Michael Bryan

An Overview Of Equity

What is equity? The word ‘equity’ is one of the most ambiguous in the law. Its most obvious meaning is fairness and justice. Many would argue that equity is the overriding goal of all law. How could the law ever justify un fair or in equitable outcomes? But a moments thought will show that applying, without more, the criterion of ‘fairness’ to solve all legal problems is open to serious objections. Decisions will inevitably reflect the subjective beliefs and values of the adjudicator as to what is fair. In a pluralist democracy disputes about what is fair or equitable are settled by elected legislators, not by unelected judges, except where legislation has explicitly authorised judges to determine cases by reference to considerations of fairness. Judges do not assess what is equitable without reference to some standard or benchmark. Secondly, equity sometimes refers to the principles applied by judges where the law is deficient for some reason. Aristotle is the first recorded writer to define ‘equity’ in these terms. In Nicomachean Ethics , Aristotle contrasted law, which was said to be ‘universal’ in its application, with equity which was seen as ‘a correction of law where it was defective owing to its universality’. We might nowadays query the assumption that legal rules are invariably of universal application. Moreover, the preferable response in a democratic society to a legal rule that cannot do justice in an individual case is to invite the legislature to reform the law. But Aristotle anticipated the lawyers idea of equity in two respects. First, equity corrects, or supplements, the law but does not replace it. The fact that equity modifies the application of the law in specific instances does not impair the legitimacy of the law in those cases where there is no need of equity. Secondly, some equitable doctrines can be explained in terms of the dilemma of ‘universality’ in the law: a soundly based legal rule of general application can on occasions be exploited for improper purposes. For example, where the law requires some contracts to be in writing equity can modify the writing requirement where its application would cause injustice.

Equitable Proprietary Interests

Introduction We saw in Part B that equity developed an armoury of personal remedies, such as specific performance and injunctions, directed at the person of the defendant. Their principal function is to enforce personal rights, such as performance of a contract. However, over time equity proved willing to award personal relief almost routinely, not only against owners of property but also against third parties who had received the property. This regular award of equitable personal relief was eventually perceived as having created a proprietary interest in favour of the party entitled to the relief. For example, if A signs a contract to purchase land from B, but B refuses to complete the contract, equity will grant the remedy of specific performance against B, and B will have to transfer the land to A. This happened so routinely that eventually A was treated in equity as if he held a property interest in the land once the contract was signed. Similarly, the regular awards of personal relief against trustees in breach of trust eventually gave rise to a proprietary interest in the beneficiary. All equitable property rights are sourced in a personal obligation enforced in equity. The availability of an equitable remedy does not necessarily mean that the interest protected by the remedy constitutes property. For example, equity grants injunctions and other relief to prevent the unauthorised use of confidential information. But confidential information is not recognised as a species of equitable property. Information is only protected against misuse by parties who act in breach of an equitable obligation of confidence. A person who has confidential information has only a personal right to protection in equity. Equitable property, like common law property, must be of a kind that is recognised as property in law.

Equity and Trusts in Australia: Rescission, Rectification and Declarations

Introduction The word ‘rescission’ is ambiguous, and its various meanings must be carefully distinguished. Here, we will be discussing rescission in the sense of the process for setting aside a voidable contract and restoring the parties to their pre-contractual position. This is distinct from rescission (sometimes known as repudiation) for breach of contract, where the innocent party to a breach of contract exercises her right to terminate the contract and sue for damages and restitution of benefits conferred under the contract. The principal difference between rescission of a voidable contract and rescission for breach of a valid contract is that the former operates retrospectively, restoring both parties to their pre-contractual position, whereas rescission for breach operates prospectively, entitling both parties to enforce their accrued rights under the contract but removing any obligation to carry out the terms of the contract in the future. When can a voidable transaction be rescinded? A contract is voidable in equity for mistake, misrepresentation, duress, undue influence, unconscionable conduct, for breach of fiduciary obligation and under the rule in Yerkey v Jones. A voidable contract is valid until the plaintiff has elected to avoid it. It will then be set aside and both defendant and plaintiff must be restored to their pre-contractual position. Gifts may also be rescinded in equity on any of these grounds except under the rule in Yerkey v Jones, which only applies to contracts of guarantee. It is unclear, however, whether a donor has to elect to rescind a gift that is voidable due to one of these vitiating factors, or whether a constructive trust will be automatically imposed over the property as soon as it is received by the donee, so that no election to rescind has to be made. The aim of rescission Rescission is a restitutionary remedy; it restores both parties to the position in which they would have been if the contract had not been entered into or the gift not made. If P buys a defective car for

Equity and Trusts in Australia: Specific Performance, Injunctions and Equitable Damages

10 000 as a result of Ds misrepresentation as to the cars roadworthiness, P can rescind the contract. P is entitled to the return of her

Equity and Trusts in Australia: Breach of Confidence

10 000 (restitution) while D is entitled to the return of the car (counter-restitution).

