1. Remembering Equity and its Role in Property Relationships
Associate Professor Cameron Stewart
Division of Law

2. The Blind Men and the Elephant
John Godfrey Saxe

3. The Anglo-Saxon Invasions c500AD

4. The Battle of Hastings 1066

5. Norman Reorganisation
Sovereignty
Absolute beneficial title
Reception of laws
Conquering
Settling;
Cessession
Feudalism

6. Henry II – the Father of the Common law
Curia Regis
General Eyre and Assizes
Assize of Clarendon 1166 – 12 freemen from the hundred and 4 from the town
Henry, Richard Coeur-de-Lion and John Lackland

7. A’Beckett’s Legacy
The Church Courts
The benefit of the
clergy

8. Edward Longshanks Hammer of the Scots
Parliament begins 1275
The use of statute as opposed to ordinance
Nisi Prius
Quia Emptores

9. Curia Regis – embryonic courts
Court of Exchequer – revenue
Court of Common Pleas – civil actions
Court of King’s bench – crime
Remaining Council functions split into
King’s Council later Concilium Regis and then Privy Council

10. The Writ System Bureacracy Organisation of wrongs Remedies Popularity
Recording
Stare Decisis
Common law

11. What’s the common law meant to do?
Persons & Property
Quick, efficient, fair and effective
Real property – real actions- real relief
Seisin
Remedies – return the seisin, pay monetary damages
Contract and tort

12. What goes wrong?

13. The Office of the Lord Chancellor
Around since Norman times
Keeper of the King’s Conscience
Cleric and Keeper of the Great Seal
Member of Lords, Judge and Church

14. Chancery as a Court Around the 15th century
Function to repair the failings of Common law
Principles of Christian fairness/conscience
Maxims of equity
Substance not form
Does not assist a volunteer
Equity follows the law
Clean hands
Discretion and the Chancellor’s foot
The two streams – law and equity

15. What does Equity do? Parkinson:
(i) the exploitation of vulnerability or weakness, as exemplified in principles relating to unconscionable dealing and undue influence;
(ii) the abuse of positions of trust or confidence, as exemplified in the law of trusts and fiduciary obligations generally;
(iii) the insistence upon rights in circumstances which make such insistence harsh or oppressive as exemplified in relief from penalties and forfeiture, the law of equitable set-off, and the refusal of specific performance on the discretionary ground of hardship;
(iv) the inequitable denial of obligations, as exemplified in the doctrine of part performance and the principle of equitable estoppel;
(v) the unjust retention of property, as exemplified in certain constructive trusts and principles of subrogation

16. The relationship between CL and Eq
James VI of Scotland
The rise of protestantism
Absolutism of sovereign – Divine Right of Kings or King-in-parliament?
Bacon & Ellesmere: Earl of Oxford’s case

17. Earl of Oxford’s case
The Office of the Chancellor is to correct Men’s consciences for Frauds, Breach of Trusts, Wrongs and oppressions, of what Nature soever they be, and to soften and mollify the Extremity of the Law ... [W]hen a Judgment is obtained by Oppression, Wrong and a hard Conscience, the Chancellor will frustrate and set it aside, not for any error or Defect in the Judgment, but for the hard Conscience of the Party.

18. The legalisation of equity
The Civil War – equity nearly destroyed
Lord Nottingham ( )– father of equity
Lord Eldon – ( ) modern rules
Precedent and fixation
Appointment of VC
Poor administration
Infamous delay – record 16 years and still interlocutory

19. 19th Century reforms Bentham and the ‘dog law’
Judicature Acts 1870s – 1970s
The two streams in one courtWindeyer J in Felton v Mulligan (1971) 124 CLR 367 at 392; [1972] ALR 33 at 46
Fusion fallacies
Salt v Cooper (1880) 16 ChD 545 at 549, Jessel MR said of the effect of the Act:
It has been sometimes inaccurately called 'the fusion of Law and Equity'; but it was not any fusion, or anything of that kind; it was the vesting in one tribunal the administration of Law and Equity in every cause, action, or dispute which should come before that tribunal. … To carry that out, the Legislature did not create a new jurisdiction, but simply transferred the old jurisdictions of the Courts of Law and Equity to the new tribunal, and then gave directions to the new tribunal as to the mode in which it should administer the combined jurisdictions.

