Equity and Law of Trusts

LLB 0421-2103

Arif Ahmed
LL.B. (Hon’s), LL.M. (1st Class), University of Dhaka
Associate Professor of Law, Notre Dame University Bangladesh
(NDUB)
Advocate, Supreme Court of Bangladesh
 Equity: Definition
• Equity was derived from the Roman term “aequitas” which means
equalization or leveling down an arbitrary preferences or denial of
justice.
• The word “equity” means ‘fair’ or ‘just’ in its wider sense, but its
legal meaning is the rules developed to mitigate the strictness and
severity of the common law.
• Equity refers to the principles of fairness and justice. It is a branch
of law that supplements and overrides the strict rules of common
law to ensure justice and fairness are achieved in individual cases.
• It is a means to reach as near as possible to natural justice or ideal
justice, but one cannot forget that equity is not same as natural
justice; rather it differs from that.
• Equity also means the remedies and procedures that are available
in civil law when legal remedies are inadequate or inappropriate.2
 Equity: Definition
• Equity is no part of the law, but a moral virtue which qualifies,
moderates and reforms the rigor, hardness and edge of the law,
and is a universal truth; it does also assist the law where it is
defective and week.
• Equity also refers to the ownership rights or interests in a
corporation or a property.
• In the field of jurisprudence, equity is the particular body of law,
developed in the English Court of Chancery, with the object of
providing legal remedies for cases wherein the common law is
inflexible and cannot fairly resolve the disputed legal matter.
• Conceptually, equity was part of the historical origins of the system
of common law of England, yet is a field of law separate from
common law, because equity has its own unique rules and principles,
and was administered by the courts of equity.
• Equity exists in domestic law, both in civil law and in common
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law systems, and in international law as well.
 Equity: Definition
• Plato expressed that, “equity is a necessary element
supplementary to the imperfect generalization of legal rules”.
• Blackstone defines equity as the soul and spirit of all law. Positive
law is construed and natural law is made by it.
• According to Snell, “equity is a portion of natural justice which,
although of a nature suitable for judicial development, was for
historical reasons not enforced by the Common Law courts, an
omission which was supplied by the Court of Chancery”.
• Mainland defines, ‘’Equity now is that body of rules administered
by English Courts of justice which were if not for the operation of
the judicature Acts, would be administered only by those courts
which would be known as Courts of Equity.”

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 Equity in common law jurisdictions (general)
• In jurisdictions following the English common law system, equity is
the body of law which was developed in the English Court of
Chancery and which is now administered concurrently with
the common law.
• In common law jurisdictions, the word "equity" "is not a synonym
for 'general fairness' or 'natural justice'", but refers to "a
particular body of rules that originated in a special system of
courts".

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 Origin & Development of Equity in England
• Norman Conquest conquered England in 1066 and after that Anglo-
Saxon period began. Before 1066 there was no existence of Common
law in England.
• In the Anglo-Saxon times and in the early day of Norman Conquest,
justice was administered by the local courts, presided over by the
layman, who owing to their ignorance of legal principles, had to rely
on the precedents. They borrowed rules the Roman law to meet the
limitation from of the local law.
• The origin of equity in England goes back to 13th century when
Edward I was ruling the Country. The law enforced at that time was
Called "Common law" which was administered in three separate
Courts:
a) The King's Bench
b) The Count of Common pleas and
c) The Court of Exchequer 6
 Origin & Development of Equity in England
• The equity was developed from 13th to 19th century in
England and these period may be divided into:
1) Medieval period until 1672
2) The period of transformation beginning with the
chancellorship of Lord Nottingham in 1672 to 1925; and
3) The modern period since 1925

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 Origin & Development of Equity in England
• Now, what is Common Law?
• The Common law consisted of Customs & usages that had become
common to the whole of England.
• In course of times, there customs were recognized in law and
began to be administered at Royal Courts, known as the Common
Law Counts.
• During the time of Edward I, common law had taken a definite
shape and these Common law rules were administered these three
Courts which had grown up during the same period.
• However, Common law was the dominant legal system, but it
often lacked the flexibility to address certain types of disputes to
provide equitable remedies.

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 What is common law?
• Common law, the body of customary law, based on judicial
decisions and embodied in reports of decided cases, that has been
administered by the common-law courts of England since the
middle Ages.
• Common law is "the body of law derived from judicial decisions,
rather than from statutes or constitutions." Legal systems that
rely on common law as precedent are known as "common law
jurisdictions”. - Black's Law Dictionary
• Common law (also known as judicial precedent, judge-made law,
or case law) is the body of law primarily developed through
judicial decisions rather than statutes.
• Although common law may incorporate certain statutes, it is
largely based on precedents. The presiding judge determines
which precedents to apply in deciding each new case.
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 What is common law?
• Blackstone defines common law as the municipal law of England
or the rule of civil conduct prescribed to the inhabitants of the
United Kingdom. It is composed of established customs, rules and
maxims such as “the king can do no wrong”.
• Common law is deeply rooted in stare decisis (the legal principle of
determining points in litigation according to precedent), where
courts follow precedents established by previous decisions.
• However, in a "case of first impression" with no precedent or
clear legislative guidance, judges are empowered to resolve the
issue and establish new precedent.

