MLL327 Study Guide - Final Guide: Equitable Remedy, Equitable Interest, Beneficial Ownership
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 agaist a peso o a ight agaist a thig ut athe aouts to a right against a
right (McFarlane & Stevens)
• Euitale iteests opeate as parasites attahed to othe ights Chaes
• 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 epessed i the tasfeos istutios
• 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
• Iteest is impressed upo the legal estate ad eists 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.