University of technology

Faculty of law

Equity of trust

Group members

Toni- Ann Turner 1304420

Kristen stone 1401959

Kadeeja walker 1405459

Adrian bailey 1307144

Boyd Brown 1201842

Matthew Bennett 1405086

Maxims of equity

The maxims of equity are principles which illustrate how equity operates. This is by giving
an illustration between how common law and also equity works in meeting the needs of
individuals. Equity only intervene it is seen to be appropriate; where common law fails to give the
situation a fair and just remedy.

Maxims

Equity follows the law

This concept illustrates that both equity and common law works hand in hand. Equity will
only intervene or overrule whenever common law requires justice. This maxim acts in personam
of the parties involved to prevent any unjust action; where it is seen possible equity will ensure the
rules act in accordance with the one of common law. Equitys rules work with common laws so
there is no contradiction. However there are some instance where the rule in common law will
stand. In the case Caleb Diplock [1951] AC 251 died in 1936 and his will created a trust leaving
the residue of his estate to "benevolent" organizations in England. Most of the money was
distributed and exhausted any remedy they might have had against the trustee. Diplock's next-of-
kin challenged the validity of the trust arguing that "benevolent" was different from "charitable"
and that trusts for non-charitable purposes are invalid. The next-of-kin wanted to trace the money
given to the benevolent organizations. The problem was that some of the benevolent organizations
on good faith used Diplock's money to build on land they owned, thus mixing the trust money with
property of their own. The court refused to allow the tracing to attack this endeavor, stating that
the trust assets were no longer identifiable. The general principle laid down in Re Diplock is that
whenever there is an initial fiduciary relationship the beneficial owner of an equitable proprietary
interest in property can trace it into the hands of anyone holding the property except a bona-fide
purchaser for value without notice

Where the equities are equal, the rst in time prevails

This maxim deals with proprieties; whenever there is a conflict which of the interest will
prevail over the other. The general rule states when there is a conflict an interest will take effect in
order of the creation but when there is an equitable interests, it may be defeated if a bona de
purchaser acquires a subsequent legal estate without notice of the equitable one. For the purchaser
of the legal estate to gain priority it will be for him to prove that he is bona de purchaser. When
there seemed to be a fraud then the legal owner and the equitable one will not be equal and the
equitable one will prevail. In Pilcher v Rawlins (1872) LR 7 Ch App 250 James LJ explained the
position of the bona de purchaser of a legal estate:

Such a purchasers [i.e. the purchaser of a legal estates] plea of a purchase for valuable
consideration without notice is an absolute, unqualied, unanswerable defense, and an
unanswerable plea to the jurisdiction of this Court. Such a purchaser, when he has once put in
such a plea, may be interrogated and tested to any extent as to the valuable consideration which
he has given in order to show bona des or mala des of his purchase, and also the presence or
the absence of notice; but when once he has gone through that ordeal, and has satised the terms
of the plea of purchase for valuable consideration without notice, then . . . this Court has no
jurisdiction whatever to do anything more than to let him depart in possession of that legal estate.

Equity will not suffer a wrong to be without a remedy

This maxim shows that equity will step in where ever a problem arise when common law
prevents an honest plaintiffs from gaining redress. This maxim would be seen as the opposite of
equity fallows the law because equitable doctrines and remedies sometimes intended to override
the unjust result arising from the enforcement of legal rights. In trust the enforcement of the rights
of the legal owner and that of the person for who is benefiting have to agree he who hold the
property would clearly lead to injustice and so equity recognized the rights of the benecial owner.

Equity sees that as done what ought to be done

This maxim of equity means where parties have entered into a contract, the courts of
equity will treat the contract as having been performed which was established in the case of
Walsh v Longsdale 1982. The issue of whether or not Walsh could stop Longsdale from
demanding a years rent and from seizing his property. In this case the seven year lease was not
granted by a deed which meant that the lease was not formally executed. It was held that
Longsdale could take action so as long as the lease is in writing contained all expressed terms,
signed and the other party has provided adequate consideration. Therefore an agreement to enter
into a lease can be treated as a lease in equity and the rights and duties of the parties have been
established as if the lease had been actually executed.

Equity imputes an intent to fulfill an obligation

This maxim of equity establishes part performance of an obligation will suffice unless the
exception applies where the law requires a perfect performance. Therefore, if a person performs
an act that could be regarded as fulfilling an obligation, it will be taken as such. In Sowden v
Sowden [1785] the husband made an agreement with the trustee of his marriage settlement that
he would pay 50000 to purchase a land. He did not pay the sum but after marriage he purchased
the land in his own name for the same amount and he did without bringing the land to settlement.
It was established however that he purchased the land to fulfill his obligation. The doctrine of
performance and satisfaction is established in the case as well as ademption which is the transfer
of property which suffices as a substitution for a gift previously promised by one party.

