Equity Detailed Notes - The Nature of Equity

LECTURE 1 The Nature of Equity 1

The Nature of Equity 1

Historical Background 1

The Development of Modern Equity 2

Fusion of Law and Equity? 2

Maxims of Equity 3

Equity will not suffer a wrong to be without a remedy 3

Equity follows the Law 4

He who seeks equity must do equity 4

He who comes to equity must come with clean hands 5

Delay defeats equity 6

Effect of the Statute of Limitations 1957 7

Laches and acquiescence 7

Equality is equity 8

Equity looks to the intent rather than the form 8

Equity looks on that as done which ought to have been done 9

Equity imputes an intention to fulfil an obligation 9

Equity acts in personam 9

LECTURE 2 Injunctions 13

Perpetual Injunctions 13

Other Discretionary Factors 14

Delay/Acquiescence 14

Effect on Third Parties 15

Interlocutory Injunctions 16

The Campus Oil Principles 16

Mandatory Injunctions 23

Mandatory Injunctions at the Trial of the Action 23

Interlocutory Mandatory Injunctions 23

Quia Timet Injunctions 25

Mareva Injunctions 26

Origins of the Mareva Injunction 26

Prerequisites to a Mareva Injunction 27

Extra-Territorial Mareva Injunctions 30

Summary of Mareva Injunctions 33

Anton Piller Order 34

The Nature of Anton Piller Orders 34

Options for a defendant facing an Anton Piller Order 35

Bayer Injunctions 37

LECTURE 3 Specific Performance 41

Specific Performance in Particular Situations 41

Contracts for the Sale of Land 41

Contracts requiring supervision 43

Contracts to build and repair 45

Contracts for personal services 46

Defences to Specific Performance 47

Lack of Mutuality 47

Mistake 47

Misrepresentation 48

Laches or Delay 48

Hardship 49

Illegality and Public Policy 49

Impossibility and Frustration 50

LECTURE 4 Equitable Remedies: Rectification 53

Grounds for rectification 53

Mutual mistake 53

Unilateral mistake 56

Onus of proof 58

Discretionary factors 59

Instruments which may be rectified 59

LECTURE 5 Equitable Remedies: Rescission 61

Grounds for equitable rescission 61

Misrepresentation/fraudulent misrepresentation 61

Innocent misrepresentation 62

Mistake 63

Undue influence 64

Undue influence and third parties 73

Unconscionable/improvident transactions 79

LECTURE 6 Equitable Doctrines, Equitable Interests and Equities 87

Equitable doctrines 87

Equitable interests 103

LECTURE 7 Equitable Doctrines – Estoppel 111

Promissory estoppel 111

Propretary estoppels 114

Relationship between proprietary and promissory estoppels 123

LECTURE 8 Introduction to Trusts 125

Definition of a trust 125

Distinguishing trusts from other concepts 125

Classification of trusts 126

LECTURE 9 Creating Express Trust 129

Formalities 129

The Three Certainties 130

LECTURE 10 Constitution of Trusts 137

Exceptions to the rule that equity will not assist a volunteer 139

LECTURE 11 Secret Trusts 145

Classification of secret trusts 145

Fully secret trusts 145

Half-secret trusts 147

LECTURE 12 Purpose Trusts 153

The need for clarity and certainty 153

The need for compliance with the rules against perpetuities and inalienability 154

Exceptions to the general principle 155

LECTURE 13 Charitable Trusts 159

Legislative framework 159

Trusts for the relief of poverty 162

Trusts for the advancement of education 164

Trusts for the advancement of religion 166

Trusts for other purposes beneficial to the community 167

LECTURE 14 Cy-Près Doctrine 171

Initial failure of charitable trust 171

Subsequent failure of charitable trust 172

Charities Act 1961 172

Application of the cy-près jurisdiction 174

LECTURE 15 Resulting Trusts 177

The nature of resulting trusts 177

Automatic resulting trusts 177

Quistclose trust 179

Transfer of personality 182

Joint Accounts 182

LECTURE 16 Property Rights of Cohabitees 191

Constructive trusts 195

Proprietary estoppel 196

LECTURE 17 Constructive Trusts 199

Institutional constructive trust 199

Unauthorised profits by fiduciaries 201

Liability of a stranger to a trust as a constructive trustee 202

Further aspects of constructive trusts 208

LECTURE 18 Trustees 213

Appointment, removal and retirement of trustees 213

Powers and duties of trustees 215

Reform 221

LECTURE 19 Tracing 225

Tracing at common law 225

Tracing in Equity 225

Restrictions on equitable tracing 229

Welcome to Equity and Trusts! Usually Lecture 1 contains general and somewhat unimportant information; this is most definitely not the case for this course. The topic of equitable maxims which is dealt with in detail in this chapter is highly examinable. What is even better is that it is quite simple, and the same question is almost always asked. In all past exam papers the same question has been asked, with the exception of April 2007. Therefore, this is an area that requires detailed consideration so as to maximize your marks in the exam.

