1. 1
LAW OF TRUSTS
CHAPTER I
EQUITY
S. Selvakkunapalan LL.B., LL.M.
Attorney-at-Law, Additional Draftsman
Visiting Lecturer – Sri Lanka Law College.
https://selvakunapalan.blogspot.com/2019/
2. Question Paper- Law of Trusts
1. The examination paper consisting of 9 questions out of
which you are requested to answer 6 questions.
2. Every question except question No.1, carries equal marks of
16. The question No.1 which carries 20 marks is
compulsory.
2
3. Recommended books:-
1. Keeton G.W. - Law of Trusts;
2. Scott A.W. - The Law of Trusts;
3. Dr. Jill Martin- Hanbury & Martin: Modern Equity;
19th Edition;
4. Philip H. Pettit - Equity and the Law of Trusts;
Twelfth Edition;
5. A J Oakley- Parker & Mellows :The Modern Law of
Trusts; 9th edition; and
6. Coorey L.J.M. -The Reception in Ceylon of the
English Trust.
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5. 5
What is equity?
• Equity means that which is fair and just, moral and ethical; but
its legal meaning is much narrower. It is not synonymous with
justice in a broad sense.
• The early development of equity categorized it as a separate
system from the then existing common law.
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6. • Equity is the means by which a system of law balances out the
need to achieve fair results in individual circumstances.
• Equity mitigates the rigour of the common law, so that the letter of
the law is not applied in such a strict way that it may cause
injustice.
• Equity appears to imbue the courts with the general discretion to
disapply statutory or common law rules whenever good
conscience requires it.
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7. • Equity can be understood as the means by which English law
ensures that the strict application of a common law or statutory
rule does not result in any unfairness. To this extent equity is a
form of natural justice and it has a moral basis.
• Equity can be considered in its formal sense as constituting the
collection of substantive principle to judge people’s consciences.
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8. • Equity should be understood as being a code of technical,
substantive rules and not simply as a reservoir of general principles.
• Principles of justice and conscience are the basis of equity
jurisdiction, but it must not be thought that the contrast between
law and equity is one between a system of strict rules and one of
broad discretion- A. Duggan (1997) 113 L.Q.R 601)
• Equity operates on the conscience of the owner of the legal
interest. In the case of a trust, the conscience of the legal owner
requires him to carry out the purposes for which the property was
vested in him.
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9. What is common law?
• Norman invasion in 1066 and William I seized control of the entire
Kingdom.
• England and Wales developed as a single jurisdiction and Scotland
retained its own legal system.
• Hence the term “common law” coined to mean this new system of
legal principle created by the English courts which was common to
the entire Kingdom.
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10. • Hentry II created the courts of King Bench to hear the matters.
Medieval courts and the principles of the common law began.
• If the common law courts’ decision was unfair or unjust, there
remained a right to petition the King directly.
• The proliferation of suits that were brought directly before the
King required the creation of a separate mechanism for hearing
them.
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11. • During the Medieval period, the position of Lord Chancellor was
created to hear the petitions.
• The Medieval Lord Chancellor was empowered to issue royal writs
on behalf of the Crown.
• The Lord Chancellor was a politician and foremost. Until 1741, it
was the Lord Chancellor who would have been considered the
prime minister to the Crown.
• Early Lords Chancellor were all clerics; that is they were bishops
who were keepers of the King’s conscience. Latterly, the Lords
Chancellor were secular appointments.
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12. • Since the Constitutional Reforms Act 2005, the Lord Chancellor
need not be a lawyer. He must be ‘qualified by experience’.-
section 2 (Lord Bingham (2006) 122 L.Q.R 211.
• In time, the number of petitions brought before the Lord
Chancellor became so numerous that a separate system of courts
was created to hear those cases – the courts of chancery.
• Lord Chancellor’s intervention gradually developed a distinct body
of law called ‘equity’ which was well established by the fifteenth
century. From then on, the Chancellor’s jurisdiction was exercised
via what later becomes ‘Court of Chancery.’
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13. • Equity is the branch of the law which, before the Judicature Act of
1873 (Britain) came into force, was applied and administrated by
the Court of Chancellery.
• Developed system of law has been assisted by the introduction of
discretionary power to do justice in particular cases where strict
rules of law cause hardship.
• Equity is the body of rules which evolved to mitigate the severity
of rules of the common law. Its origin was the exercise by the
Chancellor of the residual discretionary power of the King to do
justice.
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14. History of the Court of chancery
• At the end of 13th century, if the common law courts failed to do
justice, an aggrieved person might petition to the King.
• From early times, these petitions seeking the King’s
extraordinary justice seem to have been referred to the
Chancellor, and as early as the reign of Edward-I petitions are
found addressed to the Chancellor and the Council.
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15. • This procedure became more frequent, and by the end of 14th century
petitions began to be addressed to the Chancellor alone.
