INTRODUCTION TO EQUITY LAW AND TRUSTS

Equity and Trust Assignment

Ms Upeka Perera

As per Lord Evershed Equity have its own advantages and disadvantages along with its complexities. ‘Equity is that specific body of law which supplements the common law and is invoked in circumstances where the conduct of the defendant is deemed unconscionable’ Equity is also the name that we give to the set of rules that traditionally supplemented the common law where the application of the common law would have operated too harshly. This was done to achieve what is sometimes referred to as natural justice, or more simply speaking fairness.

Equity was put forward as means of providing remedies that would correctly redress the situation in a way that the common law remedy of damages could not, such as in the case of Inwards v Baker. Equity is available to mitigate the harshness of common law by using different procedures and different remedies in every case.

Purists would even say equity’s discretionary nature is palm tree justice…’equity is as long as the chancellors foot’ meaning that in equity one individual might not get justice all in all reasons however ‘palm tree’ is also needed because it looks into the situation of the particular individual for example looks into one individual’s co-habited relationship and takes those circumstances into consideration which means it looks into the ‘intent rather than the form’. This maxim was also illustrated in the case of Parkin V Thorold 1852 which ensures that equity is generally less concerned with precise forms than the common law. This is also further illustrated in Walsh V Lonsdale 1882 and Locking V Parker where a question developed whether a real security in the form of trust for sale of land was or was not a mortgage? It was held by the judge that…. ‘It is not for the court of Equity to be making distinctions between forms instead of attending to the real substance and essence of the transaction’, however it is said that common law is blind when it comes to the substance. Taking into consideration the fact that the judge’s discretionary nature and how decisions are taken in cases where intent is more of a concern. And therefore one could say that this is the significance of ‘palm tree justice’ that Lord Evershed talks about. Further elaboration proves that it provides remedies for individual situations, basically a person who didn’t receive a remedy at common law but ‘restrain injustice’ meaning injustice prevented at equity level and this is been emphasized in one of the 12 maxims which was developed in the time of Lord Nottingham (1673-82) when the court of chancery decided to move from a general principle of ‘conscience’ to decisions based on settled principles and doctrines. The discretionary use of maxims is illustrated in Tinsley V Milligan1994 which discusses the situation where a couple who had acquired a guest house together under one name, thus allowing the other to claim benefits, during conflict the legal owner of the home decided to evict her partner. Upon this the other woman stated she had equitable interest within the property, the case was disallowed due to the fraudulent use of their relationship, e.g. The claimant categorized afoul of the aphorism “he who comes to equity must come with clean hands”, Moreover Tinsley’s argument of equitable interest was accepted by Lord in a strong dissenting judgment on the basis of the above mentioned maxim whereas

Miligan was convicted of a criminal offence in relation to this scheme. Moving on one of the maxims which can be derived to give more meaning to the above mentioned statement of injustice being prevented and states that ‘Equality is Equity’. In other words claimants should be treated equally as a last resort and this is illustrated in the case of Midland Bank plc v Cooke 1995 where it was held that a common intention constructive trust can arise where X and Y equally provide a deposit on a house purchased in the name of one or both of them.

In the analysis on the purpose of bringing up equity it introduced new remedies basically because it was felt that the common law remedy was insufficient or that the common law did not necessarily address the remedy wanted by the individuals who suffered detriment. Say, for example, in a contract, where one party defaults under their obligations, under common law it would normally be the practice that the innocent party is given damages. Yet, the innocent party may not always want damages; instead they might want to go ahead with the contract. This was recognized in equity by granting the remedy of specific performance. This can be illustrated by the case of Walsh v Lonsdale, where a contract was entered into for the grant of a lease, but the formalities as are required for the grant of a legal lease were not complied with. Therefore, the lease ineffective in law, hence equity granted specific performance of the contract so that irrespective of the fact that formalities were not complied with, the lessee still had to pay rent as per the terms of the contract as if a legal lease had been granted so that it would not be unconscionable on the part of the lessee. It is crucial to realize that equity only insists on the good behavior of those who come to equity seeking a remedy. It does not insist that the successful equitable claimant must continue to use his equitable interest with honesty after the award. This is perhaps nowhere better emphasized than in the case of Williams V Staite which states that an injunction like all equitable remedies is discretionary .

