EQUITY 1.5 CONVERSION, ELECTION, PERFORMANCE AND SATISFACTION

• Isochukwu
• 7
• Equity and Trust I

CONVERSION, SATISFACTION, PERFORMANCE AND ELECTION.

CONVERSION.

The meaning and essence of this fictitious doctrine has been embodied in the dictum of Bowen LJ in Attorney General v. Hubbuck

“When money is agreed or directed to be turned into land or land agreed or directed to be turned into money… equity would regard that which ought to be done as done”.

Meaning that in the above scenario, the money becomes land (realty) and the land becomes money (personalty) in the eyes of equity from the time such direction/directive becomes effective. Notwithstanding that there has been no actual sale.

As has been noted by Sewel MR in Fletcher V Ashburer; “contracting parties may make land money or money land”.

Langdell has recognised the fictitious and artificial nature of the doctrine.

The birth of this doctrine (as noted by Maitland) lies in the two systems of intestate succession that operated in England (Personalty (movables) and realty (immovable property)).

Circumstances where the doctrine will operate where:

1. Where there is a binding and enforceable contract for the sale or purchase of land: the doctrine takes effect once the contract is concluded. The money becomes land and the land money and devolves as such notwithstanding that there has been no actual sale. In such situation, the vendor is seen as holding it in trust for the purchaser.
2. Where there is an option to purchase: the rule in Lawes V Bennett posits that if an owner of real estate contracts to sell it and dies before the contract is executed, the estate is converted into personalty and the other party can elect in favour of the contract[1]. Conversion takes place from the moment the other party elects in favour of the contract-Re Isaacs. The testator can expressly exclude the operation of this rule in his will. In Re Carrington, this doctrine was extended to option to purchase shares (this has been greatly criticised). In Weeding V Weeding, the court held that the rule would not operate where the specific devise is made after the option is given. The rule in Lawes V Bennett has been repudiated in America and it has been reluctantly applied in England with its scope reduced. It has been criticised by Hanbury as a spurious product of conversion which deprives a devisee of land and gives him a precarious income instead.
3. Trust for sale/Purchase: whenever there is a binding direction in a will or settlement that trustees shall sell a land, the land (realty) is treated as money (personalty) conversely, where there is a direction to use money to buy land, the money is treated as realty from the moment the trust instrument becomes operative or from the testator’s death (in the case of a will). Where such instruction/direction is optional, there would be no conversion-Re Twopeny’s Settlement
4. Statutory Trust for Sale: (by the combined interpretation of Section 61, 62, 63 and 64 of the Property and Conveyancing Law 1959 (applicable to the former western and mid-western states) and Section 37 of the Administration of Estates Law 1959) Land conveyed to persons in undivided shares, shall be held upon trusts for sale, Meaning that the land is to be sold and the money shared between the beneficiaries. This creates conversion because as far as the beneficiaries are concerned, the land is money-Re Kempthrone. E.g. if the dean gives the members of the law class of 2018 a piece of land in undivided shares, in equity, the land is treated as money and should be sold. Then the money would be distributed in undivided shares between the students.
5. Where land is partnership property: partnership property is that which is held by partners. In the absence of a contrary intention or agreement between the partners, such land is treated as personalty-AG V Hubbuck. Same position has been enacted in Section 22 Partnership Act 1890 (a Statute of General Application) and Section 23 Partnership Law (Western Nigeria) 1959.
6. Where a court of competent jurisdiction directs a sale of realty. Conversion takes place from the date of order. The court may however order that there should be no conversion in deserving situations. For example in AG V Marquis of Ailesbury the court excluded the operation of the doctrine in the interest of a lunatic who owned the property.

FAILURE OF CONVERSION.

It may be total or partial.

• Total: where the disposition is illegal or where all the beneficiaries for a trust for sale die before the trust instrument takes effect.

Reconversion: the process of reversing or discharging conversion thereby restoring the property to its original position-Snell- Principles of Equity. It may be effected by the act of the parties or operation of the law-Re Cook.

This doctrine is of little importance in Nigeria and in England it has been whittled down by the Administration of Estates Act 1925 which abolished the descent of realty to heir. However, the doctrine is not totally useless as it can arise where a testator disposes of his realty and personalty separately and to different persons. Then, in determining the testator’s realty and personalty, the doctrine of conversion may arise to determine who gets what.

SATISFACTION AND PERFORMANCE.

Equity imputes an intention to fulfil an obligation and equity leans against double portions as lord Cranworth noted in Chichester V Coventry.

SATISFACTION.

The guiding maxim here is: “Equity leans against double portions”.

Satisfaction occurs where a debtor donates a thing to a creditor, a presumption that the thing donated serves to extinguish/satisfy prior debt may be raised. This doctrine of satisfaction may be understood in two senses:

• Satisfaction of a debt by legacy.
• Satisfaction of portion debts by legacy or subsequent portions.