• As the practice became habitual and references were frequent, the
Chancellor and his office of chancery inevitably acquired the
characteristic of the court. The Chancellor made a decree upon his own
authority.
• In medieval period, the Chancellor’s jurisdiction was vague and
undefined; as well as the subject matter of the petitions which invoked
it.
• The basis of intervention was that it was necessary on grounds of
conscience. His authority was unquestioned in the case of fraud and
breach of confidence.
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16. 16
• During the medieval period, the chancellor was the most important
person in the country next to the King himself: Maitland described him
as “the King’s Secretary of State for all departments.
• One of the important functions of the Chancery was to issue the royal
writs or inventing new ones, the Chancellor could have some influence
on the development of the law.
• The cases referred to the Chancellor and chancery fall into two main
groups, firstly cases where the law was defective, and secondly those
where there was a theoretically remedy at common law but the
petitioner was unable to obtain it because of disturbed state of the
country, power and wealth of the other party.
17. • In exercising jurisdiction in cases of this kind, it is unlikely that the
Chancellor regarded himself as administering separate system of law.
• Consequently hardship increasingly often arose because of defects in
the law, and petitions began to be brought on this ground. In giving
relief in these cases, new law was being created, and it was this new
law which became known as equity in contrast common law
dispensed in the common law courts.
• The conflict between the jurisdiction was reduced by the fact that it
was a cardinal rule of the court of chancery that ‘equity acts in
personam’.
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18. • In the central institution, the trusts, the Chancellor never denied that
the trustee was the legal owner of the trust property.
• But merely insisted that the trustee should deal with it in accordance
with trust for the benefit of the beneficiaries.
• Until Judicature Act 1873, the Court of Chancellery had almost
exclusive equity jurisdiction; rules of equity were not enforced in the
common law courts.
• The two systems had a lot of conflict to the extent that, by the
nineteenth century a number of series of Parliamentary reports
resulted to the Judicature Acts 1873 and 1875.
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19. • The two Acts were responsible for amalgamating the existing
superior courts into a single Supreme Court of Judicature.
• A claimant could only sue at common law, if his complaint came
within the scope of an existing writ.
• In the 13th century, the available writs covered very narrow ground.
Even if the claim came within the scope of an existing writ, it may
have been that for some reasons, such as the power and influence of
the defendant or etc.
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20. 20
• It was possible after the Statute of Uses 1535, to create equitable
interests in land by imposing a use upon a leasehold, or by requiring
the legal owners of freehold land to collect the rents and profits and
to pay them over to the beneficiaries.
• If the land limited to A to the use of B to the use of C, is it possible to
argue that the first use will be executed, and that B will hold the legal
estate to the use of C?
• Such a resolution was reached by about 1700; the second use is
called a trust.
• A shorter form, which became settled practice, was to omit A, and to
make the disposition “unto and to the use of B in trust for C”.
21. • However, the story of development is confused and uncertain.
• If land was given to A on A’s undertaking to hold the land to use and
benefit of B, it was unconscionable for A to keep it for his own benefit. B
however had no legal claim or title of the land.
• The conveyance to A gave him whatever legal estate was conveyed, and, at
common law, A could exercise all the rights which that estate gave him.
• From the beginning of Chancellorship of Lord Nottingham in 1673 and to
the end of that of Lord Eldon in 1827, equity was transformed from a
jurisdiction based upon the personal interference of the Chancellor into
system of established rules and principles.
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22. 22
• Lord Nottingham did much to weld together and consolidate the
whole system.
• In the nineteenth century, the modern law of trusts developed and
shaped to meet entirely new conditions of social life.
• Section 25 of the Supreme Court of Judicature Act 1873 provided
for the solution of many problems in which those rules would
conflict.
• Subsection 11 contained a general residual clause: “Generally, in all
matters in which there is any conflict or variance between the rules
of equity and the rules of common law with reference to the same
matter, the rules of equity shall prevail.”
23. • There used to be two completely distinct sets of courts in England.
This position continued until enactment of Judicature Act 1873,
which removed the need to sue in common law courts for a
common law remedy, and so forth.
• Before the Judicature Act 1873 came into full effect in 1875, it was
necessary for a litigant to decide whether his claim related to
common law or to equity.
• The result of the Judicature Act 1873 was that the practical
distinction between common law and equity disappeared. However,
it is vitally important to understand that the intellectual distinction
remains.
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24. Amalgamation of Administration
or Fusion of Rules?
• The Judicature Acts 1873 and 1875 were responsible for amalgamating
the existing superior courts into a single Supreme Court of Judicature.
• This Supreme Court replaced the courts of Queen’s Bench, Court of
Exchequer chamber, Exchequer and Common Pleas as well as the court
of Chancery, and the court of appeal in Chancery.
