Equity Law: S1
Lecture Set 1: Introduction
Lecture 1
What is Equity and How did it develop?
(I) Equity developed due to dis-satisfaction with the common law (general rules) and its remedies.
Ref: Earl of Oxford’s Case (1615) 1 Rep Ch 1
(i) Mens actions are so diverse and infinite that it is impossible to make any
general law that will satisfactorily meet with every particular
circumstance and not fail in some circumstance.
The relationship between Common Law and Equity
As equity developed there were 2 different court systems – claimants had to go to the common law court if they wanted a
common law remedy (damages) or had to go to the Chancery courts if they wanted an equitable remedy.
However, the Supreme Courts of Judicature Act (1873) brought both equity and common law under one branch within the
senior court system for England and Wales. Generally, there are arguments about whether the ‘fusion’ has resulted in
substantive fusion of common law and equity or whether it has resulted in ‘just’ administrative fusion.
There are many conceptual distinctions surrounding this area: (1) The distinction between the difference of durability of
equitable rights compared with that of legal rights.
Equity is all about conscience
(i) Fundamentally, equity deals with situations where a defendant has not done anything ‘illegal’ or contrary to the
common law, however, they have done something ‘unconscionable’. It is this ‘unconscionable’ behaviour that
equity seeks to remedy.
(ii) Equity is no longer the conscience of ‘one man’, the development of the courts of chancery has resulted in
developed principles.
(iii) ‘’unethical but not illegal’’
Central themes of Equity
There are essentially 3 central themes of Equity
(1) Equitable Rights
(2) Equitable Maxims
(3) Equitable Remedies
Equitable Rights
The difference between equitable property rights and legal property rights
(i) Legal Property Rights – binds the whole world.
(ii) Equitable Property Rights – (for example, those under a trust) – will bind everyone except the Bona Fide Purchaser
for Value Without Notice (BFPFVWN) (EQUITY DARLING).
(iii) Bona Fide – means In Good Faith
, (iv) Purchaser for Value – Purchased property (land) and provided the appropriate value (consideration)
(v) Without Notice – explained in Barclays Bank v O’Brien
(1) Actual Notice – purchaser is aware of the equitable interest over the property they wish to purchase.
(2) Constructive Notice – purchaser would have been aware of the equitable interest over the property they wish
to purchase had they carried out the usual enquires and inspections.
(3) Imputive Notice – awareness of an equitable right that comes via a third party working on behalf of the
purchaser (for example – conveyancing solicitor)
NB: In terms of land law, amusement is the right to do something on somebody’s land (for
example- park, store). These are easements – if there are legal easements, then it is enforceable
with any purchaser of the land. However, if it is an equitable interest, then it can be enforced on
anyone who owns the land apart from a bona fide purchaser for value without notice purchases
it. Therefore, somebody who has acted in good faith, paid market value and has no notice of
your equitable interest. In this scenario the equitable interest cannot be enforced upon them.
Equitable Maxims
Equitable Maxims – (the following maxims refer to equity’s want to prevent unconscionable fraud (not criminal)). Maxims are
guiding principles which ensure that equity is no longer ad hoc but that it is a formalised system which still contains some
flexibility and is constantly evolving.
(i) Equity will not suffer a wrong without a remedy
(ii) He who comes to equity must come with clean hands
(iii) Equity follows the law (but not slavishly or always)
The later guidelines refer to how equity is concerned with people’s intentions and what they intend to do rather than
formalities. Whereas common law tends to be quite formality based, equity takes a formal flexible approach, if equity sees that
the intention is still there then it will still apply.
(iv) Where there is equal equity the law shall prevail. When equities are equal the first in time shall prevail.
(v) Equity looks to the intent rather than the form
(vi) Equity will not permit statute or common law to be used as an engine for fraud.
(vii) Equity will not assist a volunteer, delay defeats equity, equity acts in ‘personam’ and equity imputes an intention to
fulfil an obligation.
Equitable Remedies
(i) Equitable compensation
(ii) Equitable restitution
(iii) Specific Performance
(iv) Injunctions
(v) Rectification
(vi) Rescission
(vii) Subrogation
(viii) Account
,Lecture 2
What are Trusts and how did this concept develop (good way of legally avoiding tax)
Structure of the segment
(i) The Trust Concept
(ii) Types of Trust
(iii) Express Trusts – Sub-categories and key features
(iv) Implied Trusts – Sub-categories and key features
The essence of the Trust
The trust device allows more than one person to have an interest in property simultaneously through division of equitable and
legal ownership of a property.
(i) Trustee – hold the legal title and therefore have the ownership in law, however, this only provides them with
management of the trust property.
(ii) Beneficiary – they have the equitable interest in the property and therefore get the benefit of that trust property.
