Equity and Law of Trusts

1
Introduction
• Page 3 of Hanbury and Maudsley's Modern Equity
(16th Edition, Sweet & Maxwell):
• "Equity is a multifaceted concept. In a broad sense, it
refers to what is fair, just, moral, and ethical; however,
its legal meaning is much narrower. Equity is the
branch of law that was applied and administered by
the Court of Chancery prior to the Judicature Act of
1783."
Definition
• The word “equity” is derived from the classical Latin
word “aequitas”, which means fairness or
reasonableness. In its practical application, “aequitas”
signified the following of the spirit of the law, as
opposed to the strict letter.
• It connoted reasonable modification of the letter of
the ordinary law.
Definition
• Equity is also known as:
• "those principles of natural justice administered first
by the King-in-Council, and later by the Chancellor,
first as a member of that Council, then as an
independent judge, to correct and supplement the
common law."
Categories of definition
• From the above, Equity therefore has two
meanings:
• 1. Ordinary or popular meaning
• 2. Technical meaning
Ordinary meaning
• In the ordinary sense, equity is synonymous with
natural justice, morality, or fair play.
• For example, before a person is found guilty in a court
of law, he must be given the opportunity to defend
himself.
• In this context, equity means doing good.
Technical meaning
• In the technical sense, equity refers to a set of rules or
principles that are not and do not differ from common
law.
• It is a set of rules or principles that supplement the
general rules of law.
Technical meaning
• The distinction between common law and equity,
which gives rise to the meaning that equity is that
which is not common law, must be understood.
• Only by studying the historical origins and
development of equity in England can such a
distinction be made.
Historical Origin and Development of Equity
• Prior to the development of equity, common law was
the dominant law in England.
• Case law helped to shape common law over time. It
was administered by the King's justices in the old royal
courts.
• The three common law courts were King's Bench,
Common Pleas, and Exchequer.
The Court of King’s Bench
• The Court of King's Bench: This court takes its name
from the original concept of the monarch sitting with
his judges "in banco", that is "on the bench".
• It handled both civil and criminal cases in which the
King was interested.
The Court of Common Pleas
• The Court of Common Pleas heard civil cases brought
by one person or citizen against another.
The Court of Exchequer
• The Court of Exchequer: The primary jurisdiction of
this court was cases involving royal revenue.
• Later, it gained jurisdiction over debts owed by one
citizen to another. It ultimately took many debt cases
that should have been heard in the Court of Common
Pleas.
Common Law
• The common law was strict because a person had to be
issued with a writ disclosing a cause of action before he
could seek redress for his grievance.
• This writ was issued by the King's Chancellor.
• The Chancellor was the "keeper of the King's conscience"
and represented the Crown's "moral attitude" as an
ecclesiastic.
Common Law
• Precedent hampered the common law courts.
• Furthermore, the Provisions of Oxford of 1258
prohibited the Chancellor from issuing new types of
writ on his own initiative.
• These constraints prevented the common law from
developing quickly enough to provide justice in all
cases.
Common Law
• Furthermore, in the turbulent 13th century, a
plaintiff was frequently unable to obtain a
remedy in the common law courts, even when
he should have, due to the strength of the
defendant, who would defy the court or
intimidate the jury.
Petitions to the King
• Due to the limitations of common law, plaintiffs began to
petition the King in Council to exercise his extraordinary
judicial powers on one of two grounds: (a) that there was no
remedy available; or (b) that the available remedy was not
administered properly.
• Thus, where the common law's rigidity worked unfairly or
provided no remedy, an appeal was made to that higher
justice known as "equity," which resided in the King as the
"fountain of all justice."
Petitions to the King
• When petitioned, the King's residuary power allowed him to temper
the rigidity of ordinary law and do justice in accordance with reason,
good faith, good conscience, and current moral ideas.
• As a result, equity was created to address the shortcomings of
common law.
The Court of Chancery
• The practice of petitioning the King persisted, giving rise to the
establishment of a Court of Chancery as a separate institution from
the King and his Council.
• Equity is thus defined as "those principles of natural justice
administered first by the King-in-Council, and later by the Chancellor,
first as a member of that Council and then as an independent judge,
to correct and supplement the common law."
The Court of Chancery
• The Chancellor's jurisdiction was unclear in the Middle Ages.
• He used his authority for reasons of conscience.
• In theory, conscience was based on universal and natural
justice rather than the Chancellor's personal opinion or
conscience.
• In practice, however, the standards varied with each
Chancellor, giving rise to the expression "Equity is as long as
the Chancellor's foot."
The Court of Chancery
• Where the common law did not provide for jurisdiction, the
Chancellor enacted one.
• Common law courts, for example, lacked the authority to order
specific performance or grant an injunction.
• The Chancellor would also provide a remedy in cases where a
common law rule resulted in significant injustice due to an unforeseen
set of facts.
• Justice demanded that the rule be changed or amended.
• If the rule could not be amended or modified, justice demanded the
creation of a new rule to lessen the harshness and severity of the
common law rule.
Equity
• This new body of rules developed to cure the shortcomings
of the common law are what came to be known as equity.
• The rigidity and deficiency of the common law led to the
evolution of equity.
• In this sense, equity can be seen as supplementing or
filling in the gaps left by the common law.
Difference between common law and equity
• Equity is distinguishable from the general body
of law and from the common law, in particular,
not because it seeks to achieve a different end,
since both equity and the common law seek to
achieve justice.
• Rather, equity is distinguishable because it
appears at a later stage of legal development.
Regularization of Equity
• With the passage of time, Chancellors began to apply the same
principles in all cases rather than following the inclination of the
moment dictated by circumstances under the concept of conscience.
• The Court of Chancery became more organized as well.
• More judicial officers were appointed, and a Chancery Court of
Appeal was established.
• What began as an irregular process of petitioning the Crown in
exceptional circumstances had evolved into a regular system of courts
with recognized jurisdiction.
Rigidity of Equity
• The systematization of equity rules resulted in rigidity ("rigor
aecquitatis"); they became as ingrained as those of common law.
• Lord Eldon (1801-1827), one of the most famous Chancellors, stated in
Gee v. Pritchard (1818) 2 Swans 402 at 414:
• “The doctrines of this court ought to be as well settled, and made as uniform
almost as those of the common law, laying down fixed principles, but taking
care that they are to be applied according to the circumstances of each case.
I cannot agree that the doctrines of this court are to be changed with every
succeeding judge. Nothing would inflict on me greater pain, in quitting this
place, than the recollection that I had done anything to justify the reproach
that the equity of this court varies like the Chancellor’s foot.”
Rigidity of Equity
• It must not therefore be assumed that every
injustice was the subject of equitable intervention.
• Initially, it was never certain when equity would apply
since the Chancellor’s powers were wide but vague.

