A A o 8 o JCSOUTHE! RN REGIONA =^^ ■.-; 1 ARY 7 9 1 ACII ^^"^ ^ 1 6 = ^^ = UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY JUST PUBLISHED. Price 18a. ; Cash, 14s. 6d. ; or post free, for cash with order, 15s. THIRD EDITION, thoroughly revised and VERY CONSIDERABLY ENLARGED. a m: AN UAL OF THE PRINCIPLES OF EQUITY A Treatise on Equity, specially written for Students, and intended in particular as a complete Text-Book for Candidates for the Solicitors' Final Examination. By JOHN INDERMAUR, Solicitor, kc. OPINIONS OF THE PRESS ON THE SECOND EDITION. " Tiiis manual is an excellent one for the pnrposes for which it is primarily intended, and thoroughly deserves its popularity. It is clear throughout, and the effect of the leading cases admirably stated. . . . The student will gain a real insight into Chancery law by its perusal. The cases cited are ample for the student's purpose, and it is, we think, a great merit of the book that it is not overloaded with cases in which no new principle is laid down. By the multiplication of comparatively unimportant cases, the studenfs mind is often confused, and the principles of Equity lost sight of. Mr. Indekmauk's Index is excellent." — Lute Times, 15th February, 1890. " The first edition of this little book was published in 1886, and so well has it been received by students that a new issue is now called for. Mr. Indehmauk's experience in writing for students has been acquired in the course of a long career of successful coaching, which has enabled him to put clearly and concisely before his readers just that which will be of most service to them. The book has been amplified and carefully revised, and some portions of it have been practically re-written." — Late Journal, 8th March, 1890. LONDON : GEO. BARBER, 16, CURSITOR STREET, CHANCERY LANE, And all Law Booksellers. Demy8vo. Price 5s. 6d. ; Cash, 4s. 6d. ; or Post Free, 4s. 9d. THIRD EDITION. THE Student's Guide to Prideaux's Conveyancing, By JOHN INDERMAUR, Solicitor, &c, Author of '* Principles of Common Lute," "Manual of Practice" "Manual of the Principles of Equity," " Epitomes of Leading Cases" etc., etc., BEING NOTES ON PEIDEAUX (Ioth EDITION), Interleaved for the Use of Students, And with a Set of Test Questions on the Work ; Epitomes of various Acts of Parliament, including The Vendor and Purchaser Act, 1874 ; The Conveyancing Acts, 1881 tois9'_> ; The Settled Land Acts, 1882 to L890 ; The Trustee Act, 1888 ; The Trust Investment Act, 1889. A FEW OPINIONS OF Till'. PRESS ON THE THIRD EDITION. " Mr. Indehmai k's excellent 'Student's Guide to Prideaux's Conveyancing 'has reached a third edition appropriately within a short time of the appearance of the fifteenth edition of ' Prideaux.' The thoroughness of Mr. Iwdehmai it's work is too well known to need comment from us, and we need only say thai this edition is thoroughly up to date. The book is interleaved so that the student niav add his own notes." — Law Times, Match 18th, 1898. "The fifteenth edition of ' Prideaux's ( onveynncing ' was published in January, 1893, and in tire following month Mr. iNDXitMAUtt brought out the third edition of his « Student's Guide' to that standard treatise criticism to which worka like the present are so constantly sub- it they fulfil a not unimportant function in legal education if they are used as Bir. Imbirmauk urg< i use his • Guide '—merely a Inquiry and as Introductory primers to the standard books whose contents the) digest. Mr. [ndermai it's Manual Is interleaved with blank pages in ordi r thai students may ad al their discretion. We think that this Uttle work, which is entirely unpretentious in its character, Is calculated both to induce students to read ' Prideaux 'and Late ■/< <>i nut, March 18th, : i:. 16, ( i R i mh: STUE1 r, I HANCERI LANK, And all Law Loo). - THE STUDENT'S GUIDE PRINCIPLES OF EQUITY. With the Publisher's complime nts. The favour of a review wi II oblige. THE STUDENT'S GUIDE TO THE PRINCIPLES OF EQUITY JOHN INDERMAUR, Solicitok, (First Prizeman, Michaelmas, 1872), Author of " Principles of Common Law," " Manual of Equity," "Manual of Practice, " The Student's Guide to the Principles of Common Law," Joint Author with Mr. Thwaites of "The Student's Guide to Real and Personal Property," " The Student's Guide to Procedure and Evidence," &c, &c. CHARLES THWAITES, Solicitor, (First in First Class Honours, June, 1880; Sheffield District Prizeman, 1880 Reardon (Yearly) Prizeman, 1880 ; Scott Scholar, 1880, and Conveyancing Gold Medallist, 1880), Author of " A Guide to Criminal Law," Joint Author with Mr. Indermaur of " The Student's Guide to Real and Personal Property," "The Student's Guide to Procedure and Evidence," &c, &o. LONDON: GEO. BARBER, "LAW STUDENTS' JOURNAL" OFFICE, 10 & 17. CUR8ITOB STREET, CHANCERY LANK 18 9 4. In 24se LONDON : PRINTED BY GEO. BARBER, CURSITOR STREET, CHANCERY LANE, E.C. ADVERTISEMENT. This little work forms one of a series of Guides to the Bar Final by the Authors. The others are — on Real and Personal Property, third edition, by Messrs. Indermaur and Thwaites ; on Criminal Law, third edition, by Mr. Thwaites ; on Common Law, third edition, by Mr. Inder- maur; on Procedure and Evidence, by Messrs. Indermaur and Thwaites ; on Trusts and Partnerships, second edition, by Mr. Indermaur ; and on Specific Performance and Mortgages, by Messrs. Indermaur and Thwaites. The two Guides last named are now obsolete, and their place is supplied by this new Guide to the Principles of Equity. Messrs. Indermaur and Thwaites have in preparation a Guide to Constitutional Law and Legal History. It is hoped that this book will be found of use by the class for whom it is written. Though particularly intended for Bar Students, it may, perhaps, be found of service to Articled Clerks as well. Messrs. Indermaur and Thwaites continue to prepare Students in class, privately, and by post, for the Bar Final Examinations, Solicitors' Final (Pass and Honours) Examinations, and Solicitors' Intermediate Examination. Particulars may be had on application, personally or by letter, to Messrs. Indermaur and Thwaites, at their Chambers, 22, Chancery Lane, London, W.C. ■J -J, < ■ \ Lam., London, July, 1894. CONTENTS. PAGE I —THE COURSE OF READING 1 II.— EPITOME OF THE TRUSTEE ACT 1893 7 III.— TEST QUESTIONS ON INDERMAUR'S MANUAL OF EQUITY. (3rd Edition.) 21 IV.— DIGEST OF QUESTIONS AND ANSWERS :— 1 . Equity Generally, The Maxims, and the Judicature Acts . . . . . . . . . . . . . . . . 45 2. Trusts and Trustees . . . . . . . 53 3. Administration . . . . . . . . . . . . t>7 4. Partnership and Companies . . . . . . . . 76 5. Mortgages . . . . . . . . . . . . . . 85 ) word of mouth. Any 54 THE student's guide to the assignment of an existing trust must however be in writing by the 9th section of the Statute of Frauds. (Indermaur's Equity, 31, 32.) Q. Having regard to the Statute of Frauds, what is sufficient evidence of a trust of real estate ? It is said that " in cases of charitable trusts a greater latitude of construction is allowed than in ordinary trusts" Illustrate this. A. To create a trust of real estate writing is absolutely necessary (29 Car. II., c. 3, sec. 7). This enactment, how- ever, does not apply to trusts of real estate arising merely by implication or construction of law. The latitude shown by the Court, as regards charitable trusts, is well illustrated by the cy-prcs doctrine, which is, that if a testator has created a charitable trust which fails, but has shown a general charit- able intention, the idea of the trust will be carried out as nearly as possible, and will not be allowed to fail as would be the case were a private individual concerned, and not a charity (Biscoe v. Jackson, 35 Ch. D., 460). (Indermaur's Equity, 32, 56.) Q. A bequeaths £1,000 to B by will, and tells B verbally that he is to hold the money in trust for a fever hospital, and B agrees to do so. G is appointed executor, but the will contains no other provisions. Who is entitled to the £1,000 ? and what must the party so entitled do to obtain payment ? A. This is a case of a secret trust. Assuming the facts stated in the question are all capable of proof, or are admitted by B, the hospital is entitled to sue for a declaration that B holds in trust for them, and that he must carry out the trust. (Indermaur's Equity, 42-44.) Q. Distinguish a trust infringing the rule against per- petuities from one infringing the statutory limits of accumu- lation. What, in the latter case, becomes of income for the period for which the trust for accumulation exceeds those limits'? A. A trust infringing the law against perpetuities is one where the property, the subject of the trust, is itself tied up in PRINCIPLES OF EQUITY. 55 such a way as to withdraw it from ordinary transferability for a period of time exceeding that allowed by the rule laid down in Cadell v. Palmer (Indermaur's Conveyancing and Equity Cases, 23). A trust infringing the statutory limits of accumu- lation is where the income of property is directed to be accumulated for a period which merely exceeds that allowed by the Thellusson Act (39 & 40 Geo. III., c. 98). The income for the period for which the trust for accumulations exceeds those limits goes to such person or persons as would have been entitled thereto if no accumulation had been directed. (Weatherall v. Thornburgh, 8 Ch. D., 261.) Q. Explain, and illustrate by cases, the laiv as to executory trusts. What difference exists betiveen executory trusts arising out of ante-nuptial agreements and out of wills ? A. Executory trusts are always valid if by will or by instrument inter vivos for value ; but if created by an instru- ment inter vivos without value then they are not enforced. An executory trust is primarily construed in the same way as an executed trust, for Equity follows the Law, but the Court does not hesitate to depart from this strict construction, and to follow the party's intention when such intention can be perceived. The well-known case of Lord Glenorchy v. Bosville (1 Wh. &Tu.,l) furnishes a good illustration. There is often a material distinction in the case of executory trusts arising in marriage articles and wills respectively, for in the former you have the intention from the very nature and well-known design of the instrument, whilst in the latter you can only gain the intention from the actual words used. (Indermaur's Equity, 41, 42.) Q. What is the effect of incompleteness in the execution of a voluntary settlement or gift ? Give instances of such incom- pleteness, distinguishing the cases where what was intended was a transfer by the donor, from cases ivhere he meant to be a trustee for the beneficiary ? A. The effect of incompleteness in the execution of a 56 the student's guide to the voluntary settlement or gift is that the settlor or donor can draw back from it, and the Court will always refuse to decree specific performance. A voluntary trust, to be binding, must be a perfect trust (Ellison v. Ellison, 1 Wh. & Tu., 291). Instances of such incompleteness are to be found in Jefferys v. Jefferys (Cr. & Ph., 138) and in Antrobus v. Smith (12 Ves., 39). In the latter case a father desiring that his daughter should have a certain share in a company indorsed upon a receipt a memorandum as follows: "I hereby assign to my daughter all my right, title, and interest," &c, &c. It was held that this was only an imperfect gift, and could not be enforced by the daughter. But, if the father had simply declared himself a trustee for his daughter, a perfect trust being created, the gift would have been good. (Indermaur's Equity, 33, 34.) Q. Explain, and illustrate by cases, the law as to what is requisite to constitute such a voluntary gift or settlement as would be enforced by the Court. A. It must be complete, or else the giver of the benefit must have plainly declared himself a trustee. If any voluntary trust, gift, or assignment is incomplete, the Court will not give effect to it (Ellison v. Ellison, 1 Wh. & Tu., 291). The case of Jefferys v. Jefferys (Cr. & Ph., 138) is a good illustration of the necessity of a voluntary trust being com- plete, and the case of Antrobus v. Smith (12 Ves., 39), is a good illustration of the necessity of a gift or assignment being complete. (Indermaur's Equity, 33, 34.) Q. A assigned certain funds by deed to B, on certain trusts for C, with no expressed powers of revocation. G was not informed of the transaction. A subsequently destroyed or lost the deed. Has C on hearing of the matter any remedy ? A. Assuming the assignment was complete, C acquired perfect rights under it, and may take proceedings to have the benefit of the assignment. A trust, though voluntary, PEINCIPLES OF EQUITY. 57 is, if complete, irrevocable, if there is no power of revocation reserved by the instrument. (Indermaur's Equity, 34.) Q. When may voluntary trusts be avoided or set aside (a) under Statute ; (b) by rules of Equity ? A. (a) Under 13 Eliz., c. 5, if they constitute frauds on creditors ; and also under the Bankruptcy Act 1883, in case of bankruptcy within two years, and even within ten years, unless the parties claiming under the settlement can show the settlor was solvent when he made it. Formerly also, under 27 Eliz., c. 4, a voluntary trust of land would be defeated by a subsequent sale for value, but this is not so now since the Voluntary Conveyances Act 1893. (b) If obtained by fraud or undue influence, or made under mistake, or if the object of the trust had ceased to exist, or if in favour of creditors, and not communicated to them. (Indermaur's Equity, 35, 36.) Q. Compare and contrast the Statutes 13 Eliz., c. 5, and 27 Eliz., c. 4, for the avoidance of fraudulent dispositions of property, and explain the object of the Voluntary Conveyances Act 1893. A. 13 Eliz., c. 5, provided that all dispositions of both realty and personalty made for the purpose of defeating creditors, should be void unless made bond fide for value. 27 Eliz., c. 4, provided that all voluntary dispositions of land should be void against a subsequent bond fide purchaser for value. This was altered by the Voluntary Conveyances Act 1893, which provides that no voluntary conveyance of land, if made bond fide and without any fraudulent intent, shall be void against a purchaser for value who takes since 29th June, 1893. (Indermaur's Equity, 35, 3G.) Q. Define and illustrate Implied and Constructive Trusts respectively ? A. An implied trust maybe denned as one founded upon an unexpressed but presumable intention, e.g., A pays the pur- chase-money of property and takes a conveyance in the 58 THE student's guide to the name of B, here B will generally be held to be a trustee for A. (See Dyer v. Dyer, 1 Wh. & Tu., 236.) A constructive trust may be denned as one raised by construction of equity, to satisfy the demands of justice, without reference to any pre- sumable intention, e.g., where a trustee makes a profit out of his trust estate, he will be bound to account for such profit to his cestui que trust. (See Keech v. Sandford, 1 Wh. & Tu., 53.) Q. Land is conveyed by X to A and his heirs by the direction of B, who pays the purchase-money. B dies intestate, leaving a widow and one son. Who is entitled to the land ? A. Dyer v. Dyer (1 Wh. & Tu., 236) shows that if A is a stranger he only takes as a trustee for B, but if a wife or child, unprovided for, that then generally he or she will take beneficially, it being presumed to be an advancement. Assuming that A was a stranger B's son will take subject to the widow's dower. (Indermaur's Equity, 45.) Q. When a wife joins her husband in mortgaging, ivhat equitable presumptions arise, and what rights has she or her representatives against the husband or his representatives? What effect has the "Married Women's Property Act 1882" on the doctrine? A. As decided in Huntingdon v. Huntingdon (2 Wh. & Tu., 1141), the Court presumes that the wife simply charged her estate as surety for her husband, and that she or her representatives are to have the estate back again free from the mortgage. In cases coming within the Married Women's Property Act 1882, there is now no need for the husband to join in a mortgage of the wife's property, so that there will now ordinarily be nothing on the face of the mortgage to raise the presumption of the wife's estate being but as surety for her husband's debts, though, of course, parol evidence could be given to shew that this was so, and that being shewn then no doubt the general rule of suretyship prevails. (Indermaur's Equity, 50; and see Be Marlborough, Davis v. Whitehead, Law Students' Journal, April, 1894, p. 76.) PRINCIPLES OF EQUITY. 