INTRODUCTIONThe system of equity includes that portion of natural justice which is judicially enforceable but which for various reasons was not enforced by the courts of common law. In this context the expression natural justice is used in the broad sense of recognising and giving effect to justifiable rights of aggrieved parties based on principles of fairness and conscience that were not acknowledged by the common law courts. The common law system was perceived as being too formalistic and rigid in its outlook with the result that the potential rights of certain litigants were subject to abuse. The principles which gave effect to the rights of litigants and which were not recognised by the common law courts were known as equity.

Equity, unlike the common law, was not an independent system of legal rules. It did not stand alone. It presupposed the existence of the common law, which it supplemented and modified. The rules of equity were originally based on conscience and principles of natural justice, and were applied on a case-by-case basis. Where there were gaps in the common law rules that created injustice to one or more of the parties, the rules of equity filled in these gaps. Thus it has been said that Equity came to fulfil the law, not to destroy it. The two systems of rules were complementary to each other. The rules of equity were regarded as that portion of natural justice that was judicially enforceable but which for a variety of reasons was not enforced by the courts of common law. The effect was that although the rules of equity did not directly contradict the common law, the application of equitable rules was capable of producing an effect which was different from the common law solution. A modern example of the operation of equity is illustrated by Cresswell v Potter[footnoteRef:2] In this case, a sale of land by a poor and ignorant person (judges expression) at a substantial undervalue and without independent legal advice was regarded as an unconscionable bargain and the transaction was set aside. [2: [1978] 1 WLR 255.]

ESTABLISHING A PHILOSOPHICAL BASIS FOR EQUITYEquity has a philosophical tradition which dates back to the ancient Greeks, so it is with great caution that I should consider tampering with it. Nevertheless, it should be remembered that the English Courts of Equity have never expressly acknowledged that they are operating on any one philosophical basis; although, as will emerge in the next few paragraphs of this coursework, it may appear that they do have such grand aspirations hidden within their judgments.Hegel was one of the foremost philosophers of the last 200 years not a lawyer but his definition of the activities of equity in its legal sense is particularly useful. Equity permits the achievement of fair or just results where statute or common law might otherwise admit unfairness or injustice. Hegel set out the following definition of equity:Equity involves a departure from formal rights owing to moral or other considerations and is concerned primarily with the content of the lawsuit. A court of equity, however, comes to mean a court which decides in a single case without insisting on the formalities of a legal process or, in particular, on the objective evidence which the letter of the law may require. Further, it decides on the merits of the single case as a unique one, not with a view to disposing of it in such a way as to create a binding legal precedent for the future.Hegels summary, however, should be treated with some caution because he wrote as a German philosopher rather than as an English lawyer. Yet it captures the fact that the court is concerned only with the merits of the case between the claimant and the defendant, and not necessarily with the broader context of the law. In this way the court can focus on reaching the best result in the circumstances, even where a literal application of statute or common law might seem to require a different result. Maitland, in lectures published at the beginning of the 20th century, would have us believe that equity is founded on ancient English elements and rejected the idea that equity was taken from Roman law. In truth the provenance of the English courts of Equity is a mixture of the ecclesiastical courts and a body of law which developed in terms of a line of precedent from 1557 onwards. However, the basis of equity as a counterpoint to the common law is not an idea which should be considered to be simply English. There are echoes of it in the ancient Greek philosophers when, as Aristotle argued that equity is the rectification of legal justice in so far as the law is defective. Laws are general but the raw material of human behaviour is such that it is often impossible to pronounce in general terms. Thus justice and equity coincide and both are good, but equity is superior.

THE DEVELOPMENT OF TWO SYSTEMS: COMMON LAW AND EQUITYIt is impossible to understand any part of law from England without understanding English history in brief first. The genesis of English polity and the structure of its legal system are the result of the Norman invasion of 1066[footnoteRef:3] by which William I seized control of the entire kingdom. The composition of that kingdom had itself been the result of hundreds of years of consolidation of warring tribes. The development of England and Wales as a single legal jurisdiction results from hundreds of years of wars of conquest fought by the insurgent English against the Welsh. Scotland retained its own, distinct legal system despite the Act of Union of 1707. [3: This was the battle where King William I of Normandy defeated King Harold at the battle of Hastings. The years after the battle spread what is known as common law]

The Norman Conquest is vitally important though. It forms the point in time at which the Normans introduced an entirely new legal system to England. This law was common to the whole of the kingdom. Arguably, it was the first time that the kingdom had had such a single legal system. Hence the term common law was coined to mean this new system of legal principle created by the English courts which was common to the entire realm, rather than being a patchwork of tribal customs applied unevenly. It is thought that the term common law itself derives from the ecclesiastical term jus commune which was used to describe the law administered by the Catholic Church.[footnoteRef:4] [4: Maitland, 1936, 2]