• Eventually, the Chancellor had to rely on well-

settled principles of equity.
Per Jessel, M.R. in Re National Funds
Assurance Co. (1878) 10 Ch.D 118 at 128
• “This is not, as I have often said, a Court of Conscience, but a Court of
Law.”
• According to the Court of Appeal in Re Diplock [1948] Ch. 465 at 481:
• If the claim being made did exist,
• “it must be shown to have an ancestry founded in history and in the
practice and precedents of the courts administering equity
jurisdiction. It is not sufficient that because we may think that the
‘justice’ of the present case requires it, we should invent such a
jurisdiction for the first time.’
Rigidity of Equity
• Harman, L.J. said the following in Campbell Discount Co. v. Bridge
[1961] 1 Q.B. 445 at 459:
• “Equitable principles are, I think, perhaps rather too often
bandied about in common law courts as though the Chancellor still
had only the length of his foot to measure when coming to a
conclusion. Since the times of Lord Eldon the system of equity for
good or evil has been a very precise one and equitable jurisdiction is
exercised on well known principles.”
Conclusion of definition
• As a result, equity law is concerned with the technical rather than the
ordinary meaning of equity.
• Any definition of equity must consider two factors: first, form and
history, and second, substance or principle of equity.
• However, it should be noted that today, some aspects of equity are
strict and technical, while others give the court a lot of leeway.
Comparison of Equity and Natural Justice
• To define equity solely in terms of natural justice is not entirely
accurate.
• The principles of equity applied in courts differ from the rules of
natural justice.
• When the natural justice rules enforced by the courts are examined, it
is clear that many of them are common law rules, many others are
statutory, and some are derived from ecclesiastical and other sources.
• In the technical sense, only a small portion of the total can be said to
be equity rules.
Equity and Natural Justice
• It can be said that equity in the technical sense
encompasses more than the traditional rules of
natural justice.
• Equity incorporates some or most of the common law
rules.