Editorial Committee of the Cambridge Law Journal

Burdens on Personal Property and the Economic TortsAuthor(s): Andrew TettenbornSource: The Cambridge Law Journal, Vol. 52, No. 3 (Nov., 1993), pp. 382-384Published by: Cambridge University Press on behalf of Editorial Committee of the Cambridge LawJournalStable URL: http://www.jstor.org/stable/4507842 .

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382 The Cambridge Law Journal [1993]

signal an expansive approach to liability for omissions in Canada.

Second, while united in denying the application ofthe ex turpi defence

to the facts, the members of the court were sharply divided as to the

pl'ea's scope and rationale. Foreign courts will certainly want to assess

the merits of the various approaches canvassed by the Supreme Court

of Canada when next ruling upon the relevance of a plaintiffs misconduct to a claim in tort.

MlTCHELL MdNNES.

382 The Cambridge Law Journal [1993]

signal an expansive approach to liability for omissions in Canada.

Second, while united in denying the application ofthe ex turpi defence

to the facts, the members of the court were sharply divided as to the

pl'ea's scope and rationale. Foreign courts will certainly want to assess

the merits of the various approaches canvassed by the Supreme Court

of Canada when next ruling upon the relevance of a plaintiffs misconduct to a claim in tort.

MlTCHELL MdNNES.

BURDENS ON PERSONAL PROPERTY AND THE ECONOMIC TORTS

Sometimes I may want to transfer property, such as securities, to you on the basis that if some event happens in future you are to pay me a

sum of money. As against you there is no problem: if the condition is

fulfilled and you do not pay, I can sue you in contract. But what if you re-transfer that property to someone else? Is there any way for me to

make sure that I will have a similar claim against that third party or

any subsequent purchaser? In Law Debenture Trust Corp. p.l.c. v.

Ural Caspian Oil Co. Ltd. [1993] 2 All E.R. 355 a transferor

in this situation seems, by the skin of its corporate teeth, to have found

a way to do it. Whether it ought to have is, perhaps, more doubtful.

Shell and others held shares in four oil companies whose assets in

Russia had been expropriated by the Bolsheviks. In 1986 they sold

their shares to LO Ltd., LO covenanting that any compensation received from a newly co-operative Russian government would be

paid to LD as trustee for all the erstwhile shareholders (including others whose shares LO had not bought). LO further agreed that the

shares would not be re-transferred except to a transferee who had

entered into a similar covenant with LD. LO subsequently sold the

shares to Hilldon, and Hilldon sold them to UC; in neither case was

any such covenant extracted from the purchaser. Compensation was

in time received by UC: UC refused to pay it over, and LD now

sought to extract it from them, alleging that both they and Hilldon

had known of the covenant when they bought. The first, predictable, arrow in LD's quiver was Knight Bruce

L.J.'s statement of principle in De Mattos v. Gibson (1858) 4 De G.

& J. 276: that reason and justice demanded that he who bought

property knowing of a covenant by the seller to use it in some way should not be allowed to use it inconsistently with that covenant.

Unfortunately this shot fell wide of the mark. Briefly catechising the

subsequent cases on the De Mattos principle, down to Swiss Bank v.

Lloyds Bank [1979] Ch. 548, Hoffmann J. was prepared to accept its

basic soundness, but gravely observed that it could not be used as a

BURDENS ON PERSONAL PROPERTY AND THE ECONOMIC TORTS

Sometimes I may want to transfer property, such as securities, to you on the basis that if some event happens in future you are to pay me a

sum of money. As against you there is no problem: if the condition is

fulfilled and you do not pay, I can sue you in contract. But what if you re-transfer that property to someone else? Is there any way for me to

make sure that I will have a similar claim against that third party or

any subsequent purchaser? In Law Debenture Trust Corp. p.l.c. v.

Ural Caspian Oil Co. Ltd. [1993] 2 All E.R. 355 a transferor

in this situation seems, by the skin of its corporate teeth, to have found

a way to do it. Whether it ought to have is, perhaps, more doubtful.

