Materials and Lecture Outlines
Materials and Lecture Outlines
Materials and Lecture Outlines
Outlines 2020-21
Seminar 1:
SEMINAR MATERIALS
(Week 4)
Textbook Reading:
Pearce & Barr, Pearce & Stevens’ Trusts and Equitable Obligations (Oxford, 7th edn, 2018) ch
1(1)-1(3) and 1(7)-1 (8)
Textbook Reading:
Pearce & Barr, Pearce & Stevens’ Trusts and Equitable Obligations (Oxford, 7th edn, 2018)
chapters 1(4)-1(5) , 2&3
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Saunders v. Vautier (1841) 4 Beav 115, 49 ER 282
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC669
Jones v. Lock (1865) 1 Ch App 25.
Hayton, ‘Developing the Obligation Characteristics of the Trust’ (2001) 117 LQR 96
Textbook Reading:
Pearce & Barr, Pearce & Stevens’ Trusts and Equitable Obligations (Oxford, 7th edn, 2018 ch
1 (6) & chapters 33,34 & 35
Williams P (2017) ‘Keep open clauses in leases- an open and shut case!’ Landlord and
Tenant Review 21(2) 48.
Co-operative Insurance v. Argyll Stores (Holdings) Ltd [1998] A.C. 1
Jaggard v Sawyer [1995] 1 WLR 269
Anton Piller KG v Manufacturing Processes limited [1976] Ch 55
American Cyanamid Co v Ethicon Ltd [1975] AC 396.
Mareva Compania Navieria SA v International Bulkcarriers SA; The Mareva [1980] 1 All ER
213
Redland Bricks Ltd v Morris [1970] AC 652
(iii) Trusts may be express or implied, please explain the key differences between an
implied trust and an express trust.
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(iii) In what kind of situations may trusts be used?
(iv) What does the rule in Saunders v. Vautier (1841) 4 Beav 115, 49 ER 282, tell us about the
nature of ownership and the trust device?
3. Explain the difference between the following concepts, with reference to appropriate
authorities:
4. ‘From a wider perspective, it cannot be in the public interest for the courts to require
someone to carry on a business at a loss if there is any plausible alternative by which the
other party can be given compensation. [It] yokes the parties together in a continuing hostile
relationship. The order for specific performance prolongs the battle...An award of damages,
on the other hand, brings the litigation to an end.’
(Co-operative Insurance Society v. Argyll Stores (Holdings) Ltd [1997] 2 WLR 898 per Lord
Hoffmann)
Critically analyse the law relating to specific performance in the light of the above
statement.
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Seminar 1:
LECTURE OUTLINE
I.THE HISTORY & DEVELOPMENT OF EQUITY
The Specific Legal Meaning of Equity: The Distinction between Common Law and
Equity
• A body of law consisting of the rights and remedies that have evolved historically through
the Courts of Chancery in order to mitigate the flaws and unyielding nature of the common
law.
‘Equity is...a body of rules or principles which form an appendage to the general rules of law,
or a gloss upon them.’
‘The function of the common law is to establish rules to govern the generality of cases; the
effect of these rules being to recognise that certain persons will acquire certain rights and
powers in certain circumstances. Legal rules allow the holders of legal rights and powers to
exercise them in the confidence that they are entitled to them. The function of equity is to
restrain or restrict the exercise of legal rights and powers in particular cases whenever it
would be unconscionable for them to be exercised to the full.’
‘. . . [M]en’s actions are so diverse and infinite that it is impossible to make any general law
which may aptly meet with every particular and not fail in some circumstances. The office of
the Chancellor is to correct men’s consciences for frauds, breaches of trust, wrongs and
oppression of what nature so ever they be, and to soften and mollify the extremity of the law.’
The Judicature Acts 1873-1875: (Administrative) Fusion of Equity and Common Law?
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‘I cannot agree that the doctrines of this court are to be changed with every succeeding judge.
Nothing would inflict on me greater pain...than the recollection that I had done anything to
justify the reproach that the equity of this court varies like the Chancellor’s foot.’