• Many academicians have distinct perceptions as to whether the
Judicature Acts fused both the rules of equity and common law to make
then one, or whether it was just an amalgamation of the two rules so
that each of them retains its identity but administered in the same
court.
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25. • The Judicature Act clearly fused the administration of law and equity.
The question is whether equity and law fused.
• Some scholars think that the rules of common law and equity are
totally fused and are thus no longer distinguished while others
perceive the effect of the Judicature Act to have been procedural.
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27. • The orthodox view is that only jurisdictions have been fused.
• Legal rights remain legal rights and equitable rights remain
equitable rights though administered in the same court.
• In Salt v Cooper, Sir George Jessel MR, stated to the effect that, the
intent of the Judicature Act was not to fuse the two rules , but
rather administrating law and equity under a single tribunal.
• According to Professor Ashburner although equity and common
law are streams of jurisdiction running through the same channel,
they run side by side without mingling their waters.
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28. • In MCC Proceeds Inc v Lehman Bros International Mummery LJ revealed
the fact that, the Judicature Acts intended to gain procedural
improvements when it comes to the administering of law and equity.
• This was thus not to transform the existing equitable rights into legal titles
or fuse the equitable rules with common law.
• The legislation 1925 is based on the assumption that legal ownership is
different from equitable ownership.
• In China and South Sea Bank Ltd v. Tan Soon Gin [1990 1 AC536] the
equitable nature of the duties of a mortgagee has been emphasized,
although in Medforth v. Black [2000 Ch 86 at 102] It was said whether the
duty is expressed as a common law duty or as a duty in equity, the result
is same.
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29. • However, in Raja v. Lloyeds TSB Bank Plc [2001] 82 PCR 191] it was
said that result may not always be same.
• Target Holdings Ltd. V. Redferms [1996 a AC 310] although common
law damages and compensation in equity share the requirement of
causation, they differ on remoteness and foreseeability.
• Mcc Proceeds Inc. v. Lehman Brothers International (Europe)-
whether an equitable owner could sue for conversion. It was held
that such an owner, who has no title at common law, could not bring
such an action.
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30. Fusion of Common Law and Equity
• Some scholar and judges believe that, the Judicature Act did not
merely fuse the administration of the rules of law and equity, but
rather fussed the rules themselves.
• According to Lord Denning in Errington v Errington stated that, the
rules of equity and common law have been fused for almost eighty
years by that time.
• In Tinsley v Milligan [1994] 1 AC 340, Lord Browwne-Wilkinson held to
the effect that, English law now has one single law that contains both
legal and equitable interests.
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31. • Therefore, Lord Browne- Wilkinson saw that a person in ownership
of either type of estate possessed a right of property that amounted
to a right in rem as opposed to merely a right in personam.
• It was thus held that the equitable principle that governs when
property or a title was affected under illegality had now become one
after merging the common law rule.
• In the case of In Napier and Ettrick v. Hunter [1993]1 All.ER 385 at
401, it was stated by Lord Goff inter alia that, the judiciary task
nowadays is to view the two strands of authority equity and law
moulded into a coherent whole.
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32. • Aquaculture Corp. v. New Zealand Green Mussel Co. Ltd. [1990 NZLR
299] it was stated equity and common law are now mingled … full
range of remedies should be available as appropriate, no matter
whether they originated in common law, equity or statute.
• Medforth v. Black [2000] ch. 86] Sir Richard Scott VC. Has stated “I do
not, for my part think that it matters one jot whether the duty is
explained as a common law duty or as a duty in equity. The result is
same.
• BICC Plc v. Burney Corp. (1985) ch. 232] It was said that set-off,
whether legal or equitable, can be raised as a defence whether the
relief sought by the claimant is legal or equitable.
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33. • In Sempara Metals Ltd. V. IRC [2008 AC 561] the House of Lords held
that the compound interest may be recovered at common law as well
as in equity.
• Coulthard v. Disco Mix Club Ltd. [2000 1 WLR 707] in the context of
limitation periods, it has been held that there is no distinction
between an action for fraud at common law and an action in equity for
deliberate and dishonest breach of fiduciary duty based on the facts,
which is equitable counterpart of the common law claim.
• Swindle v. Harrison [1997 4 AllEr 705] Hobhouse LJ. confirmed that
common law damages were not available for breach of fiduciary duty.
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34. • One indication of fusion is a situation where the legal remedy of damages
may be given for breach of an equitable right.
• The converse, an equitable remedy for breach of a legal right, such as an
injunction to restrain a tort, or specific performance of a contract, is
explicable as the exercise of equity’s concurrent jurisdiction and is not an
example of fusion.
• Generally, the breach of an equitable right will provide an equitable remedy
only. Thus a breach of a restrictive covenant by a non-contracting party is
remedied by an injunction, not damages.
• In AG vs. Gurdian News paper Ltd. (1990 1AC190) Lord Goff said that
damages are available for breach of confidence, despite the equitable
nature of the wrong.
