Equity and Trusts

1

• Equity and Trusts Introduction Historical
  Origins (2)

2
Maitland

• Other jurisdictions outside of the corpus of the
  common law jurisdiction of the British Empire
  have never had the concept of the trust

3
Legal ownership

• In Roman law (from which civil system partly
  derives) central concept was dominium all the
  rights of ownership concentrated in an individual
  essentially the rights to use / to give away /
  to sell / or to destroy particular property
• Whereas English law recognises a complex bundle
  of rights in respect of particular things that
  can shared

4
Beneficiary rights

• The shift from merely personal rights to
  proprietary rights brought beneficiaries
  considerable benefit
• For example where trustees are insolvent what
  happens to the beneficiaries property?
  Proprietary rights allowed bens to take priority
  over other creditors

5
Beneficiary rights

• Beneficiaries also cam to enjoy rights of
  protection against anyone interfering with the
  property - when it is given away by mistake or
  taken deliberately

6
Fiduciary duties

• Fiduciary duties hold trustees (but now also
  many others) to certain standards of behaviour in
  the management of trust property

7
Equitys creativity

• Equity lay took rights that existed at common
  law and split off from it a new bundle or rights
  in the form of equitable ownership so that
  there were now two separate bundles of rights
  one at common law and one in equity.

8
Problems in understanding equity

• Judicature Acts of 1873 and 1875 brought equity
  and law into relation with each other by sharing
  the same court structure. Since that date
  arguments using law and/or equity can be heard in
  the same hearing.
• NB although law and equity are argued together
  in the same hearing they remain separate system
  of legal thought.

9
Conscience

• Conscience is essentially a Christian concept.
  
• Asking the court to recognise something in
  conscience is asking that that the court
  recognise the moral imperative in a given
  situation
• NB the equitable maxim he who comes to
  equity must come with clean hands

10
Living equity

• here we are in the world of doctrine, not of
  neat and tidy rules ... the court in the exercise
  of this jurisdiction is a court of conscience.
  Definition is a poor instrument when used to
  determine whether or not a transaction is
  unconscionable. This is a question that depends
  on the facts of the case.
• Lord Scarman National Westminster Bank PLC v
  Morgan 1985 2 WLR 588 at 602. See also
  Pennington and another v Waine and others 2002
  EWCA Civ 227. Tinsley v Milligan 1992 2 All ER
  391

11
Equitys creativity

• It would recognise a claim which was not
  recognised at law
• It could be utilised for people who could not
  hold legal title
• It was used to develop new juridical entities
  specifically the trust
• It has had a important role in developing other
  types of remedy

12
Changing equity

• Equity is concerned to do justice in
  conscience
• But concept in practice is subject both to
  competing claims and is now very different from
  the position that prevailed before the coming of
  the modern market economy

13
Trustsnot trust

• NB many different contexts and forms the trust
  has taken and may yet take for example pension
  funds and offshore fiscal devices but also it
  is simply not possible to extrapolate a doctrine
  of trusts that fits all their various forms

14
Social justice

• Something to consider why is it that equity did
  not become a plank in a wider scheme of social
  justice?

15
Two quotes

• There cannot be a more useful set of men to the
  public nor a more unthinking sort of people than
  common sailors who, as soon as ever they get on
  shore, for the sake of a little immediate
  pleasure are willing to part with their right to
  anything in expectation, for a very little in
  possession I do not say that every contract
  with a sailor is void, or ought to be set aside,
  but every contract with them must be fair. Lord
  Hardwicke in Baldwin Alder v Rochford (1748) 1
  Wils. KB.229
• It must not be forgotten that you are not to
  extend arbitrarily those rules which say that a
  given contract is void as being against public
  policy, because if there is one thing which more
  than another public policy requires it is that
  men of full age and competent understanding shall
  have the utmost liberty of contracting and that
  their contracts when entered into freely and
  voluntarily shall be held sacred and shall be
  reinforced by the Courts of Justice. Therefore
  you have this paramount public policy to consider
  that you are not lightly to interfere with the
  freedom of contract. Sir George Jessel MR in
  Printing and Numerical Register Company v Sampson
  (1875) LR 19 Eq 465

16
Sailors case

• Sailors would sometimes sell future rights
  rights to e.g. prize money for much less than
  there value just to realise some cash

17
Contrast

• The two quotes usefully illustrate a point of
  contrast between two different views of society
  18th Century paternalism and 19th C Liberalism

