Equity in the context of Sri Lankan Law - :Law of Trust

Equity in the context of Sri Lankan Law

1. 1 LAW OF TRUSTS I EQUITY S.Selvakunapalan LL.B., LL.M. Attorney-at-Law, Deputy Legal Draftsman https://selvakunapalan.blogspot.com/2019/

2. The phrases were especially applied to actions; an actio in personam being the remedy where a claim against a specific person arose out of an obligation. while an actio in rem was one brought for the assertion of a right of property, easement, status, etc., against one who denied or infringed it. 2

3. The proper meaning of a right in rem is a right enforceable against the world with respect of to the particular thing. The legal owner does have the rights in rem, Rights against the world with respect to the property. In accordance with the maxim equity acts in personam, equity did not say that the cestui que trust was the owner of the land, it said that the trustee is the owner of the land. But was bound to hold the property for the benefit of the cestui que trust . 3

4. Question Paper- Law of Trusts The examination paper consisting of 9 questions out of which you are requested to answer 6 questions. 2. Every question except question No.1, carries equal marks of 16. The question No.1 which carries 20 marks is compulsory. 4

5. Recommended books:- Keeton G.W. - Law of Trusts; Scott A.W. - The Law of Trusts; Dr. Jill Martin- Hanbury & Martin: Modern Equity; 19th Edition; Philip H. Pettit - Equity and the Law of Trusts; Twelfth Edition; A J Oakley- Parker & Mellows :The Modern Law of Trusts; 9th edition; and Coorey L.J.M. -The Reception in Ceylon of the English Trust. 5

6. 7. Michael Haley & Lara Mcmurtry- Equity & Trusts; 8. Alastair Hudson- Equity & Trusts (4 th Edition). 6

7. 7 What is equity? Equity means that which is fair and just, moral and ethical; but its legal meaning is much narrower. It is not synonymous with justice in a broad sense. The early development of equity categorized it as a separate system from the then existing common law. 7

8. Equity is the means by which a system of law balances out the need to achieve fair results in individual circumstances. Equity mitigates the rigour of the common law, so that the letter of the law is not applied in such a strict way that it may cause injustice. Equity appears to imbue the courts with the general discretion to disapply statutory or common law rules whenever good conscience requires it. 8

9. Equity can be understood as the means by which English law ensures that the strict application of a common law or statutory rule does not result in any unfairness. To this extent equity is a form of natural justice and it has a moral basis. Equity can be considered in its formal sense as constituting the collection of substantive principle to judge people’s consciences. 9

10. Equity should be understood as being a code of technical, substantive rules and not simply as a reservoir of general principles. Principles of justice and conscience are the basis of equity jurisdiction, but it must not be thought that the contrast between law and equity is one between a system of strict rules and one of broad discretion- A. Duggan (1997) 113 L.Q.R 601) 10

11. Equity operates on the conscience of the owner of the legal interest. In the case of a trust, the conscience of the legal owner requires him to carry out the purposes for which the property was vested in him. 11

12. What is common law? Norman invasion in 1066 and William I seized control of the entire Kingdom. England and Wales developed as a single jurisdiction and Scotland retained its own legal system. Hence the term “common law” coined to mean this new system of legal principle created by the English courts which was common to the entire Kingdom. 12

13. Hentry II created the courts of King Bench to hear the matters. Medieval courts and the principles of the common law began. If the common law courts’ decision was unfair or unjust, there remained a right to petition the King directly. The proliferation of suits that were brought directly before the King required the creation of a separate mechanism for hearing them. 13

14. During the Medieval period, the position of Lord Chancellor was created to hear the petitions. The Medieval Lord Chancellor was empowered to issue royal writs on behalf of the Crown. The Lord Chancellor was a politician and foremost. Until 1741, it was the Lord Chancellor who would have been considered the prime minister to the Crown. 14

15. Early Lords Chancellor were all clerics; that is they were bishops who were keepers of the King’s conscience. Latterly, the Lords Chancellor were secular appointments. Since the Constitutional Reforms Act 2005, the Lord Chancellor need not be a lawyer. He must be ‘qualified by experience’.- section 2 (Lord Bingham (2006) 122 L.Q.R 211. 15

16. In time, the number of petitions brought before the Lord Chancellor became so numerous that a separate system of courts was created to hear those cases – the courts of chancery. 16

17. Lord Chancellor’s intervention gradually developed a distinct body of law called ‘equity’ which was well established by the fifteenth century. From then on, the Chancellor’s jurisdiction was exercised via what later becomes ‘Court of Chancery.’ Equity is the branch of the law which, before the Judicature Act of 1873 (Britain) came into force, was applied and administrated by the Court of Chancellery. 17

