EQUITY AND TRUSTS 1

Topic 1 : INTRODUCTION

A. OVERVIEW

1. The Origin and Development of Equity

2. Maxims of Equity and concept of Estoppel
3. Reception of Equity in Malaysia

B. Legal Definition of Equity.

It is a body of law that addresses concerns that fall outside the jurisdiction of Common
Law.

Equity has a very narrow and special meaning, where it is a body of rules, developed and
applied by the Court of Chancery (historically).

This court was presided by the Chancellor and the rules were developed under his authority.

Origin of Equity
How Equity developed?

Developed in the deficiencies of the Common Law.

There are few problems occurred that lead to the development of Equity.

1st problem
-Common Law has loopholes- where a remedy was not available or where a remedy
was available but was not appropriate to the particular loss of the Plaintiff.

-At that time, the chancellor was responsible for the issuance of Writs and all actions
had to be commenced by the issuance of the Royal Writ.

2nd problem

-Where a plaintiff may have had a Common Law remedy but he was prevented from
enforcing it because of the power and influence of other parties- eg: victim of the
Jury who heard the case. (where the Jury is corrupted)

3rd problem

-Rigidity of Common Law rules, where the Common Law requires formality.
 -Eg: Two persons entered into a verbal contract/ oral agreement where under the
Common Law, it requires a contract to be in writing.

As a result, Common Law would not recognise the contract nor grant any remedies on it,
regardless the merit of the case.

Thus, equity comes as GLOSS ON THE COMMON LAW.

C. How Equity came into the picture?

Equity worked alongside the Common Law and provided different solution to the
problem.

If the parties feel that the Common Law would not provide an appropriate solution to
their case, the parties could petition to the King and the Council asking that justice
be done.

This petitions were referred to the Chancellor which called suits.

Chancellor

The Chancellor was very important as he was responsible in the issuance of the
Royal Writs.

The Chancellor was also the Head of the Common Law and what he did was to
ensure that the Common Law worked in an acceptable way.

As for the petition, the Chancellor responded to it by issuing a decree without the
procedures usually associated with a court hearing.

However, the decision is uncertain and unpredictable as it is based on the ideas and
beliefs, judgments and conscience of each particular Chancellor.

D. Systemization of Equity

Introduction of Rigidity

As mentioned earlier, the equity varied with the differences of the Chancellors
verdicts/ beliefs that is to be described as uncertain and unpredictable.

Thus, the appointment of the Chancellors brought a gradual improvement towards

the rigidity of the Equity.
 Gradually, decisions began to be based on precedent.

This development took place at the same time as lawyers began to be appointed as
Chancellors and eventually a body of law evolved which was as rigid as the
Common Law.

It became more predictable, precedent- based system , started at the end of 17th
century.

E. Equity vs Common Law

Generally, the approach of equity is to follow the Common Law unless there is
justified/sound reason to do otherwise.

However, where two bodies of laws exist, there must be occasion/s they are
conflicting.

When conflict arose between Equity and Common Law, equity would use the
common injunction , which had the effect of preventing the Common Law judgments
from being entered.

This of course, brought disatisfaction to the common lawyers, and it remains in

active conflict for many years.

This conflicting era was not resolved until the reign of James I, when it was decide
that the rules of equity should prevail.

The Supreme Court of Judicature Act 1873 S. 25(11) stated that in case of conflict
between rules of Equity and Common Law, Equity should prevail.

F. The Maxim of equity

The maxims of equity can be described as a set of general of principles which are said to govern the
way in which equity operates. The maxims are applied only when the court feels it is appropriate.

Maxims of Equity:

1. Equity follows the law.

- Implies that equity would intervene and overrule the common law if justice required it.
Case: Re Diplock [1948] 2 All ER 31
2. Where the equities are equal, the law prevails. Where the equities are equal, the first in time
prevails;

- This maxims concerned with priorities, that is to say which of various interests prevails in the
event of a conflict.

3. Equity looks to the intent/ substance rather than to the form;

- Courts of equity draw a differences between which is matter of substance/ intention, and which is
matter of form.

- It is said that by insisting on the form, where the substance have to be defeated, it holds it as
inequitable.

Case: Walsh v Lonsdale (1882)21 Ch D 9

4. Equity looks on that as done which ought to be done

- This relates to specific performance.

Case: AG for Hong Kong v Reid [1994] All ER 1

5. Equity imputes an intention to fulfil an obligation

- Where a person has undertaken an obligation his later conduct will, if possible, be interpreted as
fulfillment of that obligation.
6. Equity acts in personam

- The main remedy available at common law is damages.

- However in equity, the remedy acted against the person and ordered him to do something (specific
performance) or not to do something (injunction)

- Other equitable remedies are rescission and rectification.

- If the order of the court is not obeyed then the imprisonment may follow.

7. Equity will not suffer a wrong to be without a remedy.

- This maxim indicates that the equity will not allow the technical defects of the common law to
prevent worthy plaintiffs to obtain redress/ remedy.

The development of equitable doctrines and remedies are somehow be seen as the way or solution
to prevent unjust result arising from the enforcement of legal rights.

Eg: The use of specific performance to enforce contracts not enforceable at law (like oral contract).

8. He who seeks equity must do equity

- Though the previous maxim indicates equity will intervene where the common law cant preserve
justice, it should not be thought that equity will automatically intervene whenever a certain situation
arises.

Case: Chappell v. Times Newspapers [1975] 2 All ER 233

9. He who comes to equity must come with clean hands

- A party seekin an equitable remedy must not be guilty of unconscionable conduct

Case : Cross v Cross (1983) FLR 235

Case: Tinsley v Milligan [1993] 3 All ER 65

G. ESTOPPEL

Meaning & Concept

It is an ancient doctrine of remedy

Meaning : That a person must keep their promise , if another rely on their promise and acts
to their detriment.

It provides a useful mean of dealing in a difficult situation.

Lord Denning : judge should not be bound by the strict legal rules if it would lead to unjust
result.

Types of Estoppel

1. Estoppel by representation

2. Promissory Estoppel

3. Proprietory Estoppel

1. Estoppel by representation

- Principle: person who makes an unambiguous representation, by words, by conduct or by silence,

of an existing facts and causes another party to act to his detriment (damage/loss) in reliance on the
representation will not be permitted subsequently to act inconsistently with that representation.

2. Promissory Estoppel

- Basically prevents a party to a contract from acting in a certain way because they promised not to
act in that way, and the other party to the contract relied on that promise and acted upon it.

Case: Central London Property trust Ltd v High Trees House Ltd (1947) KB 1303

3. Proprietory estoppel

Applicable where one party knowingly encourages another to act, or acquiesces (assent/consent)in
the others actions, to his detriment and in infringement to the first partys right.
In some circumstances, this doctrine may create a claim and an entitlement to positive proprietory
rights

Case: Greasly v Cooke (1980) 1 WLR 1306

H. Other Cases

Willmott v Barber [1880]1 5 Ch. D 96;

Ramsden v. Dyson [1981] 2 WLR 576;

Amalgamated Investment and Property Co. Ltd (in liquidation) v. texas Commerce
Inteenational bank Ltd (1982) Q.B. 84;

Re Bansham [1986] 1 WLR 1498

Taylor v Dickens [1998] 1 FLR 806