Henry II created the courts of Kings Bench to hear matters otherwise brought before the Crown. From these early, medieval courts the principles of the common law began. 27 Rights were founded and obligations created as a result of the decisions of these early courts. There remained, however, a right to petition the King directly if it was thought that the decision of the common law court was unfair or unjust.[footnoteRef:5] However, the proliferation of suits that were brought directly before the King eventually required the creation of a separate mechanism for hearing them. Otherwise the King would be permanently diverted from important matters like war, hunting and effecting felicitous marriages.[footnoteRef:6] [5: So, for example, a tenant of land who was unjustly dealt with in the court of his local lord could seek a remedy directly from the King if he was unsatisfied with the decision of the court.] [6: It should also be remembered that for these Norman kings, England was a distraction from their main business of protecting their lands in Aquitaine and elsewhere in Europe. ]

During the medieval period the position of Lord Chancellor was created, among other things, to hear those petitions which would otherwise have been taken directly to the monarch. The medieval Lord Chancellor was empowered to issue royal writs[footnoteRef:7] on behalf of the Crown through the use of the Great Seal, but gradually acquired power to hear petitions directly during the 13th and 14th centuries. As a result the Lord Chancellors discretion broadened, until some lawyers began to comment that it had begun to place too much power in the hands of one person.[footnoteRef:8] [7: This was a common document that was used by a claimant to start a case. Though it changed in form over the centuries, it was only abolished recently by the Civil Procedure Rules 1998 and it was replaced by the claim form which remains in use in England today.] [8: Selden is reputed to have said: Equity is a roguish thing. For [common] law we have a measureequity is according to the conscience of him that is Chancellor, and as that is longer or narrower, so is equity. Its all one as if they should make the standard for the measure a Chancellors foot.]

This statement implied that Lords Chancellor were thought to ignore precedent and to decide what judgments to make entirely in accordance with their own caprice. The Courts of Chancery were typically comprised only of the Lord Chancellor and his assistant, the Master of the Rolls, until 1813 when the first Vice-Chancellor was appointed.[footnoteRef:9] [9: There were no official, methodical law reports of Chancery cases before 1557: Maitland, 1936, 8]

The Lord Chancellor was a politician first and foremost. In truth, before Robert Walpole became the first Prime Minister in 1741, it was the Lord Chancellor who would have been considered the prime minister to the Crown. It was the Lord Chancellor who would summon defendants to appear before him to justify their behaviour. This jurisdiction of the Lord Chancellor, which was hotly contested, arose from the range of writs which he would serve even after a court of common law had given judgment: in fact, the Lord Chancellor would be concerned to ensure that the individual defendant had behaved properly and would not be seeking to overturn any rule of the common law.

THE CONFLICT BETWEEN COMMON LAW AND EQUITY

The general approach of equity was to follow the common law unless there was a sound reason to do otherwise. So, equity recognised and protected those estates in land and those interests in land that were recognised and protected by the common law. In fact, as well as recognising the common law estates, equity recognised other estates too. But in a legal system where two bodies of law existed there were bound to be occasions when there was a conflict. If conflicts arose between equity and the common law, equity would use the common injunction, which had the effect of preventing the common law action from proceeding or preventing the common law judgment from being enforced. This was clearly not acceptable to the common lawyers and for many years there was very active conflict.

THE ARGUMENT BETWEEN LORDS COKE AND ELLESMEREDuring the 1600s, there was also competition the between equitable Chancery and common law jurisdictions. The issue was highly political, with Lords Coke and Ellesmere arguing at some length in the House of Lords. Lord Coke accused Lord Ellesmere of pandering to royal absolutism and weakening the rule of law. Lord Ellesmere, in turn, claimed that Lord Coke was attempting to undermine the equitable jurisdiction and contribute to an unjust rule of law. This conflict culminated in the Earl of Oxfords Case (1615), followed by the issue of a decree by King James I: in the event of a different outcome being reached between common law and equity, equity prevails.

Earl of Oxfords Case[footnoteRef:10]: [10: (1615) 1 Ch Rep 1]

FactsA plaintiff is successful at common law and seeks to execute the judgment he obtains However, Lord Ellesmere, a judge of Chancery, thinks this would be against conscience, and seeks to prevent the plaintiff from asserting his common law rights Sir Edward Coke, Lord Chief Justice, challenged this decision.IssueShould a result reach in equity displace (that is, take priority over) the common law position?ReasoningLord Ellesmere: The existence of equity was thus a concession to the inevitability of injustice, while its dominance a reflection of prioritising justice in the individual case over universality of laws The cause why there is a Chancery is for that mens actions are so diverse and infinite that it is impossible to make any general law which may aptly meet with every particular act and not fail in some circumstance. The role of equity is to temper and mitigate the law to soften and mollify the extremity of the law The office of the Chancellor is to correct mens consciences for frauds, breach of trust, wrongs and oppressions of what nature so ever they be This reflects a view of conscience that is corrective of the attitudes of individual litigantsDecisionA decree is issued by James I to the effect that the Kings subjects ought not be left to perish under the rigor and extremity of our law

EFFECT OF THE KINGS DECISIONThe kings decision in favour of the Chancery had dual effect on the nature and character of Chancery jurisdiction. Firstly, the jurisdiction of the court became far-reaching. Many litigants were fascinated by the supple and swift judicial policy of the Court of Chancery. Over time, the court was so much hard pressed that it could not adequately cope with its business. The court was poorly staffed and poorly organised; its procedure had become complex and inefficient. The result was unnecessary delay in the administration of justice.

