EQUITABLE JURISDICTION

[THE NATURE OF EQUITY]

Introduction
Right in personam and right in rem
Maxims of Equity
Conclusion
 EQUITABLE JURISDICTION
[THE NATURE OF EQUITY]
Introduction:
• The term 'equity' has many meanings even when it is used in legal language.
It is not always easy to differentiate between these different meanings but
often this is crucial. Consider some of them as: Equity as fairness or justice -
a basic doctrine that the established law or legal rules of a system ought to
be applied in such a way as to do justice or to achieve fairness; Similarly
equity is sometimes referred to as if it were a doctrine of morality or of
natural justice, embodying some basic requirement that the law is ultimately
required to do or to achieve justice in legal disputes notwithstanding the
particular legal rules expressed in statutes or in the common law; Equity as
indicating a general body of legal doctrine which emerged in England
through the practices of the Equity or Chancery Courts; Similarly equity will
sometimes be referred to in a jurisdictional sense as if it referred just to
those special types of cases which will be heard by a specialist equity court.
You will frequently read of equity as distinct from common law being used
in just this way.
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Introduction: (Continuation)
• Equity as indicating those circumstances where a court exercising
equitable jurisdiction feels it has a duty to intervene and to provide
certain special remedies or to remedy the operation of the common law.
For example, the court might say something like 'the plaintiff in this
case has sufficient equity to permit the court to intervene'. Equity as
indicating some sort of property or other interest which is not quite the
same as a legal or common law interest in property - but regarded as
enforceable in the equity courts. Hence, some forms of property are
called equitable property. An interest of a beneficiary under a trust or an
interest in a partnership are examples of equitable proprietary interests.
Equity as meaning simply the right to an equitable remedy such as an
injunction to restrain a breach of some wrong or an order for specific
performance of a contract (an order which requires that the contract be
carried out).
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Introduction: (Continuation)
• Apart from the definitional aspect of equity as part of its nature, reference could also
be made to the following points:
(1) Equity as a body of law: The application of equitable justice has gradually resulted in
the evolution of tangible equitable principles which embellish the common law by
alleviating the deficiencies of the absolute law. Thus, the most common legal
understanding of ‘equity’ today is not an intangible sense of justice, but rather a
discernable body of law, developed by the early Courts of Chancery and
administered by the modern Courts of Justice.
(2) Equity corrects the law: In its discretionary capacity, equity operates to correct the
law, not to overwhelm it. The jurisdictional foundation of equity is, as Aristotle notes,
corrective rather than distributive; it prescribes relief against the proscriptive
operation of common law.
(3) Form and substance: Whilst equitable principles were intended to alleviate
deficiencies of the common law, they still give effect to the spirit of the law. Equity is
not obliged to follow the letter of the law, where the universality of this ‘letter’
produces injustice, equitable principles follow the ‘reason and spirit’, so that
deficiencies arising from a strict literal interpretation can be corrected.
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Introduction: (Continuation)
• Apart from the definitional aspect of equity as part of its nature,
reference could also be made to the following points:
(4) Standard of conduct: Equity does not apply defined rules, it
evaluates specific conduct, this requires flexibility and
discretion. Most equitable principles are based upon
discretionary standards of conduct rather than definitive rules;
these standards usually stem from the basic precepts of good
faith, honesty and generosity, and in this sense are rational in
nature. The concept of ‘unconscionability’ is a good example to
cite here i.e. abusing a position or relationship of trust or
confidence; exploiting a recognised vulnerability or weakness).
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Right in personam and right in rem:

• All legal rights are either in personam or in rem. An ‘in personam’ right
is a personal right attached to a specific person. In rem rights are
property rights and enforceable against the entire world. In other words,
in rem rights are proprietary in nature; related to the ownership of
property and not based on any personal relationship, as is the case with
in personam rights. See for example the case of tracing in equity
whereby it can be a personal claim or proprietary claim in nature.
• In addition to the above, the law of rights in personam is one and the
same as the law of obligations. The reason is that a right in personam in
one person correlates with an obligation in another. For example, if you
negligently run over my foot, I have a right in personam to an award of
damages. And you are the persona against whom I can exercise my
right. Looked at from your end of this relationship, the same thing can
be affirmed by saying that you are under an obligation to pay me
damages. (See examples such as contract law, law of tort, etc)
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Right in personam and right in rem: (Continuation)

