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Original Printed Version (PDF)


[COURT OF APPEAL]


In re DIPLOCK.


DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS).


1948 Feb. 9, 10, 11, 12, 13, 16, 17, 18, 19, 20, 23, 24, 25, 26, 27; Mar. 1, 2, 8, 9, 10, 11, 12; July 9.

Lord Greene M.R., Wrottesley and Evershed L.JJ.


Administration - Distribution under invalid charitable bequest - Mistake of law - Right of next-of-kin to recover in equity from charities wrongly paid - Difference between this equitable claim in personam and common law action for money had and received - Applicability of Statutes of Limitation - Claims in rem - Application of equitable doctrine of tracing.


C. D. by his will directed his executors to apply his residuary estate "for such charitable institutions or other charitable or benevolent object or objects in England" as they should in their absolute discretion think fit. The executors distributed a large part of the residue among one hundred and thirty-nine charities before the next-of-kin of the testator challenged the validity of the original bequest, which was held by the House of Lords to be invalid ( Chichester Diocesan Fund and Board of Finance (Inc.) v. Simpson [1944] A. C. 341).

The claims of the next-of-kin against the executors or their estates were compromised, with the approval of the court, but a number of actions continued against institutions which had participated in the distribution. In most cases, the cheque sent by or on behalf of the executors had been paid into the institution's general account. Some of such accounts were in credit, others were overdrawn and unsecured, a few were overdrawn and wholly or partly secured. In some cases payment was made to a special account: in a few cases it had been earmarked for a particular purpose. In some




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instances the money was expended in altering or enlarging existing buildings on land owned by the charity. (The various cases are analysed in the judgment.)

The claims of the next-of-kin were of two main kinds: (a) claims "in personam" based on an alleged equity in an unpaid creditor, legatee or next-of-kin to recover from an overpaid beneficiary or (as here) stranger to the estate; (b) claims "in rem" based on the doctrine of tracing assets which are identifiable, either unmixed, or as part of a mixed fund in the hands of a volunteer who has wrongly received them.

Held, I. As to the claims "in personam":

(1.) Without attempting any exhaustive formulation of its nature applicable to every class of case, there was established the existence of such an equity as was claimed against a recipient who was paid more than he was entitled to receive at the date of the payment or who was not in fact entitled to any payment; and such equity might be available equally to an unpaid or underpaid creditor, legatee or next-of-kin.

(2.) The claim by a next-of-kin was not liable to be defeated merely (a) in the absence of administration by the court; or (b) because the mistake under which the original payment was made was one of law rather than fact (the equitable claim being on a different footing in this respect from the common law action for money had and received); or (c) because the original recipient turned out to have no title at all, and was a stranger to the estate. As regards the conscience of the recipient on which equity acts it may be, and in such a case as the present is, sufficient that he has received some share of the estate to which he is not entitled.

But (3.) Such a claim by an unpaid beneficiary is subject to the qualification that since the original wrong payment was due to the blunder of the personal representatives, the beneficiary's primary claim is against them, and the direct claim against those overpaid or wrongly paid must be limited to the amount irrecoverable for any reason from the party responsible. In the present case the amount recovered from the executors under the compromise must be apportioned among the charities in proportion to the grants they had received, so that the maximum recoverable from any individual charity by the next-of-kin would be rateably reduced.

(4.) The amount for which the defendants were liable under this head was to be reckoned without interest.

(5.) The period of limitation applicable was twelve years under s. 20 of the Limitation Act, 1939.

All reported authorities on this equitable doctrine from Nelthrop v. Hill (1669) 1 Ch. Cas. 135 and Noel v. Robinson (1682) 1 Vern. 90, to the present day, discussed and considered.

II. As to the claims "in rem":

The equitable right of tracing into a "mixed fund" is not confined to cases like Hallett's case (1880) 13 Ch. D. 696, where the right is asserted against the original "mixer" who was in a fiduciary relationship to the claimant. The case of Sinclair v. Brougham [1914] A. C. 398 decided that Hallett's case (supra),




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was an illustration of a much wider principle, viz.: that one whose money has been mixed with that of another or others may trace his money into the mixed fund (or assets acquired therewith) though such fund (or assets) be held, and even though the mixing has been done, by an innocent volunteer, provided that (a) there was originally such a fiduciary or quasi-fiduciary relationship between the claimant and the recipient of his money as to give rise to an equitable proprietary interest in the claimant; (b) the claimant's money is fairly identifiable; and (c) the equitable remedy available, i.e., a charge on the mixed fund (or assets), does not work an injustice.

Thus:

(a) Where the defendant is in a fiduciary relation to the claimant, and has mixed the claimant's money with his own, the claimant takes priority. The same result follows if the defendant had notice that the money was in equity the claimant's.

(b) Where the contest is between two claimants to a mixed fund consisting of moneys belonging to both and therefore held on behalf of both, they share pari passu.

(c) Where the claimant's moneys are handed by way of transfer to a person who takes for value without notice of the claimant's equity, the claim (like all equitable claims in like circumstances) is extinguished.

(d) In the case of a volunteer who takes without notice (e.g., by way of gift from the fiduciary agent), if there is no question of mixing, he holds the money on behalf of the true owner, whose equitable right to the money still persists as against him.

(e) But if the volunteer innocently mixes the money with money of his own, or receives it mixed with his own money from a fiduciary agent, he must admit the claim of the true owner, but is not precluded from setting up his own claim in respect of the moneys which he has contributed to the mixed fund, the result being that they share pari passu, neither being entitled to priority.

In re Hallett's Estate (1880) 13 Ch. D. 696; In re Guardian Permanent Benefit Building Society (Crace-Calvert's Case) (1882) 23 Ch. D. 440; Sinclair v. Brougham [1914] A. C. 398 considered.

Applying these principles to the cases before the court, where there had been a mixing of trust money with charity money (or where it had been paid into a special account and remained unmixed) the next-of-kin were entitled to recover, pari passu with the charity in the case of mixed funds, (subject, as in the claims "in personam" to a rateable reduction in respect of the amounts recovered from the executors under the compromise). But where the moneys received by the charity had not been mixed with moneys of the charity but had been expended on the alteration or improvements of their own assets, as by erecting buildings on their own land, or in discharging debts of the charity secured or unsecured, the trust money could not be disentangled, the equitable remedy of a charge would work an injustice, and the claim of the next-of-kin was no longer available.

In working out the equity in a case where the trust money was




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paid into an active bank account, prima facie the rule in Clayton's case (1816) 1 Mer. 572 was applicable.

Where a charity having received trust money attributed a specific asset of its own to the money it had received, the charity was prima facie bound by its own voluntary act.


APPEALS from Wynn-Parry J.(1).

The facts of these appeals are fully stated in the judgment of the court, and are therefore briefly summarized here.

By the will dated November 3, 1919, of Caleb Diplock, who died on March 23, 1936, his executors were directed to apply his residuary estate "for such charitable institution or institutions or other charitable or benevolent object or objects in England as my acting executors or executor may in their or his absolute discretion select and to be paid to or for such institutions and objects if more than one in such proportion as my executors or executor may think proper."

The will was proved on May 16, 1936, the residuary estate amounting to about 263,000l. In the next three years the executors paid out 203,067l. 10s. 0d. to 139 charitable institutions of their choice. Each payment was made by cheque, accompanied by a letter from the executors' solicitors, which while it did not follow exactly the terms of the will referred to the bequest to "charitable or benevolent objects," and announced the allocation of a named amount. There was no doubt that these payments were made by the executors and received by the charities in good faith, believing the testator's bequest to be valid and effectual.

But in 1939 certain persons claiming to be next-of-kin of the testator challenged the validity of the bequest, and on October 18, 1939, the executors' solicitors wrote to each of the participating institutions a "warning letter," informing them of the challenge and calling on them not to expend or deal with the distributed sums in their hands until they heard further.

In 1940 an action (referred to as "the main action") was started in which (ultimately) three of the forty-eight next-of-kin of the testator were plaintiffs, and the executors or their personal representatives, four of the participating charities, the Attorney-General, and one Conolly who was appointed judicial trustee of the estate, were defendants. An originating summons was issued, for the determination of the validity of the original bequest, and in 1944 the House of Lords held it to be wholly


(1) [1947] Ch. 716.




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invalidated by the use of the disjunctive "or benevolent" (see Chichester Diocesan Fund and Board of Finance (Inc.) v. Simpson (1)). In 1944 an order was made in the main action approving a compromise of all claims of the next-of-kin against the executors or their estates.

On July 28, 1945, the three next-of-kin and the judicial trustee issued writs in a number of other actions (of which nine were before the court in these appeals) claiming relief against individual recipients of the distributed sums. The circumstances varied; in some cases the sum received was paid into a general account which might be (a) in credit, (b) overdrawn and unsecured, or (c) overdrawn and secured, partly or wholly. In other cases the money was paid into a special account, and in some cases the money had been used for a specific purpose such as the erection of a building, or the purchase of equipment.

The claims of the plaintiffs fell into two main categories:

(1.) claims "in personam" based on the alleged right of an unpaid or underpaid beneficiary, to recover money overpaid to another beneficiary or (as here) to a stranger to the estate;

(2.) claims "in rem," based on the right of "tracing" assets, where they or their proceeds could be identified in the hands of those who had wrongly received them.

Wynn-Parry J. wholly rejected the claims "in personam," and most of the claims "in rem," but allowed certain of the latter. The plaintiffs appealed against all his orders, except so far as they were in their favour.


Pascoe Hayward K.C., J. L. Arnold and Cockle for the plaintiffs.

J. N. Gray K.C. and Dunbar for the National Institute for the Deaf and Dr. Barnardo's Homes.

Gerald Upjohn K.C. and Dunbar for Prince of Wales' Hospital and Leaf Homoeopathic Hospital.

Pennycuick K.C. and J. F. Bowyer for St. George's Hospital.

Pennycuick K.C. and J. H. Stamp for Westminster Hospital, Queen Alexandra's Cottage Homes, Guy's Hospital and Heritage Craft Schools.

R. W. Goff for Royal Sailors' Orphan Girls' School.

John Monckton for the judicial trustee.

Danckwerts and D. H. McMullen for the Attorney-General.


 

Cur. adv. vult.


(1) [1944] A. C. 341.




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DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

July 9, 1948. Owing to the length of the judgment of the court (LORD GREENE M.R., WROTTESLEY and EVERSHED L.JJ.) a summary only was given in court by LORD GREENE M.R., the text being duplicated and handed down to counsel and other persons requiring copies. The costs of thus reproducing the judgment were made costs in the cause.

The full text of the judgment is as follows:

These appeals, ten in number, which have been heard together, are from a reserved judgment of Wynn-Parry J. delivered on March 11, 1947, in those actions together with nine others (all of which were also tried by him together) and from orders made in the actions on April 1, 1947, following further discussion on that day before the learned judge, pursuant to his judgment.

It will be necessary at a later stage to refer in some detail to the facts of the several cases. At this stage it will be convenient and sufficient to refer in general terms to the circumstances, common to all of them, which have given rise to these actions; and to state briefly the nature of the claims made in the present appeals (which amount together to some 54,760l.) and to the effect of the orders appealed from.

The considerable litigation, of which these appeals form but a part, arises out of the will, dated November 3, 1919 and proved on May 16, 1936, of Caleb Diplock who died on March 23, 1936. By the terms of this will the testator's executors were directed to apply his residuary estate "for such charitable institution or institutions or other charitable or benevolent object or objects in England as my acting executors or executor may in their or his absolute discretion select and to be paid to or for such institutions and objects if more than one in such proportion as my executors or executor may think proper."

The total amount of the residuary estate proved, we were told, to be approximately 263,000l. But notwithstanding the size of the estate and the trap which, at least to a lawyer, might have been discerned in the testator's language, the executors proceeded without any application to the court, to distribute during the years 1936, 1937 and 1938 203,067l. 10s. 0d., among one hundred and thirty-nine charitable institutions of their choice. All payments were made by cheque and in each case a letter was sent to the recipient of the testator's money which emanated from an address in Eastbourne and had printed al the top left-hand




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corner the words "Wintle & Hodgson, Solicitors." The letter was in the following form:


"Dear Sir,

"Estate of Caleb Diplock deceased.

"Grants to London & other charities.

"The above named deceased by his will bequeathed his residuary estate for distribution amongst such hospitals and institutions or other charitable or benevolent objects in England as his executors might in their absolute discretion select, and in such proportion as they might think proper

"The executors have decided to allocate a grant of £ (blank) to (blank)

"We have pleasure in enclosing you herewith a cheque for this amount

"We shall be obliged if you will sign and return us the enclosed form of receipt.

"yours faithfully,

"(sd) Wintle & Hodgson."


Nothing turns on the form of the enclosed receipt.

There is no doubt that when the executors made these distributions they bona fide believed that the testator's directions in regard to his residuary estate were valid and effectual. The letter quoted above did not, as will be observed, exactly transcribe the relevant part of the will, though its language did comprehend the ill-omened disjunctive - ".... charitable or benevolent objects ... - ." It is however also clear and conceded by the appellants that each of the respondents to these appeals accepted their respective cheques in the full faith and belief that the executors were properly entitled so to distribute the residuary estate.

In the year 1939 certain persons claiming to be next-of-kin of the testator, having learnt of the contents of his will, challenged the validity of the residuary bequest and intimated their challenge to the executors. Accordingly on October 18, 1939, the executors' solicitors wrote to each of the institutions who had participated in the distribution of Mr. Diplock's residuary estate (including the respondents to these appeals) informing them of the challenge and calling upon them not to deal with the distributed sums in their hands until they had further heard from the executors' solicitors. Whatever be the effect as regards notice of the formal letters which accompanied




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the distribution, it is conceded by all the respondents that from the time of the receipt by them of the so-called "warning letter" of October 18, 1939, they must be treated as having had notice of the invalidity of the testator's residuary bequest, and that accordingly his residuary estate had from the date of his death properly been distributable among the persons entitled as his next-of-kin by virtue of the Administration of Estates Act, 1925.

On January 3, 1940, the writ was issued in the first of the actions (1940. - D. - No. 14.) the subject of these appeals. This action has been referred to as "the main action." Originally the sole plaintiff was John Henry Diplock, one of the claimants as next-of-kin. He died in 1940. As a result of amendments, the parties to this action (which was intituled "In the matter of the estate of Caleb Diplock deceased") later consisted of the following: as plaintiffs, three persons (in addition to J. H. Diplock) all of whom were subsequently found (by certificate made in the action), to be of the number of those (48 in all) entitled as next-of-kin to the residuary estate: and as defendants, the three surviving and proving executors, Messrs. Wintle, Handson (both of whom have died) and Thomas, one Johnson who with the defendant Thomas was trustee of a certain piece of land and a sum of consols formerly part of the residuary estate, St. George's Hospital and three other charitable institutions, H.M. Attorney-General, Mrs. Handson (the widow and personal representative of the defendant Handson) and one C. G. Conolly who had (by an order in the main action dated December 8, 1943) been appointed judicial trustee of the estate. Of these defendants only St. George's Hospital (against whom the plaintiff-appellants' claim is for the sum of 8,000l. received by it from the executors), the Attorney-General and Mr. Conolly are before this court.

The claim against St. George's Hospital was wholly rejected by Wynn-Parry J., who ordered the appellants to pay the hospital's costs of the action.

In all the other nine actions which are the subject of these appeals, the writs were issued on July 28, 1945. All were entitled "In the matter of the statutory trusts affecting the residuary estate of Caleb Diplock deceased by virtue of the Administration of Estates Act 1925." In each case there are four plaintiffs, namely, the three claimants as next-of-kin, who with J. H. Diplock are plaintiffs in the main action,




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together with Mr. Conolly. In each there is but one defendant. The following catalogue of the actions (referred to by their respective appellations used in the appeals) identifies the several defendants and states the amounts of the respective claims and the effect of the relevant orders made in regard to them by the learned judge. In action I. E the plaintiff-appellants claimed the sum of 3,000l. paid by the executors to Dr. Barnardo's Homes. This action was dismissed with costs. In action I. F the plaintiff-appellants claimed from G. W. Lilburn, acting secretary of the National Institute for the Deaf, the sum of 1,500l. paid to that institution by the executors. This action was dismissed with costs. In action II. A the plaintiff-appellants claimed the sum of 1,000l. paid by the executors to the Prince of Wales' Hospital, Plymouth. This action was dismissed with costs. In action II. C the plaintiff-appellants claimed from Sir R. J. S. Dodd as chairman and E. Haigh as honorary secretary of the Leaf Homoeopathic Hospital the sum of 7,500l. paid by the executors to that hospital. In this case Wynn-Parry J. ordered the defendants to pay to the plaintiff Conolly (the judicial trustee) the agreed sum of 250l., rejected the rest of the claim and ordered the plaintiffs to pay one-half of the defendants' costs. In action III. C the plaintiff-appellants claimed from F. R. D'O. Monro the secretary of the Royal Sailors' Orphan Girls School and Home the sum of 2,000l. paid by the executors to that institution. This action was dismissed with costs. In action IV. A the plaintiff-appellants claimed from the President, Vice-Presidents, Treasurer and Governors of the Westminster Hospital the sum of 4,000l. paid to that hospital by the executors. This action was dismissed with costs. In action IV. B the plaintiff-appellants claimed from Colonel J. R. Warren the Chairman and two Deputy Chairmen of the Heritage Craft Schools the sum of 2,000l. paid by the executors to that institution. This action was dismissed with costs. In action IV. D the plaintiff-appellants claimed from J. C. Smith and others as the Committee of Management of Queen Alexandra Cottage Homes the sum of 4,760l. paid by the executors to that institution. In this case the learned judge ordered payment by the defendants to Mr. Conolly of the sum of 1,035l. 12s. 0d. (being the proceeds of redemption of a like nominal amount of 3 per cent. Local Loans purchased for the sum of 1,000l. part of the sum of 4,760l.) together with interest earned thereon from January 6, 1939, to the date




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of payment: but he rejected the balance of the claim and ordered the plaintiffs to pay to the defendants five-sixths of their costs. Finally in action IV. E the plaintiff-appellants claimed the sum of 21,000l. paid by the executors to Guy's Hospital. In this case the learned judge ordered the defendants to pay to Mr. Conolly the sum of 5,052l. 19s. 0d. together with 70l. 6s. 3d. for interest. He rejected the rest of the plaintiffs' claim but held the plaintiffs entitled to recover three-fourths of their costs of the action less those costs relating to the application to speak to the minutes of the judgment the defendants' costs of that application to be paid by the plaintiffs with the usual provision for set-off.

Against all the orders thus briefly described (so far as they are not in their favour) the plaintiffs have appealed to this court. There are no cross-appeals.

When the main action was instituted, there had been no determination by the court on the question of the validity of the testator's residuary dispositions. But pursuant to a direction given by Bennett J. in the main action an originating summons was in the month of June, 1940, issued by the executors for the purpose of obtaining the court's determination whether or no those dispositions were valid. This summons (1940 - D. - 1041) came before Farwell J., who decided the question in favour of the validity of the bequest: but his decision was reversed by this court in 1941; and the House of Lords (Lord Wright dissentiente) in 1944 (sub. nom. Chichester Diocesan Fund and Board of Finance (Inc.) v. Simpson) (1) affirming the decision of the Court of Appeal finally held the dispositions to be wholly invalidated by the "or benevolent."

To complete this general statement of facts, reference must be made to an order made by Simonds J. (as he then was) in the main action on April 5, 1944, whereby certain terms of compromise were approved of all claims by the plaintiffs as next-of-kin of the testator against the estates of the two deceased executors, Messrs. Wintle and Handson, and also against the surviving executor Mr. Thomas, and against Mrs. Handson as personal representative of her late husband. The precise terms of the compromise are not material to be here set out but the learned judge ordered that such compromise should be binding on all the persons beneficially


(1) [1944] A. C. 341.




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entitled to any property of the testator as to which he died intestate other than the then surviving plaintiffs (who were parties to the compromise): and he further ordered that all further proceedings should be stayed against the defendants Thomas and Mrs. Handson. It follows that, from the date of the order of April 5, 1944, no right remained in any person claiming as next-of-kin of the testator to claim against any of the executors of the testator or against any of the estates of any of the executors in respect of devastavit or other misapplication of the testator's residuary estate.

Against this general background of fact it is now possible to state the nature of the appellants' claims in these appeals. These claims fall broadly under two heads which have been compendiously described as claims in personam and claims in rem. The former (which, as will be seen, must be sub-divided) are personal claims which it is said the appellants are able to make in equity against each of the respondents. If it be held that, in accordance with this argument, there is a good foundation for such equitable claims, then further questions will arise whether and to what extent the Statutes of Limitation - particularly the Limitation Act of 1939 - directly or by analogy apply to defeat such claims: but save possibly for the bearing of the dates of the several payments ;md of certain other dates upon these statutory defences the special facts relating to the application by the several respondents of the sums respectively paid to them have no relevance to the claims in personam. In other words since it is conceded for the purposes of the appeals that all the respondents must be treated as solvent, they will each of them be bound, if the personal claims are made good on the part of all the next-of-kin, to repay or account for the full amount of the sums received by them (less a due proportion of what has already been recovered from the executors or their estates by virtue of the order of April 5, 1944), with or without interest, subject only to the defence of limitation.

It is to be noted that Wynn-Parry J. wholly rejected the claims of the appellants in personam. In so far as the learned judge ordered any of the respondents to pay any sum to the judicial trustee (as appears from the recital already made) those orders were based on the appellants' claims in rem.

The claims in rem rest upon the application of the principles alleged to underlie the well known case of In re Hallett (1)


(1) (1880) 13 Ch. D. 696.




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explained and expanded (as it is said) in Sinclair v. Brougham (1) as to enable the appellants to "follow" or "trace" the moneys paid to the several respondents into the various assets held by such respondents wholly or partly attributable to those moneys. In considering these claims "in rem" (as distinct from the claims "in personam") it will be necessary to examine in detail the facts relating to the disposal by each of the respondents of the several sums paid to them by the executors. As regards these facts, there is, fortunately, no dispute: and in every case except the main action agreed statements of facts have been prepared for the use and convenience of the court.

We turn, however, first to the claims "in personam." Before analysing the nature of those claims it is convenient to deal with one general matter of defence raised by Mr. Neville Gray. It was said by him that the formulation of any equitable claim against any of the respondents must at least postulate that the consciences of the respondents must in some degree be affected by their retention of the moneys paid to them which should properly have been paid to the appellants and other next-of-kin of the testator. Mr. Gray sought to defeat these claims, as it were, in limine, by denying altogether the postulate: for, said he, notwithstanding the formal invalidity of the bequest, at least it must be taken that Mr. Caleb Diplock intended the respondents or similar institutions to enjoy the residuary estate in preference to his blood relations and it does not lie, accordingly, in the mouths of the next-of-kin to allege any unconscientiousness on the part of those whose claim is in accordance with the wishes that the testator had expressed, albeit ineffectually. This argument appears to us to be wholly untenable. It is in our opinion impossible to contend that a disposition which according to the general law of the land is held to be entirely invalid can yet confer upon those who, ex hypothesi, have improperly participated under the disposition, some moral or equitable right to retain what they have received against those whom the law declares to be properly entitled. We add also that in determining the difficult questions which the appeals have raised it is immaterial that the respondents are charitable institutions of the most deserving character. In considering the application of the principles of equity it does not seem to us that there is any different standard of conscientiousness for charitable or other corporations from that appropriate to an individual.


(1) [1914] A. C. 398.




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DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

As already indicated, the appellants' claims in personam must be sub-divided and fall under two quite distinct heads. First, it is argued that by the terms of the letters which accompanied all the executors' payments, the respondents were given notice of the invalidity of the trusts declared of the testator's residuary estate, or at least were put upon inquiry as regards their validity so that the respondents (who were in any event pure volunteers) were subjected to a constructive trust of the moneys they received in favour of the next-of-kin. Secondly, it is argued that apart from any notice which the respondents may have had of the true effect of the testator's will, they had in truth no right to receive any of the moneys paid to them and that in the circumstances of the case already set forth the unpaid next-of-kin have a direct claim, recognized and established by the courts of equity, to recover from the respondents the sums improperly paid to the respondents and properly belonging to the next-of-kin.

