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[1929] HCA 42
High Court of Australia
1929-07-01
Dixon JJ, Long Innes J, Act J
Original judgment source is linked above.
LANGMAN 0:0: 3.) Segoe eee PLAINTIFF, AND DEFENDANT,
ON APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES.
H.C. or A, Money-lender - Advances by unregistered money-lender - Securities therefor - V
wipes Infants Loans Act 1905 (N.S.W.) (No. 24 of 1905), secs, 2, 8 - Equity Act
Rnox C1 (N.S.W.) (No. 24 of 1901), sec. 10* - Administration of Justice Act ackeand 2 (N.S.W.) (Wo. 42 of 1924), sec. 18*. Dixon JJ.
South Wales in its equitable jurisdiction alleged only that the defer while an unregistered money-lender within the meaning of the Money-
lender made certain advances to the plaintiff and obtained from her as for the repayment thereof certain stock mortgages and a lien on certain 'The plaintiff claimed declarations (1) that these transactions were of money-lending by a money-lender and (2) that the securities given by: plaintiff were void ; and the plaintiff also prayed that she might have sud further or other relief as the nature of the case might require. The demurred to the statement of claim. The Supreme Court (Long
*The Equity Act 1901 (N.S.W.) ground that a merely declaratory provides by sec. 10, as amended by is sought thereby, and the the Administration of Justice Act 1924 make binding declarations of 1 (N.S.W.), sec. 18, as follows: "No - whether any consequential suit shall be open to objection on the could be claimed or not."
Schnelle v. Dent, (1925) 35 C.L.R. 494, distinguished. David Jones Lid. v. Leventhal, (1927) 40 0.L.R. 357, followed. Lodge v. National Union Investment Co., (1907) 1 Ch. 300, approved.
Decision of the Supreme Court of New South Wales (Full Court): Handover y, Langman, (1929) 29 $.R. (N.S.W.) 435, affirmed.
A suit was brought in the Supreme Court of New South Wales n its equitable jurisdiction by Violet Ellen Ruth Langman against liam Handover, in which the statement of claim was substantially
In April 1927 the defendant in the course of his said business money-lender, in consideration of advances to the plaintiff to amount of £400, obtained from her the security of a stock age over 650 sheep dated, filed and registered on 21st April , under the Liens on Crops and Wool and Stock Mortgages Act The said advances were already partly secured to the ndant by a registered crop lien dated 30th September 1926 an advance of £300 and further advances, made and n by the defendant in the course of his business as a money-
The plaintiff claimed : - (1) That the above-mentioned transactions may be dec! He, be transactions of money-lending by a money-lender; -
(2) That the said stock mortgages and crop lien may be declared to be and to have been void and of no effect ;
(3) That the plaintiff may have such further or other relief ; the nature of the case may require.
In addition to entering an appearance and disputing the who of the plaintifi's claim, the defendant demurred to the stateme of claim, the grounds of the demurrer being (1) that the stat of claim discloses no equity to any relief in this honourable Con (2) that this honourable Court has no jurisdiction to entertain th suit; (3) that this honourable Court has no jurisdiction to ms a declaration of right except in proceedings for equitable relie relating to equitable rights or titles. At the hearing bef Long Innes J. a fourth ground was taken orally, that if the can be regarded as one for equitable relief it is demurrable beca the plaintiff does not in the statement of claim offer to do equi
During the hearing plaintiff's counsel disclaimed any intenti on asking for any equitable relief under the third prayer in the statem of claim. $
The demurrer was overruled, but an appeal from this decis was allowed by the Full Court of the Supreme Court : Handov Langman (1).
From the decision of the Full Court the plaintiff now, by spe¢ leave, appealed to the High Court.
Other material facts are stated in the judgments hereunder.
Hill, for the appellant. The statement of claim is not de on the ground that a Court of equity has no jurisdiction to ent it. This is a suit for equitable relief; although such relief v asked for, it could have been granted by the Court. Thes being illegal, they would form a cloud on the title to the (Halsbury's Laws of England, vol. xut., p. 53), and the ap was entitled to come to equity and to ask for the documents: delivered up, therefore the Equity Court could grant the relief s
It is not necessary for a party in such a position to wait until an action iscommenced at law (McDonnell v. Coles (1); Ryan v. Mackmath ). The appellant has established an equity entitling her to come to the Equity Court for relief (Tooth & Co. v. Coombes (3) ). The test as to whether a person is entitled to seek a declaratory decree s the jurisdiction of the Court to grant it (David Jones Lid. v. eventhal(4) ). The question whether consequential relief could or could not be given is immaterial. If the appellant had a right to such relief under sec. 10 of the Equity Act 1901 (N.S.W.) it is not ry for her to ask for it.
' [Isaacs J. referred to David Jones Lid. v. Leventhal (5).]
_ As the aid of the Court was properly invoked, the power conferred on the Court by that section might have been exercised. Although appellant could have done so, she was not bound to ask that the documents be delivered up for cancellation. Consequential lief need not now be asked for (Walsh v. Alexander (6); Jackson vy. Turnley (7) ). On the statement of claim as now appearing the lant could ask at the hearing for delivery up of the documents cancellation. If the facts disclose that equitable relief could be for, that is sufficient to entitle the appellant to come to the ity Court for relief. The appellant comes within the decision in Rooke v. Lord Kensington (8) inasmuch as although she could have asked for consequential relief she was not bound to do so the Court was not bound to grant such relief. Tooth & Co.'s Case (9) did not say that the relief must be asked for. The lant has only to disclose a right in her statement of claim to her within sec. 10 of the Zquity Act. The statement of claim is not demurrable on the ground that it does not offer to do equity (Daniell's Chancery Practice, 4th ed., p. 354). The decisions in he cases of Scott v. Nesbit (10), Whitmore v. Francis (11) and Mason y. Gardiner (12) are distinguishable, as they were made prior to
) (1923) 23 S.R. (N.S.W.) 299, at (6) (1913) 16 C.L.R. 293,
. 986. ) (1925) 42 N.S.W.W.N. 93, at p. (9) (1925) 42 N.S.W.W.N. 93. a (10) (1789) 2 Bro. C.C. 641; 29 E.R. 355. (1927) 40 C.L.R. 357. (11) (1820) 8 Price 616; 146 E.R. 1314. at 40 CLR. ab p. 368 (12) (1793) 4 Bro. 0.C. 436; 29 E.R. 5 976.