• A suit ‘in personam’ is a suit against a person. A suit ‘in rem’ is a suit against
a piece of property. Most suits in modern days are in personam. In rem suits
are useful, however, when you can't get jurisdiction over the person. For
example, if someone in Malaysia cybersquats your internet domain name by
registering it with a company in Singapore, you can file a lawsuit in rem
against the domain name in Singapore to avoid the problem of finding a
court that has jurisdiction over someone in Malaysia.
• All in all, in rem is Latin for "in a thing". In a lawsuit, an action in rem is
directed towards some specific piece of property, rather than being a claim
for, say, monetary compensation against a person (which is an in personam
or personal action). It focuses on proprietary title to property. Land is an
example of a case where, when the title (e.g. who owns a house) is in
dispute, an in rem action is used to deliver the land itself back to the rightful
owner. The distinction between an in rem action and an in personam action
is relevant to which jurisdiction a court case may need to be filed, for the
purposes of conflict of laws and civil procedure. An in rem action means that
the right jurisdiction would be where the property actually is.
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Maxims of Equity:
• There are a number of maxims that represent the general principles of equity.
These maxims retain importance because they provide broad guidelines by
which the courts exercise their equitable jurisdiction. They should always be
borne in mind that because, as equitable remedies are discretionary, they may
often dictate, when (and when not) a remedy will be granted. The most
important equitable maxims include:
(a) Equity will not suffer a wrong without a remedy: The principle behind this
maxim is that equity will intervene to protect a right which, perhaps because of
some technical defect, is not enforceable at law. It is not sufficient that the
defendant may be guilty of some moral wrong: the plaintiff’s right must be
suitable for enforcement by the court. In other words, the maxim is not to be
taken literally as equitable remedies are geared only to strike against
unconscionable behaviour and operate only if that behaviour constitutes a legal
(as opposed to a mere moral) wrongdoing. The classic example is the
enforcement of trusts. The beneficiary had no remedy at common law if the
trustee claimed the property for himself, as the trustee was the legal owner, but
he could enforce his rights in equity. More modern developments include the
giving of an equity in matrimonial home to a deserted spouse, the evolution of
promissory estoppel, the employment of constructive trust, expanding the range
of injunctions. See also specific performance as a classic case.
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Maxims of Equity: (Continuation)

(a) Equity will not suffer a wrong without a remedy:
• Furthermore, reference could be made to the case Ashby v
White (1704) in trying to have a better understanding of this
maxim. In this case, the court held that ‘If a plaintiff has a
right, he must of necessity have a means to vindicate it, and
a remedy if he is injured in the exercise or enjoyment of it’.
• This maxim has in mind only those wrongs capable of
judicial redress.
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Maxims of Equity: (Contribution)
(b) Equity follows the law: Clearly equity may not depart from statute
law, nor does it refuse to follow common law rules save in
exceptional circumstances (i.e. Conflicts between the rules of law and
equity). Hence, it would appear that the maxim ‘equity follows the
law’ has been construed: in the literal sense, so that an equitable right
may not generally override a legal right; in the sense that equity has
adopted some of the rules of the common law, in the sense that,
unless there is a good reason for deviating from the law, equity will
follow it. Thus equitable interests in land corresponds with legal
estates and interests. For example, the rights and duties of the parties
under an equitable lease are the same as if the lease were legal. See
also the case of Hopkins v Hopkins (1739) where Lord Hardwicke
said: “Trust estates, which are creatures of equity, shall be governed
by the same rules as legal estates so as to preserve the uniform rule of
property’.
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Maxims of Equity: (Contribution)