Secondly, the officials of the court became corrupt and incompetent. The power of the court to issue injunctions became a source of iniquities. Litigants, with the active assistance of the court made use of the power as delay tactics and to pervert the course of justice. Various but unsuccessful attempts to reform the Chancery jurisdiction and its procedure were made before the later piecemeal reform of the 19th century. The position of the Chancery court and its jurisdiction in the English legal system before the 19th century reform was neatly described by Sir Carleton Allen in his book Law in the Making[footnoteRef:11], thus: [11: 7th Ed. (1964) p.420]

While equity (in the technical sense) has made important contribution to our law, there is another and a darker side of the picture. The history of the Court of Chancery is one of the least credible in our legal records. Existing nominally for the promotion of liberal justice, it was for long corrupt, obstructive and reactionary, prolonging litigation for the most unworthy motives and obstinately resisting all efforts at reform.

THE JUDICATURE ACTS 187375It is clear that although equity started life as a mere supplement to the common law it developed into a separate system. Equity was administered by the Courts of Chancery which were separate from the common law courts. This caused many problems. For example, it was often necessary to use both the common law courts and the court of equity in the same dispute. There were some improvements but it was not until the Supreme Court of Judicature Acts 187375 that the position changed significantly. This legislation provided for the creation of one single Supreme Court to replace the separate courts that existed previously. The Courts of Exchequer, Queens Bench, Chancery, Common Pleas, Probate, Admiralty and the Divorce Court were abolished. In their place was one court, divided, for convenience only, into three Divisions of the High Court (Queens Bench, Chancery and the Probate Divorce and Admiralty Divisions, the latter being renamed the Family Division in 1970).

The Act specifically provided that, if there was a conflict between the rules of the common law and the rules of equity, equity shall prevail[footnoteRef:12].There is no doubt that this legislation merged the administration of the two systems of law. Ashburner, in Principles of Equity, expressed his view by saying that the two streams of jurisdiction, though they run in the same channel, run side by side and do not mingle their waters. There have been judicial and academic statements to the effect that there is a fused system of law. For example, in United Scientific Holdings Ltd v Burnley Borough Council[footnoteRef:13], Lord Diplock said: The innate conservatism of English lawyers may have made them slow to recognise that by the Supreme Court of Judicature Act 1873, the two systems of substantive and adjectival law formerly administered by courts of law and Courts of Chancery (as well as those administered by Courts of Admiralty, Probate and Matrimonial Causes) were fused. [12: Supreme Court of Judicature Act 1875 s 25(11); now the Supreme Court Act 1981 s 49] [13: [1977] 2 WLR 806]

The prevailing view appears to be that, although the two systems operate closely together, they are not fused. In MCC Proceeds Inc v Lehman Brothers International (Europe)[footnoteRef:14], Mummery LJ said that the substantive rule of law was not changed by the Judicature Acts. These were intended to achieve procedural improvements in the administration of the law and equity in all courts, not to transform equitable interests into legal titles or to sweep away the rules of the common law. However, Lord Browne-Wilkinson, in Tinsley v Milligan[footnoteRef:15], appears to take a different view. He said: More than 100 years has elapsed since the fusion of the administration of law and equity. The reality of the matter is that, in 1993, English law has one single law of property made up of legal estates and equitable interests. The distinction still remains between equitable and common law remedies. There remain important differences between common law and equitable rights. [14: [1998] 4 All ER 675] [15: [1993] 3 All ER 65]

MAXIMS OF EQUITYThe intervention of the court of equity over the centuries may be reduced into the following maxims. The importance of the maxims ought not to be overstated: they are far from being rigid principles, but exist as brief sentences which illustrate the policy underlying specific principles. Sir Edward Coke viewed the maxims in a more justificatory sense: A maxim is a proposition to be of all men confessed and granted without proof, argument or discourse[footnoteRef:16]. [16: Sir Edward Coke, The First Part of the Institutes of the Laws of England; or a Commentary uponLittleton (1628) vol 1, 57a]

I. Equity will not suffer a wrong to be without a remedyThis maxim illustrates the intervention of the Court of Chancery to provide a remedy if none was obtainable at common law. At the same time it must not be supposed that every infringement of a right was capable of being remedied. The wrongs which equity was prepared to invent new remedies to redress were those subject to judicial enforcement in the first place.