20. Property in CL
Universalized, reified, fetishized – the materialization of the common law
Formality
Creation
Transfer
Rights recognised in contract and tort – breach of contract, trespass, negligence
Remedies for breach of property rights – damages
CL makes orders about the property not the people

21. Property in Eq Substance Conscience Power
Responsibility – lunacy, infants, married woman
Trust and confidence
BUT through the logic of precedent not unfettered discretion
Rights recognised through doctrines of equity – misrepresentation, undue influence, duress, unconscionability, fiduciary relationships, part performance, equitable estoppel, breach of confidence
Remedies – injunctions, specific performance, constructive trusts, personal orders
Equity makes orders about the people not the property

22. Property in Eq
Equitable property or interest (equitable fee simple, mortgages, covenants etc)
Personal Equities (Gill v Gill)
Mere Equities (Latec)

23. Case study 1: When contracts go bad
A (vendor) exchanges contracts with B (purchaser)
A gets a better offer from C (he knows about B’s offer) and completes the sale to C before B knows
Common law approach? Breach and damages – no property held by B
Equitable approach: breach and specific performance
But what about the property interests?

24. Case study 1: When contracts go bad
In common law B is not the owner as the contract has not been completed so the property cannot be returned
In equity, the rule in Lysaght v Edwards says that B gets an equitable interest from the exchange and that it is a form of constructive trust, which can be enforced against C (when he knows about B)

25. Case Study 2: Fat Henry and the problem of trusts
Henry and the purse strings
Taxation in Tudor England – feudal tenures
Primogeniture
Devising land by will
The legal remainder rules

26. The use A --------------------------B --------------------C
(Landowner) (feoffee to use ) (cestui que use)
Legal estate Beneficial estate
CL Equitable

27. The Statute of Uses 1535 Collapse the use Springing uses
The use on the use
Equity creates property where there was none before……

28. Case study 2: Part performance and the equitable ‘impersonation’
A Lease for a factory – an agreement to create a deed
Or a mortgage created by deposit of title deeds
Or a promise to give a life interest if cared for in dotage…

29. The requirements for writing
23B Assurances of land to be by deed
No assurance of land shall be valid to pass an interest at law unless made by deed.
23C Instruments required to be in writing
Subject to the provisions of this Act with respect to the creation of interests in land by parol: (a)  no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent thereunto lawfully authorised in writing, or by will, or by operation of law, ….

30. The requirements for writing
54A Contracts for sale etc of land to be in writing
No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged…
CL says no deal

31. Part performance Equity looks to substance not form
Was there an agreement?
Did a party act under that agreement and performed an act to their detriment which relates solely to the agreement?
Is the agreement one which a court of equity would order specific performance?
If yes to all then equity creates an interest which is an equitable impersonation or copy of the common law interest being claimed

32. Legal interest v legal interest
When two or more legal interests in the land conflict the main principle is that a person cannot convey an interest which he or she does not have (“nemo dat quod non habet”)
Partial eg where A leases to B – A then sells to C – C ‘s interest is taken subject to the lease
Wholly inconsistent – A sells to B and then sells to C: C receives nothing

33. Equitable interest v equitable interest
General rule : the earlier interest has the better claim, if everyone has acted in good conscience
NOTE: no nemo dat equivalent – equity is a court of conscience – many exceptions to the general principle – first in time principle is a last resort

34. Equitable interest v equitable interest
Who has the best equity?
Heid v Reliance Finance Corporation Ltd – the better equity depends on the circumstances –
look to the conduct of the parties
the question of negligence on the part of the prior claimant
the effect of any representations made by the prior claimant which may give rise to an estoppel
did the conduct of the prior claimant enable such a representation to be made?

