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Published online by Cambridge University Press: 16 January 2009
The purpose of this article is to consider the legal effects of a transfer of property by A to B subject to the performance by B of some obligation in favour of C, a third party to the transfer. The student of the law of contract is well familiar with the common law rule that no one who was not an original party to the contract is entitled to the benefit of that contract. But this rule creates hardship in particular cases and it has been shown that, in the main, three methods have been evolved to evade those unfortunate results. First, the legislature has intervened and provided C, the third party, with statutory rights. Secondly, the doctrine of agency has been invoked whereby C may claim that he is the principal of B. Thirdly, but with varying success, the trust concept has been pressed into service whereby C has sometimes been able to show that he is a beneficiary.
1 See Hanbury, Modern Equity (5th ed.), pp. 149–58; Cheshire and Fifoot, Law of Contract (2nd ed.), pp. 322–30.
2 Reference should be made to Theobald, Law of Wills (10th ed.), p. 428; Lewin, Trusts (15th ed.), pp. 87–9; Underhill, Law of Trusts and Trustees (10th ed.), pp. 37–41.
3 (1831) 5 Sim, 22.
4 (1843) 2 Ha, 607; compare Re Booth [1894] 2 Ch. 282.
5 At p. 611.
6 (1823) Turn. & R. 207.
7 Ames, Lectures on Legal History, p. 236; Challis, Law of Real Property (3rd ed.), p. 81, states the rule as follows: “No one may take advantage of a condition except the person making it or his privies in right and representation, that is, (1) his heirs quoad estates descendible to them, (2) the executors or administrators quoad estates transmissible to them, and (3) the successors of corporations sole.” This right has been made assignable by successive statutes, see Cheshire, Modern Real Property (6th ed.), pp. 519–20, and Law of Property Act, 1925Google Scholar, s. 4 (3).
8 For conditions generally, see Bailey, Law of Wills (3rd ed.), pp. 128–38.
9 (1699) 2 Vern. 366.
10 (1704) 2 Free. 278.
11 (1739) 1 Atk. 382 at p. 383.
12 (1882) 21 Ch.D. 431 at pp. 435–6.
13 (1679) 2 Show.K.B. 36; see also Wright v. Wilkin (1862) 31 L.J.Q.B. 196, where the words “upon this expression condition” were construed as imposing a trust on the devisee.
14 The effect of a devise of lands without words of limitation followed by the imposition of some obligation on the devisee, is discussed below.
15 At p. 41.
16 See Bailey, Law of Wills, pp. 130–3.
17 [1939] Ch. 700.
18 At p. 703.
19 (1882) 21 Ch.D. 431.
20 (1883) 3 My. & K. 534; compare Att.-Gen. v. Wax Chandlers' Co. (1873) L.R. 6 H.L. 1.
21 At p. 542.
22 (1846) 12 Cl. & F. 812; see especially per Lord Campbell at p. 831.
23 (1890) 62. L.T. 533 at p. 534.
24 For example, the remedy of a mere chargee is sale with the assistance of the court; see per Lord Hatherley in Tennant v. Trenchard (1869) L.R. 4 Ch. 597 at p. 542.
25 The American Restatement of the Law of Trusts (Vol. 1), § 10, makes this distinction as follows: “If the transferor shows an intention to impose a duty on the transferee to deal with the property for the benefit of a third person, and to give to the third person a beneficial interest therein, a trust is created; but if he shows an intention not to impose such a duty on the transferee, but to give to the transferee the beneficial interest therein and to give a security interest to the third person, an equitable charge is created.”
26 Real Property Limitation Act, 1833, s. 40; see now Limitation Act, 1939, s. 18 (1).
27 Trustee Act, 1888, s. 8.
28 See, for example, Hodge v. Churchward (1847) 16 Sim. 71; Cunningham v. Foot (1878) 3 App. Cas. 974.
29 A claim in respect of a capital sum charged on real or personal property is now barred after 12 years (Limitation Act, 1939, s. 18 (1); as to an annuity (being a “rentcharge”) charged on land, only six years' arrears are recoverable (ibid., s. 17); but a claim to an annuity charged on personal property appears not to be subject to any statutory bar. See Preston and Newson, Limitation of Actions, p. 156.
As to trustees, an action by a beneficiary to recover trust property or in respect of any breach of trust, shall not be brought after the expiration of six years except (a) where the trustee has been guilty of fraud, or (b) where the beneficiary is seeking to recover from the trustee the trust property or its proceeds which are either in the hands of the trustee or have previously been received by him and converted to his own use.
30 (1885) 53 L.T. 494; see also Jillard v. Edgar (1849) 3 De G. & Sm. 502.
31 At p. 495.
32 [1931] 1 Ch. 475. So also in Wigg v. Wigg (1739) 1 Atk. 382, the testator devised lands to his second son T. “upon condition” that he made certain payments to his own children with a clause of entry for breach. T. died in the testator's lifetime, and the testator's heir entered and sold the land to a purchaser for value. It was held that the words imposed a charge on the property and did not create a condition (which would have failed by reason of the devise lapsing) and that the land in the hands of the purchaser was bound by the charge because “he had notice, for though he had no notice before he paid his money, yet he had notice before the execution of the conveyance, and it is all but one transaction,” per Lord Hardwicke.