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 What is common law?
• England was conquered by the Normans in the year 1066.
• The common law, so named because it was "common" to all the
king's courts across England, originated in the practices of the
courts of the English kings in the centuries following the Norman
Conquest in 1066.
• There was no common law for the whole of England at any time
before the Norman Conquest. It established a unified legal system,
gradually supplanting the local folk courts and manorial courts.
• England spread the English legal system across the British Empire,
first to Wales, and then to Ireland and overseas colonies; this was
continued by the later British Empire.
• Many former colonies retain the common law system today.

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 Courts of common law
• Equity came into existence during the 13th
century. At that time there were three courts of
common law:
 The King’s Bench
 The Court of Common pleas
 The Court of Exchequer

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 The defects/ deficiencies of the common law
• The common law courts used juries which could be intimidated
and corrupted.
• The common law had only one remedy, damages, which was often
inadequate.
• There was incomplete remedy and no remedy in many cases.
• The common law paid too much attention to formalities, e.g. if a
contract was made which required written evidence for its
enforcement, then lack of such evidence meant that the common
law courts would grant no remedy.
• The common law courts did not recognize the trust.
• Inadequate relief.
• Incomplete and defective procedures.
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 The defects/ deficiencies of the common law
• The equitable jurisdiction in England grew up because of the
deficiencies of the common law and the inadequacy of the remedies.
• The common law was deficient in the following three respects:
(i) Remedy was not available in many cases for want of proper writs,
(ii) The relief granted by the common law courts was not always
adequate. They gave relief only in damages for breach of a contract
but did not provide for specific performance.
(iii) The procedure in the common law courts was defective and
unsatisfactory; it was very cumbrous and formal.
• The inevitable result of the deficiencies in common law courts was
that persons who could not get relief in common law courts
presented their petitions to the King who forwarded these petitions
to the Chancellor.
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 Origin & Development of Equity in England
• Petitions to the king:
Consequently the litigants turned to the King as the ultimate source of
justice, seeking his intervention to deliver fairness and equity. Equity law
had been emerged in medieval England during the reign of King Richard
and King John in the late 12th and 13th centuries. The prerogatives to
grant relief outside the law was exercised by the King in Council and so
the people who could not get adequate relief owing to defects in
Common law began to refer their writs/petitions to the King. In the
beginning the King decided the cases with the help of his Council, but
afterwards when such petition began to grow it was not possible for the
King to come up with the work and the King referred the petitions to the
Chancellor. In the medieval period, the chancellor was the most
important and powerful personage in the country next to the king
himself. He had been described as the king’s prime minister, the king’s
secretary of state for all departments and the keeper of the kin’s
conscience. The Chancellor kept king’s seal and all the writings that were
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to be in the king’s name were done under his supervision.
 Origin & Development of Equity in England
Emergence of Chancery Court and growth of Chancellery jurisdiction
(14th Century):
The assignment of this task of disposing of petitions extended the
powers of the Chancellors. The Chancellor could now entertain new
writs and granted various reliefs and the simple procedure of his
court became very popular. Thus the Chancellors began to exercise
an independent and original jurisdiction as a court of equity in
concurrent to the common law. Chancellor decided the cases on the
basis of justice, equity and good conscience. During the 14th century,
equity law began to develop its own identity as a distinct legal system
in England with the emergence of the Chancery Court. The Chancery
Court was tasked with handling equitable matters and crafting
remedies based on the principles of fairness, justice and good
conscience, in contrast to the rigid rules of common law.
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 Origin & Development of Equity in England
• What are the equitable remedies and principles?
Law of equity introduced a range of in remedies that sought to provide
justice in cases where common law remedies were inadequate. The
remedies included - Specific performance of contract, injunctions,
and rescission (Cancellation of contracts) etc. Equity was guided by
the principles such as fairness, good faith and conscience.
• Expansion of equitable jurisdiction (15th Century):
Since the Chancellor was empowered in the reign of Edward II to grant
relief in extraordinary cases, he began to exercise his jurisdiction
strongly expanding the equitable jurisdiction to a large extent. In the
15th century chancellor became powerful and important next to the
king and people filed petitions to the chancellor directly instead of
the king. The Chancery Courts did not follow any certain law like the
Common Law Courts, but the Chancery Courts followed principles of
justice equity, fairness in administering justice. 17
 Origin & Development of Equity in England
• 16th century: In 16th century Chancery extended its jurisdiction and
began to deal with cases related to accident, fraud and breach of
confidence.
• 17th Century (Conflict between equity & common law): In this period
the Chancery had to struggle for is its existence against the Common law
Courts. As equity law gained prominence, tension and conflicts arose
between equity and common law systems during 16th - 17th centuries.
In the Earl of Oxford's Case when quarrel arose between the Chancellor
Ellesmere and Chief Justice Coke, the King James I finally decided the
case in favor of the Chancellor Ellesmere by injunction that the Chancery
could prevent people from going to the Common law counts.
Maitland observed, “from this time to onward the Chancery had the upper
hand though it did not claim to be superior to the Common law Court,
but it could prevent people from going to Common law Courts, whereas
Common law Courts could not prevent people from going to Chancery
court". 18
 Origin & Development of Equity in England
• 18th Century (Development of the maxims of equity):
During this period the principles of equity law became more
systematic. Equity now administered by the Chancery as
recognized part of the law and of the land. They formulated,
important principles of equity, which were basic principles that
guided equitable decisions. During this times the Chancellors were
Lord Eldon, Lord Hardwick and Lord Tolbot. In the last days of
Lord Eldon, equity was became as a well settled system of rules
like the Common law.
• 19th Century (fusion of law & equity):
The 19th century witnessed significant legal reforms aimed at
harmonizing the Common law and equity systems. The Judicature
Acts of 1873 and 1875 were enacted to merge the Common law
and equity courts in England and Wales into a Single Supreme
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Count of judicature.
 Origin & Development of Equity in England
• Thus the old courts of Chancery and Common law of were
abolished and one Supreme Court of Judicature was created,
where the same judges began to administer both the Common law
and equity, but in the event of conflict between the two, the rules
of equity prevailed.
• The merger marked the end of historical division between the
Common law and equity, ensuring that litigants could seek both
legal and equitable remedies together within the Same Count of
law.