18. 18 Developed system of law has been assisted by the introduction of discretionary power to do justice in particular cases where strict rules of law cause hardship. Equity is the body of rules which evolved to mitigate the severity of rules of the common law. Its origin was the exercise by the Chancellor of the residual discretionary power of the King to do justice. 18

19. History of the Court of chancery At the end of 13 th century, if the common law courts failed to do justice, an aggrieved person might petition to the King. From early times, these petitions seeking the King’s extraordinary justice seem to have been referred to the Chancellor, and as early as the reign of Edward-I petitions are found addressed to the Chancellor and the Council. 19

20. This procedure became more frequent, and by the end of 14 th century petitions began to be addressed to the Chancellor alone. As the practice became habitual and references were frequent, the Chancellor and his office of chancery inevitably acquired the characteristic of the court. The Chancellor made a decree upon his own authority. 20

21. In medieval period, the Chancellor’s jurisdiction was vague and undefined; as well as the subject matter of the petitions which invoked it. The basis of intervention was that it was necessary on grounds of conscience. His authority was unquestioned in the case of fraud and breach of confidence. 21

22. 22 During the medieval period, the chancellor was the most important person in the country next to the King himself: Maitland described him as “the King’s Secretary of State for all departments. One of the important functions of the Chancery was to issue the royal writs or inventing new ones, the Chancellor could have some influence on the development of the law. 22

23. The cases referred to the Chancellor and chancery fall into two main groups, firstly cases where the law was defective, and secondly those where there was a theoretically remedy at common law but the petitioner was unable to obtain it because of disturbed state of the country, power and wealth of the other party. In exercising jurisdiction in cases of this kind, it is unlikely that the Chancellor regarded himself as administering separate system of law. 23

24. Consequently hardship increasingly often arose because of defects in the law, and petitions began to be brought on this ground. In giving relief in these cases, new law was being created, and it was this new law which became known as equity in contrast common law dispensed in the common law courts. The conflict between the jurisdiction was reduced by the fact that it was a cardinal rule of the court of chancery that ‘equity acts in personam’ . 24

25. In the central institution, the trusts, the Chancellor never denied that the trustee was the legal owner of the trust property. But merely insisted that the trustee should deal with it in accordance with trust for the benefit of the beneficiaries. 25

26. 26 Until Judicature Act 1873 , the Court of Chancellery had almost exclusive equity jurisdiction; rules of equity were not enforced in the common law courts.

27. The two systems had a lot of conflict to the extent that, by the nineteenth century a number of series of Parliamentary reports resulted to the Judicature Acts 1873 and 1875. The two Acts were responsible for amalgamating the existing superior courts into a single Supreme Court of Judicature. 27

28. A claimant could only sue at common law, if his complaint came within the scope of an existing writ. In the 13 th century, the available writs covered very narrow ground. Even if the claim came within the scope of an existing writ, it may have been that for some reasons, such as the power and influence of the defendant or etc. 28

29. 29 It was possible after the Statute of Uses 1535, to create equitable interests in land by imposing a use upon a leasehold, or by requiring the legal owners of freehold land to collect the rents and profits and to pay them over to the beneficiaries. If the land limited to A to the use of B to the use of C, is it possible to argue that the first use will be executed, and that B will hold the legal estate to the use of C? 29

30. 30 Such a resolution was reached by about 1700; the second use is called a trust. A shorter form, which became settled practice, was to omit A, and to make the disposition “unto and to the use of B in trust for C”. However, the story of development is confused and uncertain. 30

31. If land was given to A on A’s undertaking to hold the land to use and benefit of B, it was unconscionable for A to keep it for his own benefit. B however had no legal claim or title of the land. The conveyance to A gave him whatever legal estate was conveyed, and, at common law, A could exercise all the rights which that estate gave him. 31

32. 32 From the beginning of Chancellorship of Lord Nottingham in 1673 and to the end of that of Lord Eldon in 1827, equity was transformed from a jurisdiction based upon the personal interference of the Chancellor into system of established rules and principles. Lord Nottingham did much to weld together and consolidate the whole system. 32

33. 33 In the nineteenth century, the modern law of trusts developed and shaped to meet entirely new conditions of social life. Section 25 of the Supreme Court of Judicature Act 1873 provided for the solution of many problems in which those rules would conflict. 33

34. 34 Subsection 11 contained a general residual clause: “Generally, in all matters in which 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.” 34