18
Kenyon J 1800

• Though in a state of society some must have
  greater luxuries and comforts than others yet all
  should have the necessaries of life and if the
  poor cannot exist, in vain may the rich look for
  happiness or prosperity. The legislature is near
  so well employed as when they look to the
  interests of those who are at a distance from
  them in the ranks of society. It is their duty
  to do so religion calls for it humanity calls
  for it and if there are hearts that are not awake
  to either of those feelings, their own interests
  would dictate it. The law has not been disputed
  for though in an evil hour all the statutes that
  had been existing for above a century were at one
  blow repealed, yet thank God, the common laws
  were not destroyed

19
The coming of the market

• The paternalistic attitudes expressed by Kenyon
  came rather late in the day

20
A gradual transition

• Throughout this period conflicting decisions
  made by chancellors on points of economic
  liberalism meant the courts were unpredictable on
  this point

21
19th C view

• By the mid 19th c it was settled practice that
  courts would not remake contracts there must be
  no interference in the principle of the liberty
  of the contracting parties and their fictional
  quality of equal status

22
Kenyon J

• Speculation has said that the fear of such an
  offence is ridiculous, and a very good man, a
  learned writer has said that you might as well
  fear witchcraft. I wish Dr Adam Smith had lived
  to hear the evidence today, and then he would
  have seen whether such an offence exists, and
  whether it is to be dreaded.

23
Kenyon J

• If he the poor man had been told that cattle
  and corn were to be brought to market and then
  bought by a man whose purse happened to be longer
  than his neighbours, so that the poor man who
  walks the street, and earns his daily bread by
  his daily labour could get none but through his
  hands, and at the price that he chose to demand
  that it had been raised would he have said that
  there was no danger from such an offence.

24
The common law offences

• Regrating the offence of buying goods and
  reselling them in the same market Forestalling
  the offence of buying or selling goods before a
  market
• Engrossing the offence of buying up goods in
  order to speculate by forcing up the price

25
The just price and the fair exchange

• Behind the offences was a simple concept the
  just price
• Thus even up to the early 1800s to be
  enforceable a contract had to be fair as in the
  example of the sailors above

26
Origins of equity

• Equity is a concept inherited from the civil
  legal system that began with the Greeks

27
Aristotle defines equity

• it is equity to pardon human failings, and to
  look to the lawgiver and not to the law to the
  spirit and not to the letter to the intention
  and not to the action to the whole and not to
  the part
• Rhetoric I.XIII.1374a.
• what creates the problem is that the equitable
  is just, but not the legally just but a
  correction of legal justice. The reason is that
  all law is universal but about some things it is
  not possible to make a universal statement which
  shall be correct.
• Ethics (v.x)

28
Origins of equity

• Equity in clearly a part of what is called
  natural law from which we derive the term natural
  justice.
• the prevention of unjust enrichment as a
  distinct and independent principle tends to be
  recognised late in the development of any legal
  system, and has to struggle for a place in the
  legal firmament because, as a latecomer, it cuts
  across other principles already expressed in
  doctrines and reinforced by rules. John Dawson

29
Conceptions of unfairness

• Unjust enrichment now a developing area of the
  law of restitution
• Derives originally from Roman law and was the
  principle underlying the Roman legal device of
  quasi-contractual relationships

30
Unfairness

• The interventionist courts of equity up to
  1800s took a very broad view of what exactly
  constituted an unfair contract.
• it was not only fraud or misrepresentation in
  the modern sense that sufficed it was also any
  unfair dealing, any form of imposition, any
  taking advantage of the poverty or distress of
  another, any weakness of understanding, any
  mistake Patrick Atiyah The Fall and Rise of
  Freedom of Contract

31
Civil system

• The principles of discretionary justice that had
  begun with the Greeks and passed into Roman law
  found their way eventually into English law but
  is a far more explicit part of the civil legal
  system practised within continental Europe

32
Models for the trust?

• Models proposed include for example, the Roman
  fideicommissum and the Germanic Salmann

33
Equitable remedies

• enforcement of trust obligations
• grant of specific performance
• the right of redemption
• injunctions
• discovery

34
The old and new worlds

• What was the old world that the coming of the
  free market replaced and why was there a need for
  the application of the equitable jurisdiction to
  change in order to accommodate it?

35
Religious influences

• Property relationships became individualised and
  the ecclesiastical courts and later the Court of
  Equity enforced the Christian conception of
  property as shared then possible to conceive
  as a legal owner owing obligations to the
  equitable owner