II. Where the equities are equal, the first in time prevailsThis maxim concerns priority between two competing equitable interests in property. The general rule is that equitable interests rank according to the order of their creation. A well-known example is Cave v. Cave[footnoteRef:17]. In this case, a sole trustee in breach of trust used trust money in the purchase of land, and had the land conveyed 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. Neither A nor B having notice of the trust. [17: (1880) 15 Ch. D. 639]

Held: As legal mortgage took priority over the equitable interests of the Beneficiaries (Where there is equal equity the law shall prevail), but the interests of the beneficiaries had priority over Bs mortgage, since they were earlier in time (where the equities are equal, the first in time prevails).III. Equity follows the lawThe view originally taken by the Court of Equity was that deliberate and carefully considered rules of common law would be followed. Equity only intervened when some important factor became ignored by the law. Thus, in the early stages of the development of the law of trusts, the Lord Chancellor and, subsequently, the Court of Chancery acknowledged the valid existence of the legal title to property in the hands of the feoffee[footnoteRef:18] (or trustee). The acquisition of this title by the feoffee was dependent on compliance with the appropriate legal requirements for the transfer of the property. [18: An expression that was used originally to describe the trustee. The full title was feoffee to use.]

IV. Where there is equal equity, the law prevailsEquity did not intervene when, according to equitable principles, no injustice resulted in adopting the solution imposed by law. Thus, the bona fide purchaser of the legal estate for value without notice is capable of acquiring an equitable interest both at law and in equity.

V. He who seeks equity must do equityA party claiming equitable relief is required to act fairly towards his opponent. For example, a tracing order would not be obtained in equity if the effect would be to promote injustice. Lord Romilly MR explained in Haywood v Cope[footnoteRef:19]: the discretion of the Court must be exercised according to fixed and settled rules; you cannot exercise a discretion by merely considering what, as between parties, would be fair to be done; what one person may consider fair, another person may consider very unfair; you must have some settled rule and principle upon which to determine how that discretion is to be exercised. [19: (1858) 25 Beav 140]

VI. He who comes to equity must come with clean handsThe assumption here is that the party claiming an equitable relief must demonstrate that he has not acted with impropriety in respect of the claim. Certainly, in the context of the granting of injunctions, which, like all equitable remedies, are, the principle has been broadly stated; for example, Wood J stated in Cross v Cross[footnoteRef:20]: He who comes to equity must come with a clean hand and any conduct of the plaintiff which would make a grant of specific performance inequitable can prove a bar. It appears, however, that the uncleanness must relate directly to the matter in hand, otherwise anyone might be denied a remedy simply because he was of bad character. [20: (1983) 4 FLR 235]

VII. Delay defeats equity (equity aids the vigilant and not the indolent)Where a party has slept on his rights and has given the defendant the impression that he has waived his rights, the court of equity may refuse its assistance to the claimant. This is known as the doctrine of laches[footnoteRef:21].A court of Equity has always refused its aid to stale demands, where a party has slept upon his right and acquiesced for a great length of time. Nothing can call forth this court into activity, but conscience, good faith, and reasonable diligence; where these are wanting, the court is passive, and does nothing. Per Lord Camden LC in Smith v. Clay (1767) 3 Bro.C.C 639 n. at 640 n [21: The essential element of laches is that there has been an unreasonable delay by the plaintiff in bringing the claim. Because laches is an equitable defense, it is ordinarily applied only to claims for equitable relief (such as injunctions), and not to claims for legal relief (such as damages).]

VIII. Equality is equityWhere two or more parties have an interest in the same property but their respective interests have not been quantified, equity as a last resort may divide the interest equally.

IX. Equity looks at the intent rather than the formThe court looks at the substance of an arrangement rather than its appearance in order to ascertain the intention of the parties. For example, a deed is not treated in equity as a substitute for consideration. Lord Romilly MR thus expressed this maxim in Parkin v Thorold[footnoteRef:22]. It should not be thought that this implies that formalities are never required, however. Equity will not enforce or recognise equitable interests where, for example, formalities are required by statute. This maxim is in the nature of a general principle only, which implies that equity is generally less concerned with precise forms than the common law. [22: (1852) 16 Beav 59]

X. Equity imputes an intention to fulfil an obligationThe principle here is based on the premise that if a party is under an obligation to perform an act and he performs an alternative but similar act, equity assumes that the second act was done with the intention of fulfilling the obligation.XI. Equity regards as done that which ought to be doneIf a person is under an obligation to perform an act which is specifically enforceable, the parties acquire the same rights and liabilities in equity as though the act had been performed. Under the doctrine in Walsh v. Lonsdale[footnoteRef:23], one who enters into possession of land under an agreement for a lease of which the court will grant specific performance, is in the same position (as between himself and the landlord) as if the lease had actually been granted to him. In other words, an agreement for a lease is as good as a lease. [23: (1882) 21 Ch. D. 9]

XII. Equity acts in personamOriginally, equitable orders were enforced against the person of the defendant, with the ultimate sanction of imprisonment. A later equitable invention permitted an order to be attached to the defendants property, i.e. in rem. Today this maxim has lost much of its importance.XIII. Equity will not assist a volunteerThis maxim is still applicable today and reflects the principle that a party seeking equitable assistance, such as an equitable remedy, is required to demonstrate that he has provided valuable consideration. Thus, in order to enforce a contract by way of specific performance the claimant is required to be a non-volunteer.