35. There used to be two completely distinct sets of courts in England. This position continued until enactment of Judicature Act 1873, which removed the need to sue in common law courts for a common law remedy, and so forth. Before the Judicature Act 1873 came into full effect in 1875, it was necessary for a litigant to decide whether his claim related to common law or to equity. 35

36. The result of the Judicature Act 1873 was that the practical distinction between common law and equity disappeared. However, it is vitally important to understand that the intellectual distinction remains. 36

37. Amalgamation of Administration or Fusion of Rules? The Judicature Acts 1873 and 1875 were responsible for amalgamating the existing superior courts into a single Supreme Court of Judicature. This Supreme Court replaced the courts of Queen’s Bench, Court of Exchequer chamber, Exchequer and Common Pleas as well as the court of Chancery, and the court of appeal in Chancery. 37

38. Many academicians have distinct perceptions as to whether the Judicature Acts fused both the rules of equity and common law to make then one, or whether it was just an amalgamation of the two rules so that each of them retains its identity but administered in the same court. 38

39. The Judicature Act clearly fused the administration of law and equity. The question is whether equity and law fused. Some scholars think that the rules of common law and equity are totally fused and are thus no longer distinguished while others perceive the effect of the Judicature Act to have been procedural. 39

40. Fusion of Administration and Continuing Distinction between Common Law and Equity 40

41. The orthodox view is that only jurisdictions have been fused. Legal rights remain legal rights and equitable rights remain equitable rights though administered in the same court. 41

42. In Salt v Cooper, Sir George Jessel MR, stated to the effect that, the intent of the Judicature Act was not to fuse the two rules , but rather administrating law and equity under a single tribunal. 42

43. According to Professor Ashburner although equity and common law are streams of jurisdiction running through the same channel, they run side by side without mingling their waters. In MCC Proceeds Inc v Lehman Bros International  Mummery LJ revealed the fact that, the Judicature Acts intended to gain procedural improvements when it comes to the administering of law and equity. (continue) 43

44. This was thus not to transform the existing equitable rights into legal titles or fuse the equitable rules with common law. The legislation 1925 is based on the assumption that legal ownership is different from equitable ownership. 44

45. In China and South Sea Bank Ltd v. Tan Soon Gin [1990 1 AC536] the equitable nature of the duties of a mortgagee has been emphasized, although in Medforth v. Black [2000 Ch 86 at 102] It was said whether the duty is expressed as a common law duty or as a duty in equity, the result is same. However, in Raja v. Lloyeds TSB Bank Plc [2001] 82 PCR 191] it was said that result may not always be same. 45

46. Target Holdings Ltd. V. Redferms [1996 a AC 310] although common law damages and compensation in equity share the requirement of causation, they differ on remoteness and foreseeability. Mcc Proceeds Inc. v. Lehman Brothers International (Europe)- whether an equitable owner could sue for conversion. It was held that such an owner, who has no title at common law, could not bring such an action. 46

47. Fusion of Common Law and Equity Some scholar and judges believe that, the Judicature Act did not merely fuse the administration of the rules of law and equity, but rather fussed the rules themselves. According to Lord Denning in Errington v Errington  stated that, the rules of equity and common law have been fused for almost eighty years by that time. 47

48. In Tinsley v Milligan [1994] 1 AC 340, Lord Browwne-Wilkinson held to the effect that, English law now has one single law that contains both legal and equitable interests. Therefore, Lord Browne- Wilkinson saw that a person in ownership of either type of estate possessed a right of property that amounted to a right in rem as opposed to merely a right in personam. (continue) 48

49. It was thus held that the equitable principle that governs when property or a title was affected under illegality had now become one after merging the common law rule. In the case of In Napier and Ettrick v. Hunter [1993]1 All.ER 385 at 401, it was stated by Lord Goff inter alia that, the judiciary task nowadays is to view the two strands of authority equity and law moulded into a coherent whole. 49

50. Aquaculture Corp. v. New Zealand Green Mussel Co. Ltd. [1990 NZLR 299] it was stated equity and common law are now mingled … full range of remedies should be available as appropriate, no matter whether they originated in common law, equity or statute. Medforth v. Black [2000] ch. 86] Sir Richard Scott VC. Has stated “I do not, for my part think that it matters one jot whether the duty is explained as a common law duty or as a duty in equity. The result is same. 50

51. BICC Plc v. Burney Corp. (1985) ch. 232] It was said that set-off, whether legal or equitable, can be raised as a defence whether the relief sought by the claimant is legal or equitable. In Sempara Metals Ltd. V. IRC [2008 AC 561] the House of Lords held that the compound interest may be recovered at common law as well as in equity. 51