59 Q. What is meant by a power in the nature of a trust ? If residue be bequeathed to such of the testator's nearest relations as A shall appoint, to whom, may he appoint ? Would the effect be different if the words were " to my nearest relations in such shares as A may appoint f " To whom, and in what shares, ivill the property in each case go if A makes no appointment ? A. A power in the nature of a trust arises where there is a general intention in favour of a class, and a particular intention in favour of individuals of that class to be selected by the donee of the power. Here, if the donee fails to make any selection, and there is no gift over in default of appoint- ment the members of the class will take share and share alike (Burrough v. Philcox, 5 My. & C, 72). A may appoint, in the first case, to relations who are not next-of-kin, for he has a power of selection ; but in the second case A can only appoint to next-of-kin, for he merely has a power of distribu- tion (2 Wh. & Tu., 1103). In default of appointment the property will go, in the first case, to the whole class of the testator's nearest relations equally, and the representatives of those members of the class who die in A's lifetime will take their deceased's share (Lambert v. Thwaites, 2 L. E. Eq., 151) ; and in the second case the result will be exactly the same (Pope v. Whitcombe, 3 Mer., 689) because although A might have distributed the funds unequally, the Court interposing on his default divides the funds equally. (2Wh. &Tu., 1101, 1102.) Q. Define and give an instance of a resulting trust ? A. A resulting trust is in the nature of an implied trust, and arises where the objects of a trust fail, and therefore the property the subject of the trust comes home again to the creator. Thus, A settles property on B in trust for C, who turns out was dead at the time, and the consequence is that B holds for A. (Indermaur's Equity, 47, 48.) Q. Give instances of different hi mis uf constructive trusts. A will bequeathed, renewable leaseholds to A for life, remainder 60 THE STUDENT'S GUIDE TO THE to B. A bought the freehold reversion. How does the freehold devolve on A's death ? A. Instances would be (a) a trustee making directly or indirectly a profit out of his trust estate (Keech v. Sandford, 1 "Wh. &Tu., 53) ; (b) a vendor's lien for unpaid purchase- money (Mackreth v. Symons, 1 Wh. & Tu., 355). As the testator has shown an intention that the leaseholds should be renewed, the freehold on A's death will devolve on his heir or devisee, as the case may be, subject to the right of B to have the leaseholds renewed for the term for which they are capable of being renewed. The heir or devisee will thus be a constructive trustee to this extent for B. (Indermaur's Equity, 51, 52 ; Lewin on Trusts, 404.) Q. State the general object, and mention the principal provisions, of the Trustee Act 1893. A. This Act was passed to consolidate previous statutory provisions on the Law of Trusts contained in a variety of statutes. (See Epitome of the Act, ante, p. 7.) Q. How may a new trustee be appointed if the existing trustee dies? And how would you vest the property in mortgages, consols, and freeholds ? A. A new trustee may be appointed by the person nomi- nated for that purpose by the trust instrument, and if no such person, by the last surviving or continuing trustee or the executors or administrators of the last-surviving or con- tinuing trustee. As regards the freeholds they would be vested by means of a declaration inserted in the deed of appointment. The mortgages and the consols would, however, have to be transferred in the ordinary manner. (Trustee Act 1893, sees. 10, 12.) Q. A is the surviving trustee of a will which contains no power to appoint new trustees. What must be done on A's death to appoint new trustees and vest the trust property in them f The trust estate consists of £1,000 lent on mortgage of freeholds, £1,000 Consols, £1,000 Brighton Railway Stock, a PRINCIPLES OF EQUITY. 61 copyhold farm, £1,000 due on a promissory note i and a leasehold house and some furniture. A. By the Trustee Act 1893 (sec. 10) the personal representative of A can appoint new trustees by signed writing. A deed should be employed, and should contain a declaration that the trust property is to vest in the new trus- tees, as this will operate as a conveyance (under Section 12) to them of the money due on the promissory note, the leasehold house, and the furniture. But the mortgage must be conveyed by separate deed of transfer ; the Consols by signature of the books at the Bank of England; the railway stock by deed of transfer registered with the company ; and the copyholds by surrender and admittance. Q. B, the sole trustee for J.'s children under a settlement comprising leasehold, freehold and copyhold lands held on trust for sale, £1,000 Consols, and a sum of money due on a pro- missory note goes abroad and cannot be found. What must the beneficiaries do to obtain a sale and division of the pro- perty 1 ? A has three children, one of whom was a daughter married in 1883. A. Assuming that the trustee has been abroad for more than a year, a new trustee may be appointed under the Trustee Act 1893 (sec. 10), provided that there is a person named in the deed to appoint new trustees. The leaseholds and freeholds and the money can be made to vest in the new trustee by declaration under Section 12 of this Act, but as regards the copyholds a vesting order must be obtained. If the provision of Section 10 does not, however, apply, a summons must be taken out under the Trustee Act 1893 (sees. 25, 2G), for the appointment of a new trustee and for a vesting order. A new trustee being appointed, and the property duly vested in him, the sale can take place. Tf all the children are sui juris they could make a good title without the appointment of a new trustee. As regards the daughter, she, being married since 1882, her husband would not 62 THE student's guide to the have to join. A vesting order would, however, have to be obtained. Q. Hoiv can a trustee retire ivithout appointing a new trustee in his place? The trust property consists of freeholds, copyholds, leaseholds, mortgage debts, furniture and consols. What must be done to vest these respectively in the continuing rustees ? A. He may under the Trustee Act 1893 (sec. 11), retire with the consent of his co-trustees, and such other person, if any, as is empowered to appoint new trustees if there will still be left two trustees. The matter must be carried out by deed. Under Section 12 a declaration in the deed will be all that is necessary as regards the freeholds, leaseholds and furniture ; but copyholds, mortgages, and stocks are ex- cepted, and must be transferred in the ordinary way. Q. In what respect did the Wills Act alter the general rules of Equity under which the trustees' 1 estate commonly determined when their intervention was no longer necessary ? A. Formerly, when it was not specified in the will what estate the trustees were to take, they would have taken merely such an estate as was necessary for the purposes of the trust ; but now, under the 30th and 31st sections of the Act (1 Vict., c. 26), when there is a devise to trustees without words of limitation, they take either an estate determinable on the life of a person taking a benefical life interest in the property, or if the trust may endure beyond such life, then they take the fee simple. Q. Are there any, and if so what, circumstances under which a trustee may claim remuneration for services performed in relation to the trust ? A. Yes, he may do so : — (1) Where he is expressly authorised by the trust instrument to make charges for his services. (2) Where at the time of accepting the trust he expressly stipulated with beneficiaries who were sui juris for a remuneration, and there was no unfair pressure on his part. (3) Where the Court has expressly allowed remunera- PRINCIPLES OF EQUITY. 63 tion. (4) Where the trust property is abroad, and it is the custom of the local Courts to allow remuneration. (Inder- maur's Equity, 81.) Q. State and illustrate the rules of law as to the reim- bursement and remuneration of trustees. A. A trustee is entitled to be reimbursed all expenses which he has properly incurred in the execution of the trust, and as between the beneficiaries these are generally out of the capital, but until payment the trustee has a lien on both capital and income. If the trustee has committed a breach of trust he must make that good before he is reimbursed. A trustee is not entitled to remuneration for his services unless the trust instrument expressly gives it to him, or he bargains for it before he accepts the trust, or where the Court expressly allows it, or he is managing property abroad and the local custom allows it. (Indermaur's Equity, 81.) Q. State and discuss, referring to modern cases, the ride in Hoive v. Lord Dartmouth. Hoiu may the rule be excluded ? A. Where personal property, being either of a wasting nature, or of a kind not yielding a present income, is given in trust as a whole and not specifically for one for life with remainders over, it is to be converted and properly invested, so that thus, for instance, short leaseholds may be preserved for the remainderman, and the tenant for life may gain a benefit from reversionary property. The rule does not apply if the property is given specifically, nor where there is an express direction for sale at a particular period, e.g., an express trust to convert at the death of the tenant for life, for this will entitle him to specific enjoyment (Alcock v. Sloper, 2 M. & K., 699), nor where the trustees have special power to retain existing investments if they should think fit (Gray v. Siggers, 49 L. J., Ch., 819). (Indermaur's Equity, 62-64; 2 Wh. & Tu., 321, 336-344.) Q. Tivo landed estates, A and B, were devised to trustees upon trust for immediate sale and for investment of sale 64 the student's guide to the moneys, and for payment of income of investments to a tenant for life, and for transfer (on his death) of the investments absolutely to a remainderman. The trustees neglected to sell, but paid to the tenant for life the income of the estate A, which was more than the interest on investment of its sale moneys would have been. Estate B ivas vacant land, producing no income during the life of the tenant for life. On the death of the tenant for life, the capital value of each estate ivas not less than at the testator's death. What are the rights of the remainderman or the liability of the trustees in respect of excessive payments from Estate A to the tenant for life ? A. The trustees are guilty of a breach of trust by dis- obeying the trust for immediate sale and investment, and the remainderman can hold them liable for this. The remainderman is entitled to demand from the trustees the amount of consols that could have been bought had the two estates been sold at the end of a year from the death (which may be a very different sum to that which the same money would purchase now) , and they can call upon the trustees to pay them the excess of the income derived from the two estates during the life of the tenant for life beyond the dividends upon those consols ; the trustees are then entitled to be recouped by the tenant for life, or as he is dead, by his estate, so far as such excess income is concerned. (2 "Wh. & Tu., 346 ; Indermaur's Equity, 62.) Q. A is a trustee of a will, and invests trust moneys on mortgage of land and buildings, and on railway debentures. The securities turn out insufficient. In what circumstances would A be liable to make good the loss ? A. He will be liable if he was prohibited from investing in such securities, or if he has not exercised all proper pre- cautions. Assuming he is not prohibited, still he will be liable as regards the debentures unless the railway company had during each of the 10 years past before the date of investment paid a dividend of not less than £3 per cent, per PRINCIPLES OF EQUITY. 65 annum on its ordinary stock (Trustee Act 1893, sec. 1). As regards the mortgages he will be liable unless he has had a report of a surveyor as indicated by the Trustee Act 1893, and has not advanced more than two-thirds of the reported value. If he has advanced more than two-thirds, he will be liable for any excess he has advanced beyond that amount. (Indermaur's Equity, 71.) Q. A, being trustee of a will, invests trust money on a mortgage tvhich turns out to be a deficient security. Under tvhat circumstances will A be liable for the loss? When, and to what extent, can a trustee so liable claim to be recouped by a beneficiary the amount which he has been called on to pay ? A. A will be liable unless he has acted in the manner pointed out by the Trustee Act 1893, under which he will not be liable if he has had the property properly valued, and the valuer has advised an advance, and he has not lent more than two-thirds of such value. If so liable, he is only respon- sible in respect of any excess that he has advanced over the two-thirds. Under the same Act he would be entitled to be recouped out of the particular beneficiary's interest, if he has made the advance with the consent in writing of the beneficiary, or at his instigation, or request. (Indermaur's Equity, 70, 71, 85.) Q. A trustee is held liable for loss caused by a breach, of trust. Under what circumstances has he any remedy over (a) against a co-trustee ; (b) against a cestui que trust ? A. (a) If the breach of trust does not amount to actual fraud, a trustee who has had to refund a loss is entitled to contribution from his co-trustee (Indermaur's Equity, 80). (6) The Trustee Act 1893 (sec. 45), provides that where a trustee commits a breach of trust, at the instigation, or request, or with the consent in writing of a beneficiary, the Court may, even if the beneficiary is a married woman without power to anticipate, impound all or any part of the bene- ficiary's interest to indemnify the trustee. (lb., 85.) F 66 the student's guide to the Q. If a trustee by request of a cestui que trust commits a breach of trust, what right of indemnity has he? Where trustees are jointly and severally liable for a breach of trust, can one of them, as between himself and the others, claim in any and what case to be indemnified by them ? A. By Section 45 of the Trustee Act 1893, where the breach was committed at the instigation or request, or with the consent in writing, of a beneficiary, the Court may im- pound all or any part of the beneficiary's interest to indemnify the trustee (or any person claiming through him), even though the beneficiary is a married woman entitled for her separate use without power of anticipation. He is entitled to contribution, except in the case of actual fraud, or where he has got the benefit of the breach of trust, or where he was the confidential legal adviser of the others. (Indermaur's Equity, 80, 85.) Q. To what extent is a trustee liable for a breach of trust committed (a) by a co-trustee, (b) by an agent f A. (a) He is not liable if he has not in any way conduced to the breach of trust, e.g., if the co-trustee has received money apart from him. But he will be liable if he lets it then remain in the co-trustee's hands. If he pays money to a co-trustee who misapplies it, he will be liable unless his action was reasonable, e.g., for the co-trustee to pay away in the place in which he resided, (b) He is liable unless it was necessary, or in the usual course of business, to employ an agent. In these cases he is not liable if he has been guilty of no negligence (Re Speight, Speight v. Gaunt, 9 App. Cases, 1 ; Indermaur's Equity, 75, 76.) Q. When, and under ivhat conditions, may trust property be followed into the hands of third persons ? A. It can be followed, as long as it is capable of identification, into the hands of every one except (1) a bond fide purchaser who has got the legal estate without notice of the trust, or (2) in the case of a negotiable PKINCIPLES OF EQUITY. 67 instrument in the hands of a holder in due course. (Inder- maur's Equity, 87, 88.) Q. Under ivhat circumstances, if any, may a trustee purchase the trust property, or any interest therein ? A. The general rule is that a trustee cannot purchase of his cestui que trust, but such a purchase may stand if a full price is paid, and every possible fact that might affect the matter is disclosed, and no advantage taken by the trustee of his position. The onus of proving this would rest on the trustee. The trustee can always purchase by leave of the Court, and an originating summons to obtain such leave can be issued under Order LV., rule 3. (Indermaur's Equity, 81, 82.) Q. To what extent, if at all, does lapse of time bar a claim by a cestui que trust against his trustee on an express trust ? A. Formerly the Statutes of Limitation did not apply in such a case, and lapse of time was never any bar unless the cestui que trust had been guilty of laches. If there had been laches the cestui que trust was prevented from suing because of the maxim, Vigilantibus non dormientibus wquitas subvenit. The Trustee Act 1888 (sec. 8), however, provides that as regards actions commenced after 1st January, 1890, trustees may plead any Statute of Limitation, except where the claim is founded on fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof, still retained by the trustee, or previously received by him and converted to his own use. In these excepted cases, therefore, lapse of time does not bar unless there have been laches. (Indermaur's Equity, 82, 83.) 3. Administration. Q. In what different ways may proceedings be commenced in the Chancery Division for the administration of the estate r 2 68 the student's guide to the of a deceased 'person. Has any other tribunal any jurisdiction of this nature ? A. Such proceedings are commenced by action in the ordinary manner, or else by originating summons under Order LV., rule 4. They should be commenced in the latter way if the matter is simple in its nature, and no special relief is sought, e.g., to charge the executors with wilful default. Under the Bankruptcy Act 1883 (sec. 125), as amended by the Bankruptcy Act 1890 (sec. 21), an insolvent estate may be administered in bankruptcy, or if being administered in equity it may be transferred to bankruptcy. Q. What do you understand by assets ? Distinguish between legal and equitable assets respectively ? A. Assets means property of a deceased person available for payment of his debts. Shortly stated the distinction between legal and equitable assets is this, that where the assets devolve upon the executor ex virtute officii, then they are said to be legal assets available at law for payment of debts, but when they come to the executor under an express devise or trust, then they are said to be equitable, as only capable of being taken advantage of in equity, the distinction, therefore, referring to the remedy of the creditor and not to the nature of the property. (Indermaur's Equity, 108.) Q. Explain the nature of, and reasons for, an executor's right of retainer. In what circumstances does it, and does it not, arise ? A. It is his right to retain a debt owing by the testator to himself out of legal assets in priority to other debts of the same degree, because he cannot, of course, sue himself, and it is a common rule that he has a right to prefer one creditor of the same degree to another. He cannot retain out of equitable assets, nor can he retain after a receiver has been appointed in administration proceedings. (Indermaur's Equity, 102, 103.) PEINCIPLES OF EQUITY. 