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LA302 - Rochefoucauld v Boustead - Judgment

ROCHEFOUCAULD v BOUSTEAD

[1897] 1 Ch 196

LINDLEY L.J.

The question raised by this appeal is whether the plaintiff is entitled to an account from the defendant of the proceeds of sale of certain coffee estates in Ceylon. The estates in question are known as the Delmar estates. They formerly belonged to the plaintiff; they were mortgaged first to Barings and then to a Dutch company, and on May 27,1873, they were sold and conveyed to the defendant. In form the conveyance was to him absolutely, but the plaintiff insists that the estates were conveyed to the defendant as a trustee for the plaintiff, subject, however, to the repayment to the defendant of the amount which he paid for them and of the expenses which he has incurred in managing the estates. The estates were sold by the defendant or his mortgagees many years ago without the knowledge of the plaintiff, and she says that the proceeds of sale were more than sufficient to repay to the defendant all his advances, and that a considerable surplus remained which the defendant ought to have paid over to her. The defendant, in answer to this claim, says (1.) the estates were conveyed to him, not as a trustee for the plaintiff, but as beneficial owner; (2.) the trusts alleged by the plaintiff cannot be proved by any writing signed by the defendant, and the Statute of Frauds affords a defence to the action; (3 ) the plaintiff's claim, even if proved, is barred (a) by the defendant's bankruptcy, (b) by the Statute of Limitations, (c) by the plaintiffs laches, and the equitable doctrines applicable to delay independently of the statute.

Kekewich J. decided against the plaintiff on the first ground - namely, that there was no trust in favour of the plaintiff. This view of the case rendered it unnecessary for him to consider the other defences. The plaintiff has appealed from this decision; and, as we have been unable to take the same view as the learned judge of the effect of the evidence, it will be necessary for us to deal with all the other defences relied upon by the defendant.

The circumstances under which the Delmar estates were conveyed to the defendant are to be gathered from the verbal testimony of the plaintiff, the defendant, and Mr. Duff, and a mass of correspondence both before and after the conveyance. The correspondence after the conveyance is relied upon by the plaintiff as being inconsistent with the defendant's contention that he acquired the estates for himself beneficially, free from any trust in favour of the plaintiff.

We come, therefore, to the conclusion that the plaintiff has proved that the estates in question were conveyed to the defendant on May 27, 1873, upon trust for her, but subject to a charge in his favour in respect of all sums advanced by him in order to obtain the estates from the Dutch company in the first instance, and of all sums advanced by him in order to work them as coffee plantations after he had acquired them.

This conclusion renders it necessary to consider whether the Statute of Frauds affords a defence to the plaintiff’s claim. The section relied upon is s.7, which has been judicially interpreted in Forster v. Hale (1798) 3 Ves. 696 and Smith v. Matthews (1861) 3 D.F. & J 139. According to these authorities, it is necessary to prove by some writing or writings signed by the defendant, not only that the conveyance to him was subject to some trust, but also what that trust was. But it is not necessary that the trust should have been declared by such a writing in the first instance; it is sufficient if the trust can be proved by some writing signed by the defendant, and the date of the writing is immaterial. It is further established by a series of cases, the propriety of which cannot now be questioned, that the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself. Consequently, notwithstanding the statute, it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the form of conveyance and the statute, in order to keep the land himself. This doctrine was not established until some time after the statute was passed. In Bartlett v. Pickersgill 1 Eden 515 the trust was proved, and the defendant, who denied it, was tried for perjury and convicted, and yet it was held that the statute prevented the Court from affording relief to the plaintiff. But this case cannot be regarded as law at the present day. The case was referred to in James v. Smith, and was treated as still law by Kekewich J.; but his attention does not appear to have been called to Booth v. Turle 16 LR QB), nor to Davies v. Otty (No. 2) (1865) 35 Beav. 208 both of which are quite opposed to Bartlett v. Pickersgill 1 Eden 515. So is Haig v. Kaye LR 7 Ch 469. The late Giffard L.J., one of the best lawyers of modern times, speaking of Bartlett v. Pickersgill, said: "It seems to be inconsistent with all the authorities of this Court which proceed on the footing that it will not allow the Statute of Frauds to be made an instrument of fraud": see Heard v. Pilley LR 4 Ch 548, 553. The case not only seems to be, but is, inconsistent with all modern decisions on the subject. See, in addition to those already mentioned, Lincoln v. Wright 4 Be G&J 16, where a conveyance absolute in form was held to be a mortgage only. See also In re Duke of Marlborough, [1894] 2 Ch 133 in which Stirling J. examined the authorities, and held that an assignment absolute in form was subject to a trust for the plaintiff.

