Equity Law Issues in Britain - Essay Example

EQUITY LAW by As a legal concept, as influenced by English common law, equity pertains to the set of maxims which reigns supreme in terms of civil law, and from which all civil laws are derived from. The foundational basis of the contemporary law system was a set of writs that were issued by The Chancery, the office of equity. Accordingly as Halliwell (1997) portrays, equity continues to be wholly unaffected by any existing state laws, mitigating the prevailing rigors of common law. This allows courts to utilize existing discretion, when applying justice in accordance with natural law (Halliwell, 1997:09). Practically, Hudson (2009) avers that modern equity is limited by both procedural and substantive rules, with legal writers tending to focus on prevailing technicalities. From these are drawn the twelve ‘vague’ ethical statements, referred to as the maxims of equity. The ethical statements further guide in the application of equity according to civil law (Hudson, 2009:24). The concept elicits criticisms that are traceable to historical conceptualization, during its development. This is mainly based upon its lack of fixed rules, further augmented by the fact that it later on lost a majority of its flexibility. The law on perfectly constituted trusts and perfect gifts has been ‘tolerably clear’ since 1862 (Halliwell, 2003:192). This is traceable to the authoritative statement by Turner during the Milroy v Lord case (4 De G.F. & J. 264; 45 E.R. 1185; [1861-1973] All E.R. Rep. 783). Use of the term ‘tolerably clear’ is necessitated by the presence of exceptions, which were previously articulated by courts previously. Influential in this regard is interpretation of the Privy Council’s advice, during the Court of Appeal’s hearing of the Pennington v *Conv. 193 Waine case (Halliwell, 2003:192). Subsequent interpretation of the court’s ruling was viewed as providing courts of equity the unfettered discretion, concerning whether voluntary trusts or gifts should take effect. This is with regard to the role of ‘un-conscionability in Equity’, which requires principled reasoning. Pundits are thus of the view that courts of law need to utilize principled approaches, as opposed to the exercising of unfettered discretion that is based on individual notions of judges pertaining to what is fair or not (Halliwell, 2003:194). The presence of ‘unfettered discretion’ potentially has far reaching consequences, with regard to voluntary property dispositions. Thus, the presence of voluntary settlement can occur by way of outright transfer of property by way of ‘gifting’, declaration of trust and/ or transfer to trustees on trust. In this regard, avenues utilized towards achieving settlement (through transfer will) are dependent on the property type involved. The influential nature of this ‘discretion’ continues to impact upon courts, through their giving of effect to what are considered ineffective transactions. This further portrays the influential nature of ‘discretion’, given the subsequent legal interpretation of the Pennington v Waine case (Moffat, Bean & Dewar, 2005:184). As Garton (2003) provides, this is in respect to the fact that it alleviates the general rule in equity, a gift that fails at common law, pertaining to want of formalities, does not take effect hence, the prevailing theoretical and practical problems within the rule with focus being particularly on the role-play of ‘trust mechanisms.’ A disparity prevails between orthodox trust law theory and the operational ability of the rule (Garton, 2003:364). Thus, pundits are of the view that while it has varying problems, the introduction of un-conscionability is utilized when justifying for the perfecting of imperfect gifts. The rule in Re Rose necessitates clarity, when dealing with pertinent formalities required during the transfer of titles under law (Garton, 2003:365). In essence, the transferor needs to execute appropriate transfer forms in writing, as determined by the entity’s article(s) of association. Secondly, the transferor needs to deliver the executed form, along with certificates of shares. If it is a single receiver of the shares, he/ she hence receive both the transfer form and certificate. This is in contrast to scenarios when the shares are transferred to different individuals, or when the transferor desires to retain the title, where the certificate and transfer forms are delivered to the company (Todd & Watt, 2007). In finality, company directors are required to approve the new transferee as owner of the shares. This procedure is in line with the entity’s obligation of keeping an updated company register of shareholders/ members. In case of contexts of private limited entities, the directors are usually granted discretion by existing articles of association to either