The first of these claims was not argued in the court below and has been somewhat faintly argued in this court. As already observed, the form of letter on which the respondents rely for this part of their case does not purport to quote and does not in fact accurately reflect the exact language of the will: but it does in its paraphrase retain the essential vice of the original in its use of the disjunctive formula "charitable or benevolent objects." It is conceded by the respondents that from the moment that they received, by the later letter of October 18, 1939, notification of the plaintiffs' challenge they must be taken to have been so affected with notice of the claim of the next-of-kin as to be accountable in respect of any balance of the sums originally paid to them which remained in their hands unexpended or undisposed of. It is said by the appellants that a corresponding liability attached to them from the moment of the original receipt by them of the sums paid by the executors since, even without any actual challenge, they cannot be heard to allege ignorance of the invalidity which, by the general law, attached to the words used in the letter no less than to the words used in the will: alternatively, that the respondents having received letters which purported to state the substance of the material part of the will and being volunteers and unable to plead lack of knowledge that the substance, so stated to them, was without legal effect, were put upon inquiry and, not having inquired,




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DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

took what they received subject to the risk of having to account and repay if it turned out that they had been improperly paid.

The argument has, it must be confessed, some attraction. For to the eye of the lawyer, particularly one made wise after the event of the decision of the House of Lords in Chichester Diocesan Fund and Board of Finance (Inc.) v. Simpson (1) it may seem plain enough that the executors had embarked upon an entirely irregular execution of their duties. But we have come to the conclusion that this branch of the appellants' claim ought not to succeed. As we have already stated each of the respondents in fact accepted the moneys paid to them in good faith and in the belief that they were properly entitled to receive what the executors handed to them. As a matter of general principle the appellants' argument would indeed lead to startling results. For if the respondents can be said to be put upon inquiry then they must have been under some duty to inquire. What, on the basis of this contention on the part of the appellants (which is, of course, wholly distinct from the other branch of their personal claim, later dealt with), would be the duty of one who is told by executors that he is a legatee under a testator's will and paid that which he is told he has been given? Must he call for and examine the will to satisfy himself of its validity? Must he inquire whether all claims ranking in priority to his own have been satisfied? In the present case it is to be noted that the letter which the respondents received came, on the face of it, from the executors' solicitors. Moreover, even though the language used in the letter might be said to convey to the tutored mind some suspicion of the validity of the disposition, it would not follow that such language though taken verbatim from the will would necessarily in its context result in invalidity. In our judgment persons in the position of the respondents, themselves unversed in the law, are entitled in such circumstances as existed in the present case to assume that the executors are properly administering their estate: and if, as is admitted in this case, they took the money bona fide believing themselves to be entitled to it, they should not have imposed upon them the heavy obligations of trusteeship. We do not think it necessary or desirable to attempt an exhaustive formulation of the law applicable as regards notice in case of payments to legatees save to say that every case of


(1) [1944] A. C. 341.




[1948]

 

479

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

this kind will depend upon its own facts and that the principles applicable to such cases are not the same as the principles in regard to notice of defects in title applicable to transfers of land where regular machinery has long since been established for inquiry and investigation. For these reasons we reject this part of the appellants' claim.

But the second branch of the appellants' personal claim is one of far greater difficulty and complexity. It has involved considerable research into cases over a period of more than two hundred and fifty years and we have been much indebted to counsel for the help which their industry and argument have given to the court. It is to be noted that Wynn-Parry J. in the court below did not have the advantage, afforded to this court, of an examination of the cases prior to the year 1800.

It will be convenient at this stage not to attempt any formulation of the appellants' argument under this head beyond that already indicated, viz., that in the circumstances and having regard to the facts of the present case, the appellants have a direct claim in equity against the respondents to recover the sums improperly paid to the respondents, or to recover such proportion of such sums as may be required to make good to the appellants and the other persons entitled as next-of-kin, after bringing into account what has been recovered from the executors or their estates by virtue of the compromise order of April 5, 1944, what should have been received by them from the testators' residuary estate. According to the judgment of the learned judge the point was put before him in somewhat wider and more general terms(1). But however the proposition be restricted by reference to the particular facts of the case the reasoning of the learned judge in rejecting the proposition will, if well founded, be necessarily fatal to it. For after an examination of the various cases relied on before him beginning with Gillespie v. Alexander (2), in 1826 (the earlier seventeenth and eighteenth century cases, as we have already observed, not having been cited to him) the learned judge concluded that an unpaid beneficiary could only sue the wrongly paid recipient of the testator's money in equity in the same circumstances as those which would enable him in the name of or by joining the personal representative to sue at law, that is, when the wrong payment had been made under a mistake of fact.


(1) [1947] Ch. 716, 723.

(2) (1826) 3 Russ. 130.




[1948]

 

480

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

"In my judgment" he said(1) "the authorities establish that so far as a mere money demand is concerned (and I am, as regards this part of the matter, dealing only with a money demand) where the executor or administrator has paid money or transferred property part of the estate of the deceased to a person not entitled thereto in such circumstances as not to make the recipient an express trustee, the only remedy open to the legatee or next-of-kin rightfully entitled against the recipient is either to pursue a common law claim for money had and received in the name of the executor or administrator, or to pursue in equity a claim analogous to the common law action for money had and received, in which it would be unnecessary to join the executor or administrator as plaintiff. In either case, however, as I have shown, it would be essential to demonstrate that the money was paid under a mistake of fact and not a mistake of law, a mistake in construing a will being regarded for this purpose as a mistake of law."

Now upon the question whether the mistake here made was one of fact or of law we think the learned judge was clearly right in deciding that it was the latter and we cannot usefully add anything to what fell from him upon that point. Equally we agree with him that as regards common law claims for money had and received the action will not lie where the money has been paid under a mistake of law. It may, we think, be taken to be clearly established that the common law claim is founded upon an implied promise to pay and that - whether by an application of the principle "ignorantia juris non excusat" or on other grounds - no such promise will be implied where the payment was made under mistake of the general law. It is no doubt true that for certain purposes (for example the purposes of the application of the Statutes of Limitation) the direct equitable claim by the unpaid beneficiary against the wrongly or overpaid recipient of part of the testator's estate - for it is conceded that in certain circumstances such direct claims will lie - has hitherto been regarded as analogous to the common law claim for money had and received. Both are, after all, money claims. But the common law claim, as may now be taken to be established, is in no sense derived from equity, but has a lineage altogether independent of it. And as the appellants forcibly pressed upon us in argument, in other respects there are marked and important


(1) [1947] Ch. 716, 742.




[1948]

 

481

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

differences between the claim here put forward on the part of the appellants and a claim at common law for money had and received. In the latter the proper claimant is normally the person who originally made the payment or is that person's principal or representative: and the claim is made against him who received the money or his representative. It is indeed difficult to see how, save between the parties to the original transaction or between parties linked by a relationship such as that of principal and agent, any implied promise to repay could be imported. In the present case the payments were originally made by the executors and it is in our judgment impossible to say that in making the payments the executors were acting as agents or in any way on behalf of the next-of-kin, of whose rights and existence the executors were entirely ignorant Plainly, nothing that the next of kin have done can be said to have involved any ratification or acceptance on their part of the executors' acts. Further whatever may have been the nature of the mistakes made by the executors, the next-of-kin have never made any mistake at all whether of law or of fact.

For these reasons it seems to us that in approaching the question of the existence and characteristics of the direct equitable cause of action there is not, unless the authorities otherwise establish, any necessity in logic for regarding the claim as being clothed, as it were, with all the attributes or limitations appropriate to the common law action for money had and received. Nor, on similar grounds, does it appear that there is any conflict involved between law and equity. Equity here, as in other places, comes in, as Maitland has observed, "not to destroy the common law but to fulfil it." Since (for so runs the appellants' argument) the common law can only recognize the two parties to the transaction, payer and payee, or at most third parties asserting the rights of one or other of them, the common law does not, to borrow again from the language of Maitland "comprehend the whole truth." For the payers in the present case (namely the executors) were handling not their own money but the money of others who had a proprietary interest unknown to and unrecognized by the executors and who, from the moment when they became aware of their own rights and the transactions of the executors, immediately challenged and repudiated what the executors had done.

Nevertheless, if the claim in equity exists it must be shown




[1948]

 

482

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

to have an ancestry founded in history and in the practice and precedents of the courts administering equity jurisdiction. It is not sufficient that because we may think that the "justice" of the present case requires it, we should invent such a jurisdiction for the first time.

It becomes therefore necessary to examine carefully the numerous decided cases from the days of Lord Keeper Bridgman and Lord Keeper Finch (afterwards Lord Chancellor Nottingham) and to see what principle has been established by them. As we have already observed, that such a jurisdiction does exist in some circumstances and in some cases is clearly established and indeed conceded. But it is said on the part of the respondents that the jurisdiction is subject to the limiting principle that equity acts upon the conscience of the defendant which is affected where (and only where) the defendant has the necessary knowledge or the necessary knowledge can be imputed to him: that the necessary knowledge can be imputed in cases of the administration of an estate from the fact that in all of them the recipient of the money knows or ought to know that he takes it under a title which is in its very nature defeasible in favour of other interested persons. Thus, according to the respondents' argument, every beneficiary takes subject to the rights of creditors; every residuary legatee takes subject to the rights of pecuniary legatees and other residuary legatees; and a next-of-kin takes subject to the rights of other relatives of equal or nearer degree. But it is contended that the present case is outside the ambit of the jurisdiction on the ground that the respondents (who were paid on the footing of their being entitled as residuary legatees) cannot in their assumed capacity as residuary legatees be said to have taken subject to the rights of the next-of-kin. It would appear therefore to follow from the respondents' argument that the equity will apply and fasten, as it were, upon the conscience of a recipient who has some legitimate interest in or right to the estate in question (however remote) but will have no application to and will not affect the conscience of one who, as it later turns out, had no interest in and was a stranger to the estate some part of which was nevertheless paid to him. There may be thought to be some lack of logic in such a result; and the formulation of the respondents' case differs widely, it is plain, from the conclusion on this part of the case of the learned judge. The question remains - what do the authorities establish?




[1948]

 

483

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

Reference to the text-books has not proved of very great assistance. The matter is however dealt with at some length in Roper on Legacies (4th ed., 1847), vol. I., chap. VII., s. III. Under the general title "Of the Refunding of Legacies" it is stated as follows:-

"In the last section was considered the right of legatees to follow the assets in the possession of strangers under titles derived from the executor by sales or pledges. It remains to consider the rights of executors, creditors, and unsatisfied legatees, to call back parts of the estate, which have been overpaid to one or more of the legatees, by reason of a defect of assets."

There follow then two sub-sections, the first dealing with the executor's right to oblige a legatee to refund, the second dealing with the equity of creditors to oblige legatees to refund. The third sub-section may be quoted more fully:-

"With respect to the equity of one legatee to make another refund, it may be stated as a general rule, that an unsatisfied legatee cannot maintain a suit against another who has been paid by the executor; because the remedy in the first instance, is against the executor; who, by discharging one legacy, has admitted assets for the payment of all.

"But an exception to this rule occurs, when the executor is in insolvent circumstances; for since the unsatisfied legatee can have no redress against him, he would be without a remedy, unless permitted to call upon the other legatee to refund.

"Still this permission is qualified, and subject to the following distinctions.

"If the assets be originally sufficient to satisfy all the legacies, and one of the legatees procure from the executor, either by or without suit, payment of his legacy; and then the executor wastes the estate, so as to render it deficient to discharge the remaining bequests, those legatees cannot oblige the satisfied legatee to refund: first, because the payment was not a devastavit in the executor and secondly, because the legatee is protected by the principle, that vigilantibus non dormientibus jura subveniunt. But -

"If the assets be originally deficient to answer all the legacies, and a legatee receive from the executor his legacy in full; in that case, as the payment was a devastavit by the executor, and it is a rule in equity, that upon a deficiency, of assets, all general legatees shall proportionally abate,




[1948]

 

484

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

the court will entertain a suit by the unsatisfied legatees, to compel the one so paid, to refund.

The distinctions upon the present subject are thus stated by Sir Joseph Jekyll .... 'That as all legatees are, upon a deficiency of assets, to be paid in proportion, so, if the executor paid one of them, the rest should make him refund in proportion; and if one of the legatees obtained a decree for his legacy, and was paid, and afterwards a deficiency happened, the legatee who recovered should refund notwithstanding, in imitation of the spiritual court, where a legatee recovering his legacy was made to give security to refund in proportion. But that if the executor had at first enough to pay all the legacies, and afterwards by his wasting the assets occasioned the deficiency; the legatee, who had recovered his legacy, should not be compelled to refund, but should retain the advantage of his legal diligence, which the other legatees neglected, in not bringing their bill in time, before the devastavit of the executor; whereas, if they had commenced their suit before the commission of the waste, they might have obtained the same success'."

Many of the early cases to which we shall presently refer are cited in support of the passages quoted from Roper. It will be observed that there is no suggestion in the text of any such underlying principle as that contended for by the respondents nor any suggestion that the action - by analogy to the common law action for money had and received or otherwise - will lie only where the mistake made is a mistake of fact. The limitation, according to Roper, in the case of an unpaid legatee is the absence or exhaustion of any remedy against the executor or administrator.

On the other hand there is in Roper no reference, in terms, to a claim by a next-of-kin against other wrongly paid or overpaid next-of-kin or legatees; nor (oddly enough) is there any reference to the important case of David v. Frowd (1), which had been before Sir John Leach in 1833. That case is together with a modern decision of this court in Mohan v. Broughton (2), cited in the notes to Seton on Judgments and Orders, 7th ed., vol. II., p. 1595, in support of the proposition "Though the estate has been distributed among those found to be next-of-kin they are liable in general to refund to the real next-of-kin .... and an action may be brought by such real next-of-kin for the purpose."


(1) (1833) 1 My. & K. 200.

(2) [1900] P. 56.




[1948]

 

485

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

The earliest cases cited to us in which there is found any reference to the right of an unpaid creditor or legatee to go direct against a legatee already paid were three cases all reported in the first volume of Cases in Chancery; they are Nelthrop v. Hill (1) before Lord Keeper Bridgman, Windham J. and Turner B., Grove v. Banson (2) in the same year before Lord Keeper Bridgman and Wyld J., and Chamberlain v. Chamberlain (3) before Lord Keeper Finch. It is not necessary to refer further to these three cases. All were cited to Nottingham L.C. in the case of Noel v. Robinson (4). This case may be regarded as having laid the foundation for the later exercise of the equity jurisdiction for which the historical justification was the rivalry in regard to the administration of the estate of deceased persons between the courts of Chancery and the spiritual courts. According to Sir William Holdsworth (vol. VI. of the History of English Law at p. 652), the Chancery court "had practically taken over the jurisdiction of the ecclesiastical courts over suits for legacies and suits for the distribution of residue. In theory it is true the jurisdiction of the ecclesiastical courts over these matters lasted till 1857; but it was generally ignored by the court of Chancery, on the grounds .... that the ecclesiastical courts could not do complete justice in these cases - they could not give any indemnity to an executor paying a legacy under an order of the court, they could not order the legatees to refund if other debts subsequently appeared ...": and he cites Noel v. Robinson (4) in support. In the ecclesiastical court it was the practice that ".... to guard himself against latent debts the executor is entitled to demand security of the legatee before paying his legacy to refund in case the amount is required in discharge of" debts. (See Coote: Ecclesiastical Court Practice (1847), p. 641.) But at least from the time of Noel v. Robinson (4) it appears that the court of Chancery resorted to no such practice: and the reason, we think, was that, in the case supposed, the creditor would be treated as entitled to claim a refund direct from the legatee.

Having regard to its importance as a starting point and as showing the reason and justification for the jurisdiction, it is desirable to refer somewhat fully to the case of Noel v. Robinson (4). The plaintiffs in the case were specific legatees of


(1) (1669) 1 Ch. Cas. 135.

(2) Ibid. 148.

(3) (1675) 1 Ch. Cas. 256.

(4) (1682) 1 Vern. 90.




[1948]

 

486

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

a moiety of the testator's American plantation. The defendant Robinson was the testator's executor who after granting a lease of the plantation had later sold it to the second defendant Faulconer. The plaintiffs alleged that Robinson by granting the lease must be taken to have assented to the specific bequest: and their claim against both defendants was for the property and for an account. Robinson by his answer denied that he had assented to the bequest and said that the sale to Faulconer was required to pay the testator's debts, the deficiency of the estate having arisen since the date of the lease as a result of adverse trading conditions. He further said that even if the lease must be taken as an assent, nevertheless he (Robinson) having in fact paid the testator's debts could stand in the shoes of the creditors and claim in effect a refund from the legatees.

The Lord Chancellor after referring to the practice of the spiritual court in regard to the giving of security proceeded ".... but in this court though there be no provision made for refunding, yet the common justice of this court will compel a legatee to refund. It is certain that a creditor shall compel the legatee to refund and so shall one legatee compel the other where the assets become deficient. But whether the executor himself, after he has once voluntarily assented unto a legacy, shall compel the legatee to refund is causa prim impressionis: and it must be allowed that there is a great difference between a voluntary assent and where the executor was compelled to assent ...." According to the report in Vernon the plaintiffs' bill was dismissed: but as pointed out in the notes in the English Reports(1) the decree was in fact in the plaintiffs' favour.

The next case is Anonymous (2), briefly reported. It was a claim by a creditor of A. against the executor of A.'s executor and legatees under the will of A.'s executor. It was decreed that the legatees should refund.

Next is Newman v. Barton (3), which also appears to have been a case of a claim by an unpaid creditor against a legatee. It was, however, observed by the court: "A creditor shall follow the assets in equity into whosesoever hands they may come. But where the executor had voluntarily paid the full legacy and afterwards assets proved deficient to pay the other legacies" - by which we understand to be meant that the assets were not deficient when the legacy was paid -


(1) 23 E. R. 334, 336.

(2) (1682) 1 Vern. 162.

(3) (1690) 2 Vern. 205.




[1948]

 

487

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

".... neither the executor nor any of the other legatees should compel him to refund: but if the payment had not been voluntary, but he had recovered his legacy by decree, then he should have refunded."

If we have rightly interpreted the observations of the court in the last case they indicate a qualification to the unpaid legatee's right to sue, which is not be to found in the report of Lord Nottingham's judgment in Noel v. Robinson (1), namely that, at least where the original payment was made voluntarily, there is no right of recovery unless there was originally a deficiency of assets. The foundation for the qualification is that in the absence of an original deficiency the first paid legatee got no more than what he was properly entitled to receive: and so, it may be added, there was nothing in respect of which equity could affect his conscience.

The point is brought out more clearly in the judgment (cited by Roper in the passage we have quoted above) of Sir J. Jekyll M.R. in the first of the eighteenth-century cases, the Anonymous case(2). It was there laid down that a legatee paid in full was bound to refund to other legatees, whether the original payment had been made voluntarily or under compulsion, provided that there was an original deficiency of assets: but that where the deficiency arose from later waste by the executor then on the principle of "vigilantibus non dormientibus succurrit lex" there would be no right to a refund. It is further to be noted that the right to claim a refund was stated by Sir J. Jekyll to be "in imitation of the spiritual court" - a reference to the practice already mentioned of requiring security before payment of a legacy.

The point is still further expanded in the case of Orr v. Kaines (3). That was in fact a case of a claim by unpaid legatees against a solvent executor: but in the course of his judgment Sir J. Strange M.R. observed that the voluntary payment (in full) of a legacy by an executor amounts to an admission by him of assets sufficient for all so that he will be compelled, if solvent, to pay all other legacies in full, whatever the state of the assets. But if the executor is insolvent then because "there is no other way" the unpaid or underpaid legatees can directly compel the fully paid legatee to refund. It is however stated in a note in the English Reports(4) (correctly, having regard to the previous decisions) that the


(1) 1 Vern. 90.

(2) (1718) 1 P. Wms. 495.

(3) (1750) 2 Ves. Sen. 194.

(4) 28 E. R. 125.




[1948]

 

488

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

direct claim against the legatee is inapplicable where the deficiency arises after the payment to him, i.e., by reason of subsequent waste by the executor.

The second part of Sir J. Strange's judgment marks a second step in the development of the equitable jurisdiction since Noel v. Robinson (1) - the appearance of a condition to the legatee's right to claim direct against the legatee that there should be "no other way" whereby the wrong to the former can be remedied - "because" as observed by Roper in the passage we have already quoted "the remedy is in the first instance against the executor."

The last of the eighteenth-century cases is Walcott v. Hall (2), cited in the note in the English Reports to the Anonymous case in 1 P. Wms. That was a case where the executor having paid all the legacies save one for 50l. which he retained for an infant, subsequently was made bankrupt. It was held, following the reasoning of the three previous decisions, that in the circumstances the fully paid legatees never having received more than they had been properly entitled to receive there was no room for any claim in equity against them for a refund.

Before dealing with the later cases which were cited to the learned judge below it may be convenient to make some observations on the effect of the authorities to which we have referred from Noel v. Robinson (1) in 1682 to Walcott v. Hall (2), First it is in our judgment impossible to find in any of them any trace of such an underlying principle or ratio decidendi as that contended for by the respondents in this court. It is no doubt true that an equitable claim predicates that the conscience of the defendant must be affected. But we have failed to observe any justification, in the judgments cited, for the suggestion that the state of the defendant's conscience depends upon his knowledge or assumed knowledge that his title to the money paid to him may or may not be defeasible in favour of other interested persons. The test as regards conscience seems rather to be whether at the time when the payment was made the legatee received anything more than, at the time, he was properly entitled to receive.

Second, there is equally in our judgment no trace of any such limitation to the right of action as Wynn-Parry J. thought to be discernible from the later cases, namely, that there must be


(1) 1 Vern. 90.

(2) (1788) 29 E. R. 167 (n); 2 Br. C. C. 305.




[1948]

 

489

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

or have been administration of the estate by the court, and that the mistake made by the executor in paying the first legatee in full must be a mistake of fact. As regards the latter, it is no doubt true that so far as can be gathered from the reports, the overpayments that had been made arose from nothing more than a miscalculation of the assets available and might therefore fairly be regarded as due to mistakes of fact. But so far from suggesting that the nature of the mistake made was a relevant consideration, the reports do not for the most part even indicate how it came about that the payments were made in fact. As regards the suggested qualification that there was or had been an administration by the court of the estate of the testator, the reports of the cited cases seem to us wholly to negative any such requirement. There are frequent references to the effect of payment by the executor voluntarily, that is, in the absence of any decree sanctioning or ordering the payment. It is nowhere suggested that the right of the unpaid legatee to claim from the fully or overpaid legatee depends upon there being or having been an administration of the estate by the court.

Thirdly, it is in our view of the first importance to bear in mind the circumstances in which the equitable cause of action arose and the reason for which it came into existence, namely, the aim and desire of the chancery court, in the course of its struggle with the spiritual court, to provide some means of relief which would render unnecessary and take the place of the requirement of the spiritual court for the giving of security by the first paid legatee.

On the other hand it is, finally, to be noted that, so far, no case had arisen in which the plaintiffs were not legatees under a will but next-of-kin either claiming to share in the distribution with other next-of-kin or claiming to be entitled to the estate against other persons in whose favour distribution had been made as the persons supposedly entitled under the terms of a will or under an intestacy.

We come now to the cases cited by Wynn-Parry J. in the court below. Of the first five, namely, Gillespie v. Alexander (1); Greig v. Somerville (2); David v. Frowd (3); Sawyer v. Birchmore (4) and Thomas v. Griffiths (5), the learned judge observed that in each case there was or had been an


(1) 3 Russ. 130.

