Equity

The law in England developed in two streams:

  • the Common Law ,and
  • Equity

Both streams had their own courts

The Judicature Acts 1873-75 rationalised the position. They created one system of courts by amalgamating the common law courts and the court of equity to form the Supreme Court of Judicature which would administer common law and equity.

Equity was formally established in Earl of Oxford’s Case (1615) 1 Ch Rep 1. Equity’s moral purpose was described by Lord Ellesmere as being “to correct men’s consciences for frauds, breach of trust, wrongs and oppressions … and to soften and mollify the extremity of the law“.

Equity also created new rights by recognising trusts and giving beneficiaries rights against trustees. (A trust arises if one party gives property to trustees to hold for the use of beneficiaries.) The common law did not recognise such a device and regarded the trustees as owners.

The most significant equitable doctrine is “the trust“. Superannuation Funds are based on the legal concept of “the trust“.

A “trust” is not a company or a legal person. A “trust” is a set of equitable obligations between the Trustee and the Beneficiaries of the trust as established by the Trust Instrument and the general laws of trusts (and in the case of Government Regulated Superannuation Funds by statutory laws as well).

Natural person Trustees and corporate Trustees are “legal persons“, but the “trust” itself is something different.

An important case in English trust law was Westdeutsche Landesbank v Islington LBC [1996] UKHL 12. Lord Browne-Wilkinson re-asserted a traditional understanding of a trust as being based on the conscience of the person (or persons) who acts as trustee.

His Lordship went back to basics stating:
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 purpose for which the property was vested in him……..”

Equity is based on a series of fundamental equitable principles. Some of these principles are listed below:

“He who seeks equity must do equity”

A claimant will not receive the court’s support unless the claimant has acted fairly himself. A Court of Equity will not act in favour of someone who has for example, committed an illegal act. {Nessom v Clarkson(1845) 4 Hare 97, Oxford v Provand (1868) 5 Moo PC (NS) 150, Lodge v National Union Investment Co Ltd [1907] 1 ch 300.}

“He who comes to equity must come with clean hands”

As a development of this Principle of fairness, an applicant for an equitable remedy will not receive that remedy where he or she has not acted equitably himself.

“Equity acts in personam”

This is the key feature of equity. Lord Selbourne in Ewing v Orr Ewing (No. 1) (1883) 9 App Cas 34,40 stated:

“The courts of Equity in England are, and always have been, courts of conscience, operating in personam and not in rem, and in the exercise of this personal jurisdiction they have always been accustomed to compel the performance of contracts and trusts which were not ….within their jurisdiction”.

 

 

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