Equity and Land Law

Question 1

Introduction to Equity and Land Law

Answer 1

• Equity has had a defining influence on the development of land law. This is particularly apparent in the development of the trust as a means of owning and transferring land and the impact of the doctrine of notice (bona fide purchaser for value without notice) on land disputes.
  1. Origins of Equity
  2. Origins of the Trust
  3. Maxims
  4. Doctrine of Notice

Question 2

What is Equity?

Answer 2

• It is a body of rules which developed separately from the common law system but is now applied in the courts generally since the merger of the equity and common law courts at the end of the 19th century.
• It derives from the Latin ‘aequus’ meaning even or fair.
• It originated as a means to mitigate the historical strictness and unfairness of the common law system.

Question 3

What are the origins of equity?

Answer 3

• Common law grew out of the development of a centralised legal system in England around 1066. But by 1200s had become problematic.
• Although initially flexible, it became limited by the operation of the writ- if case did not fall into a specific writ then you could not take an action in the common law system. The Common Law courts became so rigid that sometimes absurd situations could occur.
• Limited by type of remedies- usually damages- not useful as could not order someone to stop the damage before it had happened.
• If cases could not be resolved or resolved appropriately by the common law courts, the king would be petitioned. The king assigned this role to the Lord Chancellor.
• The Lord Chancellor was originally a man of the church which influenced the language of petitions which emphasised the demands of ‘conscience’ and often asked if the Chancellor ‘will every pray’. (Later lawyers took the role).
• Similarly, the Chancellor based his decisions on principles of conscience and fairness.
• The system of petitioning the Chancellor allowed for new writs to be developed. The Court of Chancery developed out of the role of the Lord Chancellor in making decisions based on conscience.
• Yet, Equity did not replace the common law. It merely aided it.

Question 4

What is equity - 2

Answer 4

• Making decisions based on conscience resulted in new remedies that had more practical use for the petitioners (e.g., specific performance, injunctions).
• Equity would not follow the strict letter of the law if it would cause unfairness. Therefore, Equity could refuse to follow a statute if it would cause injustice.
• Overtime various maxims were developed which governed how the Courts of Chancery made its decisions.
• Note that equity took longer to gain a stronghold in Ireland due to the ongoing existence of Brehon law up until the 17th century. Even though Ireland had a Lord Chancellor his role was much more limited in practice.

Question 5

Equity and the Common Law

Answer 5

• Equity and the common law were operated by two different systems of courts up until the end of the 19th century: the Court of Chancery and the Common Law Courts.
• The Court of Chancery were often criticised due to the cost and delays within the system. By the early 19th century there were efforts to solve these problems but by the end of the 19th century the Supreme Court of Judicature Acts 1875 (England) and 1877 (Ireland) consolidated the two systems into one court system.
• This was continued after Irish independence by the Courts of Justice Act 1924 (which set up the Irish Supreme Court and High Court to replace the older courts under the 1877 Act) and the Courts (Establishment and Constitution) Act 1961 which continued this approach in the newer Irish legal system we know today.

Question 6

The Law of Trusts: The Origin of the Trust

Answer 6

• The modern trust developed out of the medieval concept of the use whereby the owner of land would give it to another to hold on his behalf. It was often a convenient means of providing for the management of property during one’s absence. (The motivation could also be less honourable as it allowed a debtor to avoid his creditors by conveying his land to others for his own use thereby allowing the debtor to hide his property from the creditor).
• However, the concept of the use had drawbacks in so far as this arrangement only imposed a moral obligation on the person holding the land and the original owner had no legal remedy if his wishes were not carried out.
• Therefore, if I gave land to Eloise to create a trust for my own benefit; legally it would appear that the land was hers. Therefore, if she refused to acknowledge my beneficial interest there was nothing legally I could do as legally the property would be in her name.
• However, Equity intervened and forced the legal holder of the property in such situations to carry out their obligations which they were obliged to do in conscience
• The reasons for growth of the use are many but essentially it allowed a person to escape from the many feudal services and incidents associated with land ownership. If the land was held ‘to the use of another’ then neither party was liable.