EVOLUTION OF THE TRUST Tracing the development of the trust by equity is to discover a series of problems looking for answers: the answers being provided by the trust[footnoteRef:24]. It is a concept which began as the solution to some relatively simple and straightforward problems and then just grew and grew. Its great merit was and still is its adaptability, its ability to evolve and cope with new and different problems. The modern trust has its origins in the use which was developed as the response of equity to the shortcomings of the common law. [24: Nigel Stockwell and Richard Edwards, Equity and Trusts seventh edition 2005 at page 6]

The development of the trust began even before the Norman Conquest in 1066, when land was transferred to the use of other people or purposes. At first the problems that presented themselves were often of a temporary or short-term nature. For example, the owner of land was planning to be away for some time and he transferred the land to a friend (the transferee) who it was understood would take the land not for his own benefit but would hold it for the family of the owner. Often the arrangement was to last only until the owner returned. In most cases there would be no problem: the friend would honestly and faithfully carry out his promise and would ensure that the benefits of the land flowed to the family. However, there were occasions when the promise was not kept or a disagreement arose over the manner in which the land was administered. In such cases the common law would recognise only the ownership of the transferee. The family was considered to have no rights in the land at all. In other words, the family had absolutely no legal redress if the transferee simply ignored his promise and administered the land for his own benefit. The promise was binding in honour only and the family had to hope that a wise choice had been made and that the transferee was a man of honour.

In the fourteenth and fifteenth centuries the Chancellor began to protect the family and would order the transferee to carry out the terms of his promise. As equity acts in personam, the protection took the form of ordering the transferee to act in a particular way to accord with the terms of his agreement. Soon, however, equity allowed the family to enforce their rights not only against the original transferee but also against third parties who received the property from the original transferee. However, it was always accepted by equity that the legal owner of the property was the transferee. So, gradually, over a period of many years, the attitude of the Chancellor evolved into the recognition of separate rights of the family, and eventually it was accepted that two types of ownership could exist in property at the same time. One was recognised by the common law and the other by equity. The terminology used was that the transferee was known as the feoffee to uses and the people for whom he held the property were called the cestuis que use. Again, the use was applied in order to sidestep the common law prohibition on disposing of land by will. The would-be testator would transfer the land during his lifetime to a number of his trusted friends and then nominate to whose use they were to hold the land after his (the transferors) death, and in the meantime until his death the property would be held for the transferor. Again, the use was being employed to overcome what many saw as a defect of the common law.

DEFINITION/DESCRIPTION OF THE TRUST A trust is very difficult if not impossible to define, but its essential elements are reasonably easily described and readily understood. There have been very many attempts to produce a definition of a trust but such definitions are long, amounting to descriptions rather than definitions, or shorter but susceptible to criticism. It is not considered worthwhile either to attempt yet another definition or to criticise existing definitions; rather I will describe the concept of a trust. If a settlor[footnoteRef:25], Simon, transfers property to trustee 1 and trustee 2 (Tim and Tom) to hold on trust for Ben, the legal ownership of the property is vested in Tim and Tom and the equitable (or beneficial) ownership is vested in Ben. It will be recalled that this division of ownership was the invention of equity and is the basis of the trust. Tim and Tom hold the property not for their own benefit but for the benefit of Ben. Tim and Toms technical, legal, ownership brings only burdens and responsibilities which make their position very onerous. The duties and responsibilities of Tim and Tom will be imposed by the settlor, by statute and by the general law of trusts. The beneficial ownership which rests with Ben brings with it, as the name suggests, the positive advantages of ownership. Any income which the trust property generates will belong to Ben. Any profit made from the trust property will accrue for the advantage of Ben. [25: A person who creates a settlement. In a broad sense the term includes testators; in a more restricted sense it signifies one who settles property during his life. Oxford dictionary of law 5th Ed. 2003 at page 459]

Generally speaking, it is not possible to create trusts for purposes rather than to benefit human beneficiaries. The most important exception to this general rule against purpose trusts is the charitable trust. It is also possible to have a trust for a purpose which is to provide a direct benefit to a group of people. For example, in Re Denley[footnoteRef:26], the court found that a valid private trust came into existence when land was given to be used as a sports field primarily for the benefit of the employees of a specified company. [26: [1968] 3 All ER 65]

In most trusts the settlor will transfer the trust property to others to hold as trustees but it is perfectly possible for a trust to be created by the owner of the property declaring that he holds it henceforth on specified trusts for the beneficiaries. It is also possible for a settlor to be a beneficiary under a trust he has created. If Tim and Tom deal with the trust property in a way that is contrary to the terms of their trust this will constitute a breach of trust, and Ben will be able to seek various remedies through the courts, including damages. If trust property has improperly been transferred to a third party it may be possible for Ben to follow or trace the trust property into the hands of third parties and recover it.