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35. Conclusion
• Both views are supported by authorities and strong justification that a lot
of confusion as to which side is right occurs. However, despite all the
diverse opinions by judges and scholars, the rules of equity and common
law are clearly administered in one court and as seen in the cases above,
are at times subjected to ‘cross-remedies’ as in Harris v Digital Pulse Pty
Ltd.
• This is to mean that, although not entirely the same, the rules of equity
and common law at times apply inter-changeably.
• This perception accrues from the observation that, the Judicature Act
does not authorize any substantive fusion between equity and law;
neither does it reveal any prohibition for the occurrence of such a fusion.
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36. 36
Nature of Equitable Rights
• In its simplest form, one view emphasizes the fact that a beneficiary’s
remedy is in the form of an action against the trustee; a right in
personam.
• On the other hand, equitable interests under trusts are equitable
proprietary interests, corresponding to legal estates, and the
beneficiary can properly be regarded as the owner of the beneficial
interest; and ownership is a right in rem.
37. • In the Roman law, from which they are taken, the expressions “in rem”
and “in personam” were always opposed to one another, an act or
proceeding in personam being one done or directed against or with
reference to a specific person, while an act or proceeding in rem was one
done or directed with reference to no specific person, and consequently
against or with reference to all whom it might concern, or “all the world.”
• The phrases were especially applied to actions; an actio in personam
being the remedy where a claim against a specific person arose out of an
obligation.
• while an actio in rem was one brought for the assertion of a right of
property, easement, status, etc., against one who denied or infringed it.
37
38. • The proper meaning of a right in rem is right enforceable against
the world with respect to the particular thing. The legal owner does
have the rights in rem, Rights against the world with respect to the
property.
• In accordance with the maxim equity acts in personam, equity did
not say that the cestui que trust was the owner of the land, it said
that the trustee is the owner of the land. But was bound to hold the
property for the benefit of the cestui que trust.
• The maxim that equity acts in personam does not prevent us from
treating a beneficiary under a trust as having equitable ownership.
38
39. • A beneficiary’s interest behind a trust has long been treated as having the
basic characteristics of a proprietary interest in that it can be sold or
mortgaged.
• Historically, the protection of the beneficiary was based on the
Chancellor’s willingness to proceed in personam against the trustee, that
protection has ended up by creating the rights in the nature of the
ownership.
• The trustee is the owner at law and the beneficiary is the owner in equity.
• The trustee sues for the possession of the trust property. Trustee not the
beneficiary, sues for conversion of the trust property. The beneficiary’s
right is to compel the trustee to take action. Certain cases, beneficiary
may take action himself on behalf of the trust, joining the trustee as
defendant.
39
40. • E.g. The trustee has sold the property to bona fide purchaser. Here
trustee would defeat the equitable ownership of the beneficiary.
• In this situation, bona fide purchaser is not determinative of the
question whether beneficiary’s interest is proprietary or whether his
rights are in rem or in personam. It demonstrates simply that legal
and equitable ownership may have different effects.
• In the practical point of view, it can be said that where the problem
involves the working of the trust machinery, so that the beneficiary
asserts his rights by an action against the trustees to enforce their
duties the old theory that equity acts in personam is wholly
acceptable.
40
41. • But in other cases, the theoretical view is overtaken by a pragmatic
approach. So, it depends on the language of the statute.
• Ewing v. Orr-Ewing (1883)- there is no space here to run through
every aspect of equity jurisdiction to establish the point that equity
acts in personam. One practical application of this proposition is the
fact that a court of equity will exercise to order specific performance
to administer assets abroad if the executors are in England.
• R. Nolan (2006) 122 L.Q.R 232] – trustee is owner at law; and the
beneficiary is the owner in equity. A recent analysis is that the interest
of the beneficiary is negative, or ‘exclusionary’. It is a negative right to
exclude non-beneficiary from the assets as opposed to a positive right
to impose trustee duties on them.
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42. • S. Aaron (2010) 24 T.L.I 155 at 173] Another view is that the
beneficiary’s interest is “a bundle of in personam equitable rights
against the trustee”.
• Mcc Proceeds Inc. v. Lehman Brothers International (Europe) [1998 4
All ER 675] trustee sues for conversion of the trust property.
• Shell UK Ltd. V. Total UK (2011) Q.B 86] it has been held that a duty of
care may be owned to a beneficial owner of property just as much as
to a legal owner, but this has been criticized as blurring legal and
equitable ownership in a manner contrary to principle and authority.
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43. 43
• Equity did not say that cestui que trust was the owner of the land, it
said that the trustee was the owner of the land, but added that he
was bound to hold the land for the benefit of cestui que trust.
• A beneficiary’s interest behind a trust has been treated as having the
basic characteristics of a proprietary interest in that it can be bought,
sold, mortgaged, and devised or bequeathed.