35. Equitable interest v equitable interest
Generally: the earlier equitable interest may be postponed to the later interest where:
(a) the conduct of the earlier interest holder has led to the later interest holder acquiring an interest;
(b) in the mistaken belief that the prior interest did not exist
If the equities are equal then first in time

36. Equitable interest v equitable interest
EG Able agrees to sell his land to Barb. Able gives the title deeds to barb and signs a receipt for the purchase money even though he has yet to be paid. Barb proceeds to grant an equitable mortgage over the land to Clary. How has the better interest?
Look to the equities:
Able has an equitable lien over the property
Clary has an equitable mortgage

37. Equitable interest v equitable interest
Both the equities are security interests – no real difference between them – However Able’s negligent conduct in giving the title deeds and signing the certificate means that it was his fault that Clary took his interest without notice- Hence Clary’s interest is superior
See Rice v Rice (1853) 61 ER 646

38. Equitable interest v equitable interest
Exception: in the case of land held under a trust the beneficiaries will not lose their priority because of negligent or fraudulent conduct by the trustee
Shropshire Union Railways and Canal Company v The Queen

39. Equitable interest v equitable interest
Exception doesn’t apply unless the trust is properly formed or in cases where the trustee has failed to complete the trust be receiving the trust property
Walker v Linom

40. Mere Equities
Exception: Mere equities – personal right to a remedy – proprietary in nature but less than a full equitable interest
Examples: the right to have a document rectified, right to have a conveyance set aside because of the grantee’s fraud
Latec Investments Ltd v Hotel Terrigal Pty Limited: Terrigal had granted a mortgage to Latec. Latec exercised the power of sale of the mortgage and sold it to a wholly owned subsidiary, Southern – Southern granted a further equitable interest to MLC which had no notice of the Terrigal interest

41. Mere Equities
Terrigal argued that the sale was fraudulent – not at arm’s length – both Southern and Latec had conspired to sell at a low price
What was the priority between the interest held by Terrigal and the interest held by MLC? It was held that Terrigal had a bare right to sue and have the transaction set aside – a mere equity
A prior mere equity will not prevail over a later full-blown equitable interest that was taken without notice

42. Exception: tacking
Exception: tacking – tabula in naufragio – if a later equitable interest holder purchased for value and without notice and is later able to acquire the legal estate then the later interest holder can tack its equity onto the legal estate and jump priority
EG Mortgages – If Able grants a mortgage to Bette then an equitable mortgage to Clary and then another equitable mortgage to Donna – then the order of priority will normally be B, C, D – but if Donna can later buy the land off Bette then Donna equitable interest will be tacked to the legal estate and Clary will come in last

43. Prior legal interest v equitable interest
In cases where there has been no fraud on the part of the legal estate holder the prior legal estate prevails over the later equitable estate
Where the equities are equal the law prevails

44. Prior legal interest v equitable interest
Exceptions:
Where the legal interest holder was a party to the fraud that led to the equitable interest being created Northtern Counties v Whipp
Where the legal interest holder was grossly negligent in failing to inquire after or obtain possession of the title deeds Walker v Linom

45. Prior legal interest v equitable interest
Exceptions:
Where the legal interest holder entrusted the title deeds to an agent with limited authority to raise money by using the property as a security interest, and that agent exceeds authority by borrowing more than was intended – legal interest is bound to the full extent.
Brocklesby v Temperence Permanent Building Society

46. Prior legal interest v equitable interest
Exceptions:
Where the legal holder hands over a title document which is used by a fraudster to create an equitable interest in another who takes on the faith of the document
Barry v Heider

47. Prior equitable interest v legal interest
The legal interest will prevail if it was acquired:
1. by a purchaser:
Anyone who acquire an interest for value (lessee, fee simple owner, mortgagee)
2 for value
Consideration in money – needs to be more than nominal amount but not market valu
3 in good faith
Bona fide – no hint of conspiracy or unclean hands