(2) (1830) 1 Russ. & My. 338.

(3) 1 My. & K. 200.

(4) (1836) 1 Keen, 391.

(5) (1860) 2 Giff. 504.




[1948]

 

490

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

administration action. "An analysis of these cases" he said(1) discloses two points of significance. In the first place, the distribution had in each case been made pursuant to an order of the court in an administration action and in the second place the mistake, pursuant to which in each case the money had been paid, was a mistake of fact."

As we have already stated, in the light of the earlier decisions, the fact of there being or having been an administration suit and a distribution pursuant to an order of the court cannot be regarded as a condition of, or even as a material consideration for, the existence or exercise of the jurisdiction: and the same appears hardly less true of the character of the mistake made. On that ground no doubt the answer of the respondents to this part of the appellants' claim has in this court, as already noticed, been put upon a different and more elaborate basis.

Of the five cases referred to, the first two and the last were cases of claims by creditors, and the same is true of another case cited to us, Davies v. Nicolson (2) which came before Knight-Bruce and Turner L.JJ. There can however be no doubt, in our judgment, that whether the claimant be a creditor or a beneficiary the cause of action both in its history and its essential character is the same.

We now come to the important case of David v. Frowd (3). It is true, as stated by the learned judge, that there had in that case been an administration by the court of the estate of the deceased, one David Williams, and that the estate had been distributed pursuant to an order of the court amongst the persons who had been found by certificate of the master to be entitled as the next-of-kin. But there is nothing in the judgment of Sir John Leach which gives any support to the view that these were material circumstances to the plaintiff's right of action. Nor is there anything in the judgment to indicate that the learned Master of the Rolls regarded it as relevant that the assumed error made - though made not by the personal representatives making the payment but by the master in his certificate - was one of fact, namely, as regards the identity of the next-of-kin.

But the main significance of the case for present purposes lies in this: that the claim of the plaintiff was that she was the sole next-of-kin and in that capacity entitled to recover back from those who had received the estate the whole of what they


(1) [1947] Ch. 716, 731.

(2) (1858) 2 De G. & J. 693.

(3) 1 My. & K. 200.




[1948]

 

491

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

had been paid - and, on the basis of the validity of the plaintiff's claim, wrongly paid. It should be stated that the intestate's personal representatives were included among the defendants in the action but it is plain on an examination of the pleadings (which we obtained from the Public Record Office) that they were joined as recipients of part of the estate in their capacity as supposed members of the class of next-of-kin. Indeed, having regard to the administration decree and the orders made thereunder the personal representatives as such were obviously immune from attack.

For the purposes of the hearing before Sir John Leach it was agreed at the Bar that the title of the plaintiff as sole next of-kin should be admitted. On that footing the question for the court was whether she was precluded by the administration decree from making her claim. That question the Master of the Rolls answered in the negative. By his order he referred it to the master to inquire whether the plaintiff was sole next-of-kin or one of the next-of-kin: and he added a declaration "that if the plaintiff be established as the sole next-of-kin of the intestate, the defendants are bound to refund to the plaintiff the several sums which they have received under the order of the court" in the administration action.

Having regard to the importance of the case we caused the records to be searched with a view to discovering what was the exact order made and what was the outcome of the order. No trace of the formal order could be discovered and (whether the matter was afterwards settled or for other reasons) no record was found of any later order or proceeding.

However that may be, David v. Frowd (1) was, on the proved or assumed facts of the case and having regard to the declaration made, a case in which the defendants were held liable to refund not merely so as to let in some person found to be entitled to participate with them in the distribution, but to the full extent of what they had received and on the basis, accordingly, that they had in truth from the start been total strangers to the estate, without any title to what had been paid to them. Mr. Pascoe Hayward placed, naturally, great reliance upon the case providing, as it does, at least a close analogy to the present. And upon the face of it the principle sought to be formulated by the respondents (which we have earlier quoted) cannot be satisfactorily applied: for it cannot, as it seems to us, be seriously contended that the defendants,


(1) 1 My. & K. 200.




[1948]

 

492

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

when they received their payments pursuant to the court's order following the master's certificate, must have known or be taken to have known that their title was wholly defeasible in favour of some other outside party so as to render their consciences susceptible to be acted upon by equity: or if such knowledge can be imputed to them, then one may ask why should there not equally have been imputed to the respondents in the present case knowledge that their title as residuary legatees was liable to be defeated in favour of one who successfully challenged the validity of the residuary bequest itself?

It was therefore not surprising that the respondents sought to explain away the case by suggesting, for example, that it should be regarded as specially dependent upon its own facts or that Sir John Leach applied to it per incuriam (as Mr. Neville Gray argued) the principle of the earlier cases. In our view all these attempts fail. An examination of the judgment makes it, we think, clear that the learned Master of the Rolls, alter argument upon the point, deliberately treated as applicable the principles of the earlier cases: and though David v. Frowd (1) has since been frequently cited, no doubt has ever been cast upon its correctness or upon the appropriateness of its place in the chain of decisions from Noel v. Robinson (2) onwards. "It is argued" said Sir John Leach after a full reference to the case of Gillespie v. Alexander (3) "that there is a distinction between a creditor and a person claiming as next-of-kin, because a creditor, it is said, has a legal title; the right being equal, there is no distinction in a court of equity between a legal and equitable title. It is not however accurate to say that a creditor continues to have a legal title after the fund has been administered in this court; he has, under such circumstances, lost that title by the administration of the court and his only remedy is in a court of equity." There then follows the passage quoted in his judgment by Wynn-Parry J.(4). So far as concerns the conscience of the recipient wrongly paid, the passage seems to us to support the view that that fact of itself - the fact that he has received something to which in truth he was never entitled - may well sufficiently affect his conscience for the purposes of the jurisdiction of the court of equity. "A party claiming under such circumstances has no great reason to complain that he is called upon to replace what he


(1) 1 My. & K. 200.

(2) 1 Vern. 90.

(3) 3 Russ. 130.

(4) [1947] Ch. 716, 731.




[1948]

 

493

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

has received against his right; complaints of hardship come with little force from the party who seeks to support a wrong."

It is convenient to refer next to the case of Mohan v. Broughton - (1) a case not referred to in the argument before us but cited with David v. Frowd (2) in support of the note in Seton which we have earlier quoted. That was a case in which the plaintiff sought, on the footing that she was one of the next-of-kin of an intestate, to revoke letters of administration previously granted to another. The matter came originally before the court of first instance upon an application by the defendant to stay the proceedings under the court's inherent jurisdiction. In the Court of Appeal, by consent, every question of substance was agreed to be tried on the assumption that the plaintiff's title was established. Reference was made in the argument to David v. Frowd (2) and also to Sawyer v. Birchmore (3) one of the five cases cited to Wynn-Parry J. previously mentioned and also a case of a claim by a next-of-kin though only for a partial refund so as to allow the claimant to participate with those already paid. Lindley M.R. in his judgment (with which Vaughan Williams and Romer L.JJ. agreed) said "Now, what is it that this lady wants? She does not want to revoke the letters of administration for nothing .... she says that in an administration action which was commenced some few years ago the estate of the intestate had been distributed amongst the wrong persons .... Therefore she wants this revocation for the purpose of asserting her right. In other words she wants to follow the assets into the hands of the persons who have got them. I do not myself see any difficulty in her commencing an action for that purpose in the Chancery Division ...." The learned Master of the Rolls spoke of "following the assets" but in the light of the argument and the reference to David v. Frowd (2) and Sawyer v. Birchmore (3) it is, in our view, clear that he had in mind the exercise of the equitable jurisdiction which those cases illustrated.

Two more cases directly bearing on this part of the case may usefully be referred to before we come to the case of In re Rivers (4). They are Fenwick v. Clarke (5) and Peterson v. Peterson (6). Neither appears to have been cited in the court below. In Fenwick v. Clarke (5) a claim by an unpaid


(1) [1900] P. 56.

(2) 1 My. & K. 200.

(3) 1 Keen, 391.

(4) [1920] 1 Ch. 320.

(5) (1862) 4 De G. F. & J. 240.

(6) (1866) L. R. 3 Eq. 111.




[1948]

 

494

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

legatee to recover from legatees who had been paid in full came before Knight-Bruce and Turner L.JJ. The claim failed on the ground that there had been at the time of the payment tother defendants a sufficiency of assets. Walcott v. Hall (1) was cited and followed: and in the course of his judgment Turner L.J. quoted and approved part of the passage in Roper on Legacies which is cited earlier in his judgment (at p. 459).

"If the assets be originally sufficient to satisfy all the legacies, and one of the legatees procure from the executor, either by or without suit, payment of his legacy; and then the executor wastes the estate, so as to render it deficient to discharge the remaining bequests, those legatees cannot oblige the satisfied legatee to refund: First, because the payment was not a devastavit in the executor; and secondly, because the legatee is protected by the principle, that vigilantibus non dormientibus jura subveniunt."

The first paragraph of the headnote in Peterson v. Peterson (2) is as follows: "Where one of several residuary legatees or next-of-kin has received his share of the estate of a testator or an intestate, the others cannot call upon him to refund, if the estate is subsequently wasted: secus if the wasting has taken place before such share was received."

The claim in the case was by a next-of-kin of an intestate against other next-of-kin and was dismissed because the plaintiff failed to satisfy the court that there had been an insufficiency of assets when the defendants were paid. It is to be noted that (as appears from the recited facts) the administrator had been made bankrupt.

Many of the earlier cases were reviewed in the course of the argument - Anon. (3), Walcott v. Hall (1), Orr v. Kaines (4 ), David v. Frowd (5) and Sawyer v. Birchmore (6). At p. 114 of the report, Lord Romilly M.R. said:

"The rule is, that if one of the residuary legatees has received only his share, the subsequent wasting of the assets by the executor will not entitle the other residuary legatees to call upon him to refund; and there is obvious good sense in that rule; for, if the executor renders his accounts to a residuary legatee, and pays him his share, what right or business has the residuary legatee further to interfere in the matter of the administration of the estate? He cannot file a bill for the


(1) 2 Br. C. C. 305.

(2) L. R. 3 Eq. 111.

(3) 1 P. Wms. 495.

(4) 2 Ves. Sen. 194.

(5) 1 My. & K. 200.

(6) 1 Keen. 391.




[1948]

 

495

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

administration of it, and, were he to do so, he would probably have to pay the costs. If so, why is he to suffer for the laches and neglect of the other residuary legatees, who have not required the executor to account to them, or to pay over the balance in his hands, or due from him? The case, however, is materially altered if the executor has dissipated a portion of the assets before any residuary legatees call upon him to account; and, it would seem, the rule ought to be that what is available at that time should be equally divisible among the whole of the residuary legatees; but, where one residuary legatee calls upon another to refund, upon the ground of being overpaid, then, in my opinion, the burden of proof lies upon the person requiring the money to be refunded to show that the payment was made in excess."

We come accordingly to the last of the long line of cases - In re Rivers (1), before Eve J. The importance of the case lies plainly in its modernity and in the fact that its decision followed chronologically certain other cases - particularly Hilliard v. Fulford (2), In re Robinson (3) and In re Hatch (4) - to which we presently refer and which in the view of Wynn-Parry J. tended to negative the existence to-day in such a case as the present of the equitable right of action contended for by the appellants. Having regard to the significance of the case we were supplied by the appellants with copies from the Public Record Office of the pleadings and the order made by Eve J. in the action.

The plaintiff in the action claimed to be entitled to a share in a reversionary legacy of 200l. payable under the will of William Rivers on the death of the plaintiff's mother which occurred in 1917. The defendants were the personal representatives of one of the residuary legatees under the will. They admitted assets for the purposes of the action. The testator had died in the year 1863. A grant of letters of administration with the will annexed was made to the life tenant of residue who died in 1885. An administration action had been instituted in the year 1868 and in the course of that action an order was made for the carrying over of a sum of 266l. 13s. 4d. 3 per cent. annuities to a separate account entitled "The Annuity Account" of the plaintiff's mother. It had no doubt been the intention of the testator that the fund retained to answer the annuity given to the lady - which was in amount 8l. per annum - should, on her death, provide the legacy of


(1) [1920] 1 Ch. 320.

(2) (1876) 4 Ch. D. 389.

(3) [1911] 1 Ch. 502.

(4) [1919] 1 Ch. 351.




[1948]

 

496

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

200l. bequeathed in that event to the plaintiff and her brothers and sisters. But as appears from the statement of claim no provision was in fact made in the administration action for the reversionary legacy - the relevant order providing that, on the death of the plaintiff's mother, the fund of annuities carried over to the separate account should fall into and become part of the testator's general residue.

In the event, the proceeds of the sale in 1917 of the 266l. 13s. 4d. annuities after providing for certain duties and costs fell far short of 200l. The whole of the rest of the estate had been distributed. In these circumstances, the plaintiff claimed direct against the defendants, as overpaid residuary legatees, the difference between what she had in fact received and what she should have received, namely 19l. 10s. 1d.: and the order of Eve J. was, simpliciter, an order for payment of that sum by the defendants to the plaintiffs.

On the face of it the case appears entirely in line with those we have cited. But Wynn-Parry J. did not so interpret it. "In my judgment," he said(1) "the case, when examined, does not help the plaintiffs. It is, I think, a simple example of a person receiving a payment otherwise than in due course of administration and being compelled to submit to an adjustment. It was for that reason, I think, that counsel for the defendants in that case was constrained to admit that he could not rely on the Statutes of Limitation. So regarded, the case falls within, and is but a further illustration of the principle emerging from, the five cases to which I have referred I would add that, in so far as it may be necessary to do so, I take the view that in this case a mistake of fact was involved."

With all respect to the learned judge we do not think that so limited an interpretation can fairly be put upon the case. Having regard particularly to the nature of the argument and the citation of authorities to the judge, including Anon (2), Walcott v. Hall (3), Gillespie v. Alexander (4) 1v, David v. Frowd (5), Sawyer v. Birchmore (6), Fenwick v. Clarke (7) and Peterson v. Peterson (8), we do not think it open to doubt that Eve J. purported to exercise the equitable jurisdiction to order an overpaid beneficiary to refund direct to an underpaid


(1) [1947] Ch. 716, 736.

(2) 1 P. Wms. 495.

(3) 2 Bro. C. C. 305.

(4) 3 Russ. 130.

(5) 1 My. & K. 200.

(6) 1 Keen. 391.

(7) 4 De G. F. & J. 240.

(8) L. R. 3 Eq. 111.




[1948]

 

497

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

beneficiary and that there was no question of making an adjustment in due course of administration. As regards the Statutes of Limitation it would appear to have been a sufficient answer to any defence under the statutes that the plaintiff's cause of action did not arise until her mother's death in 1917. It is to be noted that the plaintiff appears to have recovered the full amount of her deficit from the defendants though, as pleaded by them, they in fact represented one only of the residuary legatees.

The case of In re Rivers (1) is the last of the direct authorities, the last of a long line of cases which appear to us to illustrate a coherent and continuous development of an equitable jurisdiction of which the foundation was firmly laid by Lord Nottingham in the year 1682 in the course of, and as a move, as it were, in the struggle between the court of equity and the spiritual court. It has been necessary to examine the cases in no little detail in order that the shape of the development may be traced. But before stating the conclusions we draw, it is necessary to refer to certain other cases cited before Wynn-Parry J. These cases have at best an indirect bearing upon the main point and save that In re Rivers (1) was cited in the last of them the authorities directly relevant to the main point were not cited. Appeal was, however, made by both appellants and respondents to passages in the judgments and the learned judge relied upon them - or at least on certain of them - as "militating against the existence of the principle" for which the appellants contended. We are in this respect unable to share the learned judge's view.

The first of these cases is Rogers v. Ingham (2). The appellants had relied on certain statements in the judgments particularly of Mellish L.J. and Baggallay J.A. in support generally of their contention that it was no answer to the appellants that the mistake which had been made was one of law not of fact. We agree with the learned judge in thinking that the appellants can derive little or no help from the case, which arose out of the circumstance that the trustee of a certain will had with the full knowledge and indeed, at the time, the assent of the plaintiff made certain payments to the defendant to which, on the true construction of the will, the defendant had not been entitled. In these circumstances the court held that the plaintiff must be treated as having herself, though by the hands of the trustees, made the payment; and


(1) [1920] 1 Ch. 320.

(2) (1876) 3 Ch. D. 351.




[1948]

 

498

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

consequently as being in no different position from that of trustees making a payment under a mistake as to the legal position.

It is convenient to refer next to In re Robinson (1) before Warrington J. In that case a grant of annuities having been made by King Charles II the persons entitled in the year 1886 purported to execute a disentailing assurance. The trustees had from 1886 to 1900 paid the annuities to the person entitled on the basis of the validity of this assurance. The court having held (in other proceedings) that the attempt to disentail was ineffectual under the general law, the plaintiff in 1911 sought to recover from the defendant what had been wrongly paid from 1886 to 1900. At an early stage in the argument the learned judge asked what statute of limitation was applicable to the case and Mr. Cave K.C. for the defendant is reported to have answered that the claim being one for money had and received the relevant statute was that of James I. Thenceforward the case appears to have proceeded entirely on the basis of its being one for money had and received and the learned judge held on that footing that the claim was barred under the Act of 1623. As we have stated, no reference was at any stage made to the Noel v. Robinson (2) line of cases and the plaintiff's counsel did not attempt to contend that the plaintiff's right of action lay in equity on the authority of those cases, as distinct from the claim at common law. We agree with Wynn-Parry J. in thinking that the case does not assist the appellants. We do not think that it assists the respondents either.

Hilliard v. Fulford (3) was somewhat strongly relied upon by the learned judge. In that case the executor-trustees of a will, erroneously construing its effect, treated the testator's residue (amounting to 3,750l.) as divisible into fifths. Four of the shares they had paid out. The fifth sum of 750l. had been paid into court on behalf of an infant. In the subsequent proceedings, the plaintiff had established, first, that on the true construction of the will he was entitled to participate with the other five residuary legatees, i.e., that the residue had been divisible into sixths and not fifths: and second that the trustees had improperly spent out of residue 1,095l. on repairs to certain real property and were accountable to residue accordingly for that sum - in other words that the true residue


(1) [1911] 1 Ch. 502.

(2) 1 Vern. 90.

(3) 4 Ch. D. 389, 394.




[1948]

 

499

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

consisted not of 3,750l. divisible into five shares of 750l. but of 4,845l. divisible into six shares of 807l. 10s. 0d. The question, and the sole question, before Jessel M.R. on the application which forms the subject of the report was how in the circumstances, certain costs which the trustees had been ordered to pay and the trustees' own costs, charges and expenses should be borne. It is true that certain observations of the Master of the Rolls quoted by Wynn-Parry J. appear, on the face of them, to be of more general import - "of course you cannot make those other residuary legatees pay back anything. There is no pretence for saying that they can be compelled to come in and contribute." But it is in fact quite clear not only from the last sentence in the report before the judgment and the second sentence of the judgment but also from the order made which is set out in the end of the report that the sole question was that of costs. In order to give effect to the Master of the Rolls' decision the executor-trustees were to be put in the position as if no distribution had been made that is, as though they still retained in their hands the whole residue of 4,845l. From that notional sum the costs were to be deducted and then the amount of the sixth shares ascertained. To the extent that the shares of the residuary legatees who had been paid worked out at a figure below 750l. the executor-trustees as the parties responsible for the blunders were made, in effect, to pay the difference out of their own pockets. As clearly appears when the matter is translated into figures no question whatever arose of any claim by the plaintiff or the infant defendant to obtain a refund from the other four residuary legatees. They each in the end all received their full shares and if the other legatees were left in the position of having had more than their full shares, they retained the surplus at the expense of the executors. Had the question of a refund to the plaintiff or the infant defendant arisen the Noel v. Robinson (1) cases (which were irrelevant and not mentioned) would no doubt had been referred to.

The second case relied upon by Wynn-Parry J. was In re Hatch (2), before Sargant J. There, following a decree for judicial separation, a husband had entered into a covenant to pay his wife a certain annual sum. After his death his estate (subject to the covenant) became divisible among his children, one of whom died having appointed his mother (the wife) as his personal representative and universal legatee. The


(1) 1 Vern. 90.

(2) 4 Ch. D. 389, 394.




[1948]

 

500

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

husband during his life and his executors after his death having wrongly paid to the wife her annuity without deduction for income tax it was sought in administration proceedings relating to the husband's estate to make the wife recoup out of her share in the estate (derived from the deceased child) the overpayments she had received as a creditor. Sargant J. rejected the claim on the ground that the overpayments having been made under a mistake of law, they never were a "debt" due from the wife so that there was nothing properly liable to be recouped. He went indeed somewhat further. "Assume," he said "... that by a mistake of law the annuitant as a creditor had been paid too little so that the residuary legatee had been paid too much would it be open to the annuitant to stop the distribution of the estate until the sums by which the residuary legatees had been overpaid had been deducted? To ask that question, is in my opinion, to answer it." It is unnecessary in the present case for us to express any view on the correctness of the decision in In re Hatch (1). It is sufficient to observe that once again no reference was made to any of the Noel v. Robinson (2) authorities and that had such reference been made it is at least possible that some of Sargant J.'s observations would have been subject to qualification. In our view the case cannot in the circumstances be regarded as any authority against the existence of the principle of equity jurisdiction for which the appellants contend.

There remain the two recent cases, somewhat similar in character, of In re Mason (3) (before Romer J.) and In re Blake (4) (before Maugham J.). Both cases were petitions of right against the Crown presented by persons claiming as next-of-kin of intestates, in effect, to recover moneys received many years previously by the Crown on the footing of the intestates having left no next-of-kin. It will be necessary to refer again to these cases or at least to In re Blake (4) in regard to the question of the application to the present case of the relevant Statutes of Limitation. But the sole question determined in both cases, material for present purposes, was whether the claims were barred by the application of the statute 21 Jac. 1, c. 16.

In Mason's case(5) the intestate Maria L'Epine, had died


(1) [1919] 1 Ch. 351, 356.

(2) 1 Vern. 90.

(3) [1928] Ch. 385; in C. A. [1929] 1 Ch. 1.

(4) [1932] 1 Ch. 54.

(5) [1928] Ch. 385, 391-2; in C. A. [1929] 1 Ch. 1.




[1948]

 

501

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

as long ago as 1798: and for the purpose of his judgment Romer J. assumed that moneys which in fact belonged to her next-of-kin represented by the plaintiff had been wrongly paid over by the administrators to King George III. "It is in other words" said the learned judge "a claim by a cestui que trust to recover from a third party money which his trustee has by mistake paid to that third party. Such a claim is one for money had and received .... it may be a matter of some doubt whether, in strictness, the cestui que trust in such a case could maintain an action against the third party for money had and received, though he could at all events maintain a suit in equity for it, making the trustee a party. But in such a suit the cestui que trust would have no better right than the trustee would have in an action brought by himself and, if the claim of the trustee would be barred in an action at law by any Statute of Limitation the claim of the cestui que trust, so far as it was one for money had and received, would be equally barred." And on that ground the learned judge held the plaintiff's action to be barred.

Now again, there was no reference whatever made to the Noel v. Robinson (1) line of cases. Had there been we do not think Romer J. would or could have used exactly the language that he did. We do not intend to cast any doubt upon the correctness of Romer J.'s decision - and it would not indeed be open to us so to do, for the decision was affirmed in this court. But it is we think not accurate to say - particularly in the light of the Noel v. Robinson (1) cases - that the claim of the plaintiff was an action for money had and received. As we have earlier pointed out there are essential differences between the common law action and the equitable action which is the subject of the present case. And we note that in the Court of Appeal in In re Mason (2) more guarded language was used, e.g., by Lawrence L.J. who said" .... the proceedings are (in effect) proceedings for money had and received ...." Though therefore In re Mason (2) is undoubtedly an authority binding on this Court for the application at that date to such a case as was there considered of the statute of James I., we cannot regard it as an authority for the view that an action in equity by an unpaid next-of-kin to recover direct from an overpaid or wrongly paid recipient of an intestate's estate will be liable to be defeated, like an


(1) 1 Vern. 90.

