DEFINITION OF EQUITY.

Transcription

1 FOR THE LOVE OF CHRIST JESUS; THE BEGINNING AND THE END. LAW OF EQUITY AND TRUSTS PART I TABLE OF CONTENTS LAW OF EQUITY PART 1 DEFINITION OF EQUITY. NATURE, ORIGIN AND RECEPTION OF EQUITY. THE MAXIMS AND PRINCIPLES OF EQUITY NATURE OF EQUITABLE INTEREST AND THE DOCTRINE OF NOTICE. 9 EQUITABLE INTEREST AND LEGAL ESTATES THE DOCTRINE OF NOTICE. PRIORITY. PARTICULAR INTERESTS. EQUITABLE ASSIGNMENT OF CHOSES IN ACTION. DISTINCTION BETWEEN NOVATION AND ASSIGNMENT. THE DOCTRINE OF CONVERSION THE DOCTRINE OF SATISFACTION. THE DOCTRINE OF PERFORMANCE THE DOCTRINE OF ELECTION. THE REMEDY OF INJUNCTION. SPECIFIC PERFORMANCE. THE REMEDY OF RESCISSION. RECTIFICATION. DEFENCES AVAILABLE TO EQUITABLE REMEDIES. LAW OF EQUITY This note is too short please consult your textbooks. It should serve as a mere guide. Please read sentence line thoroughly and ask questions where confused. DEFINITION OF EQUITY. Broadly speaking, equity is that which is fair, right and just a moderator of the rigour of legal rules seeking to mitigate the harshness. Technically speaking, it is the law administered by the early courts of chancery. This technical definition is unnecessary in the light of the fusion of both systems by the Judicature Act 1873 and NATURE, ORIGIN AND RECEPTION OF EQUITY. Traceable to 13 th century England with the exercise of equitable jurisdiction by the chancellors during the reign of king Edward 1. :: In those days, the Kings Bench, Common pleas and the Exchequer operated independently. :: The common-law was operated by the writ (form of action) system. A claimant

2 had to fit his claim into an existing writ. Chancellors were the secretary of state who drew and sealed royal writs. :: With the suspension of this power (to draw writs) by the provision of Oxford , the law became rigid and a claimant who could not fit his claim into an existing writ had no remedy. :: The litigant who was denied justice (for inability to fit his claim into an existing writ) petitioned the king (through the council) who could exercise his prerogative of mercy. :: The chancellors usually dealt with these petitions. The chancellors in dealing with these petitions were guided by the ideas of conscience, good faith and reason based on the facts of each case. This led to the administration of flexible and responsive justice based on the facts of each case rather than rigid systems of law. :: This flexible system of justice was criticised by Selden as varying according to each chancellor s conscience just as the length of their feet. As the chancellor extended and consolidated his jurisdiction, inevitable conflicts between the Chancery and Common Law courts arose. Various cases (like Neath V Rydley and Courtney V Glanvil) demonstrated the belligerence of the common-law courts towards interference by the chancery. This notwithstanding, Cardinal Wosely granted common injunction in deserving cases to prevent access to common-law courts. This shows how aggressive the courts were towards one another. :: The tension between common-law courts and the chancery became glaring in the Earl of Oxford s Case, where a common-law court held that the defendant was entitled to eject the plaintiff (who built a house) from his land. When the case went to the Chancery, Lord Ellesmere held to the opposite and granted an injunction to restrain the defendant (landowner) from ejecting the plaintiff (assignee of lease) from the land as by the law of God, he who builds a house must live in it. This sparked the outrage of the common-law courts and the quarrel was referred to king James 1 who resolved the dispute in favour of the Chancery. :: The Common-law Procedure Amendment Act 1854 and the Chancery Amendment Act (Lord Cairns Act) were enacted to accommodate the separate administration of the two systems. For example, it enabled each court to grant both common and equitable reliefs (to some extent). :: Subsequently, Both systems of administration were fused by the Judicature Act 1873 and 1875 with Section 16 and 25 respectively 1 Though granted respite by the In Consimili Casu Clause of Westminster 1285