In Westdeutsche Landesbank Girozentrale v Islington London Borough Council[footnoteRef:27], Lord Browne-Wilkinson made a number of points that relate to the underlying nature of the trust and of equitable interests: [27: [1996] 2 All ER 961]

i. Equity operates on the conscience of the owner of the legal interest. In the case of a trust, the conscience of the legal owner requires him to carry out the purposes for which the property was vested in him (express or implied trust) or which the law imposes on him by reason of his unconscionable conduct (constructive trust).

ii. Since the equitable jurisdiction to enforce trusts depends upon the conscience of the holder of the legal interest being affected, he cannot be a trustee of the property if and so long as he is ignorant of the facts alleged to affect his conscience, i.e. until he is aware that he is intended to hold the property for the benefit of others in the case of an express or implied trust, or, in the case of a constructive trust, of the factors which are alleged to affect his conscience.

iii. In order to establish a trust, there must be identifiable trust property. The only apparent exception to this rule is a constructive trust imposed on a person who dishonestly assists in a breach of trust who may come under fiduciary duties even if he does not receive identifiable trust property.

iv. Once a trust is established, as from the date of its establishment the beneficiary has, in equity, a proprietary interest in the trust property, which proprietary interest will be enforceable in equity against any subsequent holder of the property (whether the original property or substituted property into which it can be traced) other than a purchaser for value of the legal interest without notice.

BONA FIDE PURCHASER PRINCIPLE When the concept of the trust was being developed by equity, one of the problems that had to be addressed was what the rights of the beneficiary were if the trustee transferred trust property to a third party in breach of trust. The solution that equity imposed is not surprising when it is recalled that the courts proceeded on the basis of principles of conscience. If the trustee transferred the trust property to a purchaser who was acting in good faith, who gave value for the property and who had no notice of the equitable interests existing in the property, equity saw no reason why the purchaser should be treated as having acted with unconscionable conduct and so there was no reason why equity should allow the claim of the beneficiary to prevail.

The bona fide principle is obviously important but it is limited. It does not apply if the trust property is acquired by a volunteer or by a purchaser of an interest other than the legal interest. The bona fide principle only applies if the purchaser has no notice of the equitable interests. Notice can include actual and constructive notice. A person has constructive notice of matters of which he would have known had he made those inquiries which a reasonable man would have made. A purchaser will also be fixed with notice of facts known to his agents (e.g. his lawyers). This is called imputed notice.

CLASSIFICATION OF TRUSTS There are several ways in which trusts can be classified, all of which have some value. By method of creationThis method classifies trusts according to their method of creation. The majority of trusts are express trusts, i.e. trusts in which the settler expresses an intention to create the trust. Express trustsThese trusts are the product of the express and expressed intention of the settler to create a trust. It may be that the potential settlor has not expressed himself as clearly as he might and that the court has to decide if a trust is actually intended; nevertheless, if the court finds that a trust is intended, it will be an express trust.Resulting trustsThis type of trust comes into being when a settlor has set up a trust but the beneficial interest (or part of it) results or returns to the settlor. An example would be if a settlor transfers property to trustees but fails to name or describe the beneficiaries. Another illustration of a resulting trust occurs if property is bought and conveyed into the name of someone else. BY TYPE OF BENEFICIARYPrivate trustsMost of the trusts discussed in this book are private trusts in that they are set up to benefit either a single individual or a class of specified people.

Public trustsThese trusts are intended to benefit the public at large or at least a section of it. One of the commonest examples of a public trust is the charitable trust. One of the conditions for validity as a charitable trust is that it bestows a benefit on the public or a section of the public. By nature of beneficiaries interestFixed trustsIn a fixed trust the settlor states in the trust instrument the exact interest or share that each of the beneficiaries is to have. For example, if the settlor, Sam, transfers property to trustees to hold for his two children, Ben and Bill, equally, he has created a fixed trust. The shares of Ben and Bill have been precisely defined by Sam. The result of creating a fixed trust is that the beneficiaries have the beneficial ownership of property. Bill, for example, will be the owner of an interest equal to his share in the trust.Discretionary trustsUnder such a trust the trustees are given the discretion to decide the extent to which beneficiaries are to benefit. For example, Sam may decide to transfer property to trustees to hold on a discretionary trust for his two children, Bill and Ben, giving the trustees the discretion to decide how Bill and Ben are to benefit from the income and the capital of the trust fund. Neither Bill nor Ben has any interest in the trust property. Simple trustsA simple or bare trust exists where the trustees have no active duties to perform. The trustees are simply the holders of the legal estate. An example of a simple trust is if property is transferred into the name of a mere nominee for the real or beneficial owner.