Question 7

Example of how trust could be used

Answer 7

• Under the Common Law a person had to be over the age of 21 before they could inherit land.
• If a father discovered that he was seriously ill and his oldest child was just 10, this child would be deprived of ownership of the land until such a time as he achieved the age of majority.
• In the meantime, the Lord could succeed to the land and then penalties (taxation) would be imposed. In this situation, and primarily as a means of avoiding such penalties, (F) could transfer the land to a family member or friend who would hold the land ‘to the use’ of the son until he reached the age of majority – therefore no penalties would be payable.

Question 8

Summary of the use and origins

Answer 8

• The concept of the use is important in the law of equity and is the origin of the modern trust.
• To circumvent certain obligations and common law rules historically, it became common to transfer property in such a way that the legal ownership would be transferred to one party for the equitable benefit of another.
• Under this construction the person who held the land, looked after it for the use/ benefit of another person.
• E.g., “My house to Patrick to the use of Sally”
• Patrick is the legal owner, but he keeps it for the benefit of Sally, the equitable owner.
• Person who receives the land legally = feoffee to uses (feoffee)
• Peron for whose benefit the land is kept= cestui que use (cestui)
• Patrick= feoffee
• Sally = cestui

Question 9

What are the Chancellor’s rules in respect of the use?

Answer 9

• 1483: heirs to the feoffee were bound by the use (had to give the benefit to the cestui as per the original transfer)
• 1466: purchaser with express notice of the use was bound by it.
• Equity intervened to construct a trust where the justice of the case required.

Question 10

Statute of uses

Answer 10

• Statute of Uses 1535 (King Henry VIII)
• Statute of Uses (Ireland) 1634
• The Use allowed people to circumvent incidents within the feudal system, so the Statute of Uses was concerned with preventing this circumvention and to restore the wealth travelling upwards to the king.
• Before the Statute of Uses, the feoffee had the legal rights and the cestui had the equitable rights (see above)
• After the Statute of Uses, the feoffee was left with nothing and the cestui had the legal and the equitable rights
• Only few exceptions to this (e.g. if the feoffee and the cestui were the same person)

Question 11

to avoid the statute of uses

Answer 11

People were unhappy that their means of avoiding feudal incidents had been taken away, so an alternative mode of creating a use was developed; the double use or use upon a use.

Question 12

What is the double use?

Answer 12

“To Bob to the Use of Sam to the Use of Tom” = “To Bob to the Use of Sam; to Sam to the Use of Tom”.
What did this mean? See Jane Tyrell’s case

Question 13

Jane Tyrells’ case 1557:

Answer 13

• Any attempt to introduce a second use was void.
• Therefore, by the rule in Tyrell’s Case, the legal and equitable rights would go to Sam in the construct “To Bob to the Use of Sam, to the Use of Tom”.
• But later in Sambuch v Dalston

Question 14

Sambuch v Dalston 1634:

Answer 14

• The court was willing to enforce a double use.
• To Bob to the use of Sam to the use of Tom would be considered as two parts:
• “To Bob to the use of Sam; To Sam to the use of Tom”
• The first part would be interpreted as per the Statute of Uses to transfer legal and equitable rights to Sam, but the second part would be interpreted to transfer the equitable rights (the use) to Tom, while the legal rights would be held by Sam.
• Over time the wording altered so that “Unto and to the Use of Sam in trust for Tom” would achieve the same effect. “Unto and to the Use of” encompassing the first use.

Question 15

Modern trust

Answer 15

• The double use was the phrasing used to create a trust until the Land and Conveyancing Law Reform Act 2009 came into effect. This act repealed the Statute of Uses.
• After the commencement of the 2009 Act, it is possible to create a trust using straight forward language. E.g., “to Ann in fee simple in trust for Barry for life”.

Question 16

The presumption of advancement and the trust

Answer 16

• Prior to the 2009 act if a transferor transferred unregistered land to another person without consideration, the transferor was deemed to have created a resulting trust in favour of themselves.
• This presumption could be rebutted if a relationship existed between the two parties which indicated that a moral obligation of support existed between them (i.e. a presumption of advancement).

Question 17

Presumption of advancement: What did Simmon’s say in Sheard v Cartright 1955?

