TRUSTS REVISION NOTES
Introduction to Equity
- Equity was originally founded on the Lord Chancellor’s discretion – ‘Chancellor’s
foot’
- Equity is the body of rules which evolved to mitigate the severity of the rules of the
common law – principles of justice and conscience are the basis of equity.
- 19th century was a period of great development of the equitable jurisdiction ->
industrialisation increased the need for administration of companies and
partnerships and the change in emphasis from landed wealth to stocks and shares
necessitated the development of new concepts of property settlements.
- Equity and common law were originally administered by separate courts. The two
court systems co-existed uneasily until the Earl of Oxford’s Case, when the King held
that equity prevailed over the common law in the event of a conflict.
- The Judicature Acts 1873-75 represent the unification of the two jurisdictions with
the result that all judges could apply both equitable and common law rules -> single
Supreme Court, comprising the High Court and the Court of Appeal – s25 of the Acts
gave statutory authority to the principle where common law and equity conflicted,
equity prevailed (re-enacted by Senior Courts Act 1981, s49 (1))
- Walsh v Lonsdale -> represents the effect of the Judicature Acts -> equity held that
the tenant was liable to pay a year’s rent in advance and the distress was lawful ->
the agreement for the lease was as good as a lease.
- The effect of the Judicatures Acts was to enable the court to treat ‘as done that
which ought to be done’ and to allow an equitable defence.
o Legal remedy of damages can be given for breach of an equitable right
o An equitable remedy for breach of a legal right can be given eg injunction or
SP of contract
- Fusion debate
o The Judicature Acts create unified administration, but do they create a
unified body of law?
o Argument1 the Acts only unified the administration of the law
They co-exist but they do not mix – Ashburner’s metaphor (two
parallel streams of water that do not mix)
o Argument2 the Acts effected a more substantive fusion of equity and the
common law
Walsh – Jessel MR argued that ‘there are not 2 separate estates as
there were formerly. There is only one Court and the Equity rule
prevails in it’
1
, Lord Diplock – argued that Ashburner’s metaphor of two parallel
streams is ‘mischievous and deceptive’ and that the ‘streams’ had
long since mingled together
It is clear that the rules and remedies of equity and common law have
moved closer together – AG v Blake: HL proved willing to grant
equitable remedies more flexibly in respect of the breach of a legal
right in exceptional circumstances – eg breach of fiduciary duty
o Argument3 equity and common law should be fused
Pressing need to complete the unification of the two systems
Worthington – argues that the two systems increasingly invade each
other’s territory, and this creates the risk that like cases will not be
treated alike and the ability of judges to make clear decisions will be
clouded
Convincingly argues that the two systems have always borrowed from
each other and that neither system now occupies a distinctive
conceptual position
- Nature of equitable rights
o Can be a right in rem or right in personam
o A beneficiary’s interest behind a trust gives him proprietary interest
o Beneficiary is the owner in equity whereas the trustee is the owner at law.
The trustee is able to sue and the beneficiary is not.
o Equitable ownership of the beneficiary is defeated once the property is sold
to a bona fide purchaser.
- Maxims of Equity
o ‘Equity looks to the intent rather than the form’
o ‘Equity regards as done that which ought to be done’
o ‘Equity will not allow a statute to be used as an instrument of fraud’ eg
Rochefoucauld v Boustead [1897] 1 Ch 196
o ‘Equity follows the law’
o ‘Equity will not suffer a wrong to be without a remedy’
o ‘He comes to Equity must do so with Clean Hands’ -> in a relevant sense:
Argyll v Argyll
Equitable remedies
- Discretionary -> awarded when common law remedies are inadequate. Enables the
claimant to take full advantage of a right at common law
- If equity refuses damages, the claimant’s right to sue for damages still exists in law
- Specific performance
o Discretionary
o Only available where common law remedy of damages for breach is
inadequate. Not available if in the construction of the contract the parties
2
, have agreed that a specific sum of money is to be paid as an alternative to
performing the contract.
o Remedy in personam -> issued against the defendant. Can also take place if
the defendant is within the jurisdiction of the court even though the subject-
matter of the contract is outside the jurisdiction of the court – Penn v
Baltimore (court’s discretion is limited when it comes to land.)
o Court must ensure that D is in a position to comply with SP and must observe
that it is being performed
o Performance of contract must be breached for the order to start
o Damages can be granted in addition to or in substation for SP
If D fails to comply, C can seek damages or the dissolution of the
contract – Johnson v Agnew
o Beswick v Beswick – aunt could not enforce contract as a 3rd party but as
uncle’s administratrix wife, obtained order for SP – on behalf of his husband’s
estate rather than in her own right
o Argyll Stores Ltd – court refused SP to keep the supermarket to stay in the
building bc it would require constant supervision
- Injunctions
o In personam -> does not solely depend on the discretion of the judge but
rather according to the sufficient legal reasons or on settled legal principles
o Must be a right in law or in equity to be protected by an injunction
o Prohibitory injunctions – restraining the commission of a certain act
o Mandatory injunctions – orders the act to be undone
o Interim injunctions – sometimes D must be immediately restrained to avoid
irreparable damages
o Perpetual injunctions – means that the order will finally settle the present
dispute
o Without notice – if the order is given without notice, D has the chance to set
it aside or have it varied.
o Quia timet injunctions – an order which aims to protect potential harm to
claimant’s rights. Infringement to rights is threatened but not yet occurred.
