Introduction to Equity and Trusts

What is equity?

A system of law existing side by side with the common law and statute law.

How did equity develop?

From medieval times, dissatisfied litigants could petition the King, who delegated such matters to the Lord Chancellor who made decisions.  By the late 15th century, the Court of Chancery had emerged, with a more flexible, inquisitorial process (no jury, power to compel discovery of documents, and remedies such as injunctions). Chancery could act where common law remedies were inadequate. It granted remedies both to enforce equitable rights

Reform of Court of Chancery?

The Judicature Acts 1873-75 (E&W) and 1877 (Ireland). They abolished the old courts and created the High Court and Court of Appeal. Law and equity would now be administered together. Sometimes this is known as fusion.

When does equity intervene?

When a defendant has done something, which though not illegal, is unconscionable.

What does equity comprise of?

Equitable Rights, Equitable Maxims and Equitable Remedies

Equitable Rights

Bind everyone except for a very specific type of purchaser known as Equity’s Darling.

Equity’s Darling

A bona fide purchaser for value without notice.

Key Issue with the Role of Chancellors?

‘Length of the Chancellor’s foot’ - One person’s assumption of justice, random and at the discretion of one person.

Conflict between common law and equity?

Section 25 Judicature Act 1873 - where common law and equity conflict, equity prevails. (Section 86(1) Judicature (NI) Act 1978 applies same to NI).

Maxims of Equity

Guiding principles, expressions of how equity works. Example: ‘those who come to equity must come with clean hands.’

Equitable Remedies

Provides remedies in equity, including specific performance, rectification, rescission and equitable compensation (Target Holdings Ltd v Redfens [1996] AC 421)

What is a Trust?

A legal relationship where one person (the trustee) holds and manages property for the benefit of others (beneficiaries). Separated ownership from benefit.

Settlor

Creates the trust and transfers the property into it.

Trustee

Legally owns and manages the property (can be the settlor themselves).

Beneficiary

Enjoys the benefit of the trust property.