52. Coulthard v. Disco Mix Club Ltd . [2000 1 WLR 707] in the context of limitation periods, it has been held that there is no distinction between an action for fraud at common law and an action in equity for deliberate and dishonest breach of fiduciary duty based on the facts, which is equitable counterpart of the common law claim. Swindle v. Harrison [1997 4 AllEr 705] Hobhouse LJ. confirmed that common law damages were not available for breach of fiduciary duty. 52

53. One indication of fusion is a situation where the legal remedy of damages may be given for breach of an equitable right. The converse, an equitable remedy for breach of a legal right, such as an injunction to restrain a tort, or specific performance of a contract, is explicable as the exercise of equity’s concurrent jurisdiction and is not an example of fusion. 53

54. Generally, the breach of an equitable right will provide an equitable remedy only. Thus a breach of a restrictive covenant by a non-contracting party is remedied by an injunction, not damages. In AG vs. Gurdian News paper Ltd . (1990 1AC190) Lord Goff said that damages are available for breach of confidence, despite the equitable nature of the wrong. 54

55. Conclusion Both views are supported by authorities and strong justification that a lot of confusion as to which side is right occurs. However, despite all the diverse opinions by judges and scholars, the rules of equity and common law are clearly administered in one court and as seen in the cases above, are at times subjected to ‘cross-remedies’ as in Harris v Digital Pulse Pty Ltd. 55

56. This is to mean that, although not entirely the same, the rules of equity and common law at times apply inter-changeably. This perception accrues from the observation that, the Judicature Act does not authorize any substantive fusion between equity and law; neither does it reveal any prohibition for the occurrence of such a fusion. 56

57. 57 Nature of Equitable Rights In its simplest form, one view emphasizes the fact that a beneficiary’s remedy is in the form of an action against the trustee; a right in personam . On the other hand, equitable interests under trusts are equitable proprietary interests, corresponding to legal estates, and the beneficiary can properly be regarded as the owner of the beneficial interest; and ownership is a right in rem .

58. In the Roman law, from which they are taken, the expressions “in rem ” and “in personam ” were always opposed to one another, an act or proceeding in personam being one done or directed against or with reference to a specific person, while an act or proceeding in rem was one done or directed with reference to no specific person, and consequently against or with reference to all whom it might concern, or “all the world.” 58

59. The maxim that equity acts in personam does not prevent us from treating a beneficiary under a trust as having equitable ownership. A beneficiary’s interest behind a trust has long been treated as having the basic characteristics of a proprietary interest in that it can be sold or mortgaged. Historically, the protection of the beneficiary was based on the Chancellor’s willingness to proceed in personam against the trustee, that protection has ended up by creating the rights in the nature of the ownership. 59

60. The trustee is the owner at law and the beneficiary is the owner in equity. The trustee sues for the possession of the trust property. Trustee not the beneficiary, sues for conversion of the trust property. The beneficiary’s right is to compel the trustee to take action. Certain cases, beneficiary may take action himself on behalf of the trust, joining the trustee as defendant. 60

61. E.g. The trustee has sold the property to bona fide purchaser. Here trustee would defeat the equitable ownership of the beneficiary. In this situation, bona fide purchaser is not determinative of the question whether beneficiary’s interest is proprietary or whether his rights are in rem or in personam . It demonstrates simply that legal and equitable ownership may have different effects. 61

62. In the practical point of view, it can be said that where the problem involves the working of the trust machinery, so that the beneficiary asserts his rights by an action against the trustees to enforce their duties the old theory that equity acts in personam is wholly acceptable. But in other cases, the theoretical view is overtaken by a pragmatic approach. So, it depends on the language of the statute. 62

63. Ewing v. Orr-Ewing (1883)- there is no space here to run through every aspect of equity jurisdiction to establish the point that equity acts in personam. One practical application of this proposition is the fact that a court of equity will exercise to order specific performance to administer assets abroad if the executors are in England. 63

64. R. Nolan (2006) 122 L.Q.R 232] – trustee is owner at law; and the beneficiary is the owner in equity. A recent analysis is that the interest of the beneficiary is negative, or ‘exclusionary’. It is a negative right to exclude non-beneficiary from the assets as opposed to a positive right to impose trustee duties on them. 64

65. S. Aaron (2010) 24 T.L.I 155 at 173] Another view is that the beneficiary’s interest is “a bundle of in personam equitable rights against the trustee”. Mcc Proceeds Inc. v. Lehman Brothers International (Europe) [1998 4 All ER 675] trustee sues for conversion of the trust property. 65

66. Shell UK Ltd. V. Total UK (2011) Q.B 86] it has been held that a duty of care may be owned to a beneficial owner of property just as much as to a legal owner, but this has been criticized as blurring legal and equitable ownership in a manner contrary to principle and authority. 66

67. 67 Equity did not say that cestui que trust was the owner of the land, it said that the trustee was the owner of the land, but added that he was bound to hold the land for the benefit of cestui que trust. A beneficiary’s interest behind a trust has been treated as having the basic characteristics of a proprietary interest in that it can be bought, sold, mortgaged, and devised or bequeathed.