Equity and Trusts in Australia: Certainty Requirements in The Law of Trusts

Introduction The title of this chapter may look like a grab bag of remedies, but this is not the case. Specific performance and injunctions are equitable remedies. The remedy of equitable damages is a creature of statute available either in lieu of or in addition to the equitable remedies of specific performance and injunction. Thus the three remedies are closely related. They will be discussed in turn. Specific performance An order of specific performance is an order directing a party to a contract to perform the contract according to its terms. The party will be directed to perform all his obligations under the contract. The remedy of specific performance illustrates the dualist nature of our legal system. It is only available in respect of the common law action of breach of contract. Specific performance exemplifies equity acting in its auxiliary jurisdiction. As the remedy is usually dealt with in contract law or remedies courses our coverage will be brief. General considerations There are two considerations generally relevant to an award of specific performance. These are: (a) fairness to both parties; and (b) the supervision requirement.

Equity and the Warped Moral Approach

Introduction The equitable obligation of confidence is used to protect information from unauthorised misuse or exploitation by others. The action now has two significant aspects; it is traditionally used to protect commercially valuable information such as trade secrets, and it is increasingly used to protect personally private information. Whether the same considerations apply to these two aspects of the action is an open question. Though the obligation of confidence is one of the oldest in equitable jurisdiction, in many ways it is also equitys newest area of interest, and has recently been called upon to protect interests previously thought to be ineffectively protected. The long hiatus between the action’s origins and its current development is partly due to the unusual position confidentiality has occupied. Whereas many equitable responsibilities, such as trust or fiduciary obligations, have no direct common law counterparts, confidentiality can be regulated by regimes other than equity. Up until the mid-twentieth century most cases concerning the equitable obligation of confidence also involved a breach of an obligation of confidence not sourced in equity. For this reason, the courts were not particularly rigorous in their discussions of the doctrine. In older cases it can be hard to discern whether courts are referring to an equitable obligation, a contractual obligation, or perhaps both. This is particularly noticeable in respect of remedies.

Equity and Trusts in Australia

Introduction All dispositions that are intended to transfer property, such as contracts, gifts, trusts and wills must be clearly defined if they are to be legally effective. In the event of a dispute a court may have to ascertain whether the property owner intended to dispose of her property and, if so, on what terms. In some cases the court may have to determine the identity, or identities, of the recipients of the property, or the quantum of property transferred. A recipient of property will need to know if the transfer constitutes a gift, a loan or a trust. All trusts, whether or not they also have to satisfy writing requirements, must be sufficiently certain in order to be enforceable. The certainty requirements for trusts are more demanding than for contracts because trusts can affect the rights of parties who did not agree to, or participate in, its creation. These parties may include the beneficiaries and third parties who do business with the trustee. An express trust must be certain in three distinct respects, sometimes called the ‘three certainties’. They are: (a) Certainty of intention. The settlor must have intended to create a trust of her property, as opposed to making a gift of it or lending it to another. (b) Certainty of subject-matter. The subject-matter of the trust must be specified with reasonable certainty. (c) Certainty of objects. The beneficiaries of the trust must be sufficiently identifiable. Charitable trusts are not required to satisfy the requirement of certainty of objects. They are discussed in chapter 17. Resulting and constructive trusts, which are not created by a settlor but are judicially imposed, will not satisfy the requirement of certainty of intention although the other two certainty requirements are still applicable to them. The certainty requirements are related to each other in the sense that failure to satisfy one of the certainties may cast doubt on whether one of the other requirements has been met. For example, if the subject-matter of a trust is uncertain it may well also be the case that the settlor did not truly intend to make the recipient of her property a trustee. Certainty of intention The settlor must have intended to create a trust of her property, as opposed to making a gift or a loan.

Breach of Confidence: Social Origins and Modern Developments

FRAUD IS, among other things, a social activity, and most fraudsters succeed in implicating other parties in their schemes. The parties will vary in their degree of complicity. Some will be willing participants, others will be innocent agents, while still others will have been suspicious but will have reconciled their involvement in the fraud with their own personal or business values. The imposition of civil liability on participants in fraudulent transactions depends on the formulation of sensitive rules which discriminate between these different degrees of involvement. Under English law participants who do not beneficially receive the proceeds of the fraud are liable to compensate1 its victims under what is sometimes termed the “second limb” of Barnes v Addy,2 which imposes an obligation on a dishonest participant in a breach of fiduciary obligation to pay equitable compensation to the principal to whom the fiduciary duty was owed.3 Although assistance in a breach of fiduciary obligation became a recognised head of equitable relief in the nineteenth century it was only in 1995, as a result of the Privy Council decision in Royal Brunei Airlines Sdn Bhd v Tan,4 that liability was premised on the dishonesty of the participant. Prior to that decision a participant had to have “knowingly” assisted in a breach of fiduciary duty. The authorities on the meaning of “knowledge” were unsatisfactory not so much because they were inconsistent (which they were) but because they adopted a typology of knowledge of the fraud which did not reflect materially different degrees of reprehensibility.5 In short, they were not sufficiently discriminating. In the Royal Brunei decision Lord Nicholls, having surveyed the authorities as they then stood, concluded that “knowledge” should be replaced by “dishonesty” as the touchstone of equitable liability. In a much-cited passage he insisted that dishonesty, although carrying subjective connotations, was an objective concept:6