the Chancery Procedure Act 1852, and also because money was d in those cases whereas here no money is due because the securiti are illegal. Neither in words nor in terms does the third pray the statement of claim make a claim for consequential although perhaps such relief could be given under it. A claim consequential relief must specifically set out the nature of t th relief sought. te [Isaacs J. referred to Cockerell v. Dickens (1).] ty In Chapman v. Michaelson (2) the plaintiff was not put up terms as to doing equity although under the Judicature Ai rules of equity prevail. z [Dixon J. referred to Russian Commercial and Industrial B v. British Bank for Foreign Trade Ltd. (3).] The granting of a declaration of a legal right is a ma discretion and is quite apart from the question of j (Schnelle v. Dent (4) ). The securities are invalid, and on the fact before it the Court has power to make a declaration of right (0 man v. Michaelson (5) ). The power of the Court to order a to do equity is a discretionary power, and therefore the question. its exercise cannot arise on a demurrer. It is not necessary statement of claim to contain an offer to do equity (Schnellev. Chapman v. Michaelson (6) ; Whitmore v. Francis (7) ). [Starke J. referred to Story on Equity Jurisprudence, 3rd ed pars. 698-701, as to the right to equitable relief.] ;
Browne K.C. (with him Sheppard), for the respondent. demurrer a Court is not entitled to draw any inferences of (Lubrano v. Gollin & Co. Pty. Lid. (8) ). There should have allegation of ownership on the part of the appellant at the time tl securities were given, and that such ownership subsisted at the the suit was commenced. Such allegations have not been made. documents in question are not before the Court. An ord deliver up documents is made under the quia timet jurisdi the Court, and before such jurisdiction can be invoked there
(1) (1840) 1 Mont. D. & DeG. 45, at (5) (1908) 2 Ch. 612, at p. 619. p. 81. (6) (1908) 2 Ch. 612; (1909) 1
(3) (1921) 2 A.C. 438. (7) (1820) 8 Price 616 ; 146 E. (4) (1925) 35 CLR. 494. (8) (1919) 27 C.LR. 113, at p. 1
allegation as to a blot on title has no relation to personal property.
Pleading, p. 154). Where the jurisdiction of the Court depends on fear, facts showing such fear must be stated in the pleadings (Story on q Equity Jurisprudence, 3rd ed., p. 296, pars. 700-702). Anticipation of a danger presupposes there is a danger existing, and that is an essential _ ingredient in a statement of claim (Halsbury's Laws of England, vol. xmt., pp. 42, 52). A right to a declaration is not itself an _ equity. There being no allegation as to fear, the claim is a purely legal
(1) (1890) 43 Ch. D. 435, at p. 449. (4) (1921) 2 A.C, 438,
(2) (1927) 40 C.L.R. 357. (5) (1925) 42 N.S.W.W.N., at p. 94, (3) (1908) 2 Ch. 612; (1909) 1 Ch. (6) (1908) 2 Ch. 612.
be an allegation of fear or danger (Barrett v. Day (1)). The H.C. or A.
Material facts on which the claim is based must be alleged in the Laneman pleadings (Daniell's Chancery Practice, 5th ed., p. 267; Mitford on yaxpover,
It was decided in Bromley v. Holland (1) that money could recovered at law even if the documents were not registered i accordance with the relevant Act and were therefore void. Under what are known as the "usury cases,' and also in "annuity cases," relief was granted only on terms; which is in accord with the principle followed in Lodge v. National Union Investment Co. (2 The intention of the Legislature was that, when a money- Jends money without complying with the provisions of the Mo lenders and Infants Loans Act, his chance of recovering the mo
[Drxon J. referred to Hanson v. Keating (3), followed and discussed in Gibson v. Goldsmid (4); United States of America v. McRae (5).]
There is no conflict between the decision in Lodge v. National Union Investment Co. (2) and the decision in Chapman v. Mic (6). In the latter case all three Justices point out that there no equitable claim: the Court was simply administering legal and, of course, in those circumstances could not act on equitable principles. Similarly there is no conflict between the decision Schnelle v. Dent (7) and Lodge's Case, as in the former ¢ purely legal questions arose during the course of a suit in equ and were dealt with by the Equity Court by reason of sec. 4 of Equity Act. As to whether it is necessary to allege in the plea an offer to do equity, see Mason v. Gardiner (8); Ex parte Sorit (9). A person seeking relief must aver readiness and willi to perform the contract (Walker v. Jeffreys (10), followed u McDonald vy. McMullen (11) ).
[Knox C.J. But that was a suit for specific performance, whe! such an averment is essential.
[Isaacs J. referred to United States of America v. McRae (5).
(1) (1802) 7 Ves. 3; 32 ER. 2. (7) (1925) 35 C.L.R, 494.
(2) (1907) 1 Ch. 300. (8) (1793) 4 Bro. C.C. 436 ; 29 ER, :
(4) (1854) 5 DeG. M. & G. 757; 43 (9) (1814) 3 V. &B. 14; S5 ER 384, ER. 1064, (10) (1842) 1 Ha, 341, at p. 352;
(6) (1908) 2 Ch. 612; (1909) 1 Ch. (11) (1908) 25 N.S.W.W.N, 142. 238, (12) (1873) 8 Ch. App. 351.
