Law, History & Equity

This post will explore a bit about equity…
 

First the definition of ‘Equity’ is this: a source of law based on principles of fairness and natural justice.


Historically, the King of England would oversee and resolve disputes. You could only take a dispute to the King if you purchased a writ and over time these writs become fixed and inflexible and only parliament could supply them. It was the Provisions of Oxford 1258 that restricted the availability of writs. This rigidity and lack of remedies (for example only  damages were the outcome of going to court) forced people to petition to the King for natural justice. The petitions were given to the Chancellor to manage as it was the chancellor who was believed to be the conscience of the King. The petitions usually had one of the four allegations: (i) common-law is defective; (ii) the remedy of the court, damages, was not satisfactory and inadequate; (iii) the defendant was too powerful, unequal bargaining power existed and; (iv) court lack jurisdiction where non-domestic people where involved like foreign traders.Given the mass of petitions that were received, the chancellor created a court, Court of Chancery, to resolve these issues by applying flexible customary rules.

At first the chancery court was very unpredictable as it didn’t follow any basis of law, just merely the chancellor’s judgement and eventually these did form a precedent but anyway between 1673-1828 guidelines were prescribed and these were known as equitable maxims. Examples of equitable maxims include: (i) He who comes to equity must come with clean hands i.e.should not be trying to use equity for unfair and unjust reasons e.g. D&C Builders v Rees [1966] 2 QB 617; (ii) Equity looks at intention not the form i.e. equity will look at what intention has the person come here with not what they have done or history etc; and (iii) He who seeks equity must do equity i.e. equity must apply both ways its a kind of negotiation e.g. Chappell v Times Newspapers [1975] 1 WLR 482.


Examples of equitable remedies include: (i) specific performance so to compel a party to fulfill their contractual obligation e.g. Beswick v Beswick [1967] 2 All ER 1197; (ii) rescission so a resolution that brings the parties as far away as possible from original contractual position e.g. Redgrave v Hurd (1881) LR 20 ChD 1; and (iii) injunction so to cease a party from doing certain acts e.g. Lumley v Wagner [1843-60] All ER 814.


The Chancery court was successful in fulfilling its purpose of dispute settlement. However, there were conflicts with the regular Common law courts, outcomes were unpredictable and it suddenly had also had president over where common law and equity clashed. The King clearly stated the president of equity in the Earl of Oxford’s case (1615) 1 REP Ch 1 where the chancery court found the common law courts to have committed fraud and they put an injunction on the common law court. This dissatisfaction caused by the Chancery Court can be seen in comments such as ‘equity varies with the length of the chancellor’s foot’ (John Seldon, jurist). So Parliament put an end to this in 1873-1875 by creating the Judicature Act which stated that it the common law courts’ responsibility both to practice equity as well as common law reasoning. This tension between two sets of laws even in the one court has given scope for judicial creativity for making law.

It is important to note that equity itself is not a self-sufficient system, as Maitland says it is a ‘gloss’ on the common-law system, bettering the defects of common law. It is also important for studying precedent because it shows the value and need of precedent. Precedent which is a form of equity has been created to rectify some of issues and hardships associated with a common law system.

Certainty of Objects

Certainty of objects is required for a trust to be declared valid. However, different tests are used for different types of trusts.

Fixed Trusts

Discretionary Trusts

 

Unincorporated Associations

This topic is divided into four video tutorials.

The first introduces what is an unincorporated association and outlines the central issue with it.

The second video discusses contract holding theory and how unincorporated associations hold property.

The third video looks at the ways in which gifts can be made to unincorporated associations and the problems associated with that.

The final video looks at what happens when unincorporated associations are dissolved.

 

Classification of Trusts

This video is about Classification of Trusts. Both express (fixed & discretionary) and non-express/implied/imputed (resulting and constructive) trusts are explored. Particular detail to remedial & institutional constructive trusts and automatic & presumed resulting trusts are made. Please find some written notes below.

 

Express trusts –  These are trusts intentionally created by settlor either expressly declaring himself trustee or transferring to a third party trustees, the trust.

Fixed express trust – This is where the beneficiary has a fixed entitlement to the the asset

Discretionary express trust – This is where the beneficiaries’ entitlements are not set out by the settlor in the trust deed and are left to the discretion of the beneficiaries.

Non-express/implied/imputed trusts – It is where a trust is inferred by operation of law as opposed to the settlor expressly declaring a trust.

Constructive trusts – A trust created by the courts where it is unconscionable for the legal owner to retain equitable ownership e.g. where a trust property is transferred to a third party with the knowledge of the beneficial ownership. Satisfy the demands of justice and good conscious.

Remedial v Institutional constructive trusts

The US remedial model focuses on the trust structure to resolve injustices whereas the traditional English model has been to enforce the structure so long as the legal conditional are met regardless of any dispute. Remedial trusts lie in the discretion of the court whereas institutional constructive trusts operate in the rule of law.

 Resulting trust – Operation of law as opposed to any good conscious mechanism. According to Lord Browne-Wilkinson in Westdeutsche Landesbank v Islington LBC 1996: They arise in two situations:

Automatic – where there has been an attempt to create a trust but the beneficial interest fails e.g. it hasn’t been fully dealt with.

Presumed – where voluntary gifts and contributions to the purchase price are made, it is assumed that it results back to the donor or those who contributed to the purchase price.

Introduction to Trusts

In this video I introduce the legal concept of a trust by addressing the following questions:

1. What is a trust? Why is preferred over a contractual arrangement?
2. How can one create a trust?
3. What are the essential elements of a trust?
4. What is the moral basis of a trust? And is it still relevant today?

Please find written notes below.

Basics of trusts

What is a trust? Why is it preferred over contracts?

  • A trust is a form of ownership which whereby the legal rights are separate to the equitable rights.

There are significant advantages to utilizing a trust mechanism over say a contractual arrangement which it is often compared too:

  • If the property is sold by the trustee under a breach, the beneficiaries benefits would be overridden even though the third party knew all knew all along because of privity of contract. And the only way to solve this would be to make the beneficiary party to contracts between settlers and trustees.
  • In a contract, yes the settlor could bring action against trustee but in a trust, the beneficiary can and this actually makes more sense as the whole purpose of the contract would be for the beneficiaries to benefit.
  • There are situation such as ones where children are involved and those to benefit can’t enter contracts because they do not have the capacity to enter one.

What are the essential elements of a trust ?

  1. The three certainties:

(i) Certainty of intention, that the settlor intended to create a trust

(ii) Certainty of subject matter, what the trust property is and the quantum each beneficiary is to receive

(iii)Certainty of objects, who the beneficiaries are

2. Beneficiary principle – the trust must be designed for identifiable humans to benefit

3. Any formalities are complied with e.g. for the legal transfer of land a deed and registration is required

How do you create a trust?

  1. Either you transfer your property to a trustee
  2. You declare yourself as a trustee holding it for the benefit of another individual.

What is the moral basis of a trust and is it still relevant today?
The moral basis of a trust refers to a ‘confidence reposed in some other’ (Lord Chief Justify Coke), such a confidence gives rise to moral obligation and this has given rise to legal principles.

Essentially, the moral basis is still important today because it goes someway in explaining fiduciary duties which are imposed on trustees.