The defence, based on the Statute of Frauds, is met by the plaintiff in two ways. First, she says that the documents signed by the defendant prove the existence of the trust alleged; secondly, she says that if those documents do not prove what the trust is with sufficient fulness and precision, the case is one of fraud which lets in other evidence, and that with the aid of other evidence the plaintiff’s case is established. In our opinion the plaintiff is correct in this contention. We are by no means satisfied that the letters signed by the defendant do not contain enough to satisfy the Statute of Frauds. Whether this is so or not, the other evidence is admissible in order to prevent the statute from being used in order to commit a fraud; and such other evidence proves the plaintiffs case completely.

Counsel for the plaintiff contended that the Statute of Frauds had no application to lands in Ceylon. But, having regard to Leroux v. Brown 12 CB 801, and to the language of s.7 of the Statute of Frauds, we are unable to see why the defendant should not be able to rely on that statute as a defence to any proceedings in this country having for their object the proof and enforcing of a trust, even of lands abroad. The statute relates to the kind of proof required in this country to enable a plaintiff suing here to establish his case here. It does not relate to lands abroad in any other way than this: it regulates procedure here, not titles to land in other countries. If, therefore, the statute afforded the defendant a defence, he would be entitled to the benefit of it. But, for the reasons above given, the statute affords him no protection.

Having come to the conclusion that the plaintiff has proved her case by evidence admissible by our law, it is necessary to consider the other defences raised. The first is bankruptcy.

The defendant became bankrupt in 1879, and he obtained his discharge in May, 1880. The Bankruptcy Act then in force was the Act of 1869, and by s. 49 of that Act bankrupt trustees were not discharged from the claims of their cestuis que trust. This defence, therefore, fails.

The next defence is the Statute of Limitations. The trust which the plaintiff has established is clearly an express trust within the meaning of that expression as explained in Soar v. Ashwell. [1893] 2 QB 390. The trust is one which both plaintiff and defendant intended to create. This case is not one in which an equitable obligation arises although there may have been no intention to create a trust. The intention to create a trust existed from the first. The defendant is not able in this case to claim the benefit of s.8 of the Trustee Act, 1888 (51 & 52 Vict. c. 69), and the statute which is applicable is the Judicature Act, 1873 (36 & 37 Vict. c. 66), s.25, sub-s.2, which enacts as follows: "No claim of a cestui que trust against his trustee for any property held on an express trust, or in respect of any breach of such trust, shall be held to be barred by any Statute of Limitations." The Statutes of Limitations, therefore, afford no defence if the plaintiffs action is to be regarded as one brought by a cestui que trust against his trustee seeking for an account of trust property. It was, however, urged by the defendant's counsel that this action was really one for an account by a mortgagor against a mortgagee in possession, and that so regarded one of the Statutes of Limitations was a bar to it. In support of this contention counsel cited Locking v. Parker LR 8 Ch 30; In re Alison. 11 Ch D 284. These cases undoubtedly shew that a conveyance upon trust for sale to secure a sum advanced is regarded as a mortgage, and that although there may be a trust declared of the surplus in favour of the mortgagor the Statute of Limitations is a bar to an action brought by him for the surplus if his title to the land is barred before a sale by the mortgagee. The ground of these decisions is that the trusts were such that the mortgagor could not enforce them and compel a sale, but could only redeem. Those cases, however, shew that the mortgagor can as cestui que trust enforce the trust of the surplus after sale if his title to the land is not barred before the sale takes place, as it was in In re Alison. 11 Ch D 284; Banner v. Berridge 18 Ch D 254, which was also cited to support the view we are considering, merely shews that a mortgagee selling under a power of sale is not an express trustee of the surplus for the mortgagor in the absence of words creating & trust for him. The mortgagee in that case was a mortgagee of a ship, and he sold as such under his statutory power. The real transactions in those cases were mortgages, and were very different from the real transaction in this case. The real transaction here was a purchase by the defendant for the plaintiff; she claims relief, not as mortgagor, but as the defendant's cestui que trust, although she admits his lien on the property for his advances; she claims an account of his dealings and transactions with her property, and in particular an account of the money which he has obtained from it. This being the real nature of her claim, the cases to which we have alluded are not applicable to it, and the Statutes of Limitations are no bar to the action.

