In order to analyse the differing approaches, concerning formalities and incompletely constituted trusts within the modern tradition of equity, it is important to understand the history and development of Equity.

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Equity and Trusts – LW 301 – Student No. 80124947

In order to analyse the differing approaches, concerning formalities and incompletely constituted trusts within the modern tradition of equity, it is important to understand the history and development of Equity.

Equity is the body of law developed by the Court of Chancery in England before 1873. Its justification was that it corrected, supplemented and amended the common law. It softened and changed many injustices inherent in common law and provided remedies where at law they were either inadequate or non-existent. Equity looks to substance rather than form, thus enabling it to give effect to the true intentions of parties to a transaction where the strict legal position does not reflect those intentions. Equity does not operate on its own. There never is equity without law. Wherever the Common Law grants rights and duties to the civilian population at large, equity regulates the conscientious use of those legal powers and the discharge of the legal duties. Equity is not distinct from law but a distinct feature of law. Equity’s origin was the exercise, by the Chancellor, of the residual discretionary power of the King to do justice among his subjects in circumstances in which, for one reason or another, justice could not be obtained in a common law court.

In the early seventeenth century the competition between ‘common law’ and ‘Chancery’ came to a head in the Earl of Oxford Case. In this case the common law court gave a verdict in favour of one party and the Court of Equity then issued an injunction to prevent that party enforcing that judgement. After the outcome of this case it was decided that in cases of conflict between common law and equity, equity will prevail. The Judicature Act 1873 “fused” the administration of law and equity by the creation of the High Court of Judicature exercising both law and equity and gave supremacy to equity in cases of conflict. In a famous metaphor, Ashburner said “the two streams of jurisdiction, though they run in the same channel; run side by side, and do not mingle their waters.” Since 1873, both legal and equitable rules have developed and the developments of those legal rules have sometimes been influenced by established equitable doctrines with the effect that a situation which would at one time have been treated differently at law and equity is now treated in the same manner. It can be said a century of fused jurisdiction has seen the two systems working more closely together, each changing and developing and improving from contact with the other and each willing to accept new ideas and developments regardless of their origin. The two systems are coming ever closer but strictly speaking they are not fused.

The maxims of equity embody the general principles which have evolved from the Court of Chancery. They are not rules which must be rigorously applied in every case but have more of a guideline effect.

Equity acts in personam. This means that equity has jurisdiction over the defendant personally. In the leading case of Penn v Lord Baltimore which concerned a disagreement about a boundary line in the United States, at law the UK courts had no jurisdiction over there but because the defendant came back to the UK for the trial the judge ordered a specific performance, in equity, of a promise which Lord Baltimore had made to Penn. Failure to comply with a specific performance order is a contempt of court which is punishable by imprisonment.  

Another important maxim is Equity will not perfect an imperfect gift. Unless consideration is given, an undertaking to give something is unenforceable. In the case of a trust, if a settlor arranged for a trustee to hold property for a beneficiary, the settlor must do everything in his power to transfer the property in question to the trustee because if he fails to do so the trust will be held to be incompletely constituted and therefore void ab initio. Where an incomplete gift is made during the donor’s lifetime and the donor appointed the donee as executor, the vesting of the property in the donee in his capacity as executer may be treated as the completion of the gift overriding the claims of the beneficiaries under the will. This exception to the rule comes from the case of Strong v Bird. For the rule in Strong v Bird to apply two criteria must be satisfied. There must be evidence of the donor’s intention to make an immediate inter vivos gift and that intention must have continued right up until the donors’ death. The donor must not have treated the property as his own during the relevant period. Farwell J confirmed this in Re James by stating that “equity will not aid the donee but on the other hand if the donee gets the legal title to the property vested in him…he is entitled to rely on his legal rights.”

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Trusts are primarily about money and the preservation of wealth. The idea of the trust developed as a means for providing for the family, although these days’ trusts are used for many more purposes. ‘The trust’ continues to be a form of property-holding of ever increasing importance because of its adaptability and convenience in effecting complicated forms of settlement. A definition of a trust can be found in the Hague Convention, which provides that “for the purposes of this convention the term ‘trust’ refers to the legal relationship created inter vivos or on death by a person, the settlor, when ...

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