(2) [1929] 1 Ch. 1, 12.




[1948]

 

502

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

action at common law for money had and received, unless the payment wrongly made was under a mistake of fact.

In our judgment the result of In re Blake (1) is the same. In In re Blake (1) Eve J.'s decision in In re Rivers (2) was cited-though none of the earlier cases on which In re Rivers (2) was founded. But - whether having regard to the citation of In re Rivers (2) or otherwise - Maugham J. expressed himself in more precise language (if we may venture to say so) than had been used in In re Mason (3) and clearly intimated his appreciation of the existence of an equitable cause of action to recover money wrongly paid away by an executor or administrator, distinct in character from the common law action for money had and received. The relevant passages from Maugham J.'s judgment are cited by Wynn-Parry J.(4), and we need not repeat them It is true that Maugham J. did not in terms refer to an equitable claim independent of a mistake of fact or of any mistake: but the mistake which had been or was assumed to have been made in In re Blake (1) was a mistake of fact and no further consideration of the attributes or qualifications of the equitable cause of action was necessary for the decision in the case.

What then is the conclusion to be drawn on this part of the appellants' claim from what we fear has been a long citation of the authorities? It is not, we think, necessary or desirable that we should attempt any exhaustive formulation of the nature of the equity invoked which will be applicable to every class of case. But it seems to us, first, to be established and that the equity may be available equally to an unpaid or underpaid creditor, legatee, or next-of-kin. Second, it seems to us that a claim by a next-of-kin will not be liable to be defeated merely (a) in the absence of administration by the court: or (b) because the mistake under which the original payment was made was one of law rather than fact; or (c) because the original recipient, as things turn out, had no title at all and was a stranger to the estate; though the effect of the refund in the last case will be to dispossess the original recipient altogether rather than to produce equality between him and the claimant and other persons having a like title to that of the recipient. In our judgment there is no authority either in logic or in the decided cases for such limitations to the equitable right of action. In our judgment also there is


(1) [1932] 1 Ch. 54.

(2) [1920] 1 Ch. 320.

(3) [1929] 1 Ch 1, 12.

(4) [1947] Ch. 716, 741, 742.




[1948]

 

503

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

no justification for such limitations to be found in the circumstances which gave rise to the equity. And as regards the conscience of the defendant upon which in this as in other jurisdictions equity is said to act, it is prima facie at least a sufficient circumstance that the defendant, as events have proved, has received some share of the estate to which he was not entitled. "A party" said Sir John Leach in David v. Frowd (1) "claiming under such circumstances has no great reason to complain that he is called upon to replace what he has received against his right."

On the other hand, to such a claim by an unpaid beneficiary, there is, in our judgment, at least in circumstances such as the present, one important qualification. Since the original wrong payment was attributable to the blunder of the personal representatives, the right of the unpaid beneficiary is in the first instance against the wrongdoing executor or administrator: and the beneficiary's direct claim in equity against those overpaid or wrongly paid should be limited to the amount which he cannot recover from the party responsible. In some cases the amount will be the whole amount of the payment wrongly made, e.g., where the executor or administractor is shown to be wholly without assets or is protected from attack by having acted under an order of the court.

Authority for this qualification is to be found in the judgment of Sir J. Strange in the case of Orr v. Kaines (2), where he observed that, if the executor is insolvent, an unpaid legatee is admitted to claim direct from the wrongly paid recipient because "there is no other way." See also the note to Hodges v. Waddington (3), "the principal case went upon the insolvency of the executor." It is true that no direct authority for the qualification is to be found in any of the other decided cases; but in none of those cases where the direct claim was allowed, did it appear in fact that there was an executor or administrator against whom a claim might have been made or successfully made. Roper in the passage which we have cited from his text book treats the qualification as established by the authority of Orr v. Kaines (2): where the unpaid legatee "can have no redress against" the personal representative the direct claim is justified since otherwise "he would be without a remedy." In our judgment the absence or exhaustion of the beneficiary's right to go against


(1) 1 My. & K. 200, 211.

(2) 2 Ves. Sen. 194.

(3) (1684) 2 Ventris. 360.




[1948]

 

504

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

the wrongdoing executor or administrator ought properly to be regarded as the justification for calling upon equity to come to the aid of the law by providing a remedy which would otherwise be denied to the party who has been deprived of that which justly is his.

In the present case the order of April, 1944, put an end, on the terms recited in the order, to any claim which any of the next-of-kin of Caleb Diplock might otherwise have had against his executors or their estates or any of them. Though we have not been told of the exact circumstance in which that order came to be made, it must, in our view, be assumed that the compromise sanctioned by the order represented a fair estimation of what might have been recovered from the executors or their estates in the course of proceedings brought against them. And it must also in our judgment necessarily be assumed that in no circumstances could the full total of the sums wrongly paid away - which amounted to over 200,000l. - have been recovered from the executors or their estates.

We have not been informed of the exact sum recovered under the compromise(1). But it follows in our judgment that the sum recovered ought to be credited rateably to all the one hundred and thirty-nine charities so that the maximum amount which in equity can be recovered by the next-of-kin from any respondent is thus limited to the same,e proportion of the sum paid to that respondent as the balance of the total sum paid away by the executors to the one hundred and thirty-nine charities less the total amount recovered from the executors and their estates bears to the total sum paid away. For example, if the amount so recovered is one-fourth of the total sum paid away, then the maximum liability of any respondent to refund direct to the next-of-kin would be three-fourths of that which such respondent received.

It is to be noted that the writ in the main action (against St. George's Hospital and others) was issued in January, 1940 - more than four years before the date of the compromise order. It does not, however, follow, in our judgment, that at the date of the issue of the writ the plaintiffs had no cause of action in equity for recoupment. The point has an important bearing on the further question of the application of the relevant Statutes of Limitation. If our view is right, the beneficiary's


(1) Reporter's Note. - During argument on the form of the orders, the amount was mentioned as 15,000l., and this sum is mentioned in one of the minor amendments then made by the court.




[1948]

 

505

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

cause of action does not or does not necessarily arise for the first time after exhaustion of any remedy he may have against the personal representative If it did only so arise for the first time the overpaid recipient might have the possibility of such proceedings hanging over him for a very great length of time and the commencement of the running of the Statutes of Limitation might be similarly postponed. In our judgment the cause of action is for recoupment of such amounts as are in fact irrecoverable from the party primarily responsible - viz., the personal representative - and it will be sufficient in any case at the trial to show that at the date of the writ the whole of the sums wrongly paid away were not recoverable from the personal representative. In the present case the extent of the executors' contribution has been determined: and there is therefore no difficulty in fixing the amounts which, if they are otherwise liable, the respondents must refund. In cases where the total recoverable from the personal representative has not been finally determined at the date of the trial of the action against the recipient, any order would have to make appropriate provision for the plaintiff duly prosecuting his claim against the personal representative and bringing into account all sums then or thereafter recovered from him.

It is also to be noted that in the main action the plaintiffs were J. H. Diplock (who died in 1940) and three other members of the class of next-of-kin: and in the other nine actions the plaintiffs are those three other individuals plus Mr. Conolly. We understand that there has been some collaboration both among the forty-eight persons who together constitute the whole class of next-of-kin on the one side and between the one hundred and thirty-nine charities to whom the 200,000l.-odd of residue was wrongly paid on the other, with a view to limiting the litigation between them. It does not, however, appear that in any of the actions the plaintiffs have sued in representative capacities, though in the main action (alone of all of them), the plaintiffs have asked for a representation order and in all the actions the relief sought includes general administration or execution of the trusts. It is further to be observed that in all the actions the prayer under this branch of the claim is for payment of the sums received by the defendants to the judicial trustee - in no case do the plaintiffs ask for payment direct to themselves of what is alleged to be due to them. We have in mind also that Mr. Pascoe Hayward in regard to the question of limitation conceded that, even if the plaintiff sued in a




[1948]

 

506

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

representative capacity, it would not follow that the claim of some of the class represented were not barred if in fact those persons had been aware of their rights for the requisite period of time. And we further have in mind that the present appeals relate to ten actions only of a total of one hundred and twenty-two commenced at one time or another, of which twenty were brought to trial.

It may become necessary to discuss with counsel the proper extent and form of relief on the basis of this judgment.

But we notice that in those of the learned judge's orders which required payment by any of the respondents, such respondents were directed to pay the sums ordered to Mr. Conolly the judicial trustee - for the purpose of being administered by him, as we assume, on behalf of the whole class of next-of-kin generally. No suggestion was made before us that, assuming liability under this head of the appellants' argument on the part of any respondent, this form of order was not in the circumstances correct, i.e., it was not suggested that the liability of any respondent should be limited by reference to the individual interest of any next-of-kin or by reference to the proportion which the sum originally paid to that respondent bore to the total amount wrongly distributed. Subject to discussion on the precise form of order, it appears to us in the light of the submissions made to this court that each respondent should be ordered to repay to the judicial trustee the sums originally paid over to that respondent but subject to the limitation already mentioned that the sum of 15,000l. recovered by or on behalf of the next-of-kin by virtue of the compromise order of April, 1944, should be treated as having been credited rateably to and among all the one hundred and thirty-nine charities (including the respondents) in proportion to the original sums paid over to them. Any sums in fact recovered from any of the charities other than the respondents would, on the other hand, not have to be credited rateably to and among all the charities. There is, of course, the further limitation that no member of the class of next-of-kin can be entitled to recover more than the sum which he would have received, had the estate been properly administered. But it seems clear that this further limitation can have no practical significance.

We should add that, as already indicated, in our judgment the respondents are liable under this head of their claim for the principal claimed only and not for any




[1948]

 

507

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

interest. This last result appears to follow from the case of Gittins v. Steele (1) cited in Roper (loc. cit.) at p. 461, where the language of Lord Eldon in the case is cited: "If a legacy has been erroneously paid to a legatee, who has no farther property in the estate, in recalling that payment, I apprehend that the rule of the court is, not to charge interest; but if the legatee is entitled to another fund making interest in the hands of the court, justice must be done out of his share."

We turn accordingly to the defence of limitation. Upon this question we have not the advantage of Wynn-Parry J.'s judgment since, upon the view he took, the question of limitation did not arise.

It will be convenient to recall one or two material facts and to add to them a few more. Caleb Diplock died on March 23, 1936. The several payments to the respondents to these appeals were made at various dates from November 28, 1936, to March 10, 1938. On the view that we take, however, these dates of payment are not material. The main action was instituted on January 3, 1940, and it seems clear therefore that on no view can the defence of limitation be available to St. George's Hospital. The remaining nine actions were instituted on July 28, 1945. It has, however, been admitted for the purpose of the appeals that these actions should be treated as having been initiated at an earlier date, namely, March 22, 1945: so that if the proper period of limitation be six years (as the respondents contend) time would not in any case have begun to run effectively in the respondents' favour later than March 22, 1939. It has also been conceded for the purposes of these appeals that of the three next-of-kin who are plaintiffs in all the actions, one, Cornelius Simpson, was aware of the death of Mr. Diplock early in 1939, but that the other two did not become aware of the death until after March 22, 1939. If therefore the date on which the claimant discovered or ought with reasonable diligence to have discovered the mistake made by the executors is the material date for determining when the period of limitation began to run, it is obvious that, in the case of the latter two plaintiffs, their claim prima facie cannot be barred: for unless it can be shown that there was some lack of reasonable diligence they cannot have discovered the mistake made before they knew that Mr. Diplock was dead. In the case of the plaintiff Cornelius Simpson the


(1) (1818) 1 Swanst. 200.




[1948]

 

508

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

matter may be otherwise, though it cannot of course be assumed that knowledge of Mr. Diplock's death involved any knowledge of the terms of his will or of the executors' mistake.

It is admitted on both sides that the only statute now applicable is the Limitation Act, 1939, which came into operation on July 1, 1940: for by the effect of s. 34, sub-s. 4 and the schedule to that Act, all relevant subsisting statutory provisions for limitation were repealed, including ss. 3, 4 and 7 of the Act of 1623, the Real Property Limitation Acts of 1833 and 1874 and the Trustee Act, 1888. On the basis therefore that the defence of limitation must rest on the application, direct or by analogy, of the Act of 1939, the two questions to be answered are, first, what (if any) is the relevant period and second (in so far as necessary) from what date does the period begin to run?

Mr. Pascoe Hayward submitted that the answer to the first question is twelve years. Having regard to the dates it is plain that, if twelve years is the appropriate period, the second question need not be considered. The period of twelve years will carry the time back from March 22, 1945, to a date long before Mr. Diplock's death.

Mr. Pascoe Hayward founded his contention on the terms of s. 20 of the Act which, he says, is the section by its language applicable to the present case.

Section 20 is as follows:-

"Subject to the provisions of sub-s. 1 of the last foregoing section" (which excepts from any period of limitation an action by a beneficiary against a trustee where the trustee has been party to fraud or to recover trust property in the trustee's hands or converted by him to his use) "no action in respect of any claim to the personal estate of a deceased person or to any share or interest in such estate, whether under a will or on intestacy, shall be brought after the expiration of twelve years from the date when the right to recover the share or interest accrued, and no action to recover arrears of interest in respect of any legacy or damages in respect of such arrears, shall be brought after the expiration of six years from the date on which the interest became due."

Mr. Pascoe Hayward contended that, according to the ordinary acceptation of the language used, this branch of the appellants' claim is "an action in respect of" a "claim to .... a share or interest in" the personal estate of a deceased person.




[1948]

 

509

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

Mr. Upjohn, on behalf of the respondents, has argued that upon its proper construction the section relates only to claims of the character mentioned against a personal representative: and bearing in mind that the Act is in its heading described as "an Act to consolidate with amendments certain enactments relating to the limitation of action" he prayed in aid (as he was entitled to do) 'he terms of the consolidated statutes, as interpreted by the courts. Indeed, both Mr. Upjohn and Mr. Pascoe Hayward invoked the language of the earlier Acts in support of their arguments; and it is therefore necessary to make some reference to them.

As regards actions by legatees (which had been held to include residuary legatees) to obtain payment of their legacies or shares of residue, the period of limitation had been fixed by the Real Property Limitation Act, 1874 (s. 8) as twelve years "after a present right to receive the same shall have accrued to some person capable of giving a discharge ...." - the period of twelve years having been substituted for twenty years prescribed by s. 40 of the Real Property Limitation Act of 1833. Neither the 1833 nor the 1874 provision was expressly confined to actions against the personal representative: but the formula used in both was "no action to recover a legacy ....": and having regard to the formula, it appears (and it was not, as we understood, disputed) that the two sections related only to actions to "recover" from the estate: that is, in effect, to actions against personal representatives (see e.g., In re Johnson (1), per Chitty J.)

It having been held that the Act of 1833 did not cover claims upon an intestacy by a next-of-kin, the gap was filled by s. 13 of the Law of Property Amendment Act, 1860, which fixed the relevant period at twenty years - the same as the period then applicable in the case of a legacy. The formula used in the Act of 1860 followed that of the Act of 1833" .... no suit to recover the personal estate or any share of the personal estate of any person dying intestate ...." to which in this case were added the words "possessed by the legal personal representative of such intestate." The terminus from which the period began to run was the same as that applicable to a claim for a legacy.

The Act of 1874 (which reduced the statutory period from twenty to twelve years in the case of a legacy) left untouched the period applicable to a claim by a next-of-kin.


(1) (1885) 29 Ch. D. 964, 971.




[1948]

 

510

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

Prior to the coming into operation of the Property Legislation of 1925 the position, therefore, as regards claims by unpaid next-of-kin under an intestacy was as follows: if the claim was against the personal representative the relevant period of limitation was twenty years from the accrual of a present right to receive the share claimed by some person capable of giving a discharge. But if the claim was a claim in equity direct against some third party wrongly paid or overpaid - that is a David v. Frowd (1) form of action - neither the Act of 1860 nor any other Statute of Limitation had any direct application. In such case the statute of James I. was applied, treating the action as analogous in this respect to a common law action for money had and received. That this was so is illustrated by the decision of Maugham J. in 1932 in In re Blake (2) to which we have already referred. In that case, the material facts of which have already been stated the third party sued was the Crown. The liability at the Crown in such proceedings and the application by analogy of the statute of 1623 arose from s. 3 of the Intestates Estates Act, 1884. That section provided (inter alia) that a petition of right should not be presented "in respect of the personal estate of any deceased person or any part or share thereof .... except within the same time and subject to the same rules of law and equity in and subject to which" a like proceeding might be instituted against a subject. Maugham J. accordingly held that, applying the period of limitation which would have been appropriate in the case of a similar claim against the subject, the claim had become barred six years after the date of the payment. (See also In re Mason (3) cited above). In the course of his judgment Maugham J. pointed out that having regard to the nature of the cause of action the relevant section of the Intestates Estates Act, 1884, was s. 3 and not s. 2. The latter section provided that where the administration of the personal estate of any deceased person had been granted to a nominee of the Crown, any proceeding against that nominee "for the recovery of the personal estate of such deceased person or any share thereof" should "be of the same character and .. subject to the same rules of law and equity (including the rules of limitation under the Statutes of Limitation ....)" as if the administration had been granted to the nominee as one of the next-of-kin. As observed by Maugham J., therefore,


(1) 1 My. & K. 200.

(2) [1932] 1 Ch. 54.

(3) [1929] 1 Ch. 1.




[1948]

 

511

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

had the action been one brought against a nominee of the Crown in his capacity of personal representative the effect of s. 2 of the Act of 1884 would - or would but for the Law of Property (Amendment) Act, 1924 - have been to make applicable the twenty-year period prescribed by s. 13 of the Law of Property Amendment Act, 1860. But (as the learned judge pointed out) one of the effects of the property legislation of 1925 had been the repeal by s. 10 and sch. X of the Law of Property (Amendment) Act, 1924, of s. 13 of the Act of 1860 without (apparently, per incuriam) any reservation of the cases of persons dying before the coming into operation on January 1, 1926, of the Property Acts of 1925. In the case of persons dying on or after January 1, 1926, the effect of s. 46 of the Administration of Estates Act, 1925 (which made the administrator of an intestate a trustee for the next-of-kin) would appear to have been to make applicable the provisions of s. 8 of the Trustee Act, 1888, to claims by the next-ot-kin against the administrator. It should be added the-t another effect of the property legislation of 1925 was (by virtue of s. 56, and Part I. of sch. II to the Administration of Estates Act, 1925) to repeal ss. 2 and 3 of the Intestates Estates Act, 1884, in the case of deaths occurring on or after January 1, 1926. Those sections were, however, reproduced and extended to real estate also - by sub-ss. 1 and 2 of s. 30 of the Administration of Estates Act, 1925, which, so far as material to the present appeals, made use of the same wording, quoted above, as that used in s. 2 ("for the recovery of") and s. 3 ("in respect of") of the Act of 1884.

The position therefore immediately prior to the coming into operation of the Limitation Act, 1939, as regards claims by unpaid next-of-kin, was substantially the same as that which obtained prier to the coming into operation of the property legislation of 1925 - the provision of s. 30 of the Administration of Estates Act, 1925, in the case of persons dying after the coming into operation of that Act, having replaced, as regards proceedings against the Crown, the similar provisions of ss. 2 and 3 of the Intestates Estates Act, 1884 - save that as regards claims by the next-of-kin of a person dying on or after January 1, 1926, against his personal representative the relevant period of limitation would (apparently) have been that governed by s. 8 of the Trustee Act, 1888 - that is, save in the excepted cases of fraud, etc., prima facie six years from the accrual of the cause of action.




[1948]

 

512

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

Mr. Pascoe Hayward, in support of his argument for the application to the present case of s. 20 of the Act of 1939, relied strongly on the contrast in the language used, on the one hand, in s. 2 of the Intestates Estates Act, 1884, and s. 30, sub-s. 1, of the Administration of Estates Act, 1925, in reference to actions "for the recovery of" the personal estate of an intestate; and, on the other, the language used in s. 3 of the Act of 1884 and s. 30, sub-s. 2, of the Administration of Estates Act, 1925, in reference to actions "in respect of" the personal estate of an intestate. The first formula is (he says), that appropriate to claims against the personal representative and, accordingly, follows the formula found in the Acts of 1833, 1860 and 1874 in reference to actions "to recover" a legacy or a share of residue. The second is that appropriate to a David v. Frowd (1) type of action. By its use, therefore, of the second formula - ".... no action in respect of any claim to the personal estate ...." section 20 of the Act of 1939 must (according to Mr. Pascoe Hayward) necessarily be taken to apply, if not to apply primarily, to an action of the character here in question. Having regard to the repeal of the Acts of 1833 and 1874, it seems to us plain that s. 20 of the Act of 1939 must apply to claims by an unpaid beneficiary against the executor or administrator - in other words to claims by a beneficiary "to recover" his legacy or share. On the other hand we cannot see that according to ordinary usage of the English language, the section does not equally apply to a claim by an unpaid beneficiary direct against one overpaid or wrongly paid. In our judgment Mr. Pascoe Hayward is right in saying that such an action is fairly and properly described as an action "in respect of" a claim to the personal estate of a deceased person or to a share therein. The examination we have made into the previous history of the legislation does not in our judgment provide any valid reason for rejecting this interpretation of the language. On the contrary, the references on which Mr. Pascoe Hayward relies seem to us strongly to support it. It is a well-established canon of the construction of Acts of Parliament (and particularly of consolidating statutes) that phrases used therein which have been the subject of judicial interpretation are used in the sense in which they have been so interpreted. It seems to us, therefore, particularly in the light of Maugham J.'s decision in In re Blake (2) that the adoption in s. 20 of the formula "in respect of" by way of


(1) 1 My. & K. 200.

(2) [1932] 1 Ch. 54.




[1948]

 

513

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

contrast to the formula "for the recovery of" which had appeared in the Acts of 1833, 1860 and 1874, and also in s. 2 of the Act of 1884 and s. 30, sub-s. 1, of the Administration of Estates Act, 1925, must have been deliberate; and that it is impossible to resist the conclusion that by its use Par iament intended to bring within the ambit of s. 20 of the Act of 1939 claims of the David v. Frowd (1) type as well as claims directly against a personal representative. It is true that if our construction is right there is some awkwardness as regards the date from which, in the case of a David v. Frowd (1) claim, the period of limitation begins to run; for that date must be "the date when the right to recover the share or interest accrued," that is, the same date as that from which the statute runs in the case of a claim against a personal representative, and without regard to the time when the moneys belonging to the claimant were in fact wrongly paid to the recipient. But in our view the awkwardness (if such it be) is insufficient to override the effect which we think must be given to the earlier part of the section.

It is also true that, if this interpretation is correct, the effect of the new Act will have been to increase the statutory period applicable to causes of actions of the kind here in question. Such a result no doubt appears contrary to the general trend of the legislation of the last hundred years. But the question depends upon the language Parliament has thought fit to use: and there is at least substantial ground for supposing that the increase was not accidental. Section 33 (a), the saving section, provides that nothing in the Act is to enable an action to be brought which was barred before the commencement of the Act by an enactment repealed by the Act. An example of such a case might well be provided by a claim on the part of a next-of-kin against an administrator. According to the respondents' own argument (with which we agree) such a claim would now by virtue of s. 20 be subject to the limitation period of twelve years from the accrual of the right to receive the share of the estate. Before the coming into operation of the Act of 1939 such a claim would have been liable to be barred in six years by virtue of the repealed provisions of s. 8 of the Trustee Act, 1888. Again, in the case of an action at common law for repayment of money paid under a mistake of fact, time formerly ran from the date of payment. Section 26 of the Act of 1939 postpones the commencement of the running of time until the


(1) 1 My. & K. 200.




[1948]

 

514

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

mistake is, or with reasonable diligence should be, discovered.