Shell and others held shares in four oil companies whose assets in

Russia had been expropriated by the Bolsheviks. In 1986 they sold

their shares to LO Ltd., LO covenanting that any compensation received from a newly co-operative Russian government would be

paid to LD as trustee for all the erstwhile shareholders (including others whose shares LO had not bought). LO further agreed that the

shares would not be re-transferred except to a transferee who had

entered into a similar covenant with LD. LO subsequently sold the

shares to Hilldon, and Hilldon sold them to UC; in neither case was

any such covenant extracted from the purchaser. Compensation was

in time received by UC: UC refused to pay it over, and LD now

sought to extract it from them, alleging that both they and Hilldon

had known of the covenant when they bought. The first, predictable, arrow in LD's quiver was Knight Bruce

L.J.'s statement of principle in De Mattos v. Gibson (1858) 4 De G.

& J. 276: that reason and justice demanded that he who bought

property knowing of a covenant by the seller to use it in some way should not be allowed to use it inconsistently with that covenant.

Unfortunately this shot fell wide of the mark. Briefly catechising the

subsequent cases on the De Mattos principle, down to Swiss Bank v.

Lloyds Bank [1979] Ch. 548, Hoffmann J. was prepared to accept its

basic soundness, but gravely observed that it could not be used as a

This content downloaded from 195.34.78.245 on Mon, 16 Jun 2014 14:00:09 PMAll use subject to JSTOR Terms and Conditions

Case and Comment

general escape clause to avoid the awkwardnesses of privity of contract. The cases applying it were, he pointed out, limited to those where injunctions had been granted to prevent positive acts likely to defeat the original promise. This marked the limit of the rule; since here UC's only sin was one of omission-failure to pay-it was therefore beyond its reach.

With respect, it is suggested that his Lordship was absolutely right. The basis of De Mattos, as has been suggested by the author ([1982] C.L.J. 58) is that the transferor should not be deprived of an effective remedy by the (sub) purchaser. If the original transferor has a specific remedy, e.g. by injunction restraining the use of property in a certain way, then there is no point in enjoining anyone except the person who has it: one cannot tell another how to behave with something he has not got. If on the other hand the transferor has a money remedy, such as an action in debt or for breach of contract against his immediate transferee, this remains unaffected and there is no need for further rights against the purchaser. The latter was the case here: presumably LD retained its rights against LO.

LD's second argument, the rather enigmatic "benefit and burden" principle, was easier to dispose of. Whatever the status of that principle (which was unclear), there was no evidence that the duty to pay over the compensation was meant to run automatically, so to speak, with the shares concerned: indeed the stipulation between LD and LO that LO was to ensure that all further transferees covenanted specifically with LD evinced an intention that it should not. And in any case LO's duty to account could not be tied specifically to the shares concerned, given that LO's duty was to pay over all compensation, even that relating to the holdings of those shareholders not participating in the scheme.

Thirdly, LD raised an ingenious argument based on the economic torts. It was this that succeeded, at least to the extent of avoiding a striking-out under RSC 0. 18 r. 19. As regards Hilldon, indeed, the point was not too difficult, and Hilldon conceded it. By taking a transfer of the shares in the knowledge that LO was thereby breaking its contract with LD in not insisting on a covenant from Hilldon to account for compensation received, Hilldon was wittingly participating in that breach of contract, and B. M. T.A. v. Salvadori [1949] Ch. 566 was clear authority that that sufficed to make them liable in tort under Lumley v. Gye (1853) 2 E. & B. 216. The problem was UC. Hilldon might be liable in tort to LD, but they were not contractually bound to LD in any way; hence by taking a transfer from Hilldon, UC could not be said to have participated in any breach of contract. However, it was pointed out that where property was transferred to a third party with the aim of defeating an obligation concerning it (e.g. a solus

C.L.J. 383

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The Cambridge Law Journal The Cambridge Law Journal

agreement) which bound the transferor, then the transferee could be ordered by mandatory injunction to re-transfer it so as to preserve that obligation: see Esso v. Kingswood [1974] Q.B. 142. By accepting the shares from Hilldon UC had deprived LD of that remedy; and Hoffmann J. was prepared to hold that the principle in Lumley v. Gye extended to one who participated in an act tending to defeat a remedy as much as to a party to infringement of the underlying right. It followed that, assuming DL were right on the facts, UC would be liable to them in tort.