accept or refuse registration of any share transfers (Cope, 1997:116). This is in scenarios where there is perception of the registration is founded on the upholding of the bona fide company interests. Thus, debate prevails as to why the same discretion cannot be subsequently granted to public limited companies’ directors (Cope, 1997:118). Regarding equity, the court decision in the Milroy v Lord case (Moffat, Bean & Dewar, 2005:158) is instrumental with regard to legal interpretations. The Court of Appeal held the position that the intended transfer would not be allowed by equity to take effect. This was in reference to the declaration of trust that was in favor of the plaintiff. Influential in this manner that the perception that this would allow all imperfect gifts to operate as perfect trust, hence removing the requirement of compliance with transfer formalities as constituted under law. Worthington (2006) alludes that the Re Rose rule was influential in the decision-making processes of various court cases, portraying the effective aspect of transfers in equity, as a result of compliance with all pertinent formalities of share transfer (Worthington, 2006:8). Thus, it is upon the strength of such equity that imperfect gifts can be perfected under common law. I am therefore of the opinion that both arguments are valid, given the prevailing contexts when judgments were made, with regard to equity (Worthington, 2006:10). On the one hand, where everything is done within legal law to effect transfer of shares through formal avenues under equity, such transfers are deemed as legally binding. This hence avails the means through which gifts (transfers) can be perfected (Worthington, 2006:11). Where legal loopholes exist, regarding the effectual transfer equity, such transfers as deemed null and void. Equity is hence achieved, with the delivery of the executed share certificates and transfer forms to either the individual or the company, in cases where transfer is to multiple individuals. To be noted is that emphasis is placed upon the aspect of ‘delivery’ of the essential transfer forms and share certificates, in order for equitable assignment to be achieved (Laycock, 1993:53). Legally as Hayton (2001) avers, once a transferor completes all necessary procedures under his/ her power, transfers are considered effective in equity, even though other parties do not necessarily act upon other pertinent requirements (Hayton, 2001:243). A limitation prevails in the fact that under such circumstances, there is need for the transferor to make his thoughts known, regarding the issue of share transfer. In this context, it is quite impossible to rightly determine whether there is intent of the transfer to take immediate effect, as opposed to the ideal of ‘as soon as allowed under law’ (Hayton, 2001:244). In conclusion, while the aspect of trust is necessary when effecting transfers under equity, a number of theoretical problems arise. This is due to the lack of linkage with prevailing orthodox trust law. Accordingly, the role of the trust mechanism avails two avenues of construing trust over shares. This is by way of either creating situational contexts that necessitate the imposing of constructive trusts over shares as an appropriate measure, vis-à-vis the transferor’s actions that operate as declarations of express trust, for the transferee’s benefit. Pertinently, there is need for further understanding of the trust mechanisms, given the prevailing theoretical inconsistencies between trust law theory and the rule in Re Rose. Reference List Cope, M 1997, Proprietary Claims and Remedies. Federation Press. 4 De G.F. & J. 264; 45 E.R. 1185; [1861-1973] All E.R. Rep. 783. Equity: Issues and Trends: the Importance and Pervasiveness of Equitable Doctrines and Principles in Modern Private, Commercial, and Public Law, 1995, Federation Press. Garton, J 2003, The role of the trust mechanism in the rule in Re Rose (Case Comment). Sweet & Maxwell. Halliwell, M 1997, Equity and Good Conscience In A Contemporary Context. London, Old Bailey Press. Halliwell, M 2003, Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor’s foot? Sweet & Maxwell. Hayton, D, 2001, Hayton & Marshall Commentary and Cases on The Law of Trusts and Equitable Remedies. London: Sweet & Maxwell. Hayton, D 2003, Underhill and Hayton: Law Relating to Trusts and Trustees. London: Butterworths. Hudson, A 2009, Equity and Trusts (6th Ed.). London: Routledge-Cavendish. Laycock, D 1993, The Triumph of Equity. SUM Law and Contemporary Problems, 56: 53. Moffat, G., Bean, G. M., & Dewar, J. (2005). Trusts law: Text and materials. Cambridge: Cambridge University Press. Todd & Watt, 2007, Cases and Materials on Equity and Trusts (6th Ed.). Oxford: Oxford University Press. Worthington, S 2006, Equity (2nd Ed.). Oxford: Oxford University Press. Read More