The Content of Equity

   
Causes of Action (Offences)
Breach of Trust: This might occur where a trustee made off with trust property. The common law court would never deal with it.

Breach of Fiduciary Duty: A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. Absolute loyalty is expected from the fiduciary.

Breach of Confidence: In Seager v Copydex Lord Denning MR established the principle that even if you do not have a confidentiality agreement in place, under equity a person who has received information in confidence cannot take unfair advantage of it. That person must not make use of it to the prejudice of the person who gave it without obtaining his consent

Estates
A legal owner holds the legal estate. An equitable estate is one where the legal owner holds that legal estate on behalf of a beneficiary. This is also called an equitable interest.

An equitable estate can be sold, leased, assigned, or mortgaged. However, it is not valid against the “Chancellor’s Darling”, the bona fide purchaser for value without notice.

Also, only a legal owner can sue for conversion.
[Conversion is a common law tort. A conversion is a voluntary act by one person inconsistent with the ownership rights of another. It is a tort of strict liability. Its criminal counterpart is theft. An example is where a person puts his property in storage and the owner of the storage facility sells it. Traditionally, a conversion occurs when some chattel is lost, then found by another who appropriates it to his own use without legal authority to do so. All theft is conversion, but not all conversions are thefts because conversion requires no element of dishonesty.]

Rules
There were cases where the common law court would treat a situation one way, or find absolute liability, while the chancery would apply a different set of rules or with discretion. The Supreme Court of Judicature Acts, 1873 and 1875 mentioned nine specific instances where the Equity rules would be used, and then gave a general catchall phrase that in any case of conflict, the rules of Equity would prevail. The following examples come from the Act itself or from case law. They are examples only. In writing your essays, you do not need to spend excessive time describing the principles or cases.

Wardship and education of children: The Court of Chancery had jurisdiction over minors which stemmed from the prerogative of the Crown as parens patriae, the exercise of which was delegated to the Chancellor. Usually this related to property disputes and the minor’s entitlement to property. The Judicature Act gave the general Court the power to have a minor be made a ward of the Court.

Time stipulations in contracts: In the common law, time is important in every contract. Should a party fail to perform his contractual obligations by a certain time, he was in breach. Equity was more indulgent. The deadline was usually not considered essential unless the contract specifically stated that time was of the essence. Therefore, specific performance might be granted even though a deadline had been missed.

Liability of Personal Representatives: A personal representative is the executor (appointed by the Will) or administrator (appointed by the Court) of the estate of a deceased person. Suppose an executor puts the estate money into the bank, and the bank crashes. In the common law, he would be strictly liable to pay back the money. In equity, the Chancery would consider all the circumstances of the case, and would only hold him liable if there had been wilful default.

Power of the mortgagor to sue a tenant: In the common law, a mortgagor who wanted to eject a tenant had to join the mortgagee (the bank) as a plaintiff in the suit. In equity, the mortgagor could simply sue the tenant on his own.

Treatment of leases not under seal: Consider a regular lease for a year. After a year, the parties usually go “month-to-month”, establishing a periodic tenancy where the rent is paid every month and either party only needs to give one month’s notice to quit.

Where a contract is for more than a year, it must be sealed (stamped with a special stamp) and registered in the Registry. (In England and Trinidad, this is necessary for contracts over three years.)

Where two parties created a written long lease but failed to comply with the necessary formalities, law and equity treated the lease in two ways.

In law, the Court considered that the lease was a periodic tenancy only. The period was taken as the period in which the tenant paid rent. So a tenant who paid monthly on a seven year unregistered lease was considered to be a monthly tenant. His lease could be terminated at a month’s notice by either party.

In equity, the Chancery considered that the full long lease existed. So a tenant who paid monthly on a seven year unregistered lease had an equitable seven year lease. The terms of the lease were according to the written agreement. However, it is important to note that this was an equitable lease only, i.e., an equitable estate. It could be defeated by the Chancellor’s darling. The Court found that the tenant had this type of lease in Walsh v Lonsdale.

Remedies
Specific Performance: Specific performance is an order of a court which requires a party to perform a specific act, usually what is stated in a contract. It is an alternative to awarding damages, and is classed as an equitable remedy

Injunction: An injunction is an equitable remedy in the form of a court order that requires a party to do, or to refrain from doing, certain acts

Recission: In contract law, rescission has been defined as the unmaking of a contract between parties. Rescission is the unwinding of a transaction. This is done to bring the parties, as far as possible, back to the position in which they were before they entered into a contract (the status quo ante).

Tracing: Tracing is a legal process, not a remedy, by which a claimant demonstrates what has happened to his/her property, identifies its proceeds and those persons who have handled or received them, and asks the court to award a proprietary claim against the property, or an asset substituted for the original property or its proceeds. Tracing allows transmission of legal claims from the original assets to either the proceeds of sale of the assets or new substituted assets.

Tracing ordinarily facilitates an equitable remedy, and is subject to the usual limitations and bars on equitable remedies in common law countries. In many common law countries, there are two concurrent processes, tracing at common law and tracing in equity. However, because the right to trace at common law is so circumscribed,[1] the equitable process is almost universally relied upon, as equitable tracing can be performed into a mixed fund.

Equitable Damages and Equitable Accounting: we will study these in the next section of the syllabus

Practice
After the case has been determined, the next important thing is the lawyer’s fee! J This is called “Costs”. Often the loser has to pay his own costs as well as the winner’s. Sometimes each party has to pay its own costs.