Hill, in reply. The Court can take cognizance of facts which may be implied from the facts alleged in the statement of claim (Lubrano v. Gollin & Co. Pty. Ltd. (1)). Facts not stated in the state-
[Isaacs J. referred to In re Robinson ; Clarkson v. Robinson (3), as to the rights of an assignee for value without notice.]
_ The following written judgments were delivered : - _ Kyox C.J. This is an appeal by leave from an order of the Supreme Court allowing a demurrer to the statement of claim. ie relevant portions of the statement of claim and the grounds of lemurrer are set out at length in the reasons of the Supreme (Handover v. Langman (4) ) and need not be repeated here. questions argued before this Court were (1) whether the allega- in the statement of claim disclose any right to equitable relief cor relief relating to an equitable right or title, and (2), if so, whether statement of claim is demurrable on the ground that it contains offer to repay to the defendant the sums advanced by him to
ile an unregistered money-lender within the meaning of the -lenders and Infants Loans Act, in the course of his business as a money-lender made certain advances to the plaintiff and obtained from her as security for the repayment thereof certain mortgages and a lien on crops. It claims declarations (a) that those transac- tions were transactions of money-lending by a money-lender and
(1) (1919) 27 C.L.R., at p. 118. (3) (1911) 1 Ch. 230. (2) (1905) 2 Ch. 624. (4) (1929) 29 S.R. (N.S.W.) 435,
(b) that the securities given by the plaintiff are void and of no In compliance with the Equity Rules a prayer for further or ot]
disclaimed any intention of asking for any equitable relief under this prayer. The facts alleged, if taken to be true, establish that the transactions and securities in question are void under th provisions of the Money-lenders Act, but they establish no The statement of claim contains no allegation that the ani comprised in the securities belonged to the plaintiff or that they any of them were in existence at the time when the suit was insti
or assign his securities, or that he claimed any interest in the li stock or denied the plaintiff's title thereto or that any facts e which would entitle the plaintiff to come for equitable relief in th
fairly construed, is nothing more than a claim for the declarati of a legal right, and the case is covered by the decision in this in David Jones Lid. v. Leventhal (1). This is sufficient to dis
dealt with fully in the reasons given by my brothers Isaacs, Rich and Dizon, I think it right to say that I adhere to the principle o
this point. As I took part in the decision of this Court in Schnelle v. Dent (2 I may add that I agree with Harvey (.J. in Eq, in the reasons giver by him for thinking that the decision of the Court in that case ; not in any way inconsistent with the decision of Parker J. in Lo Case (2). In my opinion the appeal should be dismissed.
(1) (1927) 40 C.L.R. 357, (2) (1907) 1 Ch. 300. (3) (1925) 35 C.L.R. 494,
~ Tsaacs J. Harvey J., in delivering the judgment of the Full Court of New South Wales, said (1) : - ''It appears to me that the laintiff is substantially in this dilemma: either this is not a suit for equitable relief, in which case his suit is demurrable under the authority of David Jones Ltd. v. Leventhal (2), or it is a suit for
and where the right insisted on is legal such a claim cannot itself constitute a suit. Nothing could place the position more clearly, may I add more accurately, than it is stated in the judgment of learned Chief Justice in the case mentioned (3). The appellant's ment would open the door of the Equity Court to an endless ariety of common law cases, merely because equitable intervention not asked for might have been sought. For instance, the vendor of land could sue on his contract for an overdue instalment of purchase- money simpliciter, merely because he might have claimed specific performance. Damages for trespass to land could be obtained hout a jury on the ground that a claim for an injunction to restrain tition could have been added. And so on ad infinitum. But s the pleading sustain the assumption that the facts stated raise
_ tt) (1929) 29 S.R. (N.S.W.), at pp. 2) ( M7448, (8) (1927) 40 CLLR, at p. 368,
an equity on which a claim for equitable relief could have b founded ? I am of opinion that Mr. Browne's contention that th donotis correct. There is no allegation of any negotiable instrume such as a promissory note or bill of exchange. There is no alleg or suggestion that the respondent intends, or that the app anticipates any intention on the part of the respondent, to as the mortgages. The mortgages are not of land, and do not con within the doctrine of clouding a title. If they were assigned,
menace to the appellant. As to the necessity of danger, see F v. Hughes (1). Sec. 15 of the Liens on Crops and Wool and St Mortgages Act merely places an indorsee in the same position a original mortgagee as to right, title and interest. What # amounts to in this case is unknown to the Court. Further, set 1 of the Conveyancing Act 1919 (No. 6) would require the responde to indemnify the appellant in case of assignment. But, still the mortgages were of live-stock. There is no statement whether the 50 animals mortgaged in October 1925, or the 6 sheep mortgaged in April 1927, ever belonged to the appellant; 0 if they did, whether they are now in existence or have had a1 progeny. In my opinion, the statement of claim leaves the matt in conjecture, and consistent with there being no menace to appellant if the mortgage documents remain in the possessi the respondent. I may add that the presumption of continu of the life of the stock is one of evidence, and might serve t 1 trial to uphold an allegation of continued existence if that weref in the statement of claim. But, in my opinion, the allegat would be necessary if the relief of delivery for cancellation. claimed. The first horn of the dilemma is, in my opinion, fatal the appeal (see Maine and New Brunswick Electrical Power Co Hart (2) ). But the second has been vigorously argued, and is perhay $ more important, because it is not escapable by the mere ust words in the pleading. Though it has been split up in into two inquiries, namely, the necessity of an offer to do equ