• Even though, the protection of the beneficiary was based on the
Chancellor’s willingness to proceed in personam against the trustee,
that the protection has ended up by creating rights in the nature of
ownership.
44. 44
• To argue that a beneficiary is not to say that legal rights are the same
as equitable, or that equitable ownership is the same as legal.
• Rather, it is to accept the basic peculiarity of ownership under the
English law of trusts. The trustee is the owner at law; and the
beneficiary is the owner in equity.
• The trustee sues for rent or possession; and with personality, the
trustee, not the beneficiary, sues for conversion of the trust property.
The beneficiary's right is to compel the trustee to take action; though
he may, in some cases, take action himself, on behalf of the trust,
joining the trustee as defendant.
45. • The right sometimes be inadequate; as where the trustee has sold the
property to bona fide purchaser of the legal estate for value without
notice, who will defeat the equitable ownership of the beneficiary.
• Webb v. Webb (1994) 8 J.L.T 99) Where a father bought a flat in
France in his son’s name and sought a declaration that the son was
trustee and an order to vest the property in the father, his action was
classified as in personam for the purposes of the 1968 Brussels
Convention. Now Article 22 of the Council regulation (EC) No.
44/2001 so that the son’s claim that only the French Court had
jurisdiction failed.
45
46. • Prazic v. Prazic [2006] 2 F.L.R 1128] Where a wife sought a declaration
in the English courts as to her beneficial interest in land in England, her
claim was classified as in personam. Thus the English courts did not
have exclusive jurisdiction and the action was stayed because her
husband had already commenced divorce and ancillary relief
proceedings in France.
• On the other hand in Re Hayward [1997 Ch 45] the claim by the
trustee in bankruptcy of a deceased legal and beneficial co-owner of a
villa in Spain to his share of the property was held to be in rem, so that
the Spanish Court had exclusive jurisdiction under the Convention.
46
48. • The main result of the distinction between common law and equity
is that each has distinct claims and remedies.
• Common law is the system which is able to award cash damages for
loss.
• Common law claims such as breach of contract, negligence and
fraud and, remedies such as damages and tracing property.
• Equity claims such as breach of trust, claiming property and,
remedies such as specific performance, injunction, rescission,
rectification
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50. Specific Performance
• Specific performance is an equitable remedy in relation to the
enforcement contracts.
• An award of specific performance compels the defendant to
perform his contractual obligations.
• The specific performance is a residual and discretionary remedy.
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51. • In the case of Cooperative Insurance v. Argyll [1997] 3 All ER 297
specific performance is traditionally regarded in English Law as an
exceptional remedy, as opposed to the common law remedy of
damages to which a plaintiff is entitled as of right… specific
performance was part of the discretionary jurisdiction of the Court
of Chancery to do justice in cases in which the remedies available
at common law were inadequate.
• Specific performance is an order which is made to require the
performance of contractual obligations in certain circumstances.
• Consequently, the order requires only the performance of those
obligations and does not rest on there having been some breach of
contract. (no requirement of breach)
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52. Contracts where specific performance
available
• The underlying principle in relation to real property is that each
parcel of land is unique, so that an award of damages would be
insufficient compensation for a failure to transfer a specified piece
of land. Therefore, the buyer of the land may be able to impose an
award of specific performance on the seller to compel the transfer.
(Adderley v. Dixon 1824)
• The underlying in relation to contracts for the transfer of chattels is
that specific performance will be ordered in circumstances in which
the chattel has a intrinsic value such that it would not be readily
possible to acquire a substitute chattel.
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53. Contracts where specific performance
unavailable
• This remedy may be displaced in situations in which such
performance is impracticable.
• Contracts involving the personal skill of one of the parties are the
clearest example of contracts which will not be specifically enforced
on the basis that an order of specific performance would be
inappropriate in the circumstances.
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54. • In the case of Patel v Ali [1984] 1All ER 978 ‘A’ entered into a contract
to sell his land to B. Completion of sale was delayed because of certain
personal difficulties on the part of ‘A’. At the time that he agreed to
sell, ‘A’ was wealthy and healthy. However, during the delay, ‘A’
contracted cancer and hospitalized. ‘A’ became heavily reliant on
friends and neighbours. ‘B’ sought specific performance of the
contract.
• It was held that exceptionally specific performance may be refused
because of change of circumstances subsequent to the contract such
that a decree of specific performance would inflict on the defendant a
hardship amounting to injustice.
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55. Injunction
• The injunction is an equitable remedy. It is at the discretion of the
court to make an order to either party to litigation.
• An injunction will be awarded on an interim or a permanent basis,
either in a mandatory or prohibitory form.
• It is necessary that no common law remedy would be sufficient in
the circumstances; the applicant must come with the clean hands;
there must not have been delay on the applicant’s part; some rights
of the applicant must be affected.
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56. • The respondent must not suffer undue harm as a result of the
injunction.
