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trusts-and-equity-lecture-notes-lecture-notes-lectures-1-10-Law of Trusts and Equity (University of Birmingham)

Lord Dudley v Lady Dudley [1705] Prec. Ch. 241, 244 (Sir Nathan Wright): “[E]quity is no part of the law, but a moral virtue, which qualifies, moderates, and reforms the rigour, hardness, and edg e of the law, and is a universal trust, it does also assists the law Haley and McMurty, Equity and Trusts (4th edn, Sweet & Maxwell 2014): “The term “equity” is, in a general sense associated with notions of fairness, morality, and justice. It is an ethical jurisdiction, originally of canon law descent. On a more legalistic level, however, “equity C word of warning: in this module you will hear us referring to ‘the common law.’ Note that ‘common law’ has (at least) three separate meanings: 1. ‘Common Law’ as the legal tradition of systems found in the Commonwealth and United States, as opposed to the ‘Civil Law’ tradition of Continental Europe. 2. ‘Common Law’ as ‘judge-made’ law, as opposed to statute. 3. ‘Common Law’ as the jurisdiction of the courts, as opposed to the equitable jurisdiction of the King and his Chancellor. We will see that equity has an important and interesting history. From medieval times the Common Law was a body of rules that were interpreted strictly by the Common Law courts. Where the Common Law did not provide a remedy, or the outcom - *Webb & Akkouh, Chapter One and/or Hayton & Mitchell, Part One - *Burrows (ed) English Private Law (OUP 2nd ed, 2007) (p220-233, on Canvas). - *A Burrows, ‘We do this at Common Law but that in Equity’ (2002) 22 Oxford Journal of Legal Studies 1 - *Lord Neuberger MR, ‘Has Equity Had its Day?’ (available on Canvas) 1. The history of equity The problem: ‘[T]he growing strength of the substantive [common] law could also work injustice, because the judges preferred to suffer hardship in individual cases than to make exception to clear rules. The stock example was that of the debtor who gave his creditors a sealed bond but did not ensure that it was cancelled when he paid up. The law regarded the bond as incontrovertible evidence of The common law would only look at the written evidence (the bond), equity would look at the conscience of the parties. Earl of Oxford’s case (1615) 1 Rep Ch 1, 6 This was a major conflict between Lord Chief Justice Coke (COMMON LCW) and Lord Ellesmere over whether the chancellor would continue to grant common injunctions [you don’t need to know the facts] Lord Ellesmere: ‘[M]en’s actions are so diverse and infinite that it is impossible to make any general rule which may aptly meet with every particular and not fail in some circumstances The aftermath: ‘[The criticism that equity was unprincipled and unpredictable] began to be less true in the later seventeenth century, as the principles of equity began to become more fixed. Cases in the Chancery began to be reported around the middle of the century The criticism: Though following the Earl of Oxford case, the position of chancellor remained unchallenged but equity in itself was not without criticism Gee v Pritchard (1818) 2 Swans 402, 414 Re Telescriptor Syndicate Ltd [1903] 2 Ch 174 Re National Funds Assurance Co (1878) 10 ChD 118 Jessel MR: ‘[the Chancery Division of the High Court] is not, as I have often said, a Court of Conscience, but a Court of Law.’ CC v AB [2006] EWHC 3083 (QB), [27] Eady J: ‘With such a wide range of differing views in society, perhaps more than for many generations, one must guard against allow Salt v Cooper (1880) 16 ChD 544, 549 Jessel MR: ‘the main object of the Cct was to assimilate the transaction of Equity business and Common Law business by different Courts of Judicature. It has been sometimes inaccurately called ‘the fusion of Law and Equity’; but it was not any fusion, or anything of the kind; it was the vesting in one tribunal of the administration of Law and Equity in every cause, action or dispute which should come before that tribunal.’ MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 Cll ER 675 (CC), 691 Mummery LJ: ‘[The Judicature Ccts w]ere intended to achieve procedural improvements in the administration of law and equity in all the law courts, not to transform equity interests into legal titles or to sweep away altogether the rules of the common law…’ Substantive fusion The idea that the judicature acts removed any substantive distinction between common law and equitable claims, and abolished defences and remedies. (sometimes called the ‘fusion fallacy’ by its detractors) Boyer v Warbey [1953] 1 QB 234 Lord Denning: ‘I know that before the Judicature Cct 1873 it was said that the doctrine of covenants running with the land only applied to covenants under seal and not to agre United Scientific Holdings Ltd v Burnley Borough Council [1978] CC 904, 924-925 Lord Diplock: ‘… by 1977 this metaphor [of two streams running side by side] has in my view become both mischievous and deceptive. The innate conservatism o Tinsley v Milligan [1994] 1 CC 340, 371 ‘Equity is not to be presumed to be past the age of child-bearing’ Lord Neuberger MR, ‘Has Equity Had its Day?’ • *Re Vandervell’s Trusts (No 2) [1974] Ch 269 [read case in full] Involves a settlement he set up for his children: what happened to the option to repurchase So there was a resulting trust for Mr. Vandervell. But, as soon as the option was exercised and the shares registered in the trustees' name, there was created a valid trust of the shares in favour of the children's settlement “The effect of Pennington v Waine should not be seen as introducing a new exception to the rule against perfecting imperfect gifts; rather it is an opportunity to recast ‘I reach that conclusion [to deny the transfer] without any great comfort that the existing rules about the circumstances when equity will and will not perfect an apparently imperfect gift of shares • *Milroy v Lord (1862) 45 ER 1185 • *Richards v Delbridge (1874) LR 18 Eq 11 • Shah v Shah [2010] EWCC Civ 1408 2 Fortuitous vesting: the rule in Strong v Bird The third exception to the rule that equity would not perfect an imperfect gift, which has arisen out of Strong v Bird, and Re Ralli’s Wills trust. Fortui FIVE REMEDIES [for breach of FD] 1. Rescission of contract between principal and fiduciary, or between principal and 3P; 2. “Pecuniary rescission” (award of money sum representing the value of property transferred under a voidable contract that can no longer be restored in specie; 3. Equitable compensation for other types of loss sustained by the principal; 4. Account of profits made through breach. 5. Constructive trust imposed on profits. The last four are the ones were talking about NNDERSTCNDING THE FIDICNCRY • Fiduciary relationships are status based – arise as a matter of law as a result of the parties’ [purely contractual] relationship. • Fact based fiduciary relationships where duties imposed on an ad hoc basis according to the circumstances of the case. The orthodox way of thinking of FD relationships is that their status based not contract based. You don’t have to assume every responsibility a lot of them attach to this status e.g. as a trustee a lot of responsibilities attach to that stauts. [MISSING C SLIDE HERE 8.. understanding fidicuary] CONTRCCTNCLISING THE FIDICNCRY • Courts will not introduce fiduciary duties unless clear that is an appropriate construction. JP Morgan Chase Bank v Springwell Navigation Corp (Gloster J): “the mere fact that one party to a commercial relationship ‘trusts’ the other does not predicate a fiduciary relationship • Edelman: voluntary undertaking in order for obligations to arise, and content determined by ordinary contractual process – officious bystander, implication • Dr Finn: a person “is not subject to fiduciary obligations because he is a fiduciary. It is because he is subject to them that he is a fiduciary.” Cn example of a fiduciary relationship largely circumscribed by the contract, with terms dictating it. • Aas v Benham • But, remember Lord Eldon in ex parte James: • “This doctrine… stands much more upon general principle than upon the circumstances of any individual case. It rests upon this • Trustee de son tort: a person who isn’t a trustee, there is no trust instrument operating with respect to them but who takes it upon himself to deal with trust property as if he were a trustee • Five-fold classification in Baden Delvaux v Societe Generale: 1. Cctual knowledge; 2. Wilfully shutting one’s eyes to the obvious; 3. Wilfully and recklessly failing to make such inquiries as an honest, reasonable man would; 4. Knowledge of circumstances which would indicate the facts to an honest, reasonable man; 5. Knowledge of circumstances, which would put an honest and reasonable man on inquiry

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