Free «Modern Meaning of "Equity"» Essay Sample
Table of Contents
To have a clear understanding of the modern day meaning of “equity”, it is important to understand the traditional meaning of the word. In its formative years, equity was applied by the Chancery court in order to avoid the rigidity of common law. Thus, rather than following a form-based approach, Chancery courts resorted to their “conscience” in deciding cases. “Conscience” at that time referred to judges’ and defendants’ private knowledge of facts which could not be proved by common law because of the medieval common law conceptions of documentary evidence and of trial by jury.
Following from its historical meaning, Macnair stated that the modern technical meaning of equity is simply the rules which were applied in the Court of Chancery in 1875, as developed by the modern court system ever since. This modern meaning also draws on the general idea of fairness or justice as opposed to the letter of the law.
0 Preparing Orders
0 Active Writers
0% Positive Feedback
0 Support Agents
The main issue therefore is to ascertain whether the modern meaning of “equity” entails the traditional meaning of “conscience”. The modern meaning of equity still entails conscience. However, the idea of “conscience” is no more applied in the traditional sense, but rather in the modern sense which implies a “particular overtone of ‘honesty’.” For instance, it can be inferred from the case of Westdeutsche Landesbank Gironzentrale v Islington LBC that the conscience of a party is affected when the Court considers acting in a certain way to be dishonest. Related explanations of modern equity have been expressed over time. For example, Ballow explained “equity” as meaning the English bill under jurisdiction of the Chancery court, and in Pitt v Page, “conscience” was said to mean the equity jurisdiction.
Hurry up! Limited time offer
Use discount code
The Role Equity Plays in the Law of Trusts
Maitland observed that trust law was the “greatest and most distinctive achievement performed by Englishmen in the field of jurisprudence”. The ingenuity and greatness of trusts law, however, owes a lot to equity – trusts law was established as a result of the extension of the doctrine of equity to the field of property ownership.
The role of equity in the law of trust is best understood if one takes a historical account of the incursion of the Chancery courts into property matters. During the medieval period, ownership of land was based on the feudal system. This practice required “tenants” to pay rent to their “over-lord” in order to be granted “tenure”. So as to prevent the different forms of injustice that often arose from this system of land ownership, the Chancery courts developed the notion of “use”. This meant that if land was conveyed to X “to the use of Y”, this had the effect that, whilst X became the owner of the land, X was obliged to apply it for the benefit of Y and was prevented from treating it as his own. X was termed the “foeffee”, while Y was known as the “cestui que use”. While common law courts only recognised the legal rights vested in X, Chancery courts took X, who is the “foeffee”, to be bound in conscience to apply the property for the benefit of Y, the cestui que use.
It is this meticulous delineation of property rights that allowed for the ingenuity of the modern day law of trusts. The legal and equitable ownership of the trust property are separate and can be held by different persons. This possibility derives from the divergent practice of the common law and chancery courts. The separation of ownership and beneficial interest opens up numerous practical possibilities for trusts law. For instance, it helps in family settlements. It also allows for tax avoidance possibilities, which is reflected in cases such as IRC v Duke of Westminster, WT Ramsay v IRC, Ingram v IRC etc. The influence of equity also enables us to use trust to achieve flexibility in commerce and so on.
To sum up the role of equity in trusts law, one can say that equity is an integral element of what we know as trusts law. Thomas and Hudson were apt in putting this message across. They said thus:
Benefit from Our Service: Save 25% Along with the first order offer - 15% discount, you save extra 10% since we provide 300 words/page instead of 275 words/page
“The essence of a trust is the imposition of an equitable obligation on a person who is the legal owner of property (a trustee) which requires that person to act in good conscience when dealing with that property in favour of any person (the beneficiary) who has a beneficial interest recognised by equity in the property. The trustee is said to “hold the property on trust” for the beneficiary. There are four significant elements to the trust: that it is equitable, that it provides the beneficiary with rights in property, that it also imposes obligations on the trustee, and that those obligations are fiduciary in nature.”
2. “Robert, who has just died, made a fortune from his various business activities over the years. He had no children but many nieces and nephews and more distant relatives. He left a will containing the following trust provisions...”
Get an order prepared
by Top 30 writers 10.95 USD
VIP Support 9.99 USD
Get an order
Proofread by editor 3.99 USD
extended REVISION 2.00 USD
SMS NOTIFICATIONS 3.00 USD
Get a full
PDF plagiarism report 5.99 USD
WITH 20% DISCOUNT 28.74 USD
It is important to ascertain whether the declarations made by Robert comply with the three certainties requirements. Regarding the intention to create a trust, there is no controversy since the question indicates that the declarations are to be construed as trust provisions. Also, the properties which are the subject of the first and second declarations are clear – the first declaration requires the trustee to pay the sum of £163,500 in the first declaration, while the second declaration requires the trustee to pay £163,100,000. The next thing is to check the certainty of object for declarations (a) and (b)
(a) “Any of my old friends who have fallen on hard times shall receive a payment of £163,5000”
We can start by identifying the words in this declaration that might impact on the requirement of certainty of object. They are; “any”, “my old friends” and “fallen on hard times”. The next task is to identify the appropriate test for assessing the certainty of object. Robert’s gift is of the nature of a fixed trust since the declaration specifies the amount to be distributed to any potential beneficiary. On this account, it could be argued that the fixed trust is in favour of a class consisting of any of Robert’s old friends who have fallen on hard times. If this were to be the case, the Class Ascertainability Test (CAT) would be applicable. The CAT requires that, in a fixed trust, every member of the class of beneficiaries must be firmly ascertainable; otherwise, the trust would fail for the lack of certainty of object (complete list test). See IRC v Broadway Cottages and Re Gulbenkian.
