origins of equity

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Origins and Nature of Equity

Some parts of equity you may recognise. You will have come across it in Contract, breach (remedies) and it also relates to co-ownership issues in property law.

Equity is a little bit difficult to get used to as a concept- it is thus easier to briefly examine its origins and history. Until the Judicature Acts were passed in the 1870s, Equity was a separate jurisdiction. Since then it is no longer a separate/supplementary jurisdiction but rather has developed through the common law.

Before the Judicature Acts, Equity was applied and administered by the Court of the Chancery. In the 14th/ 15th Centuries, if an individual had a common law action he went to the Common law courts for redress. If his grievance was not resolved by the common law, he had to turn to the Chancery Courts for redress- for example, if he wanted damages, he sought them at common law but if an injunction was desired, he had to look to Chancery. Chancery offered specific performance of the obligation.




Prior to the 18th Century, the Chancellor was the most important man in the kingdom after the monarch. It was he who issued writs, allowing plaintiffs to proceed with their actions in court. A Plaintiff could only sue if his action/complaint came within the scope of an existing writ. These writs were very specific in their application and covered only very narrow ground. The Common law was thus frozen by its inflexibility.

Because the action by writ was so limited, people began to petition the Chancellor directly, requesting that he exercise discretion. The Chancellor then began to receive these petitions and started to run his own court, where he would receive the parties. He had the power to subpoena people to this court, a power the common law judges did not enjoy. Thus the Chancellors court developed, dealing with work that could not be dealt with by the common law judges. However, people soon realised that the Chancellor afforded better justice and therefore began to bring common law actions before the Chancellor as well. The Chancellor was not so much concerned with case law and precedent but rather an individual sense of right and wrong (idea of the Chancellors foot). Thus equity came into its own. Although the jurisdiction was vague and undefined, the Chancellor gave justice according to conscience. This is not how equity functions nowadays, however- it is not simply a case of going to court and seeing what mood the judge is in today!

The Chancellor was developing things which were equitable (eg. specific performance, injunctions and other equitable remedies) but the most far-reaching development was the trust.

What is a trust??

The following gives a simple illustration

A gives land to B. However, A does not want B to own the land just yet and thus passes it to C on the undertaking that he hold it for B. Therefore, B will ultimately own the land but for the time being it is vested in C. The common law took the view that C was the owner- his is the name on the deed. On the other hand, the Chancellor took a different and more inventive view - C keeps the land but holds it for B. The Chancellor compelled C to hold the land. Thus C was the owner at law (legal owner) and B the owner at equity (equitable or beneficial owner).

Early terminology - C was the FOEFEE TO USES (trustee) and B was CESTUI QUI USE (beneficiary).

The trust was called the USE. The law in this area was crystallised by the Statute of Uses 155. This Statute put the settlor (the person giving away something) and the beneficiary in a legal taxable relationship. To get around this, another use was built in and in the 1700s, the terminology then became UNTO AND TO THE USE OF A ON TRUST FOR B . Thus the use became the trust, defined by the relationship between the trustee and beneficiary.

At the same time, there was a struggle over the power to award injunctions in the Chancellors court. This was a quarrel between the Chancellors Court and the Common Law Courts, resulting in the Common law Procedure Act 1854 and the Chancery Amendment Act 1854.

The Common law Procedure Act 1854 gave the Common law courts power to give certain equitable remedies whilst the Chancery Amendment Act did the reverse- giving Chancery Courts powers to award damages.

Friction between the two jurisdictions was apparent as early as 1610. In order to align the two jurisdictions, the King (James 1) had Francis Bacon (then Attorney General) judge a famous dispute between Lord Chancellor Ellesmere and LCJ Coke. It was decided that where there is conflict between the two, equity shall always prevail.

Ultimately in the Judicature Acts (187 and 1875) the two systems (law and equity) were fused.

Through the Acts, all the old courts were abolished and the Supreme Court of the Judicature was formed.

Included High Court which was structured in three divisions;

QBD-Tort/Contract/

Chancery- land/ Companies/Trust/Insolvency/Probate etc.

Family- Divorce/Children etc.

Each court in the new Supreme Court dispenses Common law and Equity- it is no longer compartmentalised. A plaintiff may seek common law and equity together. Equity is thus no longer a supplementary jurisdiction - to regard it as such would be to an utterly misleading statement of equitys place in the scheme of things today. Equity is hard to define as a concept (Rather through its content).

Equitable remedies are not just granted ad hoc- rather according to previous cases and principles developed through them (precedent).