68. 68 Even though, the protection of the beneficiary was based on the Chancellor’s willingness to proceed in personam against the trustee, that the protection has ended up by creating rights in the nature of ownership. To argue that a beneficiary is not to say that legal rights are the same as equitable, or that equitable ownership is the same as legal.

69. 69 Rather, it is to accept the basic peculiarity of ownership under the English law of trusts. The trustee is the owner at law; and the beneficiary is the owner in equity. The trustee sues for rent or possession; and with personality, the trustee, not the beneficiary, sues for conversion of the trust property. The beneficiary's right is to compel the trustee to take action; though he may, in some cases, take action himself, on behalf of the trust, joining the trustee as defendant.

70. The right sometimes be inadequate; as where the trustee has sold the property to bona fide purchaser of the legal estate for value without notice, who will defeat the equitable ownership of the beneficiary. 70

71. Webb v. Webb (1994) 8 J.L.T 99) Where a father bought a flat in France in his son’s name and sought a declaration that the son was trustee and an order to vest the property in the father, his action was classified as in personam for the purposes of the 1968 Brussels Convention. Now Article 22 of the Council regulation (EC) No. 44/2001 so that the son’s claim that only the French Court had jurisdiction failed. 71

72. Prazic v. Prazic [2006] 2 F.L.R 1128] Where a wife sought a declaration in the English courts as to her beneficial interest in land in England, her claim was classified as in personam. Thus the English courts did not have exclusive jurisdiction and the action was stayed because her husband had already commenced divorce and ancillary relief proceedings in France. 72

73. On the other hand in Re Hayward [1997 Ch 45] the claim by the trustee in bankruptcy of a deceased legal and beneficial co-owner of a villa in Spain to his share of the property was held to be in rem , so that the Spanish Court had exclusive jurisdiction under the Convention. 73

74. Common Law and Equitable Remedies 74

75. The main result of the distinction between common law and equity is that each has distinct claims and remedies. Common law is the system which is able to award cash damages for loss. Common law claims such as breach of contract, negligence and fraud and, remedies such as damages and tracing property. Equity claims such as breach of trust, claiming property and, remedies such as specific performance, injunction, rescission, rectification 75

76. Equitable remedies- Specific Performance Injunction Rescission and Rectification &etc. 76

77. Specific Performance Specific performance is an equitable remedy in relation to the enforcement contracts. An award of specific performance compels the defendant to perform his contractual obligations. The specific performance is a residual and discretionary remedy. 77

78. Cooperative Insurance v. Argyll [1997] 3 All ER 297 Specific performance is traditionally regarded in English Law as an exceptional remedy, as opposed to the common law remedy of damages to which a plaintiff is entitled as of right… specific performance was part of the discretionary jurisdiction of the Court of Chancery to do justice in cases in which the remedies available at common law were inadequate. 78

79. Specific performance is an order which is made to require the performance of contractual obligations in certain circumstances. Consequently, the order requires only the performance of those obligations and does not rest on there having been some breach of contract. ( no requirement of breach ) 79

80. Contracts where specific performance available The underlying principle in relation to real property is that each parcel of land is unique, so that an award of damages would be insufficient compensation for a failure to transfer a specified piece of land. Therefore, the buyer of the land may be able to impose an award of specific performance on the seller to compel the transfer. (Adderley v. Dixon 1824) 80

81. The underlying in relation to contracts for the transfer of chattels is that specific performance will be ordered in circumstances in which the chattel has a intrinsic value such that it would not be readily possible to acquire a substitute chattel. 81

82. Contracts where specific performance unavailable This remedy may be displaced in situations in which such performance is impracticable. Contracts involving the personal skill of one of the parties are the clearest example of contracts which will not be specifically enforced on the basis that an order of specific performance would be inappropriate in the circumstances. 82