• Injunctions divide between those which require some actions from
the respondent (mandatory injunction) those which require the
respondent to refrain from some actions (prohibitory injunction)
and those which seek to prevent some action which it is feared may
be performed in the future.
• Interim injunction is awarded on an interim basis during the
litigation.
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57. • Their award is based on a balance of convenience between the
potential harm suffered by the applicant if no injunction were
awarded, and the potential convenience caused to the respondent if
the injunction were to be awarded.
• An injunction will not be ordered in circumstances in which damages
would be sufficient.
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58. Rescission
• Rescission is an equitable remedy used to set aside contracts and to
restore the parties to the positions which they had occupied previously.
• In the case fraudulent misrepresentation, the claimant will be entitled
to rescind the contract to prevent the wrongdoer from benefiting from
its wrongdoing.
• A material mistake made by both parties to a contract will enable that
contract to be rescinded.
• The right to rescind will be lost where it is impossible to return the
parties to the positions they occupied previously, where the contract
has been affirmed, or where there has been delay.
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59. Rectification
• Rectification is available to amend the terms of a contract better to
reflect the true intentions of the parties.
• Rectification will be available in circumstances of common mistake.
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61. MAXIMS OF EQUITY
• The maxims of equity embody the general principles which evolved
in the Court of Chancellery. They are not rules which must be
rigorously applied in every case. Maxims are more in the nature of
general guidelines illustrating the way in which equitable jurisdiction
is exercised.
• Maxims do not assert any particular view of the world other than
that people should behave reasonably towards one another.
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62. 1. Equity will not suffer a wrong to be without a remedy;
2. Equity follows the law;
3. He who seeks equity must do equity;
4. He who comes to equity must come with clean hands;
5. Where equities are equal the law prevails;
6. Where equities are equal the first in time prevails;
7. Equity imputes an intention to fulfill an obligation;
8. Equity regards as done that which ought to be done;
9. Equality is equity;
10. Equity looks to the intent rather than the form;
11. Delay defeats equity;
12. Equity acts in personam.
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63. Equity will not suffer a wrong
to be without a remedy
• The principle behind this maxim is that equity will intervene to
protect a right which, perhaps because of some technical defect, is
not enforceable at law. It is not sufficient that the defendant may
be guilty of some moral wrong.
• This principle is at the very heart of equity: where the common law
or statute does not provide for remedying of a wrong, it is equity
which intercedes to ensure that a fair result is reached.
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64. • Equity will intervene in circumstances in which there is no apparent
remedy but the court is of the view that justice demands that there be
some remedy made available to the complainant.
• A beneficiary has no right at common law to have the terms of the trust
enforced, but the court will require the trustee to carry out those terms to
prevent him from committing what would be in effect a wrong against the
beneficiary.
• The classic example is the enforcement of the trusts. The beneficiary had
no remedy at common law, if the trustee claimed the property for himself,
as the trustee was the legal owner, but he could enforce his right in equity.
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65. • Following are the limitations of the maxim.
(i) Where right and remedy both within the jurisdiction of common
law.
(ii) Acts of State; the courts are not authorized to question the acts of
State.
In terms of section 62 of the Trusts Ordinance, a trustee has a duty to
perform a particular act. If he doesn’t discharge his duty, the
beneficiary may compel the trustee to protect the property.
for the purpose of understanding: In the case of violation of a
fundamental right, the aggrieved party must invoke the jurisdiction of
the Supreme Court within one month.
65
66. Equity follows the law
• Clearly equity may not depart from statute law, nor does it refuse to
follow common law rules save in exceptional circumstances. Thus,
equitable interests in land correspond with legal estates and
interests.
• it can be said that equity always follows the law in the sense of
obeying it and conforming to its general rules and policy, whether
contained in common law or statutory law. The rules of equity can
not override the specific provisions of the law.
66
67. • The court of common law and a court of equity came to completely
different decisions on the merits of the very same case. The common
law courts apply the rules mechanically. Equity enables fairness and
principle to outweigh rigid rules. Therefore, equity will have priority
over non-statutory common law rules.
• Common law has ‘rules’ which are applied in regor Juris more
mechanically than the ‘principles’ of equity, which are principles
governing the standard and quality of behaviour in a more subtle way
than legal rules.
• Equity enables fairness and principle to outweigh rigid rules in
appropriate circumstances. However, equity will be bound to follow
statutes in all circumstances.
67
68. • Equity will not refuse to be bound by rules of common law unless there is
some unconscionability in applying particular common law rules.
• Section 66(1): Nothing in section 65 entitles the beneficiary to any right in
respect of property in the hands of a transferee in good faith for
consideration without having notice of the Trust, either when the purchase
money was paid, or when the conveyance was executed.
• Mexfield Housing Co-operative Ltd. V. Berrisford (2011 Ch. 244) – it was
said “if an interest in land does not satisfy the basic legal requirements for
its existence, then it will not, as a general rule, exist as an interest in land
either at law or in equity.
