LAWS2385 Final Notes PDF

Table of Contents {#table-of-contents.TOCHeading} ================= [Institutional Equity 8](#institutional-equity) [2 Important Points in History 8](#important-points-in-history) [Map of Equity 11](#map-of-equity) [Contract 12](#contract) [Civil Wrongs 13](#civil-wrongs) [Civil Procedure 14](...

Table of Contents {#table-of-contents.TOCHeading} ================= [Institutional Equity 8](#institutional-equity) [2 Important Points in History 8](#important-points-in-history) [Map of Equity 11](#map-of-equity) [Contract 12](#contract) [Civil Wrongs 13](#civil-wrongs) [Civil Procedure 14](#civil-procedure) [Maxims of Equity 14](#maxims-of-equity) [Equitable Remedies 16](#equitable-remedies) [Personal and Propretary Remedies 16](#personal-and-propretary-remedies) [Personal Remedies 16](#personal-remedies) [Proprietary Remedies 17](#proprietary-remedies) [Comparing Proprietary Remedies & Personal Remedies 17](#comparing-proprietary-remedies-personal-remedies) [Objective of Equitable REmedies 18](#objective-of-equitable-remedies) [Equitable Property 21](#equitable-property) [Equitable Interests and Rights 22](#equitable-interests-and-rights) [How Are Property Interst Created 23](#how-are-property-interst-created) [Characterisitcs of Equitable Property Trusts 23](#characterisitcs-of-equitable-property-trusts) [The Nature of Equitable Ownership 24](#the-nature-of-equitable-ownership) [DKLR Holding Co v Commissioner of Stamp DUties 24](#dklr-holding-co-v-commissioner-of-stamp-duties) [Equitable Interests and Equities 25](#equitable-interests-and-equities) [Fiduciary Obligations 30](#fiduciary-obligations) [Recognised Relationships 31](#recognised-relationships) [Ways of Identifying Fiduciary Relationships Ad Hoc 32](#ways-of-identifying-fiduciary-relationships-ad-hoc) [Outside the Recognised Relationships 32](#outside-the-recognised-relationships) [Vertical Relationships 33](#vertical-relationships) [Horizontal Relationships 35](#horizontal-relationships) [Concurrent Contractual and Fiduciary Relationships 36](#concurrent-contractual-and-fiduciary-relationships) [Distortion of Fiduciary Duty 38](#distortion-of-fiduciary-duty) [Scope of the Fiduciary Relationship 38](#scope-of-the-fiduciary-relationship) [Fiduciary Obligations 40](#fiduciary-obligations-1) [Authorisation and Ratification 41](#authorisation-and-ratification) [Strictness 41](#strictness) [Obligation to not Obtain any Unauthorised Profit from the Relationship 43](#obligation-to-not-obtain-any-unauthorised-profit-from-the-relationship) [Obligation not to be in a Position of Conflict 44](#obligation-not-to-be-in-a-position-of-conflict) [Informed Consent as a Defence for Breach of Fiduciary Duty 47](#informed-consent-as-a-defence-for-breach-of-fiduciary-duty) [Remedies for Breach of Fiduciary Obligation 48](#remedies-for-breach-of-fiduciary-obligation) [Law of Assignment 48](#law-of-assignment) [Property Terminology 49](#property-terminology) [Common Law Assignment of Legal Property 49](#common-law-assignment-of-legal-property) [Equity's Intervention 50](#equitys-intervention) [Equitable Assignment of Legal Property 50](#equitable-assignment-of-legal-property) [Consideration 50](#consideration) [Gifts 51](#gifts) [Non-Assignable Rights 52](#non-assignable-rights) [Future Property 53](#future-property) [Assignment of Equitable Property 57](#assignment-of-equitable-property) [Assignment of Choses in Action at Common Law 58](#assignment-of-choses-in-action-at-common-law) [Statutory Assignment 59](#statutory-assignment) [Summary of s 12 Conveyancing ACt 1919 requirements: 59](#summary-of-s-12-conveyancing-act-1919-requirements) [Equitable Choses in ACtion 60](#equitable-choses-in-action) [Legal Property that can only be assigned in Equity 61](#legal-property-that-can-only-be-assigned-in-equity) [Statutory Writing Requirements for the Assignment of Equitable Property 62](#statutory-writing-requirements-for-the-assignment-of-equitable-property) [Voluntary Disposition of Equitable interst 64](#voluntary-disposition-of-equitable-interst) [SUmmary 69](#summary) [Express Trusts 70](#express-trusts) [Definition 70](#definition) [Essential Characteristics of a Trust 71](#essential-characteristcs-of-a-trust) [Parties to a Trust 72](#parties-to-a-trust) [Different Types of Trusts 73](#different-types-of-trusts) [Distinction Between Trust Power and Bare Power 74](#distinction-between-trust-power-and-bare-power) [Types of Appointment 75](#types-of-appointment) [Existence of Trust Obligations 75](#existence-of-trust-obligations) [Quarantining Assets from Creditors of the Trustee 75](#quarantining-assets-from-creditors-of-the-trustee) [Public Police in Relation to Trusts 76](#public-police-in-relation-to-trusts) [Trusts and Related COncepts 77](#trusts-and-related-concepts) [Trust and Agency 77](#trust-and-agency) [Trust and Bailment 78](#trust-and-bailment) [Trust and Equitable Charge 78](#trust-and-equitable-charge) [Trust and Contract 80](#trust-and-contract) [Trust and a Condition 81](#trust-and-a-condition) [Trust and Debt 82](#trust-and-debt) [Trust and Partnership 84](#trust-and-partnership) [Certainty Requirements in the Law of Trusts 85](#certainty-requirements-in-the-law-of-trusts) [Certainty of Intention 85](#certainty-of-intention) [Objective or Subjective Intention 86](#objective-or-subjective-intention) [Sham Trusts 87](#sham-trusts) [What Intention has to be proved? 87](#what-intention-has-to-be-proved) [Precatory Trusts 87](#precatory-trusts) [Intention to Create an Immediate Trust 88](#intention-to-create-an-immediate-trust) [Contract and Trust: QUestions of Certainty and Intention 91](#contract-and-trust-questions-of-certainty-and-intention) [The Co-existence of Contract and Trust: The QUistclose Trust 91](#the-co-existence-of-contract-and-trust-the-quistclose-trust) [Two Elements to Prove With Intention 91](#two-elements-to-prove-with-intention) [Certainty of Subject Matter 92](#certainty-of-subject-matter) [Quantum Requirement 92](#quantum-requirement) [Certainty of Objects 93](#certainty-of-objects) [Powers and Certainty 94](#powers-and-certainty) [Conceptual and Evidentiary Uncertainty 96](#conceptual-and-evidentiary-uncertainty) [Fixed Trusts 96](#fixed-trusts) [Trust Powers (Discretionary Trusts) 97](#trust-powers-discretionary-trusts) [Status of the Criterion Certainty Test in Australia 97](#status-of-the-criterion-certainty-test-in-australia) [Administrative Unworkability 97](#administrative-unworkability) [Capricious Trust and Power 98](#capricious-trust-and-power) [Certainty of Objects and Trustees' Duties 98](#certainty-of-objects-and-trustees-duties) [Executing a Trust Power 98](#executing-a-trust-power) [Creating an Express Trust 100](#creating-an-express-trust) [Methods of Creating a Trust 100](#methods-of-creating-a-trust) [Self-Declaration of Trust 101](#self-declaration-of-trust) [Trust Created by Transfer 103](#trust-created-by-transfer) [Exceptions to Statutory Writing Requirements 105](#exceptions-to-statutory-writing-requirements) [Testamentary Trust 106](#testamentary-trust) [The Doctrine of Incorporation by Reference 107](#the-doctrine-of-incorporation-by-reference) [Incomletely Constituted Trusts 107](#incomletely-constituted-trusts) [Non-Simultaneous Declaration and Vesting 108](#non-simultaneous-declaration-and-vesting) [Trusts and Public Policy 108](#trusts-and-public-policy) [Non-Statutory Public Policy 109](#non-statutory-public-policy) [Non-Statutory Public Policy 109](#non-statutory-public-policy-1) [Trustees Duties and Powers 110](#trustees-duties-and-powers) [Sources of the Trustees' Duties and Powers 110](#sources-of-the-trustees-duties-and-powers) [Duties on Assumption of Trusteeship 110](#duties-on-assumption-of-trusteeship) [Duty to Adhere to the Terms of the Trust 110](#duty-to-adhere-to-the-terms-of-the-trust) [Duty to 'get in' the Trust Assets 111](#duty-to-get-in-the-trust-assets) [Ongoing Management Duties 112](#ongoing-management-duties) [Duty to Keep Assets Separate 112](#duty-to-keep-assets-separate) [Keeping and Rendering Accounts 114](#keeping-and-rendering-accounts) [Duty to Give