83. In the case of Patel v Ali [1984] 1All ER 978 ‘A’ entered into a contract to sell his land to B. Completion of sale was delayed because of certain personal difficulties on the part of ‘A’. At the time that he agreed to sell, ‘A’ was wealthy and healthy. However, during the delay, ‘A’ contracted cancer and hospitalized. ‘A’ became heavily reliant on friends and neighbours. ‘B’ sought specific performance of the contract. 83

84. It was held that exceptionally specific performance may be refused because of change of circumstances subsequent to the contract such that a decree of specific performance would inflict on the defendant a hardship amounting to injustice. 84

85. Injunction The injunction is an equitable remedy. It is at the discretion of the court to make an order to either party to litigation. An injunction will be awarded on an interim or a permanent basis, either in a mandatory or prohibitory form. 85

86. It is necessary that no common law remedy would be sufficient in the circumstances; the applicant must come with the clean hands; there must not have been delay on the applicant’s part; some rights of the applicant must be affected. The respondent must not suffer undue harm as a result of the injunction. 86

87. Injunctions divide between those which require some actions from the respondent ( mandatory injunction ) those which require the respondent to refrain from some actions ( prohibitory injunction ) and those which seek to prevent some action which it is feared may be performed in the future. Interim injunction is awarded on an interim basis during the litigation. 87

88. Their award is based on a balance of convenience between the potential harm suffered by the applicant if no injunction were awarded, and the potential convenience caused to the respondent if the injunction were to be awarded. An injunction will not be ordered in circumstances in which damages would be sufficient. 88

89. Rescission Rescission is an equitable remedy used to set aside contracts and to restore the parties to the positions which they had occupied previously. In the case fraudulent misrepresentation, the claimant will be entitled to rescind the contract to prevent the wrongdoer from benefiting from its wrongdoing. 89

90. A material mistake made by both parties to a contract will enable that contract to be rescinded. The right to rescind will be lost where it is impossible to return the parties to the positions they occupied previously, where the contract has been affirmed, or where there has been delay. 90

91. Rectification Rectification is available to amend the terms of a contract better to reflect the true intentions of the parties. Rectification will be available in circumstances of common mistake. 91

92. Maxims of Equity 92

93. MAXIMS OF EQUITY The maxims of equity embody the general principles which evolved in the Court of Chancellery. They are not rules which must be rigorously applied in every case. Maxims are more in the nature of general guidelines illustrating the way in which equitable jurisdiction is exercised. Maxims do not assert any particular view of the world other than that people should behave reasonably towards one another. 93

94. Equity will not suffer a wrong to be without a remedy; Equity follows the law; He who seeks equity must do equity; He who comes to equity must come with clean hands; Where equities are equal the law prevails; Where equities are equal the first in time prevails; Equity imputes an intention to fulfill an obligation; 94

95. 8. Equity regards as done that which ought to be done; 9. Equality is equity; 10. Equity looks to the intent rather than the form; 11. Delay defeats equity; 12. Equity acts in personam. 95

96. Equity will not suffer a wrong to be 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. This principle is at the very heart of equity: where the common law or statute does not provide for remedying of a wrong, it is equity which intercedes to ensure that a fair result is reached. 96

97. Equity will intervene in circumstances in which there is no apparent remedy but the court is of the view that justice demands that there be some remedy made available to the complainant. A beneficiary has no right at common law to have the terms of the trust enforced, but the court will require the trustee to carry out those terms to prevent him from committing what would be in effect a wrong against the beneficiary. 97

98. The classic example is the enforcement of the 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 right in equity. Following are the limitations of the maxim. (i) Where right and remedy both within the jurisdiction of common law. (ii) Acts of State; the courts are not authorized to question the acts of State. In terms of section 62 of the Trusts Ordinance, a trustee has a duty to perform a particular act. If he doesn’t discharge his duty, the beneficiary may compel the trustee to protect the property. 98

99. for the purpose of understanding: In the case of violation of a fundamental right, the aggrieved party must invoke the jurisdiction of the Supreme Court within one month. 99

100. 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. Thus, equitable interests in land correspond with legal estates and interests. it can be said that equity always follows the law in the sense of obeying it and conforming to its general rules and policy, whether contained in common law or statutory law. The rules of equity can not override the specific provisions of the law. 100

101. The court of common law and a court of equity came to completely different decisions on the merits of the very same case. The common law courts apply the rules mechanically. Equity enables fairness and principle to outweigh rigid rules. Therefore, equity will have priority over non-statutory common law rules. Common law has ‘rules’ which are applied in regor Juris more mechanically than the ‘principles’ of equity, which are principles governing the standard and quality of behaviour in a more subtle way than legal rules. Equity enables fairness and principle to outweigh rigid rules in appropriate circumstances. However, equity will be bound to follow statutes in all circumstances. 101