• Stack v. Dowson (2007 2 A.C. 432) where the legal title to land is held
jointly, the equitable interests follow the legal title unless a contrary
intention is proved.
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69. He who seeks equity must do equity
• A plaintiff who seeks equitable relief must be prepared to act fairly
towards the defendant. The operation of this principle can be seen where
equity, in allowing the rescission of a contract for a mistake, puts the
plaintiff on terms which appear to the court to be just and equitable.
• This maxim deals with future obligations.
• In Ashby v. White, wherein a qualified voter was not allowed to vote and
who therefore sued the returning officer, it was held that if the law gives a
man a right, he must have means to maintain it.
• A plaintiff seeking an injunction will not succeed if he is unable to carry out
his own future obligations.
69
70. He who comes to equity must
come with clean hands
• The ‘clean hand’ principle looks to the previous conduct. Thus equity
will not grant relief against forfeiture for a breach of the covenant
where the breach in question was flagrant.
• It is not uncommon for the party who is considered to be at fault or
responsible for causing harm in a situation to be unable to file a legal
action or claim. This can be due to a variety of reasons, such as the
fact that the party does not have the standing to bring a claim, or
because the party is barred from bringing a claim due to the doctrine
of unclean hands.
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71. • In general, a party must have a legally recognized interest in a matter
in order to bring a claim or take legal action. This means that the
party must have suffered some sort of injury or harm as a result of
the actions of another party. If the party who is at fault has not
suffered any harm, they may not have the standing to bring a claim.
• Additionally, the doctrine of unclean hands is a legal principle that
holds that a party who is seeking relief from the court must come to
the court with "clean hands," meaning that they must have acted
fairly and in good faith in relation to the matter at hand. If a party is
found to have acted improperly or dishonestly in relation to the
matter, they may be barred from bringing a claim or taking legal
action.
71
72. • In Argyll vs. Argyll (1967) the fact that the wife’s adultery had led to
the divorce proceedings was no grounds for refusing her an injunction
to restrain her husband from publishing confidential materials.
• If both parties have “unclean hands,” the court should consider only
those of the applicant, and need not balance the misconduct of one
against that of the other.
• A court of equity will not act in favour of someone who has
committed an illegal act.
72
73. Where equities are equal the
law prevails
• This maxim operates where there are two or more competing
interests, one legal and the other equitable. Where the claims of both
parties are fair and meritorious, precedence will be given to the legal
interest.
• This maxim was developed in connection with interests in lands. When
a purchaser acquires property bona fide without notice of a defect in
the vendor’s title, the equities are equal and the legal estate will
prevail.
73
74. • If the purchaser takes title with notice of the defect, the earlier title,
if valid, will prevail. The force of this maxim has largely been
displaced by legislated systems of land title registration.
• Where two people have purported to purchase goods from a
fraudulent vendor for the same price, neither of them would have a
better claim to the goods in equity. Therefore, the rules of
commercial rules would be applied.
74
75. Where equities are equal the
first in time prevails
• This maxim dealing with the priorities of competing interests, may
be dealt with. This provides the foundation for the doctrine of
notice. Thus, a prior equitable interest in land can only be
defeated by a bona fide purchase of a legal estate without notice.
• If the purchaser is bona fide and without notice, then the equities
are equal and his legal estate prevails.
75
76. • If he took with notice the position is otherwise, as the equities are
not equal. If he does not acquire a legal estate then the first in time,
i.e. the prior equitable interest, prevails as equitable interests rank in
order of the creation.
• This maxim has lost some of its importance since the introduction of
the system of registration of certain interests in land.
• For understanding: Registration of documents
76
77. Equity imputes an intention to
fulfill an obligation
• Where a person is obliged to do some act, and does some other act which
could be regarded as a performance of it, then it will be so regarded in
equity. This is the basis of the doctrines of performance and satisfaction.
For example, if a debtor leaves a legacy to his creditor, this is presumed to
be a repayment of the debt so that unless the presumption is rebutted, the
creditor cannot take the legacy and sue to recover the debt.
• In Sowden v. Sowden, a husband agreed with the trustees to pay them
£50,000 for the purpose of purchasing land in a particular area D. He, in
fact, never paid the sum, but after marriage purchased the land at D in his
own name, for £50,000. He died and could not bring the land into a
settlement. Equity courts construed that he purchased land to fulfil his
obligation.
77
78. Equity regards as done that which
ought to be done
• Where there is an especially enforceable obligation, equity regards
the parties as already in the position which they would be in after
the performance of the obligation. Therefore in equity, a specifically
enforceable contract for a lease creates an equitable lease. This is
the doctrine of Walsh vs. Lonsdale.
• Similarly, a specifically enforceable contract for the sale of land
transfers the equitable interest to the purchaser, the vendor holding
the title on constructive trust until completion.
