Griffith University

Equity & Trusts Notes

4024LAW

2015

Making shit fair since the Court of Chancery

Notes Equity & Trusts Semester 1, 2015

Contents
Module 1: The Nature and History of Equity ........................................................................ 2
Module 2: Equitable Rights, Titles and Interests.................................................................. 7
Module 3: Fiduciary obligations ............................................ Error! Bookmark not defined.
Module 4: Unconscionable conduct: fraud, unconscionable dealings and estoppel ..... Error!
Bookmark not defined.
Module 5: Equitable Remedies 1 ......................................... Error! Bookmark not defined.
Module 6: Equitable Remedies 2 ......................................... Error! Bookmark not defined.
Equity Revision .................................................................... Error! Bookmark not defined.
Module 7: Trust Parties and Certainties ............................... Error! Bookmark not defined.
Module 9: Trust formalities, duties and breach ..................... Error! Bookmark not defined.
Module 10 Fixed and discretionary trusts in action (how to avoid Tax 101) .............. Error!
Bookmark not defined.
Module 11 Resulting Trusts............................................... Error! Bookmark not defined.
Module 12 Constructive Trusts .......................................... Error! Bookmark not defined.
Tutorial Work ....................................................................... Error! Bookmark not defined.

1|Page
Notes Equity & Trusts Semester 1, 2015

Module 1: The Nature and History of Equity

Unit 1: Equity and rights, titles and interests
Module 1: The nature and history of equity
Module 2: Equitable rights, titles and interests
Unit 2: Relationships of trust and confidence
Module 3: Fiduciary obligations
Module 4: Unconscionable conduct: fraud, unconscionable conduct and
estoppel
Unit 3: Equitable remedies
Module 5: Equitable remedies 1
Module 6: Equitable remedies 2
Unit 4: The Structure of Trusts
Module 7: Trust parties and certainties
Module 9: Trust formalities, duties and breach
Unit 5: Working with trusts
Module 10: Fixed and discretionary trusts
Unit 6: Trusts as remedies
Module 11: Resulting trusts
Module 12: Constructive trusts
Unit 7: Revision
Module 13: Revision

Sources of Law in Australia

Australian law is sourced from:
Common law
Equity
Statutes
Delegated legislation
International agreements
Customary law
Common law and equity arrived in Australia with colonisation.
Equity looks to the substance of law, not its form. It concerns the conscience of both
parties.

Key stages in the evolution of equity

Before the Normans in 1066
Enforced by the King
The Norman invasion (colonisation)
This brought a more centralised court system and had 6 circuits around the
country that passed judgements which developed into the Common law
The reign of Henry II (1154-1189)
Judges began keeping records of the facts and reasons for their decisions
th
The 13 century Common Law Courts
The Kings Bench
Criminal in nature
The Exchequer
The Court of Common Pleas

2|Page
Notes Equity & Trusts Semester 1, 2015

The development of the writ system:

With a limited number of forms for action, there were limited forms of relief.
In the 14th century, the Court of Chancery developed to make up for the failings of the
Common Law

Writ of Attachment
an order to seize a debtors property
Writ of Replevin
to recover personal property illegally taken
Writ of Habeas Corpus
to get a person out of gl and before the court/judge
Writ of Certiorari
An order by an appellate court granting a right of appeal
Writ of Naifty
An order seeking to get runaway serfs

Earl of Oxfords Case (1615) 21 ER485

The cause why there is a Chancery is, for that Mens actions are so diverse and
infinite. That it is impossible to make any general law which may aptly meet with
every Act, and not fail in some Circumstances

Case Summary
Arose out of dispute between tenants
The relevant land was granted by Henry 8th . He left the land to Magdelin College in
his will. College wanted to sell a parcel of land, but there was a statute saying they
could not do so. Ended up in possession of the Earl of Oxford, he had developed
it significantly.
Master of college wanted it back, so he claimed the Earl did not have title to the
property
Central issue- whether the court of chancery had jurisdiction (they did)
However, equity doesnt overrule the common law
Equity doesnt say that the common law is wrong, but it does find a solution to do
justice to the two parties

Supreme Court Act 1995 (Qld) s 244:

Law and equity to be administered in all suits by Supreme Court
In every civil cause or matter commenced in the court law and equity shall be administered
by such court and shall be administered according to the rules following:
(1) If any plaintiff or petitioner claims to be entitled to any equitable estate or right or
to relief upon any equitable ground against any deed instrument or contract or
against any right title or claim whatsoever asserted by any defendant or
respondent in such cause or matter or to any relief founded upon a legal right
which heretofore could only have been given by a court of equity the said court
and every judge thereof shall give to such plaintiff or petitioner such and the

3|Page
Notes Equity & Trusts Semester 1, 2015

same relief as ought to have been given by the said court in its equitable
jurisdiction

The main features of the judicature system:

All branches of the court have the power to administer equitable remedies
Equitable defences can be pleaded in all branches of the court and the appropriate
relief given
All branches of the court must recognise equitable rights, titles and interests
All branches of the court have a general power to determine legal rights and titles
The common injunction is abolished

The fusion debates

That the result of the Judicature Acts in England (and the analogous Australian legislation)
is:
EITHER the complete merger of the common law and equity
OR an administrative/procedural merger

Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298

Spigelman CJ
The common law and equity remain conceptually distinct [18]
He underlined that the fiduciary duties in the case are derived from the
existence of the contract of employment [43]
Note his narrower basis to Heydon JA [3]
Heydon JA
In his lengthy analysis (!) the question was Can exemplary damages be
awarded for breach of fiduciary duty? [233]
He concluded that exemplary damages could not be awarded in NSW [470]
Note that he read the trial judges analysis as fusing, to an extent, the
principles of the common law and equity [353], [355]
Mason P (dissenting)
The approach was to generally follow the trial judge and to base his
conclusions of notions of consistency and coherence[153]
In relation to the fusion fallacy:
With respect to the learned authors of [Meagher Gummow &
Lehane's Equity Doctrines and Remedies], this fusion fallacy
conception is itself fallacious and historically unsound [136]
No one advocates incorporation or borrowing by direct force of
the enactment of the Judicature Act 1873 (UK) or its Australian
counterparts [139]
Note his 6 reasons for countenancing the novel remedy here [218]-[223],
and his statement that judges should not be deterred by fear of a false
fusion fallacy charge and act boldly [225]
(1) Open to court to recognise a novel step (exemplary damages, assumed NOT
established by binding decision)
(2) Legitimate development of the law
(3) Not a field of social issue, but was about the structure of the law
4|Page
Notes Equity & Trusts Semester 1, 2015

(4) Similar recent developments in other jurisdictions

(5) Absence of authority does not mean the power does not exist, only that a plaintiff
has not tested it
(6) Remedial issue only, not the creation of a novel right

Canson Enterprises Ltd v Boughton & Co (1991) 3 SCR 534

the fusion of law and equity provides a general, but flexible approach, although
the whole of the two systems should not be indiscriminately melded together: some
equitable concepts like trusts, equitable estates, and consequent equitable remedies must
continue to exist apart, if not in isolation, from common law rules

Supreme Court of Canada analysed the ambit of compensation as an equitable

remedy. (ie with analogy to tort law)
Appeal dismissed, facts disclosed fiduciary duty, which triggered

The Concepts of Justice

Bottomley and Parker distinguish between:

Formal/procedural justice
So longs as the procedures are followed, then justice will be done (doesnt
concern the final outcome)
And substantive justice
Just and fair outcomes

Raphael distinguishes between:

Ethical notions of justice and legal notions of justice
Justice as entitlement or rights
And the conservative and reformative faces of justice
Conservative Preserving the order and stability of society
Reformative Change and tries to remove imperfections by redistributing
rights to make the social order fairer

Maxims of Equity

General guidelines followed by the courts of equity in applying equitable principles

Help to explain those concepts that have influenced the development of equitable
doctrine
They are not specific rules or principles of law they are invoked to justify or fortify
decisions, and they do not create causes of action or positive rules of law
Ethical principles not legal principles
They are not independent of one another and often overlap
No longer of significant relevance albeit they aid in understanding the nature of
equity and its development
Maxims are rules of thumb applied by the Court of Chancery, but these days
they are general guidelines used by the courts

5|Page
Notes Equity & Trusts Semester 1, 2015

Maxims are not binding rules, they merely indicate general principles or policies of equitys
jurisdiction
They create neither a cause of action nor positive rules of law
They are not independent, but frequently overlap
Note the centrality of conscience to the equitable maxims
They are like equitys ethical principles