(1) (1820)1 Coop. temp. Cott. 329; 47 E.R. 879. (2) (1929) A.C. 631, at P|
nd the correctness of Lodge v. National Union Investment Co. (1), it is really at bottom one only, namely, the duty of a plaintiff in tering a Court of equity to seek equitable relief on the ground of
must candidly confess that I do not understand, and have never understood, why there should be any hesitation in accepting Lodge's @ase as good law. To differ from a considered judgment of -d Parker on a principle of equity is in itself a formidable under- to be justified only by a clear manifestation of error. His opinion has stood for twenty-two years, has never been seriously enged, on the contrary has been approved of, and where distinguished it has been distinguished in a way that is rather a ecognition of its accuracy; and, for my part, the exploration of foundations to which I have been driven by the arguments in this has satisfied my mind that the position of Lodge's Case is impregnable. If I am wrong, I must be content cum Platone are. Lord Parker's opinion, after considering -a great many evant authorities, was expressed as late as the year 1907, and is
exception enabling him to sue notwithstanding such illegality, ould have relief without being put on terms by which both parties be restored to the positions they occupied before the transaction enced." It will be observed that the £1,075 was not the debt" created by the transaction, but the amount of money ally received. The terms imposed were therefore not in conflict h the Money-lenders Act: as the learned Judge said, it was ng both parties back as they were before the transaction nenced. Now, what fault can be found with that? I do not pose to re-examine all the authorities referred to in Lodge's Case, some brief references may be usefully made before citing other judicial pronouncements which fully support Lord Parker's ion. In the usury cases, so far as dealt with in equity, the iple was that the plaintiff seeking to be relieved had to do
"what was just" (see per Thurlow L.C. in Scott v. Nesbit The obligation to pay what was actually paid with legal i was only a particular instance of the underlying principle. of equity said the plaintiff must pay what was "due." That, it has been said, meant what was due at law. Nothing was due law on a contract usurious and otherwise illegal ab initio. It Wi an inseparable transaction, and, so, bad throughout. No actio could be founded on it (per Littledale J. in White v. Wright because it is void (per Lord Mansfield in Floyer v. Edwards (3 Not even a bona fide indorsee without notice of a negotia instrument given by the borrower upon the usurious considera could recover anything upon it. (Lowe v. Waller (4); see Morse v. Wilson (5) and per Lawrence J. in Barnes v. Hedley (6 When, therefore, the word "due" is used by a Court of equity
and conscience. In bankruptcy the rigid rule was adhered treating the whole obligation as void and unrelievable. (See Ex Scrivener (7) and Ex parte Skip (8).) This may, at least to extent, have actuated Fletcher Moulton L.J. in Chapman v. Mi (9) on the point of discretion. But in equity, as seen in Serit Case and Skip's Case, the borrower was compelled, as the of relief, to pay what was "really due." Equity considered "really due" in a case of usury, restoration of the money receiy with some fair interest as compensation for its use in the meantim Restoration, so far as possible, to the status quo ante is the key. of the doctrine. It is so in all cases of rescission. It is accepte the House of Lords in Savery v. King (10). In the case of ill that is especially necessary, as Lord Parker observed in the quoted from Lodge's Case (11). A plaintiff, party to an can sue only in exceptional cases. Here, not being in pari delicto, respondent is not entirely shut out of Court. But to be rectus in
3 29 (6) (1809) 2 Taunt. 184, at p. 19 127 E.R. 1047.
(3) (1774) 1 Cowp. 112, at p. 13; 98 E.R. 995, afb OTD 2 Doug. 736; 99 ER, 70.
(8) (1752) 2 Ves. 48! (9) (1909) 1 Ch., at (10) (1856) 5 H.L.C, 627; 10 BA 1046, 4 (11) (1907) 1 Ch,, at p. 312.
comesto disavow. In Perpetual Executors and Trustees Association of
and its general nature can be seen by reference to Wright's Case. From the judgment of Lord Atkinson I re-quote a few words _ presently apposite (3): "The plaintiff, in suing to recover possession of his property, is not carrying out the illegal transaction, but is seeking to put, everyone as far as possible, in the same position as they were in before that transaction was determined upon." That being the true principle, how can a plaintiff coming into Court to claim absolute relief from what he and another have illegally done, manifest to the Court that he purges himself of the illegality in which he has partici- "pated and from which he has received a benefit, and so make clear that he comes into the Court of Conscience with clean hands? He certainly cannot, unless he offers to restore, so far as he can, the benefits he has had. The case of Hanson v. Keating (4) is especially valuable in this case. I shall quote a passage bearing only on the
specific point to which I am immediately addressing myself. Wigram Ve. says (5) : - " If a bill be filed by the obligor in an usurious bond, to be relieved against it, the Court, in a proper case, will cancel the bond, but only upon terms of the obligor refunding to the obligee the money actually advanced. . . . The equity of the obligor 'is to have the entire transaction rescinded. The Court will do this, so as to remit both parties to their original positions ; it will not -telieve the obligor from his liability, leaving him in possession of the 'fruits of the illegal transaction he complains of." This has the indorsement of Turner L.J. in Gibson v. Goldsmid (6). Story on Equity Jurisprudence, par. 301, is to the same effect. See also per Buller J. in Alexander v. Owen (7). That is plain enough. The Court does not, aid illegality if it refuses relief and leaves parties as they already stand before the law. Each has voluntarily parted with property to the other, and the Act and the common law give to neither any
(1) (1917) 23 C.L.R. 185, at p. 197. (5) (1844) 4 Ha., at pp. 5, 6; 67 (2) (1908) L.R. 35 Ind. App 98. E.R. 537.