Information to Beneficiaries 115](#duty-to-give-information-to-beneficiaries) [Duties of Performance 120](#duties-of-performance) [Duty of Care 120](#duty-of-care) [Duty Of Act Impartially 123](#duty-of-act-impartially) [Duty To Act Personally 125](#duty-to-act-personally) [Duty to Consider Exercise of Powers 126](#duty-to-consider-exercise-of-powers) [Consequences of an Invalid Exercise of Power 129](#consequences-of-an-invalid-exercise-of-power) [Particular Aspects of the Trustee's Fiduciary Obligations 130](#particular-aspects-of-the-trustees-fiduciary-obligations) [Duty to Act Gratuitously 130](#duty-to-act-gratuitously) [The Self-Dealing Rule 131](#the-self-dealing-rule) [The Fair Dealing Rule 131](#the-fair-dealing-rule) [Duties on Winding up a Trust 132](#duties-on-winding-up-a-trust) [Trustee Investment Duties and Powers 132](#trustee-investment-duties-and-powers) [Sources and Conent of Trustees' Investment Powers 133](#sources-and-conent-of-trustees-investment-powers) [Trustee Duties in the Context of INvestment 133](#trustee-duties-in-the-context-of-investment) [The Modern Approach to 'Prudence' 135](#the-modern-approach-to-prudence) [The Case for Trustees Having regard to Ethical Considerations 139](#the-case-for-trustees-having-regard-to-ethical-considerations) [Compensation for Loss 143](#compensation-for-loss) [Trustee's Rights and Liability 144](#trustees-rights-and-liability) [The Nature of a Trustees Right to Indemnity 144](#the-nature-of-a-trustees-right-to-indemnity) [The Status of the Trustee's Right to Indemnity 145](#the-status-of-the-trustees-right-to-indemnity) ['Properly Incurred' Expenses 146](#properly-incurred-expenses) [Exclusion by Trust Instrument 147](#exclusion-by-trust-instrument) [Liability of the Director of Trustee Companies 147](#liability-of-the-director-of-trustee-companies) [Third Parties and the Trustee's Right of Indemnity 148](#third-parties-and-the-trustees-right-of-indemnity) [Recovery Against Beneficiaries Personally 149](#recovery-against-beneficiaries-personally) [Creditor's Right to be Subrogated to the Trustee's personal Indemnification by Beneficiaries 150](#creditors-right-to-be-subrogated-to-the-trustees-personal-indemnification-by-beneficiaries) [Trustee's Right To Impound Beneficiary Interest 150](#trustees-right-to-impound-beneficiary-interest) [Trustee's Right of Contribution from Co-Trustees 151](#trustees-right-of-contribution-from-co-trustees) [Trustee's Right to Recover Overpayment from a Beneficiary 151](#trustees-right-to-recover-overpayment-from-a-beneficiary) [Right to Seek Directions From Court 152](#right-to-seek-directions-from-court) [Breaches of Trust: Defences and Remedies 152](#breaches-of-trust-defences-and-remedies) [Trustee Liability for Breach of Trust 152](#trustee-liability-for-breach-of-trust) [Liability for Breach of Trust -- Standing 152](#liability-for-breach-of-trust-standing) [When will a Trustee have standing to sue for Breach of Trust 152](#when-will-a-trustee-have-standing-to-sue-for-breach-of-trust) [When will a Beneficiary have standing to sue for Breach of Trust 153](#when-will-a-beneficiary-have-standing-to-sue-for-breach-of-trust) [Excusing Liability 153](#excusing-liability) [Exclusion of Liability -- Trust Instrument 153](#exclusion-of-liability-trust-instrument) [Excusing Liability -- By Statute 155](#excusing-liability-by-statute) [Defences 157](#defences) [Consent 157](#consent) [Removal of a Trustee 158](#removal-of-a-trustee) [Termination of Trust 159](#termination-of-trust) [Rule in Saunders v Vautier 159](#rule-in-saunders-v-vautier) [Limitations 161](#limitations) [Tracing 163](#tracing) [introduction 163](#introduction) [Distinguising Tracing From Following and Claiming 164](#distinguising-tracing-from-following-and-claiming) [Tracing and Claiming at Common Law and Equity 165](#tracing-and-claiming-at-common-law-and-equity) [Fiduciary Requirement 166](#fiduciary-requirement) [Equitable Tracing Rules 167](#equitable-tracing-rules) [Scenario 1(a) Trustee mixes trust money with own account and spends some of the money 168](#scenario-1a-trustee-mixes-trust-money-with-own-account-and-spends-some-of-the-money) [Scenario 1(b) Trustee mixes trust money with own account, purchases some property and dissipates rest. 169](#scenario-1b-trustee-mixes-trust-money-with-own-account-purchases-some-property-and-dissipates-rest.) [Scenario 1(c) -- Trustee mixes trust money with own account and makes payments in and out of account 169](#scenario-1c-trustee-mixes-trust-money-with-own-account-and-makes-payments-in-and-out-of-account) [Scenario 2 -- Trustee mixes money of multiple beneficiaries with own account and spends some: 170](#scenario-2-trustee-mixes-money-of-multiple-beneficiaries-with-own-account-and-spends-some) [Scenario 3 -- Trustee mixes trust money with own account, withdraws some of it and invests it sucessfully. 171](#scenario-3-trustee-mixes-trust-money-with-own-account-withdraws-some-of-it-and-invests-it-sucessfully.) [Scenario 4 Trustee pay trust money to honest volunteer who mixes money 172](#scenario-4-trustee-pay-trust-money-to-honest-volunteer-who-mixes-money) [Defences to Equitable Tracing Claims 173](#defences-to-equitable-tracing-claims) [Priorities 174](#priorities) [Equitable Interests and Equities 174](#equitable-interests-and-equities-1) [The Doctrine of Notice 175](#the-doctrine-of-notice) [Personal Liability of Accessories and Recipients 180](#personal-liability-of-accessories-and-recipients) [Introduction 180](#introduction-1) [Third Party Liability: The rule in *Barnes v Addy*. 181](#third-party-liability-the-rule-in-barnes-v-addy.) [Knowing Receipt 182](#knowing-receipt) [Breach of Fiduciary Obligation 182](#breach-of-fiduciary-obligation) [Receipt of Property by a Third Party 183](#receipt-of-property-by-a-third-party) [Knowledge of the Breach of Fiduciary Duty 184](#knowledge-of-the-breach-of-fiduciary-duty) [Remedies for Knowing Receipts 187](#remedies-for-knowing-receipts) [Knowing Assistance 188](#knowing-assistance) [A dishonest, Fraudulent Breach of Trust 188](#a-dishonest-fraudulent-breach-of-trust) [Assistance in Breach 190](#assistance-in-breach) [Knowledge in Breach 191](#knowledge-in-breach) [Remedies for Knowing Assistance 193](#remedies-for-knowing-assistance) [Other Forms of Participatory Liability 193](#other-forms-of-participatory-liability) [Claims Based on Tracing 193](#claims-based-on-tracing) [Inducing a Breach of Trust 193](#inducing-a-breach-of-trust) [Trusteeship de son tort 194](#trusteeship-de-son-tort) [Remedies -- Equitable Compensation, Accounts of Profit 194](#remedies-equitable-compensation-accounts-of-profit) [Monetary Rewards in Equity 194](#monetary-rewards-in-equity) [Accounts of Profits 195](#accounts-of-profits) [Calculation of Profits 195](#calculation-of-profits) [Allowances 198](#allowances) [Equitable Compensation 200](#equitable-compensation) [Emergence of the Jurisdiction to Award Equitable Compensation 201](#emergence-of-the-jurisdiction-to-award-equitable-compensation) [Calculation of Equitable Compensation 202](#calculation-of-equitable-compensation) [Breaches of Trust 202](#breaches-of-trust) [Breach of Fiduciary Duty 204](#breach-of-fiduciary-duty) [Common Law Adjustedments to Quantum 206](#common-law-adjustedments-to-quantum) [Bars to Relief 207](#bars-to-relief) [Laches 207](#laches) [Acquiescence 210](#acquiescence) [Unclean Hands 210](#unclean-hands) [Hardship 212](#hardship) [Effect of Order on Third Party 214](#effect-of-order-on-third-party) [Resulting Trusts 214](#resulting-trusts) [Overview of Resulting Trusts 215](#overview-of-resulting-trusts) [Presumed Resulting Trusts 216](#presumed-resulting-trusts) [When Does the Presumption of Resulting Trust Not Apply? 