Two brief comments are apposite on this last point. First, it is-to say the least-a drastic extension of common law

tortious liability: the more so, given that the only remedy affected was an equitable one by injunction. With respect, there must be some doubt whether it is desirable, having generally shut out the concept of obligations affecting personal property at the front, thus to re-admit it via the side door of the economic torts.

Secondly, it remains to be seen what the effects of this decision will be on property law, and indeed commerce in general. Take, for example, land law. It is now accepted that contractual rights to the use of land (e.g. licences) do not in general bind purchasers: even with notice they cannot be forced to respect them (e.g. Ashburn Anstalt v. Arnold [1989] Ch. 1). But can the beneficiary of such a right now sidestep this rule by arguing that a purchaser, by taking land with knowledge of the right concerned, is knowingly participating in an act depriving him of his right to an injunction against the vendor to enforce it? One would hope not: the whole thrust of recent years has been to increase the marketability of land free from incumbrances. But it is difficult to see how in logic this situation differs from that in the Law Debenture case, and how the purchaser can be given the protection he clearly needs.

Whatever the answer may be, there can be no doubt that a good deal of litigants' money is going to be spent-and some 50 per cent. of it lost-in the next few years in working out just what are the implications of Hoffmann J's decision. Good for lawyers, maybe: but for those involved in everyday commerce, perhaps rather less so.

ANDREW TEITENBORN.

RESTITUTION AND FAILURE OF CONSIDERATION IN AUSTRALIA

Baltic Shipping Co. v. Dillon (1993) 47 A.L.J.R. 228 is the latest Australian High Court authority in the evolution of the modern law of restitution in Australia. In David Securities Pty. Ltd. v. Commonwealth Bank (1992) 175 C.L.R. 353 the court reanalysed

agreement) which bound the transferor, then the transferee could be ordered by mandatory injunction to re-transfer it so as to preserve that obligation: see Esso v. Kingswood [1974] Q.B. 142. By accepting the shares from Hilldon UC had deprived LD of that remedy; and Hoffmann J. was prepared to hold that the principle in Lumley v. Gye extended to one who participated in an act tending to defeat a remedy as much as to a party to infringement of the underlying right. It followed that, assuming DL were right on the facts, UC would be liable to them in tort.

Two brief comments are apposite on this last point. First, it is-to say the least-a drastic extension of common law

tortious liability: the more so, given that the only remedy affected was an equitable one by injunction. With respect, there must be some doubt whether it is desirable, having generally shut out the concept of obligations affecting personal property at the front, thus to re-admit it via the side door of the economic torts.

Secondly, it remains to be seen what the effects of this decision will be on property law, and indeed commerce in general. Take, for example, land law. It is now accepted that contractual rights to the use of land (e.g. licences) do not in general bind purchasers: even with notice they cannot be forced to respect them (e.g. Ashburn Anstalt v. Arnold [1989] Ch. 1). But can the beneficiary of such a right now sidestep this rule by arguing that a purchaser, by taking land with knowledge of the right concerned, is knowingly participating in an act depriving him of his right to an injunction against the vendor to enforce it? One would hope not: the whole thrust of recent years has been to increase the marketability of land free from incumbrances. But it is difficult to see how in logic this situation differs from that in the Law Debenture case, and how the purchaser can be given the protection he clearly needs.

Whatever the answer may be, there can be no doubt that a good deal of litigants' money is going to be spent-and some 50 per cent. of it lost-in the next few years in working out just what are the implications of Hoffmann J's decision. Good for lawyers, maybe: but for those involved in everyday commerce, perhaps rather less so.

ANDREW TEITENBORN.

RESTITUTION AND FAILURE OF CONSIDERATION IN AUSTRALIA

Baltic Shipping Co. v. Dillon (1993) 47 A.L.J.R. 228 is the latest Australian High Court authority in the evolution of the modern law of restitution in Australia. In David Securities Pty. Ltd. v. Commonwealth Bank (1992) 175 C.L.R. 353 the court reanalysed

384 384 [1993] [1993]

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