102. Equity will not refuse to be bound by rules of common law unless there is some unconscionability in applying particular common law rules. Section 66(1): Nothing in section 65 entitles the beneficiary to any right in respect of property in the hands of a transferee in good faith for consideration without having notice of the Trust, either when the purchase money was paid, or when the conveyance was executed. 102

103. Mexfield Housing Co-operative Ltd. V. Berrisford (2011 Ch. 244) – it was said “if an interest in land does not satisfy the basic legal requirements for its existence, then it will not, as a general rule, exist as an interest in land either at law or in equity. Stack v. Dowson (2007 2 A.C. 432) where the legal title to land is held jointly, the equitable interests follow the legal title unless a contrary intention is proved. 103

104. He who seeks equity must do equity A plaintiff who seeks equitable relief must be prepared to act fairly towards the defendant. The operation of this principle can be seen where equity, in allowing the rescission of a contract for a mistake, puts the plaintiff on terms which appear to the court to be just and equitable. This maxim deals with future obligations. 104

105. In Ashby v. White , wherein a qualified voter was not allowed to vote and who therefore sued the returning officer, it was held that if the law gives a man a right, he must have means to maintain it. A plaintiff seeking an injunction will not succeed if he is unable to carry out his own future obligations. 105

106. He who comes to equity must come with clean hands The ‘clean hand’ principle looks to the previous conduct. Thus equity will not grant relief against forfeiture for a breach of the covenant where the breach in question was flagrant. It is not uncommon for the party who is considered to be at fault or responsible for causing harm in a situation to be unable to file a legal action or claim. This can be due to a variety of reasons, such as the fact that the party does not have the standing to bring a claim, or because the party is barred from bringing a claim due to the doctrine of unclean hands. 106

107. In general, a party must have a legally recognized interest in a matter in order to bring a claim or take legal action. This means that the party must have suffered some sort of injury or harm as a result of the actions of another party. If the party who is at fault has not suffered any harm, they may not have the standing to bring a claim. Additionally, the doctrine of unclean hands is a legal principle that holds that a party who is seeking relief from the court must come to the court with "clean hands," meaning that they must have acted fairly and in good faith in relation to the matter at hand. If a party is found to have acted improperly or dishonestly in relation to the matter, they may be barred from bringing a claim or taking legal action. 107

108. In Argyll vs. Argyll (1967) the fact that the wife’s adultery had led to the divorce proceedings was no grounds for refusing her an injunction to restrain her husband from publishing confidential materials. 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 the other. A court of equity will not act in favour of someone who has committed an illegal act. 108

109. Where equities are equal the law prevails This maxim operates where there are two or more competing interests, one legal and the other equitable. Where the claims of both parties are fair and meritorious, precedence will be given to the legal interest. This maxim was developed in connection with interests in lands. When a purchaser acquires property bona fide without notice of a defect in the vendor’s title, the equities are equal and the legal estate will prevail. 109

110. If the purchaser takes title with notice of the defect, the earlier title, if valid, will prevail. The force of this maxim has largely been displaced by legislated systems of land title registration. Where two people have purported to purchase goods from a fraudulent vendor for the same price, neither of them would have a better claim to the goods in equity. Therefore, the rules of commercial rules would be applied. 110

111. Where equities are equal the first in time prevails This maxim dealing with the priorities of competing interests, may be dealt with. This provides the foundation for the doctrine of notice. Thus, a prior equitable interest in land can only be defeated by a bona fide purchase 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. 111

112. If he took with notice the position is otherwise, as the 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 the creation. This maxim has lost some of its importance since the introduction of the system of registration of certain interests in land. For understanding: Registration of documents 112

113. Equity imputes an intention to fulfill an obligation Where a person is obliged to do some act, and does some other act which could be regarded as a performance of it, then it will be so regarded in equity. This is the basis of the doctrines of performance and satisfaction. For example, if a debtor leaves a legacy to his creditor, 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. 113

114. In Sowden v. Sowden , a husband agreed with the trustees to pay them £50,000 for the purpose of purchasing land in a particular area D. He, in fact, never paid the sum, but after marriage purchased the land at D in his own name, for £50,000. He died and could not bring the land into a settlement. Equity courts construed that he purchased land to fulfil his obligation. 114

115. Equity regards as done that which ought to be done Where there is an especially enforceable obligation, equity regards the parties as already in the position which they would be in after the performance of the obligation. Therefore in equity, a specifically enforceable contract for a lease creates an equitable lease. This is the doctrine of Walsh vs. Lonsdale . 115