69 Q. Have any, and if so what, classes of creditors any priority against the estate of deceased persons ? Wlien, and how, has the laiv on this subject been altered during the present reign ? A. Yes ; debts rank thus : — (1) Debts due to the Crown by record or specialty ; (2) debts preferred by particular statutes ; (3) registered judgments against the deceased, and unregistered judgments against the personal representative ; (4) recognizances and statutes ; (5) specialty debts, arrears of rent, simple contract debts, and unregistered judgments against the deceased, and (6) voluntary bonds. By Hinde Palmer's Act (32 & 33 Vict., c. 69) the priority of specialty debts, which formerly existed over simple contracts, was taken away, and both of these debts were made to rank pari passu. If, however, the estate of the deceased is insolvent and is being administered in bankruptcy, these priorities are not observed, but all debts rank equally, subject to the provisions of the Preferential Payments in Bankruptcy Act 1888. (Indermaur's Equity, 108-112.) Q. State shortly the law as to the rights and liabilities of executors in respect of contracts made, and torts committed during the lifetime of their testator? A. In respect of contracts the rights and liabilities generally continue, and the maxim Actio personalis moritur cum persona has no application, but the contract to marry is an exception, and there is no continued right or liability here, unless injury can be shown to the estate of the party (Chamberlain v. Williamson, 2 M. & S., 408; Finlay v. Chirney, 20 Q. B. D., 494). There is also no continued liability on contracts involving personal skill on the part of the deceased, and contracts of personal service expire with the death of either of the parties to them (Baxter v. Burfield, 2 Str. 1266). The liability or right in respect of torts generally ends with death (subject to certain statutory ex- ceptions). When a liability continues the executor's Liability 70 THE STUDENT'S GUIDE TO THE will be only to the extent of his testator's assets, unless he sets up a defence false within his own knowledge, or unless he admits assets. Q. Explain shortly the position of an executor and of creditors, when the deceased's business is being carried on by the executor under a direction contained in the testator's will. A. The executor is personally liable for debts incurred by him unless the creditors agree to look only to the estate ; but he is entitled to indemnity out of the estate subject to this, that if the testator has only authorised a certain portion of his estate to be devoted to the business, then the right of indemnity will only extend to that portion. It was also decided in Re Gorton, Dowse v. Gorton (1891, A. C, 190) that the executor's right of indemnity is subject to the rights of those persons who were creditors of the testator at his death, unless, indeed, they have assented to the business being carried on, in which case the executor is entitled to indemnity even against them. (Indermaur's Equity, 98.) Q. .£1,000 is owing to A by B deceased, and Es estate is being administered in Chancery. A holds security worth £600. Can A prove for his entire debt, or how should he proceed ? A. Formerly he could have proved for the whole £1,000 and yet have retained his security ; but it was provided by the Judicature Act 1875 (sec. 10) that the bankruptcy rules hereon should prevail. A therefore must realise his security and prove for the deficiency, or else estimate his security and prove for the deficiency. He might also, if he chose, relinquish his security and prove for the entire debt, or he might simply retain his security and not prove at all. Q. Distinguish "specific," "general" and "demonstrative" legacies. How is the doctrine of ademption affected by the dis- tinction? If a testator makes a will, leaving to A a sum described as now " owing to me on mortgage from B," and PRINCIPLES OF EQUITY. 71 afterwards the mortgage is paid off, and the money received by the testator and invested on another mortgage, is A's legacy gone ? A. A specific legacy is a bequest of a particular thing, or sum of money, or debt belonging to the testator, as dis- tinguished from all others of the same kind., e.g., my diamond ring, or a thousand pounds owing to me by C. A general legacy is a bequest to be satisfied out of the general personal estate, e.g., a diamond ring or a thousand pounds. A demonstrative legacy is a bequest, which in its nature is a general legacy, but there is a particular fund pointed out to satisfy it, e.g., a thousand pounds out of my consols. A specific legacy alone is liable to ademption, i.e., the legatee loses the particular thing if testator does not own it at his death ; but general legacies and demonstrative legacies are not liable to ademption — except when given to a child and a subsequent portion is given by the parent during his life, which will be a satisfaction or ademption pro tanto (see post, pp. 108, 109, Indermaur's Equity, 103, 104) . The legacy to A is specific and is adeemed, for there exists nothing at the death on which the will can operate. (2 Wh. & Tu., 236, 282.) Q. What are the rides as to legacies carrying interest ( A. The general rule is that they carry interest at 4 per cent, per annum, after the lapse of one year from the testator's death, but in the following cases they carry interest from the date of the testator's death, viz. : — (1) A legacy charged upon land ; (2) a legacy to a child when there is no other provision for such child's maintenance ; (3) a legacy given in satisfaction of a debt which itself carried interest; and (4) a specific Legacy, and also a demonstratiw Legacy so Long as it remains specific, carry with them their interest or profits froni ill'' date <>l the death. (Indermaur's Equity, 15(5.) (j. Dietingwish between vested and contingent legacies, and give an illustration of each. If a legacy is charged on In ml 72 the student's guide to the and directed to be paid at a future day, ivhat becomes of it if the legatee dies before that day ? A. A vested legacy is one which the legatee is to get in all events, even though the time of payment may be post- poned, e.g., a legacy to A payable on his attaining 21. A contingent legacy is one that the legatee is not to get unless a certain event happens, e.g., a legacy to A if he shall attain 21. As regards legacies which are charged on land and the payment postponed, if the postponement is for the con- venience of the estate, the legacy will nevertheless be paid, but if the postponement is with regard to some event personal to the legatee, then it is otherwise. (Indermaur's Equity, 104, 105.) Q. The testator in each of the following cases died possessed of personal estate ivorth £300 and of a freehold house ivorth £1,000: — (a) He bequeaths Jd 500 to B, and the residue of his real and personal estate to C. (b) He bequeaths £500 to B, and his freehold house to C. (c) He bequeaths £500 to B, and then gives his real and personal estate to trustees upon trust to sell the same and apply the proceeds in payment of his debts and legacies, but does not make any further disposition of his estate, (d) He bequeaths £500 to B, and directs that the same shall be a charge on his real estate. State out of what property and in what proportions the legacy is payable, if at all, in each of the above cases, and who is entitled to the residue. A. (a) There is an implied charge of the legacy on the land, and B's legacy will be paid in full and C will get the rest of the estate. (6) B will get paid as much of his legacy as there is personalty to pay it, and C will get the freehold house specifically devised to him. (c) The legacy is payable rateably out of the estate, and assuming that there is enough money left after satisfying the debts, B's legacy will be paid in full. If there is any balance after this it will go to the heir-at-law and next-of-kin of the testator respectively, (d) B PRINCIPLES OF EQUITY. 73 gets his legacy in full, and after this the balance of the estate goes to the testator's heir-at-law. (See Goodeve's Eealty, 3rd edition, 403.) Q. What is a donatio mortis causa ? How does it (1) resemble, (2) differ from, a legacy f A. It is a gift of personal property made by a person who apprehends that he is in peril of death at the time, and is evidenced by a delivery of the property, or the means of obtaining the possession thereof, to the donee, and a condition accompanies the gift that it is revocable at pleasure, and is necessarily revoked if the donor recovers. It resembles a legacy in that it is liable to both probate and legacy duty, and it is liable for debts on deficiency of assets. It differs from a legacy in that it vests in the donee from the delivery in the deceased's lifetime, and it requires no assent on the executor's part. (Indermaur's Equity, 106, 107.) Q. Inivhat order are the various assets of a deceased person to be applied in payment of debts ? A. The following is the order :— (1) The general personal estate. (2) Any estate particularly devised for payment of debts, and only for that purpose. (3) Estates descended to the heir. (4) Real or personal property charged with the pay- ment of debts, and devised, or suffered to descend, or speci- fically bequeathed, subject to that charge. (5) General pecuniary legacies pro rata, including herein annuities, and also demonstrative legacies which have become general. (6) Specific devises, residuary devises, and specific bequests not charged with debts. (7) Real and personal estate ap- pointed by will under a general power of appointment. (8) Paraphernalia of the widow of the deceased. (Indermaur's Equity, 114.) Q. With regard to tlte order for application of assets men- tioned in the list ansvier, when is the general personal estate of a decaNed />< -r.-nH not ihv. />i i uuiryfimd for payment of his debts f A. In fch< following cases: — (1) When the general 74 THE student's guide to the personal estate is by express words exonerated, and post- poned to some other asset. (2) Where it is exonerated and postponed by the testator's manifest intention. (3) Where the debt is one in its nature real, e.g., a jointure. (4) When the debt was not contracted by the person whose estate is being administered, but by someone else from whom he took it. (5) Where the debt is a mortgage debt, or one for which a vendor's lien exists. (Indermaur's Equity, 117.) Q. Where a person dies leaving realty and personalty, and there being either a mortgage or a vendor s lien existing in respect of his realty, what are the rights of the various parties interested? A. Under the Statute 17 & 18 Vict., c. 113, the mortgage debt is payable primarily out of the mortgaged property, and under the Statutes 30 & 31 Vict. , c. 69, and 40 & 41 Vict. , c. 34, this is also the case as regards a vendor's lien. Subject to any mortgage or vendor's lien, the realty will, of course, go to any devisee, or if none to the heir. The legatees or next- of-kin will get the personalty, subject to payment of any deficiency as regards the mortgage or vendor's lien, and subject to any other debts. (Indermaur's Equity, 118.) Q. State and illustrate the doctrine of marshalling in the two classes of cases — (1) marshalling assets of a deceased person ; (2) marshalling securities. A. (1) Marshalling assets indicates the right of each beneficiary in the dead man's estate, as against the other beneficiaries (when all the creditors have been paid) , to have the assets arranged so that they shall be deemed exhausted by the debts in the proper order in which they are applicable for that purpose. Thus, if a creditor has seized and sold a specific legacy in satisfaction of his debt, the specific legatee is entitled to claim an indemnity from the residuary legatee, a devisee in trust to pay debts, the heir-at-law, general legatees, and a devisee charged with debts, all of whose benefits are liable before his specific legacy. (2) Marshalling securities is the principle by which a creditor, who has a PRINCIPLES OF EQUITY. 75 right to go against two funds, may be compelled by a second creditor, who can only go against one of those funds, to take his debt, in the first place, out of that fund which the second creditor cannot touch, but this right cannot be exercised to the prejudice of a third party. (Notes to Aldrich v. Cooper, 2 Wh. & Tu. ; Indermaur's Equity, 119-121, 124-126.) Q. To secure a debt due from A\s firm to their bankers, A, whose firm had, in the ordinary course of business, possession of some delivery warrants belonging to B, urongfidly pledged them with the bank tvithout JB's knowledge ; and one of A's partners, icho knew nothing of the fraud, also gave to the bank another security for the same debt. The firm having become bankrupt, the bank paid themselves by selling B's property. What remedy has B to recoup himself? What are the prin- ciples involved ? A. B is entitled to have the banker's securities mar- shalled ; and, to the extent of the value of his property which the bank has sold, may have the benefit of the security given to the bank by the innocent partner, and may, therefore, prove against the innocent partner's estate to that extent. The principle is that a guarantee by one's partner for the debt of the firm, which gives the creditor the right to prove against the estate of that partner in addition to his right of proof against the general estate of the part- nership, is a security to which marshalling applies. (Ex parte Salting, 25 Ch. D., 148; 2 Wh. & Tu., 116; Inder- maur's Equity, 124-126.) Q. What becomes of the undispjosed-of residue of a testators personal estate where the will appoints executors, but contains no resid/uary bequest? A. Formerly the executor would have taken for his own own benefit, but now, under I Wm. IV., c. 40, he will be a trustee for the next-of-kin. If no next-of-kin, fche executor will, however, Btill take for his own benefit. (Re Bacon, I imp v. Coe, 31 Oh. D., 460.) 76 THE student's guide to the Q. If testator gives his real and personal estate in trust to pay debts and other legacies, would the date of testator's death have any effect on a legacy to a charity ? A. Yes. Formerly, as the Court would not marshal assets in favour of a charity, the legacies would be deemed to be payable rateably out of the whole estate ; and in so far as the estate consisted of realty, or leaseholds, or money savouring of realty, the charitable legacies would proportion- ately fail. This, however, is no longer so now, by reason of the Mortmain Act 1891, if the testator died after 5th August, 1891, and the charitable legacies would substantially stand in the same position as other legacies. (Indermaur's Equity, 121-124.) Q. What is meant respectively by (1) open account; (2) stated account; (3) settled account; (4) surcharging and falsifying ? A. (1) An open account is one where the balance is not struck or is not accepted by all the parties. (2) A stated account is one which has been expressly or impliedly acknowledged to be correct by all the parties. (3) A settled account is one not only acknowledged to be correct, but which has also been discharged by payment, or otherwise, between the parties. (4) Surcharging signifies the showing amounts received and not accounted for ; and falsifying means showing items of disbursement wrongly inserted in an account. (Indermaur's Equity, 137, 138.) 4. Partnership and Companies. Q. Describe tuhat is meant by partnership. A. By the Partnership Act 1890 (sec. 1) partnership is defined as the relation which subsists between persons carrying on a business in common with a view to profit. This i^ the ordinary actual partnership, but a person is said to be PRINCIPLES OF EQUITY. 77 a dormant partner when, though participating in profits, he takes no active part in the concern. Further, if a person allows his name to appear in a firm, though he does not participate in the profits, or, in fact, have anything to do with the concern, he may he estopped from denying that he is a partner. Such a person is styled a nominal partner. Q. Point out the differences between co-partnership and co-ownership f Explain ivhat is meant by a "partner's lien." A. Co-ownership need not arise from agreement, part- nership must ; the former need not involve community of profit and loss, partnership must; each co-owner may transfer his share to a stranger, a partner cannot, so as to make the alienee a partner; each partner is the implied agent of the rest, but each co-owner is not ; a partner has a lien for outlays, but a co-owner has not ; a partner cannot compel partition, but a co-owner can ; a co-owner's share of realty devolves on his devisee or heir, but a partner's share on his personal representative ; partners have an action of account but not so necessarily co-owners. By a partner's lien is meant the right of each partner on dissolution to have all the property belonging to the partnership sold, and the proceeds of sale, after discharging all the partnership debts and liabilities, divided amongst the partners according to their respective shares in the capital. (Pollock's Partner- ship, 5th edition, 5, 100.) Q. What are the rules by which the question tuhether a partnership does or does not exist is to be determined ? A. Joint tenancy or other co-ownership does not of itself create a partnership, nor does the sharing in gross returns. The receipt of a share of profits is prima facie evidence of partnership, but does nut necessarily create a partnership, and in particular none of the following positions necessarily create a partnership : (a) The receipt of a debt by instalments or otherwise out of accruing profits. (6) The remuneration of a servant or agent by a share of profits, (c) The payment 78 the student's guide to the of any money to a widow or child of a deceased partner out of profits, (d) The lending of money to receive interest varying with the profits. (e) The receiving a portion of profits in consideration of the sale of a goodwill. (Partner- ship Act 1890, sec. 2.) Q. What are the principal rules contained in the Partner- ship Act 1890, with regard to rights and duties of partners inter se ? A. The general rules, "as laid down in Section 24, are as follows : (1) Profits, capital, and losses are to be shared equally. (2) Partners to be indemnified for payments and liabilities made and incurred in the ordinary course of business. (3) Extra capital to bear interest at £5 per cent. (4) No partner entitled to interest on capital till profits ascertained. (5) Every partner entitled to take part in the management of the partnership business, but without remuneration. (6) No new partners to be introduced without consent of all. (7) In case of dispute majority to prevail, but no change in the nature of the business without consent of all. (8) Books to be kept at principal place of business, with liberty to each partner to inspect and copy. Q. What events dissolve a partnership ? Explain how the affairs of a partnership should be wound up in case there are no articles of partnership, and owing to losses the assets are insufficient to repay the capital embarked. A. A partnership is dissolved — (1) If for a fixed term by effluxion of time. (2) If for a single undertaking by the termination thereof. (3) If for an undefined time by reason- able notice. (4) By death. (5) By bankruptcy. (6) By the unlawfulness of the business. (7) By the decree of the Court. (Partnership Act 1890, sees. 32-44.) Section 44 of the Partnership Act 1890, provides that the assets shall be applied — (1) In paying the debts and liabilities of the firm to persons who are not partners. (2) In paying to each partner rateably what is due from the firm to him for PRINCIPLES OF EQUITY. 