CH 2 Flashcards
What areas of law were developed by courts of equity?
Trusts - still an area of stand alone equity Mortgages Fiduciary guardianship Partnerships Bankruptcy Fraud Mistake IP early days A lot of business organization is equity
Be able to describe four different meanings that might be associated with “equity” and the definition of “equity” that is important for our purposes
1)Equity as fairness
Fair and just
Ex employment equity, pay equity etc
Considerable disagreement as to what is fair
Courts of equity may have initially done this but that is not what we mean
2)Equity as net worth
Net worth ex of house after creditors paid, equity investmnts
This use comes from the equity of redemption concept developed in courts of equity.
To borrow money you had to give security, conveyed property to lender with a contractual obligation of lender to convey it back to you if you pay by certain date. If you didnt pay then lender kept property. Courts of equity addressed this by allowing borrwer to pay in reasonable period of time/ This right to pay off debt and get back property was called equity of redemption.
The value of borrowers interest (the equity of redemption) was the value of property less unpaid debt.
This is a product of equity but is still not the definition of equity for historical understanding.
3)Equity as corrective to Law
all systems of law arguably need to address problem that fixed rules may work an injustice in some unanticipated circumstances
civil law systems with broadly worded codes, liberal interpretation and non-binding precedent
courts of equity arguably performing this role in their early days - That is what chancellor was doing at a point (correcting injustices in law due to strict rules etc), but not once courts were merged
4)Mere Equities
Defences to legal actions
These defenses were created by courts of equity
Duress, set off, mistake, innocent misrep, etc
5)Maitland’s Definition of Equity:
The relevant definition
“Equity is now that body of rules administered by our … courts of justice which, were it not for the operation of the Judicature Acts, would be administered only by those courts which would be known as Courts of Equity.”
A body of rules
Medieval Origins of Equity
Be able to briefly trace the medieval origins of courts of equity discussing: (i) Its administrative beginnings. (ii) Its development as a corrective to law. (iii) The origin of the concept that equity follows the law. (iv) Why its remedies were in personam. (v) The types of persons who initially served as chancellors and its significance.
(1)Administrative Beginnings
Courts of equity originated with petitions to the king in the 13th century
Complaints were originally procedural (bribed jurors, action not being enforced, etc)
King could provide justice where courts couldnt or wouldnt
Sometimes influential ppl would just not have writs enforced against them
(2)Development as Corrective to the Injustices of the Common Law
Initially complaint dealt with by king/council, often delegated to chancellor (starting in 1340s)
Grew quickly
CL court rigidity
No new writs - New situations would arise that could not be remedied by the common law courts because there was no writ available that dealt with those situations.
Remedy at CL courts restricted to damages,
Single issue for juries - questions of law simplified for jury ignored full context and led to unfairness,
Constraining rules of evidence - CL rules of evidence excluding less reliable evidence
Ex CL was written evidence only/dominant
Leads to petitions to chancellor on substance of common law court decisions and chancellor performing corrective justice
It was in the context of these complaints, the Chancellor began performing equity in the sense of corrective justice.
(3) “Equity follows the law” and acts “In personam”
Equity follows the law – equity took the common law as given and simply acted in response to decisions of the common law courts. This is referred to as “equity follows the law” (does not overrule, ie not a court of appeal)
In Personam: Order of court of equity applied to a person not a grant of property right ie order not to enforce a CL judgement
Remedies in Personam - If the Chancellor found in favour of a petitioner, he would make an order that applied to the person and not to the particular property
(4) Court of Chancery and Other Conciliar Courts
Mid 15th century court of chancery set up
king/council still held jurisdiction over some cases, gradually these led to development of conciliar courts
These w court of chancery exercised equitable jurisdiction → courts of equity
Two separate systems, law and equity
there were courts of equity (e.g., Star Chamber; Court of Requests) but main court of equity by the end of the 17th century was the Court of Chancery
(5) Ecclesiastic Chancellors to Non Ecclesiastic Chancellors
Before early 16th century chancellors were bishops or cardinals, trained in roman and canon law
early chancellors were ecclesiastics – lends some credence to trusts coming from Roman law and canon law since these chancellors would likely be familiar with it – also borrowed Roman civil law procedure of petitions by complainants and interrogatives (e.g., asking questions of respondent or other relevant persons – more of an inquisitorial approach)
Infuenced recognition of use by chancellor (which seems to have come from ecclesiastic courts) bc would have been familiar with it from ecclesiastic courts
After early 16th century, chancellors were seldom ecclesiastics.
