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VOL. 78 PART 2 MARCH 2020
party. If the trustee, however, refused to do so, the beneficiary could sue,
but was required to join the trustee as a defendant. Lord Hanworth M.R.
explained that the rule was designed to eliminate procedural difficulties
and circuity of action. It would have been possible for Harmer to initiate
a separate proceeding to have it declared that Armstrong was his trustee.
Upon receiving this declaration, he could seek leave to sue in Armstrong’s
name when Armstrong refused to enforce his rights. Harmer
could then bring an action against the vendors for specific performance.
By allowing Harmer to sue the trustee and the vendor, the court could
prevent the multiple proceedings.
28 Lawrence L.J., in his reasons, emphasized that the rule which would
allow Harmer to join Armstrong as a defendant was an equitable rule, distinct
from the common law sealed contract rule. Both rules were equally
established and authoritative in the law. He explained the equitable rule
as follows, at p. 88:
Whenever a party under a contract, at the date when he enters into
it is ... a trustee for a third party that party has a right conferred
upon him by way of property to sue on the contract whether the
contract be under seal or not and can, according to well settled principles,
enforce that right in equity, joining the trustee as a defendant
to the action. The right of a beneficiary in such a case as the
present, however, is to enforce the agreement according to its tenor, that
is to say in favour of the defendant Armstrong, and not in favour of the
plaintiff beneficiaries. Emphasis added.
Lawrence L.J. also recognized that a court could refuse to enforce a contract
in this way if there was a debate as to whether a trust relationship
actually existed between the party to the contract and the third party
29 In my view, the decision in Harmer does not, as the appellant contends,
carve out an exception to the sealed contract rule. On the contrary,
the decision specifically distinguished the equitable principle applied in
the case from the sealed contract rule. The decision provides the means
for beneficiaries to enforce those agreements entered into by their
trustees when those trustees have refused to do so. As this Court recognized
in Margolius, supra, the case was one of a cestui que trust seeking to
enforce a contract when the trustee had committed a breach of trust in
refusing to do so. The decision is based on the law of trusts and not on the
law of contract. Emphasis added.
In my view, it is highly questionable whether the Court of Appeal’s decision
in Harmer v. Armstrong is a valid basis for suggesting that s. 7 of the BC
PoAA applies only if the attorney states that it is acting as such. Plainly the
section does not say that. Moreover, s. 123(1) of the Law of Property Act is
not mentioned at all in the Court of Appeal’s decision in Harmer.51 It seems
more likely that that provision was not brought to the Court of Appeal’s
attention sufficiently than that the court intended to read words into that
provision without even mentioning it.52