a promissory obligation. Specific performance is usually only decreed if there is no adequate remedy at law (see G. Jones and W. Goodhart, Specific Performance (Butterworths, 1996)).
 
B. Injunctions: restraining a wrongful act or ordering a particular act to be done
 
 
C. Declaratory relief: declaring the rights and obligations of the parties
 
 
D. Anton Piller orders: made to preserve property or documents before action is concluded
 
 
E. Mareva injunctions restraints a defendant from dealing with his assets
 
 
F. Delivery up and cancellation: destruction of relevant property
 
18.4.6 Delivery up and cancellation is an equitable remedy leading to the destruction of relevant property.
 
G. Monetary compensation: unclear if local courts have jurisdiction
 
 
H. Rescission: setting aside tainted transactions ab initio
 
 
I. Rectification: correcting instruments that do not accurately reflect the intention of the parties
 
 
J. Promissory estoppel: rights cannot be enforced if inequity results
 
 
K. Estoppel by convention: where both parties transact on a shared assumption and it is unjust for one party to go back on that assumption
 
 
L. Issue estoppel
 
 
M. Laches: disentitling a plaintiff from relief due to unreasonable delays or negligence
 
 
N. Unclean hands and illegality bar a person from equitable remedies
 
 
O. Set off
 
 
 
 
 
SECTION 5 EQUITY AND PROPERTY
 
A. Equitable interest distinct from legal interest
 
18.5.1 One of the unique features of the common law system is the existence of a dual ownership of property. Ownership of property can be divided into the following: a legal interest and an equitable interest. A legal interest is enforceable against the whole world while an equitable interest is enforceable against the whole world except for the bona fide purchaser for value without notice. For example, where the property is held on trust, a trustee holds the legal title of the trust property, whereas the beneficiary has the equitable interest in the trust property. It must be noted that in matters of priority, the position might be decided by the relevant statute e.g. the Land Titles Act (Cap 157, 2004 Revised Ed.) will govern issues of priority with regard to registered land. The duality of property ownership also enables the creation of security interests such as mortgages, floating charges and fixed charges. Usually in these security interests, the debtor is the legal owner whereas the creditor is the equitable owner of the property. The equitable ownership can be asserted as a proprietary claim if the debtor becomes insolvent. It must be noted that some security interests must be perfected under the relevant statutory regime (see e.g. Companies Act (Cap 50B, 2006 Revised Ed.).
 
B. Express trust: created by the Settlor
 
18.5.2 An express trust is a trust which is expressly created for the benefit of another person to achieve certain desired consequences (see J. H. Langbein, “The Secret Life of the Trust: The Trust as an Instrument of Commerce” (1997) 107 Yale Law Journal 165; S. Worthington, “The Commercial Utility of the Trust Vehicle” in Extending the Boundaries of Trusts and Similar Ring-Fenced Funds (Kluwer, 2002), at 135). The usual pattern of an express trust is as follows: a settlor transfers trust property to the trustee on trust for the beneficiaries and specifies the terms of the trust. A settlor can also declare himself to be a trustee for the beneficiaries. It is also possible for a beneficiary to be a corporate entity (see Goi Wang Firn v Chee Kow Ngee Sing (Pte) Ltd [2014] SGHC 261). Quite apart from wealth management, the trust is also used in commerce such as the Real Estate Investment Trust (see J. Koh, “Singapore Chapter” in Real Estate Investment Trusts, (Globe Business Publishing, 2006), (Booth and Boyle, eds), 175). In Singapore, it is also possible to settle a business trust (see Business Trusts Act (Cap 31A, 2005 Revised Ed.; see also H.W. Tang, “The Resurgence of “Uncorporation”: The Business Trust in Singapore” (2012) Journal of Business Law 283).
 
(1) Elements of an express trust: the ‘three certainties’
 
 
C. Resulting trust: Absence of Intent to Benefit the Transferee
 
 
D. Constructive trust: declared by the court according to equitable principles
 
 
E. Proprietary estoppel arises when there is detrimental reliance on an assurance given by the plaintiff
 
 
F. Tracing
 
 
 
 
Updated as at 30 April 2015
 
By: Tang Hang Wu
Professor
School of Law, Singapore Management University