(c) He who seeks equity must do equity: This looks to the future conduct of the
claimant or plaintiff and entails that, for example, if the claimant seeks to
rescind (i.e. withdraw from) a contract, the court will ensure that the claimant
acts equitably by returning any deposit paid under the contract. Similarly, if the
claimant seeks to specifically enforce a contract then he must be prepared to
perform his side of the bargain. In other words, a claimant or plaintiff who seeks
equitable relief must be prepared to act fairly towards the defendant. Hence, a
claimant or plaintiff seeking an injunction will not succeed if he is unable or
unwilling to carry out his own future obligations. The maxim is, therefore,
employed to ensure fairness. This maxim is also the foundation of the doctrine
of election. See the case of Chappell v Times Newspapers (1975), where the
Court of Appeal emphasised that plaintiffs, by their refusal to undertake to
refrain from disruptive action during an industrial dispute, had not shown
themselves willing to perform their side of contracts of employment and could
not seek equitable relief when they were not prepared to act equitably. See also
the case of Jordan v Money (1854), where Lord Cranworth said: ‘If a person
makes a false representation to another, and that the other acts on it as a prima
facie proposition, the person who made the false representation shall not
afterwards be allowed for his own benefit to set up that which he said was false’.
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Maxims of Equity: (Contribution)
(d) He who comes to equity must come with clean hands: This principle is
closely related to the last one, save that the latter looks to the plaintiff’s future
conduct, while the “clean hands” principle looks to the previous conduct. In
other words, this maxim looks to the past conduct of the claimant or plaintiff
and entails that, if the claimant’s conduct in relation to the dispute has been
improper, the chances are that equity will not assist him. See the case of
Overton v Banister (1844) in which a minor fraudulently misrepresented her
age and persuaded trustees to pay money to her; later, when she came of age,
she sued them for payment of the sum again, but her claim was not allowed.
See also the case of Midland Bank v Wyatt [1975] 1 FLR 696- where a
husband and wife executed a declaration of trust in 1987 (when the husband
was contemplating a new business). The husband apparently settled their only
real asset on the wife and daughter’s name. The document was kept in a safe
and the couple continued to act as absolute owners of the property, in
particular by mortgaging it. The husband’s business failed and the bank
obtained a charging order against the house. The husband then revealed the
trust document. The court held that it was a sham. The inference was that the
husband had “kept it up his sleeve for rainy day” in order to defeat future
creditors. See also the case of Tinsley V Milligan (1983) the decision of the
House of Lords.
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Maxims of Equity: (Contribution)

(d) He who comes to equity must come with clean hands: See also the case of Dering
v Earl of Winchelsea (1787), where Lord Eyre said: “A man must come into a
court of equity with clean hands; but when this is said it does not mean a general
depravity; it must have an immediate and necessary relation to the equality sued
for; it must be a depravity in a legal as well as in a moral sense’. See also the case
of Argyll (Duchess) v Argyll (Duke) [1967] Ch. 302- where the court held that the
fact that the wife’s adultery had led to the divorce proceeding was not a ground for
refusing her an injunction to restrain her husband from publishing confidential
material; her adultery did not license her husband to “broadcast unchecked the
most intimate confidences of earlier and happy days”.
• Still as part of an explanation of the above maxim, reference could also be made
to a case of specific performance i.e. it would not be granted in relation to a
contract which was brought about by the claimant’s misrepresentation or fraud or
where the claimant is himself in breach of that contract.
• If both parties have “unclean hands,” the court should consider only those of the
applicant, and need not balance the misconduct of one against that of another. See
the case of San Lee Investment Co. Ltd v Wing Kwai Investment Co. Ltd (1983)
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Maxims of Equity: (Contribution)

• In Tinsley v Milligan [1993] 3 All ER 65, where a property was
purchased by two women who intended to run a guest house. Both
parties contributed to the purchase price but the title was registered in
the name of Tinsley to enable Milligan to claim social security
benefits dishonestly. When the relationship broke down Milligan
claimed an equitable interest under a resulting trust. Tinsley argued
that Milligan was not entitled to a share because she was prevented
from asserting a claim because of the illegal purpose. She relied on
the equitable maxim ‘He who comes to equity must come with clean
hands’. A majority in the House of Lords held that Milligan was
entitled to claim a snhare in the property. The equitable maxim
prevents a plaintiff asserting an equitable title to property only if he
had to rely on his illegal conduct to establish his/her claim. In this
case the resulting trust arose automatically because of the
contributions of Milligan.
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Maxims of Equity: (Contribution)

