Conveyance of property and the requisite methods of notice when accepting an offer are clearly defined under s.196 of the Law of Property Act 1925, so when a buyer elected to take advantage of an option to purchase, they did so in a way that flirted with the prescribed method yet failed to secure the bargain despite arguments to the contrary.
Having decided to sell his home the respondent wrote to the appellants setting out an option to purchase which expired within a six-month period, while the specific terms of the offer outlined in clause 2 stated clearly that:
“The said option shall be exercisable by notice in writing to the intending vendor at any time within six months from the date hereof…”
Contrastingly s.196(4) of the Law of Property Act 1925 also explains that:
“Any notice required or authorised by this Act to be served shall also be sufficiently served, if it is sent by post in a registered letter addressed to the lessee, lessor, mortgagee, mortgagor, or other person to be served, by name, at the aforesaid place of abode or business, office, or counting-house, and if that letter is not returned through the post-office undelivered; and that service shall be deemed to be made at the time at which the registered letter would in the ordinary course be delivered.”
And so on this occasion the appellants solicitors drafted a written acceptance of the offer before hand delivering it to the respondent’s solicitors while noting within the correspondence that a copy of the written notice of acceptance and a deposit cheque had also been posted to the respondent’s home.
After receiving the letter the solicitors telephoned the respondent to advise him they had received the notice, and that a copy of it was on its way to him, whereupon he explained that he had already made travel plans, and so having been instructed by his solicitors to leave despite the expected letter, he vacated his home for a number of days.
After being franked and handed to the post-office, the letter ultimately failed to arrive at the respondent’s home, thus the appellants sought legal action to secure the purchase on grounds that a contract for both sale and purchase had been executed irrespective of whether the posted letter had arrived, while it was also argued that the oral communication between the solicitors and the respondent further confirmed acceptance of the offer when factoring in the solicitors possession of the letter.
In the first instance the appellants relied upon Henthorn v Fraser, in which the Court of Appeal had held that:
“Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.”
However the court ruled against them, before the Court of Appeal overruled and distinguished Henthorn in light of an absence of expressed postal methods expressed within the purchase option, and so dismissed the appeal on grounds that failure of the respondent to physically take receipt and read the notice became fatal to any claim of right to buy, while clarifying that:
“If a notice is to be of any value it must be an intimation to someone. A notice which cannot impinge on anyone’s mind is not functioning as such.”
In what was to become an overly protracted and yet hotly debated case, the question of trust instrument validity and the limiting scope of trust powers, fell upon the English courts to answer, when what appeared at the time was judicial wisdom, later proved a confused doctrine that polluted similar cases in the years following its declaration.
Having become the director of a highly successful M&E company first established in 1927, and as a man of inherent providence, the deceased had taken it upon himself to draft a trust deed in 1941, that would allow his current and former employees to benefit from financial gifts on a potentially recurring basis, while in addition to this their immediate relatives were also to enjoy similar windfalls, as was contained in clause 9(a) of the trust, which read that:
“The trustees shall apply the net income of the fund in making at their absolute discretion grants to or for benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons in such amounts at such times and on such conditions (if any) as they think fit and any such grant may at their discretion be made by payment to the beneficiary or to any institution or person to be applied for his or her benefit and in the latter case the trustees shall be under no obligation to see the application of the money…”
However upon his death in 1960, the appointed executors notified the trustees that the trust was void for uncertainty, as it would be almost impossible to distinguish one employee from another, never mind any relatives known to exist at the time of his passing, which was a position adopted in light of the company’s growth from 110 to 1,300 employees during the preceding years.
Commencing by way of an originating summons in 1967, the trustees argued that clause 9(a) merely represented a power to distribute funds to a class of beneficiaries, while the executors held that the use of the word ‘shall’ created instead, a mandatory trust that once unable to be fully executed, would nullify itself and thus fall within the residual estate.
In the first instance, the Court of Chancery examined the construction of the deed, and found that due to discretionary nature of clause 9(a), the trust conferred a power upon the trustees, and not an immutable instruction that once unfulfilled, rendered the trust void for uncertainty; a statement upon which the executors challenged the findings in the Court of Appeal.