Equity acts in personam

This maxim governs how equity is administered in law where an act in personam is directed
to a specific person while in rem -the proceeding is directed at no specific person. This maxim
makes the location of the property irrelevant when the court can acquire jurisdiction over the
person of the defendant. One of the grounds for applying this rule is that the defendant must be
within the jurisdiction. The case of Penn v Baltimore 1750, an order of specific performance was
granted to the plaintiff who appeared before the English court with a boundary dispute. The land
however was in the United States and both parties were English nationals. Here it was established
that equity makes orders regarding property outside the jurisdiction by making orders against the
person. Also in Ewing v Orr Ewing (1883), L. R. 9 App. Ca. 48. a man while domiciled in
 Scotland died leaving his personality and realty in England. The executors of his estate argued that
they were under no obligation to administer the estate. It was held that the administration could
begin in England as equity acts in personam.

He who comes to equity must come with clean hands.

This means a person must have acted honestly and fairly in the matter at hand.
It does not require every plaintiff to have an unblemished background in order to prevail but the
court will refuse to assist anyone whose cause of action is founded on his or her own misconduct
towards the other party. It deals with the present conduct of the plaintiff. For example, a tenant
who does not pay rent in accordance with the rent agreement could not bring a claim against his
land lord as he had not acted equitably himself. This is seen in the case of Coatsworth v Johnson
(1886) 55 LSQB 22, where the tenant sought specific performance of his landlords agreement to
grant him a lease. It was held that the tenant was in breach of a covenant in the intended lease.
Specific performance is discretionary and the court under equity will require a party seeking an
equitable remedy to come with clean hands.

He who seeks equity must do equity

It should not be thought that equity will automatically intervene whenever a certain situation arises.
In general, one can say that wherever certain facts are found and a common law right or interest
has been established, common law remedies will be available whether that produces a fair result
or not. By contrast, equitable remedies are discretionary and the court will not grant them if it feels
that the plaintiff is unworthy, notwithstanding that prima facie he has established an equitable right
or interest.

The person who seeks an equitable remedy must be prepared to act equitably and the court may
oblige him to do so. In the field of contract the court will not grant an injunction to prevent breach
for the benefit of a party who is not prepared to perform his side of the bargain. In Chappell v
Times Newspapers Ltd (1975) newspaper employees who had been threatened that they would be
sacked unless they stopped their strike action applied for an injunction to prevent their employers
from carrying out the threat. The court held that in order to be awarded a remedy the strikers should
undertake that they would withdraw their strike action if the injunction was granted. Since they
refused to do this, the injunction was also refused.

Where the equities are equal, the law prevails.

Where the equities are equal there is no reason for equity to favour one over the other, and the one
with the legal title will therefore prevail. Where a debtor promised to secure two creditors holding
equal claims. One of them who obtained a conveyance was held to have thereby acquired a legal
advantage over the other which gave him the priority. As between two tax purchasers having equal
equities one who had obtained the legal title through a sheriff's deed was awarded priority.

Delay defeats equity

Time is essential when bringing a claim in a court of equity. A claimant who wishes to be grant a
relief by the court must do so within a time period that is reasonable. If the delay is determined
unreasonable then the granting of that relief would inevitable produce an inequitable result. In Leaf
v International Galleries (1950) 2 KB 86; 1 All ER 693 where a contract for sale of a painting
innocently represented as painted by Constable could not be set aside after the plaintiff had delayed
in bringing an action for five years before the court.

The doctrine of not allowing an equitable remedy where there is unconscionable delay is known
as laches. Acquiescence is where one party breaches another's rights and that party doesn't take
an action against them they may not be allowed to pursue this claim at a later stage. This maxim
deals with the defence of laches and acquiescence to equitable relief that is available to the
defendants. The court defines this maxim to be mean more than just a mere delay but instead
implies the true meaning of neglecting to do what ought to have been done. As a result the maxim
will make a claimant who delays in making a claim not able to seek equitable relief. A defendant
have a defences of laches or acquiescence if the plaintiff either affirmed or abandoned his right,
thereby implying the plaintiff had knowledge of his right. In the case of Nelson v Rye , [1996] 1
WLR 1378 the court held that the equitable doctrine of lashes applied and this therefore prevented
the claimant from gaining a remedy when a musician tried to claim an account of earnings which
had been wrongfully retained by his manager in breach of fiduciary duty after six years had
elapsed.

