Equity And Trusts: Evolution And Development

Equity refers to right doing, good faith, honest and ethical dealings in transactions or relationships between individuals. The ordinary conception of equity is,therefore, based on morality and is linked to what is normally exhorted in churches, mosques and other religious establishments. It is also captured by objective XI of the National Objective and Directive Principles of State Policy contained in the Constitution of Uganda 1995 which enjoins Government to take steps to realise balance development of the diverse areas of Uganda and to pursue affirmative action in relation to the least developed.

From the time of early Greek Philosophers, there is the idea of equity in the general juristic sense as a supplement to law. The Greek conception of law was later relied upon by Roman jurists to develop and widen Roman Law when the Roman Legal System appeared to be signating. It is notable that Roman Law was not split up like English law into rules of common law and rules of equity. Roman Law was an integral part of Roman Legal Systems.

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While Roman Law contributed little to the development of English Equity, it had influence on the early development of English Law and Equity. For instance the Praetor, who administered equity was similar to the Lord Chancellor and his equitable jurisdiction. Thus the praetor's Edict which merged equity with the general law is similar and comparable to the manner in which common law and equity emerged to constitute the dual English System.

Equity came into existence during the 13th century[1]. At that time the courts of law had froze the typesof claims they would hear as well as the procedure governing the hearing of those claims. The range of claims that would be heard became narrow and the processes to bring the actions to court became so technical with jurors often being bribed. As a result of these changes plaintiffs with meritorious claims were often denied relief[2].

To attempt to counteract this discrepancy remedies could be obtained by petitioning the King, who had residual judicial power to deal with such matters. The King began delegating the function of dealing with such petitions to the Chancellor. The post of Chancellor at this time was usually a clergyman and King’s confessor. The Chancery evolved into a judicial body known as the Court of Chancery, until by the end of the 15th century the judicial power of the Chancery was fully recognised. The Court of Chancery was in effect developed as a court of conscience to counteract the defects that existed in the common law system. The rules of equity varied from Chancellor to Chancellor until the end of the 16th century[3].

As equity developed it began to conflict with common law. Litigants used equity to their advantage often seeking an equitable injunction prohibiting the enforcement of a common law order. If a common law judgment was enforced in disobedience of a common injunction then the person enforcing the judgment could face imprisonment[4]. In the Earl of Oxford’s Case (1615)[5] the Court of Chancery issued a common injunction prohibiting the enforcement of a common law order. The matter was referred to the Attorney General Sir Francis Bacon when no resolution could be reached between the 2 courts. Sir Francis upheld the common injunction and stated that ‘in the event of any conflict between the common law and the law of equity, equity would prevail’. Lord Ellesmere pointed out in the above case why there was a need for a Chancery. He stated ‘Men’s actions are so diverse and infinite that it is impossible to make any general law which may aptly meet with every particular and not fail in some circumstances. The office of the Chancellor is to correct men’s consciences for frauds, breaches of trust, wrongs and oppression of what nature so ever they be, and to soften and mollify the extremity of law.’

By the 17th century only lawyers were appointed to the office of Chancellor. From 1529 onwards when Sir Thomas Moore was appointed as Chancellor records of proceedings in Courts of Chancery were kept which led to the development of equitable doctrines. Prior to his appointment no such records were kept and decisions made by the Chancellors were discretionary and erratic. By the beginning of the 19th century the Court of Chancery had become a court of equity. In the case of Gee v Pritchard[6] Lord Eldon made the comment that, the doctrines of the Court of Chancery ought to be 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 by 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.

The primacy of equity as stated by Sir Francis was later enshrined in the Judicature Act 1873 s25 which also joined the courts of equity and the courts of common law into one under the title of the Supreme Court. The Supreme Court was divided into 2 forming the High Court and the court of Appeal. The High Court was further divided under 5 different headings giving rise to the Chancery Division, King’s Bench Division, Common Pleas Division, Exchequer Division and the Probate, Divorce and Admiralty Division. The central feature of these reforms was that every court would now possess the power and have the duty to decide cases in line with common law and equity[7]. Where there is a discrepancy between the common law solution and an equitable one the precedent of the Earl of Oxford’s case still applies meaning that equity will be paramount in the decision making process. The Supreme Court Act 1981 s49 has embodied this principle and instructed that (1) Every court exercising jurisdiction in England and Wales in any civil cause or mater shall continue to administer law and equity on the basis that wherever there is any conflict or variance between the rules of equity and the rules of common law with reference to the same matter, the rules of equity shall prevail[8].Before the common law courts and the Court of Chancery became one common law actions could only be commenced by means of a writ whereas actions in the Court of Chancery were commenced by an informal bill of complaint and the process begun by the use of a subpoena[9].

Chancery hearings were informal and were not restricted to being able to sit at certain times as was the case with the Common Law Courts. Hearings could even take place within the Chancellor’s house. It would appear that common law and equity were effectively fused together by the Judicature Acts. Ashburner’s view of this was The two streams of jurisprudence though they run in the same channel, run side by side, and do not mingle their waters[10].