RELEVANCE OF EQUITY IN UGANDAIn Uganda, Equity was received by the 1902 and 1911 Orders in Council which made Equity and Common Law to be applied concurrently and where there was conflict between the two with reference to the same subject matter, the rules of equity would prevail. The judicature statute cap 13 sec 14(3) gives strength to this principle as follows; the applied law, the common law and doctrines of equity shall be in force in so far as the circumstances of Uganda and its people permit.The magistrates' court act similarly facilitates the application of common law doctrines as well as equity under section 11 (1)[footnoteRef:28]. It follows that equity is applicable in Uganda thereby giving relevance to its doctrines in Uganda's legal system. It is of vital importance to note that courts of law in applying Equity take into consideration the maxims of Equity which are the basis of the various doctrines of equity that include the following. [28: In every civil cause or matter before a magistrates court, law and equity shall be administered concurrently.]

THE DOCTRINE OF NOTICE This doctrine refers to knowledge of an existing fact. The rationale is to prevent a buyer of a superior title from setting it against earlier owners of inferior interests which affect the property. A buyer of the legal estate with notice of prior equitable interests affecting the estate takes it subject to prior equitable interests. There are three types of notice: actual notice, constructive notice and imputed notice.Actual noticeThis is where the purchaser or mortgagee wasconsciously aware of the existence of the equitable interest. In ZIMBE V KAMANZA (1954), the appellant and respondent both purchased the same piece of land; the latter never registered his title while the former did.The Registrar didnt show the Appellant that land belonged to the Respondent who sued. It was held that, the appellant was entitled to rely on the registrars revelation and was not entitled to make any further inquiry.Constructive noticeConstructive notice is concerned with what the purchaser or mortgageeought to be aware of or what they would have discovered by making reasonable inquiries. Constructive notice is to the effect that a purchaser will be fixed with notice if "it is within his own knowledge or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him."Reasonable inquiries including visiting the property and asking any occupants if they have aninterest or if they are a tenant to whom they pay their rent.Imputed noticeA purchaser or mortgagee is deemed to know all that his agent knows or has constructive notice of. In SEJJAKA V REBECCA MUSOKE (1985), the respondents husband died leaving behind property which a third party acquired through fraud and sold to the Appellant.Appellant argued that he was a bona fide purchaser of value without notice. The issue was whether the Respondent had notice. It was held that Musoke and Co. Advocates who were acting as her agents were aware of the alleged fraud concerning the disputed property.

THE DOCTRINE OF ELECTIONThe doctrine of election is a rule of equity that requires that if a testator attempts to dispose of property belonging to someone else and also makes a devise to that person, the beneficiary must choose between either keeping the property or accepting the devise. Usually, the doctrine of election will require the following: The testator must intentionally dispose of the property. The property must belong to someone other than the testator. The will must devise other property to the actual owner.The doctrine of election arises in this way. A testator purports to leave property to A which belongs to B. The will also confers a benefit on B. Obviously B may refuse to hand over his property to A. But if he does decide to keep it together with the benefit given to him by the will, he must compensate A for the loss of what the will attempted to give him.In Uganda, discernible the relevance of the doctrine of election is discernible in The Succession Act which has a number of provisions that incorporate the doctrine of election ranging from Section 167 to Section 178, Sec 167 and provides that a person whose property has been disposed off by the testator has a right to elect. Hence these provisions illustrate the fact that the doctrine of election is incorporated into Ugandas legal system.[footnoteRef:29] [29: Sec 64(2) states that "the land which is included in any certificate of title or registered instrument shall be deemed to be subject to the reservations, exceptions, covenants conditions and powers if any contained in the grant of the land and to any rights subsisting under any adverse possession of the land and to any public rights of way and to any easements acquired by enjoyment."]

DOCTRINE OF SATISFACTIONThe basis of this doctrine is the maxim Equity imputes an intention to fulfill an obligation. Where a person is under an obligation to do one thing but does another, the doing of that other thing may be held to satisfy the legal obligation. For example A owes B 2 million. A died and the debt remains outstanding. A left a will and in his will, he left B 2 million. A intended to satisfy his obligation (to pay the debt) towards B thus the 20002 million left in As will is intended to relinquish As debt towards B. B must give up his claim to the debt if he wishes to take the legacy left by A. This doctrine is not applicable where: The debt was incurred after A made his will; The debt is not a specific sum; The will made by A contains a specific direction to pay his debts.The doctrine of satisfaction has been incorporated in Ugandas legal system and can be traced in Sections 164 to 166 of the Succession Act. Section 164 provides that where a debtor bequeaths a legacy to his or her creditor, and it does not appear from the will that the legacy is meant as satisfaction of the debt the creditor shall be entitled to the legacy as well as well as to the amount of the debt. The Judicature Act under section 14(2) (b), Magistrates Court Act section 11also provide for the application of the doctrine of Satisfaction in Uganda.