Further, it does not seem to us surprising or unreasonable that the period of limitation applicable to a claim by a beneficiary against a personal representative should be the same as that applicable to a claim by him direct against one overpaid or wrongly paid out of an estate.

We therefore conclude that the period of limitation applicable to this branch of the appellants' claim is by virtue of s. 20 of the Act of 1939 twelve years from the date when their rights accrued with the result that the defences of limitation necessarily fail.

We add, however, that, if we are wrong in this view, it is by no means clear that the respondents are substantially in any better position. If s. 20 of the Act does not apply, then it is conceded that there is no section of the Act which expressly does apply to the case. In that event Mr. Upjohn relies on sub-ss. 1 (a) and 7 of s. 2 of the Act. So far as material those sections are as follows:-

Sub-s. 1: "The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued, that is to say:-

(a) actions founded on simple contract ...." Sub-s. 7: "This section shall not apply to any claim for .... equitable relief except in so far as any provision thereof may be applied by the court by analogy in like manner as the corresponding enactment repealed by the Act has heretofore been applied."

Mr. Upjohn says that the effect of these two sub-sections is to preserve and perpetuate, as it were, the analogous application to causes of action of this character of the repealed statute of James I. We assume in Mr. Upjohn's favour that the words "action founded on simple contract" must be taken to cover actions for money had and received, formerly actions on the case, and, as such, covered in express terms by the Statute of James 1. The assumption must we think be made though the words used cannot be regarded as felicitous. Even so, however, we are unable to agree with Mr. Upjohn that the language of sub-s. 7 is sufficient, as regards what we have called David v. Frowd (1) claims, to override what we have felt compelled to conclude is the natural and inevitable meaning of the express terms of s. 20. It is to be noted that the opening words of sub-s. 7 are negative in form - "This section shall not apply to


(1) 1 My. &. K. 200.




[1948]

 

515

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

any claim .... for equitable relief." The sub-section proceeds ".... except in so far as any provision thereof may be applied by the Court by analogy," etc. In our view the effect of this somewhat diffident language must be to limit the analogous (in the present case the doubly analogous) application of s. 2 of the Act to claims of a kind for which no express provision is to be found elsewhere in the statute.

Assuming, however, that, contrary to our view, s. 2 of the Act does apply, by analogy, to the present case, what is the result? We have already given our reasons for thinking, on Mr. Upjohn's hypothesis, that the "accrual of the cause of action" cannot be postponed until the right of the next-of-kin against the executors and their estates have been exhausted. But the provisions (inter alia) of s. 2 are, by s. 1, expressed to be subject to the provisions of part II of the Act which provide for the extension of the periods of limitation in the case of .... mistake" - that is subject to the provisions of s. 26 of the Act. By that section where (by para. (c)) "the action is for relief from the consequences of a mistake," the period of limitation "shall not begin to run until the plaintiff has discovered or could with reasonable diligence have discovered ...." the mistake.

In order to avoid any difficulty created for him by s. 26, Mr. Upjohn discerns in the hands of the appellants on this part of their case a double-edged sword: for he says that it is an essential part of their main argument that the appellants themselves made no mistake and are not in any way prejudiced or affected by the mistake of the executors. But in truth this dangerous weapon is in our view in the respondents' hands. For if they seek to bring the case, for the purposes of the defence of limitation, within s. 2 of the Act and to rely upon the reasoning in In re Blake (1), they must do so by averring that the cause of action is analogous to the common law action for money had and received. And if they assert the analogy, they must take it with its attributes and consequences. Beyond doubt, it would appear that in the case of an action at common law to recover money paid under a mistake of fact, s. 26 would now operate to postpone the running of time. It is true that no such action would lie where the mistake is one of law: but for reasons which we have already given we do not accept the respondents' contention that the "analogous" claim in equity will also lie


(1) [1932] 1 Ch. 54.




[1948]

 

516

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

only where the mistake made was one of fact. In our judgment, therefore, assuming the analogy (as it must be assumed if s. 2 is to apply at all) the action is one for the recovery of money paid away by mistake - albeit by the mistake of other persons and by a mistake of law - and in our judgment, on this assumption, is an action for relief from the consequences of mistake no less than would be an action at common law to recover money paid away under a mistake of fact.

If, therefore, contrary to our view, s. 2 is applicable (subject to s. 26) the proper order would be to direct an inquiry to ascertain when each of the appellant next-of-kin - and each of the remaining next-of-kin, if the appeals are to enure for their benefit - discovered or ought with reasonable diligence to have discovered the mistake. As we have already stated it would appear almost certain, as regards two of the appellant next-of-kin and not improbable as regards the third, that the relevant dates would be found to be after March 22, 1939; and we cannot help thinking it likely that similar answers would be given in regard to the other beneficiaries. The result would therefore not, as it seems to us, be likely to be of assistance to the respondents. In our judgment, however, the answer to the defences of limitation is that by virtue of s. 20 of the Act the relevant period is twelve years. That answer is fatal to the defences.

If the views we have expressed on the validity of the claims in personam, on the defence of the Statute of Limitations, and on the orders to which the appellants are entitled, are correct, the appellants have said that they do not need to rely upon their alternative claims in rem. It might therefore be thought to be strictly unnecessary for us to express any views in regard to those claims. But the claims - including particularly the very difficult question of the effect of the case of Sinclair v. Brougham (1) have been the subject of elaborate arguments before us and they are fully dealt with by Wynn-Parry J. in his careful judgment. With much of that part of the learned judge's judgment (as later appears) we agree, though we venture to differ from him in certain important respects.

We also bear in mind that though they have all been heard together there are before us ten appeals and it was clear from the arguments that, having regard to the special facts relating to each respondent, the success or partial success of the


(1) [1914] A. C. 398.




[1948]

 

517

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

appellants' claims in rem against one respondent would by no means necessarily involve a corresponding success against all or any of the others. It appears to us, therefore, that our views in regard to these claims, as they might affect each respondent, would be a material consideration affecting any application by any respondent for leave to appeal to the House of Lords. Further if on any such appeal it were held that we were wrong in our conclusions either upon the substance of the personal claims or upon the defence of limitation or upon the orders to which the appellants are entitled, the appellants would certainly seek to rely upon their proprietary claims either in substitution for or as supplementary to their personal claims.

In all the circumstances therefore of this remarkable case it has not seemed to us that it would in any case be satisfactory for us to express no view on the claims in rem. We think too that such a course would lack proper respect to the learned judge's judgment and the arguments of counsel.

There is, moreover, one point in regard to which, as it seems to us, success by the appellants on their personal claims would not, or would not necessarily, exhaust their rights. We have already stated our view that upon their personal claims the appellants are not entitled to any interest. The same may not however be true as regards the claims in rem, at least where the appellants are able to "trace" their proprietary interest into some specific investment. It is to be noted that in two out of the three cases in which Wynn-Parry J. ordered payment to the judicial trustee (namely in action IV. D against the Committee of Management of Queen Alexandra Cottage Homes and in action IV. E against Guy's Hospital) those orders included payments in respect of interest. As we have already stated there is no cross-appeal by the respondents concerned in either of those cases.

Prima facie, therefore, it appears to us that where the appellants can make good their claim in rem against any respondent and can also in the circumstances make good a claim for interest (including the two cases in which orders to that effect have been made by the learned judge) the appellants would be entitled to recover upon their claim in rem (so far as it went) together with interest and to limit their recovery upon their personal claim to the balance of the principal sum paid to the respondent less the principal amount recovered upon their claim in rem.

We think it right therefore to state fully our own conclusions




[1948]

 

518

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

on this branch of the case and our reasons for them. It will be seen that the only claims which in our view can be supported on the basis of the so-called equitable doctrine of tracing are of a strictly limited character.

We shall endeavour to explain our views as to the basis on which the doctrine must now be taken to rest. In this connexion we regard the case of Sinclair v. Brougham (1) as of fundamental importance. That decision, in our view, did not so much extend as explain the doctrine of Hallett's case(2), which now must be regarded not, so to speak, as a genus but as a species in a genus where equity works on the same basic principles but selects what on the particular case is the equitable method of applying them in practice It will be found that our views as to the meaning and effect of the speeches in Sinclair v. Brougham (1) differ from those expressed by Wynn-Parry J. We should, however, be lacking in candour rather than showing respect if we refrained from saying that we find the opinions in Sinclair v. Brougham (1) in many respects not only difficult to follow but difficult to reconcile with one another.

Before passing to a consideration of the case of Sinclair v. Brougham (1) we may usefully make some observations of our own as to the distinction between the attitude of the com mon law and that of equity to these questions.

The common law approached them in a strictly materialistic way. It could only appreciate what might almost be called the "physical" identity of one thing with another. It could treat a person's money as identifiable so long as it had not become mixed with other money. It could treat as identifiable with the money other kinds of property acquired by means of it, provided that there was no admixture of other money. It is noticeable that in this latter case the common law did not base itself on any known theory of tracing such as that adopted in equity. It proceeded on the basis that the unauthorized act of purchasing was one capable of ratification by the owner of the money (see per Lord Parker in Sinclair v. Brougham (3).) Certain words of Lord Haldane in Sinclair v. Brougham (1) may appear to suggest a further limitation, i.e., that "money" as we have used that word was not regarded at common law as identifiable once it had been paid into a banking account(4). We do not, however, think it necessary to discuss this point at


(1) [1914] A. C. 398.

(2) 13 Ch. D. 696.

(3) [1914] A. C. 398, 441.

(4) Ibid. 419.




[1948]

 

519

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

length. We agree with the comments of Wynn-Parry J. upon it(1) and those of Atkin L.J. (as he then was) in Banque Belge v. Hambrouck (2). If it is possible to identify a principal's money with an asset purchased exclusively by means of it we see no reason for drawing a distinction between a chose in action such as a banker's debt to his customer and any other asset. If the principal can ratify the acquisition of the one, we see no reason for supposing that he cannot ratify the acquisition of the other.

We may mention three several matters which we think are helpful in understanding the limitation of the common law doctrine and the reasons why equity was able to take a more liberal view They are as follows:

(1.) The common law did not recognize equitable claims to property, whether money or any other form of property. Sovereigns in A's pocket either belonged in law to A or they belonged in law to B. The idea that they could belong in law to A and that they should nevertheless be treated as belonging to B was entirely foreign to the common law. This is the reason why the common law doctrine finds its typical exemplification in cases of principal and agent. If B, a principal, hands cash to A, his agent, in order that it may be applied in a particular manner, the cash, in the eyes of the common law, remains the property of B. If, therefore, A, instead of applying it in the authorized manner, buries it in a sack in his garden or uses it for an unauthorized purchase, B can, in the former case, recover the cash as being still his own property and, in the latter case, affirm the purchase of something bought with his money by his agent. If, however, the relationship of A and B was not one which left the property in the cash in B but merely constituted a relationship of debtor and creditor between them, there could, of course, have been no remedy at law under this head, since the property in the cash would have passed out of B into A.

(2.) The narrowness of the limits with in which the common law operated may be linked with the limited nature of the remedies available to it. Specific relief as distinct from damages (the normal remedy at common law) was confined to a very limited range of claims as compared with the extensive uses of specific relief developed by equity. In particular, the device of a declaration of charge was unknown to the common law and it


(1) [1947] Ch. 716, 745-6.

(2) [1921] 1 K. B. 321, 335.




[1948]

 

520

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

was the availability of that device which enabled equity to give effect to its wider conception of equitable rights.

(3.) It was the materialistic approach of the common law coupled with and encouraged by the limited range of remedies available to it that prevented the common law from identifying money in a mixed fund. Once the money of B became mixed with the money of A its identification in a physical sense became impossible, owing to the fact of mixture there could be no question of ratification of an unauthorized act; and the only remedy of B, if any, lay in a claim for damages.

Equity adopted a more metaphysical approach. It found no difficulty in regarding a composite fund as an amalgam constituted by the mixture of two or more funds each of which could be regarded as having, for certain purposes, a continued separate existence. Putting it in another way, equity regarded the amalgam as capable, in proper circumstances, of being resolved into its component parts.

Adapting, for the sake of contrast, the phraseology which we have used in relation to the common law, it was the metaphysical approach of equity coupled with and encouraged by the far-reaching remedy of a declaration of charge that enabled equity to identify money in a mixed fund. Equity, so to speak, is able to draw up a balance sheet on the right-hand side of which appears the composite fund and on its left-hand side the two or more funds of which it is to be deemed to be made up.

Regarded as a pure piece of machinery for the purpose of tracing money into a mixed fund or into property acquired by means of a mixed fund, a declaration of charge might be thought to be a suitable means of dealing with any case where one person has, without legal title, acquired some benefit by the use of the money of another - in other words, any case of what is often called "unjust enrichment." The opinion of Lord Dunedin in Sinclair v. Brougham (1) appears to us to come very nearly to this, for he appears to treat the equitable remedy as applicable in any case where a superfluity, expressed or capable of being expressed in terms of money, is found to exist. Such a view would dispense with the necessity of establishing as a starting point the existence of a fiduciary or quasi-fiduciary relationship or of a continuing right of property recognized in equity. We may say at once that, apart from the possible case of Lord Dunedin's speech, we cannot find that any principle


(1) [1914] A. C. 398.




[1948]

 

521

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

so wide in its operation is to be found enunciated in English law. The conditions which must exist before the equitable form of relief becomes available will be considered later in this judgment. But one truism may be stated here in order to get it out of the way. The equitable form of relief whether it takes the form of an order to restore an unmixed sum of money (or property acquired by means of such a sum) or a declaration of charge upon a mixed fund (or upon property acquired by means of such a fund) is, of course, personal in the sense that its efficacy is founded upon the jurisdiction of equity to enforce its rules by acting upon the individual. But it is not personal in the sense that the person against whom an order of this nature is sought can be made personally liable to repay the amount claimed to have belonged to the claimant. The equitable remedies pre-suppose the continued existence of the money either as a separate fund or as part of a mixed fund or as latent in property acquired by means of such a fund. If, on the facts of any individual case, such continued existence is not established, equity is as helpless as the common law itself. If the fund, mixed or unmixed, is spent upon a dinner, equity, which dealt only in specific relief and not in damages, could do nothing. If the case was one which at common law involved breach of contract the common law could, of course, award damages but specific relief would be out of the question. It is, therefore, a necessary matter for consideration in each case where it is sought to trace money in equity, whether it has such a continued existence, actual or notional, as will enable equity to grant specific relief.

To turn to another preliminary matter: We do not think that confusion can be avoided unless the meaning of the word "money" as used in connexion with this class of question is kept in mind. It is tempting to use the illustration of sovereigns in a bag or, to use an expression of Lord Dunedin's, a strong box. But this must not blind us to the fact that such an illustration has little or no likeness to actual facts in present day conditions. We can explain what we mean by a reference to the present cases. The plaintiffs claim that "money" forming part of the residuary estate of the testator and, therefore, divisible among his next-of-kin, has been improperly paid to a charity. This "money" when "paid" was in the form of a cheque on the executorship account, i.e., a negotiable instrument. This negotiable instrument at the moment preceding its delivery to the charity belonged to the residuary




[1948]

 

522

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

estate of the testator and any of the next-of-kin, if he had known of the situation, could have secured an injunction restraining the executors from delivering it to the charity. As in that event the cheque would never have been presented for payment, the "money" representing the relevant portion of the residuary estate would have remained in its existing state, i.e., as part of the chose in action constituted by the banker's debt to the executors in respect of the executorship account.

The charity accepted the cheque; and on the assumption that it was not a purchaser for value and is not to be charged with such notice as to make it a constructive trustee, it accepted the cheque as a volunteer. The first stage, therefore, was that the charity had in its possession a negotiable instrument which in origin belonged to the residuary estate and in which the next-of-kin were, in the eyes of equity, interested.

If the next-of-kin had been in a position to interfere at that stage they could, in our view, clearly (and the contrary was not argued) have recovered the cheque from the charity whom, as a volunteer, equity would have compelled to recognize the equitable interest of the next-of-kin in it. But the cheque was in fact paid into a banking account in the name of the charity. The next-of-kin claim to follow their "money." What really happened was that when the cheque was cleared, a credit was passed by the paying bank to the collecting bank for the benefit of the charity who thus, without handling any "money" in the sense of cash, became possessed of "money" in the sense of credit in its banking account, i.e., a chose in action. Now, if the "money" in the form of the cheque was "paid in" to a separate account so that the "money" in the form of a chose in action which resulted from the operation remained "unmixed" (i.e., was identifiable as a chose in action having a separate existence) it is not disputed that the "money" will be specifically recoverable from the charity. It is not suggested in that case that the title to the "money" of the charity as a volunteer can defeat the claim of the next-of-kin to recover it for the benefit of the estate. The appropriate equitable relief would be by way of specific order for restoration of what, in the eyes of equity, never ceased to belong in equity to the estate; the reason, of course, being that the charity, which took the cheque not as a purchaser for value without notice but merely as a volunteer, could not set up a title adverse to the estate in respect of "money" (i.e., on those facts a separate and identifiable chose in action) obtained by means of "money" in the




[1948]

 

523

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

form of a cheque, i.e., an order by the executors on their bankers to transfer from "money" belonging to the estate in the form of a chose in action an aliquot sum of "money" in the form of a credit in favour of the charity, as payee of the cheque, in its account with its bankers.

When the various senses in which the word "money" is used are appreciated, the conceptions of "purchaser for value without notice" and of "volunteer" which are common currency in the language of equity, do not appear inappropriate, as they might perhaps have done (at any rate at first sight) in the case of current coins which pass by delivery: and one of the apparent difficulties in the way of tracing, identifying and locating "money" does, we think, disappear.

The first question which appears to us to fall for decision on this part of the present appeals may, we think, be thus formulated: Did the power of equity to treat Diplock "money" as recoverable from the charity, which undoubtedly existed down to the moment when the cheque was paid by the bank on which it was drawn, cease the moment that the "money" by the process of "mixture" came to be represented by an accretion to or an enlargement of the chose in action consisting of a debt already owing to the charity by its own bankers? Wynn-Parry J., in effect, decided that it did. His reason for taking this view, shortly stated, was as follows: The principle applicable was to be extracted from the decision in Hallett's case(1) and that principle was in no way extended by the decision in Sinclair v. Brougham (2). The principle can operate only in cases where the mixing takes place in breach of a trust, actual or constructive, or in breach of some other fiduciary relationship and in proceedings against the trustee or fiduciary agent: here the mixing was not of this character, since it was effected by an innocent volunteer: there is no ground on which, according to principle, the conscience of such a volunteer can be held in equity to be precluded from setting up a title adverse to the claim: in every case, therefore, where a "mixture" has been carried out by the charity, the claim, whether it be against a mixed monetary fund or against investments made by means of such a mixed fund, must fail in limine.

Now we may say at once that this view of the inability of equity to deal with the case of the volunteer appears to us, with


(1) 13 Ch. D. 696.

(2) [1914] A. C. 398.




[1948]

 

524

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

all respect to Wynn-Parry J., to be in confiict with the principles expounded, particularly by Lord Parker, in Sinclair v. Brougham (1). If Lord Parker means what we think he meant, and if what he said is to be accepted as a correct statement of the law, Mr. Pennycuick, who argued this part of the case on behalf of the charities, admittedly felt great difficulty in supporting this part of the reasoning of the learned judge. We shall deal further with Lord Parker's observations on this topic when we come to them in our examination of Sinclair v. Brougham (1). But here we may conveniently summarize what we consider to be the effect of them as follows: Where an innocent volunteer (as distinct from a purchaser for value without notice) mixes "money" of his own with "money" which in equity belongs to another person, or is found in possession of such a mixture, although that other person cannot claim a charge on the mass superior to the claim of the volunteer he is entitled, nevertheless, to a charge ranking pari passu with the claim of the volunteer. And Lord Parker's reasons for taking this view appear to have been on the following lines: Equity regards the rights of the equitable owner as being "in effect rights of property" though not recognized as such by the common law. Just as a volunteer is not allowed by equity in the case, e.g., of a conveyance of the legal estate in land, to set up his legal title adversely to the claim of a person having an equitable interest in the land, so in the case of a mixed fund of money the volunteer must give such recognition as equity considers him in conscience (as a volunteer) bound to give to the interest of the equitable owner of the money which has been mixed with the volunteer's own. But this burden on the conscience of the volunteer is not such as to compel him to treat the claim of the equitable owner as paramount. That would be to treat the volunteer as strictly as if he himself stood in a fiduciary relationship to the equitable owner which ex hypothesi he does not. The volunteer is under no greater duty of conscience to recognize the interest of the equitable owner than that which lies upon a person having an equitable interest in one of two trust funds of "money" which have become mixed towards the equitable owner of the other. Such a person is not in conscience bound to give precedence to the equitable owner of the other of the two funds.

We may enlarge upon the implications which apear to us to be contained in Lord Parker's reasoning. First of all, it appears to us to be wrong to treat the principle which underlies


(1) [1914] A. C. 398.




[1948]

 

525

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

Hallett's case(1) as coming into operation only where the person who does the mixing is not only in a fiduciary position but is also a party to the tracing action. If he is a party to the action he is, of course, precluded from setting up a case inconsistent with the obligations of his fiduciary position. But supposing that he is not a party? The result cannot surely depend on what equity would or would not have allowed him to say if he had been a party. Suppose that the sole trustee of (say) five separate trusts draws 100l. out of each of the trust banking accounts, pays the resulting 500l. into an account which he opens in his own name, draws a cheque for 500l. on that account and gives it as a present to his son. A claim by the five sets of beneficiaries to follow the money of their respective trusts would be a claim against the son. He would stand in no fiduciary relationship to any of them. We recoil from the conclusion that all five beneficiaries would be dismissed empty handed by a court of equity and the son left to enjoy what in equity was originally their money. Yet that is the conclusion to which the reasoning of the learned judge would lead us. Lord Parker's reasoning, on the other hand, seems to us to lead to the conclusion that each set of beneficiaries could set up its equitable interest which would prevail against the bare legal title of the son as a volunteer and that they would be entitled to share pari passu in so much of the fund or its proceeds as remained identifiable.

An even more striking example was admitted by Mr. Pennycuick to be the result of his argument, and he vigoruosly maintained that it followed inevitably from the principles of equity involved. If a fiduciary agent takes cash belonging to his principal and gives it to his son, who takes it innocently, then so long as the son keeps it unmixed with other cash in one trouser pocket, the principal can follow it and claim it back. Once, however, the son, being under no fiduciary duty to the principal, transfers it to his other trouser pocket in which there are reposing a coin or two of his own of the same denomination, the son, by a sort of process of accretion, acquires an indefeasible title to what the moment before the transfer he could not have claimed as his own. This result appears to us to stultify the beneficent powers of equity to protect and enforce what it recognizes as equitable rights of property which subsist until they are destroyed by the operation of a purchase for value without notice.


(1) 13 Ch. D. 696.




[1948]

 

526

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

The error into which, we respectfully suggest, the learned judge has fallen is in thinking that what, in Hallett's case(1) was only the method (there appropriate) of bringing a much wider-based principle of equity into operation - viz., the method by which a fiduciary agent, who has himself wrongfully mixed the funds, is prohibited from asserting a breach of his duty - is an element which must necessarily be present before equity can afford protection to the equitable rights which it has brought into existence. We are not prepared to see the arm of equity thus shortened.

It is now time to examine in some detail the case of Sinclair v. Brougham (2). Before us it was argued, on behalf of the respondents, that the principle on which it was decided was not that applied in Hallett's case(1) but a different one altogether, invented with a view to solving a particular problem. We do not agree. The principle, in our view, was clearly the same; but in its application to new facts fresh light was thrown upon it, and it was shown to have a much wider scope than a narrow reading of Hallett's case(1) itself would suggest.

We have examined with care not only the opinions themselves but the printed cases and the arguments of counsel as well as the judgments of the majority and of Fletcher Moulton L.J. in the Court of Appeal. It is in the context of this material that the speeches must be interpreted.