The Earl of Oxford’s Case (1615) 1 Ch Rep 1
Marquis of Waterford v. Knight (1844) 11 C.P. & Fin. 653
Re Vandervell’s Trust No.2 [1974] Ch. 269 per Lord Denning M.R.:
‘Even a court of equity would not allow him to do anything so inequitable and unjust.’
‘Subject to the provisions of this or any other Act...wherever there is any conflict or variance
between the rules of equity and the rules of the common law with reference to the same
matter, the rules of equity shall prevail.’
Lord Napier and Ettrick v. Hunter [1993] W.L.R. 42 at 59 per Lord Goff:
‘No doubt our task nowadays is to see the two strands of authority, at law and in equity,
moulded into one coherent whole.’
Equity Comprises …
1. Equitable Rights:
By equity
Informality
Binds the whole world except the Bona Fide Purchaser for Value Without Notice
The doctrine of notice
‘The doctrine of notice lies at the heart of equity. Given that there are two innocent parties,
each enjoying rights, the earlier right prevails against the later right if the enquirer of the later
right knows of the earlier right (actual notice) or would have discovered it had he taken proper
steps (constructive notice). In particular, if the party asserting that he takes free of the earlier
rights of another knows of certain facts which put him on enquiry as to the possible existence
of the rights of that other and he fails to make such enquiry or take such other steps as are
reasonable to verify whether such earlier right does or does not exist, he will have
constructive notice of the earlier right and take subject to it.’ (per Lord Browne Wilkinson)
Types of Notice
i. Actual Notice
ii. Constructive Notice
iii. Imputed Notice (Actual or Constructive)
Bona Fide Purchaser For Value Without Notice Takes Free: Equity’s Darling
i. Bona Fides
ii. Purchase for Value
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iii. Of the Legal Title
iv. Without Notice
3. Equitable Maxims:
• ‘Equity will not suffer a wrong without a remedy’; fundamental. If common law and statute do
not provide a remedy equity intervenes
• ‘He who comes to equity must come with clean hands’; A claimant may not seek an
equitable remedy if they have failed to acted equitably themselves.
• ‘Equity follows the law (but not slavishly or always)’; equity mitigates the rigours of the CL
but equity will be bound to follow statutes in all circumstances, it only goes against CL if the
outcome would have been UNCONSCIONABLE
• ‘Equity looks to the intent rather than the form’; Courts look to the substance of a transaction
rather than just its superficial appearance
• ‘Equity looks on as done that which ought to have been done’; equity considers that
something has been done if it ought to have been done- see Walsh v Lonsdale (1882) 21 Ch
D9
• ‘Equity will not permit statute or common law to be used as an engine of fraud’; explains the
general relationship between common law equity and statute (Rochefoucauld v Boustead
[1897] 1 Ch 196)
• ‘Equity will not assist a volunteer’; equity will not assist a claimant who has given no
consideration (Jones v. Lock (1865) 1 Ch App 25)
The ‘use’
• The ‘use’ was the progenitor of what we now know as a ‘trust’. Uses can be traced back to
the 7th/8th Century
• When people went on crusades or pilgrimages it was important that their land was looked
after – whoever did this would need the same power and rights over that land as the legal
owner
• In such cases if the trustee breached his duties beneficiaries had no legal rights but could
petition the king – in such cases the kings order only operated ‘in personam’ ( i.e. against the
personal conscience of the trustee or a third party) at this stage beneficiaries had no
proprietary right in trust assets
• ‘To A & B to the use of C’
• They allowed people to avoid paying feudal fines to the king (early tax evasion!)
• It made land ownership more complex -‘No man can know his title to any land with certainty’
• In response to these problems Henry VIII enacted the Statute of Uses (1536). Implications of
this statute: that legal title was transferred to the beneficiary in the use- thereby bringing the
use to an end. ( Mostly affected uses over land)
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• Draftsmen found a way to avoid the statute – the use upon a use i.e. to A to the use of B to
the use of C’.