48. Prior equitable interest v legal interest
4. without notice of the prior equitable interest
Can be actual, constructive or imputed
Actual: knowledge of the actual facts – real knowledge
Constructive: knowledge that would have come into the person’s attention had they made reasonable inquiries eg case of land sold with a tenant in possession – purchaser should have checked the rights of the lessee - constructive notice
Must be able to find the interest – old system title allowed to go back 30 years
CAct s 164
Imputed: at law you are regarded as having been notified eg where agent is notified by no principle

49. Prior equitable interest v legal interest
The rule in Wilkes v Spooner
Subsequent purchasers are in the same shoes as the legal estate holder even when the subsequent legal interest has notice or receives via gift

50. Registration Systems
Problems with fraudulent transactions in the early colony
1800 – order of Governor King that all agreements concerning land be in writing or entered into books kept at Sydney, Parramatta and Hawkesbury
1802 – Judge Advocate’s office

51. Registration Systems
1817- Gov Macquarie – Fraudulent against a bona fide purchaser for value
1825 – Registration Act – substantially amended over time and then repealed in 1984 and sections transferred into the Conveyancing Act

52. Conveyancing Act and the Register of Deeds
Section 184C – general register of deeds
Open to public inspection – s 199
Deliver original and copy to the Registrar – registered with a number – copy kept on file
Any instrument affecting land or not can be registered – not necessarily a “deed” as such

53. Conveyancing Act and the Register of Deeds
The effect of registration?
(a) Validity of the document – some instruments must be registered to have legal force eg short form of mortgage discharge, appointment of new trustee, powers of attorney
Registration for priority – s 184G – instruments affecting land, executed bona fide and for valuable consideration take priority over earlier instruments
Effect – earlier legal interest will be defeated by later legal interest upon registration of later interest and so on
However it only affects priority – will not perfect a fraudulent transaction, mistake or forgery

54. Unregistered interests in the Torrens system
Section 41(1) – unregistered instruments not effective to pass any estate or interest in land until registered
RPA does recognize unregistered interests but not the instruments: Barry v Heider(1914) 19 CLR 197 – the instrument does not create an interest in land but the agreement between the parties brings into being an equitable interest which is then enforceable
Hence unregistered interests are said to be in the nature of equitable interests in the Torrens system, even if they are in writing (remember the Statute of Frauds!!)

55. Priorities between registered and unregistered interests
Unregistered interests are extinguished by registered interests (unless caveats or exceptions to indefeasibility: see below)

56. Priorities between unregistered interests
Priority is determined by general common law principles: however some unregistered interests never have to be registered and hence are “legal” eg short term leases and adverse possession, mortgage by deposit of title deeds

57. Priorities between unregistered interests
So generally we got back to the principles – where the broad idea is “First in time has the better equity” but the main principle is “Who has the better equity?”
Look to conduct: inaction or postponing conduct, failure to lodge a caveat to protect the interest

58. Exceptions to indefeasibility - Fraud
A person who acquires a registered interest through fraud has a defeasible interest: RPA ss 42, 43, 124
Eg their interest can be set aside.
The requirements for setting aside such an interest are:
the registered proprietor’s interest must have been acquired through implication in the fraud; and
the implication may be personal or through the acts of an agent.

59. Exceptions to indefeasibility - Fraud
General principle: unless the fraud can be brought home to the registered proprietor, registration will confer indefeasibility.
Definition of fraud: actual dishonesty, which can be attached to the registered proprietor’s title (Assets Co Ltd v Mere Roihi [1905] AC 176)
Sometimes said to be “moral turpitude”

60. Exceptions to indefeasibility - Rights in personam
While registration of an interest may extinguish other unregistered interests personal rights of action can still survive – sometimes called “personal equities”
Examples:
Right of specific performance in a sale of land contract;
Right of beneficiary to call on performance of trust;
Right to rectify a mistake in a contract which has bestowed title on the wrong party.
The personal equity must rest on a legal or equitable cause of action

61. Exceptions to indefeasibility - Rights in personam
Bahr v Nicolay (No 2) 1988) 62 ALJR 268.
The registered proprietor (R) was bound by a personal equity where R knew of an unregistered interest and had purchased the property on the basis that R would recognise and be bound by that unregistered interest.