There are many, and here are a few:

A person who seeks equity must do equity
Maguire v Mackeronis
Couldnt get funds for property, solicitor gave them money and they
breached. Decision set aside on the condition that the family could pay back
the mortgage at a lower rate than the first one
A person who comes to equity must come with clean hands
Defence. Defendant argues that the plaintiff cant seek equitable relief as
they have engaged in conduct that equity prohibits
Equity will not suffer a wrong without a remedy
To provide a remedy when the Common Law doesnt have one
Equity will not allow statute to be used as an instrument of fraud
Equity wont allow the unconscionable assertion of statutory rights eg equity
will recognise equitable rights in property when its not in writing
Equity looks to intent, rather than form
Distinction between substance and form of transaction
Equity will look beyond what is expressed by the parties, but it will not
substitute a different transaction between the parties
Equity assists the diligent, not the tardy
Operates as a defence when the plaintiffs unreasonably delay in bringing a
proceeding
Equity acts in personam
Highlights the proposition that equity acts on the individuals conscience.
Acts against the person not in rem. It relates to the conscience of the parties
Equity is equality
Where there are rival claimants in equity, distribution is based on how much
each party has contributed
Equity will not assist a volunteer
Person who hasnt given consideration, but will help beneficiaries in a trust.
These days, there are many examples where equity will assist a volunteer
Equity will not perfect an imperfect gift
Where something remains to be done by the donor granting the gift. Eg
where a person promises to assign future property that is not in existence,
then the court will enforce that promise
Equity regards as done that which ought to have been done
The idea that equity operates on the conscience of a person to dictate what
should be effected

6|Page
Notes Equity & Trusts Semester 1, 2015

Module 2: Equitable Rights, Titles and Interests

What are equitable interests?

The equitable interests (being considered a proprietary interest) are the strongest
estate one can have in equity
The proprietary interest gives the holder rights that can be exercised directly
against the property which is the subject of the interest
The best example is the trust
Existence is premised on the separation of legal and equitable interests in
property
Trust A proprietary equitable interest is the strongest estate that someone
can have in equity

Settlor - Person creating the trust

Beneficiary -
Trustee - Person
Person for whom
holding the rights
the rights are held

An equitable interest is not a legal interest. The owner of the legal estate holds a legal
interest.
An equitable interest is the right to compel the trustee to hold and use the legal estate in
accordance with equitable obligations and terms of the trust.

Examples of equitable interests

Rights of a beneficiary under an express trust

Rights holder of an equitable mortgage or charge secured against the property
Right against property implied by equity to secure discharge of a debt (equitable
lien)
Enforcement in equity of a lease where legal formalities are not fulfilled

The formula for equitable interests?

Burns Philip Trustee Co Ltd v Viney [1981] 2 NSWLR 216 AT 223-4, Kearney J
The administration of equity has always paid regard to the infinite variety of interests and
has refrained from formulating or adhering to fixed universal and exhaustive criteria with
which to deal with such varying situations. The approach traditionally adopted by equity has
been to retain flexibility so as to accommodate the multitudinous instances in which
fundamental equitable rules fail to be applied
A right in equity that might be protected by an equitable remedy
Equity arose and is continuing to evolve to overcome the harsh outcomes of the Common
Law by narrowing to find a cause of action. To have a definition of equity would go
against the means of equity

7|Page
Notes Equity & Trusts Semester 1, 2015

Distinguishing equitable interests

Equitable
interest
Flexible

Proprietary interest Mere equity

Qualities: eg power to
1. protect right against person holding (or personal
legal estate equity)
2. enforce right against 3rd parties (except
purchaser for value without notice) Qualities:
3. dispose of equitable interest Requires courts
assistance to
Wily v St George Partnership Banking Ltd substantiate claim
(1999) 84 FCR 423 at 433

Equitable interests are flexible. Classifying equitable interests is temporal and dynamic

Why do you need to identify the equitable interests?