DOCTRINE OF PERFORMANCE

This doctrine is applicable much like the doctrine of satisfaction. Where a person is under an obligation to do one thing but does another, equity may still regard the performance of that thing as performance of the original obligation. This doctrine is applicable in these situations:

Agreement to purchase land A is under the obligation to purchase one land. Several lands have been bought, none of which is the land A was supposed to purchase. Here, it is presumed that the lands were bought in performance or part performance of the obligation. Agreement to leave money A has agreed to leave a sum of money, through a will to B. However, A suddenly died without having the opportunity to write the will. Under this doctrine, B is entitled to a portion of As personal estate.

The doctrine of performance in Uganda today has a great effect in succession matters; wills are construed literally through the wording as well as the circumstances surrounding the making. The other factors that reflect performance in succession matters are the onerous bequests, contingent bequests and conditional bequests contained in sections 109-123 of the succession Act. . However the fact that there is limited case law shows that the doctrine is of little practical relevance in Uganda. RELEVANCE OF TRUSTS IN UGANDAThe trust in Uganda is governed by various statutes such as the Registration of Titles Act which requires any declaration of trust with respect to land to be evidenced by a memorandum in writing signed by the person creating the trust. The Succession Act states that all trusts created by testamentary disposition must be executed and attested in accordance with the formalities therein prescribed, that is; they must be in writing, signed by the testator and the signature be acknowledged by two witnesses in writing. Under the Mental Treatment Act CAP 279, the court may direct settlement to be made of the property of a lunatic or any part thereof or any interest therein and subject to such powers and provisions as the court may deem expedient.Trust idea enables employers to arrange pension scheme for their employees upon retirement as law requires. This is of great use to the employers because it enables efficiency at work as it attracts and retains employees. Social security funds in Uganda include National Social Security Fund established under section 2 of the NSSF Act to keep employees money on trust. This way, NSSF is the trustee and employees are the beneficiaries. In fact, the employee is entitled to pension upon retirement and this is reflected In the case of Kashambuzi V Makerere University where court held that the applicant and also senior lecturer was entitled to pension upon retirement. Mismanagement of such funds by the trustee is actionable and this creates certainity on the part of the employers. The case of David Chandi Jamwa describes this since he was convicted for causing financial loss to NSSF. This creates certainty on the part of employees.Trusts are applied to preserve environment. Environmentally sensitive areas or natural resources like Water bodies, wetlands, forest reserves and other ecological and touristic areas are held in trust for Ugandans. This is provided for by Article 237 of the constitution section 44 of the land Act. Such resources can only be kept safe under the control of government and examples include; Mabira forest, Bugala Island in Kalangala district among others, all owned by government on behalf of the people. In such a setup, government is the trustee and we Ugandans the beneficiaries.

Similar to the above are the minerals found in and on Land in Uganda. These include minerals like Gold, Oil and others so valuable and are in large quantities. Article 237 of the constitution and Section 3 of the mining Act vest all land with such resources in government notwithstanding ownership of or by any other person. This leads to proper planning of the minerals as well as their equal distribution to the citizens. Therefore, the government becomes the trustee under the above mentioned provisions and citizens beneficiaries.The trust has also been employed through the equitable doctrine of tracing which is employed in the constructive trust. .the intervention of the so-called constructive trusts, the courts have been enabled to give relief against all sorts of fraudulent schemes where by scoundrels have sought to enrich themselves at the expense of other persons. The constructive trust is therefore one implied by court usually in reference to an interest in income or property arising out of an unconscionable bargain such that the individual does not benefit from the same. In the case of Teddy Seezi Cheeye v Uganda the appellant who was the Director of Economic Monitoring in Internal Security Organisation formed a Non-governmental organisation that fraudulently siphoned funds meant to alleviate the suffering of victims of HIV/AIDS in Kalangala and Rukungiri. He was ordered to refund 112m to the Global Fund as well as imprisoned. In a country rife with corruption and abuse of office for personal gratification, the trust, through the doctrine of tracing is a tenable partial remedy to the same.

CONCLUSIONIt is difficult to understand any part of English law without briefly tracing the history of England in the period 1066 where the common law also first came up. Equity now works in tandem with common law. It is also responsible for the evolution of the trust. Although a precise definition of trust has not been entirely successful, the concept of trust has contributed significantly in our understanding of the general application and operation of the law in a legal discourse. It enables property to be given to persons in succession. Unincorporated associations which lack a legal personality and so cannot hold property can do so by way of trusts. Also, a variety of charitable trusts may be used to create trusts for the public or for the section of the public or for relief of poverty.Page 22 of 24