Here, the court referred to In re Gestetner Settlement, in which Harman J had held that when ascertaining the exactness of a trust deed beneficiary class:
“[T]he trustees must worry their heads to survey the world from China to Peru…”
Which was to suggest an immense undertaking for trustees, unless it could be proven that the deed conferred a mere power, in which case, reasonable certainty of the beneficiary class ought then be shown. In light of this precedent, the court subsequently held that as before, the context of clause 9(a) was such that the trustees were afforded discretionary powers, and so held that:
“[C]lause 9 of the deed may properly be construed as the judge did, by holding that it creates a power and not a trust…”
At which point the executors along with the deceased’s widow, pursued their argument before the House of Lords on grounds that clause 9(a) represented a mandatory trust, and that as such, the ruling in the recent Inland Revenue Commissioners v Broadway Cottages directed the decision of the court when it held that:
“[A] trust for such members of a given class of objects as the trustees shall select is void for uncertainty, unless the whole range of objects eligible for selection is ascertained or capable of ascertainment…”
Which it was argued, was now impossible due to the vast number of both former and existing employees, causal employees and extended family members; a contention that left the House allowing the appeal by way of reference back to the Chancery Court for greater clarification, while also holding that in their opinion:
“[T]he trust is valid if it can be said with certainty that any given individual is or is not a member of the class.”
Once again in 1972, the court reviewed the position on the wording, and thereby meaning of trusts and powers, along with the validity of the trust in relation to s.164 of the Law of Property Act 1925, which stipulated that:
“1. No person may by any instrument or otherwise settle or dispose of any property in such manner that the income thereof shall…be wholly or partially accumulated for any longer period than one of the following…(a)the life of the grantor or settlor; or (b) a term of twenty one years from the death of the grantor, settlor or testator…”
And so with a thoughtful, albeit exhaustible, examination of the deed, the court held that a discretionary trust did exist, and that despite the 31 years since its execution, such an instrument was valid when called into purpose, which echoed the sentiment of the House when the court further held that the trust was valid on the principle that there were sufficient company records to show, and thereby establish, who was reasonably eligible for the benefit of the funds when distributed by the trustees, upon which the executors challenged the judgment before the Court of Appeal one final time.
Here, the executors argued that unless an individual could not be proven as falling outside the scope of the trust, the trust must fail, while the court reasoned that while operating within the bounds of practicality, the trustees had shown that they were equipped to trace staff records back to the inception of the company, and thereby allocate the majority of employees and their immediate relatives, whereupon the court conclusively dismissed the appeal, while simply holding that:
“[A] trust for selection will not fail simply because the whole range of objects cannot be ascertained.”
Implication by way of contract, is argued in a case involving the conflict of interests between two tenants and a perhaps disorganised and rushed grant of occupancy by the landlord.
In a time immediately before the Law of Property Act 1925, a landowner sought to let out a part of his estate for a determined period. Under the terms of the lease there was at the time, a gravelled road that passed by the tenant’s rented property named ‘The Gardens’, while leading to the door of the main estate property named ‘The Hall’.
At the time the tenant began his residence, there was also an unfinished bridleway that allowed for access to the rear of the Gardens, albeit given no mention within the contract, nor any reliable evidence that use of the drive had been orally agreed between the two parties. During this period, and shortly after taking occupancy of the Gardens, the Hall was leased to another occupier, with no issues arising between them.
A few years afterwards, this same tenant vacated the Hall, and so the landowner let it out to another party for a fixed period, after which the occupier of the Gardens continued to use the gravelled drive as a means of access to the front of his property, as he had since his lease began. Two years after taking up residency, the defendant in this case erected a wire fence to prevent the claimant and tenant of the Gardens from using the gravelled drive as a means of access, hence resulting in litigation.
Relying upon the wording of s.62(1) of the 1925 Act, and the fact that there had never been any other suitable means of access to his home, the claimant argued that an easement by way of implication had been granted by the landlord. When considered by the court, the facts determined that there was a clear difference between the granting of a lease and the conveyance of interest in land or property; and that in this instance the former applied.
There was however, the principle that under the terms of the contract there could be argued, an obligation to undertake full performance of the rights bestowed the claimant, where unless the contract provides specific exclusion of a right of way between two sharing tenants, the gravelled drive afforded both users equal powers to enforce their rights. It was on these grounds that the judge endorsed the action and awarded accordingly, while holding that:
“[A] grantor of property, in circumstances where an obvious, i.e., visible and made road is necessary for the reasonable enjoyment of the property by the grantee, must be taken prima facie to have intended to grant a right to use it.”
