MLL327 Study Guide - Final Guide: Equitable Remedy, Equitable Interest, Beneficial Ownership

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Property Law Topic Eight
understand the rationale underlying the nature of equitable interests
Statute of Uses (1535) to prevent avoidance of feudal fees: beneficial ownership was equated to legal
tenure and thereby attracted feudal incidents
If a common law estate is not created or equitable obligations are imposed against the legal owner of
an estate, an equitable interest may arise
Equitable interests can arise where they are expressly created (institutional interests) or where they
are needed to remedy a particular unfairness (remedial interests)
An equitable interest is created if it would be against the conscience of the court to deny the existence
of interest
Equity impresses rights onto a pre-existing estate (Gray)
It is eithe a ight agaist a peso o a ight agaist a thig ut athe aouts to a right against a
right (McFarlane & Stevens)
Euitale iteests opeate as parasites attahed to othe ights Chaes
Any right can be subject to equity
Equitable interests are not carved out of an estate
DEVELOPMENT OF EQUITABLE INTEREST:
Equity followed the common law by analogy:
Equitable interests confer same proprietary rights as conferred by common law
Equitable interests are proprietary but not in same sense as common law estate
Equitable interests can arise over freehold and leasehold
Equitable interests only enforceable in equity jurisdiction
Equitable interest must be just and fair
Objective of equitable interests is to redress the limitations of the common law
No limit to equitable interests
Examples: beneficial ownership, equitable lease, equitable mortgages, equitable liens and restrictive
covenants
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appreciate differences between common law estates and equitable proprietary interests
Enforceability: Common law ownership is enforceable in rem against whole world.
Equitable title is enforceable in personam:
(Beneficial ownership may be defeated by a bona fide purchaser of legal estate
for value without notice)
Content: Rights attached to equitable ownership differ from legal ownership (Equitable
owner has no right to possession)
Creation: Equitable ownership may arise in a number of different ways: (express
intention, inferred intention supported by acts or imposed by court)
Nature: Not all equitable interests will constitute equitable ownership.
Determination of whether an equitable right has proprietary consequences can be ambiguous:
Must be a nexus of sufficient propinquity between right and the property to
which right relates.
Whether there is a nexus of propinquity is a conundrum
Proprietary equitable rights are enforceable @ specific property
Non-proprietary equitable rights may simply confer on holder a right to
seek relief in equity
appreciate the different forms of equitable proprietary interests that have evolved;
TRUST:
Most significant creation of courts of equity
Trust was developed by Chancery jurisdiction
Foundation of use was the transfer of property to a trusted person who has to hold it not for own
benefit but for the purpose epessed i the tasfeos istutios
Parties:
Settlor/Creator (A)
Transferee feoffee to uses (trustee) (B)
Person to benefit cestui que use (beneficiary) (C)
Reasons for evolution of the use in Chancery:
Beneficiary avoid payment of feudal tenures tax because he was not seised of land
Allowed disposal of land by will
Avoided problems with contingent legal remainder interests and the possibility that future
interests being struck down for lack of seisin
Trust:
trustee is legal owner of estate pursuant to a legal transfer
transfer of estate not absolute because trustee was required to look after property for benefit
of defined beneficiaries
beneficiary is equitable owner over the same land
Property fragmented according to jurisdiction legal and equitable ownership
Conscience of the trustee must be affected to be enforceable in equity
Equity treated right to enforce the trust as a property interest attached to the legal title of the trustee
Trust only enforceable in equity jurisdiction in accordance with established equitable remedies
The trust survived the Statute of Uses 1535 and lives on today
Trustee
Trustee holds full legal estate and legal rights
At law trustee has the right to possession of the land
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Trustee owes fiduciary duty to the beneficiaries not entitled to treat the property as entirely their
own
Beneficiary
Beneficiary has an equitable interest in property
Beneficiary has no right to possession
Beneficiary entitled to compel trustee to exercise legal rights in accordance with trust
Any proprietary interest may be placed under trust:
Fee simple
Life estate
Remainder interest
Leasehold
Equitable beneficial interest (new trust sub-trust)
DKLR HOLDINGS CO PTY LTS V COMMISSIONER OF STAMP DUTIES
ISSUES
Equitable interest is not carved out of estate leaving the owner with less than
full legal estate but it is impressed upon it
Cannot transfer legal title while purporting to retain beneficial ownership
Essential features of a trust:
the trustee must be under a personal obligation to deal with the
trust property for the benefit of the beneficiaries (equitable
obligation proper);
the obligation attaches to the trustee in personam; and
the obligation must also be annexed to the trust property:
the obligation is also annexed to the property so that the
equitable interest resembles a right in rem
HELD
Consequences:
Owner in fee simple does not hold two estates (only legal
estate)
Although equitable interest is an interest in property it is a
right to compel the trustee to hold the legal estate in
accordance with the obligations that equity imposes on the
trustees
Content of beneficiaries interest is right to compel the trustee to hold and use their legal rights in
accordance with terms of trust
Interest of beneficiary is not carved out of legal estate
Iteest is impressed upo the legal estate ad eists simultaneously with it
At law a beneficiary has only benefit of trust (no right to possession )
Beneficiary can not sue the trustee in ejectment
Right to possession can only be ordered in equity
If trust property is placed in possession of beneficiary, at law the beneficiary is tenant at will of the
trustee
Trustee may determine possession of beneficiary and recover land from him in an action for ejectment
and the beneficiary would not have a legal defence
(DKLR Holdings Co v Commissioner of Stamp Duties)
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Document Summary

Property law topic eight understand the rationale underlying the nature of equitable interests. Statute of uses (1535) to prevent avoidance of feudal fees: beneficial ownership was equated to legal tenure and thereby attracted feudal incidents. If a common law estate is not created or equitable obligations are imposed against the legal owner of an estate, an equitable interest may arise. Equity impresses rights onto a pre-existing estate (gray) It is (cid:374)eithe(cid:396) a (cid:396)ight agai(cid:374)st a pe(cid:396)so(cid:374) (cid:374)o(cid:396) a (cid:396)ight agai(cid:374)st a thi(cid:374)g (cid:271)ut (cid:396)athe(cid:396) a(cid:373)ou(cid:374)ts to a (cid:858)right against a right(cid:859) (mcfarlane & stevens) E(cid:395)uita(cid:271)le i(cid:374)te(cid:396)ests ope(cid:396)ate as (cid:858)parasites atta(cid:272)hed to othe(cid:396) (cid:396)ights(cid:859) (cid:894)cha(cid:373)(cid:271)e(cid:396)s(cid:895: any right can be subject to equity. Equitable interests are not carved out of an estate. Equitable interests confer same proprietary rights as conferred by common law. Equitable interests are proprietary but not in same sense as common law estate. Equitable interests can arise over freehold and leasehold. Equitable interests only enforceable in equity jurisdiction.