219](#when-does-the-presumption-of-resulting-trust-not-apply) [Incomplete Dispositions of a Beneficial Interest 224](#incomplete-dispositions-of-a-beneficial-interest) [Quistclost Trusts 226](#quistclost-trusts) [Resulting Trust 232](#resulting-trust) [Constructive Trusts 233](#constructive-trusts) [Introduction 233](#introduction-2) [The Constructive Trust Compared with Other Trusts 233](#the-constructive-trust-compared-with-other-trusts) [Categories and Principles 234](#categories-and-principles) [Constructive Trusts and Unjust Enrichment 234](#constructive-trusts-and-unjust-enrichment) [Constructive Trusts and Unconscionablity 234](#constructive-trusts-and-unconscionablity) [Constructive Trusts and Wrongdoing 235](#constructive-trusts-and-wrongdoing) [Common Intention Constructive Trusts 235](#common-intention-constructive-trusts) [The Baumgartner Constructive Trust 236](#the-baumgartner-constructive-trust) [Assessing Contributions 238](#assessing-contributions) [Equitable Adjustments 238](#equitable-adjustments) [Is the Baumgartner Constructive Trust an Institution or a Remedy 238](#is-the-baumgartner-constructive-trust-an-institution-or-a-remedy) [Impact of family law Legislation on Constructive Trusts 239](#impact-of-family-law-legislation-on-constructive-trusts) [Constructive Trusts as a Remedy for Proprietary Estoppel 239](#constructive-trusts-as-a-remedy-for-proprietary-estoppel) [COnstructive Trusts Imposed for Breach of Fiduciary Obligation 240](#constructive-trusts-imposed-for-breach-of-fiduciary-obligation) [Fiduciary obtains a benefit or profit where there was an acttual or possible conglict of interest and duty 241](#fiduciary-obtains-a-benefit-or-profit-where-there-was-an-acttual-or-possible-conglict-of-interest-and-duty) [Bribes and Secret Commissions 242](#bribes-and-secret-commissions) [Constructive Trusts as a Restitutionary Remedy for Unjust Enrichment 243](#constructive-trusts-as-a-restitutionary-remedy-for-unjust-enrichment) [Non-Contractual Transfers of Property 243](#non-contractual-transfers-of-property) [Contractual Transfers of Property 244](#contractual-transfers-of-property) [Doctrine of Mutual Wills 244](#doctrine-of-mutual-wills) [Constructive Trusts Imposed Over Property Transferred Under Specifically Enforceable Contracts 245](#constructive-trusts-imposed-over-property-transferred-under-specifically-enforceable-contracts) [The Principle of *Holroyd v Marshall* and Assignments of Future Property 246](#the-principle-of-holroyd-v-marshall-and-assignments-of-future-property) Institutional Equity ==================== Creation of a special court, distinct from the courts administering the general law, having the power to modify or correct the general law. - England: Court of Chancery until enactment of mid-19^th^ century judicature legislation. - Australia: Several courts including the HCA, Federal court, supreme court and inferior courts. 2 Important Points in HIstory ----------------------------- 1. Paradox of institutional equity is that it is premised on the existence of a court which no longer exists. - Court of chancery which administered equity doctrines developed by chancellors was abolished by judicature legislation -- enacted in all states except NSW which retained a separate court of equity until 1972 - Courts applying equity today do not have to administer equity in the same way it was administered prior to the Court of Chancery's abolition -- equitable principles are flexible and respond to changes in social and economic conditions 2. Court of Chancery never had any general power to correct a common law rule when rule caused injustice - Equitable intervention is significant in some areas of law (property law), but slight in others (tort law) -- when equity modifies the law is not deducible by logical proposition - Scope of jurisdiction can only be determined by reference to history of that jurisdiction -- possible to infer that equity will modify the law on one matter from the fact that it already intervenes in another closely-related matter - +-----------------------------------+-----------------------------------+ | **History of Equity** | | +===================================+===================================+ | Emergence of institutional | Origins in state of 14^th^ | | equity: medieval origins | century English common law and in | | | rigidity of the procedures for | | | initiating writs to commence a | | | common law action | | | | | | - Highly centralised system of | | | justice with processed | | | initiated by issue of writ by | | | chancery, which function as | | | the royal secretariat | | | | | | - Issue of writs was the basis | | | of the formulary system of | | | law -- claims could only be | | | brought before a common law | | | court if the facts fitted | | | within the formula or wording | | | of a writ issued by chancery | | | | | | - Strictness of formulary | | | system meant that not all | | | complainants could obtain a | | | writ giving them access to | | | common law courts | | | | | | - Some litigants petitioned | | | the king who retained | | | overriding power to | | | administer justice who | | | referred petitions to the | | | chancellor  | | | | | | | | | | | | - Early chancellors were | | | churchmen with legal | | | training but evolved to | | | be individuals with a | | | common law background in | | | the late 17^th^ century.  | | | | | | - No question at that time of | | | chancellors correcting or | | | modifying the common law -- | | | little common law which could | | | meaningfully have been | | | corrected | | | | | | - Doctrinal issues raised | | | by plaintiff's proof of | | | the matters alleged in | | | the writ were settled by | | | the jury verdict not | | | judicial ruling | | | | | | Real differences between | | | common law and equity in | | | formative stages | | | concerned not substantive | | | law but procedures | | | applied by chancellors to | | | obtain evidence | | | | | | | | | | | | - Action began not by writ but | | | by simple summons to appear | | | before chancellor | | | | | | - Failure to comply | | | rendered defendant liable | | | for contempt of court | | | | | | | | | | | | - Evidence taken by | | | questionnaires or written | | | depositions  | | | | | | | | | | | | - Did not work with jury | | | | | | - Disputes typically arose when | | | the trustee of land who was | | | bound to hold the land for | | | the benefit of the | | | beneficiary claimed the land | | | for himself | | | | | | - Common law courts could | | | do little but chancellor | | | could make orders to | | | protect beneficiaries | | | interest in the land -- | | | law of trusts  | | | | | | | | | | | | - Chancellors enjoyed | | | considerable discretion | | | -- operated as court of | | | conscience  | +-----------------------------------+-----------------------------------+ | Competition between Common Law & | 16^th^-17^th^ century was one of | | Equity  | jurisdictional conflict between | | | common law courts and chancery | | | | | | - Chancery jurisdiction rested | | | on sovereign's prerogative | | | power to administer justice, | | | which was challenged by a | | | parliament increasingly | | | inclined to test the limits | | | of the prerogative | | | | | | - Resolution of dispute | | | established basis of | | | relationship which exists | | | today | | | | | | Notable grievance of common | | | law judges was chancellors' | | | power to grant an order known | | | as a common injunction to | | | prevent enforcement of a | | | judgement obtained in a | | | common law court  | | | | | | | | | | | | - If P obtained a common law | | | judgement against D which the | | | chancellor considered had | | | been procured by | | | unconscionable conduct, | | | injunction granted to prevent | | | P from enforcing judgement | | | | | | - Judgement enabled D to avoid | | | consequences of adverse | | | judgement against him or her  | | | | | | **Earl of Oxford's Case** | | | | | | | | | | | | - CJ Coke challenged | | | jurisdiction of Chancellor, | | | Lord Ellesmere to award | | | common injunctions | | | | | | - although Coke had law on his | | | side, King James I ruled in | | | favour of equity accepting | | | argument that judgement was | | | obtained by oppression | | | | | | - established the supremacy | | | of chancery over common law | | | in cases of conflict between | | | jurisdiction | | | | | | 17^th^ century chancellors | | | awarded few common | | | injunctions, which were of | | | doubtful legality.  | | | | | | | | | | | | - Chancellors careful to | | | respect boundaries between | | | chancery and common law | | | courts.  | | | | | | Chancery's work at end of | | | 17^th^ century in enforcing | | | uses and preventing | | | oppression in exercising | | | contractual rights was | | | indispensable to landholding | | | society | | | | | | | | | | | | - Succeeded by period of reform | | | and consolidation undertaken | | | by Lord Nottingham etc.  | | | | | | - Responsible for | | | development of | | | mortgagor's equity of | | | redemption, rule against | | | perpetuities and for | | | formulating principles | | | governing relief against | | | unconscionable bargains | | | | | | By end of 18^th^ century, | | | most basic equitable | | | doctrines applied had | | | been established although | | | undergone process of | | | renewal and restatement | | | | | | | | | | | | - Equity became gloss on common | | | law, modifying it but not | | | rivalling it | +-----------------------------------+-----------------------------------+ | Reform and the judicature | Chancery court in 19^th^ century | | legislation  | criticised for delays in hearing | | | and disposing of cases | | | | | | - A defect of chancery was that | | | claimants might have to bring | | | more than one set of | | | proceedings to obtain the | | | relief they wanted | | | | | | - P who wanted to obtain order | | | of specific performance of a | | | contract would have to sue in | | | common law court to establish | | | validity of contract and then | | | obtain an order of specific | | | performance in chancery | | | | | | - System of civil justice | | | that separated equity | | | fr4om adjudication by | | | common law courts was | | | defective | | | | | | Judicature Acts 1873-6 | | | enacted reforms which | | | improved the | | | administration of common | | | law and equity but did | | | not change substantive | | | law | | | | | | | | | | | | - Enactment of legislation is | | | landmark in equity but clear | | | limits exist | | | | | | - Never intended to fuse | | | together legal and | | | equitable rights  | | | | | | | | | | | | - Described as fusion | | | fallacy to justify merger | | | of the two | | | | | | - E.g., fusion fallacy | | | is to assume that a | | | contract to create a | | | lease enforceable in | | | equity confers the | | | same rights and | | | imposes the same | | | duties as a common | | | law lease created by | | | execution of a deed | +-----------------------------------+-----------------------------------+ | Reception of equity in Australia  | NSW Act 1823 conferred on newly | | | created supreme court the power | | | to exercise locally the | | | jurisdiction that the chancellor | | | exercised in England | | | | | | - Pressure exerted by state's | | | first equity judge, Willis J | | | led to provision for | | | appointment of a primary | | | judge in equity by | | | administration of justice act | | | 1840 | | | | | | Supreme court structure | | | created by other states | | | required judges to administer | | | both common law and equity -- | | | did not mean the two were | | | fused procedurally  | | | | | | | | | | | | - Pre-judicature act | | | institutional model of | | | English equity wads strictly | | | applied | | | | | | - Judges who devoted most | | | of their time to deciding | | | common law claims were | | | required to hear equity | | | suits determined by | | | equity procedures  | | | | | | - NSW different both because | | | judicial resources permitted | | | equity specialisation and | | | this in turn reflected volume | | | of commercial and property | | | litigation in Sydney | +-----------------------------------+-----------------------------------+ | Judicature Legislation in | Attempts made to improve the | | Australia | model | | | | | | - SA supreme court procedure | | | act 1853, anticipated that | | | legislation by conferring | | | power on the supreme court in | | | any proceedings to make | | | orders of specific | | | performance of agreements or | | | to grant injunctions | | | | | | - S175 permitted actions at | | | law to be brought to | | | enforce exclusively | | | equitable obligations | | | | | | - QLD's equity procedure act | | | 1873, measure permitted | | | common law courts to grant | | | monetary relief in cases | | | where an equitable claim or | | | demand had been made. | | | Monetary award dependent upon | | | plaintiff establishing an | | | entitlement to a | | | discretionary equitable | | | remedy.  | | | | | | Overtaken by rapid adoption | | | of English style judicature | | | legislation in all states | | | except NSW | +-----------------------------------+-----------------------------------+ | *Place of Equity in Modern Law * | 1. Subject matter of equity | | | cannot be determined by | | | reference to legal history -- | | | cannot be logically deduced | | | from general propositions | | | | | | 2. Existence of a separate body | | | of equitable principles means | | | that much of Australian | | | private law exhibits a dual | | | character -- drawn from both | | | common law and equity  | +-----------------------------------+-----------------------------------+ Map of Equity ============= Equitable claims are remedy driven -- attempts made to characterise defendants as equitable wrongdoers for purpose of obtaining a distinctive equitable remedy such as an account of profits or a constructive trust - Number and distinct remedial aims of equitable remedies in contrast to common law encourages attempts to fit the facts of a case to the criteria of a particular doctrine in order to achieve the remedial outcome desired by P If remedy-driving is successful, may result in distortion of fundamental ideas of equity - Australian judges have not permitted basic equitable concepts to be stretched or distorted solely for purpose of enabling a P to obtain relief which is unavailable at common law Fundamental distinction between exclusive jurisdiction and auxiliary jurisdiction of equity. +-----------------------------------+-----------------------------------+ | **Exclusive Jurisdiction** | **Auxiliary Jurisdiction ** | +===================================+===================================+ | Consists of matters which prior | Acts in support of legal rights | | to the judicature legislation | | | could only be adjudicated upon by | - When a tort or breach of | | chancery and not by common law | contract has been committed | | courts | and common law damages re an | | | inadequate remedy for the | | - Includes enforcement of | plaintiff | | trusts and other fiduciary | | | obligations, equitable | - Legal rights then enforced by | | obligations of confidence and | award of an equitable remedy  | | rescission of contracts on | | | equitable grounds such as | | | misrepresentation and | | | unconscionable conduct  | | +-----------------------------------+-----------------------------------+ | Only equitable remedies can be | Remedy of specific performance | | awarded when equity acts in its | granted to enforce contract for | | exclusive jurisdiction | sale of land because damages are | | | considered inadequate to | | - Common law damages not | compensate for the breach | | available although equitable | | | compensation (monetary remedy | - Injunction awarded to | | compensating for financial | restrain commission of | | loss caused by breach of | trespass to land because | | equitable obligation) can be | damages will usually be an | | ordered | insufficient remedy | +-----------------------------------+-----------------------------------+ | Creates hierarchy of remedies | | | | | | - Only equitable remedies can | | | be awarded in exclusive | | | jurisdiction; common law | | | damages are never available | | | | | | - In auxiliary jurisdiction, a | | | court considers whether | | | damages will adequately | | | compensate for P's loss and | | | only if that remedy is not | | | adequate will the award of an | | | equitable remedy be | | | considered.  | | | | | | - Damages for breach of | | | contract are inadequate | | | if a monetary award will | | | not enable the plaintiff | | | to purchase a market | | | substitute for the | | | defendant's performance | | | | | | | | | | | | - Order of specific | | | performance or an | | | injunction compels the | | | defendant  to perform his | | | obligations under a | | | contact or prevents a | | | breach of a duty owed by | | | the defendant to the | | | plaintiff  | | +-----------------------------------+-----------------------------------+ Contract -------- Common law determines existence of a contract and rights and obligations of contracting parties, but equity modifies contractual obligations and provides relief both for breach and where the plaintiff's consent to the agreement has been vitiated  - Principle areas of equitable intervention: - Creation and modification of enforceable promissory obligations. Equitable doctrine of estoppel prevents the enforcement of some promises which would otherwise give rise to legal obligations although not developed as a mode of promise enforcement, estoppel doctrine, particularly proprietary estoppel has effect of enforcing promises - On the ground that a party's consent was vitiated by fraud, duress, unconscionable conduct, undue influence, mistake, misrepresentation and where a guarantee is entered into without a full understanding of its nature and effect. Rescission restores the parties to their pre-contractual position - Rectification of terms of a written contract where they do not conform to the agreement the parties made - Assigning benefit of performance of contractual obligations in equity. Judicature legislation introduced a procedure for assigning the benefit of contracts, did not supersede the equitable principles of assignment which continue to apply when statutory criteria are not met - Where a contractual term specifies a sum payable by the defendant upon breach of contract and the sum exceeds the maximum loss that might be incurred on breach, equity may strike down the term on the ground that it constitutes a penalty. Equity will give relief against a contractual provision entitling the plaintiff to forfeit the defendant's property upon breach of a contractual term if forfeiture would be a disproportionate response to the breach - Remedy of specific performance compels performance of a contract according to its terms. Particular provisions of a contract can also be enforced, positively or negatively by award of an injunction. In contrast to other examples of equitable intervention listed in this section, equity acts in its auxiliary not its exclusive jurisdiction. Civil Wrongs ------------ Relieves against consequence of forms of wrongdoing that are only recognised in equity, Counterparts to common law torts, but with qualifications that equitable bars and remedies are not comparable to common law defences - Breach of fiduciary duty -- availability of gains-based remedies is one of the characteristics of breaches of equitable obligation that distinguishes them from torts - Equitable relief is not limited to fiduciary who has committed the breach of obligation. Secondary parties including those who receive proceeds of fiduciary wrongdoing or who assist in breach can be held liable to make restitution of benefits received or to compensate for loss - Breach of confidence. Equitable obligations of confidence are relevant where there is no contract, i.e., where disclosure made in course of negotiations which were broken off without agreement being reached between parties. Remedy for some invasions of privacy. Civil Procedure --------------- Equity's regulation of civil litigation -- not covered - Contribution - Subrogation - Marshalling Maxims of Equity ================ Maxims are not equitable principles, and equity and trust problems cannot be solved solely by reference to a maxim - Apt to mislead without knowledge of the authorities which gave practical application to their content - Maxims express in concise form certain policies that inform application of equitable doctrine -- not substitute for precise application of equitable doctrine to facts of case Decision and maxim often do not readily align & there is no fixed list of maxims. Common list includes: a. She who seeks equity must do equity -- P claiming equitable relief must perform their obligations arising out of the subject-matter of the dispute b. He who comes to equity must come with clean hands -- P will be refused equitable relief if his conduct in the transaction in respect of which he is claiming relief has been improper. c. Equity looks to intent rather than form -- court of equity examines the substance of a transaction and not its form, all courts have power to ignore sham transactions and focus on true rights and duties created by parties or imposed by law  d. Equity treats as done that which ought to be done -- transaction may give rise to equitable rights even though no legal rights have been created because there has not been compliance with necessary legal formalities e. Equity acts in personam -- all equitable rights were once considered to be personal rather than proprietary just as right to performance of a contract is personal. Court of equity makes personal orders which operated on conscience of legal title-holder.  f. Equity follows the law -- courts of equity recognise legal rights, interests and estates although they will prevent the unconscientious exercise of these entitlements. Also sometimes applies limitation statutes by analogy to applications of the statutes at common law.  g. Equity does not assist a volunteer -- volunteer means someone who has not provided consideration. Confined to those who have given value in a transaction  h. Delay defeats an equity -- impact of a claimant's delay in bringing an equitable claim  +-----------------------------------------------------------------------+ | *Earl of Oxford's Case* (1615) | +=======================================================================+ | **Facts:** | | | | - The dispute concerned a conveyance of land (a portion of | | Magdalene College, Cambridge) to Queen Elizabeth I. | | | | - The Masters of the College transferred the land to Queen | | Elizabeth I, unaware of the provisions of a statute (the | | Ecclesiastical Leases Act 1571 13 Eliz c 10) which meant that | | this lease had not complied with the legal requirements. | | | | - The Queen then granted the land to Benedict Spinola who then on | | sold it to the Earl of Oxford. The Earl built a number of houses | | upon the land, and one house was leased to John Warren. | | | | - In time, the new Master of Magdalene College (Barnabas Gooch), | | having examined the provisions of the statute, realised that the | | initial lease was void. He then argued that he was entitled to | | lease the land to John Smith. | | | | - Warren brought an action in the common law court for Smith to be | | ejected | +-----------------------------------------------------------------------+ | **Held:** | | | | James I ruled in favour of Lord Ellesmere's decision in the Court of | | Chancery | | | | - "when their case deserveth to be relieved in course of equity by | | suit in our Court of Chancery, they should not be abandoned and | | exposed to perish under the rigor and extremity of our laws...we | | \... do approve, ratifie and confirm, as well the practice of our | | Court of Chancery" | | | | The effect of his ruling was that where the rules of the common law | | and chancery (equity) conflict, equity shall prevail | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | *Corin v Patton* (1990) | +=======================================================================+ | **Facts:** | | | | The Pattons were joint proprietors of land.  | | | | Mrs Patton did not want the interest to transfer to her husband after | | her death and executed a transfer of her interest in the land to | | Corin her brother 5 days before her death.  | | | | She also executed a deed of trust.  | | | | - Corrin would hold the property on trust for her/ or as she | | directed.  | | | | The transfer and deed were handed to her solicitor.  | | | | To register the transfer, she had to obtain a duplicate copy of the | | certificate of title from the Bank but she took not steps to do so | | before dying | +-----------------------------------------------------------------------+ | **Issue:** | | | | Will the maxims of equity correct her failure to take all the | | required steps i.e. getting the certificate? | +-----------------------------------------------------------------------+ | **Decision:** | | | | Application of the maxims of equity are discretionary. | +-----------------------------------------------------------------------+ | **Held:** | | | | - Mrs Patton did not do all that was necessary for her to do in | | order to affect a transfer. The certificate of title remained | | throughout with the mortgagee and Mrs Patton took no steps to | | arrange for its production for the purposes of registration.  | | | | - The mere fact that (a) Mrs Patton had declared her intention to | | discontinue the joint tenancy; and (b) Mrs Patton acted in such a | | way as to affect a discontinuation of the joint tenancy, did not | | suffice to sever her joint tenancy.  | | | | - Therefore, the gift is not recognised by equity and the Appellant | | fails. | +-----------------------------------------------------------------------+ Equitable Remedies ================== Remedies evolve from the procedures courts apply: - Equitable remedies grew out of practice of chancellors exercising continuing supervision of matters that were sufficiently complex to require more than the parties having a day in court - *Hewett v Hewett* -- court had to determine which timber on a property the plaintiff would be allowed to cut down from time to time for rest of his life  - Remedies are not immediately granted once a plaintiff proves their claim but may be limited or denied altogether in response to a range of factors relevant to the particular claim  - Court's discretion exercised after consideration of the positions of both parties; sometimes effect of remedy on other parties including wider community considered too Personal and Propretary Remedies -------------------------------- Distinguished according to their effect and purpose they fulfill. ### Personal Remedies Orders directed to the person of the defendant. Defendant must comply with the order or else be in contempt of court. Award of personal remedy has no direct impact on the defendant's property.  - Awards of damages for tort or breach of contracts are examples of personal remedies - Also has personal remedies such as equitable compensation, account of profits and injunction ### Proprietary Remedies Directed to property to which the defendant holds title. Order may declare that identified property belongs to the plaintiff in equity as constructive trust orders do. - Alternatively, the court can direct the sale of that property in order to satisfy the plaintiff's judgement, unless the defendant satisfies the judgement out of other resources - This is the consequence of imposing an equitable lien over the defendant's property. **Types of Proprietary Remedies** +-----------------------------------+-----------------------------------+ | **Constructive trust** | **Equitable Lien (or charge) ** | +===================================+===================================+ | Order that the defendant hold | Security interest over property. | | identified property on trust for | Although it attaches to | | the plaintiff. Plaintiff entitled | particular property, the | | to the property in equity, or to | plaintiff does not obtain a share | | a proportionate interest in that | of the property, as is the case | | property assessed by the court.  | with a constructive trust. | | | Instead, lien acts similarly to a | | - If property appreciates in | mortgage to secure a debt. If | | value the plaintiff will be | defendant does not discharge the | | entitled to the benefit of | debt to the plaintiff out of | | the appreciation | other funds, the property in | | | question will eventually be sold | | - Conversely, plaintiff carries | and the plaintiff paid out of its | | the risk of any depreciation | proceeds.  | | | | | Constructive trust is not a | - Some liens including | | general remedy available whenever | trustee's lien over trust | | justice and fairness requires. | property to secure repayment | | Imposed in carefully defined | of trust expenses arise | | situations | automatically.  | | | | | | - Liens can also be judicially | | | imposed in support of | | | personal remedies  | | | | | | - *Giumelli v Giumelli* | | | lien imposed as security | | | for payment of the | | | personal remedy of | | | equitable compensation  | +-----------------------------------+-----------------------------------+ ### Comparing Proprietary Remedies & Personal Remedies Proprietary remedies have important advantages over personal remedies - Plaintiff can make a claim to the property that is the subject matter of a proprietary remedy -- crucial if defendant is insolvent.  - Property will vest in plaintiff rather than the trustee in bankruptcy or liquidator and therefore the defendant's unsecured creditors will not have access to it - Contrasts award of a personal remedy which entitles the plaintiff only to the status of an unsecured judgement creditor in the defendant's insolvency - Enforceable against third parties who have received the property in question form the defendant. Only limitation on right to recover property from third parties is that they are not enforceable against a good faith purchaser of the property without notice of the plaintiff's rights.  - In contrast, a personal remedy is enforceable only against the party against whom the remedy is ordered - Entitle the plaintiff to claim specific property to which they attach special value, for which money cannot provide adequate compensation. This characteristic of proprietary remedies is often overlooked  - Personal remedy will only entitle the plaintiff to the assessment of a sum of money representing the value of the property - Limitations of proprietary remedies include that remedy cannot be award if the defendant no longer has property over which it can be imposed. Objective of Equitable REmedies ------------------------------- +-----------------------------------+-----------------------------------+ | **Coercion** | Some remedies are coercive, | | | compelling the defendant to | | | behave in a certain way | | | | | | - Specific performance requires | | | the defendant to perform his | | | contractual obligations | | | according to the terms of the | | | contract is coercive | | | | | | - Injunction are also coercive | | | requiring defendant to act or | | | cease acting as ordered. | +===================================+===================================+ | **Compensation** | Equitable compensation | | | compensates a plaintiff for loss | | | caused by commission of an | | | equitable wrong such as breach of | | | trust | +-----------------------------------+-----------------------------------+ | **Disgorgement** | Requires a wrongdoer who made a | | | profit from breach of an | | | equitable obligation such as | | | breach of confidence or fiduciary | | | obligation to disgorge those | | | profits to the plaintiff | | | | | | - Defendant can be ordered to | | | account for the profits | | | | | | - Can be effected by the award | | | of an account of profits | | | secured by imposition of an | | | equitable lien over property | | | purchased with the | | | plaintiff's money  | +-----------------------------------+-----------------------------------+ | **Restitution** | Trustee who has misappropriated | | | trust moneys will be ordered to | | | make restitution to the trust | | | fund. Unless trustee holds the | | | originally money, the remedy | | | which effects restitution will be | | | equitable compensation. | | | | | | - Second meaning is that of | | | restoration -- defendant must | | | restore to the plaintiff | | | property which ought to | | | belong to them | | | | | | Important equitable | | | restitutionary remedy is | | | rescission  | +-----------------------------------+-----------------------------------+ | **Nullification ** | Sometimes nullify the legal | | | consequences of a transaction | | | without other imposing | | | obligations on the parties.  | | | | | | - Where equity orders | | | rescission of a contract | | | which has not been executed | | | by either party, contract is | | | nullified and parties have no | | | further obligation to perform | | | under the contract | | | | | | - Sometimes includes directions | | | that documents containing | | | confidential information and | | | property manufactured by | | | unauthorised use of the | | | information be delivered up | | | and destroyed.  | +-----------------------------------+-----------------------------------+ | **Reformation** | Equitable remedy of rectification | | | forms a legal documents that | | | reflects the objectively | | | ascertained agreement of the | | | party. Some orders of rescission | | | may have the incidental effect of | | | reforming a transaction.  | +-----------------------------------+-----------------------------------+ | **Vindication** | Sevres function of validating the | | | plaintiff's rights. Declaration | | | is court's statement of | | | respective rights of parties | | | before it. Injunction can serve | | | the same purpose | +-----------------------------------+-----------------------------------+ +-----------------------------------------------------------------------+ | *Giumelli v Giumelli* (1999) | +=======================================================================+ | **Facts:** | | | | - Parents had many children, but parents promised to one child that | | would transfer interest if he worked the land. | | | | - Parents never transferred interest. | | | | - Son relied on estoppel as part performance in family cases often | | hard to establish | +-----------------------------------------------------------------------+ | **Decision:** | | | | - HCA not going to grant interest in land, but with compensation | | (personal remedy rather than proprietary) | | | | - If parents didn't pay, then **son had an equitable lien to sell** | | | | - **Court didn't want to grant title to one child for sake of | | fairness to the other children** | +-----------------------------------------------------------------------+ | **Held:** | | | | Gleeson CJ, McHugh, Gummow and Callinan JJ: | | | | - "When these matters are taken into account, it is apparent that | | the order made by the Full Court reflected what in Verwayen was | | described as the prima facie entitlement of Robert. However, | | qualification was necessary both to avoid injustice to others, | | particularly Steven and his family, and to avoid relief which | | went beyond what was required for conscientious conduct by Mr and | | Mrs Giumelli. The result points inexorably to relief expressed | | not in terms of acquisition of title to land but in a money | | sum... This is a case for the fixing of a money sum to represent | | the value of the equitable claim of the respondent to the | | Promised Lot." | | | | - Constructive trust was replaced with a reward of equitable | | compensation | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | *McKenzie v McDonald* (1927) | +=======================================================================+ | **Facts:** | | | | Mrs McKenzie's real estate agent (Mr McDonald) encouraged her to sell | | her property for less than its value. It was worth £2,445 but he | | valued it at £2,300. | | | | The real estate agent owned a shop which was worth £1,550, but which | | he over-valued at £2,000. | | | | He suggested that she exchange her farm for his shop in addition to | | paying him £300. She accepted the deal. This conduct amounted to a | | breach of his fiduciary duty. | | | | The real estate agent subsequently sold the land to a bona fide | | purchaser for its actual value. | +-----------------------------------------------------------------------+ | **Issue:** | | | | What remedy is available to Mrs McKenzie | +-----------------------------------------------------------------------+ | **Held:** | | | | Dixon AJ: | | | | "I therefore treat the defendant as having obtained on the farm 5 | | shillings per acre more than the value assigned to the farm in the | | agreement of exchange, and as by his own dealings he has rendered it | | difficult to restore the farm to the plaintiff, **he must recoup this | | difference to her.** | | | | On the other hand, there is no difficulty in restoring to him the | | shop for which he obtained an allowance of £450 more... than its | | value.... \[I\]f the defendant decides to take the shop in specie | | there is no reason why he should not be permitted to do so. | | | | I therefore propose to decree him to pay £595 to the plaintiff by way | | of compensation, but to order further that if within 21 days he | | notifies the plaintiff of his election so to do he shall take over | | the shop at a value of £2,000, of which £450 is contained in the sum | | stated for compensation." | | | | - showed how equitable remedies are discretionary.  | | | | - while rescission was available because there was a third party | | involved later -- the D owes P's damages | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | *Nelson v Nelson* (1995) | +=======================================================================+ | **Facts:** | | | | Mrs Nelson wanted to obtain a Defence Services Homes Act Loan ('DSHA | | Loan') which was a loan with a lower interest rate than that | | available on the open market. | | | | She would be ineligible for this program if she were already a | | homeowner. | | | | To avoid this, Mrs Nelson purchased a home but registered the title | | of the property in the names of her children: Elizabeth and Peter. | | | | Mrs Nelson then applied for the DSHA loan, and falsely declared that | | she had no financial interest in any real property. | | | | The house was then sold and Mrs Nelson wanted to claim the proceeds | | from the sale. | +-----------------------------------------------------------------------+ | **Issue:** | | | | Could Ms Nelson get benefit even though registering a property in the | | name of her children was illegal to fraudulently obtain a government | | benefit. | +-----------------------------------------------------------------------+ | **Held:** | | | | Held: Deane and Gummow JJ: | | | | The presumption of advancement did not apply meaning, Mrs Nelson was | | entitled to the proceeds of sale. However, she was required to repay | | the loan to the Commonwealth. | | | | "In our view, as the price of obtaining the relief she seeks for the | | recognition and enforcement of a resulting trust in respect of the | | whole of the balance of the proceeds of sale of the Bent Street | | property, Mrs Nelson must be prepared to do equity according to the | | requirements of good conscience. That may involve consideration of | | more than the interests of the parties to the litigation. Here, good | | conscience calls for the taking by Mrs Nelson of steps sufficient to | | satisfy the demands of the underlying policy of the Act." | +-----------------------------------------------------------------------+ Equitable Property ================== Personal remedies, (such as specific performance and injections), have the principle function of enforcing personal rights such as performance of a contract. Over time equity proved willing to award personal relief almost routinely, not only against owners of property but also against third parties who had received the property. Eventually these developments were perceived as having created a proprietary interest in favour of the part entitled to the relief. - E.g. if A signs a contract to purchase land from B, but B refuses to complete the contract, equity will grant the remedy of specific performance against B and B will have to transfer the land to A. - This happened so often that A was treated in equity as having a property interest once the contract was signed. Similarly, the regular awards of personal relief against the trustees in breach of trust gave rise to a proprietary interest in the beneficiary. Availability of equitable remedy does not mean that interest protected by the remedy constitutes property - Confidential information is not recognised as a species of equitable property. Information is only protected against misuse by parties who act in breach of an equitable obligation of confidence -- person who has confidential information has only a personal right to protection in equity. - Equitable property like common law property must be ok a kind that is recognised as property in law Equitable Interests and Rights ------------------------------ 1. Equity recognises the beneficiary's interest under a **fixed trust**. - **Fixed Trust** -- the beneficiary has fixed entitlements. Trustee has no discretion. - E.g. grandfather leaves his six grandchildren money in a trust. He instructs that each grandchild shall receive an equal share of the trust. Thus, each grandchild is entitled to 1/6 of the trust. - **Discretionary Trust --** the Trustee has discretion to award trust funds to potential beneficiaries. - Note: common law does not recognise trusts. 