We come now to the last ground of defence-namely, laches and lapse of time apart from the Statutes of Limitations. This is the most difficult part of the case. The time which has elapsed since the plaintiff knew that her claim to the estate was disputed is so considerable that, before giving the plaintiff the relief to which she would otherwise be entitled, it is necessary to consider what her conduct has been, and whether anything has happened to render it unjust to the defendant to compel him to account now. On January 7, 1880, Mr. Saboniere wrote a letter to the plaintiff and told her that the estates belonged to the defendant's creditors. On August 9, 1880, the plaintiff? by her then solicitor, Mr. Lake, wrote to Mr. Cooper, the defendant's trustee in bankruptcy, claiming the estates as her own. On October 29,1880, Mr. Cooper wrote to 3Tr. Lake and disputed this claim, and asserted the right of the defendant's creditors to the estates, stating that the defendant had bought them with his own money, and had mortgaged them and dealt with them as his own. It is to be inferred from another letter of Lake's, dated October 30, 1880, that he communicated the position of affairs to the plaintiff, and explained to her the necessity of making up her mind whether she would or would not embark in a very serious and expensive litigation with the defendant's trustee in bankruptcy. It is also to be inferred from her subsequent letters that she preferred not to do so, but to wait and see whether the defendant would not be able to make some arrangement with his creditors which would enable him to regain control over the estates, and then recognise her claims to them. She was unquestionably encouraged to do this by the defendant himself. See his letters of November 25 and December 14, 1882. The estates had not then been sold, but were still being carried on. We can find nothing since 1882 which was in any way calculated to induce the plaintiff to believe that her claims would ever be recognised. On the other hand, the defendant, as distinguished from his trustee in bankruptcy, never repudiated them. This suit was not instituted until October 24, 1894, twelve years after the correspondence between the plaintiff and the defendant practically ceased. The principle applicable to cases in which equitable relief is sought after long delay is well expressed in Lord Blackburn's judgment in Erlarnger v. New Sombrero Phosphate Co. (1878) 3 App Cas. 1218, 1279: "In Lindsay Petroleum Co. v. Hurd (1874) LR 5 PC 221, 239 it is said: 'The doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which :might fairly be regarded as equivalent to a waiver of it, or where, by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material. But in every case if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any Statute of Limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances always important in such cases are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.' " Lord Blackburn goes on to say: "I have looked in vain for any authority which gives a more distinct and definite rule than this; and I think, from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it. The determination of such a question must largely depend on the turn of mind off those who have to decide, and must therefore be subject to uncertainty; but that, I think, is inherent in the nature of the inquiry." In questions of this kind it is not only time, but the conduct of the parties which has to be considered. Before 1882 the defendant had mortgaged the estates as if they were his own, but he concealed such mortgages from the plaintiff. Since 1882 the estates have been sold, and he has received the moneys arising from their sale, but he concealed these transactions from the plaintiff. The defendant also destroyed the books containing the accounts of these estates. He says he did this not because the plaintiff abandoned her claims, but because he had no room for the books. Under these circumstances he can hardly invoke the loss of the books as a reason for refusing relief to the plaintiff. But, as already stated, since 1882 the defendant has done nothing to induce the plaintiff not to sue him, nor to lead her to believe that any claim by her would be recognised. On the other hand, the plaintiff has done nothing actively to lead the defendant to suppose that she abandoned any claim she might have against him as her trustee. There is nothing to be said against her except that she has forborne to sue for twelve years. In 1887 she wrote a letter to Mr. Hollams asserting her rights, but she did no more. Under these circumstances, to hold that time is a bar to the plaintiffs claim would be to decide that, although the Statute of Limitations is no bar to a suit by a cestui que trust against a trustee in a case of express trust, yet that lapse of time without more is a bar. Such a conclusion cannot be correct, and it was decided to be inadmissible in In re Cross. 20 Ch D 109. Even where there is an express trust, lapse of time, coupled with other circumstances which render it unjust to give the plaintiff relief against the defendant, will induce the Court to refuse the relief, although no Statute of Limitations might bar his claim: see Bright v. Legerton (1861) 2DF&J 606 and In re Cross. But in this case, which is one of express trust, there is nothing except time, and that without more is not sufficient apart from some Statute of Limitations. This view of the case renders it unnecessary to examine the excuses given by the plaintiff for not instituting proceedings sooner. The appeal must be allowed and the judgment be reversed. It must be declared that the defendant purchased the Delmar estates as a trustee for the plainti8, but subject to a charge for the amount paid to the Dutch company. An account must then be directed of the defendant's dealings and transactions with the Delmar estates. The account will be an account as between a trustee and his cestui que trust, not an account as between mortgagor and mortgagee, and there must be no account on the footing of wilful default. The defendant must be allowed all his advances and outlays, with colonial interest; but he ought only to be charged simple interest at 4 per cent. on balances in his hands, unless it appears that he has made more. Minutes had better be prepared and signed, and, if necessary, they can be mentioned to the Court. The defendant must pay the costs of the action up to the hearing and the costs of the appeal.

Gilmour, for the defendant, asked that the costs might be taxed on the higher scale.

LINDLEY L.J. We have power to make such an order, but it is a power which ought only to be exercised under very special circumstances. There is no ground for exercising it here.

Gilmour then asked that the accounts might be taken by an official referee instead of in chambers. He referred to the Arbitration Act, 1889 (52 & 53 Vict. c. 49), ss. 13 ,14, and Order XXXIII., rr. 2, 3, 4, as giving power to order this, and 1896 urged that there would be a great saving of time, as an official referee took a case continuously, whereas the chief clerks could only give appointments at distant intervals.

Renshaw, Q.C., doubted whether in a case of this nature an official referee would be able to proceed continuously, but he did not strongly oppose.

LINDLEY L.J. This is eminently a case for an official referee, and sending it to him will cause a great saving of time.

THE COURT accordingly directed that the case should go to an official referee.

 

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