116. Similarly, a specifically enforceable contract for the sale of land transfers the equitable interest to the purchaser, the vendor holding the title on constructive trust until completion. In AG for Hong Kong vs. Reid (1994 1 A.C. 324) the issue was whether a fiduciary who took a bribe became a constructive trustee of it or was merely personally accountable. Because he was under a duty to hand over the bribe to his principal, it was held that the property belonged to the principal in equity. 116

117. Napier and Ettrick (Lord) v. Hunter (1993 A.C. 713) where an insurer pays with respect to an insured risk, the assured recovers damages from a third party with respect to that same loss. Therefore, the insurer had immediate proprietary rights in the form of a lien over money. 117

118. Equality is equity Where two or more persons are entitled to an interest in the same property, then the principle of equity is equal division, if there is no good reason for any other basis for division. Equity, therefore, dislikes the joint tenancy where, by the doctrine of survivorship, the last survivor takes all. 118

119. This may be contrasted with the tenancy in common, where the interest of each party devolves upon his personal representative on his death. In the absence of an express declaration, to the effect that the equitable interest is held jointly, equity presumes a tenancy in common in certain cases where at law the parties are joint tenants: for example where the purchase money provided in unequal shares, equity presumes a tenancy in common in shares proportionate to the contributions. 119

120. Equity looks to the intent rather than the form This principle 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. Similarly a trust may be created although the word ‘trust’ has not been used. 120

121. A trust is created with- (1) an intention on his part to create a trust thereby, (2) the purpose of the trust, (3) the beneficiary, and (4) the trust property. Where an author uses words such as ‘I hope’, ‘I request’ or ‘I recommend’ the first condition is missing. In cases where subsequent ingredients are found, in early days, it was held by the equity courts that he had the intention. This view is in use now but not as liberally as before. 121

122. Delay defeats equity Equity aids vigilant and not indolent. This is the foundation of the doctrine of laches, whereby a party who has delayed cannot obtain equitable relief. For example under English law, actions against trustees for breach of trust must be brought within six years and delay short of this will not bar relief. Under the Trusts Ordinance, there is no time bar. 122

123. Plaintiff’s unreasonable delay is a weapon of defence by the defendant against the plaintiff. In a Bombay case, the plaintiff allowed his land to be occupied by the defendant and this was acquiesced by him even beyond the period of limitation. On a suit of the land it was decided that as the period of limitation to recover possession had expired, no relief could be granted. Humphreys v. Humphreys [2004 W.T.L.R 125] it was said that the claims to rescission and rectification may be barred by delay. 123

124. Equity acts in personam Equity has jurisdiction over the defendant personally. 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 contempt of court punishable by imprisonment. Provided that the defendant is within the jurisdiction, it is no objection that the property which is the subject matter of the dispute is outside it. 124

125. Equity acts in personam refer to the actions of a court in equity that are directed at a specific individual or group of individuals. In contrast to actions in rem, which are directed at a specific piece of property or legal right, equity acts in personam are aimed at providing a remedy or relief to a specific person or group of people. Equity acts in personam may include actions such as injunctions, which are court orders that prohibit someone from taking a specific action or require them to take a specific action. They may also include orders for specific performance, which require a party to fulfill a contract or other legal obligation, or decrees of divorce, which dissolve a marriage. 125

126. Thus in the leading case of Penn vs. Lord Baltimore (1750) specific performance was ordered of an agreement relating to land boundaries in Pennsylvania and Maryland, the defendant by in that country. 126

127. He who seeks equity must do equity He who comes into equity must come with clean hands i) It is applicable when both the plaintiff and the defendant have claims of equitable relief against each other. i ) It is applicable when the defendant has no separate claim to relief and the plaintiff’s conduct is unfair. ii) It exposes the condition subsequent to the relief sought. ii) It is a condition precedent to seeking equitable relief. iii) It refers to the plaintiff’s conduct as the court thinks it ought to be, after he comes to the court. iii) It refers to the plaintiff's conduct before he  approaches the court. iv) The plaintiff has to mould his behavior according to the impositions by the court. iv) If the plaintiff’s conduct is unfair, it would not entitle him to the relief sought. v) The plaintiff has an option or a choice before him either to submit to the conditions put by the court, or to get out of the court. v) The conduct of the plaintiff snatched his choice from him. His equitable right therefore neither be recognized nor enforced. vi) This maxim looks to the future. vi) This maxim looks at the past. 127 Distinction between maxims

128. The end of the equity session 128