(e) Where the equities are equal the law prevails (f) Where the equities are
equal the first in time prevails: These two related maxims, dealing with the
priorities of competing interests, may be dealt with together. They provide
the foundation for the doctrine of notice. Thus, a prior equitable interest in
land can only be defeated by a bona fide purchaser of a legal estate
without notice. If the purchaser is bona fide and without notice, then the
equities are equal and his legal estate prevails. If he took with notice the
position is otherwise, as equities are not equal. If he does not acquire a
legal estate then the first in time i.e. The prior equitable interest, prevails,
as equitable interests rank in order of creation. See the case of Cave v
Cave (1880), in which a sole trustee used trust money, in breach of the
terms of the trust, so as to purchase land. He took the conveyance in his
brother’s name. The brother mortgaged the land by legal mortgage to X,
and then to Y by way of an equitable mortgage. Neither X nor Y had any
notice whatsoever of the existence of the trust. It was held that X’s legal
mortgage had priority over the beneficiaries’ equitable interests. Y’s
mortgage, since it was created later in time, was postponed to the
beneficiaries interests.
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Maxims of Equity: (Contribution)

(g) Equity imputes an intention to fulfil an obligation: This means
that where a person is obliged to do something, but instead does
something else that could be regarded as a performance of the
obligation, equity will regard this as fulfilling the obligation.
This is the basis of the doctrines of performance and
satisfaction. For example, if a debtor leaves a legacy to his
creditor (of an amount at least as great as the debt), this is
presumed to be a repayment of the debt so that, unless the
presumption is rebutted, the creditor cannot take the legacy and
sue to recover the debt. In other words, the will may make it
clear whether this is the intention. If not, a presumption of
satisfaction will apply provided the debt was incurred before the
will was made; the legacy is as large or larger than the debt, and
the will does not contain a direction to pay debts.
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Maxims of Equity: (Contribution)

(g) Equity looks on that as done that which ought to be done/Equity regards as
done that which ought to be done: Where there is a specifically enforceable
obligation equity regards the parties as already in the position which they
would be in after performance of the obligation. In other words, a contract
to perform an act is treated in equity as if the act had been performed, and
equity will consider the parties to the contract as possessing the rights, duties
and remedies they would have had if the act had been performed. Therefore,
in equity a specifically enforceable contract for a lease creates an equitable
lease. See the case of Walsh v Lonsdale (1882) where a seven-year lease
was granted to the tenant, but no deed was executed. The fixed term lease
was, therefore, equitable. In the light that specific performance of the
contract to create a legal lease was available, the court admitted that an
equitable lease is as good as a legal lease. This was because equity looked on
the lease as ‘legal’ as soon as it was informally created.
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Maxims of Equity: (Contribution)

(g) Equity looks on that as done that which ought to be done/Equity regards as done
that which ought to be done:
• In addition the above, reference could also be made to the case of Lee Eng Teh
v Teh Thiang Seong & Anor [1967] 1 MLJ 42- where the Abdul Kadir JCA
stated that: “...it does not matter whether the trust is completely constituted or
not as equity regards as done which ought to be done and will perfect an
imperfect conveyance for value by regarding that as a contract to convey”.
• Furthermore, another example of this maxim is the “doctrine of conversion” that
arises on a binding contract for the sale of land. As soon as the contract is
entered into, the vendor becomes the trustee of the legal estate for the benefit of
the purchaser. This entails that the vendor’s interest has been “converted” into
the agreed proceeds of sale. Accordingly, if the property is damaged after the
contract, the risk potentially falls on the shoulders of the purchaser and the
vendor is entitled to the full purchase price.
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Maxims of Equity: (Contribution)
(h) Equity is equality: This maxim applies where two or more persons claim to be
interested in the same property. If there respective shares are not stated, and in
the absence of contrary intention, equity assumes that they are to have equal
shares. The maxim of ‘Equity is equality’ is exemplified by equity’s dislike of
the joint tenancy and its tendency to favour the tenancy in common. In Jones v
Maynard (1951), where a husband and wife had paid into and withdrawn from
time to time from a joint banking account; after their divorce, the balance in the
account was held to belong to them jointly, being considered by the court a ‘a
joint purse’. Per Vaisey J: ‘I think that the principle which applies here is Plato’s
definition of equality as a “sort of justice”. If you cannot find any other, equality
is the proper basis’.
• Apart from the case cited above, reference could also be made to the case of
Bower’s Trusts (1942), in which a settlement included a clause directing that a
fund be held for persons in unequal shares. An accruer clause concerning shares
failing to vest did not state the proportions. It was held that the accruer was to be
in equal shares.
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Maxims of Equity: (Contribution)