Satisfaction of debt by Legacy: The law was stated by Sir J Trevor in Talbott V Duke of Shrewsbury thus:

• Where a person (debtor) owes another a sum of money.
• And by his will gives him (the creditor) a sum of money as great as or greater than the debt (legacy).
• Equity treats this as satisfaction of the debt. So that the creditor shall not have both the debt and the legacy.

The rule can be rebutted/negated where:

• The legacy is smaller than the debt: in Coates V Coates; 12 pounds a week could not discharge testators liability under the separation deed of a greater amount of 15 pounds a week. Although the pro-tanto rule can be applied. The Pro Tanto rule: stipulates that where the amount of the subsequent gift is less than the legacy, it shall amount to part satisfaction. I.e it shall be deducted from the portion debt.
• No Prior Debt: Where the debt was incurred after making the will. i.e. as at the time of making the will, there was no debt in existence.
• Contrary intention: in the will. For example where the testator desires that the beneficiary should enjoy both gifts.
• Where the legacy is not of the same nature as the debt. In Coates V Coates, a bequest of the life use of a house and furniture could not be treated as a satisfaction of a monetary debt.
• Debt already discharged by the testator during his lifetime. In Re Fletcher a testator had already paid his debt of £625 to his wife. He later devised same sum. Court held that there was no point in the doctrine operating in such a situation.

 

Satisfaction of portion debts by legacies or by subsequent portions.

Satisfaction of portion debts by legacies: A portion was defined in Taylor V Taylor as something given by a father to his child with a view to establishing the child in life. For example marriage portion, money for training the child, and so on.

Simply put, where a father or person in loco parentis[2] is under a covenant to provide a portion for a child. If he subsequently gives the child a legacy, there is a presumption that the legacy was intended to satisfy the portion-debt. The donee must be a child of the donor.

 

THE DOCTRINE OF PERFORMANCE.

Equity imputes an intention to fulfil an obligation. Where a person under an obligation to do a thing does some other act capable of being regarded as a fulfilment of that obligation, it can be regarded as fulfilling the obligation.

The main difference between performance and satisfaction is that in the former, the act done must be identical to that which the convenantor agreed to do while in the latter (satisfaction), the act presumed to be in satisfaction is different from what the donor agreed to do-Lechmere V Lechmere.

Performance may be divided into two:

• Where there is a covenant to purchase and settle land: and the covenantor purchases a land, such land shall be regarded as performance of his obligation under the covenant-Lechmere V Lechmere.
• Where there is a covenant to leave money by will or for trustees to pay covenantee a sum of money. If the covenantor dies intestate, the covenantee becomes entitled under the intestacy to share in the personal estate of the deceased intestate.

THE DOCTRINE OF ELECTION.

Lord Eldon in Ker V Wanchope noted that no person can accept and reject an instrument. You cannot benefit from an instrument and disregard the burden placed by the same instrument.

The gist of election (as stated in Taylor V Williams) is summarised thus: Election occurs where in an instrument,

• A donor (testator) gives his own property to the someone (elector).
• And at the same time in the same instrument gives the elector’s property to another person.
• The elector must either elect in favour of the instrument or against the instrument (will).
• “Electing in favour of the instrument” means that the elector shall get the benefit conferred (i.e. the donor’s property) and must in turn, transfer his (elector) property to the beneficiary according to the instrument.
• “Election against” means that the elector takes the benefit (donor’s property) and keeps his own property provided he compensates the disappointed beneficiary–Ker V Wauchope.

The properties must be freely alienable: meaning the properties of the donor and elector must be freely transferrable to enable payment of compensation or transfer to beneficiary-Re Vardon’s Trust. In Ogumefun V Ogumefun and Taylor V Williams, the properties were family property and were not vested in the donor thus not freely alienable as such there could be no election.

In Cooper V Cooper, the court held that if the elector dies without making election, his successor in title steps into his shoes. But where his property is to devolve in many directions, his successor should compensate the disappointed beneficiary.

If the value of the elector’s property is more valuable than the benefit conferred on him by the (elector) instrument, he is under no obligation to pay more than the value conferred as compensation-Rogers V Jones.

The value of property is to be ascertained as at the time of testator’s death and not when election is made. The burden of proving election rests on the party alleging election-Sweetman V Sweetman.

There is generally no time limit but the elector should elect within a reasonable time. Failure may raise a presumption of election against the instrument.

DIFFERENCES BETWEEN A CONDITIONAL GIFT AND ELECTION.

In a conditional gift, the beneficiary has to choose either of the two properties and cannot have both. While under an election, the elector can have both properties provided he compensates the disappointed beneficiary.

 

[1] Do you get? Equity regards as done that which ought to be done. There was an agreement to sell the land (real property). In equity, the land has been converted into personalty (i.e. the purchase price or other consideration) notwithstanding that there has been no actual transfer. Therefore, the buyer can elect in favour of the contract (i.e. that he wants to still buy the property) and this is possible.

[2] A person in loco parentis is a person who puts himself in a relative situation of a legal father-Lawes V Lawes. The donor must be a father (not mother, grandmother, and so on) or someone in loco parentis.