79 advances. (3) In paying to each partner rateably what is due from the firm to him in respect of capital. This would, under the circumstances stated in the question, exhaust the assets, and it is unnecessary, therefore, to proceed further. There being no partnership articles, the presump- tion would be that the capital had been brought in in equal shares. Q. On what grounds will the Court dissolve a 'part- nership ? " A. The following are the chief grounds : — That a partner has been found lunatic by inquisition, or is permanently insane. Incapability of a partner to perform his part of the partnership contract. That a partner has been guilty of conduct calculated to prejudicially affect the carrying on of the business. That a partner has persistently committed breaches of the partnership business. That the business can only be carried on at a loss. That the circumstances are such that it is just and equitable that the partnership should be dissolved. (Partnership Act 1890, sec. 35.) Q. When ivill Equity interfere between partners — (a) by granting am injunction ; (b) by appointing a receiver ; (c) by appointing a manager? A. (a) It will be granted, irrespective of any claim for dissolution, to prevent a partner acting contrary to the partnership agreement, or contrary to the good faith which each partner is bound to observe towards the others, e.g., to prevent omission of a partner's name, or his exclusion from the place of business. (6) A receiver will generally only be appointed with a view to a dissolution or final winding up of the partnership affairs. (c) A manager will be appointed for the purpose of carrying on the business under the control of the Court, when it is desired to sell it (upon dissolution) as a going concern. (Indermaur's Equity, 130, L31.) Q. A is taken into partnership by B, who pays a premium. 80 THE STUDENT'S GUIDE TO THE On dissolution of partnership, can B claim a return of his premium ? A. By Section 40 of the Partnership Act 1890, where the partnership was for a fixed term, and is dissolved before the ex- piration of that term otherwise than by death of a partner, the Court may order the return of the premium, or such part thereof as it thinks just, having regard to the terms of the articles and the length of time the partnership has endured, unless the dis- solution is wholly or chiefly due to the misconduct of the partner who paid the premium, or the partnership has been dissolved under an agreement containing no provision for a return of any part of the premium. (Indermaur's Equity, 131 .) Q. State the rule in Clayton's case. Show how it applies in favour of or against — (a) deceased partners ; (b) retired partners ; (c) incoming partners, of a hanking business in the accounts between the bank and its customers. A. The rule is as regards appropriation of payments, and is threefold : (1) The debtor has the first right to state in respect of what debt or contract the payment is made. (2) Failing this the creditor has the right. (3) Failing this, the law presumes that it was made in respect of the earliest contract or debt, commencing with the liquidation of interest due. (a) As regards deceased partners, any amounts drawn out after the decease of a partner will be presumed to be on account of the balance owing at the time of the deceased partner's death, and if insolvency occurs the estate of the deceased partner will only be liable for the balance. (6) The same rule applies where a partner retires, (c) An incoming partner is not, as a rule, liable for debts contracted before he became a partner, but if such debts and others subsequently contracted are allowed to form one single account, and payments are made generally with respect to it, these payments (though made with moneys of the new firm) will be applied to the old debt, and a balance will be left for which the incoming partner will be liable. PRINCIPLES OF EQUITY. 81 Q. Will Equity decree specific performance of an agree- ment to form a partnership ? A. The Court will not generally do so, for "it is impos- sible to make persons who will not concur carry on a business jointly for their own common advantage." But where such an agreement has been acted on, the execution of a formal deed recording its terms may be ordered by way of specific performance, if necessary, to do justice between the parties. (Pollock's Partnership, 6.) Q. What are the respective rights of vendor and purchaser of a goodwill ? A. As between himself and the vendor, the purchaser acquires the right to carry on the business under the old name ; whilst, in the absence of stipulation, the vendor may compete with him in the same line of business, may advertise such business, and may even specially solicit the customers of the old firm to transfer their custom to him, but he must not in any way represent himself as still carrying on the old business. (Pearson v. Pearson, 27 Ch. D., 145 ; Pollock's Partnership, 105.) Q. What is the mode of proceeding against partnership property in respect of a partner's separate judgment debt ? A. Under the Partnership Act 1890 (sec. 23) the Court may make an order charging the partner's interest in the partnership property with payment of the judgment debt, and may appoint a receiver of that partner's share, and may order all accounts and inquiries, and make all directions which might have been made if the charge had been made by the partner, or which circumstances require. The other partners are at liberty to redeem the interest charged, or if a sale is directed to purchase. Under Section 33, on such an order being made, the partnership may, at the option of the other partners, be dissolved. (J. State shortly the provisions of the Partnership Act 1890 as to the misapplication of money received for a firm. A and G 82 THE student's guide to the B are solicitors in partnership. C, a client of the firm,, hands a sum of money to A, to be invested in a specified security, and subsequently a further sum, with general directions to invest it for him. A never invests either sum, but applies both sums to his own use. B knoivs nothing of the trans- actions. Is he liable to make good either of the losses ? A. In the following cases, viz. : {a) Where one partner acting within the scope of his apparent authority receives the money or property of a third person and misapplies it ; and (b) where a firm in the course of its business receives money or property of a third person, and the money or property so received is misapplied by one or more of the partners while it is in the custody of the firm, the firm is liable to make good the loss (Section 11). As to the first sum of money handed by C to A, B also is liable since this is part of the ordinary business of solicitors (Blair v. Bromley, 2 Ph., 354) ; but as to the second sum it is otherwise (Harman v. Johnson, 22 L. J., Q. B.,297). (Pollock's Partnership, 42, 43.) Q. Explain and illustrate the grounds on which persons who are not actually partners may be held liable for the debts of a firm, and state the limits of such liability. A. The real ground is estoppel, viz., that the person has (by speech, writing or conduct) represented, or has knowingly allowed others to represent that he is a partner in a particular firm, and that credit has been given to the firm on the faith of that representation (see Partnership Act 1890, sec. 14). If A tells B he is a partner in C & Co., and B tells D, and D consequently sells goods to C & Co., A is liable to D. To avoid this liability, a retiring partner gives notice in the London Gazette, and also to all customers of the firm ; but a deceased partner is not liable on the doctrine of holding out. (Pollock's Partnership, 50.) Q. Point out the principal differences between a share in a partnership and a share in a registered company. A. An ordinary partnership is founded on personal con- PRINCIPLES OF EQUITY. 83 fidence between the partners, and gives every partner equal rights in the conduct of the business unless there is an express agreement to the contrary. A commercial company on the other hand is regularly composed of a minority of active members designated directors, and of a majority who need not, and most commonly do not, know anything of one another, and have no part in the ordinary conduct of the business. (Pollock's Partnership, 7, 8.) Q. Define and distinguish — (a) partnership ; (b) unincor- porated company; (c) joint adventure; (d) incorporated company. A. (a) It is the relation existing between persons who have agreed to share the profits of a business carried on by all, or by any of them on behalf of all. (b) It is a species of partnership intermediate between a corporation at common law, and an ordinary partnership, (c) It is a limited part- nership confined to one particular venture, in which the partners use no firm name, and incur no responsibility beyond the limits of the venture, (d) It is a corporation registered under the Companies Acts with a common seal, and sues, and is sued, in its corporate name. (Indermaur's Equity, 127.) Q. What are the different functions of — (a) partnership articles ; (b) memorandum of association ; (c) articles of association ? A. (a) To define the scope of the partnership, and the shares, interest, duties, and general rights and positions of the partners. (6) To define the name of the company, its place of business, objects, liabilities of the members, and amount of capital, (c) To prescribe the regulations for the management and conduct of the business of the company. Q. What are the various Courts which have jurisdiction to wind up joint stock companies, and under what circumstances do their jurisdiction exist? A. (1) The High Court. (2) The Chancery Courts of the g 2 84 the student's guide to the Counties Palatine of Lancaster and Durham. (3) The County Courts. (4) The Stannaries Courts. Applications to wind up must be made (a) To the High Court, where the paid-up capital exceeds £10,000. (b) To the Palatine Court or High Court if the Company is situate within the jurisdiction of either of the Palatine Courts, and its capital exceeds £10,000. (c) To the County Court in whose jurisdiction the registered office of the company is situate, if the capital is less than £10,000, and provided the County Court has jurisdiction in bankruptcy, (d) To the Stannaries Court if the company is formed to work mines within the Stannaries, and is not shown to be actually working mines, or to be engaged in an undertaking outside those limits, or to be under a contract to do so, whatever the capital of the com- pany may be. (Eustace Smith's Companies, 5th edition, 74, 75.) Q. Shortly state the practice of the Court as to settling lists of contributories. What are the different classes of contri- butories in the winding-up of a company ? A. To answer the last part of the question first, there are two classes, viz., actual shareholders at the commence- ment of the winding-up, who are all placed in the A list, and past members who.have, however, only ceased to be members within a year prior to the commencement of the winding-up, who are placed in the B list. The A list is settled as soon after the appointment of the liquidator as possible, but the B list not until it is shown that the present members of the com- pany are unable to satisfy the debts. Notice is given of the date of settling the list of contributories, and the liquidator hears any persons who desire to urge objections why they should not be placed on the list, and he finally settles it. Every contributory placed on the list receives notice thereof, and may apply to vary by summons taken out within 21 days. (Eustace Smith's Companies, 111.) Q. In what modes may a company be wound up, and how PRINCIPLES OF EQUITY. 85 do the various modes differ from each other? On what grounds may a compulsory winding-up order be made ? A. In three ways, viz. : (1) By the Court ; (2) Volun- tarily ; (3) Subject to the supervision of the Court. The general scheme is the same in all these methods. The great distinction between winding-up by the Court and voluntary winding-up is, that in the first case the liquidators are officers of the Court and trustees for the creditors, whereas in the second case they are appointed by and are trustees for the company. In the case of a winding-up, subject to the Court's supervision, the liquidators are appointed by the company, but are subject to the Court's control. The following are the grounds : — (1) Special reso- lution to wind up by the Court. (2) Not commencing business within a year, or suspending business for a year. (3) Members reduced to less than seven. (4) Inability to pay debts. (5) That it is just and equitable to wind up. (Eustace Smith's Companies, 72, 73.) Q. What are the dates at which orders for winding-up a company (a) compulsorily, (b) voluntarily, (c) under the supervision of the Court, commence respectively ? A. (a) From the date of the presentation of the petition. {b) From the date of the passing of the resolution to wind up. (c) From the date of the passing of the resolution to wind up, and not from the date of the presentation of the petition on which the order is made. (Lindley's Companies, 5th edition, 664.) 5. Mortgages. Q. Explain, and illustrate, with reference to mortgages, the maxims, " Equity regards the spirit and not the letter," and *' Once a mortgage alivays a mortgage." A . At Common Law, if the mortgage was not paid off on the day named in the deed, the mortgagee became absolute owner, the mortgage being regarded as an estate granted to the mort- 86 THE student's guide to the gagee absolutely, subject to a condition to be performed by the mortgagor, and if not performed, the mortgagor's right was gone for ever. Equity, however, acting upon the first maxim mentioned in the question, regarded the trans- action as a security for money only, and always allowed the mortgagor to come and redeem upon payment of principal, interest, and costs. This right was called the mortgagor's equity of redemption. The second maxim mentioned in the question means that if a transaction has once been clearly shown to be a mortgage, a mortgage it will always remain. Thus a clause in the deed, providing that the mortgagor's equity of redemption should be barred if the mortgage was not paid off within five years, would be perfectly useless. (Howard v. Harris, 2 Wh. & Tu., 1178 ; Indermaur's Equity, 142.) Q. A sells property to B for £1,000, reserving a right of buying it bach at the end of a year for £1,100. He does not exercise this right within the year, but shortly afterwards claims to do so. Can he maintain this claim ? A. No, not if the transaction is really not a mortgage, but is an out and out sale with a right of re-purchase, for here the day named must be strictly observed. It may sometimes be difficult to tell which really the transaction is meant to be, and the following circumstances will all, with more or less force, point to its being a mortgage, in which case strict observance of the day is of no consequence : — (1) That the grantor remained in possession, merely accounting for rents as interest; (2) that the grantee,[though in possession, accounted for rents and profits to grantor ; (3) that the grantor paid the costs of the instrument ; (4) that the sum paid was totally inadequate, having reference to the value of the property. (Indermaur's Equity, 146, 147.) Q. What is meant by an Equity of Redemption ? What notice must be given by a mortgagor who wants to pay off f A. An Equity of Eedemption is that equitable right existing in a mortgagor, after the day named for payment PRINCIPLES OF EQUITY. 