However a defendant will not have such a defence if:

1. The plaintiff failed to enforce his rights because he was not aware of them

2. The plaintiff does not in fact suffer any prejudice or change in position as a result of the delay
itself.

3. The defendant is such as to render the success of the defence to be inequitable. That is, if the
defendant does not herself come to equity with clean hands because the delay was caused by the
fraud of the defendant.

Therefore, in considering the defences of laches and acquiescence the courts of equity consider
whether such a delay was excusable or justifiable. The courts of equity look at factors such as:

what acts were done during the period of delay;

the degree of changes and how the parties have been affected during the period of
delay and
the underlying equitable principle of justice versus injustice

Equity looks to the intent rather than the form

This maxim is concerned with the depth of the law of equity. The courts are not prepared to look
merely at the surface appearance of a claim but rather go through any article that would give effect
to the substance of any transaction. Equity will not ignore formalities, however, it will not observe
any unnecessary formalities. That is, the court of equity will look precisely at what was intended
by the parties even if they have to look at other evidence other than that which was used in the
written document. It must be noted that the court does not disregard the words used in a written
document, but posit to give effect to what was the intention of the parties. In the case of Parkin v
Thorold (1852) 51 ER 698.the judge found that by insisting on the form, the substance will be
defeated, they hold it to be inequitable to allow a person to insist on such form and thereby defeat
the substance. This principle is centered on the equitable remedy for rectification that was
established and allows for a contract to be corrected when the terms are not correctly recorded.

This maxim allows the judge to interpret the intentions of the parties if the terms aren't recorded
properly. Also, in the case Tulk v Moxhay (1848) of where a purchaser of a plot of land covenanted
with the vendor that he would keep the plot uncovered by buildings. The purpose of the covenant
was to ensure that there would be no building on the plot but it was drafted in positive form. The
court held that the intent behind this covenant was negative.

Equality is equity

The underlying principle of equity is cemented around the idea of equality and fairness. Equality
is the doctrine that all persons regardless of wealth, social status, or the political power wielded by
them are to be treated the same before the law. Where there are two individuals have two equal
claims to a property equity will mandate an equal division of title of that property between the
claimants in furtherance of an ancient principle that equity did delight in equality. The court is
more contented to treat all parties involved as equals.

That is, equity will not be unfair by playing favorites. An example of this maxim can be found in
business schemes or pension fund where if losses occur as a result of poor investment then
everyone who is entitled to benefits must therefore suffer a fair share of the loss. In addition, as it
relates to insurance, if five children of a man who is killed in an auto accident should receive
insurance money for a wrongful death action then it must be shared equally among the children if
the children are the man's only surviving close relatives.

However, there are exceptions where the court may depart from this principle. The rule applies
only to parties who are on an equal position. If, for example, the man in the auto accident died
leaving three young children, then the money that is recovered might be distributed in proportion
to each child's age. A younger child will have lost his or her father for more years than an older
brother or sister. Also, a receiver would have to prefer a secured creditor over those creditors who
had no enforceable interest in a particular asset of the company. Unless there is proof that one
person in a group is in a special position, the law will assume that each should share equally in
proportion to his or her contribution or loss.
In the case of Mcphail v Doulton [1970] UKHL 1 where a deed was executed settling a non-
charitable trust for the benefit of the staff of a company and their relatives and dependents. There
was an uncertainty about the case and the validity of the trust was therefore challenged, positing
that the objects of the trust were insufficiently certain. The court held that the maxim equality is
equity did not apply in this circumstance as equal division is surely the last thing the settlor ever
intended. In addition, equal division among all the beneficiaries would probably produce a result
beneficial to none. The court will be more inclined to consider this maxim in cases of family trusts.

Equity abhors forfeiture

The courts of equity seek to do everything in its power to avoid an unreasonable

forfeiture which is the total loss of a right or thing because of the failure to do something
as required. It does not however stand in the way of a forfeiture that is required by
statute following the maxim 'equity follows the law'. Therefore, if a party to a contract
fulfills most of their obligation and does so reasonably, the courts will not allow that
party to suffer a loss due to a minor cause.