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 Summery
• So, in a nutshell we can conclude by saying that ‘equity’ now is
that body of rules administered by the English Courts of Justice
which, before the operation of the Judicature Act, 1873, were
administered only by those courts which were known as the courts
of equity.
• We can further describe that –
i) Equity is founded on the principle of natural justice;
ii) It is the body of rules and principles which exist side by side the
original Civil Law or Common Law; and
iii) It does not supersede the existing law, but is a supplementary
addition of such law.

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 The Subject-Matters of Equity
The following matters are assigned to the Chancery Division by the Supreme
Court Act 1981:
* The sale, exchange or partition of land, or the raising of charges on land;
* The redemption or foreclosure of mortgages; The execution of trusts;
* The administration of the estates of deceased persons; Bankruptcy;
* The dissolution of partnerships or the taking of partnership or other
accounts;
* The rectification, setting aside or cancellation of deeds or other
instruments in writing;
* Probate business, other than non-contentious or common form business;
* Patents, trademarks, registered designs or copyright;
* The appointment of a guardian of a minor’s estate;
* All causes and matters involving the exercise of the High Court’s
jurisdiction under the enactments relating to companies.
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 Difference between equity and common law
• Common law evolved over time as judges made law. Common law
rules are very formal and rigid, whereas equitable
principles/maxims are more amenable to changes. The rigidities of
common law can only be addressed by making use of equitable
maxims, provided by the equity system, in certain cases.
• On the contrary, equity refers to a set of legal principles, in
jurisdictions following the English common law tradition, which
supplement strict rules of law where their application would
operate harshly.
• Where the law is found to be essentially correct but proving to be
too severe or unfair, the equity system serves to allow for a
different course of events in the legal world.
• Equity does not contradict the common law, but it aims at securing
substantial justice when the rule of common law might see
injustice. 23
 Difference between equity and common law
• The most significant distinction that exists between the two systems
is based on the remedies that each offers.
• In the common law, decisions are made by reference to existing legal
doctrines or statutes, whereas in the equity system, the emphasis is
laid on fairness and flexibility, which are known as the maxims of
equity. For instance, the most common remedy a court of law can
award is money in lieu of damages caused. Equity, on the other hand,
enters injunctions or decrees directing someone either to act or to
forbear from acting, which are in practical terms more valuable to a
complainant.
• Usually common law courts dealt with both civil and criminal
matters while the chancery court confined itself to civil matters
only.
• In common law courts the misconduct of the plaintiff did not
disentitle him to clain legal relief but in equity court plaintiff’s
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misconduct was taken as a ground for the refusal of equitable relief.
 Difference between equity and common law
Attribute Common Law Equity
Developed as a supplement to
Developed in England during
Origin Common Law to provide
the Middle Ages
fairness and justice

Legal System Part of the overall legal system Part of the overall legal system

Varied remedies including

Remedies Primarily monetary damages injunctions, specific
performance, and trusts

Precedent Relies heavily on precedent Less reliant on precedent

Judicial Discretion Less judicial discretion More judicial discretion
Flexibility Less flexible More flexible
Guided by equitable maxims
Does not have specific such as "equity follows the law"
Equitable Maxims
equitable maxims and "he who seeks equity must
do equity"

Remedies are typically Remedies can be available

Remedy Timing available after a legal right has even before a legal right has
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been violated been violated
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