Development of law of uses - Set out the early word formulation of the “use”.
Early trusts were expressed as conveyances to the use of another
A to the use of B
“Use” came from latin term meaning on behalf of.
Identify and explain three ways in which the “use” was employed in its early development.
1?) Franciscan Friars and the Form of the “Use”
1) To avoid feudal burdens of wardship and marriage
Male ages 21 and under and female 16 and under if their parents died lord got all the money from the land until reached that age, and could control marriage
Can be avoided by putting land in hands of a friend for own use - that way parent didnt own land and the friend would owe the feudal burdens
2)To avoid the feudal requirement of forfeiture for treason or felony or escheat where dies w/o heir
Law required right to land be forfeit for treason or would escheat if felony committed
Avoided by use since the conveyed property didnt belong to bad guy, he was just using it.
3)To avoid creditors
Convey ownership of assets so they cant be claimed.
Facilitated by courts of law not recognizing the use and by chancellor also not recognizing use in early days
User would have no legal title and no equitable title - thus nothing to be claimed
4)To effect Testamentary Dispositions of Land
Early customary and later common law courts said no gifts by testamentary disposition
Uses used to convey land to others during life with use for self and then on death use to others to whom they wanted to make a gift.
Identify one of the benefits of the early non-recognition of the use.
Not recognized in courts of law or initially by chancellor
Enforced in ecclesiastic courts but remedy limited to excommunication of the trustee, which did little for the beneficiary who wanted damages or an order that the trustee carry out terms of the use
No legal mech to enforce uses
Matter of honour - had to rely on other mechanisms for enforcement rather than an order for damages from a court of law or order from chancellor
Non recognition in courts gave the use some of its advantages
Avoidance of creditors depended on law not recognizing beneficiary as having any enforceable right
BUT non recognition permitted abuses by trustee
Briefly discuss the recognition of the use providing a simple example.
Non recognition permitted abuses by the feoffee (ie trustee)
Chancellor began recognizing in late 14th - 15th centiry (1390 to 1420)- would make order against trustee to comply with obligations agreed to in favour of beneficiary
If A conveyed to B for use of C but B retained profits to self, C could complain to chancellor, B would need to explain or if no satisfactory explanation then trustee must account for profits
The right of the ben against the trustee was later enforced (through in personam orders) against 3ps other than a bona fide purchaser w/o notice, so became more of a proprietary/in rem right (ex buying property knew was trust property gives ben action against purchaser who will have to hold in trust)
Discuss the reasons for the Statute of Uses and its effect.
One of purposes of employing use was to avoid feudal burdens
Uses led to reduction in feudal payments to lords and king.
Concern that rights created by use could be created without written documentation
Response was 1535 statute of uses providing that person in whose favour the use was made became the legal owner
A to B for use of C → C legal owner
Thus, could no longer avoid feudal burdens
e.g., wardship and marriage – X to A, B, and C for the use of X was just a conveyance by X to himself so X retained legal title and feudal burdens still applied
Set out two word formulas that were used in an attempt to avoid the Statute of Uses that were eventually recognized by the Court of Chancery.
Use upon a use → “A to B for the use of C in trust for D” or “A unto and to the use of B in trust for C”.
In the first, statue made C legal owner but C held in trust for D
2nd B is legal and trust for C.