Trusts can be expressed or implied
1. Express Trusts
(i) Exhaustive
(ii) Non-exhaustive
(iii) Fixed
(iv) Discretionary
2. Implied
(i) Resulting
(ii) Constructive
Ways of Creating Express Trusts
(1) Declaring yourself as trustee of your own property
(2) Transfer ones property to trustees to hold
The Express Trust Mechanism
(i) The first way of creating a trust is where the settlor (absolute owner) declares that she holds the property on trust
for the benefit of another (the beneficiary)
- Settlor holds legal title to the trust as trustee
- Equitable interest in the property passes to the beneficiary
(ii) The second way of creating a trust is through a third part trustee. The settlor transfers legal title to property to a
third party (the trustee). The trustee holds the property on trust for the benefit of the beneficiary who holds
equitable interest in the trust.
- Settlor holds no power
- Third Party holds legal title
- Beneficiary holds equitable interest
, Characteristics of Express Trusts
There are 3 essential characteristics common to all trusts as set out in Article 2 of the Hague Convention on the law applicable to
Trusts (incorporated by the Trusts Act 1987)
(1) A trust can only exist if it relates to specific property
(2) Property must be held by trustees subject to mandatory obligations
(3) These mandatory obligations must be owed to people who can legally assert their rights (the beneficiaries). –
Beneficiary Principle
Characteristics of Trusts – Beneficiaries are entitled to the benefit of the trust
(i) Beneficiaries have the right to enforce trust obligations
Ref: Saunders v Vautier (1841) 4 Beav.115
(i) Beneficiaries have the right to override the terms of the trust
(ii) Rule was developed that dictates that any beneficiaries who together are
absolutely entitled to the trust property and are all of sound mind and
agreement can terminate the trust and demand that the property be
handed to them directly.
(iii) Beneficiaries have a proprietary right, which binds the world except for
the Bona fide purchaser.
Characteristics of Trusts - Express Trusts – inter- Vivos and Testamentary
(I) A settlor can create the trust within their lifetime
(i) The trust takes place within somebody’s will. Therefore, they are called a testator. They are doing the same thing
but in a different context.
Characteristics of Trusts - Trust Fund
(i) The property that is subject to the trust is called a Trust Fund. This can be relatively fluid, one of the key functions
is to invest in the trust fund and to grow, therefore, as a result it does not stay static. (The trust fund does not have
to be the same and can be a diverse range).
Ref: Westdeutsche v Islington London Borough Council [1996] AC 669
(i) A trust can only be created in relation to specific property.
(ii) The property can be real (land), personal or intellectual property (copyrights, patents). It may also be tangible or
intangible.
(iii) You cannot create a trust of a property that you do not yet own, therefore, you cannot create a trust over future
property.
(iv) A trust will fail to exist if trust property is destroyed/dissipated.
Ref: Goldcorp Exchange Ltd [1995] 1 AC 74
(i) You cannot create a trust over unascertained property.
Lecture Set 1: Introduction
Lecture 1
What is Equity and How did it develop?
(I) Equity developed due to dis-satisfaction with the common law (general rules) and its remedies.
Ref: Earl of Oxford’s Case (1615) 1 Rep Ch 1
(i) Mens actions are so diverse and infinite that it is impossible to make any
general law that will satisfactorily meet with every particular
circumstance and not fail in some circumstance.
The relationship between Common Law and Equity
As equity developed there were 2 different court systems – claimants had to go to the common law court if they wanted a
common law remedy (damages) or had to go to the Chancery courts if they wanted an equitable remedy.
However, the Supreme Courts of Judicature Act (1873) brought both equity and common law under one branch within the
senior court system for England and Wales. Generally, there are arguments about whether the ‘fusion’ has resulted in
substantive fusion of common law and equity or whether it has resulted in ‘just’ administrative fusion.
There are many conceptual distinctions surrounding this area: (1) The distinction between the difference of durability of
equitable rights compared with that of legal rights.
Equity is all about conscience
(i) Fundamentally, equity deals with situations where a defendant has not done anything ‘illegal’ or contrary to the
common law, however, they have done something ‘unconscionable’. It is this ‘unconscionable’ behaviour that
equity seeks to remedy.
(ii) Equity is no longer the conscience of ‘one man’, the development of the courts of chancery has resulted in
developed principles.
(iii) ‘’unethical but not illegal’’
Central themes of Equity
There are essentially 3 central themes of Equity
(1) Equitable Rights
(2) Equitable Maxims
(3) Equitable Remedies
Equitable Rights
The difference between equitable property rights and legal property rights
(i) Legal Property Rights – binds the whole world.
(ii) Equitable Property Rights – (for example, those under a trust) – will bind everyone except the Bona Fide Purchaser
for Value Without Notice (BFPFVWN) (EQUITY DARLING).
(iii) Bona Fide – means In Good Faith
, (iv) Purchaser for Value – Purchased property (land) and provided the appropriate value (consideration)
(v) Without Notice – explained in Barclays Bank v O’Brien
(1) Actual Notice – purchaser is aware of the equitable interest over the property they wish to purchase.
(2) Constructive Notice – purchaser would have been aware of the equitable interest over the property they wish
to purchase had they carried out the usual enquires and inspections.
