Equity & Trusts : Introduction

Equity

How equity developed

Pre 1066: local courts, applying local customs.
1066-1485: development of Common Law.
12c onwards: development of equity.
18^thc onwards: consolidation of equity.
Common law is about structure, tests, certainty. Equity is subjective. No right answer. Equity much less structured than common law.

Why equity developed alongside common law?

Equity is not a complete system of law—without the common law equity could not exist. Equity supplemented the common law, providing solutions to its inherent rigidity.
Common law problems:
- Rigid writ system.
- Complex procedures.
- Limited Remedies: Real action for return of land BUT restricted to Damages (compensation).
Development of equity:
- If you had a claim not covered by a writ; or weren’t happy with a particularly remedy.
- Litigants appealed directly to Monarchy. Very subjective to the king.
- Monarch passed litigants to Lord Chancellor.
- Established separate court of Chancery.
- Conscience-based decisions.
- Very flexible.
- Provided new procedures (eg subpoenas);
- new remedies (eg injunctions, specific performance, rescission of a contract/deed, rectification of a document);
- new rights (eg equity of redemption, equitable mortgages, leases or easements when created without the proper legal formalities; rights under trusts, to protect beneficiaries against unscrupulous trustees and donees.

Problems with equity

Resolving problems

Principles established.
Maxims of Equity (see study book).
Earl of Oxford’s case (1615)—conflict between courts of common law and equity. Held that, if a conflict arose, equitable principles take precedence over the common law.
Judicature Acts 1873-1875. It doesn’t merge the systems of law, equity and common law still exist independently. But it means that both systems are administered through the same court system, you don’t have to choose between the courts, you just go to High court. So you can get equitable remedies for a common law claim. Enshrined principle that rules of equity prevail.
Senior Courts Act 1981, s49(1): rules of equity prevail.
Still substantive differences: common law much more rigid.
Equity today: Maxims; Remedies (not have injunctions as well); and Trust Concept.

Maxims of Equity

1. Equity will not suffer a wrong to be suffered without a remedy.
2. Equity follows the law.
3. Where the equities are equal, the law prevails.
4. Where the equities are equal, the first in time prevails.
5. He who seeks equity must do equity.
6. He who comes to equity must come with CLEAN HANDS (Argyll v Argyll [1967]).
7. Delay defeats equity.
8. Equality is equity.
9. Equity looks to the intent rather than the form
10. Equity looks on that as done which ought to be done (i.e. if equity feels something should be accomplished, it will try to complete it.) NB: only applies where there is an enforceable contract in existence or there is a trust. This is so that the trustee is not permitted to deny the beneficiary’s claim that they had done an authorised act as opposed to their actual unauthorised act).
11. Equity imputes an intention to fulfil an obligation.
12. Equity acts in personam (it operates between individuals, goes back to being administered personally by the King).
13. Equity will not assist a volunteer (unless a beneficiary under a trust) (volunteer = someone who provides nothing, if just given).
14. Equity will not perfect an imperfect gift.
15. Equity will not construe a valid power out of an invalid trust.
16. Equity will not permit a statute to be used as an instrument for fraud.
17. Equity will not permit a trust to fail for want of a trustee.

Trusts

A trust = a method of dividing ownership rights in property, separating out the duties & obligations in relation to the management of the property; from the benefits and rights of enjoyment over the property.
So basic concept of trust: we divide ownership rights in property into two types of ownership: legal; and beneficial/equitable.
Settlor: the absolute owner of the property, sets up the trust by transferring property to the trustee to hold on trust for the beneficiary.
- Settlor called ‘testator’ if a testamentary trust.
Trustee: person who holds legal title, given the duties & obligations in relation to the property. In Common Law, they are considered to be the legal owner.
Beneficiaries: Equity recognises them as owners (even though they are not the legal title holders). Benefit and rights. They have an equitable, or ‘beneficial’, interest in the property. They have enforceable rights recognised in equity (but not in common law).
A sole, absolutely entitled owner of property – at this point, an equitable trust does not exist. The creation of a trust gives one person (the beneficiary) a right against another (the trustee), who owes them a corresponding duty.
Trust fund: The obligation on the trustee to carry out the terms of the trust for the benefit of the beneficiary, is enforceable in court by the beneficiary in respect of property within the trust fund.

Trust property

Trusts can exist in relation to any form of property (property isn’t synonymous with land, land only one form of property).
Divisions of property:
- Realty and personalty
- Land and pure personalty
- Chattels real and chattels personal
- Tangible and Intangible property

Real property – realty: Relates to freehold land.
Personal property – personalty: All property other than freehold land (including, for historical reasons, leasehold land). Leases are a kind of hybrid known as ‘chattels real’.
Land: includes both freeholds and leaseholds.
Pure personalty – chattels personal: all personal property other than leaseholds; subdivided into choses (things) in possession; and choses (things) in action.
Choses in possession – tangible personal property: includes furniture, cars, paintings, books, jewellery, animals. Tangible asserts,...

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Introduction Notes

Updated Introduction Notes