78
79. • In AG for Hong Kong vs. Reid (1994 1 A.C. 324) the issue was
whether a fiduciary who took a bribe became a constructive trustee
of it or was merely personally accountable. Because he was under a
duty to hand over the bribe to his principal, it was held that the
property belonged to the principal in equity
• Napier and Ettrick (Lord) v. Hunter (1993 A.C. 713) where an insurer
pays with respect to an insured risk, the assured recovers damages
from a third party with respect to that same loss. Therefore, the
insurer had immediate proprietary rights in the form of a lien over
money.
79
80. Equality is equity
• Where two or more persons are entitled to an interest in the same
property, then the principle of equity is equal division, if there is no good
reason for any other basis for division. Equity, therefore, dislikes the joint
tenancy where, by the doctrine of survivorship, the last survivor takes all.
• This may be contrasted with the tenancy in common, where the interest of
each party devolves upon his personal representative on his death. In the
absence of an express declaration, to the effect that the equitable interest
is held jointly, equity presumes a tenancy in common in certain cases
where at law the parties are joint tenants: for example where the
purchase money provided in unequal shares, equity presumes a tenancy in
common in shares proportionate to the contributions.
80
81. Equity looks to the intent rather
than the form
• This principle does not mean that formalities may be ignored in equity, but
rather that equity looks at the substance rather than form. Thus equity will
regard a transaction as a mortgage even though it is not so described, if in
substance it appears that the property was transferred by way of security.
Similarly a trust may be created although the word ‘trust’ has not been
used.
• A trust is created with- (1) an intention on his part to create a trust thereby,
(2) the purpose of the trust, (3) the beneficiary, and (4) the trust property.
Where an author uses words such as ‘I hope’, ‘I request’ or ‘I recommend’
the first condition is missing. In cases where subsequent ingredients are
found, in early days, it was held by the equity courts that he had the
intention. This view is in use now but not as liberally as before.
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82. Delay defeats equity
• Equity aids vigilant and not indolent. This is the foundation of the
doctrine of laches, whereby a party who has delayed cannot obtain
equitable relief.
• For example under English law, actions against trustees for breach
of trust must be brought within six years and delay short of this will
not bar relief. Under the Trusts Ordinance, there is no time bar.
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83. • Plaintiff’s unreasonable delay is a weapon of defence by the
defendant against the plaintiff.
• In a Bombay case, the plaintiff allowed his land to be occupied by
the defendant and this was acquiesced by him even beyond the
period of limitation. On a suit of the land it was decided that as the
period of limitation to recover possession had expired, no relief
could be granted.
• Humphreys v. Humphreys [2004 W.T.L.R 125] it was said that the
claims to rescission and rectification may be barred by delay.
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84. Equity acts in personam
• Equity has jurisdiction over the defendant personally. The personal
nature of the jurisdiction is illustrated by the fact that failure to
comply with an order, such as specific performance or an
injunction, is contempt of court punishable by imprisonment.
• Provided that the defendant is within the jurisdiction, it is no
objection that the property which is the subject matter of the
dispute is outside it.
84
85. • Equity acts in personam refer to the actions of a court in equity that are
directed at a specific individual or group of individuals. In contrast to
actions in rem, which are directed at a specific piece of property or legal
right, equity acts in personam are aimed at providing a remedy or relief to
a specific person or group of people.
• Equity acts in personam may include actions such as injunctions, which are
court orders that prohibit someone from taking a specific action or require
them to take a specific action. They may also include orders for specific
performance, which require a party to fulfill a contract or other legal
obligation, or decrees of divorce, which dissolve a marriage.
• Thus in the leading case of Penn vs. Lord Baltimore (1750) specific
performance was ordered of an agreement relating to land boundaries in
Pennsylvania and Maryland, the defendant by in that country.
85
86. He who seeks equity must do equity He who comes into equity must come with clean hands
i) It is applicable when both the plaintiff and the defendant
have claims of equitable relief against each other.
i) It is applicable when the defendant has no separate claim
to relief and the plaintiff’s conduct is unfair.
ii) It exposes the condition subsequent to the relief sought. ii) It is a condition precedent to seeking equitable relief.
iii) It refers to the plaintiff’s conduct as the court thinks it
ought to be, after he comes to the court.
iii) It refers to the plaintiff's conduct before he approaches
the court.
iv) The plaintiff has to mould his behavior according to the
impositions by the court.
iv) If the plaintiff’s conduct is unfair, it would not entitle him
to the relief sought.
v) The plaintiff has an option or a choice before him either
to submit to the conditions put by the court, or to get out
of the court.
v) The conduct of the plaintiff snatched his choice from him.
His equitable right therefore neither be recognized nor
enforced.
vi) This maxim looks to the future. vi) This maxim looks at the past.
86
Distinction between maxims
