Southern British National Trust Ltd v Pither

The plaintiff, Abraham Pither, sought a declaration that a deed of assignment he executed was void due to fraud. The assignment transferred his right to future dividends from the liquidation of the Primary Producers Bank to The Southern British National Trust Ltd. (the trust company). The trust company intended to use these dividends to pay for debentures Pither had applied for. The dispute arose because the trust company argued that other debenture holders of the same series had acquired rights in the assigned dividends, thus precluding Pither from rescinding the assignment. The case was heard on appeal in the High Court of Australia.

The central legal issues before the court were: firstly, whether the plaintiff's right to future dividends constituted a chose in action that fell within the charging clause of the trust company's debentures, thereby creating an interest for other debenture holders; and secondly, if such an interest was created, whether the debenture holders took subject to the plaintiff's equity to set aside the assignment due to the fraud perpetrated by the trust company.

Latham C.J. found that the plaintiff's right to future dividends did not fall within the charging clause of the debentures. He reasoned that the clause specifically covered investments and moneys derived from the net proceeds of debenture sales, and the right to receive future dividends did not fit this description. He also noted that while directors have a duty to preserve property that might become subject to a charge, this duty does not confer an interest in that property upon the debenture holders. Rich and Dixon JJ. took a different approach, stating that even if the debenture holders acquired an equitable interest in the chose in action, they took that interest subject to all equities affecting the title of their assignor, the trust company. This meant they were subject to Pither's right to rescind the assignment due to the fraud.

The High Court dismissed the appeal and affirmed the judgment of the Supreme Court of Queensland. The plaintiff was therefore entitled to a declaration that the assignment was void and inoperative, and to receive the outstanding dividends from the bank.