The contest in Sinclair v. Brougham (2) was between shareholders and depositors in respect of a miscellaneous mass of assets distributable by the liquidator in the winding up of a building society. The deposits had been made, and the assets were used, in connexion with a banking business carried on in the name of the society but beyond its powers. Each of the two classes claimed priority over the other. Until the case reached the House of Lords the possibility that they might rank pari passu does not appear to have been considered. The majority of the Court of Appeal, affirming Neville J., gave the shareholders priority over the depositors. Fletcher Moulton L.J. would have given the depositors priority over the shareholders. The House of Lords held that both views were wrong and that on the principle on which Hallett's case(1) was founded, the two classes shared rateably. In one respect, no doubt, this application of the principle is an extension of it since, although the right of individuals to trace their own money (if they could) was preserved in the order of


(1) 13 Ch. D. 696.

(2) [1914] A. C. 398.




[1948]

 

527

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

the House, the order provided for tracing the aggregate contributions of the two classes as classes. Hallett's case(1) was, of course, based on the right of an individual to follow what he could in equity identify as his own money. The extension of the principle in Sinclair v. Brougham (2) was the obvious and, indeed, on the facts, the only practical method of securing a just distribution of the assets. The importance of the point must not, however, be overlooked in considering the arguments and the speeches.

Apparently it had not occurred to any of the judges in the lower courts or to any of the eminent counsel who signed the cases or argued in the House of Lords that Hallett's case(1) had anything to do with such a case as Sinclair v. Brougham (2). There is not a mention of it in any of the judgments below or in either of the printed cases or in argument in the House of Lords until Lord Haldane L.C.(3) suggested that the principle of Hallett's case(1) might apply. The point thus offered was accepted by counsel, who proceeded to base arguments upon it. Mr. Cave and Mr. Tomlin (as they then were), submitted on behalf of the depositors that Hallett's case(1) was really based, "not upon trusteeship in the narrow sense, but upon ownership" and argued that if the property of B is found in the hands of A, prima facie, A "is in a wide sense in a fiduciary relationship towards B. because equity affects his conscience with regard to that particular property." This proposition, as stated, was not accepted by the House. From it counsel deduced the consequence that the depositors were entitled to priority in respect of the moneys which they had deposited. This argument was, of course, quite different from the other two arguments adduced on behalf of the depositors, viz., that based on money had and received and that based on the principles enunciated by Fletcher Moulton L.J. in his dissenting judgment.

Mr. Upjohn and Mr. Younger (as he then was) for the B. shareholders agreed(3) that (subject to a qualification not material on the facts) "money paid under an ultra vires contract does not become the property of the society but remains the property of the payer, and so long as he can identify it he may trace it through any number of changes and claim it on the footing that it is and always has been his property." But a claim based on property was, they said


(1) 13 Ch. D. 696.

(2) [1914] A. C. 398.

(3) Ibid. 404, 406, 407.




[1948]

 

528

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

(and this relates to the point mentioned above) impossible in that case because no tracing order could be made without identification and the doctrine of tracing could not be applied to the collective claims of the depositors as a class. They also said that Hallett's case(1) was confined to fiduciary relationship in a strict sense.

Now it is to be remembered that the arguments of counsel on either side were directed to claiming priority for their respective clients and much of the reasoning in the speeches is directed to negativing these claims to priority. The House held that although the equity underlying Hallett's case(1) was applicable, the result of its proper application was that the conclusion sought by both arguments was wrong and that the fund was divisible rateably between the two classes of claimants. We may call attention in passing to the manner in which the House dealt with the argument of counsel for the B. shareholders that there could be no tracing save in favour of an individual who could follow and (in equity) identify his own property and that in consequence there could not be what would be in substance a tracing order in favour of a class. This argument does appear to raise a technical difficulty. But the House brushed it aside. Lord Sumner's speech contains the clearest exposition of the reasons for dealing with it in the manner approved by the House. He said(2): "My Lords, I agree, without recapitulating reasons, that the principle on which Hallett's case(1) is founded justifies an order allowing the appellants to follow the assets, not merely to the verge of actual identification, but even somewhat further in a case like the present, where after a process of exclusion only two classes or groups of persons, having equal claims, are left in and all superior claims have been eliminated. Tracing in a sense it is not, for we know that the money coming from A, went into one security and that coming from B. into another, and that the two securities did not probably depreciate exactly in the same percentage, and we know further that no one will ever know any more. Still I think this well within the 'tracing' equity, and that among persons making up these two groups the principle of rateable division of the assets is sound." This does at least show that in applying the equitable principle equity is entitled to adopt that method of application which in the circumstances of the case will lead to an equitable result.


(1) 13 Ch. D. 696.

(2) [1914] A. C. 398, 459.




[1948]

 

529

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

We now proceed to consider some of the salient facts in Sinclair v. Brougham (1).

The case is complicated by the fact that the claims of the depositors came to be considered at a time when the society was in liquidation, with the result that the B shareholders came into the picture as competing claimants against the assets. But a problem precisely similar in all essentials would, as it appears to us, have arisen if the depositors had claimed to trace their money while the society was still a going concern. In that case the shareholders would not have appeared as claimants at all; the competition would have been between the depositors and the society. In the actual case the shareholders were the claimants but all that they could claim was such money as the society itself could have claimed as between itself and the depositors. We shall not be thought disrespectful if we call attention, perhaps rather more emphatically than was sometimes thought necessary in the opinions as delivered, to certain distinctions which must be borne clearly in mind. The first is the distinction between the directors and the society which could not be bound in any way or for any purpose, directly or indirectly, by the ultra vires acts of the directors. The second is the distinction between the society and the shareholders who were only entitled to such equitable rights in the assets as the society itself could have claimed, for that was all that the liquidators had the right to give them.

The third distinction is of no less importance, that between the ultra vires business (which was not in law the society's business) and the assets requiring distribution which were in the society's name and of which the society was the legal owner. So far as we have been able to discover, all the aSsets in question stood, as we would have expected them to stand, in the name of the society - they were, as Lord Dunedin said, "in the society's strong box" - and it was thus that they came into the hands of the liquidator. None of them was in the name of the directors who were, therefore, not necessary parties to the proceedings. In view of the argument addressed to us and of the judgment of Wynn-Parry J. on the point,this is important and for the following reason. The starting point of the claim of the depositors was the existence of a fiduciary relationship as between themselves and the directors: that relationship arose from the fact that the depositors had entrusted their money to the directors for the purpose of a business which could


(1) [1914] A. C. 398.




[1948]

 

530

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

not lawfully be carried on, so that the directors must be treated as holding the money on behalf of the depositors. If the directors had paid the money of a depositor in-to their own banking account he would have had an action against them exactly similar to the action in Hallett's case(1) and it would have been correctly said that the directors could not be heard to set up a title of their own to the money standing in the account adverse to the claim of the depositor. But nothing of the sort could be said if the directors paid the money into the account of the society at its bankers. Neither the conscience of the society nor of its liquidator (if it went into liquidation) could ever come into the picture on the basis of a fiduciary relationship since the only parties to that relationship were the directors and the depositors. The society could not have been a party to it, since it had no power to accept the depositor's money. If, therefore, in such a case, the depositor could claim a charge on the society's account with its bankers the claim must have been based on some wider principle.

What can that principle be? In our judgment it must be the principle clearly indicated by Lord Parker, that equity may operate on the conscience not merely of those who acquire a legal title in breach of some trust, express or constructive, or of some other fiduciary obligation, but of volunteers provided that as a result of what has gone before some equitable proprietary interest has been created and attaches to the property in the hands of the volunteer.

At p. 449 of the report of Sinclair v. Brougham (2) Lord Parker says that the assets for distribution, "being assets not of a legitimate but an ultra vires business are not the assets of the society, except in so far as they can substantiate some equity to them" and "such equity as they have can arise only from an application of the same principles to which the ultra vires lenders are themselves entitled to have recourse." The result of this, in Lord Parker's opinion was that "the equities of the ultra vires lenders "and of the society are equal and it follows that the remainder of the assets ought to be divided between the ultra vires lenders and the society rateably." This result is arrived at in the manner indicated where Lord Parker says(3): "But the fact that the society's own money had been employed by its directors or agents in an ultra vires business would entitle


(1) 13 Ch. D. 696.

(2) [1914] A. C. 398, 448, 449.

(3) Ibid. 447.




[1948]

 

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the society to an additional equity. It would be entitled, on the principles of In re Hallett's Estate (1) to follow the money so long as it or any property acquired by its means could be identified. In other words, it would have exactly the same equities in this respect as the ultra vires lender, including the equity which, in my opinion, underlies the Crace-Calvert case(2)." In saying that the assets "are not the assets of the society," Lord Parker must not, we think, be taken to have disregarded the fact that they stood in the name of the society. What he must have meant was that the society could not assert any save a bare legal title except to the extent that it could establish an interest in the mass which equity could recognize.

But we must return to the facts. The money subscribed by the shareholders was rightly obtained by the society and when received became the property of the society. The directors, inasmuch as they were responsible for the manner in which this money subscribed was dealt with, were no doubt in a fiduciary position towards the society. But it was not by working on their conscience in that capacity that the House of Lords was able to assert the equitable interest of the society (and, by reason of the liquidation, of the shareholders) in the mass of assets standing in the name of the society. The House of Lords could not work upon the conscience of the directors for the simple reason that the directors were not there to have their consciences worked upon. The society (and the liquidator and the shareholders) could assert a claim to an interest in the assets, but in view of the fact that the assets consisted of a mixed fund, the only machinery by means of which such a claim could be asserted and made effective was the equitable machinery of a declaration of charge. As in their claim upon the mixed fund, the shareholders were, in view of the liquidation, in effect asserting the rights of the society itself in a matter in which, but for the liquidation, they would have had no locus standi, no question of trust or fiduciary relationship as between themselves and the society entered into the matter. The society, as it appears to us, was in the position of a person whose own moneys (viz. the amounts subscribed by the shareholders) had become mixed with moneys belonging to others (viz. the depositors) to which the society never had any right at all. The society (and, in the liquidation, the shareholders) could claim an interest in the mixed fund not


(1) 13 Ch. D. 696.

(2) (1882) 23 Ch. D. 440.




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as following an equitable interest of its own in moneys in the hands of the directors but as asserting its own equitable interest in a mass of assets standing in its own name but to the extent only to which its own assets (viz. money subscribed by its shareholders) could in equity be traced into the mass.

Looked at in this way the case of Sinclair v. Brougham (1), resolves itself into one where the fund to be distributed consisted of a mixed fund in the hands of X (the society), the origin of which could be traced in part to moneys of X itself and in part to moneys of Y (the depositors) to which X never had any equitable title but which, remaining in the eyes of equity the property of Y, was, in violation of the equitable right of Y (the depositors), mixed by Z (the directors) with the moneys of X (the society). On this basis the right of the depositors must, we think, be rested on their equitable interest which they were asserting not against the directors as trustees or fiduciary agents for them, but against the society (or what was in effect the same thing, the liquidator), as a volunteer into whose hand (or "strong box") the money of the depositors had come mixed with money belonging to the society itself. As the society was no party to the borrowing it was, vis-a-vis the depositors, a volunteer holding the legal title to the assets representing the borrowed money. It was compelled, as being a volunteer, to recognize the equal title of the depositors; and the shareholders claiming in its right were compelled to do the same. Contrary to the view of Neville J. and the Court of Appeal, the society could not claim priority over the depositors. Per contra, the depositors could not claim priority over the shareholders. To have allowed them to do so would have been to treat the society as having itself been in a fiduciary relation to the depositors (which it was not) and to place it in as bad a position as the unfaithful agent in Hallett's case(2). This would have been manifestly unjust.

This explanation appears to us to accord with the fundamental conception which lies at the root of this equitable jurisdiction, i.e., that equity intervenes not to do what might be thought to be absolute justice to a claimant but to prevent a defendant from acting in an unconscionable manner. Equity will not restrain a defendant from asserting a claim save to the extent that it would be unconscionable for him to do so. If this limitation on the power of equity results in giving to a plaintiff less than what on some general idea of fairness he might be considered entitled to, that cannot be helped.


(1) [1914] A. C. 398.

(2) 13 Ch. D. 696.




[1948]

 

533

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DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

Having done our best to formulate in our own words what appear to us to be the principles on which Sinclair v. Brougham (1) was decided, we now turn to an examination of the speeches themselves. We find it convenient to begin with the speech of Lord Parker, which appears to us to contain the clearest exposition.

Lord Parker treats five different classes of case as falling under one and the same comprehensive principle. They are as follows: (a) the case of In re Hallett's Estate (2); (b) and (c) two illustrations given by himself(3); (d) the decision of the Court of Appeal in the Crace-Calvert case(4); (e) Sinclair v. Brougham (1) itself. He prefaces his references to (a) (b) and (c) with a brief statement of the differences between the remedies at common law and in equity. The passage deserves citation at length as it provides the key to the whole opinion(5). At law, therefore, the lender can recover the money, so long as he can identify it, and even if it has been employed in purchasing property, there may be cases in which, by ratifying the action of those who have so employed it, he may recover the property purchased. Equity, however, treated the matter from a different standpoint. It considered that the relationship between the directors or agents and the lender was a fiduciary relationship, and that the money in their hands was for all practical purposes trust money. Starting from a personal equity, based on the consideration that it would be unconscionable for any one who could not plead purchase for value without notice to retain an advantage derived from the misapplication of trust money, it ended, as was so often the case, in creating what were in effect rights of property, though not recognized as such by the common law."(1)

The first of Lord Parker's own two illustrations is the case where a person standing in a fiduciary relation to two different persons acquires property by means of a mixed fund of money part of which had belonged to one and part to the other. In such a case each has an equal equity. Each is entitled to a charge and neither is entitled to priority over the other. The explanation of this result lies in the fact that each has an equitable right of property and that right of property can be traced by each into the asset purchased. Equity gives effect


(1) [1914] A. C. 398.

(2) 13 Ch. D. 696.

(3) [1914] A. C. 398, 442.

(4) 23 Ch. D. 440.

(5) [1914] A. C. 398, 441.




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to this right by means of the equitable remedy of a declaration of charge. Now in this example the property purchased is in the hands of the fiduciary agent. The case of property not in the hands of the fiduciary agent falls under Lord Parker's second illustration ((c) above).

This example is so important for present purposes that we will quote it in full(1).

"Suppose, again, that the fiduciary agent parts with the money to a third party who cannot plead purchase for value without notice, and that the third party invests it with money of his own in the purchase of property. If the third party had notice that the money was held in a fiduciary capacity, he would be in exactly the same position as the fiduciary agent, and could not, therefore, assert any interest in the property until the money misapplied had been refunded. But if he had no such notice this would not be the case. There would on his part be no misconduct at all. On the other hand, I cannot at present see why he should have any priority as against the property over the owner of the money which had, in fact, been misapplied."

Mr. Pennycuick acknowledged that this passage was a serious obstacle in his way. But he argued that the illustration was not strictly necessary or directly pertinent to Lord Parker's decision of the case before him, since in that case the mixing had been done, not by the volunteer but by the fiduciary agents before the volunteer had received anything. He argued accordingly that it was mere dictum and could not be supported either on principle or on authority. We do not think it can be regarded as mere dictum since it appears to us to be an essential step in the reasoning by which Lord Parker came to his conclusion as to the proper way to deal with Hallett's case(2), and in our view there can be no difference in principle between a case where the mixing has been done by the volunteer and a case where the mixing has been done previously by the fiduciary agent. In any event, we should not be prepared to dissent from the considered view on such a topic of the greatest master of equity of our time.

We may pause here to refer to the interpretation of this passage which commended itself to Wynn-Parry J.(3). He came to the conclusion that in this illustration Lord Parker was not "postulating the mixing by the third party in his banking


(1) [1914] A. C. 398, 442.

(2) 13 Ch. D. 696.

(3) [1947] Ch. 716. 768.




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535

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account of the money paid to him by the fiduciary agent with his own money before the investment is effected." On this basis the illustration did not appear to infringe the rule which Wynn-Parry J. himself was laying down that once a mixing takes place in the banking account of anyone not standing in a fiduciary relationship (particularly a volunteer) equity is powerless to interfere. But with all respect to the learned judge we find it impossible to agree with his interpretation. Lord Parker was clearly postulating a mixing of the two classes of money. Is it conceivable that he was not intending to include what in nine hundred and ninety-nine out of one thousand instances would be the normal case of the purchaser paying for the property bought by a cheque on his own banking account?

But in any event we do not think there is any substance in the distinction drawn by the learned judge. We are unable to share the view, which appears to underlie his reasoning, that there is some difference in the case where "money" is "mixed" in a banking account and the case where a "mixing" takes place in some other way. If a volunteer pays for the property which he purchases by two separate sums of money, one being his own and the other being that given to him by the fiduciary agent, the two sums, whether in the form of two cheques or two sums of cash, become "mixed" in the very act of purchase in the only sense that matters. Their identity is lost to the eye of the common law, which is unable to detect their continued existence in the property bought as much as if both sums had been paid into the same account at a bank. If, as Wynn-Parry J. appears to concede, the eye of equity is less shortsighted and is able to detect the existence of two sums as present in the property bought if it is paid for by two separate cheques, why is it incapable of doing precisely the same thing where the two sums are paid into one banking account? The real fact is, as it appears to us, that in the opinion of Lord Parker (with which we respectfully agree) it made not a particle of difference to the significance of his illustration whether or not the two sums had passed through one banking account before the purchase was effected.

Returning to the passage quoted, we desire to call attention to some of its features. First, the right of the owner of the money is treated as equivalent to a right of property which, in the view of equity, can only be taken away by means of a purchase for value without notice. Secondly, the limited explanation which was sufficient to decide




[1948]

 

536

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

Hallett's case(1) is not sufficient for this example, and the claim of the true owner against the volunteer does not depend for its success on the incapacity of a fiduciary agent to base a claim upon his own breach of duty. Thirdly, the money is misapplied by giving it to a volunteer who is treated as subject to the ordinary rule of equity that a volunteer takes subject to equitable estates or interests subsisting in the property taken. In other words, Lord Parker was taking a case where, in his own words, equity had "ended .... in creating what were in effect rights of property." Fourthly, the money given to the volunteer by the fiduciary agent is mixed with other money not, as in Hallett's case(1) by the fiduciary agent, but by the volunteer himself who mixes it with other moneys of his own. Fifthly, if the volunteer had no notice that the money was held in a fiduciary capacity there was no reason why he should be unable to "assert any interest in the property until the money misapplied had been refunded" - in other words, the particular matter that affected the conscience of the fiduciary agent in Hallett's case(1) and gave the principal his right to priority is not present in this example.

Lastly comes the concluding sentence in which Lord Parker says that he cannot see why the volunteer should have priority over the true owner of the money misapplied. This is a very important sentence and is in our view deliberately directed to the argument which we have noted above that the shareholders were entitled to priority. It is, moreover, obviously spoken in relation to the decision of the Court of Appeal then under review, where the majority had held that the B shareholders took priority over the depositors. On a proper understanding of the position in Sinclair v. Brougham (2), that case itself is in our opinion, as a matter of principle, on all fours with the supposed case (c) with which Lord Parker is dealing, notwithstanding that the fund in the hands of the society was not mixed by the society but was received by it already mixed by the directors; and the conclusion that the innocent volunteer (1.) is not disentitled to claim an interest in the mixed fund in competition with the true owner of the money misapplied, but (2.) is not entitled to any priority, is exactly the conclusion on which the decision in Sinclair v. Brougham (2) is founded. That this is so follows, we think, from the analysis we have made of the principle itself - namely, that when once the proprietary interest has been created by equity as a result


(1) 13 Ch. D. 696.

(2) [1914] A. C. 398.




[1948]

 

537

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

of the wrongful or unauthorized dealing by the original recipient of the money, that interest will persist and be operative against an innocent third party who is a volunteer, provided only that means of identification or disentanglement remain. For such purpose, it cannot make any difference whether the mixing was done by the original recipient (sometimes called "the fiduciary agent") or by the innocent third party.

The case of In re Guardian Permanent Benefit Building Society (Crace-Calvert's case)(1), Lord Parker subjects to an exhaustive examination. That was a case in which so much of the decision of the Court of Appeal as had decided that the unlimited power to borrow conferred by the rules of the society was void and that the society in consequence had no power to borrow at all was later reversed by the House of Lords. But Lord Parker's examination of the case relates to what the Court of Appeal decided ought to be done on the basis of its own decision as to the voidness of the borrowing power. It is important to appreciate this because Lord Parker, in expressing his agreement with the principle recognized by the Court of Appeal, evidently considered that the actual order was not really in accordance with that principle.

Now the important thing about Lord Parker's treatment of this case is that he considered the equity there applied by the Court of Appeal - "on the plainest principles of equity" as Sir George Jessel had said - was "the same equity as that on which a tracing order is based." The equity is described by Lord Parker in the following words(2): "The equity lay in this, that it would be unconscionable for the society to retain the amount by which its assets had been increased by, and in fact still represented, the borrowed money. It would be inequitable for the society to take advantage of the misapplication by its agents of money belonging to others and held by them in a fiduciary capacity." Now the "agents" in that case were the directors who, acting ultra vires the society (and to that extent not as agents of the society) as the Court of Appeal (wrongly as it turned out) held, had borrowed money from various lenders who are the "others" referred to in the passage cited. That money, as between themselves and the lenders, the directors held in a capacity fiduciary towards the lenders because they had no power on the society's behalf to borrow it. That money they applied by


(1) 23 Ch. D. 440.

(2) [1914] A. C. 398, 444, 445.




[1948]

 

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DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

dealing with it in such a way that, to use Lord Parker's words, it "found its way into the society's assets." We have already explained the process in the case of Sinclair v. Brougham (1) by which the depositors' money found its way into the Birkbeck Society's "strong box." It would have been inequitable for the Guardian Society (or its liquidator or shareholders claiming in the winding up) to take advantage of this misapplication of the lenders' money. Lord Parker disagreed with the Court of Appeal in regard to the method by which it had purported to give effect to the equity. But as to the equity itself he expressed a clear opinion.

The actual method of distribution adopted by the Court of Appeal in the Crace-Calvert case(2) was that after paying the costs of the liquidation and all debts and everything to which the members were entitled by way of return of capital, interest and bonus the surplus was to be returned to the lenders. This priority given to the creditors and the members Lord Parker criticizes, and after suggesting various matters which might have been ascertained upon an inquiry, he says(3): "One question of principle only would, I think, have been involved. Could the society be considered as having itself been a party to any breach of fiduciary duty so as to preclude it from asserting any interest in the assets, until the ultra vires lenders had been fully repaid there out? Or was the society in the position of a person who had innocently received from a fiduciary agent money belonging to another and invested it with money of his own? My present opinion is that the first of these questions should be answered in the negative and the latter in the affirmative, in which case the society and ultra vires lenders would, as against the assets, rank pari passu and without any priority the one over the other."

The importance of this passage is that Lord Parker is here treating the society as a volunteer and thus linking the Crace-Calvert case(2) with his illustration (c).

We may conclude our examination of Lord Parker's speech with a reference to a passage where he states his approval of a view expressed by Fletcher Moulton L.J. in his dissenting judgment in the Court of Appeal(4). "I agree" said Lord Parker, "that so far as the distributable assets represent the money of the ultra vires lenders, they are not in equity the


(1) [1914] A. C. 398.

(2) 23 Ch. D. 440.

(3) [1914] A. C. 398, 444, 445.

(4) Ibid. 449.




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"assets of the society." He thus returns to what he had said earlier in his speech that the equity which he was examining was based on what in effect were "rights of property, though not recognized as such by the common law."