(3) (1908) L.R. 35 Ind. App., at p. 103. (6) (1854) 5 DeG, M. & G., at p. 767; (4) (1844) 4 Ha. 1; 67 E.R. 537. 43 E.R. 1064,
he must divest himself as far as he can of all profit by the illegality he H. ©. or A-
Australia Ltd. v. Wright (1) there was cited a case of Petherpermal Laxcman Chetty v. Muniandi Servai (2). It was a case of an illegal transaction 4 excel:
right to resume the property parted with (see Bromley v. Holla (1) and Mason v. Gardiner (2), in the Lord Chancellor's judgm And so, to get back the securities given, the borrower must cor to the Court of equity claiming to remove either a cloud on title a danger of later litigation based on those securities. Then, s the Court : " He that will have equity to help where the law ca shall do equity to the same party against whom he seeks to b relieved in equity " (Saint John v. Holford (3) ). In In re Cork and Youghal Railway Co. (4) Giffard L.J. said: " Equitable terms ca be imposed on a plaintiff seeking to set aside an illegal contract as the price of the relief he asks." The conditions which may b imposed are, of course, not arbitrary. The rule as settled by t] House of Lords in Colvin v. Hartwell (5) is that " A man, who come to seek the aid of a Court of equity to inforce a claim, must prepared to submit in that suit to any directions which the kno principles of a Court of equity may make it proper to give." ti accords with United States of America v. McRae (6), where the limit
tions are more precisely stated and certainly include the restoration of the money received. In this case, as seen, the directions are, so fé settled beforehand. For this reason the plaintiff must offer restoration. Story, par. 301, already referred to, says so; and that i in accord with all relevant authorities. For instance, Whitmore Francis (7), Mason v. Gardiner (8). The judgment of Lord Selb L.C. in Jervis v. Berridge (9) is most instructive as to this. There the Lord Chancellor stated the general rule that a plaintiff in equity suing upon equitable groundsis not bound to offer on the face of his bill submit to the terms which the Court may think fit on the hea impose as the price of relief. No submission is necessary for th purpose, and, if it were, the general prayer for relief would includ But, as the Lord Chancellor indicates (10), that general rule appli cases where " the question of terms is one which ought to be deter mined at the hearing." That general class of suit is represented b
(1) (1802) 7 Ves., at p. 18; 32 E. (6) (1867) 3 Ch. App., at p. 89. (2) (1793) 4 Bro. C.C., at p. 488; 29 (7) (1820) 8 Price 616, at p. 619 ER. 976. 146 E.R. 1314. (3) (1668) 1 Chan, Cas. 97; 22 E.R. (8) (1793) 4 Bro. €.C, 436; 29 ER (4) (1869) 4 Ch. App. 748, at p. 76: 976. (5) (1837) 5 Cl & F. 484, at pp. 522- (9) (1873) 8 Ch. App. 351, 523; 7 E.R. 488, (10) (1873) 8 Ch. App., at p. 358
the ordinary litigation in Courts of equity, such as specific perform- ance, accounts, partnership suits, and so on, where the circumstances we to guide the Court as to the proper and just terms, if any, to spose, should relief be granted. In the course of those observations, will be noticed, Lord Selborne says (1) that "if the relief asked were so certainly and necessarily conditional upon particular terms," then it is a proper matter for a demurrer to the bill for not offering . That is why the two branches of inquiry as to terms and the y of each other, are really one. The Lord Chancellor then refers (2) to certain classes of cases which are outside the general e and "stand on principles of their own." He says: " There e, indeed, certain cases where a defendant has incurred forfeiture penalties, or where the controversy relates to usurious or other mlawful transactions, in which the whole locus standi in curia of the intifi is dependent on an election, which must be declared by the |, to forgo legal rights for the sake of equitable remedies." He goes on to instance still other cases, as redemption suits, in which, unless here be an offer to redeem, the plaintiff is not rectus in curia. That to say, in those exceptional cases the plaintiff has no right to ome into a Court of equity having jurisdiction only in equity, and invoke its ies naans unless he ceolares by; his Jel that he
Lord Selborne, as is seen, instances among those exceptional ases controversies relating to usurious and other unlawful transac- That is direct authority for Lodge's Case (3). The " election, which must be declared by the bill, to forgo legal rights for the sake of equitable remedies "' (2) is the plaintiff's election to surrender what elaw would allow him to keep, if he wishes to obtain the equitable edy he seeks. The Lord Chancellor in saying this, and Lord Parker in deciding as he did, were basing themselves on the mental principles already stated relevant to the special class of cases. In accord with this is the opinion of Lord Phillimore
hen Phillimore J.) quoted in Schnelle v. Dent (4), who, referring to Lodge's Case, said that a plaintiff in the position of the present appellant " must do equity ; he must therefore offer to replace the
~ (1) (1873) 8 Ch. App., at pp. 357-358. (3) (1907) 1 Ch, 300. (2) (1873) 8 Ch. App., at p. 358. (4) (1925) 35 C.L.R., at p. 524.
amending legislation of 1919. That legislation takes the borrowe . out of the complete legal immunity in which he previously sto and places him in a position of possible responsibility to a third person, though covered by indemnity of the lender. He now comes to a Court of equity for something more than the gives him. What does equity say in those circumstances ? think Lord Cottenham L.C, in Sturgis v. Champneys (1) answers question. The Lord Chancellor, in words appropriate to the system still existing in New South Wales, and, after referring to the separate jurisdiction of law and equity, proceeds: " He arises the extensive and beneficial rule of this Court, that he wl asks for equity must do equity, that is, this Court refuses its aid to give to the plaintiff what the law would give him, if the Courts of
him conditions which the Court considers he ought to comply ¥ although the subject of the condition should be one which this Court would not otherwise enforce." Reading that in conjunction with the limitations to the object of the suit that are settled by
McRae's Case (2), the rule so stated applies exactly to this case. - In my opinion the appeal should be dismissed.
Rica anp Dixon JJ. The plaintiff appeals, by special lea 7 from a judgment of the Full Court of the Supreme Court of New South Wales which, reversing the decision of Long Innes J., allowed the defendant's demurrer to her statement of claim.
The statement of claim alleges, in effect, that the defendant an unregistered money-lender, and that in the course of his busi he had obtained certain securities from the plaintiff in considerati on of advances made to her, and it prays for declarations that these transactions are transactions of money-lending by a money-len and that the securities are void, and for such further and other relief as the nature of the case may require.