87 has gone by, under which he is entitled to redeem, and have the property reconveyed to him. on payment of principal, interest, and costs. The mortgagor desiring to pay off a mortgage after the day named in the deed, must give six months' notice, or pay six months' interest in lieu of notice, so that the mortgagee may have time to find another invest- ment for his money. However, in the case of an equitable mortgage by deposit, reasonable notice only need be given, so as to enable the mortgagee to look up the deeds (Fitz- gerald's Trustee v. Mellersh, 61 L. J., Ch., 231) . (Indermaur's Equity, 152, 153.) Q, How may a mortgagor lose or be deprived of his Equity of Redemption ? A. (1) By foreclosure, that is by the mortgagee taking proceedings in Chancery asking for an account to be taken, and for an order for payment by a certain date, usually six months from the date of the Chief Clerk's certificate, and that if not then paid the mortgagor be deprived of any further right. (2) By sale of the property by the mortgagee under his powers, but, of course, the mortgagor is entitled to an account and payment of any balance. (3) By force of the Keal Property Limitations Act 1874, under which, if the mortgagee goes into possession and holds for 12 years with- out giving any acknowledgment in writing of the mortgagor's right to redeem, such right is statute barred. (4) Under the Statute 4 & 5 Wm, & Mary, c. 16, a mortgagor loses his Equity of Kedemption if he mortgages a second time without disclosing the prior mortgage. Q. Explain what is meant by re-opening a foreclosure. A. By it is meant the Court permitting a mortgagor to redeem although a foreclosure decree has been made. Thus, if a mortgagee forecloses and then sues, this operates to re-open the foreclosure. And the Court has a discretionary power to re-open a foreclosure on special grounds, e.g., ignorance of the state of the proceedings, or the day fixed Ob THE STUDENT S GUIDE TO THE for payment, irregularity in trie proceedings, illness, or accidental inability to travel on the part of the person who should have paid the money, or even temporary poverty on the part of such person. (Indermaur's Equity, 163.) Q. Can a mortgagee, after having foreclosed, or after having sold the mortgaged property, sue for any deficiency ? A. He can sue after foreclosure, but it re-opens the fore- closure, and gives the mortgagor the renewed right to redeem, and it therefore follows that if he has not merely foreclosed, but has then proceeded to sell the property, or any part of it, he cannot sue, because he no longer has the estate in his possession ready to restore to the mortgagor on payment (Lockhart v. Hardy, 9 Beav., 349). But if he has simply sold under his power of sale, he may sue for any deficiency. (Eudge v. Kickens, L. E., 8 C. P., 358; Inder- maur's Equity, 166.) Q. Explain shortly the position of a person who purchases an Equity of Redemption. A. He is generally in the same position as the original mortgagor, but is not liable to the mortgagee to pay him the mortgage debt, unless the mortgagee has joined in the transaction, and the purchaser has covenanted with him to pay the amount. But he will (in the absence of express stipulation) indirectly incur a liability, as there is an implied covenant to indemnify the mortgagor against further liability on the mortgage debt. (Waring v. Ward, 7 Ves., 337 ; Indermaur's Equity, 144.) Q. What are the remedies possessed by a legal mortgagee ? and in what order must he resort to them ? A. His chief remedies are four in number — (1) to sue for his money; (2) to enter into possession and eject the mort- gagor, and then he has certain other incidental powers, e.g., a power of leasing ; (3) to sell under express powers granted by mortgage, or by statute ; (4) to foreclose. He may exercise all his remedies concurrently, but if he first forecloses and PRINCIPLES OF EQUITY. 89 then sues, this re-opens the foreclosure, and gives the mort- gagor a renewed right to redeem, and if he has, after fore- closure, sold the property or any part of it, he cannot then sue, as he has not got the property to restore to the mortgagor on payment. (Indermaur's Equity, 156, 166.) Q. What is meant by an equitable mortgage? Explain tvhy it is allowed. What are the remedies of an equitable mortgagee f A. An equitable mortgage is one effected by a memoran- dum of charge on the property, or by a deposit of the title deeds, either alone, or with a memorandum. The ground on which it is allowed, is that if the depositor sued at Law to recover the title deeds, the lien of the depositee would be an answer, and if he sued in Equity for specific delivery, the maxim "He who seeks Equity must do Equity," would apply (Kussell v. Kussell, 1 Wh. & Tu., 773). If the mortgage is by deposit, the proper remedy is foreclosure ; but if there is also an agreement to execute a legal mortgage, the mortgagee has the option of suing either for foreclosure or sale. In any foreclosure suit also the Court has a discretion to direct a sale. (Indermaur's Equity, 149, 164.) Q. Who has priority in each of the following cases, and ivhy? — (a) Equitable mortgage to A, followed by a legal 'mortgage to B. (b) Legal mortgage to C, followed by equitable mortgage to D. (c) Equitable mortgage to E, followed by equitable mortgage to F. A. (a) The legal mortgagee B will have priority if he had no notice, actual or constructive, of the equitable mort- gage to A, for " Where the Equities are equal the Law prevails." If B did not get the deeds their absence would generally amount to constructive notice of the prior equit- able mortgage, but this would not be so if he had enquired for the deeds and a reasonable excuse was given for their non-production (Agra Bank v. Barry, Endermaur's Con- veyancing and Equity Cases, 116). (6) C has both the legal 90 THE STUDENT'S GUIDE TO THE estate and priority of time, and must have preference over D in the absence of any circumstances of fraud or conduct on C's part, which enabled the second advance to be obtained without notice of the prior one (Northern Counties In- surance Co. v. Whipp, 25 Ch. D., 482). (c) E will have priority for neither has the legal estate, and the maxim is Qui prior est tempore potior est jure. Q. State the order in which the incumbrances are payable in the following cases : — (a) A gives a legal mortgage to B, a second mortgage to G, subject to B's mortgage, and then B makes further advances to A. (b) A gives a legal mortgage to B, who lends the title deeds to A. A deposits the deeds with C to secure a loan then made, G having no notice of B's mort- gage, (c) A gives an equitable charge by deposit of deeds to B. B lends the deeds to A, who obtains a loan from G on deposit of the deeds. G has no notice of B's charge, (d) A mortgages land in Middlesex to B, who does not register his mortgage. A then mortgages the same land to G, who has notice of B's mortgage, and registers his own security. A. (a) If B knew of A's second mortgage when he made his further advances, the order will be B's mortgage, then C's, and then B's further advances ; but if B did not know, B can tack his two advances together and postpone C (Kolt v. Hopkinson, 9H.L. Cas., 514). (6) Here B is postponed to C on account of his own gross negligence (Briggs v. Jones, L. B., 10 Eq., 92). (c) C has priority, because B has lost his priority through laches, and as the equities are not equal, C, though later in time, gets priority (Bice v. Bice, 2 Drew, 73) . (d) B has priority because C took with notice, and so the object of the Middlesex Begistry Act is accom- plished. (Le Neve v. Neve, 2 Wh. & Tu., 26 ; Indermaur's Equity, 170, 171.) Q. Explain tacking fully, and give an illustration. A. It is the uniting of securities given at different times, so as to prevent any intermediate incumbrancer from claiming PRINCIPLES OF EQUITY. 91 a title to redeem, or otherwise to discharge one lien which is prior, without redeeming or discharging the other liens also, which are subsequent to his own title, e.g., A, B and C, are first, second and third mortgagees, but when C advanced his money he thought he was second mortgagee, and, there- fore, if he can buy up A's mortgage, and thus get in the legal estate, he will be able to get payment of both mort- gages before B (Marsh v. Lee, 1 Wh. & Tu., 696). The reason for the doctrine is found in the maxim, "Where the Equities are equal the Law shall prevail." (Indermaur's Equity, 169.) Q. A, B and C have successive incumbrances on lands of D. Under what circumstances can G obtain priority for the last advance over B's incumbrance by obtaining a transfer of A's security, and when would he not obtain priority ? A. If C, when he advanced his money, was not aware of B's advance he can, by buying up A's mortgage and obtaining the legal estate, get payment of both mortgages before B. But if C had notice of B's incumbrance when he advanced his money, he could not thus get priority. (Indermaur's Equity, 169.) Q. What is meant by the doctrine of consolidation ? How did the Conveyancing Act affect the topic f A. Consolidation may be defined as the right of a mortgagee having two or more securities from the same mortgagor, to refuse to allow the mortgagor to redeem one of them without redeeming the other or others. It had its origin in the maxim, " He who seeks Equity must do Equity." (See Vint v. Padget, and Notes in Indermaur's Conveyancing and Equity Cases, 96.) The Conveyancing Act 1881 (sec. 17) provided that when the mortgages, or one of them, are or is made on or after 1st January, 1882, and so far as no contrary intention is expressed, a mortgagor seeking to redeem shall be entitled to do bo without paying any inmi< \ due under any Beparate mortgage made by him, or by any person 92 the student's guide to the through whom he claims, on property other than that com- prised in the mortgage which he seeks to redeem. Q. A sole mortgagee of freeholds, copyholds, and leaseholds dies, having devised his real estate to B, and bequeathed his personal estate to C, and appointed D {who proves the will) his executor. Who can give a valid discharge for the mortgage money ? and who can reconvey the various properties? A. As regards the freeholds the money will be paid to, and the estate reconveyed by, the executor D (Conveyancing Act 1881, sec. 30). As regards the copyholds, though the money will be paid to the executor D, the devisee B will will reconvey (Copyhold Act 1887, sec. 45). As regards the leaseholds, the money will be paid to, and the estate re- conveyed by, the executor D. (Indermaur's Equity, 154.) Q. Wltat powers were given to a mortgagor in possession by the Judicature Act 1873, and the Conveyancing Act 1881 ? A. Under the Judicature Act 1873, if no notice of intention to enter has been given by the mortgagee, the mortgagor may sue for the recovery of the rents and profits, or for damages in respect of trespass, &c, thereto, in his own name only. Under the Conveyancing Act 1881, he may make agricultural or occupation leases for 21 years, or building leases for 99 years, to take effect in possession within one year, at the best rent, without fine, with usual covenants and provisions for re-entry on non-payment of rent for not exceeding 30 days, and must deliver counterpart signed by lessee within one month to mortgagee, or first mortgagee if more than one. (Indermaur's Equity, 150, 151.) Q. What sums is a mortgagee in possession entitled to add to his mortgage debt ? A. He is entitled to add any proper costs incurred, any money he may properly have expended in maintaining his title, any sums properly paid for insurance, or for renewing renewable leaseholds, and any money expended in necessary repairs. But he may not add to his property money expended PRINCIPLES OF EQUITY. 93 in general improvements, for he has no right to make the estate more expensive for the mortgagor to redeem than is necessary. (Indermaur's Equity, 160.) Q. What is meant by decreeing an account against a mortgagee in possession with annual rests? When will an account be so decreed to be taken? A. By it is meant striking an annual balance, and applying any net amount then in the mortgagee's hands in reduction of the principal from time to time. If the mortgagee entered when no interest was in arrear, and there was no other special reason for his entering, then, as he must have entered solely for the purpose of getting his principal, which could only thus be paid gradually, he has shown his willing- ness to receive payment by driblets, and annual rests will be made, i.e., a yearly balance will be struck, and any surplus, after payment of costs and interest, will, from time to time, be applied in reduction of the principal, which will produce a cor- responding abatement of interest. (Indermaur's Equity, 159.) Q. Enumerate the disadvantages of a second mortgage. A. They may be summarized as follows : (1) The second mortgagee does not get the legal estate, or the deeds, both of which are taken by the first mortgagee. (2) He is liable to be postponed in some cases by reason of tacking. (3) He is entirely subject to the first mortgagee, and can only exercise his powers subject to the first mortgagee's rights. (4) He is liable to be made a party to a foreclosure suit, or to the property being sold over his head, and he may be obliged, in order to avoid losing his whole security, to pay off the first mortgagee, and thus take the security into his own hands. (Indermaur's Equity, 17G.) 6. Fraud, Accident and Mistake. Q. On what grounds can a deed executed by a person of full age, who understands its contents, be set aside ? A. (1) On the ground of some actual fraud which may 94 the student's guide to the have been perpetrated on him either by misrepresentation, or by concealment, where the other party was bound to dis- close certain facts. (2) On the ground of some constructive fraud, e.g., in Huguenin v. Baseley (2 Wh. & Tu., 597). (3) On the ground of accident or mistake. (See Indermaur's Equity, Part II., Chap. VI.) Q. Define actual and constructive fraud respectively, and explain the distinction behveen them. A. Actual fraud may be defined as something said, done, or omitted by a person, with the design of perpetrating what he must have known to be a positive fraud; whilst con- structive fraud is something said, done, or omitted, which is construed by the Court as a fraud, because, if generally permitted, it would be prejudicial to the public welfare. The great distinction between them is that in cases of actual fraud there is always a design to do evil ; whilst in cases of constructive fraud there is not necessarily any such evil design, and there may, indeed, be nothing really harmful in the par- ticular transaction, yet to allow it to stand would be to open the door to much possible evil in other cases. (Indermaur's Equity, 189.) Q. A sells an estate to B at an undervalue. In ivhich of the folloiving cases can A bring an action for damages, or set aside the sale respectively ? (a) B makes a statement about the estate, which B believes to be true, and thereby induces A to sell at a lower price. The statement is in fact untrue; (b) B, having no knowledge or belief on the matter, makes a statement, which is in fact untrue, about the estate; (c) B, knowing of the existence of valuable mines under the estate, and that A is ignorant of the fact, refrains from telling A, and thereby gets the property below its true value. A. (a) A has no right of action for damages, for B believed his statement to be true, and it is not, therefore, fraud (Derry v. Peek, 14 App. Cases, 337), but if A relied on the state- PEINCIPLES OF EQUITY. 95 ment then he might take proceedings to set the sale aside, or successfully resist specific performance (Kedgrave v. Hurd, 20 Ch. D., 1) ; (6) A can set the sale aside, or successfully resist specific performance, and also can bring an action for damages, if he can show that B made the statement reck- lessly, for this would constitute fraud (Derry v. Peek, supra); (c) A has no right of action, nor can he set the sale aside, as a purchaser is not bound to inform his vendor of facts that he is aware of that render the property more valuable than the vendor thinks it is, unless, indeed, a fiduciary relation- ship exists. (Indermaur's Equity, 190-192.) Q. What contracts will be set aside on the ground of con- structive fraud, as being contrary to the 'policy of the law f A. Instances of such contracts are : Marriage brokage contracts, contracts or conditions in restraint of marriage, frauds on marriages, and agreements to influence testators. (Indermaur's Equity, 196.) Q. Give instances of fidiciary relationships which may vitiate contracts and other transactions entered into between the parties. A. Those existing between trustees and cestuis que trustent, solicitor and client, principal and agent, guardian and ward, parent and child, &c. (Indermaur's Equity, 198- 205.) Q. Define an expectant heir. On what principle does the Court construe dealings with them f A. An expectant heir is one who has either some reversion- ary interest, or, at any rate, has an expectancy of some future benefit. The general rule of the Court is to set aside trans- actions with expectants on the principle of constructive fraud, if the expectant, after coming into possession, applies to the Court with reasonable diligence (Earl of Chesterfield v. Janssen, 1 Wh. & Tu.,624). But such a transaction will be maintained if full consideration was paid and it was altogether fair ; and if it was made known to, and approved by, the 96 THE student's guide to the person to whose estate the expectant hoped to succeed, then also it may stand. With regard to reversions it has now heen provided by 31 Vict., c. 4, that no purchase of any reversionary interest shall hereafter be opened or set aside merely on the ground of undervalue. (Indermaur's Equity, 206.) Q. What is meant by a fraud on a power? Give an illustration. A. It means such an execution of a special power of appointment as, though apparently good, is, nevertheless, not made bond fide for the direct end reserved, but operates virtually to defeat the objects of the donor of the power. Thus, in Aleyn v. Belchier (1 Wh. & Tu., 437), a husband, having a power of jointuring his wife, executed the power with an agreement with the wife that she should receive part only as an annuity for her benefit, and that the residue should be applied in payment of the husband's debts. It was held that this private agreement for the husband's benefit was a fraud on the power, and it was set aside. Q. Define and illustrate an illusory appointment and an exclusive appointment respectively. Are such appointments valid ? A. An illusory appointment is where a person, having a power of appointment amongst a certain class, appoints to all the members of such class, but only gives a nominal share or shares to one or more members. Thus, A having a power of appointment over £1,000 in favour of B, C, and D, appoints £500 to B, £499 19s. to C, and Is. to D ; the appointment to D is merely illusory. An exclusive appoint- ment is where the donor of the power appoints the whole fund to one member of the class to the exclusion of the others. Both illusory and exclusive appointments were void in Equity, as being considered frauds on the power, but an illusory appointment was allowed at Law, and by 1 Wm. IV., c. 46, it was also permitted in Equity. An exclusive appointment, PEINCIPLES OF EQUITY. 