33 It would seem that where land is devised charged with the payment of a sum of money in favour of a third party, the land may become settled land in virtue of the Settled Land Act, 1925, s. 1 (1) (v), which provides, “Any deed, will… or other instrument… under which… and land… stands for the time being charged… with the payment of any capital, annual or periodical sums for the… advancement, maintenance or otherwise for the benefit of any persons… creates or is for the purposes of this Act a settlement”: Re Austen [1929] 2 Ch. 155. And since such an equitable charge would “arise… under a settlement” within the Land Charges Act, 1925, s. 10 (1) Class C (iii), it would not be registrable. The doctrine of notice would therefore retain some of its vitality in this case.
34 Per Lindley L.J. in Re Williams [1897] 2 Ch. 12 at p. 18.
35 (1648) 2 Free. 136.
36 (1836) 1 Myl. & Cr. 401.
37 It has been seen that where the transferee holds property subject to a charge only he is entitled to retain beneficially any surplus remaining after discharging the claims of the chargee. The same would appear to be the case where the transferee holds subject to a strict condition which he fulfils.
38 (1813) 1 V. & B. 260 at p. 272.
39 [1922] 2 Ch. 519; see also Bird v. Harris (1870) L.R. 9 Eq. 204.
40 At p. 521.
41 [1950] Ch. 204 (C.A.).
42 This distinction often arises in cases where the devisee is required to make certain payments for charitable purposes and these do not exhaust the property devised; see, for example, Att.Gen. v. The Wax Chandlers' Co. (1873) L.R. c, H.L.1, especially at pp. 19–22, per Lord Cairns.
43 [1940] Ch. 260.
44 At pp. 264–5.
45 [1942] Ch. 324.
46 At p. 326. Welby v. Rockliffe (1830) 1 Russ. & My. 571 is an example of the combination of a charge and a personal obligation.
47 [1901] 1 Ir.R. 489.
48 At p. 492.
49 It is to be observed that whereas in Re Hodge (supra) and Re Lester (supra) the transferee asked for a declaration of the extent of his obligations, in Re M' Mahon it was the third party who took the initiative. The procedure was not through an administration action for the estate was otherwise fully administered; and the order made was, “Order accordingly, declaring (the son) personally liable for the payment of £350, amount of legacy and directing him to pay the same within three months.”
50 (1871) 12 Eq. 225.
51 At p. 237.
52 (1828) 4 Russ. 478.
53 At p. 482.
54 See Duffy v. Duffy [1920] 1 Ir.R. 122 at pp. 125–6Google Scholar, per Ronan L.J.
55 s. 28.
56 (1798) 8 T.R. 1 at p. 2.
57 (1804) 5 East 87 at p. 98. See also per Lord Ellenborough at pp. 93–4.
58 Pickwell v. Spencer (1872) L.R. 7 Ex. 105, is an excellent illustration of this situation.
58a But cf. note 76, post.
59 Re M'Mahon (supra).
60 Messenger v. Andrews (supra).
61 Rees v. Engelback (supra).
62 (1760) 1 Eden 489.
63 At p. 499.
64 “He who derives the advantage ought to sustain the burden.” See Broom's Legal Maxims (10th ed.), pp. 482–6. The maxim “Cujus est dare, ejus est disponere” (the bestower of a gift has the right to regulate its disposal) was pressed into service in Scot v. Haughton & Fuller (1706) 2 Vern. 560, where Mrs. P. bought twenty-four Id. tickets in a lottery called “The Wheel of Fortune,” and distributed them among her servants on condition that if twenty shillings or more should “come up,” her daughter should have one half. The ticket held by the foot-boy produced £1,000 and he was compelled to hand over one half to the daughter.
65 (1856) 23 Beav. 32.
66 At p. 38.
67 See Cheshire, Modern Real Property, p. 364.
68 s. 2; now replaced by Law Reform (Miscellaneous Provisions) Act, 1934, s. 1 (3).
69 (1880) L.R. 5 Q.B.D. 404.
70 (1884) 52 L.T. 41; (1885) 54 L.T. 105 (C.A.).
71 At p. 44. The obligation was also treated as contractual in Batthyany v. Walford (1887) 36 Ch.D. 269 (C.A.).
72 At p. 107. Brett M.R. (at p. 106) said, “… he has come under an equitable liability which a court of equity will enforce.” Baggallay L.J. (at p. 107) said, “It is a liability in the nature of an obligation. In my opinion it is not a contract and strictly not an implied contract.”
73 [1924] 1 K.B. 826.
74 At pp. 829–31.
75 Preston and Newsom, Limitation of Actions, p. 137, deduce that such an action would be barred after six years; but see the note on Jay v. Jay (supra) in 40 L.Q.R. 391.
76 See also Re North [1952] 1 All E.R. 609 (reported after this article went to press) where a gift by will to A and B was construed as a gift to them in common because it imposed on them (“on condition that”) a personal obligation to pay “in equal shares” 10s. a week to X for life.