One of the hardest questions for any lawyer to answer is “what is equity”? In order to understand the answer to that question it is necessary to examine the historical background to the development of equity as a body of law. Equity emerged from the rules and principles that were developed by the Court of Chancery during the sixteenth, seventeenth and eighteenth centuries. Modern equity plays an important role in our legal system however in order to understand the modern case law it is first necessary to consider the origins of equity

THE NATURE OF EQUITY

Historical Background

By the end of the 13th century in England the common law had developed into quite a rigid set of rules. There were a number of problems in the way in which the common law was being administered. Keane identifies three significant defects of the common law at the time.1 Firstly, a person might not have been able to obtain justice if his opponent was too powerful or because the courts did not function effectively in his local area. A second problem facing litigants was the rigidity of the common law. If a litigant was not able to frame his complaint within the constraints of an existing procedure he could not proceed with the action at common law. Finally, there was a lack of flexibility in terms of the remedies that could be awarded by the common law courts. The courts were generally only willing to grant a remedy of damages. There are many instances where damages cannot provide an adequate remedy. For example, if a neighbour is committing a nuisance damages may not adequately remedy the wrong. In today’s legal system it would be possible to apply to the courts for an order to prevent the neighbour from continuing the nuisance. In 13th century England however, the only available remedy in the common law courts was damages.

At the time, a person who felt he had suffered injustice at the hands of the common law courts could petition the King. As a result of the inherent difficulties in the common law system, the numbers of persons petitioning the King increased dramatically. The King handed over this function to the Lord Chancellor who acted as “the conscience of the King”. The Lord Chancellor was given wide powers to dispense justice where the common law was seen to have operated unfairly. Accordingly two systems developed. The Kings judges operated mainly from the Court of Kings Bench, the Court of Common Pleas and the Court of the Exchequer. These judges administered the common law. The Lord Chancellor sat in the Court of Chancery and exercised an equitable jurisdiction on an individual, case by case basis. Institutionally the two systems were entirely separate. Litigants needed to be careful to institute proceedings in the correct court or they would have to begin the procedure all over again. Originally the position of Lord Chancellor was occupied by a clergyman but, over time, the office came to be held exclusively by lawyers. By the sixteenth century the equitable jurisdiction of the Court of Chancery had become increasingly powerful. Common lawyers became concerned that the Court of Chancery was attempting to subvert the common law rather than adopting a supplemental role. Matters came to a head in a dispute between Lord Coke, one of the most

famous common lawyers of the time, and Lord Ellesmere, the Lord Chancellor. The King sided with Lord Ellesmere and from that point on the jurisdiction of the Lord Chancellor was rarely challenged.

The beginnings of modern equity are often thought to lie with Lord Nottingham (1673– 1682) who has been described as “the father of equity”. Prior to this period the Court of Chancery suffered from much criticism for the subjective, “justice of the case” approach taken by the court and the lack of guiding principles. This lead to the famous comment that “equity varies like the Chancellor’s foot”. Under the guidance of Lord Nottingham however, the beginnings of a system of established rules and practices began to take shape. Throughout the eighteenth century equity shaped the law to meet entirely new social conditions. By the beginning of the nineteenth century the Court of Chancery was overloaded with work. Gradually efforts were made to fuse the two jurisdictions. In the middle of the nineteenth century the Common Law Procedure Act 1854 gave the common law courts a power to grant equitable remedies and the Chancery Amendment Act 1858 (the Lord Cairns Act) gave the Court of Chancery the power to award damages. The major change came with the Judicature Acts 1873 and 1875 which abolished the separate courts and created the Supreme Court of Judicature with a High Court divided into divisions known as the Queen’s Bench Division, Chancery Division, and the Probate, Divorce and...