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1History of the Court of Chancery and Introduction to Equitye words equity and trust are part of everyday language and, like many words, have more than one meaning. Which is the appropriate meaning depends on the context, and both have special meanings as part of the language of the law. In a non-technical sense, the primary dictionary meaning of equity is fairness, and lawyers sometimes use it in this sense. is concept indeed, as we shall see, lies behind its legal meaning. In the world of nance, equity is the word used to describe a companys ordinary share capital and an investment in equities means an investment in the shares of a company; as will be explained, equities in the law of trusts has a di erent meaning, except when used in connection with trustees power of investment. e legal meaning of equity has been moulded by history. In the early years a er the Norman Conquest, justice continued to be dispensed by local courts on the basis of local custom. Later, particularly under Henry II in the twel h century, royal justice developed bringing into being a common law, which applied throughout the kingdom. e subsequence emergence of equity, and its relationship to the common law, are explained in the rst three sections of this chapter. e word trust primarily carries with it the concept of con dence in the integrity and competence of a person or institution. e trust, as a legal institution, regulates the way in which a person or body holds property not for his own bene t, but for the bene t of others. Most of this book is concerned with the trust in this sense. What is known in the USA as antitrust legislation has nothing to do with the trust in this sense: it is concerned with arrangements between commercial organizations to defeat competition and keep up pricesthat is, what we think of as competition law. e history of the trust, and the meaning of equitable interests and equities, are considered in sections 4 and 5. e chapter concludes with short sections on trusts and taxation, and trusts and con ict of laws.

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Equity and the Law of Trusts

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History of the Court of Chancery

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If law be regarded in general terms as the rules enforced in the courts for the promotion of justice,2 equity may be described as that part of the law which, immediately3 prior to the coming into force of the Supreme Court of Judicature Acts 1873 and 18754 on 1 November 1875, was enforced exclusively in the Court of Chancery and not at all in the courts of common lawCommon Pleas, Exchequer, and Kings Bench. Although, in origin, the jurisdiction of the Court of Chancery was undoubtedly based on moral principles designed to remove injustices incapable of being dealt with in the common law courts, equity was always, at least until the Judicature Acts, essentially a supplementary jurisdiction, an appendix or gloss on the common law.5 In some sense, this remains the case, although developments in equitable doctrine since that date have been said to render the description of equity as an appendix to the common law an utterly misleading statement of equitys place in the scheme of things today.6 It is accordingly not really possible to de ne it successfully; it can only be described by giving an inventory of its contents or in the historical terms set out above. e position at the end of the thirteenth century, even a er the last of the three common law courts to evolve out of the Curia Regis had become separate, was that a residuum of justice was still thought to reside in the King. If, therefore, the common law courts for any reason failed to do justice, an aggrieved person might petition the King or the Kings Council. e Lord Chancellor, in addition to being the Keeper of the Great Seal and the head of the Chancery, which by this time had become an important department of state, was the head of the Kings Council and, from early times, petitions seeking the Kings extraordinary justice were referred to him. As early as the reign of Edward I, petitions are to be found addressed to the Chancellor and the Council. is procedure steadily became more frequent and, by the end of the fourteenth century, petitions began to be addressed to the Chancellor alone. e petition would pray that the person we now call the defendant should be brought before the Chancery to be examined and dealt with appropriately, and his presence was enforced by a writ of subpoenathat is, an order that he should appear before the Chancery on pain of forfeiting a sum of money. ere, he would be examined on oath, and questions of both law and fact would be determined. However they were addressed, the petitions were, in fact, dealt with by the Chancellor, although at rst purelyFor a fuller account, see Holdsworth, History of English Law, vol I, p 395 et seq; Potters Historical Introduction to English Law, 4th edn, p 152 et seq; Kerly, History of Equity; and also Milson, Historical Foundations of the Common Law, 2nd edn, p 82 et seq. 2 is begs the real question, what is justice?, which is, however, outside the scope of this book, being a question for jurisprudence and philosophy. Of course, in practice, many matters that justice would demand are not enforced in the courts for various reasons, many being unsuitable for judicial enforcement, and some of the rules enforced fail to achieve justice either generally or in a particular case. 3 Before 1842, the Court of Exchequer had an equity jurisdiction. e statement following in the text relates to the central courts and disregards the Palatine Courts (abolished by the Courts Act 1971) and the county courts. 4 Now replaced by the Supreme Court Act 1981, renamed as the Senior Courts Act 1981 by the Constitutional Reform Act 2005, as from 1 October 2009. 5 Maitland, Equity, 2nd (Brunyate) edn, p 18. See also (1997) 113 LQR 601 (A J Duggan). 6 See (1994) 110 LQR 238 (A Mason).1

