This article will explore the fourteen different equitable maxims which are in use today. In Re Diplock [] Ch , the Court of Appeal recognised that a claim in equity must be shown to exist by looking at precedent of the courts whom administered equitable jurisdiction.
However, this does not mean equity cannot be changed, it is a flexible doctrine. This is an extremely important maxim within the doctrine of equity.
One of the main reasons for equity intervening is that the defendant acted unconscionably. When equity intervenes, it will operate on the conscience of the owner of the legal interest; this was made clear in Westdeutsche Landesbank Girozentrale v Islington LBC [] AC In England, there is a tendency to treat unconscionability as a rule of substance not form — this means it is clearly defined rather than just a guiding principle.
This is demonstrated by Chappell v Times Newspapers Ltd [] 1 WLR where an injunction was not awarded to employees who wished to stop their employer dismissing them because they did not agree to not striking in the future.
This relates to the claimants past conduct. It was decided in Dering v Earl of Winchelsea [] 1 Cox Eq Cas , that improper conduct means improper conduct in a legal sense, not a moral sense. However, in Tinsley v Milligan [] 1 AC , it was held that the claimant does not need to have clean hands if their improper conduct is not relied on to claim the equitable remedy.
This is a controversial judgment by the House of Lords because the claimant had not come to the court with clean hands, and so prima facie, the maxim implies she cannot obtain equitable relief.
The true function of this maxim was given in Re Anstis [] 31 Ch D where parties have entered into a contract that is specifically enforceable, equity will treat the contract as having been performed. This maxim is often relevant where land is transferred between parties but formalities have not been observed. In such a situation, the legal title will remain with the vendor, and the purchaser will have a recognised title in equity. Thus, the vendor is holding the property on a constructive trust for the purchaser.
The main application of the maxim is where a donor purports to make a gift to the donee, but the gift is not effective and the donor retains the legal title. Equity will not perfect an imperfect gift.
However, this maxim is trumped by the principle of unconscionability. Thus, if a donor purports to make a gift but does so ineffectively, if their conduct is held to be unconscionable equity will impose a constructive trust in favour of the donee. This maxim can be explained by distinguishing between rights in rem and rights in personam.
Rights in rem are good against the world; rights in personam are rights against a particular person. Equitable rights will always be in personam because all equitable property rights are defeated by a bona fide purchaser for value. In Parkin v Thorold [] 16 Beav 59, Lord Romilly MR recognised that equity will distinguish which is a matter of substance, and which is a matter of form.
If they find that by insisting on the form, the substance will be defeated, they shall not allow the form to be relied upon. There are a number of examples for this maxim, the clearest being when a settlor has not specifically said they are creating a trust, equity will recognise a trust if it is clear the property was to be held for the benefit of someone else. In most cases, equity will follow recognised legal rules.
Where the property is not properly transferred to trustees, courts will assume the settlor intended to declare themselves the trustee. Where property is transferred to trustees, it is possible that equity will enforce the trust even if the transfer is not complete at law. The transferor must show that they have "done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property", i.
This is not seen as equity assisting the volunteer because the court is not ordering the transferor to do anything. For the trust to be fully constituted, legal title should be transferred to the trustees. What can equity do if a settlor changes their mind or dies before legal title has been transferred? In Milroy v Lord a voluntary deed was executed purporting to assign 50 shares in Louisiana Bank to Lord, upon trust. When the settlor died he was still registered as the legal owner of the shares.
The dividends had been paid to the beneficiaries, not the legal owner. Had a trust been created? To apply the test for complete constitution of a trust, you need to know what the requirements are for a gift of the kind of property in question. Shares in public companies must be transferred via the Stock Exchange. If it is a private company, the donor must execute a stock transfer form and deliver it to the donee with the share certificate.
The intention was to transfer the shares into the name of the trustee, not for the owner to declare himself trustee. The deed did not effect a transfer. The legal owner had the power to transfer the ownership of the shares by registering the name in the company books, but had not done so.
The trust was therefore not completely constituted because the settlor had not done everything in his power to effect the transfer. In Re Fry the paperwork had been completed by the settlor but the share transfer required permission from the Treasury, which had not been obtained by the time of death of the testator.
It was possible the Treasury would have asked for more information. It might have been possible for the testator to refuse to answer more questions and to pull out of the transaction.
However, the court held that there was potentially more for Fry to do because he could answer any Treasury questions. Therefore the trust was not completely constituted. The deceased had sought to transfer shares to his wife and another, to be held on trust but there was a delay in registering the change in share ownership.
For tax purposes, it was necessary to determine if the transfer was effective to dispose of his legal interest or if it continued until the new ownership was registered. The shares were held in a private company, which had the power to refuse to register someone as a shareholder.
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