Originating from the latin phrase ad opus, the purpose of a trust is to provide the safe containment of assets (whether those of property or money) on condition that they will be of benefit to another party or parties. There are many instances in which a trust can be created, and it is the intention of this article that we have a look at the more common trusts used today, before explaining their application through suitable case law propositions.
Subject to the same qualifying criteria as that of a will bequest, the terms of a valid trust require that three certainties must be readily ascertainable:
(i) The intention of the settlor
(ii) The subject matter of the trust
(iii) The identity(s) of the beneficiary(s)
The inherent problem with purpose trusts is that they are by nature, constructed so as to benefit an unlimited number of people, although often under a charitable intention. An excellent example of a purpose trust is the one described in Re Denley, where the use of recreational ground was exclusively reserved for the current and future employees of an aircraft manufacturer, and that despite presupposition of its failure, the judge upheld its validity on grounds that an approximation of the staff was, in the immediate sense, obtainable. This allowance was expressed by Goff J who remarked:
“[T]here may be a purpose or object trust, the carrying out of which would benefit an individual or individuals, where that benefit is so indirect or intangible or which is otherwise so framed as not to give those persons any locus standi to apply to the court to enforce the trust, in which case the beneficiary principle would, as it seems to me, apply to invalidate the trust, quite apart from any question of uncertainty or perpetuity. Such cases can be considered if and when they arise.The present is not, in my judgment, of that character…”
Ironically, resulting trusts are express trusts that have, by their lack of specificity, wound up benefiting the settlor, despite the very wish to relinquish title or interest. As with the third element of a successful trust, where the identities of the beneficiaries are either remitted or withheld, the principles of equity would defer the construction of the trust to that of the settlor’s gain. While in some instances the outcome causes little damage, there are equally those where a resulting trust inflicts financial loss, as was seen in Vandervell v IRC. Appreciably, there is rarely if ever, any intention to create a resulting trust, and so the instances where they do emerge rely upon clear conditions, as explained by Lord Millet in Air Jamaica v Charlton when he remarked that:
“Like a constructive trust, resulting trust arises by operation of law, though unlike a constructive trust it gives effect to intention. But it arises whether or not the transferor intended to retain a beneficial interest – he almost always does not – since it responds to the absence of any intention on his part to pass beneficial interest to the recipient. It may arise even where the transferor positively wished to be part with the beneficial interest…”
One of the advantages of a charitable trust is that it enjoys exemption from the otherwise exactness of both beneficiary and subject, although in many cases the charity of choice is typically named so as to avoid confusion within the court, or a need to invoke the cy-pres doctrine. Another is the avoidance of taxation, as charities are free from the burden of inheritance tax, capital gains tax and occupancy rates (where circumstances allow). As also outlined in s.1(1) of the Charities Act 2006, the trust beneficiaries must fall within the scope of legislation in order for the trust to succeed, and as can be found under s.2(2) of the 2006 Act, the possible forms such charities might take are reasonably extensive.
Sharing a close relevance to the strictness of fiduciary duties, constructive trusts are a means of remedy where a trustee has immorally profited from another’s property through the dysfunction of their relationship. Where evidence is found to support wrongful gain, a constructive trust is created that serves to hold the assets on trust for the now slighted settlor. An example of this is Attorney-General of Hong Kong v Reid where Lord Templeman stressed that:
“As soon as the bribe was received it should have been paid or transferred instanter to the person who suffered from the breach of duty. Equity considers as done that which ought to have been done. As soon as the bribe was received, whether in cash or in kind, the false fiduciary held the bribe on a constructive trust for the person injured.”
As with purpose trusts, an express trust is the standard form of trust, whereby the settlor (i) makes a clear expression of his wish to create a trust (ii) deliberately illustrates what form the trust takes (property or funds) (iii) who the beneficiaries are (iv) takes the correct steps to transfer the property in accordance with statute and where necessary makes it known who the acting trustees will be. The reason for this is to facilitate court intervention in the event of contention, particularly where the settlor has since died, leaving instructions within their final will or codicil. Failure to demonstrate evidence of those key elements will result in a void trust, and in death, eventual lapse into the residual estate of the deceased.