History of the Court of Chancery and Introduction to Equity

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as a delegate of the Council. As the practice became habitual and references frequent, the Chancellor and his o ce the Chancery acquired the characteristics of a court, although so far as is known it was not until 1474 that the Chancellor made a decree upon his own authority.7 e cases referred to the Chancellor and the Chancery fall into two main groups: rstly, cases in which the law was defective; and secondly, those in which there was theoretically a remedy at common law, but the petitioner was unable to obtain it because of the disturbed state of the country, or the power and wealth of the other party, who might be able to put improper pressure on the jury or even the court. For a long time,8 the latter was the most important and frequent type of case to be dealt with. In exercising jurisdiction in cases of this kind, it is unlikely that the Chancellor regarded himself as administering a separate system of lawindeed, he was not. It was a jurisdiction that was a cause of considerable complaint and it may well be that the Chancellors powers would have disappeared at about the end of the fourteenth century if it had not been for the other head of jurisdiction, which must now be considered. During the early period of growth of the common law, there was rapid development as the Chancery created new writs to meet new cases. Moreover, the common law judges had a wide discretion to do justice, particularly in the informal procedure by plaint or bill (as opposed to actions begun by writ), and in proceedings in the General Eyre. At rst, therefore, there was little scope for a jurisdiction to remedy the defects of the common law. However, this early rapid development ceased with the Provisions of Oxford in 1258, and only proceeded slowly a er the controversial9 in consimili casu clause of the Statute of Westminster the Second in 1285, so that it is fair to say that, by the end of the thirteenth century, the common law formed a rigid system that was unadaptable, or at least could only be slowly adapted, to meet new types of case. Moreover, plaints without writ, for reasons that are not fully explained, apparently ceased to be available in the fourteenth century and, at about the same time, General Eyres virtually ceased to be held. Consequently, hardship increasingly o en arose because of defects in the law and petitions began to be brought on this ground. In giving relief in these cases, new law was being created and it was this new law that became known as equity, in contrast to the common law dispensed in the common law courts.10 For a long time, there was close consultation between the Chancellor and the common law judges as to the types of case in which relief should be granted. Moreover, the7 Although he seems to have dismissed a petition without consulting the Council nearly a century before. For a discussion of an early Tudor debate on the relation between law and equity, see (1998) 19 JLH 143 (G Behrens). 8 e change seems to have taken place during the reign of Henry VI. e business of the Court of Chancery multiplied three times between 1420 and 1450, by which time nine-tenths of its work was concerned with uses: see (1970) 86 LQR 84 (Margaret E Avery). 9 See (1931) 31 Col LR 778 (T F T Plucknett); (1931) 47 LQR 334 (W S Holdsworth); (1936) 52 LQR 68 (P A Landon); (1936) 52 LQR 220 (T F T Plucknett); (1937) 46 Yale LJ 1142 (Elizabeth Dix); Fifoot, History and Sources of the Common Law, p 66 et seq; Kiralfy, e Action on the Case, p 19 et seq; J H Baker, An Introduction to English Legal History, 4th edn, p 61 et seq. 10 In addition to the equitable jurisdiction known as the English side simply because the pleadings were in the native language, there was the relatively unimportant and largely separate Latin side of the jurisdiction, so called because the records were kept in Latin. is comprised certain specialized matters such as questions relating to royal grants and inquisitions relating to the Crowns property rights, and the ordin