As per the statement made by Lord Evershed with regards to the stoppage of unconscionable conduct and can be related to Sukhindar Panesar’s definition of equity… Illustrates that some equitable maxims may seem to protect the righteousness of the common law, the maxim “equity will not allow a statute to be used as a cloak for fraud” which prevents a party from relying upon a statutory provision if to do so would be unconscionable and unfair, whilst this may seem to be an equitable principle, it clearly permits equity to ignore common law, and as equity's concern is with individual justice, the common law delivers universal justice, which means that whilst the decision may be fair under the circumstances of one particular case, the opposite could be true for many other scenarios , as in Dillwyn v Llewelyn 1862, although the intention here was, presumably, for the son to gain ownership, in other settings, this may not be the intent. And once again referring to the statement it is always about the fact that it’s unconscionable to allow a party to rely on a statutory requirements to another’s detriment! Like in the words of Cardozo in Graf v. Hope Building Corporation , in which he states that "equity works as a supplement for law and does not supersede the prevailing law".

When considering the advantages of the discretionary nature or palm tree justice it is quite possible to say that it is solely upon the judge to decide as to what will happen unlike in common law where when deciding a case common law courts strictly applied the doctrine of stare decisis, the English legal principle by which judges are obliged to follow the judgments

established by prior decisions; this meant the law did not develop even when it was obviously in need of change.

However when analysis of the statement ‘great danger in practice’ and ‘somewhat negative characteristics’ leads us to consider the believable disadvantages of equity

‘I venture to think, great danger in practice as said by Lord Evershed… anyone in the same manner would arrive at the conclusion and it can lead us to the very thought of the discretionary nature of the judges. One might also think this is disadvantageous. If judges are able to reach decisions entirely according to their own discretion there are likely to be some disparities between the ways in which such principles are put into practice. Equitable rights and remedies are not distinct but interact. Like it was stated earlier it is solely upon the judge to decide as to what will happen whereas in common law when deciding a case common law courts adheres to a legal precedent and this ensured a bit of neatness or to put in more general terms it was easier when deciding a case. As such, equitable remedies were introduced in order to allow the law to develop in time with changing social, political and personal opinion, whilst still retaining a vast majority of the stable and certain common law system. Equity has constantly striven to update the law and to this day continues to develop certain areas in order to maintain the objective of fairness, this can be seen in cases such as Mareva v International Bulkcarriers [1975] 2 Lloyd's Rep 509 and Anton Piller v Manufacturing Processes Ltd [1976] Ch 55, which introduced the Mareva injunction and the Anton Piller order, respectively.

Another point to add up to the ‘great danger in practice’ still common law would be available however it’s under common law a case starts and if the common law remedy is insufficient or is unavailable only equity come in to place. Common Law is a form of law developed by judges through tribunals and decisions of courts rather than executive branch action and legislative statutes. Following this common law tradition, legal principles were referred to as Equity, this is commonly said to “mitigate the rigor” of common law. Common law is a body of legal precedent compiled by past court decisions. These decisions become the rules that common law judges used to decide legal disputes. The above mentioned points would at all times count as an advantage of common law.

A major turning point in the advantage of equitable tracing over common law tracing appear in money laundering like Agip Africa V Jackson 1991 discusses where on instructions from a plaintiff oil exploration company, the money was transferred from Banque du Sud in Tunisia to Baker Oil’s account with Lloyds Bank in London. All but $43,000 was then paid on to unknown parties. Agip Ltd sued Mr Jackson for return of the money which upheld the main principle that there must be a fiduciary relationship which calls the equitable jurisdiction into being. In short once that pre-existing equitable interest is demonstrated the claimant is able to trace her property into the most complex of mixtures or through many transformations in the nature of the traceable proceeds.

Sir Fredrick Maitland says, “We ought not to think of common law and equity as of two rival systems” "Equity had come not to destroy the law, but to fulfill it. Every jot and every title of law was to be obeyed, but when all this had been done yet something might be needful, something that equity would require." The goal of law and equity was the same but due to

historical reason they chose a different path. Equity gave respect to every word of law and every right at law but where the law was seen defective, in those cases, equity provides equitable right and remedies for the innocent party. With regards to the statement and the quote by Sir Fredrick it is possible to say even with its flaws equity emerged for the goodwill of claimants who are in need of justice or injustice prevented.