An example of the exactness required for an express trust is found in Milroy v Lord where despite having made verbal declarations as to his wish for his company shares to benefit his niece, his associate had failed to officiate the trust through the legal channels; resulting in the shares remaining on trust for himself (as would be the case in a purpose trust). This was elaborated by Lord Justice Turner, who remarked:
“[I]n order to render a voluntary settlement valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him.”
Cestuis Que Trusts
Cestui que is an abbreviated version of ‘cestui a que use le foeffment suit fait’, which means ‘the person for whose use the foeffment was made.’ Further simplified, ‘foeffment’ represents any grant of freehold property, therefore a cestui que trust would be those holding property upon trust for the benefit of another named individual who retains legal title; although any beneficial interest remains in the hands of the cestui quetrust (or person assigned the interest).
This translates that unlike other forms of trust, the legal owner acts as a trustee, while the actual beneficiary serves as operator of the trust, much like a reversal of roles. The result of this is that should the trustee decide to convey the property, the cestui que trust can sue for breach of duty where no permission has been granted and no profits enjoyed. This was explained by Austin Wakeman Scott in his Columbia Law Review article ‘The Nature of the Rights of the Cestui Que Trust’ (1917), when he wrote:
“If a trustee should destroy the trust res, or should sell it to a purchaser without notice of the trust and dissipate the purchase money, the cestui que trust may maintain a suit in equity against the trustee for breach of trust, and recover a sum of money, either the value of the trust res, or the amount of profits which should have accrued if no breach had been committed.”
These are typically used where multiple beneficiaries exist, while the nature of the fixed trust is to state exact figures or quantities of benefit to each party, so as to avoid inequitable profit by those in receipt or miscalculation by the appointed trustees. The criteria for this form of trust was established by Jenkins LJ in Inland Revenue Commissioners v Broadway Cottages Trust, where having examined the specificity of the trust, there was insufficient evidence to obtain certainty of the beneficiaries, thus the trust failed with the reasons given that:
“[T]he trust of the capital of the settled fund for all the beneficiaries living or existing at the termination of the appointed period, and if more than one in equal shares, must be void for uncertainty, inasmuch as there can be no division in equal shares amongst a class of persons unless all the members of the class are known.”
Undoubtedly designed to protect the identity and interest of the beneficiary(s), the settlor is able to draft and execute a secret trust that can be both observed during life, and inserted into a will under the pretence that a named beneficiary will inherit absolutely, when in fact they will act as trustees for those with the intended benefit (similar arrangements can fall under intestacy provided prior agreement was arranged by the deceased). Similarly, there are half-secret trusts that operate beyond the terms of a will but under the duties of a trustee, this translates that the dispositions of the trustee remain unknown, although there is no uncertainty as to where the trust property resides. The framework of secret trusts was outlined by Peter Gibson LJ in Kasperbauer v Griffith, when he said:
“[T]he authorities make plain that what is needed is: (i) an intention by the testator to create a trust, satisfying the traditional requirements of three certainties (that is it say certain language in imperative form, certain subject matter and certain objects or beneficiaries); (ii) the communication of the trust to the legatees, and (iii) acceptance of the trust by the legatee, which acceptance can take the form of acquiescence…it is an essential element that the testator must intend to subject the legatee to an obligation in favour of the intended beneficiary. That will be evidenced by appropriately imperative, as distinct form precatory language.”
While operating much like a typical trust, the discretionary trust allows the trustee(s) to regulate and thus self-determine, the extent of the distribution to assigned beneficiaries. With two differing types, the exhaustive discretionary trust provides full and complete distribution of trust assets; whereas the non-exhaustive trust allows the trustee(s) to decide how much is awarded, and to specify what, within the trust, is granted to the beneficiaries.
Brought about through the disposition of land under co-ownership and the rules of intestacy, these trusts are designed to protect the interests of those in title. First introduced through s.34-36 of the Law of Property Act 1925 the intervention, or at least creation of such trusts, was also enforced through s.33 of the Law of Administration Act 1925, before consolidation of both Acts came through the Trusts of Land and Appointment of Trustees Act 1996. In the former instance, there is an automatic trust power to sell and retain under co-ownership, and in the latter, a power to sell through personal representative where no will was executed.