Top 30 writers
from the incredible opportunity
at a very reasonable price
If we are to apply the CAT, the trust would clearly fail for the lack of certainty of object because of the conceptual uncertainty in identifying Robert’s “old friends” who have “fallen on hard times” – the threshold for “old friends” is unknown and the definition of “hard time” is relative and uncertain. These uncertain words make it impossible to draw up a complete list of beneficiaries.
However, Robert could cure the defect in the declaration by delegating the task of identifying his “old friends” who have fallen on “hard times” to the trustee. It would thus be possible for the Court to interpret the declaration thus: “... as determined by my trustee, any of my old friends who have fallen on hard time”. Judicial authorities upon which the Court can base its decision are Re Tuck and Re Leek. Note, however, that there are other cases where the reference to trustee or third party’s opinion did not cure the conceptual uncertainty. See Re Coxen and Re Wright’s W.T.
from the incredible opportunity
at a very reasonable price
If the uncertainty in the phrase “fallen on hard times” cannot be cured by the reference to third party, it is still possible to argue that this particular phrase does not fail the certainty of object test because the declaration, when read together, implies that Robert merely sets out a condition or description which would be activated once any person can show that he/she meets such condition or description. Thus, as established in Re Allen and Re Barlow’s W.T, as long as at least “one person” can show that he/she is Robert’s old friend and have fallen on hard times, the trust will not fail for the lack of certainty of object
In assessing whether the declaration meets the requirement of certainty of object, it is important to take note of the key words which are “employees” and “ex-employees”. These words show that it is a class gift. Having noted this, the next thing to ascertain is the type of trust created. This is clearly a discretionary trust as the declaration says that the money is to be distributed “entirely at the trustee’s discretion”. To meet the certainty of object requirement under the discretionary trust, the declaration must pass the Individual Ascertainability Test (IAT). At inception, the IAT applied only to discretionary powers as shown in Re Gulbenkian.The rule has, however, been extended to the discretionary trust in the landmark case of Re Baden: McPhail v Doulton which overruled cases such as Re Ogden and IRC v Broadway Cottages.
Want an expert write a paper for you?
After the House of Lords ruled that the IAT was applicable in the discretionary trust, the case was reverted to the Court of Appeal in Re Baden No 2. The Court was to determine whether the word “employee” passed the certainty test. The Lord Justices, Stamp, Sach, and Megaw all came to the conclusion that the word “employee” passed the IAT test. Thus, on the basis of Re Baden 2, it is not necessary to engage in detailed analysis, as Robert’s reference to “employees” is likely to pass the certainty of object test.
However, since the word “ex-employees” was not directly considered in Re Baden 2, it is necessary to assess the word in light of the reasoning of the Lord Justices. On general note, whether or not any operative word is considered to be conceptually and/or evidentially certain depends largely on which of the three varying reasoning proffered by the Court in Baden No. 2 is followed.
In that case, Stamp L.J was of the opinion that the IAT would be satisfied only if it could be definitely said of any person that he was or was not within the designated class. Depending on the company’s structure and their record-keeping, the word “ex employee” would pass this test only if the records can show of any person that he/she is or is not an “ex employee”. Sachs L.J was of the opinion that a trust would not fail on account of evidential uncertaintyunder the IAT. Thus, for as long as the word can be defined with sufficient certainty (conceptual certainty), it has become a question of fact whether any given postulant could be shown to be within the defined class. In his view, the burden lay with any potential claimant to establish that he/she fell within the class. If the claim was not established, the trustees were entitled to proceed on the assumption that he/she had fallen outside it, even if it could not definitely be said that the person was outside of the class. If this test is applied to the present case, it means that even if there is no clear exhaustive record of ex-employees, the word would be considered to be conceptually certain so long as it does not cause any confusion as to who could be included in this class (for instance, ex-full-time workers, ex-part-time workers, ex-consultants, ex-contract staff, etc.). As such, the burden would be on anyone claiming to be an “ex-employee” to prove it. Megaw L.J was of the opinion that the IAT would be satisfied so long as it could be said that a significant number of persons definitely fell within the specified class, even if there was also a significant number of persons of whom it could not definitely be said whether or not they were within the class. If this test was applied, the word “ex-employee” would likely pass the IAT, where it is without doubt that a significant number of people would definitely be considered as “ex-employees” (for instance, the ex-full-time staff) even though there might be another significant number of people whom one cannot definitely say whether they fit into this group (for instance, ex-part-time workers, ex-consultants, ex-contract staff, etc.)
(c) “The rest of my estate to be divided equally amongst my relatives.”
Attractive plagiarism check option: ensure
your papers are authentic!
Regarding this third declaration, it is imperative to assess it in light of the certainty of subject matter and certainty of object.
It appears that the phrase “rest of my estate” would raise concerns as to certainty of subject matter. For instance, in Palmer v Simmonds, the word “bulk” was said to be susceptible to different meanings and, as such, failed the test of certainty of subject matter. However, the phrase is not likely to fail the test because “rest of my estate” is akin to the word “residue” which has a clear legal meaning.
For the requirement of certainty of object, it is imperative to identify the operative phrase, which is “my relatives”. The next thing is then to ascertain the kind of declaration. Reference to equal division among the members of the designated class marks this out as a fixed trust.As mentioned above, the CAT applies to fixed trusts. It means therefore that we have to be able to draw up a complete list of Robert’s relatives. The phrase “my relatives” is likely to be considered conceptually uncertain and would thus render this declaration invalid. This is because the phrase precludes the possibility of drawing up a complete list. Lord Upjohn in Re Gulbenkian explained the certainty problem that results from such phrases. In that case, he had to consider the phrase “my old friends”.
We provide excellent custom writing service
Our team will make your paper up to your expectations so that you will come back to buy from us again.