Although equity and common law are fused together in that a court is entitled to award equitable remedies or common law remedies or a combination of both within the same court[11] there are still some areas of law where the distinction between legal ownership and equitable ownership still thrive[12]. One such area is in the formation and management of trusts.Before the introduction of equity into the legal system persons wishing to dispose of their property by way of a trust where faced with the difficulty or passing ownership to their intended beneficiaries without giving them the property outright. Under the common law system the transfer of the property into the hands of the trustees’ could only be read as giving full title to the trustees and no account could be given for the concerns of the beneficiaries. The whole process of the trust system is firmly rooted in equity with the trustees holding the land on trust for the beneficiaries.

In order that the trustees can invest or deal with any of the property the ownership of the property transfers to them under common law rulings and equity creates a beneficial interest for the beneficiaries to ensure that when the beneficiaries reach the age of maturity as dictated by the trust document that the full title of the property becomes vested in them. The essential element that the trustees have to be aware of is that despite the fact that they have the power to invest or sell trust property that they are in fact acting on behalf of the beneficiaries. Trustees who make unwise investments are breach the trust can and often are made to compensate the beneficiaries for any losses incurred by their actions. In these matters equity will usually favour the beneficiaries.

Although there is an apparent fusion of common law and equity there is still a difference in the way in which common law remedies and equitable ones are administered. Common law remedies are available as of right whilst equitable remedies are discretionary and awarded at the will of the court. Equitable remedies can also be affected by the behaviour and position of the party claiming the remedy. As the courts are allowed to take into account the conduct of the party seeking the award they can decide not to award an equitable remedy where it considers their conduct should deprive them of such an award.

Problems arose in the case of Tinsley v Milligan [1993 ] AII ER 65 where the question raise was whether the plaintiff could assert a claim to an equitable interest in land by way of a resulting trust where she had acted illegally. The maxim as set down by equity that a person seeking to assert an equitable entitlement must come with clean hands prevented the plaintiff from asserting her right. Under common law a plaintiff would be entitled to assert their common law right to ownership provided that they did not need to rely on their illegal conduct to establish title. As the plaintiff in this case did not need to rely on their illegal conduct to establish title her claim succeeded.To assist the court in making equitable decisions certain maxis of equity have been established. These are not binding rules and do not provide guidance in every situation. They are intended as illustrations based on principles established in recurrent themes.

One of the maxims of equity is that it will not suffer a wrong without a remedy. This is of particular importance in trust law, where without the influence of equity the beneficiaries may lose the benefit assigned to them by way of the trust document. Another maxim was that equity follows the law, although as has been previously stated statute favours equity as prevailing when the 2 are at a variance to each other.Further maxims exist in the following circumstances. Where the equities of the parties are equal one with a legal right and the other an equitable right the common law rules will prevail. Where both only possess equitable rights the first in time right to the item prevails. It was also laid down that he who seeks equity must do equity. This means that the person seeking the equitable relief must act fairly towards the person he is seeking the relief from. As mentioned above anyone coming to equity must come with clean hands. Any illegality or inequitable conduct could effect their entitlement to an equitable remed.

In conclusion, Despite the arguments against equity and the problems caused by the insertion into the Supreme Court Act 1981 that equity should prevail if the two areas of law are in conflict with each other, it is very rare that the judges are placed in such a position, especially since they now have the power to decide issues under either common law rules or equity. From the point of view of plaintiffs the inclusion of equity is a good thing as it gives them a greater likelihood of achieving their desired outcome. The generic juristic of equity lays emphasis on the basic principles of justice and fair play in the administration of the law. This tendency arises from the fact that law at any point in time is not perfect or is defective. While it is conceded that the aim of the law is to maintain justice, this has not been achieved in practice. This explains the development of equity whose objective was to correct any injustice caused by the strict application of the law. Therefore, the fusion debate is relevant.

REFRENCES

1. Pearce, R and Stevens, J, The Law of Trusts and Equitable Obligations, 2nd Ed p4 – 7
2. T. Cockburn, T, Harris, W, & Shirley, M, Equity & Trusts, 2005,Butterworths
3. Cockburn, T & Shirley, M Equity in a Nutshell, 2005, Lawbook Co Co-op Insurance v Argyll Stores [1997] 3 All ER 297 1 Rep Ch 1 at 6
4. (1818) 2 Swan 402 at 414
5. Judicature Act 1873 s24
6. Supreme Court Act 1981 s49(1)
7. Pearce, R and Stevens, J, The Law of Trusts and Equitable Obligations, 2nd Ed p4 – 7
8. Ashburner, W, Principles of Equity, 2nd Ed, 1933, Butterworths
9. Supreme Court Act 1981 s49
10. Holdsworth, W, History of English Law, 7th Ed, 1956, Mathuen & Co Ltd