There is little to explain here other than that unlike a private trust, a public trust is created by the settlor with the express intention of benefitting certain members (or sections) of the general public. This is often achieved through the use of a charitable trust, as deemed valid through the requirements of rules required by the Charities Act 2006.
Bare (or Simple) Trusts
Perhaps the most basic of trusts, the bare or ‘simple’ trust serves only to hold property or funds in favour of a beneficiary, yet with no trustee duties attached. In this instance, the trustee is replaced with the title of nominee until transfer is required.
Unlike the previous trusts, these are created with prerequisite trustee instructions, albeit divided into two categories, namely ministerial and (as above) discretionary trusts. In the former, those duties may include rent collection and administrative functions, whereas the latter affords the trustee with powers to decide how best go about his or her role.
Running parallel to laws of contract, the quistclose trust was brought about in Barclays Bank v Quistclose Investments Ltd, in which the lender took steps to clarify that the money loaned was on condition of use, and held within the bank until the borrower chose to redeem the funds. When the borrower lapsed into liquidation, the lender asserted property rights against the bank under the principle that the funds were held on trust, and that the bank was now acting as a trustee; thus circumventing the rights of other creditors, while holding the funds in safe reserve for the lender as acting settlor. This unique approach was supported by the House of Lords, and explained well when Lord Wilberforce remarked:
“In the present case the intention to create a secondary trust for the benefit of the lender, to arise if the primary trust, to pay the dividend, could not be carried out, is clear and I can find no reason why the law should not give effect to it.”
Purpose trusts, and those with intended beneficiaries can be hard to distinguish, and so it can often fall to the courts to reexamine the intention of the settlor, so as to avoid failure where none need exist. In a case involving a company trust deed, appointed trustees, valued employees and a forfeiture clause, the terms contained within it were challenged when the company itself looked to sell some of the land granted for use, as was expressly prescribed in the trust.
In 1917, aircraft manufacturing companies Airco (A) and H. H. Martyn (H) merged to become Gloster Aircraft Co. Ltd; and in 1936 a trust deed was constructed between H and a number of trustees, which provided that a plot of land and a right of way had been conveyed to the trustees to be held on trust for H, and that the trustees were to allow H to take out a mortgage on the land in order to pay A.
In another part of the deed it was agreed that the trustees were empowered to manage the land and grant use of it to the employees (and others by agreement) for sports and recreational purposes by way of weekly subscriptions. The caveat to this arrangement was that when the subscription percentage dropped below seventy-five percent of the male workforce, or the company fell into insolvency, the land reserved was to be sold to Cheltenham General Hospital, and the proceeds used to settle the mortgage owed to A.
Roughly thirty years later, H decided to sell a portion of the land to pay for maintenance work, and at this point the question arose as to (i) liability to pay any excess funds to the Hospital, (ii) whether the trust allowed the trustees to sell any part of the land, and (iii) the integrity of the trust as to the exactness of the beneficiaries, which were deemed to be undeterminable.
When the details of the deed were scrutinised, it was argued that as the nature of the trust was one of purpose and not benefit, it could not be enforced as the purpose was not one of charity but general enjoyment. For this reason it was contended that the trust must fail, and that H was now free to use the land as it wished; however, the court took a different view and explained that while governance of the trust did include the use of the land by parties beyond the employees, it was at the discretion of the trustees and therefore a power rather than a specific point of benefit.
This interpretation changed the nature of the trust from purpose into one of direct benefit, as the names and identities of the employees (including those unsubscribing) were readily ascertainable. This translated that the trust was in every sense, valid, and that to the knowledge of the court, the subscription levels had remained above that of the percentage set, particularly when reference to s.61 of the Law of Property Act 1924 outlined how “the masculine included the feminine”.
There are within the discipline of equity, a number of maxims reverted to when settling many common law matters. The aim of this article is to present them in as exhaustive a manner as possible, while including notable cases that explain their application.