97 however, remained invalid until the year 1874, when was passed 37 & 38 Vict., c. 37, which made even an exclusive appointment valid. (Indermaur's Equity, 213.) Q. On ivhat grounds may (a) settlements, and (b) sales be set aside at the instance of the settlor or vendor ? A. (a) If voluntary and executory ; if executed through fraud, undue influence, or mistake, and the parties can be restored to their original position ; if a voluntary settlement in favour of his creditors and not yet assented to by them ; if the very object with which the trust was created has ceased to exist, (b) If the vendor was induced to sell by fraud, or if the sale is to a trustee, or person in a fiduciary position, who had not the leave of the Court, or who did not give full value and take no advantage. In both cases there must not be laches or acquiescence, and third parties must not have acquired innocently for value. (Indermaur's Equity, 182-185.) Q. What is meant by an accident remediable in Equity ? Give an example. A. Accident as relieved against in Equity may be defined as some unforeseen event, misfortune, loss, act, or omission, not the result either of negligence, or misconduct of the party. Thus, an annuity is given by will, and the executors are directed to set aside a sufficient amount of certain stock to meet such annuity. This they do, but subsequently the stock is reduced by Act of Parliament so that the annuity falls short. The Court will decree the deficiency to be made up against the residuary legatee. (Indermaur's Equity, 177, 180.) Q. Define mistake. When will the Court relieve in cases of mistake ? A. Mistake may be defined as some unintentional act, omission, or error arising from ignorance, surprise, imposition or misplaced confidence, and may be either mistake of fact or mistake of law. The Court will generally relieve in cases II 98 THE student's guide to the of mistake of fact if the mistake is of a material nature, for the rule is Ignorantia facti excusat. But the Court will not generally relieve in cases of mistakes of law, the rule being Ignorantia legis neminem excusat. To this rule, however, there is one exception, viz., where the mistake was one of title, arising from ignorance of a principle of law of such constant occurrence as to be supposed to be understood by the community at large (Lansdowne v. Lansdowne, Inder- maur's Conveyancing and Equity Cases, 146). The Court will also relieve in cases of mistake of foreign law. (Inder- maur's Equity, 181, 182.) Q. In luhat cases, and in whose favour, will the Court relieve against the defective execution of a -power of appoint- ment ? Will it ever relieve against the non-execution of a poiver ? A. The Court will relieve, either on the ground of acci- dent or mistake, where the defect is not of the essence of the power, and is in favour of a purchaser, a creditor, a wife, an intended husband, a legitimate child, or a charity (Toilet v. Toilet, 1 Wh. & Tu., 269). The Court will not relieve against the non-execution of a power unless the power was coupled with a trust, or its execution has been prevented by fraud. (Indermaur's Equity, 178, 179.) 7. Specific Performance. Q. What is meant by "specific performance of contracts" and to what kind of contracts is the doctrine confined ? A. It is a remedy peculiar to Equity, by which the Court will in some cases enforce, by attachment, strict performance of a contract, instead of leaving the person to his remedy by action for damages at law, the doctrine being based on the maxim, " Equity acts in personam." Specific performance will only be granted in cases in which damages will not PETNCIPLES OF EQUITY. 99 completely compensate, e.g., in contracts for the sale of land and houses. (Indermaur's Equity, 217, 220.) Q. State shortly the essentials of a valid simple contract of which specific 'performance can be obtained, both as regards the ordinary requisites of such a contract and the nature of the property ? A. The requisites of the contract are : (1) Parties able to contract; (2) mutual assent; (3) valuable consideration; (4) something to be done or omitted which forms the object of the contract. The contract must be of such a nature that damages will not compensate the parties for its breach, otherwise they will be left to their remedy by action for damages. (Indermaur's Equity, 217, 219.) Q. When will the Court decree specific performance of a contract contained in letters ? A. Where from the letters there is found a direct offer on the one side, and an unconditional acceptance on the other, without the introduction of any fresh term or stipula- tion, and the Court can collect, from a fair interpretation of the letters, that they import a concluded agreement. Thus, if A writes to B offering to sell a house for £1,000 and B writes back simply accepting the offer, here there is a binding contract ; but if B in accepting the offer were to insert as a condition that half the purchase-money should remain on mortgage, here there would be no binding contract. (In- dermaur's Equity, 218, 219.) Q. A offers by letter to buy a house from B for £1,000 — (a) B accepts the order verbally; (b) B writes: — "J accept your offer subject to my solicitor approving a formal con- tract." Can A sue B, or B sue A, in the above cases respec- tively, if the other party refuses to complete ? A. (a) B can sue A for specific performance, as the Statute of Frauds only requires that the contract shall be signed by the party to be charged, but A could not sue B (Indermaur's Equity, 230). (b) Neither party could here H 2 100 THE STUDENT'S GUIDE TO THE sue for specific performance, because the acceptance is subject to a condition, and does not appear to be intended to amount to a concluded agreement. (Winn v. Bull, 7 Ch. D., 29; Indermaur's Equity, 219.) Q. Will Equity decree specific "performance of a contract — (1) to sell a chattel ; (2) to do some personal act ; (3) not to do a certain thing ? A. (1) Yes the Court will do so if the chattel is of some special value, e.g., an object of vertu, a picture, or the like (Falcke v. Gray, 5 Jur., N. S., 645). There is also a general discretionary power in the Court irrespective of peculiar value under the Sale of Goods Act 1893, sec. 52. (2) No, for it would be impossible to compel obedience to it. (3) Yes, where there is a direct agreement not to do a certain thing, the Court will practically give specific performance by granting an injunction. (Whitwood Chemical Co. v. Hard- man (1891), 2 Ch., 416.) Q. What cases of specific performance stand outside the Statide of Frauds ? A. (1) "Where there has been part performance of the oral contract (Lester v. Foxcroft, 1 Wh. & Tu., 881). (2) Where the contract was intended to be reduced into writing, but has been prevented from being so by the fraud of the defendant. (3) Where the contract, although oral, is set out in the statement of claim, and admitted in the statement of defence, and the defendant has not pleaded the Statute of Frauds. In each of these cases although the contract was one for which writing was required by the Statute of Frauds, yet the Court will decree specific performance of the oral contract. (Indermaur's Equity, 220, 221.) Q. Explain the doctrine of Equity as to part performance of oral contracts. A. Where there has been a contract by word of mouth only, but which ought, according to law, to have been in writing, the Court will decree specific performance if acts PRINCIPLES OF EQUITY. 101 have been done by the parties towards the performance of such contract (Lester v. Foxcroft, 1 Wh. & Tu., 881). It is not, however, every act which will be sufficient part performance. The rule is that it must be some act exclusively referable to the contract, done with no other view than to perform it, and of such a nature that it would be a fraud now not to carry out the contract. Part, or even entire, payment of the purchase-money, or delivery of the abstract, will be insufficient ; but letting the purchaser into possession will be, for he cannot be placed in statu quo, as if the Court did not recognize and give effect to the contract he would be a trespasser. (Indermaur's Equity, 221.) Q. Where a contract has been reduced into writing, will the Court ever receive evidence of, and give effect to, a subsequent oral variation ? A. A distinction must here be observed between the position of a plaintiff seeking, and a defendant resisting, specific performance. In the latter case the Court will always admit such evidence, for the Statute of Frauds does not say that the written contract shall bind, but that the unwritten contract shall not. In the former case the Court will not generally admit such evidence, but it will do so in the following cases : — (1) After there have been acts of part performance, of the nature before described, as regards the principal contract. (2) Where the defendant in his defence sets up an oral variation as a reason for non-performance of the written contract, and the plaintiff then amends his claim, and seeks specific performance with the oral varia- tion. (3) When the oral variation has not been introduced into writing by reason of the defendant's fraud. (Woollam v. Hearn and notes, 2 Wh. & Tu., 508.) Q. Enumerate some of the chief defences to an action for specific performance. A. That the contract itself is immoral, or contrary to public policy ; that some fraud was practised on the 102 THE STUDENT'S GUIDE TO THE defendant, or there were circumstances of accident, mistake or surprise ; that there has been a subsequent variation of the contract, even though such variation was by oral contract only ; that it is practically impossible to compel the doing of the thing contracted to be done, e.g., a contract to do some personal act ; that the contract is of such a nature that damages will compensate the plaintiff. (Indermaur's Equity, 231.) Q. Will the Court decree specific 'performance of — (a) a contract to build or repair ; (b) a contract to sell the goodwill of a business ? A. (a) The Court will not decree specific perform- ance of a contract to repair premises, considering that damages will compensate. As to a contract to build, this is doubtful ; but probably the Court will not grant specific performance ; (6) No, not if the contract only relates to the goodwill, but a contract for the sale of a goodwill and of the premises, where the business is carried on, will be enforced. (Indermaur's Equity, 233.) Q. A agrees to sell a house and land to B. He can make a good title to the house and a portion of the land, but to a small part of it he cannot make a title. What are the rights of A and B respectively as regards specific performance ? A. As regards A, if he knew he had no title to the part of the property when he put it up he cannot enforce specific performance, nor can he if the part is really material to the enjoyment of the whole. Assuming, however, that he had no such knowledge and that the part is not material, he can enforce specific performance, allowing an abatement out of the purchase-money as compensation to the purchaser. As regards B, he can in all cases enforce specific perform- ance with an allowance as compensation for the portion to which a title cannot be made. (Indermaur's Equity, 236.) PRINCIPLES OF EQUITY. 103 Q. To what extent does lapse of time prevent a person enforcing specific performance of a contract ? A. (1) The rights on the contract may be statute barred. (2) Irrespective of this, as the granting of specific perform- ance is a discretionary remedy, though the party's rights, looked at in a legal light, may not be statute barred, yet if he has been guilty of laches, and has let the matter rest for a considerable time, the Court will refuse to give this relief, acting on the maxim, Vigilantibus non dormientibus cequitas subvenit. (Indermaur's Equity, 238.) Q. On a sale of land, the vendor and purchaser both die before completion. Who are the parties by and against whom the contract may be specifically enforced ? A. The vendor's personal representatives should sue or be sued as the case may be, for they represent his estate, and, under the Conveyancing Act 1881, sec. 4, have full power to convey. The purchaser's executor or administrator together with the devisee or heir-at-law, as the case may be, should be sued, and the devisee or heir-at-law, as the case may be, can sue. Q. Will Equity decree specific delivery of a chattel when there is no contract ? A. Yes, when a chattel is wrongfully detained and is an heirloom, or for some reason of peculiar value to the owner, so that damages for the detention would not sufficiently compensate. (Pusey v. Pusey, 1 Wh. & Tu., 961 ; Duke of Somerset v. Cookson, 1 Wh. & Tu., 962.) 8. Infants, Partition, &c. Q. Who is the natural guardian of an infant? What povjers of appointing guardians have the parents ? and ivhat are the powers of the Court as to custody of children ? A. The father is the natural guardian of his children, and 104 THE STUDENT'S GUIDE TO THE has a right to their custody. By 12 Car. II., c. 24, he could, by deed or will, appoint a guardian until marriage or full age ; and now, by the Guardianship of Infants Act 1886, the mother is, after the father's death, to be the guardian, either alone or jointly with the guardian appointed by the father ; and she may by deed or will appoint a guardian to act after the death of herself and the father. The Divorce Court has under this Statute, power after a decree, to pronounce the guilty party unfit to have the custody of the children (sec. 7), and, by the Custody of Children Act 1891, the Court may refuse the custody of a child to a parent who has abandoned or deserted it. By the Acts above referred to, and by its general jurisdiction, the Court has full powers of making such arrangements as to the custody and education of a child as it thinks best for the child's welfare. (Indermaur's Equity, 245-254.) Q. Under what circumstances will the Court in the exercise of its general jurisdiction remove an infant from the custody of the parent t A. When the parent is living in immorality, or is guilty of constant drunkenness, or continually ill-treats the infant, and generally where the parent's conduct is such that it will probably be injurious to the morals and interests of the child. (Wellesley v. Duke of Beaufort, 2 Euss., 1 ; Indermaur's Equity, 249.) Q. What statutory provisions have been made extending the original jurisdiction of the Court with regard to the custody of infants ? A. Under the Infants Custody Act 1873 (36 Vict., c. 12), the Court has power irrespective of any misconduct on the part of a father to give the custody of a child to the mother up to the age of 16. By the Guardianship of Infants Act 1886 (49 & 50 Vict., c. 27), the Court may, on the application of the mother, make such order as it thinks fit, regarding the custody of an infant, and the right of access of either PRINCIPLES OF EQUITY. 105 parent. It has been held under this provision that the Court has jurisdiction to order the delivery of an infant to the custody of its mother, without fixing any limit as to age. {Re Witten, 57 L. T., 336 ; Indermaur's Equity, 253, 254.) Q. A husband and ivife separate, and it is mutually agreed that the ivife shall have the custody of the children. Is this agreement binding? A. Under the Infants Custody Act 1873, this is a matter entirely in the Court's discretion, it being, however, specially enacted that the Court shall not enforce any such agreement, if of opinion that it will not be for the benefit of the infant to do so. Before this statute such an agreement would never be enforced by the Court, unless the circumstances were such that had the Court been applied to, it would have removed the children from the father's custody. (Indermaur's Equity, 250, 251.) Q. What is meant by a ward in Chancery ? Hoiv does the Court act generally with regard to its ivards ? A. Strictly speaking a ward in Chancery is an infant who is under a guardian appointed by the Court, but whenever a suit is instituted in Chancery relating to the person or pro- perty of an infant, he or she is treated as a ward of Court, though no guardian may be actually appointed. The Court is studious to protect the person and property of its wards, and nothing can be done with regard to either without the Court's sanction, and any one interfering with the infant, or his or her property, without the Court's sanction, is guilty of a contempt of Court, e.g., where a man marries a female ward without the Court's consent. (Eyre v. Countess of Shaftesbury, 2 Wh. & Tu., G93.) Q. Under what circumstances will the Court alloiv the income of an infant's properly, or part of it, to be applied towards his or her maintenance ? What principles guide the Court as to the a/mov/nt to be allowed for maintenance .' A. When the infant has no parent, or the parent is not 106 THE STUDENT'S GUIDE TO THE in a position to adequately maintain the infant according to his or her station in life. When the Court allows main- tenance, it does not always act strictly on the view of the direct maintenance and education of the infant being the only object to be attained, but it has a liberal regard to the circumstances and state of the family to which the infant belongs. Thus, if there are several children and one only has a fortune and they are all living with the parent, the Court will make such an allowance as will practically benefit all the children. (Indermaur's Equity, 255, 256.) Q. What is the rule observed by the Court as to the religion in which a child is to be brought up ? A. The general rule is that the religion of the father is to be followed, unless the child is of some reasonable age of discretion, and has already received education in another religion to such an extent as to render it dangerous and improper to effect any change in it. And although a father may have agreed to his child being brought up in a religion other than his own, it has been held that such agreement cannot be enforced, as it is contrary to public policy to allow a father to abdicate a duty naturally imposed upon him. (Re Agar-Ellis, Agar-Ellis v. Lascelles, 10 Ch. D., 49.) Q. Under what circumstances is a settlement made by an infant valid and binding ? A. A valid settlement can be made with the consent of the Court by males at 20, and females at 17, but with regard to powers of appointment and disentailing assurances executed by an infant tenant-in-tail, these are only valid if the infant subsequently attains full age (18 & 19 Vict., c. 43) . Settlements not made under the Act are not absolutely void, but voidable within a reasonable time after the infant attains full age. (Edwards v. Carter, 69 L. T., 153 ; Indermaur's Equity, 260, 261.) PRINCIPLES OF EQUITY. 