Courts didnt recognize 2nd use (ie use upon a use, or trust) - Tyrrels Case 1557
Chancellor later recognized 2nd use (Sambach 1634) restoring use to pre-statute of uses position
Explain the reason for the enactment of the Statute of Wills
Statute of Wills 1540 allowed testamentary disposition of property (since couldnt anymore if uses werent allowed after Statute of Uses - which led to rebellion)
Briefly describe the development of Equity and trusts from 1550 to 1700
1)Growing Popularity of courts of equity and conflict with courts of law
Simplicity of equity made it popular but lost some factual nuances
Competition btwn CL and equity courts – CL didnt like injunctions - would react by ordering habeus corpus where person imprisoned for seeking enforcement of CL judgement
Leads to Battle btwn lord Ellesmere (chancellor) and Lord Coke (CJ Kings Bench)- King ruled in favour of Ellesmere - lord coke later dismissed
2)Courts of Equity Survive Civil War and Removal of the Monarchy
English civil war 1640s to 1650s - Parliament votes in favour of abolishing courts of equity due to association with monarchy (1650’s)
BUT some equity courts (specifically court of chancery) survived because house could not agree on legislation to transfer the jurisdiction
3) 17th Century Developments - Equity as Body of Substantive Law
Equity moving from conscience to a body of substantive law (ex fiduciary guardianship, equity of redemption, mortgages, assignment of chooses in action, partnership law)→ more of a body of rules, less of a court of conscience
Trusts changing too→ now not just bare holding of land but being given broad powers to manage land (improve, mortgage, use proceeds, provide income)
Briefly describe the development of equity and trusts from 1700 to 1900
1)Equity further developed substantive body of rules
Copyright and trademarks protected via equitable remedy of injunction
Trust changing - more use of trust funds (shares, bonds, debentures) and using proceeds for benefits of others
Trusts for running businesses with bubble act of 1720 constraining use of joint stock companies
2) Equity becoming complex and slow (written interrogatives needed to be copied for multiple parties by hand, matters referred to masters then clerks then back to court ; fees not salaries encouraging slow process, some questions of fact sent to juries of CL since no jury procedure in chancery)
3) Response by adding vice chancellor in 1813 and then two more in 1841 and then CA in chancery in 1851 but ultimately the problems led to Judicature Act 1873-75 which merged courts of law and equity
Be able to briefly trace the history of the exercise of equitable jurisdiction in the Atlantic provinces, Ontario, Quebec, the West and the North
Atlantic Provinces: exercised equity jurisdiction as early as 1751. The merging of law/equity occurring well before the Judicature Acts in 1873
NS governor exercised jurisdiction as keeper of great seal (1751), assisted by council until 1764 when masters in chancery appointed (initially not legally trained)
PEI 1769 and NB 1784 follow NS approach
Newfoundland had diff approach 0 did not follow governor exercising equity jurisdiction - instead, equity jurisdiction exercised by SC and this was codified in 1825
QC: restored civil law system in 1774
Equity court briefly 1763-1774
Ontario: initially governors refused equity jurisdiction - eventually due to pressure created a legislative form of equity and established Court of Chancery shortly afterwards
Ont governors chose not to exercise equity jurisdiction (perhaps at behest of lenders to avoid equity of redemption)
shortly after statute passed (1835) creating statutory equity of redemptoon, court of equity created by statute (perhaps to provide of equity of foreclosure) and then absorbed into high court of Ont in 1881
West/North: courts established here were late (already other courts unifying law and equity) and so given jurisdiction over both law and equity - separate courts never created.
BC and Manitoba had for a time a divisions of the courts with equity and a division with CL.
Distinguish between procedural and substantive concepts of fusion.
SUBSTANTIVE: the rules of law and equity are merged into a single body of rules
PROCEDURAL: one can apply to a single court following a single court procedure and that could could administer both rules of law and rules of equity (remaining separate bodies of rules) and apply remedies of the sort that were formerly available in either court of law (ie. damages) or a court of equity (ie. injunction, specific performance)
~think of diagram~
Judicature Act: some areas of conflict – rule provides that where the rules of law conflict with the rules of equity, the rules of equity were to prevail.
Provide an example of the potential practical effect of the distinction (Fusion, law + equity)
Canson Enterprises Ltd v Boughton
Plf bought land, built warehouse which was damaged due to sinking piles. Plf sued engineer but there was shortfall in damages bc couldnt satsify full amount
Plf sued solicitor for breach of FD by acting for intermediate purchasor
Solicitor argued that his breach of FD did not cause loss (ie damages that flowed from breach of FD were limited and didnt amount to full damages amount).
Plf argued that claim of breach ws a claim in equity and thus mitigation etc didnt apply and that the fusion of the courts only applied to procedure and since it was an equitable claim the rules were those of equity.
Conclusion:
all SCC judges say that such defences would, in fact, have been available in a claim for equitable damages (i.e., damages claim in law and equity were similar) and therefore it made no difference that the claim was a claim in equity (i.e., judges avoid answering the substantive vs. procedural fusion issue by saying it did not matter in the circumstances of that particular case)
McLachlin, J. (for minority of two) takes same position but adds that, “we may take wisdom from where we find it, and accept such insights offered by the law of tort, in particular deceit, as may prove useful.”