Equity follows the Law (Aequitas sequitur legem)
The nature of equity is one that supports, rather than overrules the balance of justice, however it must also be stressed that where the moment calls, equity will go against those principles in pursuit of a fair outcome that common law fails to provide. A suitable case example for this isStack v Dowden, in which an unmarried couple shared a home for over twenty years while raising their children, until the time came for separation. Upon parting, the father argued that as the two parties enjoyed joint legal title, beneficial interest was automatically deemed equal, unless robustly proven otherwise.
This sentiment was echoed in the above maxim, and until this case had been presented, it remained common law that equal beneficial interest was assumed to mirror that of legal title; however, the evidence presented by the respondent was overwhelming to the point that for the first time, the percentages were divided heavily in favour of the mother, while this reexamination of beneficial assumption was instigated by Baroness Hale of Richmond, who urged:
“The issue as it has been framed before us is whether a conveyance into joint names indicates only that each party is intended to have some beneficial interest but says nothing about the nature and extent of that beneficial interest, or whether a conveyance into joint names establishes a prima facie case of joint and equal beneficial interests until the contrary is shown.”
Where the equities are equal, the law will prevail
Frequently tied to property dealings, this maxim relates to two parties seeking title to a property without awareness of each others rights. An example of this might be a beneficiary to an estate who is unaware that a third party has since acquired legal title by means of a purchase (as sometime happens when wills are not updated nor properly constructed). The courts will view both potential owners as equal, however where the legal owner can prove ownership free of fraud, the latter will succeed. This position was underlined in Pilcher v Rawlins, where it was clarified by James LJ that:
“[S]uch a purchaser’s plea of a purchase for valuable consideration without notice is an absolute, unqualified, unanswerable defence, and an unanswerable plea to the jurisdiction of this court. Such a purchaser, when he has once put in a plea, may be interrogated and tested to any extent as to the valuable consideration which he given in order to show bona fide or male fides of his purchase, and also the presence of the absence of notice; but when once he has gone through that ordeal, and has satisfied the terms of the plea of purchase for valuable consideration without notice, then…this Court has no jurisdiction whatever to do anything more then allow him to depart in possession of that legal estate.”
Equity looks to the substance rather than the form
This is a fairly descriptive maxim that serves to keep focus on legal proceedings in such a way that holds the principle of fairness above that of policy or written codes of conduct. This is not to say that where statute dictates a course of action, equity will seek to ignore that; in fact, under those terms, the black letter of legislation will always win the day.
Instead, equity looks at the form of the subject matter, rather than allowing the intention to dissolve in favour of caveats that work against common law, and obstruct a proper outcome. This was demonstrated through the words of Lord Romily Mr in Parkin v Thorold, who remarked that an agreement between a vendor and purchaser did not rest upon the limitations of time, and that when charges brought against the vendor for specific performance altered the essence of the contract, it was equity that referred the parties to the form of the arrangement:
“[T]ime was originally not of essence of the contract…although express notice will make time of the essence of the contract, where a reasonable time is specified…the notice of the 21st October did not specify a reasonable time for this purpose.”
Equity will not permit statute to be used as a cloak for fraud
While perhaps limited in scope, the effects of this maxim can be appreciated within property law matters, as it is a legal requirement under section 53(1)(b) of the Law of Property Act 1924 that any contracts for sale or occupancy must be written. And so in Bannister v Bannister, the owner of a property conveyed a party rent free occupancy of the home for life, after which they tried to evict them. It was then argued by the defendant that an oral contract existed which thus defeated the act of statute when the respondent went back on their promise.
Equity imputes an intention to fulfil an obligation
Relating to ambition and intention, the aim here is to hold to account the statements or actions by a party that are later required to be enforced, regardless of any reasonable changes in circumstance, and when the court finds that no such fulfilment has occurred, the obligation to do so will be levied through equity.
An example of this is Lechmere v Lady Lechmere, in which a Lord bound himself to purchase land for an agreed sum, that would then pass through death to his wife. Upon his passing, it was discovered that he had failed to uphold his requirement during the lifetime of their marriage, by purchasing other lands that now fell within the residue of his estate, and required a successor in title other than his son. Through the application of this maxim, the court allowed the transfer to his wife for the amount agreed, and thus his obligations were deemed satisfied, as was expressed within the judgment which read:
“[W]herever a thing is to be done either upon a condition, or within a time certain, yet if a recompence can be made which agrees in substance, though perhaps not in every formal circumstance, such a recompence shall be good, and shall go in satisfaction of the thing covenanted to be done.”