107 Q. Of ivhat property can partition be made, and who can claim partition ? A. Partition can be made of freeholds, copyholds, and leaseholds. At Common Law only co-parceners could claim it, but by the Statutes of Partition joint tenants and tenants in common have equal right ; and a mortgagee of a joint owner can also compel it. A person can only maintain an action for partition where he is entitled in possession, and where his title is manifest, and no litigation is required to determine whether he is interested or not. (Indermaur's Equity, 265, 266.) Q. What are the provisions of the Partition Act 1868 as regards the power of the Court to order a sale in the place of a partition ? A. There are three distinct provisions : (1) If it appears to the Court that a sale would be desirable in the interests of the parties, the Court, on the application of any party interested, may order a sale ; (2) If parties entitled to a moiety or more request a sale, the Court shall order one, unless it sees good reason to the contrary ; (3) If any person interested requests a sale, the Court may order one, unless the other parties interested undertake to purchase his share, and may order a valuation for that purpose. (Indermaur's Equity, 266, 267.) Q. What is an action to settle boundaries, and when will such an action be entertained ? A. Where two proprietors dispute as to their boundaries, an action to settle them may be brought in the Chancery Division. It is not sufficient to ground such an action that the boundaries are merely in dispute, but there must also be some equity superinduced by the act of one of the parties, e.g., some particular instances of fraud, or some gross negligence, &c, on the part of a person whose special duty it is to preserve or perpetuate the boundaries. (Indermaur's Equity, 271, 272.) 108 THE STUDENT'S GUIDE TO THE 9. Election, Satisfaction, Performance, Conversion, &c. Q. Define and illustrate the doctrine of Election. A. It may be defined as the obligation imposed upon a party to choose between two inconsistent or alternative rights or claims in cases where there is a clear intention of the person from whom he derives one that he should not enjoy both (Indermaur's Equity, 273). Thus A, being entitled to Whiteacre in fee simple, and Blackacre in fee tail, devises Whiteacre to his eldest son and Blackacre to his second son. At Law the eldest son would get both estates — Whiteacre because it was devised to him, and Blackacre because of the Statute De Donis (13 Ed. I., c. 1). But in Equity the eldest son would be put to his election. (Noys v. Mordaunt, 1 Wh. & Tu., 395.) Q. With regard to the doctrine of Election, what rule was established by the leading case of Streatfield v. Streatjield? (1 Wh. & Tu., 997.) A. That a person who elects against a will does not necessarily forfeit the whole benefit given to him by it, but only so much as is necessary to compensate the disappointed devisee— in other words, it establishes the principle that compensation and not forfeiture is the doctrine. (Indermaur's Equity, 276.) Q. Define the doctrine of Satisfaction. What equitable maxim does it illustrate ? A. It may be defined as the making of a donation with the intention expressed or implied that it is to be an extinguishment of some existing right or claim of the donee. It may be divided into two wide classes, viz. : (1) Satisfaction arising in the case of a child, or one towards whom the donor stood in loco parentis, followed by some subsequent benefit ; and (2) Satisfaction arising in the case of a legacy given to a creditor. The doctrine is founded upon and illustrates the PRINCIPLES OF EQUITY. 109 maxim, " Equity imputes an intention to fulfil an obligation." (Indermaur's Equity, 285, 286.) Q. Does the Court lean in favour of or against the doctrine of satisfaction ? Give illustrations. A. It leans in favour of the doctrine in the first class of cases referred to in the last answer, and against it in the second class. Thus, if a father covenants to provide a portion for his child of £5,000, and then on his marriage advances him £2,000, this will be deemed to be a satisfaction pro tanto, and he only remains liable for £3,000, in the absence of evidence to the contrary (see Ex parte Pye, 2 Wh. & Tu., 364). But if A, owing B £1,000, leaves him £500 by his will, this will be no satisfaction pro tanto, but B will get the £1,000 and the £500, for it is necessary for a legacy to satisfy a debt that it should be equal to or greater in amount, and in every possible respect equally beneficial. (See Talbot v. Duke of Shrewsbury, 2 "Wh. & Tu., 378; Chancey's case, lb., 379.) Q. What inquiries should an executor make before paying legacies to children of the testator who have married since the date of the will, and before their father's death ? A. He should inquire whether some advancement was not made to the children upon their respective marriages ; because if there was this would operate as a satisfaction or ademption pro tanto of the legacy, and the children would only be entitled to so much of the legacy as exceeded the advancement. (Indermaur's Equity, 288.) Q. A testator made a will bequeathing £3,000 in trust for his daughter for life, with remainder to her children, and afterwards gave to her in his lifetime a sum of £500. Would that be in satisfaction pro tanto of the legacy ? Would evidence be admissible that the testator so meant it ? A. Yes, the gift of £500 is prima facie a satisfaction pro tanto of the legacy — a legacy to a daughter for life, with remainder to her children as a class is a portion (lurk v. 110 THE STUDENT'S GUIDE TO THE Eddowes, 3 Hare, 509). It was decided in this case that parol evidence is admissible to rebut the presumption of satisfaction which equity draws from the bare facts, although it is inadmissible to alter, add to, or vary a written instrument, or to prove that a written instrument was intended to have an effect not expressed in it. (2 Wh. & Tu., 398, 401.) Q. What is the rule of the Court ivhere a legacy is given twice over in a will to a legatee, or where a legacy is given by a will, and then another legacy to the same legatee by a codicil f A. If a general legacy of the same amount is given twice in the same will, for the same cause, and in the same words, or with only small differences, then the legatee will not get both, but the one is in substitution or satisfaction of the other. But if a general legacy is given by will, and to the same legatee there is a general legacy given by codicil, then in the absence of internal evidence to the contrary the legacies will be cumulative, and the legatee will get them both. (Hooley v. Hatton, 2 Wh. & Tu., 349.) Q. A covenants to leave his ivife £625 by will. He dies intestate, and the wife claims to have this amount first paid to her, and then to take her share in the balance of the personal estate under the Statute of Distributions. Is this claim main- tainable ? A. It is not; she is only entitled to her distributive share, that is, of course, assuming it exceeds £625. The Court considers the covenant practically performed in this way, for "Equity imputes an intention to fulfil an obligation." (Blandy v. Widmore, 2 Wh. & Tu., 428.) Q. Define the equitable doctrine of Conversion. What is the leading case on the subject ? A. It is an implied or equitable change of property from real to personal, or from personal to real, so that each is considered transferable, transmissible and descendible according to its new character. Thus A, by his will, directs PRINCIPLES OF EQUITY. Ill his real estate to be sold, and the proceeds paid to B. On A's death this is considered at once as money, so that were B then to die it would go to his personal representatives. The leading case is Fletcher v. Ashburner (1 Wh. & Tu., 971). (Indermaur's Equity, 308, 309.) Q. Define and illustrate the doctrine of Reconversion. A. It may be denned as that notional or imaginary process whereby a prior constructive conversion is annulled. Thus, in the case put in the last answer, suppose that on A's death B were to inform the trustees, under A's will, that he did not desire a sale, but intended to take the real estate as it stood, this would effect a reconversion, and the result would be that if B were then to die, the property would go to his heir. (Indermaur's Equity, 308, 324.) Q. Explain the decision in Ackroyd v. Smithson. (1 Wh. & Tu., 1027.) A. A conversion directed by will is only deemed to operate for the purposes specified in the will, and if those purposes do not exhaust the whole of the fund, the surplus will go to the person who would have taken it if the will had not directed a conversion. Thus, if testator devises Whiteacre to trustees in trust to sell for payment of his debts, and it realises £10,000 and the debts are only £7,000, the surplus £3,000 will go to testator's residuary devisee (or heir) . As such residuary devisee (or heir) is the absolute owner of the surplus, it will (if he dies before it is paid to him) devolve in its actual condition of money to his legal personal representative. (Indermaur's Equity, 317, 318.) Q. John Broivn was entitled in fee to one-quarter of Blackacre. A partition action was instituted, and Blackacre was sold, by the order of the Court, for £5,000. John Broivn died, an infant, in 1892, leaving a tvidoiv, a son, and a daughter. What becomes of his share in the proceeds of Blackacre ? A. There is an equity here preventing the effect of the 112 THE STUDENT'S GUIDE TO THE conversion brought about by the sale under the Court's order (Foster v. Foster, 1 Ch. D., 588). Therefore, subject to the widow's dower (if any), the son takes the money. (Indermaur's Equity, 322, 323.) 10. Penalties, Forfeituees, Injunctions. Q. In what cases, and on what principles, did the Court of Chancery give relief against penalties and forfeitures ? A. The Court always gave relief in cases of provisions for payment of money when there was a stipulation for payment of a larger sum if not paid at the time mentioned, or for forfeiture of any property by reason of non-payment of money ; but the Court will not (except as now provided by Statute) give relief in the case of forfeiture of estates (Peachey v. Duke of Somerset, 2 Wh. & Tu., 1245). The Court acts upon the principle which is embodied in the maxim, " Equity regards the spirit and not the letter." (Indermaur's Equity, 334, 336.) Q. Explain the grounds upon which, and state the cases in which, Courts will relieve against penalties and forfeitures ? A. Upon the grounds that the penalty or forfeiture was inserted to secure the doing of some collateral act, and that the Court can give due compensation, for "Equity regards the spirit and not the letter," so that in all cases of provisions for payment of money any stipulation for payment of a larger sum, if not paid at the time named, or for forfeiture of any property by reason of non-payment, will always be relieved against (Sloman v. Walter, 2 Wh. & Tu., 1257). So also, from a very early time, the Court of Chancery granted relief in cases of forfeiture by tenants of their leases by reason of non-payment of rent, upon the principle that the right of entry was intended merely as a security for the debt, and that, provided the rent, interest PRINCIPLES OF EQUITY. 113 thereon, and all costs were paid, the landlord was put in the same position as if the rent had been paid to him originally. A similar power was conferred on the Courts of Common Law by the Common Law Procedure Act 1852. But if the performance of the thing itself is essential the Court will not relieve (Peachey v. Duke of Somerset, 2 Wh. & Tu., 1245). With regard to forfeitures under leases, and relief therefrom, special provision is now made by Section 14 of the Conveyancing Act 1881. (Indermaur's Equity, 335-338.) Q. State the rights of the parties in the following cases : — (a) A lease contains covenants to pay rent, to keep the property in repair, and not to assign without a licence, and also a power of re-entry for breach of covenant. The covenants are broken, (b) A mortgagor covenants to repay an advance of ±'1,000 on a certain day and interest at 4 per cent., and in default of punctual payment on the day named to pay £1,200 and interest at 5 per cent, (c) A builder agrees to finish a building in a month, and in default to pay his employer ±1,000. The building is not completed until three days after the time named, (d) A agrees with B, to whom he is selling a business, not to carry on a similar business ivithin five miles, and in case of breach of such agreement to pay £100. A starts a business in breach of the covenant, and offers B £100. A. (a) Relief can be had against a forfeiture for non- payment of rent, at any time within six months after execution in the action of ejectment. Re-entry for breach of the covenant to repair is governed by the Conveyancing Act 1881 (section 14), and the lessor must serve a notice specifying the breach, and if capable of being remedied, requiring it to be remedied, and specifying the monetary compensation required (if any); and the Court has absolute discretion to relieve against the forfeiture at any time before actual entry by the lessor. The Court cannot relieve againsl re-entry for breach of the covenant not to assign, if the T 114 THE STUDENT'S GUIDE TO THE lessor wishes to re-enter. (6) Equity will relieve against the covenant to pay the £1,200 and 5 per cent., as it is looked upon in the nature of a penalty, on the mortgagor paying the £1,000 and 4 per cent, (c) The Court will not allow the employer to recover the whole £1,000 (being a penalty), but only such reasonable portion thereof as a jury assess. (d) The Court will grant an injunction to restrain A from carrying on the business, as it is in B's choice which remedy he prefers. (Indermaur's Equity, 335-341.) Q. What is meant by an injunction? Give instances of cases in which the Court would interfere by granting an injunction. A. An injunction is a judicial process whereby a party is required to abstain from doing a particular act, or to do a particular act, in which latter case it is styled a mandatory injunction (Indermaur's Equity, 372). The following are instances : — To prevent waste ; to prevent infringement of patents, copyrights, or trade marks ; to prevent a person acting contrary to his express covenant ; to prevent the commission or continuance of a nuisance. Q. Distinguish behveen a perpetual and an interlocutory injunction. What terms does the Court always impose on granting an interlocutory injunction ? A. A perpetual injunction is one granted at the hearing of a cause, and absolutely prohibits the act complained of. An interlocutory injunction is one granted at some inter- mediate stage and may be ex parte, and it only prohibits the act for a certain time, e.g., until the next motion day, or until the hearing of the cause. The Court will only grant an interlocutory injunction on the terms of the plaintiff under- taking to abide by such order as the Court may think fit to make thereafter, should it ultimately be of opinion that no injunction ought to have been granted, and that damage has been caused thereby to the defendant. (Indermaur's Equity, 388.) PRINCIPLES OF EQUITY. 115 Q. Will the Court grant injunctions against waste in the following cases: — (a) where plaintiff is claiming an estate against a defendant in possession claiming to be owner in fee ; (b) where plaintiff is mortgagor and defendant is mortgagee in possession ; (c) where defendant is oivner in fee subject to an executory devise, which, if a certain event happens, will carry the estate over to the plaintiff. A. (a) An injunction will be granted here, for the Court will keep the property intact until the title has been decided (Talbot v. Scott, 4 K. & J.) (b) The mortgagee in possession may cut and sell ripe timber under the Conveyancing Act 1881, but he will be restrained from committing other acts of voluntary waste, unless, indeed, his security is a scanty one, when the Court will not interfere, (c) An injunction may be had to prevent equitable waste. (1 Wh. & Tu., 860.) Q. If, before an injunction, timber has been ivrongfully cut and sold, how does the Court regulate the rights to the proceeds of sale ? A. As a general rule, where the timber is severed by the act of a trespasser, or by the waste of the tenant, or by act of God, e.g., tempest, while the tenant for life impeachable for waste is in possession, the proceeds become at once the property of the owner of the first vested estate of inheritance in esse, even although there is an intervening life estate. The result is the same if the wrongful severance is by a tenant for life impeachable for waste. Lord Eomilly, however, was of opinion that unless the tenant for life was the guilty party the proceeds should be invested and the income paid to the tenant for life. (1 Wh. & Tu., 872, 873.) Q. A buys a plot of freehold land from B, and covenants fin it he will lay out £'1,000 in building on the land, and also that he ivill not use any building on the land for a manu- factory. A sells the lawl to C. Can the covenants, or either i 2 116 THE STUDENT'S GUIDE TO THE of them be enforced by B against C, and if so, how, and on what ground ? A. By the rules of Common Law, the burden of a covenant relating to freehold land does not run with the land, and neither covenant could be enforced against C. But in Equity the burden of a restrictive covenant runs with the land to anyone who takes with actual or con- structive notice of it, so that an injunction can be obtained by B against C as regards the manufactory (Tulk v. Moxhay, 2 Phil., 774). And since the Judicature Acts, the rule of Equity prevails. Q. Will the Court interfere by injunction to restrain the publication of a libel ? A. Before the Judicature Acts it would not, but it has been held that since these Acts it will. This jurisdiction to the fullest extent has only been recently thoroughly established, for at first the Court would only interfere in this way in case of libels affecting a man's property, trade, or business, but in later cases it has been held that the Court can in its discretion interfere by injunction in any case. In very clear cases the Court will even go so far as to grant an interlocutory injunction. (Indermaur's Equity, 385, 386.) Q. What is a writ Ne exeat regno, and when is it issued ? A. It is a writ issued to restrain a person from leaving the realm, and is now only issued in cases coming under the Debtors' Act 1869, i.e., to prevent the defendant leaving the country, where the plaintiff makes an affidavit that the defendant is indebted to the extent of £b0 at least, and (except in the case of a penalty other than a penalty arising under a contract) that the defendant's absence will materially prejudice the plaintiff in the prosecution of his claim. (Drover v. Beyer, 49 L. J., Ch., 37 ; Indermaur's Equity, 389.) PRINCIPLES OF EQUITY. 