• By end of 17th Century the use had become a trust. This simplified approach was confirmed
by the Tenures Abolition Act (1660) which removed feudal tax, so removed the need for the
earlier ‘Statute of Uses’
• This meant that (as is the case today) a beneficiary's interest can only be defeated by the
Bona Fide Purchaser for Value without Notice.
Trusts Today
‘A trust is a form of property ownership in which the benefit of property is separated from the
title to the property, either partly or entirely. It is a form of property ownership in which equity
interferes to protect the rights of people who are not the legal owners of property.’
Penner, The Idea of Property In Law (Oxford: Clarendon Press, 1997) at 128:
‘The trustee is not a person with whom [the beneficiaries] have any personal relationship of
any substance – he is a personification of the trust agreement, and it is that which really
settles how the gift is to work. He is a human instrument.’
Express trusts; Trusts which have been intentionally created by the settlor declaring himself
as trustee or transferring property to a trustee.
Implied Trusts
Implied trusts are trusts which arise through implication/ legal doctrine
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Types of implied trusts;
(1) Resulting trusts: arises when an express trust fails or where there is ‘presumed’
intention (Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC669).
*Westdeutsche Landesbank v. Islington [1996] A.C. 669 per Lord Browne-Wilkinson:
‘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 (express or implied trust) or which the law imposes on him by
reason of his unconscionable conduct (constructive trust).’
(2) Constructive trusts: Arise when equity presumes that, due to their unconscionable
behaviour, the legal owner holds the trust property on trust for someone else. Also used in the
context of the family home to give effect to the parties’ ‘common intention’.
‘Before a right or an interest can be admitted into the category of property, or of a right
affecting property, it must be definable, identifiable by third parties, capable in its nature of
assumption by third parties, and have some degree of permanence or stability.’ (at 1248 per
Lord Wilberforce)
When looking at trusts determine, does the trust concern real or personal property?
• Tangible: the subject matter has physical existence for example a piece of land , which you
can touch
• Intangible: something that cannot be touched i.e. a debt
• Relates to any situation in which the co-owners are not married or in which a secured
creditor is proceeding against a married couple.
• An overlap with Family Law provisions for e.g. the Family Law Act (1996)
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B. Creating Charities and Clubs
• Trusts can be used to facilitate commercial transactions (see Re Kayford Ltd [1975] 1 all
ER 604, Re Farepak [2009] EWHC 2580 (Ch) )
• Can have trustees in a commercial context – particularly regarding large scale multinational
trade contracts.
Personal remedy
Reactive not proactive
Loss must flow from breach - Target Holdings Ltd v Redferns (a firm) [1996] AC 421
‘The trustee is liable to place the trust estate in the same position it would have been in if no
breach of trust had taken place.’ Re Dawson [1966] 2 NSWR Street J
Personal remedy
Unauthorised profits must be disgorged
Very strict rule- Boardman v Phipps [1967] 2 AC 46
‘There are powerful policy reasons for ensuring that a fiduciary does not retain gains
acquired in violation of fiduciary duty , and I do not consider that it should make any difference
whether the fiduciary is insolvent. There is no injustice to their creditors in their not sharing in
an asset for which the fiduciary has not given value, and which the fiduciary should not have
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had’. Per Lawrence Collins J in Daraydan Holdings Ltd v Solland International Ltd [2004]
EWHC 622 at para 86
Unauthorised profits and their traceable proceeds will be held on constructive trust for the
fiduciary’s principal - FHR European ventures LLP v Cedar Capital Partners LLC [2014] UKSC
45
It is therefore suited to contexts where a ‘one off’ action is required rather than long term
actions.
Subject of a contract for sale must be unique (land, chattels, private shareholdings) –
Contracts for the sale of chattels (personal property) - S.52 of the Sales of Good Act (1979)
Falke v Gray (1859) 4 Drew 651, Behnke v Bede Shipping Company [1927] 1 KB 649,
Adderley v Dixon (1824) 1 Sim & St 607
Land is generally viewed as unique- Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC
444.
Law of Property (Miscellaneous Provisions) Act 1989 s.2
Shareholdings: Duncuft v Albrecht (1841) 12 Sim 189, Oughtred v IRC [1960] AC206,
Neville v Wilson [1997] Ch 144
Where quantification of damages is difficult or damages are nominal- Beswick v Bewswick
(1968) AC 58.