Equity regards as done that which ought to be done
There are times in law where the misdeeds of others wind up obscuring the natural order of events, and so it is that the equitable maxim above is crucial to redressing the imbalance, and putting matters where equity can reign. A fitting case example would beAttorney-General for Hong Kong v Reid, where a senior crown prosecutor received bribes to obstruct the course of justice, while employed in a manner that bestowed fiduciary duties.
When it was discovered that those illegal payments had been invested in a number of properties, it was agreed that those homes were held on trust by the appellant for the benefit of the Crown; and while the rules of equity prevent a debtor to the injured party being a trustee for the monies received, the Court of Appeal allowed that conflict to stand in order for the outcome to find form, and for natural remedy to occur. This decision was supported by Lord Templeman, who commented:
“It is unconscionable for a fiduciary to obtain and retain a benefit from a breach of duty. The provider of a bribe cannot recover it because he committed a criminal offence when he paid the bribe. The false fiduciary who received the bribe in breach of duty must pay and account for the bribe to the person to whom that duty was owed.”
Equity acts in personam
Because some matters involve effects belonging to individuals that may have since moved abroad, the principle that equity acts against the person provides domestic courts with an ability to extend their reach without interruption of foreign laws. This may come into play when a property owner or business person has entered into a contract that binds them within the United Kingdom, but whose absence may permit avoidance of liability for remedy. There are of course limitations to this maxim, and where the laws of the country occupied prevent such imposition, the party accused may yet evade its grasp. This was explained by Lord Cottenham in ex parte Pollard, when he outlined:
“[C]ontracts respecting lands in countries not within the jurisdiction of these courts…can only be enforced by proceedings in personam which courts of equity are constantly in the habit of doing; not thereby in any respect interfering with the lex loci res sitae.”
Equity will not suffer a wrong to be without a remedy (ubi jus ibi remediam)
Much like the founding principle of equity itself, there are times when common law can inadvertently create unjust reward for those who deserve no such fortune. And so it is that when defective legal rulings are left wanting, the maxim ‘no misdeed should go unpunished’ can be applied to restore equality, while in many respects mirroring the maxim ‘equity regards as done that which ought to be done’.
An example of this is Ashby v White, in which a member of the public community was denied the right to vote by local policemen, who wrongly acted on the damning advice of parish members, claiming he was unfit to cast opinion. When taken to court, the claimant was awarded damages, after which the ruling was later overturned in favour of the policemen.
This compelled the man to issue a writ of error against Parliament on grounds that such a verdict allowed any member of a local authority to choose who could vote, when such powers were conferred upon central government. When it was appreciated that a legal process had allowed this kind of miscarriage, the initial judgment was upheld and damages paid, while the court expressed that:
“[A]s all parliamentary causes are to be determined in parliament, it was conceived that this matter was properly determinable in the House of Commons only; and that the courts of Westminster-Hall not being authorized by any act of parliament, had no cognisance of it.”
He who seeks equity must do equity
‘Do unto others as you would have them do to you’, might be another phrase better known to some, and so again equity commands the same from those seeking remedy. It is after all, the bedrock of law that fairness and equability must at all times remain in view should the rule of law justify its own existence; so when one party brings action against another, it must act accordingly should it wish those accused to do the same. An excellent example of this is Chappell v Times Newspapers, where Megarry J explained:
“If the plaintiff asks for an injunction to restrain a breach of contract to which he is a party, and he is seeking to uphold that contract in all its parts, he is, in relation to that contract, ready to do equity. If on the other hand he seeks the injunction but in the same breath is constrained to say that he is ready and willing himself to commit grave breaches of the contract…then it seems to me that the plaintiff cannot very well contend that in relation to that contract he is ready to do equity.”
He who comes to equity must come with clean hands
Once again we look to integrity and depth of character when assessing claims of inequitable conduct, except those claiming must themselves prove their argument does not rest upon misdeeds of their own within the parameters of the matter. An example of this isHasham v Zenab or Barrett v Barrett, where two brothers worked together to avoid the loss of a property during business liquidation.