Is it open to Equity to invent new equitable interests? The Common law view is that it does not make law but declares the law. Equity doesnt hold with this fiction. The CA has said that if a claim in equity exists, it must be shown to have an ancestry founded in history- It is not sufficient that because we may think that the justice of the present case requires it, we should invent such a jurisdiction for the first time. (Re. Diplock 148 CH p.465 @ p. 481) and more recently that the creation of new rights and remedies is a matter for Parliament and not the judges (Per LJ Megaw in Western Fish Products Ltd. v Penrith D. C. 181).

In Cowcher v. Cowcher 17, Bagnall J spoke of equity in terms of the application of sure and settled principles. Thus, he further states, the length of the Chancellors foot has been measured or is capable of measurement.



Judges today have the power to dispense remedies at both common law and equity- where there is conflict equity will prevail.

With the fusion of the two systems with the 1870s Judicature Acts- did it result in a fusion of the administration or a fusion of Equity and Common law themselves? The traditional view is that merely the administration was fused. More recently the argument that the two areas themselves were fused has developed (Per Lord Denning, Errington v Errington ).

Why create a trust?

N. B. Can be created or imposed by the Court.

�æ Tax advantages

�æ To enable minors to hold land

�æ Tie up wealth/land for future generations (probably more historical than actual)

�æ To hold land on behalf of club or society (generally their land/possessions held by trustees)

�æ Make private provision for dependants (in the past for mistresses/illegitimate children). Trust deed is private whereas will is a public document.

�æ Make a gift in the future

�æ Make a gift to charity

Definition of a trust

A standard older definition by Underhill

An equitable obligation binding a person (Trustee) to deal with property over which he has control to benefit beneficiaries of whom he may be one, and any one of whom may enforce the obligation.

N.B. This definition does not include Charitable trusts nor does it cover trusts of imperfect obligation. A Charitable trust enjoys tax advantages that others do not.

Pettitt

A Trust is an equitable obligation binding a person (Trustee) to deal with property over which he has control either for the benefit of persons of whom he may be one and any one of whom may enforce the obligation or for a charitable purpose, which may be enforced at the instance of the AG or for some other purpose permitted by law though unenforceable.

Distinction of Trust from other legal concepts

1. A contract A contract cannot be enforced by someone who is not a party but a trust can be enforced by a beneficiary who is not a party.

A contract is a creation of the common law whereas a trust is a creature of equity. In a contract situation there is some give and take (element of bargain), each party giving the other some advantage. In a trust, the beneficiary is a volunteer (giving no consideration). The trustee himself generally gets no benefit and can get a lot of detriment (just say no if asked!).

N.B If a contract is delivered by way of a signed sealed and delivered deed, there is no requirement for consideration. Also remember the relatively new Contracts (Rights of Third Parties) Act 1

. Agency Both agents and trustees hold fiduciary obligations. Both come under certain obligations- duty not to delegate their responsibilities, they must not allow a conflict of interests, they cannot make secret profits and they both must keep proper accounts.

However, the principal Agent relationship is created by agreement, whereas the trustee-beneficiary relationship is not. The trustee does not represent the beneficiaries but he does perform duties for their benefit. The trustee has title vested in him (he is the legal owner) whereas that is not the case with an Agent. The Agent acts in behalf of the principle and subject to his control but the Trustee does not act in such a way vis a vis the beneficiaries.

. Powers. We will come back to these when we consider creation of trusts.

Features of a Trust

�æ Property owned and managed by Trustee who can sue and be sued

�æ For the benefit of beneficiaries (or charitable purposes enforced by Att. Gen or Charity Commissioners)

�æ Onerous fiduciary office- Trust property managed in best interests of the beneficiaries

�æ Trustee owes personal obligation to beneficiaries who also have equitable proprietary interest in the trust fund. They thus can trace trust assets and recover them from anyone but a bona fide purchaser for value without notice.

�æ Property owned and managed by trustee/s (as joint tenants) who sue or are sued

�æ Trustee owes equitable personal obligations to beneficiaries who also have equitable proprietary interests in the trust fund entitling them to trace trust assets and recover them from anyone but bona fide purchaser for value without notice.

�æ Segregated trust fund not available for claims of trustees creditors, spouse or heirs.

�æ To help with problems that may develop over long life of a trust the court has a supportive role in addition to its punitive enforcement role.

Maxims of Equity

Equity will not suffer a wrong to be without a remedy

Equity follows the law

Where there is equal equity, the law will prevail

He who seeks equity must do equity

Where the equities are equal the first in time will prevail

He who comes to equity must come with clean hands

Delay defeats equity

Equality is equity

Equity looks to the intent rather than to the form

Equity looks on that as done that which ought to have been done

Equity imputes an intention to fulfil an obligation

Equity acts in personam



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