In Newbiggen-by-the-sea, a company had a split in management with two boards of directors being appointed. Each board purported to represent the company. Let us call them BF (false board) and BT (true board). BF instructed the company’s lawyer to sue a defendant D. He did so. Then BT sued BF for having illegally brought an action in the company’s name. The Court agreed with BT.

In the Chancery, notwithstanding the victory, BT would have had to pay D’s costs in the original suit. They would then have had to try to recover these costs from BF. In the Common Law Courts, however, BF was liable for D’s costs and for BT’s.

Jessel MR said that this was nothing to do with the rules of equity but was simply a matter of practice. He therefore decided that the common law practice could apply in determining costs.

So has there been fusion?
Even today, 135 years after the Judicature Act, law is still law, and equity is still equity. Where a plaintiff goes to Court and sues for trespass or breach of contract or fraud, he invokes the common law jurisdiction. The Court does not consider his clean hands, etc. However, where he sues for breach of trust, breach of confidence, etc, he invokes the equitable jurisdiction of the Court. In some difficult cases, the judges even remark “This is what Lord Eldon would have said”, just as though the plaintiff had actually gone before the Chancery.

However some have argued that the Act was designed to “fuse” the jurisdictions creating a new hybrid. Examples can be seen where the Court treats parties the same whether they have brought an equitable or common law action. In most of the cases, this means that the Court applied a common law principle to an equitable action. Here are some examples.

Seager v Copydex
The plaintiff pitched an idea to a company for his new invention. The company declined to enter an arrangement with him. Not long after, he saw his product on the shelves – the company had stolen the idea. He could not sue them in contract because there had not been a contract between them. He could not sue for breach of patent since he had not had a patent. He brought a suit for breach of confidence. This was an equitable cause of action. However, the Court decided to award him common law damages. They decided to award the “best” remedy without restricting themselves to equitable remedies only.

Coulthard v Disco Mix Club
Mr. Coulthard was a deejay who specialized in mixing medleys. Mr. Prince, the owner of the Disco Mix Club, was the distributor of his music who sold it to the radio stations. They had a business relationship for about ten or fifteen years and then fell out. Ten years later, Mr. Coulthard decided to sue Mr. Prince. He sued him up and he sued him down. He sued him for this and he sued him for that. There were 70 pages of claims against Mr. Prince.

The Judge sat down with the claims and struck out most of them because they were out of time.

[Recall that the Limitation Act prevents persons from bringing stale actions. You cannot sue someone for having run into your car 20 years ago. In this case, Mr. Coulthard should have sued within 6 years of the various incidents.]

There was one incident, however, which Mr. Coulthard said could be described either as an action for fraud in common law, or an action for breach of fiduciary duty, which was an equitable action. The Court realized that the common law action would have been time-barred but the equitable action would not have been. The Court decided to apply the Limitation Act to both, treating law and equity the same way.

Tinsley v Milligan
We introduce this case by introducing some principles and ideas.

1.    The doctrine of advancement:
Where a person puts property in the name of his wife or child, the Court presumes that he intended to give them a gift. The legal owner (the wife or child) therefore is presumed to own the property outright. The donor (father/husband) must convince the Court that he did not mean it to be a gift, but that the legal owner holds the property in trust.

2.    Automatic resulting trust:
Where a person puts property in the name of someone who is not his wife or child, the Court presumes that the recipient holds it in trust for the donor. This is a resulting trust. The recipient then must convince the Court that they actually own the property outright.

3.    Reliance on illegality:
This occurs where the Plaintiff can only prove his title by introducing his fraudulent or illegal act. For example,  in Tribe v Tribe, a father put some shares in his son’s name. He did this to defraud some creditors. When he tried to recover the shares, however, the son refused to give him. He therefore asked the Court for a declaration that the son held the shares in trust for him.

Picture the father in Court, head bowed in shame like a schoolboy. “Well, you see, ah, My Lord, the truth is that I was trying to defraud some creditors. I never meant it to be a gift.” In order to prove his equitable title, he had to bring up the issue of the illegality.

[In the end, he settled with the creditors (so he never actually completed the fraud). The Court decided this was sufficient to allow him to recover.]

4.    The rule in Bowmakers:
In this case, the Court decided that a plaintiff would be allowed to assert his title if he did not have to rely on his own illegality to do so. Under WWII regulations, it was illegal to trade with the Germans. The company, Bowmakers, had done so, but had completed the transaction and had valid receipts for some machinery. They were trying to recover this machinery from the defendant. The plaintiff, to prove title, simply put their receipts before the court. It was not necessary for them to mention the illegal transaction. It was the defendant who tried to “carry tales”. (“But My Lord, he did something illegal, nah-nah-nah-nah-nah.”) The Court decided that it simply did not matter in this case. Note that Bowmakers had a legal title.

So what happened in Tinsley?
Two women entered into business together and used the proceeds to purchase property. They put the property in the name of one (Tinsley) because the other (Milligan) wanted to defraud the welfare department by pretending not to own any property. Some time later, the partners fell out. Milligan asked the Court to find that Tinsley held the property for her in trust. In other words, she was attempting to establish an equitable title by way of a resulting trust. She was able to show that she had contributed half the purchase price of the property. Tinsley tried of course to bring up the illegality (“But My Lord, she did something fraudulent! Nah-nah-nah”). The Court said that because Milligan did not have to rely on the illegality, she could keep the title.

This case is an example of fusion because the Court decided that a single rule could be applied in the situation whether the title was legal or equitable.

It is also an example of the limits of the maxim of “he who comes to equity must come with clean hands”.