Specific performance is not suited to employment contracts/ contracts for personal services
or to compel a business to continue to trade
Human rights implications – slavery? De Francesco v Barnum [1886-90] All ER Rep 414 at
418
Trade Union and Labour Relations (Consolidation) Act 1992 forbids any order which would
‘compel any employee to do any work or attend any place for the doing of any work’.
Contrary to the rule against constant supervision – CH Giles & Co Ltd v Morris [1972] 1 WLR
307
Relationship between employer and employee has broken down (See Geys v Société
Générale [2012] UKSC 63; [2013] 1 A.C. 523. Ashworth v Royal National Theatre [2014]
EWHC 1176 (QB).-
Specific performance will not be granted to compel a business continue trading- Cooperative
Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1.
A defendant may seek to refute a claim for specific performance on one of the following
grounds.
1. The contract did not adhere to the necessary formalities (for e.g. contracts for the
sale of land)
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2. Misrepresentation or undue influence exercised by the claimant (Walker v Boyle
[1982] 1 WLR 495)
3. Where the defendant made a mistake – Webster v Cecil (1861) 30 Beav 62.
4. Hardship – Patel v Ali [1984] Ch 283.
5. Misdescription of property - Flight v Booth (1834) 1 Bing NC 370; Charles Hunt Ltd v
Palmer [1931] 2 Ch 287
6. If the claim is unduly delayed – Huxham v Llewellyn (1873) 21 WR570 cf Williams v
Greatrex [1957] 1 WLR 31
Remedy 5- Injunctions
May be used to compel a defendant to act in a certain way i.e. to enforce the terms of a
contract (mandatory injunctions)
If a claim is not successful, Senior Courts Act 1981 s.50 allows for the payment of damages in
lieu of an injunction in exceptional circumstances
Temporary- typically granted throughout litigation to end on the date the of the final
judgement.
Guidance for when they should be granted comes from American Cyanamid Co v Ethicon Ltd
[1975] AC 396.
1. There has to be a serious issue to be tried
2. The balance of convenience test
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3. There has to be a real prospect of a trial
4. (as with permanent injunctions, damages must be deemed insufficient)
Mandatory injunctions
Compel a defendant to behave in a particular way - Shepherd Homes Ltd v Sandham [1971]
Ch 340
In Redland bricks v Morris [1970] AC 652 Lord Upjohn identified 3 aspects that the court
should consider when deciding whether to grant a mandatory injunction:
1. The claimant must show that there is a very strong possibility that they will incur
grave damages if the mandatory injunction is not granted.
2. Secondly, the court should also consider the cost to the defendant of taking action
both immediately and in the future. Wrothman Park Estate Co Ltd v Parkside Homes Ltd
[1974] 1 WLR 798;
3. If a mandatory injunction is to be granted the course of action needs to be very clear
i.e. it must be possible for the defendant to know precisely what they need to do to comply
with the injunction.
Prohibitive injunctions
Prohibitive injunctions are used to stop a defendant from engaging in certain behaviours
Lend themselves to cases regarding nuisance (Lawrence v Fen Tigers Ltd [2014] UKSC 13),
trespass (Patel v WH Smith (Eziot) Ltd [1987] 2 All ER 569), to prevent breach of contract
(Doherty v Allman (1878) 3 App Cas 709) or the release/ publication of confidential info etc.
Are proactive – deal with situations where a claimant fears an infringement of his rights but
this has not yet taken place - Secretary of State for the Environment, Food and Rural Affairs v
Meier [2009] 1 WLR 2780
-Generally to be applied in 2 circumstances as per Lord Upjohn, Redland Bricks v Morris
[1970] AC 652
1. When the defendant is threatening to, and intends to act in a way which will harm the
claimant
2. When the claimant has already been compensated for previous actions of the defendant
however there is the potential for the defendant to act in a similar way in the future.