Answer 17

“The law is clear that on the one hand where a man purchases shares and they are registered in the name of a stranger there is a resulting trust in favour of the purchaser; on the other hand, if they are registered in the name of children or one whom the purchaser then stood in loco parentis, there is no such resulting trust, but a presumption of advancement.” Simmons VC in Shepard v. Cartright [1955] AC 431 at 445

Question 18

What was the old solution to ensure that the intended transferee received the land?

Answer 18

-Old way around the presumption of a resulting trust was to use the phrase: “unto and to the use of X and his heirs”- This was taken to mean that both the legal and beneficial use went to X- no leftover use to give back to grantor as a resulting trust.

Question 19

the 2009 act

Answer 19

• S. 62(3) “a resulting use to a grantor is not implied merely because the land is not expressed to be conveyed for the use or benefit of the grantee. This means that in respect of unregistered land, the presumption that the transferor of land without consideration, had created a use in their own favour no longer exists.
• This had already been removed in respect of registered land by s. 123(3) of the Registration of Title Act 1964.
• In the past, it was necessary to create a use in order for someone who already owned the land to transfer ownership to themselves and another person (e.g. co-ownership of a house)
• S. 66(1) “any property may be conveyed by a person to that person jointly with another person in the same way in which it might be conveyed by that person to another person.”

Question 20

What are the types of trust?

Answer 20

• An Express trust
• Secret/ half secret trusts
• Constructive trusts
• Resulting trusts

Question 21

What is an Express Trust?

Answer 21

These are made expressly by the person wishing to set up a trust. There must be 3 certainties (intention, subject matter, objects (beneficiaries))

Question 22

What are secret/ half secret trusts?

Answer 22

These are hidden trusts in wills.

Question 23

What are Constructive trusts?

Answer 23

• Equity will impose a constructive trust where the justice of the case requires it:
• E.g., where the trustee makes a personal profit from the trust this will result in a constructive trust for the beneficiary.

Question 24

What is a Resulting Trust?

Answer 24

• These are implied trusts which give effect to the implied intention of a party.
• They recognise financial contributions to property where the person does not have legal ownership (e.g., a house that is legally owned by one party, but the purchase money was provided by another).

Question 25

What are the maxims of equity?

Answer 25

Some examples:
- Equity follows the law: Equity will follow the law unless it is necessary to deviate for reasons of justice.
- He who seeks equity must do equity: The future behaviour of the parties will be considering when deciding whether to grant a remedy.
- He who comes to equity must come with clean hands: The plaintiff should not have partaken in reprehensible behaviour (e.g., fraud, misrepresentation) in respect of the issue at hand.

Question 26

Doctrine of Notice: Bona Fide Purchaser for Value without Notice

Answer 26

• Equitable rights over the land, should the purchaser be deemed to take the land subject to these rights or not….
• “Equity held that all purchasers would be bound by the equitable interests of third parties over land they purchased unless they could prove that they were the bona fide purchaser of the property for value without notice.” (DL)
• This person is known as “equity’s darling”.
• It should be borne in mind that most land and interests in land are now dealt with under a system of registration. Where this is the case priority of interest will be determined by the registered number (determined based on which was registered first).

Question 27

What is Bona Fide?

Answer 27

• Must act in good faith.
• Must not have done anything underhand.

Question 28

What us Purchaser for Value?

Answer 28

• Section 3 of the Land and Conveyancing Law Reform Act 2009:
• A Purchaser is defined as a “an assignee, chargeant, grantee, lessee, mortgagee or other person who acquires land for valuable consideration.”
• Must give value for the interest acquired irrespective of the statutory provision.

Question 29

What is ‘Without Notice’?

Answer 29

• No knowledge or awareness of the third-party’s interest.
• Purchaser will be deemed to be with notice if:
  (1) they actually did know of the third-party interest or
  (2) they ought to have known about it.

Question 30

Bona Fide Purchaser for Value Without Notice

Answer 30

• Section 86 of the Land and Conveyancing Reform Act 2009 codifies the doctrine of notice (previously this was done by the Conveyancing Act 1882 [ yes apparently there were 2 Conveyancing Acts within 2 years] ):
• “A purchaser is not affected prejudicially by notice of any fact, instrument, matter of thing unless-
  (a) it is within the purchaser’s own knowledge or would have come to the purchaser’s knowledge if such inquiries and inspections had been made as ought reasonably to have been made by the purchaser; or
  (b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of the purchaser’s counsel, as such, or solicitor or other agent if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor or agent.”

