Equity and trusts ā an overview
1.1 Equity: an introduction
Equity is the body of rules that grew up alongside the common law, eventually becoming the Court of Chancery.
ā¢ It is said to
ā¢ āfill in the gaps in the common lawā and to mitigate the ārigourā of the common law;
ā¢ be based on āconscienceā (Earl of Oxford's Case (1615)).
ā¢ Equity has in effect āstepped inā
ā¢ when the common law has not provided a remedy; or
ā¢ where common law rules have been or are being used to justify conduct from a party with the legal title to property to engage in conduct that is unconscionable.
Consider what remedies you would want in the following situations and then decide whether these are available at law (compare the table in 1.3.2):
ā¢ Trespassers are camping on your land.
ā¢ You are buying a house and after exchange of contract your seller refuses to complete.
ā¢ The Land Registry has failed to register your valid legal easement.
ā¢ You have bought a car that is significantly faulty.
ā¢ You have invented an energy- saving device but a rival company is using your designs to create a similar device.
ā¢ Your trustees have used trust money to buy a holiday home for themselves.
ā¢ Your trustees have used trust money to buy shares that have generated significant dividends.
1.2 Origins of equity (and trusts)
1.2.1 Historical development of equity
ā¢ Pre- 1066:
ā¢ Local courts applied local customs.
ā¢ The country was divided up into counties with their own laws and customs.
ā¢ 1066ā1485:
ā¢ From the Norman Conquest in 1066 onwards common law began to develop where a system of law was imposed on the entire country.
ā¢ This involved a central system of government with the king at its head.
ā¢ 1485ā:
ā¢ Equity developed from the Tudor period onwards through to the Court of Chancery.
1.2.2 Problems with the common law
ā¢ Rigidity of the writ system:
ā¢ An action at common law had to be commenced by writ (now replaced by a Claim Form under the Civil Procedure Rules 1998) Each action had its own specific type of writ.
ā¢ The Provisions of Oxford 1258: Parliament in 1258 issued provisions stating that no new writs would be approved without the permission of the king in Council. This effectively meant that if a new cause of action arose then no claim could be made in the common law courts as it would have required a new type of writ.
ā¢ Complexity of procedures:
ā¢ Most cases before the common law courts dealt with land where parties and witnesses were often not present in person.
ā¢ The procedures involved were not suited to deal with personal attendance.
ā¢ Limited remedies:
ā¢ Remedies at common law were generally limited to damages in money.
1.2.3 The development of equity
ā¢ Litigants appealed directly to the monarch for a remedy that was not available at common law.
ā¢ ā¢ Eventually the monarch passed the litigants to the Lord Chancellor who was a clergyman.
ā¢ Eventually this led to the establishment of a separate court ā the Court of Chancery.
ā¢ The Court of Chancery would give āconscience-basedā decisions in areas where the common law does not provide (but only in specifc circumstances!).
1.2.4 Problems with equity
ā¢ Uncertainty:
ā¢ āEquity varies with the length of the Chancellorās footā (John Seldon, Table Talk (1689)).
ā¢ As equity is based on āconscienceā, each new Lord Chancellor that is appointed will have a different conscience from the previous Lord Chancellors.
ā¢ Hence a decision on exactly the same facts by a former Lord Chancel...