2. Equity recognises a **partner's interest** in the **partnership**. 3. Equity recognises property interests which are equivalent to common law interests. - Equitable lease - Tenant forgets to sign a lease, lease is then executed by the tenant for nine months, they live in the apartment for 9 months and pay rent. Landlord tries to evict the tenant after 9 months; court will recognise that there is an equitable lease. - This is because it would be unconscionable for the tenant to be evicted after following the terms of the lease. 4. Equity recognises equitable security interests. 5. Equity recognises equitable rights over land - E.g. easement - Easement is a common law right. Owner of land will grant another party a right to use that land. (e.g. grant neighbour right to use some of his land to use as a driveway.) - Equitable easement - An equitable easement will come into existence if the parties intended to create a common law easement but failed to do so for whatever reason. § - **Rule:** one party has done everything which the law has required them to do -- the other party is only required to finalise/register the agreement. (e.g. circumstances where the first party dies before finalisation/registration -- equity will recognise the transaction or agreement is enforceable) - **Test:** can the first party change his or her mind? Is the first party in a position to cancel the deal? - See *Corin v Patton*. How Are Property Interst Created -------------------------------- There are three ways in which property interests may be created. - By agreement. For example, an equitable mortgage is created by an agreement between a lender and a borrower. - By express trust; or - By court order or operation of law. - Constructive trust derives its efficacy from a court order and not from a settlor's expression of intention to create a trust. - Equitable lien is a court-ordered security interest imposed over the defendant's property -- of defendant fails to perform an obligation owed by the plaintiff, the property will be sold off and the plaintiff's debt discharged out the proceeds. Characterisitcs of Equitable Property Trusts -------------------------------------------- The main characteristic of equitable property interests is informality. - A deed is not required. Equitable interest will be enforceable if there is a specifically enforceable contract to create the interest. - Equity assists those who pay valuable consideration for property. Even where valuable consideration has not been paid, a transfer may be enforceable if the transferor has done all that is necessary to complete the transfer. - Equity looks to the intent and not the form of a legal transaction. Acts on the conscience of the holder of the legal title to the property. - Equitable interest can be enforced against the person who created the interest or who by his conduct is bound by the interest as well as against ay volunteer who takes from that person. - But it will not be enforceable against a good faith purchaser for value of the legal estate or interest in the property who does not have notice of the equitable interest. - Where the property interest consists of land or a security interest over personal property legislation has largely displaced the application of doctrine of notice. The Nature of Equitable Ownership --------------------------------- ### DKLR Holding Co v Commissioner of Stamp DUties +-----------------------------------------------------------------------+ | *DKLR Holding Co (No 2) v Commissioner of Stamp Duties* | +=======================================================================+ | **Held:** | | | | Hope JA: "Where the trustee is the owner in 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 has imposed upon him. | | The trustee, in such a case, has at law all the rights of the | | beneficial 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." | | | | **You can't be your own trustee** | | | | - In this case, Aickin J stated "\...that the holder of an estate | | in fee simple cannot be a trustee of that fee simple for himself | | for what he holds is a single estate, being the largest estate in | | land known to the law." | | | | Legal and Equitable title cannot be split | | | | - The owner of a property cannot keep equitable title in a property | | whilst transferring legal title to another. | | | | - E.g., If Anna transfers a property to Tracy, to be held on trust | | for Anna, she transfers the legal title to Tracy who is then | | under the obligation of a trustee. | | | | - (Brennan J "an equitable interest is not carved out of a legal | | estate but impressed upon it.") | | | | Generally, scope of an equitable interest in property is commensurate | | with the relief that equity will give the person having the equitable | | interest. | | | | - In some circumstances, the equitable interest may surpass the | | remedy | | | | - E.g., a property right conferred on the beneficiary of a fixed | | trust, versus a beneficiary of a discretionary trust who has | | enforceable rights against trustees and third party who have | | obtained title to property but have actual property interest | +-----------------------------------------------------------------------+ +-----------------------------------------------------------------------+ | *DKLR Holding Co v Commissioner of Stamp Duties* | +=======================================================================+ | **Held:** | | | | Principles | | | | - **The equitable estate is attached to legal ownership but is not | | a part of the legal ownership** | | | | - No person can be the legal and equitable owner of property | | | | - If the legal owner acquires the equitable interest, then the | | equitable interest ceases to exist | | | | Relationship between a legal interests and an equitable interest | | | | - If a person has an equitable interest in property, this implies | | that some other person has a legal interest in that property | | | | - If one person has both legal and equitable interests in the | | relevant property -- he or she has no 'equitable inters' in the | | property as such. | | | | - See the follow explanation in DKLR Holdings per Aickin J: | | | | - If one person has both the legal estate and the entire | | beneficial interest in the land he holds an entire and | | unqualified legal interest and not two separate interests, | | one legal and the other equitable. If he first holds the | | legal estate upon trust for some other person and thereafter | | that other person transfers to him the entire equitable | | interest, then again the first-named person does not hold two | | separate interests, one the legal and the other the equitable | | estate; he holds a single entire interest --- he is the | | absolute owner of an estate in fee simple in the land. The | | equitable interest merges into the legal estate to comprise a | | single absolute interest in the land. It is a fundamental | | principle of both the common law and of equity that the | | holder of an estate in fee simple cannot be a trustee of that