(3) Imputive Notice – awareness of an equitable right that comes via a third party working on behalf of the
purchaser (for example – conveyancing solicitor)
NB: In terms of land law, amusement is the right to do something on somebody’s land (for
example- park, store). These are easements – if there are legal easements, then it is enforceable
with any purchaser of the land. However, if it is an equitable interest, then it can be enforced on
anyone who owns the land apart from a bona fide purchaser for value without notice purchases
it. Therefore, somebody who has acted in good faith, paid market value and has no notice of
your equitable interest. In this scenario the equitable interest cannot be enforced upon them.
Equitable Maxims
Equitable Maxims – (the following maxims refer to equity’s want to prevent unconscionable fraud (not criminal)). Maxims are
guiding principles which ensure that equity is no longer ad hoc but that it is a formalised system which still contains some
flexibility and is constantly evolving.
(i) Equity will not suffer a wrong without a remedy
(ii) He who comes to equity must come with clean hands
(iii) Equity follows the law (but not slavishly or always)
The later guidelines refer to how equity is concerned with people’s intentions and what they intend to do rather than
formalities. Whereas common law tends to be quite formality based, equity takes a formal flexible approach, if equity sees that
the intention is still there then it will still apply.
(iv) Where there is equal equity the law shall prevail. When equities are equal the first in time shall prevail.
(v) Equity looks to the intent rather than the form
(vi) Equity will not permit statute or common law to be used as an engine for fraud.
(vii) Equity will not assist a volunteer, delay defeats equity, equity acts in ‘personam’ and equity imputes an intention to
fulfil an obligation.
Equitable Remedies
(i) Equitable compensation
(ii) Equitable restitution
(iii) Specific Performance
(iv) Injunctions
(v) Rectification
(vi) Rescission
(vii) Subrogation
(viii) Account
,Lecture 2
What are Trusts and how did this concept develop (good way of legally avoiding tax)
Structure of the segment
(i) The Trust Concept
(ii) Types of Trust
(iii) Express Trusts – Sub-categories and key features
(iv) Implied Trusts – Sub-categories and key features
The essence of the Trust
The trust device allows more than one person to have an interest in property simultaneously through division of equitable and
legal ownership of a property.
(i) Trustee – hold the legal title and therefore have the ownership in law, however, this only provides them with
management of the trust property.
(ii) Beneficiary – they have the equitable interest in the property and therefore get the benefit of that trust property.
Trusts can be expressed or implied
1. Express Trusts
(i) Exhaustive
(ii) Non-exhaustive
(iii) Fixed
(iv) Discretionary
2. Implied
(i) Resulting
(ii) Constructive
Ways of Creating Express Trusts
(1) Declaring yourself as trustee of your own property
(2) Transfer ones property to trustees to hold
The Express Trust Mechanism
(i) The first way of creating a trust is where the settlor (absolute owner) declares that she holds the property on trust
for the benefit of another (the beneficiary)
- Settlor holds legal title to the trust as trustee
- Equitable interest in the property passes to the beneficiary
(ii) The second way of creating a trust is through a third part trustee. The settlor transfers legal title to property to a
third party (the trustee). The trustee holds the property on trust for the benefit of the beneficiary who holds
equitable interest in the trust.
- Settlor holds no power
- Third Party holds legal title
- Beneficiary holds equitable interest
, Characteristics of Express Trusts
There are 3 essential characteristics common to all trusts as set out in Article 2 of the Hague Convention on the law applicable to
Trusts (incorporated by the Trusts Act 1987)
(1) A trust can only exist if it relates to specific property
(2) Property must be held by trustees subject to mandatory obligations
(3) These mandatory obligations must be owed to people who can legally assert their rights (the beneficiaries). –
Beneficiary Principle
Characteristics of Trusts – Beneficiaries are entitled to the benefit of the trust
(i) Beneficiaries have the right to enforce trust obligations
Ref: Saunders v Vautier (1841) 4 Beav.115
(i) Beneficiaries have the right to override the terms of the trust
(ii) Rule was developed that dictates that any beneficiaries who together are
absolutely entitled to the trust property and are all of sound mind and
agreement can terminate the trust and demand that the property be
handed to them directly.
(iii) Beneficiaries have a proprietary right, which binds the world except for
the Bona fide purchaser.
Characteristics of Trusts - Express Trusts – inter- Vivos and Testamentary
(I) A settlor can create the trust within their lifetime
(i) The trust takes place within somebody’s will. Therefore, they are called a testator. They are doing the same thing
but in a different context.
Characteristics of Trusts - Trust Fund
(i) The property that is subject to the trust is called a Trust Fund. This can be relatively fluid, one of the key functions
is to invest in the trust fund and to grow, therefore, as a result it does not stay static. (The trust fund does not have
to be the same and can be a diverse range).
Ref: Westdeutsche v Islington London Borough Council [1996] AC 669
(i) A trust can only be created in relation to specific property.
(ii) The property can be real (land), personal or intellectual property (copyrights, patents). It may also be tangible or
intangible.
(iii) You cannot create a trust of a property that you do not yet own, therefore, you cannot create a trust over future
property.
(iv) A trust will fail to exist if trust property is destroyed/dissipated.
Ref: Goldcorp Exchange Ltd [1995] 1 AC 74
(i) You cannot create a trust over unascertained property.