(1) (1839) 5 My. & Cr. 97, at pp. 101- 102; 41 E.R. 308. (2) (1867) 3 Ch. App. 79.
Upon the facts alleged the defendant would have taken the securities in the course of committing an offence against sec. 2 of the Money-lenders and Infants Loans Act 1905, and accordingly they would be void in his hands (Victorian Daylesford Syndicate Ltd. v. Dott (1); Bonnard v. Dott (2); Whiteman v. Sadler (3); Cornelius y. Phillips (4) ). But by virtue of sec. 166 of the Conveyancing _ Act 1919 the securities would be validated in the hands of a bona fide assignee for value, who was not himself a money-lender, and upon the defendant making such an assignment the defendant would become liable to indemnify the plaintiff.
_ The ground upon which the Full Court held the pleading demur- table was that either it was not a suit for equitable relief or it sought equitable relief against a borrowing transaction, and, as an essential condition to that relief, the plaintiff must offer to do equity by repaying the money borrowed. In New South Wales declarations of right may be obtained in the equitable jurisdiction only, and therefore the curious consequence may appear to follow from the decision of the Full Court that, although the borrower and her property are absolved as a result of statute from repaying _ the money-lender his loan, and she is indemnified against liability _ to his assigns, yet, in effect, without renouncing these very rights, she cannot have their existence declared. The maxim, he who seeks equity must do equity, is not, according to Knight Bruce L.J., i always easy to understand or apply (Gibson v. Goldsmid (5) ), but _ it does not substitute moral for legal standards in the determination of the conditions of relief. The true meaning of the maxim is that one _ who seeks the aid of a Court of equity to enforce a claim, must be Prepared to submit in that suit to any directions which the known principles of a Court of equity may make it proper to give (Colvin v. Hartwell (6) ). " The rule, certainly, does not go so far as to entitle the Court arbitrarily to impose terms upon a plaintiff, who may be driven to ask for its assistance. It is restricted in its operation, and the true meaning of it, as I apprehend, is this, that those who ask for the assistance of the Court must do justice as to the matters
(1) (1905) 2 Ch. 624, (5) (1854) 5 DeG. M. & G (2) (1906) 1 Ch. 740. 760; 43 E.R. 1064.
(3) (1910) A.C. 514. (6) (1837) 5 Cl. & F, 484, at p. 522; (4) (1918) A.C, 199, 7 ER. 488.
in respect of which the assistance is asked " (per Turner L.J. v. Goldsmid (1) ).
It is, therefore, essential to ascertain what is the matter in re: of which the plaintiff is entitled to receive the Court's Her contention is that, because documents exist which, upon tl face, bind her or her property but which, because of collateral fe are void by statute, unless and until assigned to a bona fide purchaser for value, she has an equity to have them delivered up _ and cancelled and to obtain the substitutional relief of a declaration of right. If this be so, her equity is in aid of the legal right confer by the statute. The statute having made the securities void in the hands of the party who committed the illegality, her alleged equity is to have remedies which will effectuate the rights or preserve the immunities which the statute gives her and safeguard her from danger of "instruments pregnant with the seeds of suits" ( phrase of Lord Eldon in Underhill v. Horwood (2) ). If this v her equity, it would, indeed, be incongruous for the Court wh enforced it to do so only upon the terms that she forwent the m important of those rights or immunities, and repaid the money borrowed. "
The jurisdiction of Courts of equity to direct delivery up and cancellation of instruments which, although good on their face, in fact, void, is thoroughly established by decisions. " And th decisions are founded on the true principles of equity jurisprude which is not merely remedial, but is also preventive of injust If an instrument ought not to be used or enforced, it is agai
retain it for some sinister purpose" (Story, Equity Jurisp sec. 700). But the equity to have the document recalled does no necessarily arise from the mere fact that the document is void and is outstanding considered without regard to the reason for invalidity, and irrespective of the position occupied by the parties. It might well be supposed that a party who escaped from obligation
which he voluntarily incurred, because his contract was infected with illegality, although not himself the object of the legislat
(1) (1854) 5 DeG. M. & G., at p. 765 5 (2) (1804) 10 Ves, 209, at p. 2185, 43 E.R. 1064, 32 ER. 824, rz
sanctions, might be confined to the remedies which the statute creating the illegality gave him ; and that he had no equity to any
(1) (1749) 1 Ves. 317, at p. 319; 27 E.R. 1055. (2) (1844) 4 Ha. 1; 67 E.R. 537. (3) (1844) 4 Ha., at pp. 5, 6; 67 E.R. 537.
case, the Court will execute the matter which is the subject of suit wholly, and not partially. So, if a bill be filed by the obligor in an usurious bond, to be relieved against it, the Court, in a proj case, will cancel the bond, but only upon terms of the obli refunding to the obligee the money actually advanced. The reas ing is analogous to that in the previous cases. The equity of the obligor is to have the entire transaction rescinded. The Court will do this, so as to remit both parties to their original positions: it will not relieve the obligor from his liability, leaving him in the | possession of the fruits of the illegal transaction he complains of." _ In such cases the equity is founded, not upon the necessity of - protecting the party's legal rights, but upon his willingness t resign them in order that he may be restored to the position he occupied before he embarked upon the transaction which turns out to be unlawful.