Must show a very strong probability of a future infringement and that the
damage caused will be of serious nature.
o Freezing injunctions – an interim order which prevents a party removing
assets located within the jurisdiction of the court
- Rescission
o Discretionary
o Sets aside a transaction (voluntary dispositions) -> a contract is voidable until
it is rescinded.
o Applies where there is no consideration, in case of a gift, breach of fiduciary
duty and where restitution in integrum is possible
o Restitution in integrum – has to restore the parties to their original position,
you can’t rescind if counter restitution is impossible
3
, o Mistake:
Pitt v Holt – must be a sufficiently serious mistake that it would be
unjust to not to set it aside. Mistake was set aside and granted relief.
Focus on the gravity of the causative mistake and the
unconscionability of the situation. Overruled Re Hastings Bass.
Wright v National Wesminster Bank
o Contracts:
Mistake alone is not an automatic ground for rescission
It was until recently established that there was a jurisdiction in equity
to rescind a contract on the ground of mistake common to both
parties in circumstances where the contract was valid at common law
Bell v Lever Brothers – common law position, common mistake
discredited as inconsistent
Solle v Butcher – suggestion of equitable jurisdiction where contract
valid at common law
Great Peace Shipping – rejects Solle.
o Misrepresentation:
Misrepresentation Act 1967, s2(2)
If misrep was fraudulent = must be set aside both in common law and
equity
Equity alone gives relief where misrep is not fraudulent
Mere silence does not amount to a misrep
o Undue influence:
Dominance over the claimant in procuring his execution of a
document of his entering into an obligation
Equity also covers threats or physical duress
o Unconscionable bargain:
3 elements must be established
One party must be at serious disadvantage to other reason of poverty,
ignorance or otherwise
Transaction was at an undervalue
Lack of independent legal advice
o Losing the right to rescind:
Affirmation – if you choose to affirm the contract instead of setting
aside then you lose your right to rescind.
Lapse of time - Salt v Startstone Specialists Ltd: lost right to rescind
bc time lapse and cannot can’t damages in lieu of rescission
4
Introduction to Equity
- Equity was originally founded on the Lord Chancellor’s discretion – ‘Chancellor’s
foot’
- Equity is the body of rules which evolved to mitigate the severity of the rules of the
common law – principles of justice and conscience are the basis of equity.
- 19th century was a period of great development of the equitable jurisdiction ->
industrialisation increased the need for administration of companies and
partnerships and the change in emphasis from landed wealth to stocks and shares
necessitated the development of new concepts of property settlements.
- Equity and common law were originally administered by separate courts. The two
court systems co-existed uneasily until the Earl of Oxford’s Case, when the King held
that equity prevailed over the common law in the event of a conflict.
- The Judicature Acts 1873-75 represent the unification of the two jurisdictions with
the result that all judges could apply both equitable and common law rules -> single
Supreme Court, comprising the High Court and the Court of Appeal – s25 of the Acts
gave statutory authority to the principle where common law and equity conflicted,
equity prevailed (re-enacted by Senior Courts Act 1981, s49 (1))
- Walsh v Lonsdale -> represents the effect of the Judicature Acts -> equity held that
the tenant was liable to pay a year’s rent in advance and the distress was lawful ->
the agreement for the lease was as good as a lease.
- The effect of the Judicatures Acts was to enable the court to treat ‘as done that
which ought to be done’ and to allow an equitable defence.
o Legal remedy of damages can be given for breach of an equitable right
o An equitable remedy for breach of a legal right can be given eg injunction or
SP of contract
- Fusion debate
o The Judicature Acts create unified administration, but do they create a
unified body of law?
o Argument1 the Acts only unified the administration of the law
They co-exist but they do not mix – Ashburner’s metaphor (two
parallel streams of water that do not mix)
o Argument2 the Acts effected a more substantive fusion of equity and the
common law
Walsh – Jessel MR argued that ‘there are not 2 separate estates as
there were formerly. There is only one Court and the Equity rule
prevails in it’
1
, Lord Diplock – argued that Ashburner’s metaphor of two parallel
streams is ‘mischievous and deceptive’ and that the ‘streams’ had
long since mingled together
It is clear that the rules and remedies of equity and common law have
moved closer together – AG v Blake: HL proved willing to grant
equitable remedies more flexibly in respect of the breach of a legal
right in exceptional circumstances – eg breach of fiduciary duty
o Argument3 equity and common law should be fused
Pressing need to complete the unification of the two systems
Worthington – argues that the two systems increasingly invade each
other’s territory, and this creates the risk that like cases will not be
treated alike and the ability of judges to make clear decisions will be
clouded
Convincingly argues that the two systems have always borrowed from
each other and that neither system now occupies a distinctive
conceptual position
- Nature of equitable rights
o Can be a right in rem or right in personam
o A beneficiary’s interest behind a trust gives him proprietary interest
o Beneficiary is the owner in equity whereas the trustee is the owner at law.