From the foregoing study of Lord Parker's speech, it would appear that in his opinion there is an equitable principle common to all these cases of mixed funds. It operates in different ways according to the circumstances. In some cases it results in a priority to one or other of the claimants, in other cases the claimants rank pari passu. Where one claimant is a person in a fiduciary relationship to another and has mixed moneys of that other with moneys of his own, that other takes priority. The same result follows where a person taking that other claimant's money from the person in a fiduciary relationship, with notice that it is money held in a fiduciary capacity, proceeds to mix it with money of his own. Where the contest is between two claimants to a mixed fund made up entirely of moneys held on behalf of the two of them respectively and mixed together by the fiduciary agent, they share pari passu, each being innocent. Where the moneys are handed by way of transfer to a person who takes for value without notice, the claim of the owner of the moneys is extinguished just as all other equitable estates or interests are extinguished by a purchase for value without notice. In the case, however, of a volunteer who takes without notice, e.g., by way of gift from the fiduciary agent, if there is no question of mixing, he holds the money on behalf of the true owner whose equitable right to the money still persists as against him. On the other hand, if the volunteer mixes the money with money of his own, or receives it mixed from the fiduciary agent, he must admit the claim of the true owner, but is not precluded from setting up his own claim in respect of the moneys of his own which have been contributed to the mixed fund. The result is that they share pari passu. It would be inequitable for the volunteer to claim priority for the reason that he is a volunteer: it would be equally inequitable for the true owner of the money to claim priority over the volunteer for the reason that the volunteer is innocent and cannot be said to act unconscionably if he claims equal treatment for himself. The mutual recognition of one another's rights is what equity insists upon as a condition of giving relief.

We now turn to the speeches of the other noble and learned Lords.




[1948]

 

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Viscount Haldane L.C. examines and rejects the theory that the case was one of money had and received, and on this basis he states the claim of the depositors to be as follows(1): "Their claim cannot be in personam and must be in rem, a claim to follow and recover property with which, in equity at all events, they had never really parted." He describes the limits within which the common law recognized a right to follow money. "Whether the case be that of a thief or of a fraudulent broker or of money paid under mistake of fact you can, even at law, follow, but only so long as the relation of debtor and creditor has not superseded the right in rem."

We have already referred to what appears to have been Lord Haldane's view as to this debtor-creditor qualification. What does appear to be clear is that if the "money" was mixed "with other" money, either in a bag or in a banking account the common law was unable to give to the owner any specific relief.

Thus, like Lord Parker, Lord Haldane bases the remedy available in equity upon a right of property recognized by equity as vested in the plaintiff throughout, not lost by payment into a banking account, nor by the mixture of moneys nor by merger in a mass of assets. In all these cases the equitable remedy by way of declaration of charge is available.

It is to be observed that neither Lord Parker nor Lord Haldane suggests that the equitable remedy extends to cover all cases where A becomes possessed of money belonging to B, a view which Lord Dunedin seemed inclined to accept if he did not actually do so. Lord Parker and Lord Haldane both predicate the existence of a right of property recognized by equity which depends upon there having existed at some stage a fiduciary relationship of some kind (though not necessarily a positive duty of trusteeship) sufficient to give rise to the equitable right of property. Exactly what relationships are sufficient to bring such an equitable right into existence for the purposes of the rule which we are considering is a matter which has not been precisely laid down. Certain relationships are clearly included, e.g., trustee (actual or constructive) and cestui que trust; and "fiduciary" relationships such as that of principal and agent. Sinclair v. Brougham (1) itself affords another example. There, a sufficient fiduciary relationship was found to exist between the depositors and the directors by reason of the fact that the purposes for


(1) [1914] A. C. 398, 418, 419.




[1948]

 

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which the depositors had handed their money to the directors were by law incapable of fulfilment.

An important part of Lord Haldane's speech is taken up with an examination of Hallett's case(1). He says that in Hallett's case(1) "the difficulty of following money into a debtor and creditor account like a banker's is got over in equity" by treating the loan to the banker "as an investment pro tanto of the principal's money" and allowing the principal to waive the breach of duty and to "claim the investment to the extent of the amount due to him as made on his behalf." He then points out that in the case before the House the investment was not made in breach of a fiduciary duty on the part of the society. This is important since no question arose of operating on the conscience of the persons, i.e., the directors, who had misapplied the money by using it in an ultra vires business: they were not parties. The decision in Sinclair v. Brougham (2) itself shows that the right of the owner of the money, although it may in some cases be treated as equivalent to a right to "adopt" an improper investment, does not rest on so narrow a foundation. Where there are two claimants to property which has been acquired by means of a mixed fund composed of moneys belonging to both of them, there can be no question of an "adoption" of the investment save by the consent of both of them. In the absence of such consent neither can claim any right save to have a charge, enforceable in the ordinary way by sale, and payment out of the proceeds. Lord Parker, speaking of such a case (which is his illustration mentioned in (b) above) says(3): "Each is entitled to a charge on the property for his own money and neither can claim priority over the other. It follows that their charges must rank pari passu according to their respective amounts. Further, I think that as against the fiduciary agent they could by agreement claim to take the property itself, in which case they would become tenants in common in shares proportioned to amounts for which either could claim a charge."

Lord Dunedin solved the problem on different lines. After criticizing the conclusion of the Court of Appeal in Crace-Calvert's case(4) he began by enunciating the proposition(5) that "all ideas of natural justice are against


(1) 13 Ch. D. 696.

(2) [1914] A. C. 398.

(3) Ibid. 442.

(4) 23 Ch. D. 440.

(5) [1914] A. C. 398, 431. 434-436.




[1948]

 

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allowing A to keep the property of B which has somehow got into A's possession without any intention on the part of B to make a gift to A" What he describes as the "equity" involved in the action for money had and received is in his view "based on inherent ideas of justice"; but he thought that this action would not lie in the case of payment under an ultra vires contract. This, however, does not matter if there is an equitable remedy. He compares(1) the expression by Roman jurists of what he describes as the "super-eminent equity" in the brocard "nemo debet locupletari jactura aliena" and he asks whether English equity is to retire defeated from the task which other systems of equity have conquered. He describes as unconscionable in the technical sense a view which leads to the result that "having got hold of property which does not belong to you, if only you are wise or lucky enough to change its form you may enjoy the proceeds unmolested." He says that there cannot be a jus in re in currency. If by this he means that when money is delivered as currency the title at law passes by delivery, we should, of course, agree. But if he means that there can be no equitable property left in the transferor of the money, we respectfully disagree and in this view we are supported by what was said by Lord Parker. If a principal confides money to a fiduciary agent for a particular purpose and that agent wrongfully pays it away to another, for example, on the purchase of a chattel, the principal cannot, of course, recover the money. He has no jus in re. But suppose that the fiduciary agent wrongfully gives it to a volunteer, has the principal no right in equity to recover it from the volunteer or to obtain against the volunteer a declaration of charge upon any mixed fund or any property into which it has gone? What Lord Dunedin's answer would have been to the question framed in this way is not, we think, clear. The reason is that he regards both an action to get back, e.g., a specific chattel and an action for money had and received as "just different forms of working out the higher equity that no one has a right to keep either property or the proceeds of property which does not belong to him." "Equity," he says, "helps the common law by tracing and can say that if the proceeds of property can be shown to be what I have called a 'superfluity' in the person of the recipient, then it will hold that that property is traced just as surely as if it was still in its original form."


(1) [1914] A. C. 398, 431, 434-436.




[1948]

 

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DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

We have, we think, said enough to shew that Lord Dunedin arrives at the same result in the actual case as Lord Haldane, Lord Atkinson and Lord Parker, but by a different route. In the case itself he found the "superfluity" to originate in the excess over the money subscribed by the shareholders due to the admixture of moneys lent by the depositors. The result of this was, however, not that the shareholders took 20s. in the £ before the depositors took anything. What we understand Lord Dunedin to mean is that where the assets into which the moneys of both have gone have depreciated in value the depreciation is to be treated as rateably distributed. In other words, the "superfluity" is what remained after paying to the shareholders not the par amount of their original subscriptions but the depreciated value of what they had subscribed.

Attractive though Lord Dunedin's view may be, we cannot regard it as agreeing with those of Lord Haldane, Lord Atkinson and Lord Parker. Those noble and learned lords limited the right to recover to cases where there is what equity regards in effect as a right of property. Lord Dunedin, on the other hand, treats the principle which he favours as applicable wherever the property of A has, without justification, got into the hands of B. Where this has happened, while recognizing the limited nature of the relief afforded at law, he appears to think that equity will always intervene to help the rightful owner.

Lord Sumner's approach is also different from that of the other members of the House. Like them, he rejects the claim for money had and received, and,(1) he appears to reject the broad "equity" favoured by Lord Dunedin. He thinks that the case required to be decided upon equitable principles upon which there was no direct authority. He regards the problem as one of administration. The assets requiring to be administered must be regarded as belonging to someone. They cannot be treated as res nullius. He agreed that the principle on which Hallett's case(2) is founded justified the order proposed.

There are two cases subsequent to Sinclair v. Brougham (1) which were quoted to us. Banque Belge v. Hambrouck (3), a decision of this court, was a case in which unmixed "money" in the hands of a volunteer was held to be recoverable by


(1) [1914] A. C. 398, 456, 458.

(2) 13 Ch. D. 696.

(3) [1921] 1 K. B. 321.




[1948]

 

544

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

a bank from whom the "money" had been drawn by means of cheques on its customer's account which had been fraudulently obtained or drawn by the customer's clerk. So far as it is relevant to the question which we have to consider, the case appears to do no more than afford an example of the proposition (which is not disputed) that "unmixed money" can be traced into the hands of a volunteer. But the references in the judgments to the equitable principle are in no way inconsistent with what we have said. If anything, they seem to us to support our view.

In re Blake (1), a decision of Maugham J. (as he then was), we have already referred to in other connexions: the only relevance for present purposes lies in the judge's references to the equitable principles relating to the tracing of trust funds. He said: "The old doctrine as to the impossibility of following money into the hands of a volunteer has been largely encroached upon by more modern decisions especially in cases where the trustee is the defendant." It is to be observed that neither the Banque case(2) nor Sinclair v. Brougham (3) itself was cited to or mentioned by the learned judge and with respect we do not follow him in his reference to claims against a volunteer "where the trustee is the defendant." In such a case the defendant can scarecely be described as a "volunteer." The learned judge goes on to say that he had been unable to find any case "in which a claim to follow money in the hands of a volunteer (not being the original trustee or his bankers) has been successfully made." We ourselves regard the claim of the depositors in Sinclair v. Brougham (3) and the claim of the plaintiff bank in the simpler Banque Belge case(2) as successful claims to follow money into the hands of a volunteer. With respect we cannot think that Maugham J. would have used the language that he did if the question had been fully argued before him and the relevant cases not only cited but accurately explained.

In the analysis we have made of the speeches in Sinclair v. Brougham (3), and of the principle which underlies them, it has been made clear that though the equity may operate upon the conscience of a volunteer, it will not operate upon the conscience of a purchaser for value without notice. Some attempt was made on the part of the respondents to establish that they or some of them might properly be described as


(1) [1932] 1 Ch. 54, 62, 63.

(2) [1921] 1 K. B. 321.

(3) [1914] A. C. 398.




[1948]

 

545

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

falling within the latter category, e.g., by reason of the fact that moneys which certain of them had received were paid upon the terms that such moneys were applied in a particular way. The argument was not strenuously stressed before us and was rejected by Wynn-Parry J. We entirely agree with the learned judge on this point and do not find it necessary to add anything to the reasons which he gave for his conclusion.

We have now to consider how the principles which we have outlined are to be applied to the facts of the individual cases which are before us. We deal first of all with what appear to be the most important claims from the point of view of amount. They are cases in which the money received from the Diplock executors was used in the execution of works upon land or buildings already belonging to the charities. The appellants claim in each case declarations of charge on land of the charity in respect of these amounts. The cases are: (i.) Leaf Homoeopathic Hospital (action II C) which spent 1,137l. (part of its total grant of 7,500l.) on its hospital buildings; (ii.) West-minster Hospital (action IV A) which applied the whole of its grant of 4,000l. towards the building on its own land (at a total cost of 500,000l.) of the new West-minster Hospital; (iii.) Heritage Craft Schools (action IV B) who spent their grant of 2,000l. as to 1,499&L 17s. 4d. on the erection of buildings known as the "Toddlers' Home" on land of their own, and as to 500l. 2s. 0d. (apparently) on the improvement of certain other land of their own used in connexion with the "Toddlers' Home." According to the agreed statement of facts, this latter sum was in fact so spent. According to the defence however, this sum was used to repay to a Colonel Warren a like sum advanced by him to the schools for the purpose of executing this improvement: in the notice of appeal an alternative claim is framed on this basis: we will deal with the alternative case later; (iv.) Queen Alexandra Cottage Homes (action IV D) which spent 3,750l. (part of its total grant of 4,760l.) in the erection of a block of "homes" on land of its own; (v.) Guy's Hospital (action IV E), which spent out of its total grant of 21,000l. the sum of 19,391l. 12s. 11d., less 5,052l., on the reconstruction of an existing ward in the hospital so as to form two children's wards known as the "Caleb Ward" and the "Diplock Ward" and the sum of 555l. 1s. 7d. on meeting deficits on other building operations.

These expenditures all raise the same question, viz., is there any equitable remedy available to the appellants by which




[1948]

 

546

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

they can trace the Diplock money into the property on which it was expended? Wynn-Parry J. dismissed all these claims save, in the case of Guy's Hospital, for a sum of 5,052l. (part of the sum above-mentioned of 19,391l. 12s. 11d.) which had not in fact been expended but still stood to the credit of a special account at the date of the hospital's receipt of the "warning letter." In our opinion he was right in rejecting these claims but - as will have been seen - we respectfully disagree with the reasoning by which he arrived at his result.

Where the contribution of a volunteer to a mixed fund or the acquisition of what we may call a "mixed asset" is in the form of money, it is, as we hope to have shown, inequitable for him to claim the whole fund or the whole asset. The equitable charge given to the other claimant in respect of the money contributed by him results merely in the division of the mixed fund between the two of them or the reduction of the asset by sale to its original components, i.e., money which is then divisible in the same manner. The volunteer gets back what he put in, i.e., money. On this basis, if a charity had used a mixed fund, consisting in part of its own money and in part of Diplock money, in the acquisition of property, whether (for example) land or stock, the application of the equitable remedy would have presented no particular difficulty. The Diplock money and the charity money could each have been traced. A charge enforced by sale and distribution would have been effective as well as fair to both parties. The charity would not, as the result of the mixture, have been deprived of anything that it had before.

In the present cases, however, the charities have used the Diplock money, not in combination with money of their own to acquire new assets, but in the alteration and improvement of assets which they already owned. The altered and improved asset owes its existence, therefore, to a combination of land belonging to the charity and money belonging to the Diplock estate. The question whether tracing is possible and if so to what extent, and also the question whether an effective remedy by way of declaration of charge can be granted consistently with an equitable treatment of the charity as an innocent volunteer, present quite different problems from those arising in the simple case above stated. In the case of the purchase of an asset out of a mixed fund, both categories of money are, as we have said, necessarily present throughout the existence of the asset in an identifiable form. In the case of adaptation




[1948]

 

547

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

of property of the volunteer by means of trust money, it by no means necessarily follows that the money can be said to be present in the adapted property. The beneficial owner of the trust money seeks to follow and recover that money and claims to use the machinery of a charge on the adapted property in order to enable him to do so. But in the first place the money may not be capable of being followed. In every true sense, the money may have disappeared. A simple example suggests itself. The owner of a house who, as an innocent volunteer, has trust money in his hands given to him by a trustee uses that money in making an alteration to his house so as to fit it better to his own personal needs. The result may add not one penny to the value of the house. Indeed, the alteration may well lower its value; for the alteration, though convenient to the owner, may be highly inconvenient in the eyes of a purchaser. Can it be said in such cases that the trust money can be traced and extracted from the altered asset? Clearly not, for the money will have disappeared leaving no monetary trace behind: the asset will not have increased (or may even have depreciated) in value through its use.

But the matter does not end here. What, for the purposes of the inquiry, is to be treated as "the charity property"? Is it to be the whole of the land belonging to the charity? or is it to be only that part of it which was altered or reconstructed or on which a building has been erected by means of Diplock money? If the latter, the result may well be that the property, both in its original state and as altered or improved, will, when taken in isolation, have little or no value. What would be the value of a building in the middle of Guy's hospital without any means of access through other parts of the hospital property? If, on the other hand, the charge is to be on the whole of the charity land, it might well be thought an extravagant result if the Diplock estate, because Diplock money had been used to reconstruct a corner of it, were to be entitled to a charge on the entirety.

But it is not merely a question of locating and identifying the Diplock money. The result of a declaration of charge is to disentangle trust money and enable it to be withdrawn in the shape of money from the complex in which it has become involved. This can only be done by sale under the charge. But the equitable owner of the trust money must in this process submit to equality of treatment with the innocent volunteer. The latter too, is entitled to disentangle




[1948]

 

548

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

his money and to withdraw it from the complex. Where the complex originates in money on both sides there is no difficulty and no inequity. Each is entitled to a charge. But if what the volunteer has contributed is not money but other property of his own such as land, what then? You cannot have a charge for land. You can, it is true, have a charge for the value of land, an entirely different thing. Is it equitable to compel the innocent volunteer to take a charge merely for the value of the land when what he has contributed is the land itself? In other words, can equity, by the machinery of a charge, give to the innocent volunteer that which he has contributed so as to place him in a position comparable with that of the owner of the trust fund? In our opinion it cannot.

In the absence of authority to the contrary our conclusion is that as regards the Diplock money used in these cases it cannot be traced in any true sense; and, further, that even if this were not so, the only remedy available to equity, viz., that of a declaration of charge would not produce an equitable result and is inapplicable accordingly.

We now consider two claims of a different class. They arise in connexion with the alternative case above mentioned of the Heritage Craft Schools (action IV. B) and the Leaf Homoeopathic Hospital (action II. C) as regards 6,000&L further part of the hospital's total grant of 7,500l. In the former case the alternative claim was that the judicial trustee is entitled by way of subrogation to stand in the shoes of Colonel Warren in respect of his loan of 500l. 2&S, 0d. which was said to have been paid off out of the Diplock grant. In the latter case the claim is to have the benefit of a charge for 6,000l. on property of the hospital formerly held by Barclays Bank, Ld., as security for a fixed loan for that amount which was paid off out of the Diplock grant under the terms on which that grant was made. Both claims were rejected by Wynn-Parry J.

The facts in relation to this 500l. 2s. 0d. do not appear to have been clearly ascertained. But assuming that it was used to repay Colonel Warren, the result apparently was to enable the charity to apply the sum borrowed from Colonel Warren for the purpose of executing the works in question. There is no suggestion that Colonel Warren's loan was a secured loan. The payment to Colonel Warren can only have operated to extinguish the debt owing to him and the money which he had advanced was consequently available for use by




[1948]

 

549

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

the charity for the purposes indicated without there being any obligation to repay it. The case cannot, we think, be regarded as a case of subrogation. We agree with the view of Wynn-Parry J. that in such a case the debt was extinguished so that in order to give effect to the equitable doctrine said to be applicable it would be necessary to revive the debt in some way. We do not see how it can be said to be unconscientious on the part of the charity to object to this being done. In substance the Diplock money was used for the purpose of carrying out works on the land of the charity and, in our opinion the appellants are in no better position than they are in the cases of works carried out on lands of a charity which we have already discussed.

The case of the Leaf Homoeopathic Hospital is different in that (a) the loan was a secured loan, (b) the grant was made in terms for the purpose of enabling the charity to pay off the loan, and (c) the 6,000l. in question cannot be said to have been used indirectly in the execution of works as in the case of the Heritage Craft Schools: it was used simply and solely for the purpose of clearing off an existing incumbrance.

Here, too, we think that the effect of the payment to the bank was to extinguish the debt and the charge held by the bank ceased to exist. The case cannot, we think, be regarded as one of subrogation, and if the appellants were entitled to a charge it would have to be a new charge created by the court. The position in this respect does not appear to us to be affected by the fact that the payment off of this debt was one of the objects for which the grant was made. The effect of the payment off was that the charity, which had previously held only an equity of redemption, became the owners of unincumbered property. That unincumbered property derived from a combination of two things, the equity of redemption contributed by the charity and the effect of the Diplock money in getting rid of the incumbrance. If equity is now to create a charge (and we say "create" because there is no survival of the original charge) in favour of the judicial trustee, it will be placing him in a position to insist upon a sale of what was contributed by the charity. The case, as it appears to us, is in effect analogous to the cases where Diplock money is expended on improvements on charity land. The money was in this case used to remove a blot on the title; to give the judicial trustee a charge in respect of the money




[1948]

 

550

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

so used would, we think, be equally unjust to the charity who, as the result of such a charge, would have to submit to a sale of the interest in the property which it brought in. We may point out that if the relief claimed were to be accepted as a correct application of the equitable principle, insoluble problems might arise in a case where in the meanwhile fresh charges on the property had been created or money had been expended upon it.

As regards the main action, the only appeal made to this court relates to the claim against St. George's Hospital. That charity received a grant of 8,000l. on March 20, 1937. By a letter dated October 19, 1939, addressed to the solicitors for the executors, the assistant secretary stated that this sum has been invested in the name of the rebuilding fund of St. George's Hospital." This letter is admitted in para. 4 of the defence but it is denied "that any part of the investments in the name of the rebuilding fund of this defendant in fact represents the said sum of 8,000l. or forms part of the testator's estate." According to correspondence which is before us it would appear that the 8,000l. was paid into the charity's "rebuilding appeal account" with the West-minster Bank, Knightsbridge, on March 21, 1937. The correspondence shows that certain sums (apparently small) were drawn from this account and spent and that investments were from time to time made by means of money drawn from the account. In the case of Dr. Barnardo's Homes we think (as later appears) that the rule to be applied in order to give effect to the appellants' equity would be the same as that applied in Clayton's case(1). In the case of Dr. Barnardo's Homes we have before us the relevant banking account, showing all the dealings, in and out, since the receipt of the Diplock money. In the case of St. George's Hospital we have not before us the corresponding banking account; but it appears to us that on principle the same rule would prima facie be applicable. In any case it seems to us reasonably clear that the 8,000l. or some part of it can be traced into the investments. We are unable, upon the information before us, to ascertain what precisely the appellants' rights are; but (subject to discussion) we think that they would (if necessary) be entitled to an appropriate inquiry.

The Prince of Wales Hospital, Plymouth (action II A) received a grant of 1,000l. on March 23, 1937. The cheque for this sum was paid into the hospital's current account, which


(1) (1816) 1 Mer. 572.




[1948]

 

551

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

at that date was overdrawn to the amount of 21,822l. 6s. 5d. This account was continuously overdrawn and at the date of the warning letter of October 19, 1939, the overdraft amounted to 30,187l. 16s. 5d. The hospital's bankers held security for the overdraft in the shape of investments which were of the market value of 25,835l. 4s. 3d. on March 23, 1937, and 22,322l. 2s. 11d. on October 19, 1939. Certain of these investments were sold and the proceeds applied in reduction of the debt. One holding was redeemed. No order under this branch of the case is asked for in the notice of appeal. It is therefore unnecessary for us to say anything further in regard to the Prince of Wales Hospital.

*[The National Institute for the Deaf (action I. F) received a grant of 1,500l. The cheque was paid into the charity's current account, which was in credit. It is agreed that if the rule in Clayton's case(1) were applied, the whole of the sum of 1,500l. would have to be treated as having been drawn out and expended during the year ended March 31, 1938, for the ordinary purposes of the charity, and no money or other asset could be treated as representing any part of it. But before the applicability of Clayton's case(1) is considered there is another question. For the purposes of its own accounts the charity treated the 1,500l. as having been carried, like other legacies, to its capital account and not to its income and expenditure account. Whenever general expenditure exceeded income in any year the deficiency was debited to capital account. On August 30, 1938, and in December, 1938, two sums of 500l. and 1,000l. respectively were withdrawn from the banking account and placed on deposit at the Post Office Savings Bank where they have remained, and for the purposes of the charity's accounts they have been treated as representing the 1,500l. of Diplock money. On these facts it is argued on behalf of the appellants that the charity is bound by its own appropriation and that the money so placed on deposit must be treated as representing the Diplock grant.