When the party losing their business asks the other to purchase the home (held by the assigned trustee) before refurbishing it and selling it for a substantial profit, the buyer later refuses to pass the sale proceeds back to his sibling. The brother retaliates by taking action against him, but unfortunately during the hearing it emerges that the former owner acted in collusion so as to avoid surrendering the property as payment to his creditors, therefore his request for equitable remedy was built upon deception and avoidance of duties owed. This lapse of moral fibre was explained by Richards J, who noted:
“He has in effect pleaded the unlawful purpose in paragraph 15(1)(a) of his particulars of claim : the purpose of purchasing the property in the name of John was “to avoid its being repossessed by the Trustee in Bankruptcy”. Without that purpose, the agreement or arrangement has no rational explanation. Thomas needs to allege and prove it in order to establish the agreement, but in doing so he relies on his own illegal purpose and thereby renders his interest unenforceable.”
Delay defeats equity
Fettered through the confines of the Limitation Act 1980 and the estoppel doctrine of laches, this maxim underlines that when seeking legal remedy, it is imperative that the claimant moves to argue with haste, as the passage of time will ultimately work against any reasons to the contrary. That aside, there are particular beneficiary rights exempt from delay, and those include breach of fiduciary duty, undue influence or recession of contract; while s.36 of the 1980 Act refuses to prevent claims on grounds of acquiescence, as this in itself can stand as evidence of that restraint. An excellent case for the examination of this maxim is Erlanger v New Sombrero Phosphate Co, in which Lord Jackson cited the comments in Lindsay Petroleum Co v Hurd:
“The doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct done that which might fairly be regarded as equivalent to a waiver of it, or where, by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material. But in every case if an argument against relief which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances always important in such cases are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.”
Equity will not allow a trust to fail for want of a trustee
As clearly explained within the title, this maxim states that in the event that a trust has been constructed in the absence of a trustee, or that through time those appointed have since passed, the courts will take the necessary steps to ensure the trust is honoured, and a suitable trustee will stand in receipt. This power is conferred to the courts under the Trustee Act 1925 and requires no reliance upon common law to succeed.
Equality is equity (aequalitus est quasi equitas)
Often applied to manage the distribution of assets between beneficiaries, this maxim will allow the court to distribute equal shares between any number of parties where no prior agreement has been found. While used primarily with trusts, this is also found in divorce proceedings, where evidence aside, the husband and wife cannot fully establish the exact proportions of the monies remaining after the fact. An example of this is Burrough v Philcox where Lord Chancellor Cottenham remarked:
“I think myself justified in giving effect to the intention, which appears to me to be sufficiently apparent upon the will, of giving the property to the nephews and nieces, and their children, subject to the selection and distribution of the survivor of the son and daughter; and that they all constitute the class to take all the property as to which no such selection and distribution has been made.”
Equity will not assist a volunteer
In its most simplest of forms, this maxim provides that equity will not, by virtue of their proximity, assist a party indirectly involved in a matter of grant, whether by marriage or by trust (as is most often applied). In the latter instance, a lack of consideration for the benefits of such a trust automatically renders the claimant void of support when seeking remedy, and further renders them incapable of instructing a trustee to the same end. A volunteer can however, sue for breach of duty or agreement where they are so associated, and can attain that those in trust are there for the benefit of the volunteer and hold only for their needs (where applicable).
Equity will not perfect an imperfect gift
The willingness to give freely of something must extend beyond words and take effect through action, or equity cannot enforce the gesture within the courts. This would apply to anything under common law, but is typically found in property and trust matters where a party alleged to have been conferred that of a physical form are left wanting, and so in search of remedy through the principle above. An excellent case example for this denial is Curtis v Pulbrook, in which a company director made efforts to pass on a number of shares to his daughter while in the process of liquidation, but who did so without formalising the transfer within the requirements required under company law. In concluding the error, it was remarked by Justice Briggs that:
“…without his assistance in making available the duly completed stock transfer forms, neither his wife nor his daughter could perfect the intended gifts without further assistance from Mr. Pulbrook…it follows that there was not an effective gift of Mr Pulbrook’s beneficial interest either in the 14 or in the 300 shares which he attempted to give respectively to his daughter and to his wife so that, in the result, there is nothing to prevent the charging order being made final in relation to all of them.”