3 providing that equity shall prevail over common-law in the event of conflict. :: As years went by, equity began to rigidify as men with legal training assumed the position of chancellor. As Lord Eldon had once noted that the rules of equity must be well settled. For example, in National Provincial Bank V Ainsworth, the court refused to recognise the right of a deserted wife to occupy the matrimonial home. Lord Denning grieved over the rigidity and emphasised the need for the future generation to create a new equity. The need to do justice without undue regard to technicalities has also been emphasised in-ezekiel V Nwankwo. Although equity has been criticised and seems to have rigidified over the years, equity has contributed to both substantive, procedural and remedial justice in the following regards: (amongst others): 1. Equitable Remedies: have been provided especially where damages would not do sufficient justice to the case. Specific performance compels the performance of an obligation under a contract. An injunction seeks to restrain or compel the performance of an act in deserving situations-american Cynamid V Ethicon. Rectification seeks to bring a written agreement in consonance with the prior consensus of the parties. Rescission seeks to nullify a contract for deserving reasons. These and many more remedies have been introduced by Equity. 2. Equitable Reliefs: like doctrines of part performance, secret trust, and so on has been provided. These have been applied in numerous cases like: Walsh V Lonsdale, Obanor V Co-operative Bank Ltd, Udolisa V Nwanosike, Errington V Errington amongst others to prevent fraud and do justice to each case. 3. Estoppel: the equitable doctrine of estoppel has arisen to prevent a promisor from going back on his word where a party has changed his positon in relying on the promisor s representation/promise. 4. In Trust: - Common law did not recognise the rights of beneficiaries. Equity recognises the right of beneficiaries. The trustee is compelled to act in the interest of the beneficiary. - Land is now devisable to women who can own separate property- Married Women's Property Act. 5. In Mortgage: A mortgage is a loan agreement secured with property. The contribution of equity to the realm of mortgage is that: - Equity now makes it possible for a mortgagor to redeem his property after the lapse of the contractual date for redemption. This was impossible at common-law. 6. In Land: The burden of restrictive covenants (agreement that land shall not be used in a particular way) is now recognised as running with land except for a purchaser without notice. In conclusion, the ingenuity and conscientious reasoning of the chancellor gave birth to equity which (at

4 present) touches virtually every aspect of law and justice. Equity has been received into Nigeria (first) by Ordinance no. 3 of 1863, Supreme Court Ordinance The position is that the rules of common-law, doctrines of equity and statutes of general application that were in force in England as at the first of January 1900 have been received in Nigeria. MAXIMS OF EQUITY: The exercise of equitable jurisdiction was based on certain principles which are now embodied in the maxims of equity 2. These maxims reflect the nature and essence of equity in pithy phrases which guide the application of its rules. Some are fund of numbering these maxims. This at best amounts to an indirect way of cramming and rigidifying the maxims of equity. The truth is that the total number of maxims are innumerable. What matters is that you are able to decipher the maxims at work in examination questions and real life situations. EQUITY WOULD NOT SUFFER A WRONG TO BE WITHOUT A REMEDY: This is the root of equitable jurisdiction as the chancery sought to (and indeed equity seeks to) provide remedy to litigants where the ordinary rules of law denied them. For example at common law, the rights of beneficiaries under a trust were not recognised. However, equity now recognises the rights of beneficiaries under a trust and compels the trustees to hold the property for the benefit of the beneficiaries 3. Equity introduced certain remedies which would assist the court in deciding a case. E.g. the Anton Pillar Order which enables the plaintiff to discover facts within the knowledge of the defendant as was seen in the case of Anton Pillar KG. V Manufacturing Processes where permission was granted to the plaintiff to search the defendant s premises to help him discover facts and evidence that would help him prove his case. At common-law, the only remedy for breach of contract was damages. Equity however added the remedies of specific performance, injunction, etc. where damages would not be sufficient. All these were done to provide a remedy where there is a wrong. EQUITY FOLLOWS THE LAW Kayode Eso JSC noted in Trans Bridge Co Ltd V Survey international Ltd that equity does not exist in vacuo. Equity was developed to supplement and mitigate rather than override commonlaw rules. Equity and common law should not be seen as always fighting. 2 J.O. Fabunmi (Equity and Trusts in Nigeria). 3 The right of the beneficiaries is enforceable against all but a bona fide purchaser for value without notice of the existing trust.