Question 31

What are the three types of notice?

Answer 31

1. Actual Notice
2. Constructive Notice
3. Imputed Notice

Question 32

What is Actual Notice?

Answer 32

If the purchaser actually knew (“within the purchaser’s own knowledge”)

Question 33

What is Constructive Notice?

Answer 33

• This presumes knowledge if the purchaser would have known if they had made “such inquiries and inspections…as ought reasonably to [be] made”.
• This prevents someone from not making any effort to make suitable inquiries upon purchasing land, thus relying on a lack of knowledge later in proceedings.

Question 34

Constructive Notice: Northern Bank v Henry 1981

Answer 34

• The husband had purchased a leasehold interest in a house with his wife’s money.
• When the parties separated a dispute arose over who was entitled to the leasehold interest.
• The wife claimed that a trust should be presumed in her favour as it was her money used to purchase the leasehold.
• On the same day that the wife-initiated proceedings the husband took out a mortgage on the leasehold with Northern Bank.
• The wife was later found to have an equitable interest in the leasehold house.
• In the meantime, the Bank attempted to enforce the mortgage.
• The question arose as to whether the Bank had notice of the situation or if they had done enough to be deemed not to have constructive notice?
• The Supreme Court found that the Bank had done very little investigation as to the leasehold property prior to granting the mortgage.
• It had just completed a registry search and nothing else.
• Henchy J. “A competent solicitor, acting for a normal purchaser of the property, would not have been content to take the title on such a cursory investigation.” (pg 8)
• A proper search would have revealed that the wife lived in the house, that there was a pending court action and that the husband did not have good title to offer as security of the mortgage.

Question 35

What is Imputed Knowledge?

Answer 35

This is notice that a purchaser has by nature of their agent possessing actual notice or constructive notice. The purchaser is presumed to know also have this notice, even if the information was never communicated to the purchaser.

Question 36

What is Note Today?

Answer 36

• The doctrine of notice applies primarily to unregistered land as important information in respect of registered land is detailed in the record of the title. Therefore, a search of the Register should be sufficient to provide relevant information as to any impediments on the land to the purchaser.
• Land and Conveyancing Law Reform Act 2009: Part 4 trust
• If land subject to a part 4 trust is being transferred, the transfer is said to “overreach” equitable interests (s. 21). This means that the purchaser will not be affected by the equitable interests irrespective of notice.
• There is potential for the beneficiaries to enforce this interest against the trustees however (the trustees being the people who would be transferring the land in the first place). Also, if the purchaser has actual notice of fraud then overreaching will not take affect.

Question 37

Equity and Land Law:
What happened in Binions v Evans 1972?

Answer 37

• In the 1960s a woman was promised that she could stay in a cottage after the death of her husband for the rest of her life.
• The landowner sold the land the cottage was on and notified the purchasers of this fact.
• The purchasers paid a lower price due to the promise.
• The purchasers claimed that they were not obliged to follow this ‘licence’ as they were not party to the original agreement (this is a common rule applied to enforcing licences).
• However, Lord Denning held that the woman had an equitable entitlement to remain on the land.

Question 38

Equity and Land Law:
What happened in Smyth v Halpin 1997?

Answer 38

• The plaintiff requested a site from the father to build a house.
• The father asked him why would he need two houses when the family home would be his later?
• The father suggested that the plaintiff build an extension to the family home instead.
• The father made many wills, but the final will left the ultimate ownership in the house to one of the daughters.
• The mother was given the interest in the house for life whilst the daughter was to receive the fee simple remainder.
• The plaintiff argued that he should receive the fee simple remainder. Claimed he was entitled to this interest instead of the daughter.
• The court found in favour of the plaintiff.
• The plaintiff originally had a licence to remain on the property but due to the assurance which the father had given him and the reliance on this assurance which led to detriment for the plaintiff, proprietary estoppel arose which meant that the father and his heir were estopped from removing the plaintiff from the house.
• The court found that he was entitled to the fee simple remainder.

Question 39

What do those cases show?

Answer 39

These examples demonstrate how equity continues to influence land law today due to its concern for reaching fairness in situations where the law would fail to do justice.