(h) Equity is equality:
• In Burrough v Philcox (1840), where a trust in favour of a testator’s
nephews and nieces was created, subject to a power to appoint in the
testator’s child. On the child’s failure to appoint, it was held that the
property was to be divided equally among the objects of the trust.
• All in all, another area where the maxim can be seen in operation is
entitlement to matrimonial property. Where the parties have both made
substantial contributions to the acquisition of the property, whether
directly or indirectly, then if no other basis for division clearly appears,
equity prefers to treat the parties as equally entitled rather than to
examine their precise contributions.
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Maxims of Equity: (Contribution)

(i) Equity looks to the substance and intent rather than to the form: This maxim
does not mean that formalities may be ignored in equity, but rather that equity
looks at the substance rather than form. Thus, equity will regard a transaction as
a mortgage even though it is not so described, if in substance it appears that the
property was transferred by way of security. In Parkin v Thorold (1852) where
Romilly MR said: ‘If [a court of equity] finds that, by insisting on the form the
substance will be defeated, it holds it inequitable to allow a person to insist on
such form and thereby defeat the substance’.
• In Metropolitan Electric v Ginder (1901), where X had agreed to take from Y
all the electrical energy he needed for his premises. Later, Y asked for an
injunction which would prevent X’s taking any electrical energy from Z. The
court held that, in substance, the agreement did not oblige X to take any
electricity; but it meant, in essence, that X could not obtain such energy from
anyone other than Y.
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Maxims of Equity: (Contribution)
(i) Equity looks to the substance and intent rather than to the form:
• Based on the operation of this maxim, it could be said that similarly a trust may
be created although the word “trust” has not been used. In Paul v Constance
[1977] All ER 195, where the court held that the absence of the word “trust” was
not fatal to the findings of an express declaration of trust, taking into account
the unsophisticated character of the deceased and his relationship with the
plaintiff. The words used by Constance to assure Paul of her joint entitlement to
the moneys in the account were sufficient to constitute a declaration of trust.
• In Re Kayford- where Megarry J held that ‘it is well settled that a trust can be
created without using the word “trust” or “confidence” or the like. The question
is whether in substance a sufficient intention to create a trust has been manifest’.
• In Tulk v Moxhay (1848) 18 LJ Ch 83, 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
buildings on the plot but it was drafted in positive form. It was held that the
intent behind this covenant was negative.
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Maxims of Equity: (Contribution)

(j) Delay defeats equity: This is sometimes called “laches” and means that a
claimant who takes too long to exercise his legal rights will not receive the
assistance of equity. The idea is that the claimant has to act expeditiously. In
practice, the role of this maxim has been subsumed by the Limitation Act (which
set out time limits within which actions must be commenced), but it still exerts
influence when deciding whether equitable remedies should be granted. In Leaf
v International Galleries [1950] 2 KB 86, where a contract for the sale of a
painting which was innocently represented as painted by Constable could not be
set aside after a delay of five years.
• In Allcard v Skinner (1887) LR 36 Ch D 145, where the claimant sought to
rescind gifts of her property which she had made to a religious order on the basis
of undue influence. The court held that she could not do so because of her delay
in bringing the action. In cases of undue influence, actions must be brought
within a reasonable time after the removal of the influence.
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Maxims of Equity: (Contribution)

• In Nelson v Rye [1996] 2 All ER 186, where a musician tried to
claim an account of earnings which had been wrongfully retained
by his manager in breach of fiduciary duty. Six years elapsed
before the action was brought and the court held that the equitable
doctrine of laches applied and this prevented him from gaining a
remedy.
• All in all, it is important to note that the doctrine of laches
continues to apply to those equitable claims which are outside the
Limitation Act, for example a claim to set aside a purchase of
trust property by a trustee. Similarly, claims to rescission and
rectification may be barred by delay.
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Maxims of Equity: (Contribution)