The trustee is able to sue and the beneficiary is not.
o Equitable ownership of the beneficiary is defeated once the property is sold
to a bona fide purchaser.
- Maxims of Equity
o ‘Equity looks to the intent rather than the form’
o ‘Equity regards as done that which ought to be done’
o ‘Equity will not allow a statute to be used as an instrument of fraud’ eg
Rochefoucauld v Boustead [1897] 1 Ch 196
o ‘Equity follows the law’
o ‘Equity will not suffer a wrong to be without a remedy’
o ‘He comes to Equity must do so with Clean Hands’ -> in a relevant sense:
Argyll v Argyll
Equitable remedies
- Discretionary -> awarded when common law remedies are inadequate. Enables the
claimant to take full advantage of a right at common law
- If equity refuses damages, the claimant’s right to sue for damages still exists in law
- Specific performance
o Discretionary
o Only available where common law remedy of damages for breach is
inadequate. Not available if in the construction of the contract the parties
2
, have agreed that a specific sum of money is to be paid as an alternative to
performing the contract.
o Remedy in personam -> issued against the defendant. Can also take place if
the defendant is within the jurisdiction of the court even though the subject-
matter of the contract is outside the jurisdiction of the court – Penn v
Baltimore (court’s discretion is limited when it comes to land.)
o Court must ensure that D is in a position to comply with SP and must observe
that it is being performed
o Performance of contract must be breached for the order to start
o Damages can be granted in addition to or in substation for SP
If D fails to comply, C can seek damages or the dissolution of the
contract – Johnson v Agnew
o Beswick v Beswick – aunt could not enforce contract as a 3rd party but as
uncle’s administratrix wife, obtained order for SP – on behalf of his husband’s
estate rather than in her own right
o Argyll Stores Ltd – court refused SP to keep the supermarket to stay in the
building bc it would require constant supervision
- Injunctions
o In personam -> does not solely depend on the discretion of the judge but
rather according to the sufficient legal reasons or on settled legal principles
o Must be a right in law or in equity to be protected by an injunction
o Prohibitory injunctions – restraining the commission of a certain act
o Mandatory injunctions – orders the act to be undone
o Interim injunctions – sometimes D must be immediately restrained to avoid
irreparable damages
o Perpetual injunctions – means that the order will finally settle the present
dispute
o Without notice – if the order is given without notice, D has the chance to set
it aside or have it varied.
o Quia timet injunctions – an order which aims to protect potential harm to
claimant’s rights. Infringement to rights is threatened but not yet occurred.
Must show a very strong probability of a future infringement and that the
damage caused will be of serious nature.
o Freezing injunctions – an interim order which prevents a party removing
assets located within the jurisdiction of the court
- Rescission
o Discretionary
o Sets aside a transaction (voluntary dispositions) -> a contract is voidable until
it is rescinded.
o Applies where there is no consideration, in case of a gift, breach of fiduciary
duty and where restitution in integrum is possible
o Restitution in integrum – has to restore the parties to their original position,
you can’t rescind if counter restitution is impossible
3
, o Mistake:
Pitt v Holt – must be a sufficiently serious mistake that it would be
unjust to not to set it aside. Mistake was set aside and granted relief.
Focus on the gravity of the causative mistake and the
unconscionability of the situation. Overruled Re Hastings Bass.
Wright v National Wesminster Bank
o Contracts:
Mistake alone is not an automatic ground for rescission
It was until recently established that there was a jurisdiction in equity
to rescind a contract on the ground of mistake common to both
parties in circumstances where the contract was valid at common law
Bell v Lever Brothers – common law position, common mistake
discredited as inconsistent
Solle v Butcher – suggestion of equitable jurisdiction where contract
valid at common law
Great Peace Shipping – rejects Solle.
o Misrepresentation:
Misrepresentation Act 1967, s2(2)
If misrep was fraudulent = must be set aside both in common law and
equity
Equity alone gives relief where misrep is not fraudulent
Mere silence does not amount to a misrep
o Undue influence:
Dominance over the claimant in procuring his execution of a
document of his entering into an obligation
Equity also covers threats or physical duress
o Unconscionable bargain:
3 elements must be established
One party must be at serious disadvantage to other reason of poverty,
ignorance or otherwise
Transaction was at an undervalue
Lack of independent legal advice
o Losing the right to rescind:
Affirmation – if you choose to affirm the contract instead of setting
aside then you lose your right to rescind.
Lapse of time - Salt v Startstone Specialists Ltd: lost right to rescind
bc time lapse and cannot can’t damages in lieu of rescission
4