117 11. Married Women. Q. What was, and what is now since 1882, the position of a married ivoman as regards her property ? A. As regards freeholds, the husband was entitled to the rents and profits, and if he had heritable issue by her born alive, he had an estate by the curtesy. As regards leaseholds, they vested in the husband absolutely, and he could dispose of them in any way, except by will. As regards other property, choses in possession vested absolutely in him, but if choses in action, he had to reduce them into possession. If he survived her, he took all her personalty, including lease- holds. Now, by the Married Women's Property Act 1882, as regards a woman married since the Act, all her property is to her separate use, and, as regards a woman married before the Act, all property the title to which accrues to her since the Act (see Keid v. Eeid, 31 Ch. D., 402), is her separate property. (Indermaur's Equity, 343, 345.) Q. What is meant by a fraud on a husband's marital rights ? A. Where a woman was engaged to be married, and made a settlement or other disposition of her property secretly, without the knowledge and consent of the intended husband, it operated as a fraud on him, and would be set aside (Countess of Strathmore v. Bowes, 1 Wh. & Tu., 471). This, however, is of little importance now, owing to the effect of the Married Women's Property Act 1882, which appears to render the doctrine obsolete. (Indermaur's Equity, 345, 346.) Q. Explain the nature and effect of the clause against anticipation that may be annexed to a gift to a mwried woman for her separate estate. A. It is ;i clause providing that she shall not anticipate, but shall only receive the income of her property as and 118 THE STUDENT'S GUIDE TO THE when it becomes due from time to time. The effect of the clause was fully considered in the leading case of Tullett v. Armstrong (Indermaur's Conveyancing and Equity Cases, 87), where it was laid down that it was only applicable during marriage ; but that, if property was given to a then unmarried woman for her separate use without power of anticipation, the clause became effectual upon her subsequent marriage, and that the clause would cease to have effect on her becoming a widow, though capable of reviving on a subsequent marriage if apt words were used. Under the Conveyancing Act 1881 (sec. 39) the Court has power, if it thinks fit, on a married woman's application, if for her benefit, to enable her to dispose of her property notwithstanding the anticipation clause. (Indermaur's Equity, 349, 354.) Q. A testator left his residuary estate to his married daughter for her separate use absolutely, luithout power of anticipation. In her marriage settlement there ivas a covenant for settlement of after-acquired property. Would she be compelled to bring such residue into settlement V What is the effect of a restraint on anticipation as applied to the capital of a fund given absolutely to a married woman for her separate use ? A. No, the restraint on anticipation is a restraint on alienation, and the covenant in the settlement has no effect on this property (Re Curry, Gibson v. Way, 54 L. T. Kep., 665). It used to be thought that if it was an income- bearing fund, the restraint was operative, and that if it was a sum of cash, the restraint was inoperative ; but the Court of Appeal, in Re Bown, O'Halloran v. King (27 Ch. D., 422), decided that this accident made no difference, and it depends on every occasion on what the Court gathers, from the words used in the will, that the testator really intended. The Court has power to remove the restraint under Section 39 of the Conveyancing Act 1881. PRINCIPLES OF EQUITY. 119 Q. A married woman allows her husband to receive the income of her separate property for several years. Can she afterwards demand an account from him and payment of the amount he has received ? A. No, she cannot, for the allowing him to receive it will usually amount to a gift of it to him, either for the benefit of the family or otherwise (Caton v. Rideout, 1 Mac. and G., 599) . This principle does not, however, ordinarily apply to capital received by the husband. (Re Flamank, Wood v. Cock, 40 Ch. D., 461.) Q. What debts or contracts of a married woman will bind her separate estate ? A. If settled without power of anticipation no debts or contracts will affect her property, but if not, then under the Married Women's Property Act 1882 (sec. 1 (4) ) all her debts or contracts bind her separate estate which she was then possessed of or which she might subsequently acquire. Under this provision it was, however, decided that to render subsequently acquired separate estate liable she must be possessed of some free disposable separate estate at the time of contracting the debt (Palliser v. Gurney, 19 Q. B. D., 519). The law on this point has, however, been recently altered by the Married Women's Property Act 1893 (sec. 1), and all her debts or contracts will bind her separate property which she either possessed at the time, or acquired afterwards, and whether she was at the time possessed of any separate estate or not. It is, however, specially provided that nothing in this provision is to render any separate property which she is restrained from anticipating liable to satisfy any debt. (Indermaur's Equity, 358.) Q. A spinster incurs debts and then marries, settling all her property upon herself for life without power of anticipation^ and after her death, upo/t her husband for life, and then to the child/ren of the marriage. Can the ante-nuptial creditors 120 THE STUDENT'S GUIDE TO THE enforce their claims against the -property comprised in the settlement? A. As regards the rights of the husband and the children they cannot, but as regards the woman's life interest they can, for it is provided by the Married Women's Property Act 1882 (sees. 13, 19) that a woman after her marriage shall continue liable in respect of, and to the extent of, her separate property for all ante-nuptial debts and torts, and that she cannot by settling the property on herself, without power of anticipation, deprive creditors of their rights under this provision. (Indermaur's Equity, 356, 357.) Q. A marriage settlement on a marriage in 1850 contained a covenant by husband and ivife to settle all after-acquired property of the wife. The ivife predeceased her husband, and was at her death entitled to a reversionary fund, ivhich subsequently fell into possession during her husband's life. Will it belong to him or be bound by the covenant, and therefore payable to the trustees of the settlement ? A. The fund is bound by the general covenant, as it falls into possession during the husband's life (Hughes v. Young, 32 L. J., Ch., 137 ; Fisher v. Shirley, 61 L. T. Eep., 668) ; and the Married Women's Property Act 1882 has made no difference on this point. Q. What is meant by (a) pin-money, (b) paraphernalia ? A. (a) Pin-money is an allowance settled upon the wife before marriage for her expenditure upon her person, to meet her personal expenses, and clothe her according to her proper rank and station. One year's arrears of pin-money only can ordinarily be recovered by the wife, (b) Parapher- nalia consists of such apparel and ornaments of the wife, given to her by her husband, as are suitable to her rank and condition in life. The property she possesses in parapher- nalia is of an anomalous character, for she has no power to dispose of it during her husband's life, whilst the husband can dispose of it (except her necessary wearing apparel) PRINCIPLES OF EQUITY. 121 either by sale or gift inter vivos, though not by will, so that on his death she is absolutely entitled to it, but subject to payment of his debts. (Indermaur's Equity, 361, 362.) Q. Explain the grounds upon ivhich the doctrine of a wife s equity to a settlement was introduced. Why is the doctrine of less practical importance than it was formerly ? A. It does not depend on a right of property in the wife, but is entirely the creation of Equity and has its origin in the maxim, "He who seeks Equity must do Equity." It was a condition imposed by the Court in cases where the husband was obliged to seek its assistance to enforce his Common Law right to reduce his wife's choses in action into his possession. The doctrine is of less practical importance now than formerly, because if the marriage is since 1882, or if the wife's title to the property accrues since 1882, the chose in action is made separate property by the Married Women's Property Act 1882. (Indermaur's Equity, 363-368.) Q. What is the wife's right by survivorship, and how was it affected by Matins' Act? A. It consists of her right to her outstanding property, not reduced into possession, if she survives her husband, and needs no active enforcement, and the result, therefore, was that a married woman could not, even with her husband, effectually assign her reversionary interests in personalty or other choses in action, for if she survived, notwithstanding her disposition, the property survived to her, and she could repudiate what she had previously done. Malins' Act (20 & 21 Vict., c. 57), provided that every married woman might, with the concurrence of her husband, by deed acknowledged, dispose of every reversionary interest, whether vested or contingent, under any instrument (not being her marriage settlement) made since 31st December, 1857. (Indermaur's Equity, 368-370.) 122 the student's guide to the principles of equity. Q. What testamentary pcnver has a married woman since 1882? A. If married before the Married Women's Property Act 1882, she can dispose of all property the title to which in possession, reversion, or remainder, accrues to her since the Act and during the coverture, as if she were a feme sole; and a woman married since the Act can dispose of all her property as if she were a feme sole. Such wills now need no longer be re-executed or re-published after the husband's death. (Married Women's Property Act 1893, sec. 3.) INDEX. A Accident, 97 Accounts — Open, 76 Settled, 76 Stated, 76 Actual fraud, 94 Ademption, 70, 71, 109 Administration, generally as to, 67-76 Agreement to form partnership, 81 Annual rests — Definition of, 93 When decreed, 93 Anticipation clause, 117, 118 Appointment — Of new trustees, 60, 61 Exclusive, 96, 97 Illusory, 96 Assets — Legal or equitable, 68 Order of appplication to payment of debts, 73, 74 Marshalling of, 74, 75 Assignment of choses in action, 51, 52 Association — Articles of, 83 Memorandum of, 83 Boundaries, action to settle, 107 Breaches of trust, 65, 66 B C Cases, list of important, 5, 6 Chancery — Court of, 45 Ward in, 105 Charity, gift to, 76 Cho.ses in action, assignment of, 51, 52 Clayton's case, rule in, 80 Companies, 83-85 Consolidation, 91, 92 Constructive fraud, 91, ( .t- r > Constructive trusts, 57, 58 124 INDEX. Contingent legacy, 71, 72 Contract — Specific performance of, 98-103 Part performance, 100, 101 By married woman, 119, 120 Contributories, list of, 84 Conversion, 49, 100, 111 Co-ownership, 77 Co-partnership, 77 Course of reading, 1-7 Custody of infants, 103-105 D Debts, priority of, 68, 69 Defective execution of power, 98 Demonstrative legacy, 71 Digest of Questions and Answers, 45-122 Disadvantages of second mortgage, 93 Dissolution of partnership, 78, 79 Donatio mortis causa, 73 E Election, 108 Epitome of Trustee Act 1893, 7-20 Equitable assets, 68 Equitable mortgage, 89 Equitable waste, 49, 51, 52 Equity — Meaning of, 45 Acts in personam, 47, 48, 98 To a settlement, 49, 121 Of redemption, 86-88 Exclusive appointments, 96, 97 Executor's right of retainer, 68 Executors, liability of, 69, 70 Executory trusts, 49 Exoneration of personal estate, 73, 74 Expectant heirs, 95, 96 F Foreclosure, 87, 88 Forfeitures — Generally, 112-114 When relieved against, 112, 113 Fraud — Generally, 93-96 Actual, 94 Constructive, 94, 95 On power, 96 On husband's marital rights, 117 Fusion of Law and Equity, 51 INDEX. 125 G General legacy, 71 Goodwill — Sale of, 81 Contract to sell, 102 Guardianship of infants, 103-105 H Heirs, expectant, 95, 96 Howe v. Lord Dartmouth, rule in, 63 Husband's marital rights, fraud on, 117 Illusory appointments, 96 Implied trusts, 57, 58 Infants — Generally, 103-106 Natural guardian of, 103, 104 Custody of, 104, 105 Ward in Chancery, 105 Maintenance of, 105, 106 Religion of, 106 Settlements by, 106 Injunctions — Generally, 114-116 Mandatory, 114 Perpetual, 114 Interlocutory, 114 To restrain publication of libel, 116 Joint adventure, 83 Judicature Acts, 50-53 L Laches, 67 ' Lapse of time, 67 Legacies — Specific, 7 1 General, 71 Demonstrative, 71 Interest on, 71 Vested, 71,72 ( iontingent, 71, 72 Charged on land, 7- Satisfaction of, 108-110 Legal assets, 68 Libel, injunction to restrain publication of, 116 126 INDEX. M Maintenance of infants, 105, 106 Malms' Act, 121 Marital rights, fraud on husband's, 117 Married women — Generally, 117-122 Property of, 117 Contracts by, 119, 120 Settlements by, 120 Pin-money, 120 Paraphernalia, 120, 121 Equity to settlement, 121 Right by survivorship, 121 Wills by, 122 Marshalling — Of assets, 74 Of securities, 74, 75 Maxims — JEquitas sequitur legem, 46 Equity acts in personam and not in rem, 47, 98 Equity considers that as done which ought to be clone, 46 Equity imputes an intention to fulfil an obligation, 109, 110 Equity regards the spirit and not the letter, 85, 86 He who seeks Equity must do Equity, 121 Ignorantia facti excusat, 98 Ignorantia legis neminem excused, 98 Once a mortgage always a mortgage, 85, 86 Qui prior est tempore potior est jure, 48 Vigilantibus non dormientibus cequitas subvenit, 103 Where the Equities are equal the Law shall prevail, 49 Merger, 51, 52 Mistake, 97, 98 Mortgagee — Remedies of, 88, 89, 92, 93 Mortgages — Payable primarily out of mortgaged property, 74 Generally, 85-93 Notice to pay off, 87 Equitable, 89 Tacking, 90 Consolidation, 91, 92 Reconveyance of, 92 Second, disadvantages of, 93 Mortgagor — In possession, powers of, 92 N Ne exeat regno, writ of, 116 Notice to pay off mortgage, 87 O Oral variation of written contract, 101 INDEX. 127 P Paraphernalia, 120, 121 Partition, 107 Partners — Duties of, 78 Rights of, 78, 80, 83 Liabilities of, 82 Partnership— Generally, 76-85 Definition of, 76, 77, 83 Dissolution of, 78, 79 Articles of, 83 Part performance, 100, 101 Penalties, 112-114 Pin-money, 120 Power — In the nature of a trust, 59 Fraud on, 96 Premium, return of, on dissolution of partnership, 80 Purchaser for value without notice, 48 Q Questions on Indermaur's Equity, 21-44 Questions and Answers, digest of, 45-122 R Reconversion, 111 Reconveyance of mortgage, 92 Redemption, equity of, 86-88 Reimbursement and remuneration of trustees, 63 Residue undisposed of, 75 Restraint on anticipation, 117, 118 Resulting trusts, 59 Retainer, executor's right of, 68 Retirement of trustee, 62 Rule in Clayton's case, 80 Rule in Howe v. Lord Dartmouth, 63 S Sale, when ordered in lieu of partition, 107 Satisfaction, 108-110 Second mortgage, disadvantages of, 93 Securities, marshalling, 74, 75 Separate estate, 119 Settled accounts, 76 Settlement, Equity to, 1!), li'l Settlements — Avoidance of, 97 By infants, L06 Settlement of boundaries, 107 Specilie legacy, 71 128 INDEX. Specific performance — Generally, 98-103 Of contracts, 98-103 Part performance, 100, 101 Without variation, 101 Defences to action for, 101, 102 Lapse of time, 103 After death of vendor or purchaser, 103 Irrespective of contract, 103 Stated accounts, 76 Statutes, list of important, 4, 5 Supreme Court, divisions of, 51 Surcharging and falsifying, 76 Survivorship, wife's right by, 121 Tacking, 49, 50, 90 Test Questions on Indermaur's Equity, 21-44 Thellusson Act, 55 Trustee Act 1893, Epitome of, 7-20 Trustees — Generally, 58-67 Appointment of new, 60, 61 Retirement of, 62 Estate of, 62 Remuneration of, 62, 63 Liability of, 63-66 Remedies of, 65, 66 Purchase of trust property by, 67 Trusts— Generally, 53-67 Requisites of, 53, 54 Express, 53, 54 Secret, 54 Executory, 55 Voluntary, 56, 57 Implied, 57, 58 Constructive, 58-60 Resulting, 59 Undisposed of residue, 7< Vendor's lien, 74 Vested legacy, 71, 72 Voluntary trusts, 56, 57 U V w Ward in Chancery, 105 Waste, 52 Wasting property, conversion of, 63 Wills by married women, 122 Winding-up of companies, 84, 85 Winding-up orders, date of commencement, 85 Writ Ne exeat regno, 116 GEO. 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