Equity will not aid a volunteer

A volunteer is an individual who provides a benefit whether or not the recipient requires
it or even knows about it. Therefore equity will not allow for that volunteer to take back
the benefit and this is upheld by the doctrine of choice. It is clear that the decision in
Pennington v Waine does not purport to give courts of equity an 'unfettered discretion as
to whether a voluntary gift or trust should take effect with far reaching consequences for
voluntary dispositions of property.
According to Cohen J in Re Marshall Will Trust [1945] Ch. 217 A trust in an equitable obligation
biding a person (who is called a trustee) to deal with property over which he has control (which is
called the trust property) for the benefit of person (who are called the beneficiaries or cestuis que
trust).

Under the law of trust there are several type of trust such as family trust, insurance trust and many
other trust, however what must be taken into consideration is the purpose behind the creation of
these trust. Some of the purpose are briefly outlined below.

Managing of Assets

This kind of trust is created where beneficiaries dont have the capability or desire to manage the
assets given. This is where having a trustee(s) to manage the assets become important as the trustee
will solve any problem that may arise after the grantor death. This kind of trust is mostly created
in the cases where the beneficiary is a minor or have a disability.

Protecting Assets

A grantor my set create a protective trust to ensure that a heir will not lose the property to his
creditors or sell his trust interest to someone else, or even a marriage breakdown. This kind of trust
entails the beneficiary having a life interest in the property which is made determinable on a given
event such as bankruptcy and followed by a discretionary trust in favor of specified beneficiaries
which is laid out in Section 33 of the Trustee Act 1925. Section 33 sets out a traditional formula
of protection trust which will then become operative.

Controlling the distribution of Assets

A grantor may wish to create a trust for the purpose of distribute their assets A trustee can distribute
assets to them over time. A living trust aid in separating assets that are usually deemed difficulty
to divide. The rule of living trust offers more control that a will in splitting out how such property
should be transferred after the grantors death. This allows the living trust to detail who can inherit
or use the property as well as whether or not it can be sold.

Providing Privacy
A trust agreement is a private document hence it may be used to keep information confidential
since a will is likely to be probated which becomes a public document, along with the grantors
assets. For this reason many person have replace their wills with a trust.

Avoiding compulsory succession

Compulsory succession is concerned with the portion of the deceased estate that he or she cannot
dispose of through will because it is already assigned to a rightful heir. In this regards a trust may
be created by establishing a testamentary wish that he rightful heir accepts. Under this trust the
testator can inject into his or he will wish or preference on how he or she would prefer to see their
estate divided upon death. However it is key to note that a trust of this kind must not infringe on
the right of a compulsory legacy unless its accepted by the heir.

Tax Avoidance

A trust is often used to mitigate tax liability as settlor pays tax at a higher rate than that of a trustee.
A trust cannot be set up under no circumstance use to escape tax payment that is already due, as
that is a criminal offense in law (tax evasion). The fundamental principle for this trust is that it is
legitimate to manage ones affairs to reduce a tax liability but if its created solely to avoid tax
then it may be regarded as invalid. The case of Inland Revenue Commission v Duke of
Westminster Lord Tomlin proclaimed Every man is entitled if he can, to order his affairs so as
that the tax attaching under the appropriate Acts is less than otherwise would be. If he succeeds in
ordering them so as to secure this trust, then however unappreciative the commissioner of Inland
Revenue or his fellow tax payer may be of his integrity, he cannot be compelled to pay an increased
tax.

Avoiding Probate

A trust is often time cited as a key reason why a person may set up a trust. According probate can
means substantial saving in time, the legal fees and paper works. A probate is the legal process
whereby a will is proved in court and accepted as a valid public document that is the true last
testament of the deceased. However a trust will by-pass the long process of probate which can take
up to a year to finalized and gain the assets.

Preserving disability benefits

A trust may be created for a beneficiary whom is eligible for certain disability plan payment. Once
the beneficiary meets the requirement set out by law then he will receive payments. This is known
as the Henson Trust. A Henson trust which is sometime called an absolute discretionary trust, in
Canadian law is a type of trust designed to benefit disable person, as well as the right to called
government benefit and entitlements.

Charities

A trust can be created with the purpose of providing gifts to charity. Charity trust is a popular way
to donate to charities organization as a grantor can transfer assets such as money, real estate or act
to a charitable trust, or designated that they gives it to a specified organization. These kind of
charity donation are often time tax deductible.

Providing funds for educational purpose

Creating a trust c make money available to children, grand-children, other relatives and even non
relatives for solely educational purpose. This kind of trust includes funding for coverage of college
tuition or living expense. This will ensure that upon death the deceased heir or beneficiary will be
able to access assets or funds for educational purpose.
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www.lawteacher.net Free Law Essays Property Trusts

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