In the eighteenth century it became common for those in n of money and those ready to supply it to avoid the operation of the statutes against usury by adopting the expedient of selling - and buying annuities instead of borrowing and lending money at a forbidden rate of interest. The usurer, as a rule, supplied the - money in exchange for an annuity upon the life of his client calculated at six years' purchase. (See Usury and Annuities of the Eighteenth Century, by Sybil Campbell, 44 L.Q.R. 473.) Because of this traffic the Annuity Act 1777 (17 Geo. III. c. 26) was passed. Tt made the grant of the annuity null and void unless a full memorial of the transaction was registered in Chancery. Until this statute was replaced by the less stringent provisions of 53 Geo. III. ¢. 141, the Court of Chancery was often called upon to grant relief when annuities had not been registered in conformity with the statute. In granting relief to the seller of an annuity the same principle was adopted, namely, that the plaintiff's equity to a decree for the cancellation of his void grant to the defendant annuitan depended upon his readiness to restore the consideration he h received save in so far as he had repaid it in the guise of annuity: payments. But in this case the principle upon which the Court proceeded rarely operated to impose upon the plaintiff the necessi of doing more than his legal duty ; for at law the buyer of the annu ity was entitled to recover the price he had paid for the annuity, less
'annuity payments (Shove v. Webb (1)). A consideration of the cases on this subject, however, will show that the ground for the peamteble relief was, not the legal right, but the rehabilitation of the parties in their former position. In Simpson v. Lord Howden _ (2) Lord Cottenham, in dealing with the cancellation of instruments, _ says: - "It is to be observed, as to one class of cases generally
The annuity cases are numerous and exhibit some fluctuation of opinion upon incidental matters, such as the necessity of the plaintiff offering to pay life insurance premiums paid by the annuitant, and the question whether a Court of equity should adopt "the legal rule that payments of the annuity should be treated as "repayments on account of the consideration, a subject discussed ina way which may lead to misunderstanding, but they justify Lord ham's statement. (See and compare Duke of Bolton v. Williams (3); Byne v. Vivian (4); Byne v. Potter (5); Bromley v. Holland 6); Ex parte Shaw (7) ; Hoffman v. Cooke (8); Bromley v. Holland (9); Jones v. Harris (10) ; Bazzelgetti v. Battine (11) ; Davis v. Duke
(1) (1787) 1 T.R. 732; 99 ER. (6) (1800) 5 Ves. 610, at p. 618 (Sir 348, Richard Arden, afterwards Lord Alvan- (2) (1837) 3 My. & Cr. 97, at p. 106; ley); 31 E.R. 766,
40 E.R, 862, (7) (1800) 5 Ves, 620; 31 E.R. 771, -, (3) (1793) 4 Bro. C.C. 297, and at Pp. (8) (1801) 5 Ves. 623; 31 E.R. 772. 1; 2 Ves. Jun. 138, and at p. 155; (9) (1802) 7 Ves. 3 Bi ER. 901; 30 E.R. 561. (10) (1804) 9 Ves, 48 Re 4 (4) (1800) 5 Ves. 604; 31 E.R. 762. (11) (1821) 2 Swanst. 156 (n); 36 (5) (1800) 5 Ves. 609, and the note E.R., at p. 576.
of Marlborough (1), where at p. 157 a misstatement of L Loughborough's decision in Duke of Bolton v. Williams (2) occurs
Angell y. Hadden (3)). In Lodge v. National Union Investment Co. (4) Parker J. decided that a borrower could not be relieved in equity against securities illegal and void under the Money-lenders "without being put on terms by which both parties may be res to the positions they occupied before the transaction commer (5). This, in substance, adopted the view that, as in the case of statute against usury, the illegality of the transaction embodied the outstanding instruments gave the borrower no equity, save to! remitted to his former position. Indeed, there appears to be no sound distinction, in this respect, between the effect of the tw pieces of legislation. In each case the borrower is absolved his contractual obligation, because the lender has offended against
must rest on some thing other than the legal right or immu given by statute. It is the situation created by the statute whi gives the innocent party an equity to be restored to his forme
This is made clear by Lord Selborne in Jervis v. Berridge (6). dealing with a bill to rescind for fraud, he says : - " TI confess I surprised to hear the argument that, in such a case as the p an offer, upon the face of the bill, to repay the moneys expended by the demurring defendant, was necessary ; my impression, D many years' practice at the Bar, having always been to the contt In that impression, as to what is, at least, the modern practice the Court, I am confirmed by several of the authorities which y mentioned at the Bar. . . . There are, indeed, certain where a defendant has incurred forfeitures or penalties, or the controversy relates to usurious or other unlawful transacti in which the whole locus standi in curia of the plaintiff is dependent on an election, which must be declared by the bill, to forgo leg rights for the sake of equitable remedies." The same view of th
(1) (1818) 2 Swanst. 108; 36 E.R. (3) (1817) 2 Mer, 164; 35 ER. 555. (4) (1907) 1 Ch. 300. ; (2) (1793) 4 Bro. C.C, 297; 2 Ves. Jun. (5) (1907) 1 Ch., at p. 312. 138; 29 E.R. 901; 30 E.R. 561. (6) (1873) 8 Ch. App., at p. 358
elaborate discussion of the law of usury, said : - ' The equity cases one uniform language ; and I do not know of a case in which elief has ever been afforded to a plaintiff seeking relief against usury, by bill, upon any other terms. It is the fundamental doctrine of the Court" (Fanning v. Dunham (1) ).
sec, 18 of the Administration of Justice Act 1924, the statement of aim would be demurrable.
In David Jones Lid. v. Leventhal (2) the decision of Harvey C.J. in iq. in Tooth & Co. v. Coombes (3) was approved, and it was held that statutory provision did not enable the Court to make a declara- n of right, except in proceedings for equitable relief or relating to equitable titles. If the equity to relief rests upon the rehabilita- ion, it appears to follow that a declaration of right can only be in a suit where a title to that relief is shown. It is, however, ed that, if the subject of the suit is within tae cognizance of the Court in its equitable jurisdiction, sec. 10, as amended, has he same effect as Order XXV., r. 5, of the English Rules of the Supreme Court has throughout the High Court of Justice, and ites a new statutory remedy, which is to be administered without gatd to equitable principles, and that Chapman v. Michaelson () applies. The argument is not easy to apprehend, because it nes that a claim may be within the equitable cognizance, hough the plaintiff has no equity. If, however, the views already d are well founded, it can have no application to this case, wuse all that is within the cognizance of the Court in its equitable iction is the restoration of the party to his former position, lich involves submission to refund what was paid.