5 - Estates and interest in land which existed at common-law also exist in equity. For example restrictive covenants- Tulk V Moxhay. - Just like common-law interests, an equitable interest can devolve on intestacy. - Just like common law, equity acknowledges that legal estate is vested in trustee but compels him to act in the interest of the beneficiary. Although equity follows the law, it may divert/deviate from following the law where doing so would amount to injustice. This is done by utilising doctrines like; secrecy, partperformance, estoppel, amongst others to fill the gap in law and prevent injustice. Equity seeks to prevent fraudulent use of the law 4 See Archibong V Duke, Chidiak V Coker, Udolisa V Nwanosike, etc. WHERE EQUITIES ARE EQUAL, THE LAW PREVAILS. Meaning that a legal interest in property takes priority over an equitable interest in the same property 5. Except: - The legal encumbrancer had notice of an equitable interest in the property before purchase. (Notice may be actual, constructive or implied). - There has been fraud, duress or misrepresentation in connection with the acquisition of legal title. - The transaction has been set aside by a competent court of law. In Pilcher V Rawlins: Legal estate in trust property was conveyed to the defendant by way of legal mortgage. The court held that since the defendant was an innocent purchaser for value without notice, his legal title prevailed over the beneficiary s equitable interest in the trust property. Joseph V Lyons: A assigned his afteracquired-stock to B and later pledged same to C. The court held that C (being a bona fide purchaser for value without notice) had priority over B. WHERE THE EQUITIES ARE EQUAL, THE FIRST IN TIME PREVAILS. Equitable interest is ranked in order of creation. An earlier equitable interest in the property prevails over a later equitable interest in the same property except: - The prior holder is guilty of fraud or gross negligence. In Rice V Rice, the court noted that issuance of purchase receipt without collecting payment facilitated the creation of a subsequent 4 See for example: Savannah Bank V Ajilo, where the litigant was able to evade his responsibility because the consent of governor was not sought in accordance with Section 22 of the Land Use Act. 5 See Section 16 of the Land Instrument Registration Law, all document registration in law creates a legal interest. An example of an equitable interest is a sales receipt or deposit of title deeds to secure loan (mortgage).

6 equity thus the vendor s equity was postponed due to his negligence. - In the case of assignment of choses in action 6. In Dearle V Hall, the court noted that priority in assignment of choses in action was to be determined by the order in which notice reached the debtor. In Cave V Cave, A trustee purchased land with trust money and conveyed the land to his brother. The brother then mortgaged the land to A by way of legal mortgage and then to B by way of equitable mortgage. The court held: A s legal mortgage prevailed then, the beneficiary s 7 equitable interest (being first in time) prevailed over B s equitable mortgage. HE WHO SEEKS EQUITY MUST DO EQUITY. Meaning that the plaintiff must be prepared to act justly towards the defendant. In Brown V Adebanjo, the plaintiff who had agreed ANDROID USERS SHOULD DOWNLOAD THE FULL VERSION OF THE NOTES FROM GOOGLE (APP) PLAY STORE FOR JUST #150 (ONE HUNDRED AND FIFTY NAIRA ONLY). OTHER PLATFORMS (IPHONE AND LAPTOPS) SHOULD CONTACT VITESOLUTIONSBOX@GMAIL.COM OR ON WHATSAPP FOR A DIRECT ONLINE LINK TO THE FULL VERSION. VISIT ISOCHUKWU.WORDPRESS.COM FOR MORE. 6 This shall be discussed later. 7 I.e. the beneficiary of the trust.

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27