(k) Equity acts in personam: This means that equitable remedies are personal in
that they are exercised against specific persons. They compel or permit a
person to do something or not to do something. For example, in relation to a
breach of trust the remedy is exercisable against the trustees personally. This
can involve an order of freezing the trustees’ assets even if those assets are
subject to a foreign jurisdiction. In other words, equity has jurisdiction over
the defendant personally. Thus, the personal nature of the jurisdiction is
illustrated by the fact that failure to comply with an order, such as specific
performance or an injunction, is a contempt of court punishable by
imprisonment. Provided that the defendant is within jurisdiction (or can be
served outside it), it is no objection that the property which is the subject-
matter of the dispute is outside it. See the case of Penn v Lord Baltimore
(1750), where specific performance was ordered of an agreement relating to
land boundaries in Pennsylvania and Maryland, the defendant being in this
country.
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Maxims of Equity: (Contribution)

• In Ewing v Orr-Ewing (1833), where the court held that ‘the courts of
equity in England are, and always have been, courts of conscience,
operating in personam ‘...and not in rem’.
• In Web v Web [1994] QB 696, where a father purchased a flat in the
name of his son in Antibes. He always intended that he would have
some interest in the property but the son refused to transfer rights to
him. The father was able to bring a personal action against him in the
courts although it was to pursue a claim for real property. The court held
that rights in equity are enforced by personal order against the
defendant, usually the trustee. The claimant may also have proprietary
rights in the trust property.
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Maxims of Equity: (Contribution)

(l) Equity will not permit a statute to be used as an engine of fraud: This prevents a
party from relying upon an absence of statutory formalities (e.g. Relating to land
contracts, the creation of legal leases and express trust and the registration of
land charges) if to so would be unconscionable and unfair. See the case of Shah
v Shah (2001), where a deed was not properly executed and a witness to the
deed sought to have it set aside for his own benefit. The court held that for the
witness to rely on this defect would be tantamount to fraud and upheld the deed.
• Apart from the case cited above, reference could also be made to the case of
Bannister v Bannister (1948), where the plaintiff (P) gave the defendant (D) an
oral promise that D could stay for as long as she desired in a rent-free cottage. In
return, D sold P the cottage at a relatively low price, and also an adjoining
property. The conveyance did not refer to P’s promise. P claimed possession of
the cottage, arguing that the trust was invalid because of an absence of writing
(see the English Law Property Act 1925, sec 53(1)). It was held that fraud was
on P’s part had been shown; the plea relating to absence of writing failed.
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Maxims of Equity: (Contribution)

(l) Equity will not permit a statute to be used as an engine of fraud:
• See also the case of Midland Bank Trust Co v Green (1981) in which
equity did not intervene in circumstances which appeared to suggest use of
the English Land Charges Act 1972 as a clock of fraud.
• In explaining the operation of this maxim, reference could also be made to
the operation of secret trust. For example, equity will intervene to impose a
constructive trust. Take for instance in a case of a secret trust where A
intends his gift to be used for the of C who, for some reason or another,
could not be named by A in the will, either expressly or by implication. In
doing so, A has failed to comply with the requirements of the Wills Act
1959, but to allow B to take beneficially at the expense of C would be to
allow a statute to be used as an instrument of fraud. Thus, the one who is
trying to use a statute as an instrument of fraud i.e. B would be construed as
a constructive trustee.
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Maxims of Equity: (Contribution)

• Note: Apart from the maxims of equity addressed above,
there are other equitable maxims as well such as: (i) equity
will not assist a volunteer. Thus equity will not grant
specific performance of gratuitous promise (i.e. an
agreement that is not supported by consideration. In relation
to trusts, this means that equity will assist a beneficiary only
when there is perfectly constituted trust (i.e. once legal title
to the trust property has vested in the trustee)
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Conclusion:
• The nature of equity embodies the general principles which
evolved in the Court of Chancery. For example, the maxims
of equity are not rules which must be rigorously applied in
every case, but are more in the nature of general guidelines
illustrating the way in which equitable jurisdiction is
exercised. A few examples of their operation must suffice,
but they should be borne in mind when considering the
various rules and doctrines of equity.