'Starke J. The demurrer in this case challenges the equitable ion of the Supreme Court of New South Wales to entertain suit (David Jones v. Leventhal (2) ). A fundamental rule is that iff must state a case by his pleadings within the jurisdiction
) (1821) 5 Johns. Ch. 122; 9 Am. (3) (1925) 42 N.S.W.W.N. 93. Dec. 283, at p. (4) (1908) 2 Ch. 612; (1909) 1 Ch. 238 (C.A.).
of the Court. The plaintiff here alleges no more in substance that she gave certain stock mortgages anda crop lien to the defendar which are registered under appropriate Acts, and that they are
by reason of the provisions of the Money-lenders and Infants Act 1905. There is no jurisdiction in a Court of equity to ord legal instrument to be delivered up on the ground of illegality w appears upon the face of the instrument itself (Simpson v. Howden (1); Brooking v. Maudslay, Son and Field (2) ). Buti many cases where the illegality was not apparent on the face of instrument, the Courts of equity assumed jurisdiction and ord cancellation and delivery up of the instrument. This jurisdiction attached in the case of misrepresentation or fraud, or if the i ment was one purporting to convey lands and hereditaments an
probable mischief would result from a party being allowed to re the instrument in his possession (Duncan v. Worrall (3); Equity Jurisprudence, 3rd ed., par. 700, p. 297; Story's By
is made in the pleadings in the present case, and such mischi exists or is threatened must be implied from the retention of instruments in the defendant's possession. Long Innes J. the demurrer, but on appeal his decision was reversed.
The learned Judges who heard the appeal doubted if there any sufficient allegation of fact express or implied of any a or threatened mischief, which required the interposition of a Cour of equity. In my opinion this doubt was well founded, es as the plaintiff disclaimed the right to all relief other than a de tion that the instruments were void. The Equity Act 1901, (as amended by Act No. 42 of 1924), empowers the Court, im
be insufficient to found a claim, if made, for delivery up or can of the instruments, they are equally insufficient to found a clai for a declaration of the invalidity of the instruments. The lear
(1) (1837) 3 My. & Cr, 97; 40 E.R. (2) (1888) 38 Ch. D. 636. 362. (3) (1822) 10 Price 31; 147 BR
ground : they held that a plaintiff who comes into a Court of equity for equitable relief against an unregistered money-lender must offer to do equity in the form of paying to the lender the amount borrowed from him. Numerous cases were cited to us which entirely support _ this proposition. The judgments given by Wigram V.C. in Hanson __y. Keating (1) and by Parker J. in Lodge v. National Union Inwest- ment Co. (2) and by Lord Selborne L.C. in Jervis v. Berridge (3) expound, and explain the reason of, this rule of equity. Wigram 2 V.C. said : - '' The equity " of the plaintiff "is to have the entire transaction rescinded. The Court will do this, so as to remit both q parties to their original positions : it will not relieve " the plaintiff _ "from his liability, leaving him in possession of the fruits of the illegal transaction he complains of." A multitude of authorities confirm this view, and, while they make the rule no clearer, they show that it was constantly acted upon. The plaintiff, however, relied upon Chapman v. Michaelson (4) and Schnelle _y. Dent (5). Chapman v. Michaelson is based upon the view _ that no equitable right or relief was claimed or involved, and the 4 cae is therefore not in point. Schnelle v. Dent is more difficult ;
but the learned Chief Judge in Equity, in delivering the judgment _ of the Full Court, thus distinguished the case: "It is clear from _ the authorities which were cited by the majority of the High Court that they were not considering the question of making declaratory decrees with consequential equitable relief, but that they recognized that, so far as the bill of sale was concerned, the Equity Court was _ simply dealing with it as a purely legal question with legal relief by way of damages, the Court's jurisdiction so to deal with it being based on sec. 4 of the Equity Act, which enables it to deal with Tegal questions arising incidentally in an equity suit, the equity suit at the hearing being the redemption of" a "real property mortgage." I understand that the Chief Justice of this Court, who was a party to the decision in Schnelle v. Dent agrees with is view of the case. And if it be the right view, then the case
ay (1844) 4 Ha., at p. 6; 67 ER. (3) (1873) 8 Ch, App. 351, (4) (1909) 1 Ch, 238, ot) (1907) 1 Ch. 300. (5) (1925) 35 C.L.R. 494,
"Judges, however, upheld the demurrer upon a more important H.-C. or A.
H.C. or A. does not conflict with the principle stated in Hanson v. Keating (1)
sil and Lodge v. National Union Investment Co. (2), whatever may be
Lanewan said as to the jurisdiction of the Supreme Court in its equitable
Hanover, Jurisdiction, in view of the decision in David Jones Ltd. v.
stakes. (2): Consequently, the appeal should be dismissed.
Solicitor for the appellant, W. P. Kelly, Wellington, by Maurice J. McGrath. Solicitors for the respondent, McManamey & Jelf, Dubbo, by
(1) (1844) 4 Ha, 1; 67 E.R. 537. (2) (1907) 1 Ch. 300. (3) (1927) 40 C.L.R. 357.
ON APPEAL FROM THE SUPREME COURT OF WESTERN AUSTRALIA.
H.C. or A. Income Tax (Cth.) - Assessment - Gain in the nature of income or of capital -
*The Income Tax Assessment Act or foregifts or consideration in 1922-1927 provides by sec. 16 that the nature of premiums fines or fo assessable income of any person shall demanded and given in connection include "(d) money derived by way of __ leasehold estates." royalty or bonuses, and premiums fines