With the emergence of the judicature act it harmonized the two systems further by enabling the two branches of equity and common law to be administered in the same court. The key

provisions were the establishment of a single court, the Supreme Court of

Judicature with three divisions, and the general provision that where equity and

Common law conflicted equity was said to prevail. It was foreseen that a court which applied the rules both of common law and of equity would face a conflict where the common law rules would produce one result and equity another. Section 25 of the Judicature Act 1873 provided that if there was any conflict between these principles, then equity would prevail. However, this did not cause a clash between common law and equity, which as a result still remains as two separate bodies of law.

With the exposure of the judicature act and when deciding how equity and common law interact equity to common law tends to reduce any injustice caused by the strict application of the common law and mitigates the harshness. Courts of equity provide a remedy when common law courts decide a case constitutes an equitable situation. The common law court determines things that are legally unbalanced between two parties; the courts of equity provide equalizing relief. Despite the superiority of equity, the judicature acts whilst providing for the administration of the two systems into one preserved distinctions. Where there is said to be a dispute equity was purposeful to prevail over common law and this is subject to the overriding maxim that says ‘Equity follows the law’ and can only interfere where within the principles of equity there is good reason to do so however courts will firstly apply common law and if this is not fair then an equitable remedy will be provided. This maxim sets out that equity is not in place to overrule judgments in common law but rather to make sure that parties don't suffer an injustice, for this reason proving that equity was not meant to replace common law which was already a established form of providing remedies and thereby this relationship between the 2 systems are said to be symbiotic!

It seems that we are left in an interesting position based on the above mentioned reasoning that whilst agreeing to Lord Evershed’s statement it is even possible to say that the mere fact that equity allows courts to use their discretion and apply justice in accordance with natural law merely mitigates “the rigor of common law”. It is crucial to realize that equity only insists on the good behavior of those who come to equity seeking a remedy. It does not insist that the successful equitable claimant must continue to use his equitable interest with honesty after the award and in my opinion despite the fact that it has flaws I would say that "equity works as a supplement for law and does not supersede the prevailing law".

Bibliography

Cases

Agip Africa V Jackson [ 1991] 3 W.L.R 116 (CA)

Anton Piller v Manufacturing Processes Ltd [1976] 2 W.L.R 162 (CA)

Cardozo in Graf v. Hope Building Corporation [1930] 254 N.Y 1 at 9

Dillwyn v Llewelyn (1862) 45 E.R. 1285 (QB)

Inwards V Baker [1965] 2 29 (QB)

Locking V Parker[1873] 8 30 (CA)

Mareva v International Bulkcarriers [1975] 2 Lloyd's Rep 509

Midland Bank PLC v Cooke [1995] 4 ALL E.R. 562 (CA)

Parkin v Thorold [1852] 16 Beav 59

Tinsley V Milligan [1994] AC 340 (HL)

Walsh V Lonsdale[1882] 9 21 (CA)

Williams V Staite [1978] 2 W.L.R 825 (CA)

Books

Alastair Hudson,Understanding Equity and Trusts(1st, Cavendish Publishing Limited, Great Britain 2001) 5,7,9

Frederic William Maitland, Equity, also the forms of action at common law; two courses of lectures (1st, Cambridge [Eng.] : University Press, Great Britain 1984) 19

Gary Watt, Equity and Trusts Law (2nd, Oxford University Press, United States 2010) 18,

Gary Watt, Equity and Trusts Law (3rd, Oxford University Press, United States 2012) 18,

Gary Watt,Equity and Trust Law(3rd, Oxford University Press, United Kingdom 2012)

Jill E Martin, Modern Equity (18th, Thompson Reuters Legal Limited, Great Britain 2008) 917

Richard Edwards and Nigel Stockwell, Trusts and Equity (9th, Pearson, England 2009) 45

SukhindarPanesar, Exploring Equity and Trust (10th, Pearson , 2010) 4

Journal Article

“Equity in the Modern Law: an Exercise in Taxonomy” (1996) 26 W.A.U.L.R., Accessed 1 December 2013

J. Martin “Fusion ,Fallacy and Confusion” [1994] Conv 13, accessed 1 December 2013

Websites

Lord Neuberg of Abbotsbory, 'Has Equity had it's day?' (Judiciary UK 2010) <http://www.judiciary.gov.uk/Resources/JCO/Documents/Speeches/mr-speech-hong-kong-lecture-12102010.pdf> accessed 1 December 2013