This claim, with others of the same nature, is dealt with by Wynn-Parry J.(2). His reason for rejecting the claim was that the claim could only be rested on the common law right to follow: in accordance with his general conclusion he held that


* The case of the National Institute for the Deaf is dealt with in the supplementary judgment, post, p. 559.

(1) 1 Mer. 572.

(2) [1947] Ch. 716, 778.




[1948]

 

552

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

the equitable right of tracing was not applicable for the reason that the charity was not a fiduciary agent. The claim, he thought, could not be maintained at common law since in the eyes of the common law the 1,500l. had lost its identity for ever by being mixed with other money in the charity's banking account. His reasoning ceases to be applicable if the views which we have expressed as to the equitable remedy are correct. On that basis the 1,500l. could be traced into the charity's banking account. The question whether or not it ought at any given date to be regarded as wholly or partially present in that account would have depended, in the first instance, on the answer to the question whether the rule applied in Clayton's case(1) was applicable to withdrawals made from the account or whether the account being, ex hypothesi, a mixed fund composed of Diplock money and the charity's own money withdrawals ought to be regarded as having been made rateably from both claimants. As already indicated the applicability of the Clayton's case(1) rule is later discussed in connexion with the case of Dr. Barnardo's Homes. But here the charity has earmarked the sums withdrawn from its account and deposited at the Post Office Savings Bank. It seems to us that equity cannot disregard this. A volunteer who mixes what turns out to be trust money with his own can surely himself "unmix" it subsequently if he thinks fit to do so. And as the operation of equity is directed to preventing the volunteer doing what is unconscionable, surely it would be unconscionable for the volunteer who, for his own purposes, has earmarked the trust money to assert that what he has earmarked is not trust money but money which he is entitled to keep as his own. In our opinion the appellants' claim in this part of the case to be entitled to this 1,500l. is correct, and it is not necessary here to discuss Clayton's case(1) at all.]

In the case of Dr. Barnardo's Homes (action I. E), the case presented to us as we understood it was limited to a claim to trace the sum of 3,000l. granted by the executors and paid into the charity's general current account on December 14, 1936, into a sum of 40,000l. 234 per cent. Funding Loan purchased for 39,341l. 13s. 9d. on December 23, 1936, and paid for by a cheque drawn on the same account and cleared on December 24. The precise manner in which the entries in the bank pass book ought to be interpreted is not, we think, entirely clear, but for the purpose of explaining the principle


(1) 1 Mer. 572.




[1948]

 

553

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

which we consider would be applicable we start with the position at the close of business on December 14, 1936. The position then was that the credit balance of 49,771l. 4s. 11d. represented, as to 3,000l., Diplock money, and as to the remainder, namely, 46,711l. 4s. 11d. charity money.

If the whole of this charity money is treated (as for the purpose of our explanation we are treating it) as having been paid in before the Diplock 3,000l. was paid in, it would follow, if the principle of Clayton's case(1) were applicable as between the claimants and the charity, that the first 46,771l. 4s. 11d. drawn out would be charity money. Now, as we have said, the cheque for 39,341l. 13s. 9d. was cleared and debited to the account on December 24. Meanwhile a number of withdrawals had taken place, namely:-


                              £    s.  d. 
December 15      ..    ..     682   3   2  (6 cheques) 
December 17      ..    ..       2   0   0 
December 17      ..    ..  20,123   6   0  (7 cheques) 
December 18      ..    ..      27  11   4 
December 19      ..    ..     841   9   1  (28 cheques) 
December 21      ..    ..     447   1   8  (10 cheques) 
December 22      ..    ..      66  16  10  (4 cheques) 
December 23      ..    ..          16   0 
December 24      ..    ..       3   3   0 
                          --------------- 
  Totalling..    ..    .. £22,194   7   1 
                          --------------- 


In the pass book the next withdrawal is the 39,341l. 13s. 9d. with which we have to deal. Taking, therefore, the starting figure of 46,771l. 4s. 11d. and deducting from it the 22,194l. 7s. 1d. withdrawn which, on Clayton's case(1) must be regarded as charity money, there remained 24,576l. 17s. 10d. The result would be that the sum of 39,341l. 13s. 9d. must be regarded as having consisted, as to the first 24,576l. 17s. 10d. of charity money, as to the next 3,000l. of Diplock money, and as to the remainder, of charity money. On this basis the appellants would be entitled to a charge on the funding loan in respect of their claim to 3,000l.

The above result would only follow if Clayton's case(1) applies. It might be suggested that the corollary of treating two claimants on a mixed fund as interested rateably should be that withdrawals out of the fund ought to be attributed


(1) 1 Mer. 572.




[1948]

 

554

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

rateably to the interests of both claimants. But in the case of an active banking account this would lead to the greatest difficulty and complication in practice and might in many cases raise questions incapable of solution. What then is to be done? In our opinion, the same rule as that applied in Clayton's case(1) should be applied. This is really a rule of convenience based upon so-called presumed intention. It has been applied in the case of two beneficiaries whose trust money has been paid into a mixed banking account from which drawings were subsequently made, and, so far as we know, its application has not been adversely criticized (see per Fry J. in Hallett's case(2) and per North J. in In re Stenning (3). In such a case both claimants are innocent, neither is in a fiduciary relation to the other, and if the mixed fund had not been drawn upon they would be entitled to rateable charges upon it. Exactly the same occurs where the claimants are not two beneficiaries but one beneficiary and one volunteer, and we think, accordingly, that the same principle should be adopted.

The Royal Sailors Orphan Girls' School and Home (action III C) received a grant of 2,000l. sent to them on March 20, 1937, and paid it into their current account. By a contract dated March 24, 1937, they contracted to purchase a sum of 1,943l. 18s. 5d. 312 per cent. War Stock. This stock costing (with expenses) the sum of 2,000l. was paid for by cheque on the account on April 6, 1937. It is admitted in para. 5 of the defence that this 2,000l. was the 2,000l. received from the Diplock executors.

So far, the case resembles the case of the National Institute for the Deaf in that the money was paid into a mixed account: and the charity agrees that the 2,000l. subsequently drawn out and invested in War Loan was the Diplock money. For the reasons which we have given we think that, for the purposes of the equitable doctrine, this 2,000l. and any investment shown to represent it must be regarded as belonging to the Diplock estate. But there is a further complication, since it is argued that there is no investment which can in any true sense be said to represent the 2,000l. of Diplock money. At the date of the purchase of the War Stock the charity already owned 9,747l. 10s. 2d. like stock. Both sums of stock were uncertified inscribed stock, and according to the method of accounting


(1) 1 Mer. 572.

(2) 13 Ch. D. 696.

(3) [1895] 2 Ch. 433.




[1948]

 

555

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

adopted by the Bank of England, the 1,943l. 18s. 5d. was added to the existing holding. This, by itself, would not, in our opinion, affect the power of equity to trace the Diplock money and secure its return to the estate in the shape of a proportionate part of the total holding. Unlike the case already discussed, where the Diplock money was expended in works on charity land, no injustice would be done to the charity as volunteers by carrying out the necessary process of dissection.

But there are further complications. Subsequently to the addition of the 1,943l. 18s. 5d. to the existing holding, two further sums of stock amounting respectively to 50l. 6s. 6d. and 47l. 10s. 9d. were purchased by the charity and these sums it would be entitled to have taken into account on a division of the holding. So far, still, there is no difficulty. But in addition to purchases, certain sales took place amounting to 3,509l. 11s. 4d., the purchase price being expended for the general purposes of the charity. Of these sales, the last for 434l. 11s. 2d. was effected on December 23, 1939, i.e., after the receipt of the warning letter and must, we think, be treated as referable solely to the charity's own interest. The other sales covered a period between November 10, 1938, and August 10, 1939. To what interest ought these sales to be attributed? Entirely to the charity's own interest, say the claimants, leaving the Diplock interest intact in the stock remaining unsold. They suggest that a principle analogous to that of Clayton's case(1) ought to be applied, with the result that the stock first brought into the mass which was the charity's own stock ought to be treated as having been first drawn out.

We do not accept the view that the case ought to be treated as though it were subject to the rule in Clayton's case(1). We see no justification for extending that rule beyond the case of a banking account. Here, before the sales took place, the mass of stock, if the question had then been raised, would have been regarded in equity as belonging rateably to the charity and to the Diplock estate. The only equitable way of treating the situation appears to us to be to regard each sum of stock withdrawn from the mass as having been made up in the same proportions. In so far as, upon this principle, withdrawals represented in part Diplock money and the sums received on the sale of the stock withdrawn were expended on general purposes and cannot now be traced into any existing asset, that amount of Diplock money must be regarded as having


(1) 1 Mer. 572.




[1948]

 

556

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

disappeared. But in respect of so much of the Diplock interest as is not thus accounted for, we are of opinion that the claim to a rateable proportion of the stock still held is established.

In considering the individual cases for the purpose of applying the principle of the equitable right of tracing, we have, for simplicity, assumed that the appellants' claims extend to the full amount of the Diplock moneys, properly belonging to the next-of-kin, paid to each respondent - in particular we have not taken into account the sums recovered from the executors or their estates under the compromise order.

No argument was addressed to us on this aspect of the matter. Prima facie and subject to discussion it appears to us that the sums so recovered ought to be credited rateably to all the charities for all purposes, i.e., for the purposes of the claims in rem as well as the claims in personam. In the case of Dr. Barnardo's Homes, for example, where we have expressed the view that the appellants are entitled to "trace" the whole amount of 3,000l. of Diplock money paid away to the respondent charity with the 40,000l. 234 per cent. Funding Loan, the respondent would be entitled to be treated as having accounted to the appellants for the appropriate proportion of the sums recovered so that the appellants would be limited to claiming so much only of the Funding Loan as represents the balance of their total claim of 3,000l.

The result of the whole matter is that the appellants are, in our judgment, entitled to succeed on all the appeals. Having regard to the view we have expressed in regard to their claims in personam and in regard to the failure of the defences of the Statute of Limitations to those claims, and in the light of the submissions made to us, the appellants would under this head of their claim be entitled, as it appears to us, to orders against each of the respondents for payment to the judicial trustee of an amount equivalent to the total sum paid to that respondent less a rateable proportion of the sums recovered from the executors or their estates, but without any interest.

But orders have been made by Wynn-Parry J. upon the claims in rem against three of the respondents, namely, against the Leaf Homoeopathic Hospital (action II C), in respect of an agreed sum of 250l., Queen Alexandra Cottage Homes (action IV D) in respect of the proceeds of sale of a sum of 1,000l. Local Loans and Guy's Hospital (action IV E), in respect of a sum of 5,052l.; in




[1948]

 

557

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

each of the two latter cases together with a further sum for interest. As has been already stated there is no cross-appeal against any of these orders for payment.

In addition we have expressed the view that upon their claims in rem the appellants would be entitled to succeed against certain of the respondents either wholly or in part: that is to say, (i.) against the National Institute for the Deaf (action I F), to the full extent of their claim, by tracing the Diplock money into the Post Office Savings Deposits of 1,500l.; (ii.) against the Royal Sailors Orphan Girls' School and Home (action III C), partially, by tracing Diplock money into a rateable part of the 312 per cent. War Stock; (iii.) against Dr. Barnardo's Homes (action I E), to the full extent of their claim, by tracing Diplock money on the application of the Clayton's case(1) rule into 234 per cent. Funding Loan; and (iv.) against St. George's Hospital (main action) to an extent at present unspecified by tracing Diplock money on the application of the Clayton's case(1) rule into one or other of the investments made by the hospital during the relevant period out of its "rebuilding appeal account." Subject to argument, as already stated, the amount of the appellants' claims must, for the purposes of their "tracing" remedy, no less than for the purposes of their personal remedy, be treated as rateably reduced by virtue of the sums recovered from the executors. On the other hand, in each of these cases the appellants would appear to be entitled, further, to a sum representing the interest in fact earned by the investments into which the Diplock money (reduced as above mentioned) is so traced.

At the hearing we understood the appellants to say that if they were held entitled to succeed on their personal claims they would not seek or need to rely upon their claims in rem. On this view the proper order in each case would be to set aside the order made by Wynn-Parry J. - including in the appropriate cases that part of his order directing payment to the appellants - and to substitute an order for payment to the judicial trustee of an amount equivalent to the full principal sum (reduced as above mentioned) received by the respondents. There remains, however, the question of the appellants' right in certain cases to interest.

As we have already indicated we shall be prepared to hear argument upon the proper form of order to be made in the


(1) 1 Mer. 572.




[1948]

 

558

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

several cases after there has been an opportunity on the part of all parties concerned to consider this judgment. In so far, however, as the appellants seek or are entitled to rely upon their claims in rem so as to recover sums for interest or should be taken to be bound by the orders, so far as in their favour, made by Wynn-Parry J., then the proper order would in each case appear to be: (a) to direct in the four cases of the National Institute for the Deaf, the Royal Sailors Orphan Girls' School and Home, Dr. Barnardo's Homes and St. George's Hospital a transfer to the judicial trustee of the appropriate securities in respect of which the appellants have established their right of "tracing" (or payment of a sum equivalent to the proceeds of sale thereof) together with payment of the appropriate sums for interest; (b) in those four cases and also in the three cases of the Leaf Homoeopathic Hospital, Queen Alexandra Cottage Homes and Guy's Hospital (in which Wynn-Parry J. ordered payments to the judicial trustee) to direct pursuant to the appellants' rights in personam payment to the judicial trustee of the balance of the principal sums (reduced as above mentioned) paid to the respondents after bringing into account the principal amount covered by the orders under (a) above and the orders made by Wynn-Parry J. (as the case may be); and (c) in the case of the remaining respondents to direct pursuant to the appellants' rights in personam, payment to the judicial trustee of the full principal amount (reduced as above mentioned) received from the executors. The necessary accounts and inquiries would have to be framed to give effect to the orders under (a) and (b).

As regards costs it is to be noted that the judicial trustee, who has been separately represented before us, is a defendant in the main action and a plaintiff in the other nine actions. The Attorney-General has also been represented before us as a defendant in the main action. Again subject to discussion, the proper order would appear to us to be that the respondent charities should pay the party and party costs of the appellants and of the judicial trustee and the Attorney-General, both here and below, such order to be without prejudice to the right of the judicial trustee to recover the balance of his costs, together with his proper charges and expenses, from the estate.


 

Appeals allowed.


Danckwerts informed the court that he was now instructed




[1948]

 

559

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

on behalf of the Minister of Health. Since the coming into operation on July 5, 1948, of the National Health Service, some of the respondent charities were "dead," and their assets vested in the Minister; in other cases the new Boards of Governors of the teaching hospitals might be concerned. It might be that some of the actions would have to be amended by the formal joinder of the new parties.


LORD GREENE M.R. said that there would have to be a further appointment to consider the form of order, and the matter could be discussed then.


On July 18, Danckwerts stated that the Minister accepted responsibility for the non-teaching hospitals, and was willing to be joined as a defendant, but the teaching hospitals were on a different footing. The existing corporations were dissolved, and the new Boards of Governors were independent entities, and he was not representing them nor did the Minister accept liability. He referred the court to ss. 6, 7, 9 and 78, of the National Health Service Act, 1946, and the Regulations thereunder (St. R. & O. 1948, No. 888), reg. 29 (as to amendment of proceedings) and reg. 30 (arbitration).


THE COURT intimated that the minutes of order could be drawn up, finally as regarded the defendants other than the teaching hospitals, provisionally as regarded the teaching hospitals till the Boards of Governors could be brought before the court at a later date.


July 27, 1948. Further argument was heard on an amended statement of facts and defence in the case of the National Institution for the Deaf. The following supplementary Judgment was delivered.


LORD GREENE M.R. The present question arises in the case of the National Institution for the Deaf. In our original judgment in dealing with that case(1), we took the view that Clayton's case(2) did not, on the facts as then supposed, come into question because the charity had in its own accounts treated a certain Post Office Savings bank deposit account as representing the 1,500l. of Diplock money. The view we took on that basis was as follows: "But here the charity has


(1) Ante p. 551.

(2) 1 Mer. 572.




[1948]

 

560

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

earmarked the sums withdrawn from its account and deposited at the Post Office Savings Bank. It seems to us that equity cannot disregard this. A volunteer who mixed what turns out to be trust money with his own can surely himself 'unmix' it subsequently if he thinks fit to do so. And as the operation of equity is directed to preventing the volunteer doing what is unconscionable, surely it would be unconscionable for the volunteer who, for his own purposes has earmarked the trust money to assert that what he has earmarked is not trust money but money which he is entitled to keep as his own."

The facts as they were then supposed to exist amounted to a perfectly clear case of what we described as earmarking, and we took the view that the charity, by doing that, had precluded itself from asserting that the specific item round which it had tied a label "Diplock money" was in fact their own free charity money - a perfectly clear case. It so turns out that the facts as we understood them and as they were stated in the agreed statement of facts were not as supposed. The earmarking of this money as Diplock money was not an earmarking generally but was apparently done for the sole purpose of precaution over against the possibility which was then contemplated that the Diplock money might have to be repaid. On that basis it is now agreed that that cannot be treated as a specific earmarking of that deposit account as representing Diplock money.

We have given leave to make some consequential amendments in the defence and we have admitted a new agreed statement of facts which now form the basis of the present discussion. The case as now presented in respect of this deposit account is of a quite different character. It is said: "We do not find anywhere now in the accounts or anywhere else a specific earmarking of that particular account to the Diplock money, but what we do find is in the charity's accounts an account of its general fund to which this particular Post Office deposit account is attributable. It is admitted that if that argument does not prevail the rule in Clayton's case(1) will operate against the plaintiffs, because on the basis of that rule the whole of the Diplock money has been drawn out and spent and has disappeared. The present attempt to avoid that result, and to be justified by the propositions that we accepted in our original judgment which I have explained, is based on


(1) 1 Mer. 572.




[1948]

 

561

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

the form of the accounts kept by the charity." The charity kept several accounts; I am looking at the year ending March, 1937, which had an account called the Hospital for Deaf Boys Fund, an account called Mrs. F. E. Richards' Bequest, and an account for the Bath Homes for Deaf and Dumb Women, and a general account of what is called "General Fund." That system of accounting runs on during the relevant period. Each of those funds has its own separate balance sheet. There is no suggestion that any separate bank accounts were kept for those different funds. What was done was this: the capital account for each fund is set out. On the left-hand side of the balance sheet appear assets which are attributed to that fund, and there is a balancing figure, because the account, of course, has to balance. The balancing figure consists of the attribution to each particular fund of what one may call a slice of the charity's banking account. The charity had one banking account. It did not keep a number of banking accounts, one for each fund. It had one banking account, and the method of keeping these accounts was to attribute to each of the separate funds a slice of the banking account. In each case throughout the years the figure is described as "cash at bank."

Turning to the year ending March 31, 1939, the capital account of the general fund starts with the entry on its left hand side of 21,559l. "as per last account." Looking back to the account of the general fund as at March 31, 1937, the Diplock 1,500l. had in that year gone into the general fund for the purposes of these accounts, as is specifically referred to in the balance sheet of that year. The capital account general fund appears to have been an account into which legacies and gifts were carried which were not earmarked or allocated to one of the separate funds. Into it there was carried at the end of the year any excess of income over expenditure. Similarly every year in which the balance was the other way, and there was an excess of expenditure over income, the deficit was carried to the debit of the capital account general fund. That account therefore was obviously a mere residuary account of what was left in the assets and liabilities of the charity after segregating the assets and liabilities attributable to the special funds.

The claim here relates merely to the 1,500l. It is said that the plaintiffs can pick out and identify the 1,500l. deposited at the Post Office Savings Bank and attribute that, or rather some rateable proportion of it, to the Diplock money on the basis




[1948]

 

562

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

that that particular deposit has been earmarked, to use the language of our previous judgment, as containing some proportion of the Diplock money. I do not read these accounts or the agreed statement of facts as leading to any such conclusion. This method of accountancy does not appear to me to amount to the sort of earmarking with which we were dealing on the original supposed facts. On the face of it, as I have said, it does nothing more than attribute to each particular fund which is comprised in these accounts, including the general fund, a slice of the charity's bank account. The charity in point of fact had money at the Post Office Savings Bank as we know, it also had a large sum of money on its general banking account. The figure described as cash at bank attributed to the various funds in these accounts makes no attempt to differentiate between these two accounts at all. Looking at them there is nothing to tell that the charity has definitely or finally or for some particular purpose attributed any particular bank moneys to any particular account. There is nothing on the face of this to prevent the charity putting, so to speak, the savings bank money into one of the other funds. What it is doing is treating two banking accounts as a conglomerate mass and attributing slices of them to these various funds. That no doubt was a very convenient method of accountancy. As I have said, balance sheets have got to balance. The way they dealt with the cash at bank was to treat it as a balancing item and to attribute a slice of their banking accounts which were of two kinds to these various funds.

I do not find it necessary to go very deeply into an analysis of these various accounts. What I have said I think is sufficient to show that in my opinion this is not a case where this savings bank deposit money can be regarded as having been earmarked in the sense in which we used that expression in our earlier judgment. That was a definite clear segregation of a particular investment as we thought on the facts then before us, a particular investment put away, so to speak, in the drawer as being and representing the Diplock money. I cannot find here that the savings bank deposit account has been treated in any comparable way either in its entirety or in regard to some proportionate part of it. In the result the claim, in my opinion, fails, and all that the plaintiffs can claim against the National Institute for the Deaf, Clayton's case(1) having the effect which


(1) 1 Mer. 572.




[1948]

 

563

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

I have already stated, is a claim under a personal judgment and their right to trace is non-existent.


WROTTESLEY L.J. I agree.


EVERSHED L.J. I also agree. For the purpose of recording the matter and correcting the judgment, it seems to me that a convenient course would be to treat that part of the judgment on p. 65 beginning at the first line, "but before the applicability" down to and including the third paragraph at the bottom of the page ending with the words, "could discuss Clayton's case at all," as struck out, and to substitute as it were some words to this effect: "On the facts of this case as appearing from the defence which we have given leave to amend, the statement of admitted facts and the supplementary statement of admitted facts now before the court, it seems impossible to treat any item held by this respondent as now identifiable wholly or in part with the Diplock money. We see, therefore, no ground for saying that the rule in Clayton's case(1) does not apply and the plaintiffs' claim in rem against this respondent fails accordingly."


LORD GREENE M.R. I entirely agree. It would be a very convenient course to treat the judgment as having been revised in the sense my brother has put it.


WROTTESLEY L.J. I also agree.


After some discussion as to the method of dealing with this amendment of the judgment LORD GREENE M.R.said: I think the proper thing to do is not to attempt to revise what we have in the original judgment but to have this supplementary judgment, which has the effect of saying: "What we said before ought now to read as follows." The formal order will follow that. It seems to me we cannot really get rid of two judgments in this case. The judgment of the court will consist of the reasons which I gave and the observation that my brother WROTTESLEY made and the observation of my brother EVERSHED with the addition that my brother WROTTESLEY and I made when we heard EVERSHED L.J.'s formula that we agreed with it. That is what we have said in court to-day and that is the record. The effect of that would be if you wanted


(1) (1816) 1 Mer. 572.




[1948]

 

564

Ch.

DIPLOCK, In re. DIPLOCK v. WINTLE (AND ASSOCIATED ACTIONS). (C.A.)

 

to read the actual judgment and no more, when you came to this part in the House of Lords you would say: "I am not going to trouble your Lordships with tis particular paragraph because that has been put right subsequently and now reads as follows."


Solicitors: White & Leonard; Trollope & Winckworth; Eland, Nettleship & Butt; Freshfields; Peake & Co.; Treasury Solicitor.


J. W. H.