The type of equitable interests determine:
The nature of litigation
The type of relief
Priorities between competing equitable interests
Not all equitable rights are assignable or transmissible
When an equitable interest is assigned or transmitted through a will, the assignment
may have implications under State or Commonwealth revenue legislation

Creation of equitable interests in property

Equitable interests in property may arise or be created in three ways:

By implication of law

eg resulting trust, equitable liens, equitable leases

Might not be evidenced in document, but the parties actions may imply an
agreement

By operation of law

eg constructive trust

Pursuant to intention

eg express trust
Look to the actual intention of the creator of the interest to ascertain what the
prospective parties positions are

8|Page
Notes Equity & Trusts Semester 1, 2015

Equitable interests in property implication Resulting Trust

Where one person (A) confers legal title to a property on another person (B) for
no consideration, but A is presumed by law to retain equitable or beneficial
ownership of the property
This is based on a rebuttable presumption that there was an absence of intention on
the part of A to benefit B
The presumption might be rebutted by evidence
For example leading evidence that A intended to make a gift to B
Such a presumption of advancement arises automatically in certain
relationships eg husband/wife; parent/child, and so on.
Equitable interests are created by implications of law. Their actions imply their intentions,
which equity then recognises as binding.

Equitable interests in property implication Equitable Liens

A right against property to secure the discharge of an actual or potential
indebtedness, where:
Indebtedness by the owner of property to the other party is in relation to the
acquisition of the property or an expense incurred in relation to it
The property can be specifically identified
The relationship between the debt and the property are such that the owner
would be acting unconscientiously if she or he were to dispose of the
property without the other partys consent, or without the debt being
discharged
See Hewett v Court (1983) 149 CLR 639 at 668
There are three conditions indebtedness, identification of property and unconsciously
Eg money owed to mechanic, replacing engine in car. Mechanic may seek a lien over the
car
Equitable interests in property implication Equitable Lease
The lease which is unenforceable at law is treated by equity as an agreement to lease, and
the court may grant specific performance of it
Chan v Cresdon Pty Ltd (1989) 168 CLR 242
The lessee hadnt satisfied all the formalities required by law, but the
case is authority that the court will treat an agreement to lease, as
an equitable lease for the term agreed upon in the lease
document, even though the lessee doesnt have a lease at law

Creation of equitable interests in property Operation of Law

Breach of fiduciary duty
relationship of confidence between the parties. The fiduciary is the person
whom the confidence is reposed (eg lawyer in lawyer client relationship)
Contribution to property
where a person has made an indirect or indirect contribution to property that
is not listed in its title.
Mutual wills
where two people execute mutual wills, providing that after death of the
survivor, the property is to be divided in terms of that will
Contract for disposition of land
9|Page
Notes Equity & Trusts Semester 1, 2015

purchaser of property has an equitable interest in the property until it is

exchanged to them.
Chang v Registrar of Titles (1976) 137 CLR 177

Creation of equitable interests in property Intention

Property given subject to obligations
Property to be held on trust
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1
NSWLR 510 at 518 (Justice Hope)
Where the trustee is owner of the legal fee simple, the right of the
beneficiary although annexed to the land, is a right to compel the
legal owner to hold and use the rights which the law gives him in
accordance with the obligations which equity imposed upon him. The
trustee, in such a case, has at law all the rights of the absolute owner
in fee simple, but he is not free to use those rights for his own benefit
in the way he could if no trust existed. Equitable obligations require
him to use them in some particular way for the benefit of other
persons
Intention where property is given under certain obligations
Contributions to property
An equitable interest in property may arise under the doctrine of proprietary
estoppel
Whereby a legal owner of property is prevented from asserting his or
her rights against another party whom he or she has allowed or
encouraged to deal with that interest, or act in relation to that
property, as if the latter had rights to the said property
For example, allowing or encouraging someone to carry out
renovations on the property would give them an equitable interest in
the property
In Giumelli v Giumelli (1999) 196 CLR 101 at 112
In these cases, the equity which founded the relief obtained was
found in an assumption as to the future acquisition of ownership of
property which had been induced by representations upon which
there had been detrimental reliance by the plaintiff
Instrument of security
Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207 at
227
An equitable charge is created by an appropriation of specific
property [by the chargor] to the discharge of some debt or other
obligation [owed to the chargee] without there being any change in
ownership either at law or in equity
Assignment
What is an assignment?
An assignment relates to the transfer of rights and liabilities
A transfer can be said to occur when one person (the assignor) parts
with something in circumstances where the recipient (the assignee)

10 | P a g e