Search Orders
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In this case Ormrod LJ made it clear that a search order should only be granted where:
1. There is an extremely strong prima facie case.
2. The actual or potential damage must have serious implications for the claimant.
3. There must be clear evidence that the defendant has incriminating documents which
there is a real possibility of them destroying.
These principles of the above case are now codified under s7 of the Civil Procedure Act 1997
supplemented by Civil Procedure Rules r. 25. 1 (i)
Freezing Orders:
Formerly known as ‘Mareva’ injunctions due to the key authority Marerva Compania Navieria
SA v International Bulkcarriers SA; The Marerva [1980] 1 All ER 213
Senior Courts Act 1981 s.37 (3) and Rule 25(1) (f) of the Civil Procedures Rules 1998 states
that a freezing order can:
a) Restrain a party from moving their assets outside of the jurisdiction.
b) Restrain a party’s dealing with their assets within the jurisdiction.
c)
As confirmed in Derby & Co. Ltd v Weldon (Nos 3 and 4) these orders can apply worldwide.
Guidance on when a court should grant a worldwide freezing order comes from the Court of
Appeal judgement in Dadourian Group International Inc v Simms [2006] 1 WLR 2499.
A freezing order may also affect third parties such as banks if they are aware of a freezing
order and knowingly assist or permit a breach of the order -Customs and Excise
Commissioners’ v Barclays Bank Plc [2006] UKHL 28
Remedy 6- Rectification
Criteria for rectification of a mutual mistake- Lord Justice Etherton in Daventry District
Council v Daventry and District Housing Ltd [2011] EWCA Civ 1153
1. Parties had a continuing common intention
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2. this common intention existed at the time of the execution of the document in
question
3. The common intention fits with what an objective observer aware of all the facts
would have thought the intentions of the parties to be
4. Due to mistake the instrument/ document does not reflect the parties’ common
intention.
Criteria for rectification of a unilateral mistake (in Thomas Bates & Son Ltd Windham’s
(Lingerie) Ltd [1981] 1 WLR 505. George Wimpey UK Ltd v VI construction Ltd [2005] EWCA
Civ 7)
1. The claimant must either erroneously believe that the document contained a
provision that it does not or believes that it did not contain a provision which it indeed does
contain.
2. The defendant , party B was aware of this omission or inclusion and is aware of A’s
mistake concerning it (includes wilful blindness as in Commission for the New Towns v
Cooper (GB) Ltd [1995] Ch 259
3. B failed to draw A’s attention to the mistake
4. The mistake was to B’s benefit
5. If these conditions are satisfied it would be unconscionable to allow the agreement
to continue unrectified
Remedy 7- Rescission
1. Mistake - Johnson v Agnew [1980] AC367; Pitt v Holt [2013] UKSC 26; Great Peace
Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679; Futter v Revenue
Commissioners [2013] UKSC 26
2. Misrepresentation- s.2(2) of the Misrepresentation Act 1967
3. Undue Influence- actual , presumed (Simpson v Simpson [1992] 1 FLR 601;
Mahoney v Purnell [1996] 3 All ER 61) and from a 3rd party (Royal Bank of Scotland v Etridge
( no.2) [2001] 4 All ER 449, Consumer Credit Act 2006).
Contracts made in the course of a breach of fiduciary duty will also be liable to rescission i.e.
the self-dealing rule- Tito v Waddell ( No.2) [1977] Ch 106
Bars to Rescission:
1. It has to be practically possible- Cheese v Thomas [1994] 1 All ER 35
2. Cannot rescind a contract if the claimant has affirmed it- Long v Lloyd [1958] 2 All ER
402.
3. Third parties have acquired rights – Bona fide purchase for value without notice
(BFPFVWN aka equity’s darling’)
4. Delay (laches)- Leaf v International Galleries [1950] 2 KB 86
Remedy 8- Subrogation
Subrogation is where the rights of the claimant are transferred onto a third party.
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For example an insurer
Rare
See for example Boscawen v Bajwa [1996] 1 WLR 328
Remedy 9- Account
The remedy of account relates to when a party has obtained a benefit which they are not
entitled to – for example fiduciary breach
Also applies where expense may have been incurred by a party but another party should
account for it.
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