EQUITY, TRUSTS & REMEDIES 1

LECTURE 1
NATURE OF EQUITY & ITS HISTORY
1. Overview of Issues & Concepts
2. History of Equity
3. History of Equity in NSW
4. Emerence of t!e "o#ern Equit$%&e 'uris#iction
(. )e&$tion *etween Equity & +$w, -re.'u#ic$ture System
/. 'u#ic$ture System
0. "$1ims of Equity
1. OVERVIEW OF ISSUES & CONCEPTS
2ener$&&y see 3nit Out&ine.
2. HISTORY OF EQUITY
W!$t is equity4
o t!e %o#y of #octrine $n# norm$tive princip&es 5ie6 &$ws7 #eve&ope# %y
t!e Court of C!$ncery prior to t!e 'u#ic$ture 8ct in 1903:
o ;uris#iction 5$nci&&$ry6 concurrent $n# e1c&usive7 to $pp&y t!e %o#y
equit$%&e princip&es $n# r$nt . on $ #iscretion$ry %$sis . re&ief from t!e
resu&t pro#uce# %y t!e strict $pp&ic$tion of &e$& 5ie6 common &$w or
st$tutory7 ri!ts or o%&i$tions.
3. HISTORY OF EQUITY IN NEW SOUTH WALES
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2ener$&&y see, )- "e$!er6 W"C 2ummow $n# ')< +e!$ne6 Equity: Doctrines and
Remedies 51==26 3
r#
e#ition6 *utterwort!s6 Sy#ney76 $t 1>.1/.
4. EMERGENCE OF THE MODERN EQUITABLE JURISDICTION
2ener$&&y see 3nit Out&ine.
. RELATION BETWEEN EQUITY & LAW! PRE"JUDICATURE SYSTEM
#$% C&'()* &+ L$, D-. N&) R/0&12-*/ E3'-)$45/ R-16)*, T-)5/ & I2)/(/*)*
-$rtners!ip ri!ts $n# o%&i$tions were pure&y contr$ctu$&.
)i!ts $n# o%&i$tions $risin un#er $ trust were not reconise# $t &$w.
"ort$ee w$s t!e &e$& owner of t!e mort$e# &$n#.
Castlereagh Motels Ltd v Davies-Roe ?1=//@ 2 NSW) 0= 5NSW C87
<$cts, A$rious p&$intiffs sue# B.)6 $ #irector of C"+6 on t!ree counts. On&y t!e
secon# count is re&ev$nt for t!e present purposes. C!e p&$intiffs c&$ime# inter alia,
[T]he defendant failed as a director of the plaintiff to act at all times in the
interests of the plaintiff as a whole and not in his own interests and failed
faithfully and diligently to serve the plaintiff as its director and failed to exercise
the powers conferred upon him as a director for the enefit of the plaintiff and
not otherwise in consequence whereof the plaintiff suffered loss!
Stu#ents wi&&6 per!$ps6 imme#i$te&y reconise t!e un#er&ine# wor#s in t!e $%ove
p&e$#ins, t!ey c&ose&y resem%&e t!e equit$%&e fi#uci$ry o%&i$tions of comp$ny
#irectors.
C/2)($5 I**'/! Bo comp$ny #irectors $&so 5ie6 in $##ition to t!eir equit$%&e #uties7
owe fi#uci$ry #uty $t common &$w6 wit! t!e consequence %ein t!$t $ %re$c! of t!e
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fi#uci$ry #uty ives rise to $n $ction in #$m$es $t common &$w4 C!us6 '$co%s $n#
8sprey ''8 s$i#,
"hat the plaintiff see#s to allege is that at common law the defendant as a
director of the plaintiff owed to it the duties set out [aove] and ecause of a
reach of those duties is liale to pay damages to the plaintiff!

Co support its $rument6 t!e p&$intiff re&ie# upon $ st$tement %y +or# +in#&ey ") in
Lagunus Nitrate Co v Lagunas Syndicate ?19==@ 2 C! 3=2 $t 43(6 t!$t !e w$s Dnot
$w$re of $ny #ifference %etween t!e &e$& $n# equit$%&e #uties of #irectors. C!us6 t!e
p&$intiffs $rue# t!$t t!e #uties of #irectors in equity $n# $t common &$w were
su%st$ntive&y t!e s$me.
H/5.! '$co%s $n# 8sprey ''8 re;ecte# t!e p&$intiffEs $rument on t!e %$sis t!$t
+or# +in#&ey ") c$nnot %e t$Fen $s,
[$]ntending that all those principles which must govern the conduct of directors
as fiduciaries which have een developed in equity have ecome transposed in
some manner into the common law so that there us at common law a right of
action for their reach!

C!eir Honours sou!t to confine +or# +in#&eyEs rem$rFs to t!e D#uty of c$reE owe# %y
#irectors $t common &$w 5ie6 tortious $n# imp&ie#&y contr$ctu$&7 $n# in equity.
'$co%s $n# 8sprey ''8 t!en #eci#e#,
The duties which are set out in the second count [aove] are duties which have
een developed y courts of equity as the duties of fiduciaries and amongst the
fiduciaries are directors! The courts of equity% having developed the principles of
duty% enforce those principles y their own remedies!
Coroneo v Australian Provincial Assurance Assoc Ltd 51=3(7 3( S) 5NSW7 3=1
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F$0)*! 8 mort$or sue# its mort$ee for e1ercisin its power of s$&e Dso
recF&ess&y6 wi&fu&&y $n# ne&ient&yE t!$t t!e property w$s so&# $t $ ross un#er v$&ue.
C/2)($5 I**'/! W!et!er t!e $%ove count #isc&ose# $ c$use of $ction $t common &$w.
H/5.! 5*y 'or#$n C'7 t!$t G even if t!e mort$or !$# misuse# t!e power of s$&e G t!e
count #i# not #isc&ose $ c$use of $ction m$int$in$%&e $t common &$w6 for it w$s %$se#
upon $ misconception of t!e Dpower of s$&eE. C!e C!ief 'ustice s$i#,
The power of sale% where it occurs in a legal mortgage% is not a common law
power! $t is an equitale power which is inserted to enale the mortgagee to
convey a title which is not only good at common law ut is good in equity to
defeat the equitale rights of the mortgagee! The purpose of the equitale power
is to cut down the &ealously guarded equity of redemption! The operation of
the equitale power is simply this% that if it is exercised in a way that a 'ourt of
Equity regards as unexceptionale% that court will not treat the title of the
purchaser as eing encumered y any equity of redemption in the mortgagor!
'or#$n C' t!erefore #eci#e# t!$t t!e p&$intiffEs count #isc&ose# no c$use of $ction $t
common &$w6 $n# t!e p&$intiff ou!t to !$ve %rou!t $ suit in equity to &iti$te t!e
question of $ny Dequit$%&e #e&inquenciesE %y t!e mort$ee.
#4% E3'-)7 H$. N& P&,/( )& D/0-./ D-*8')/. L/1$5 C5$-9*
Infrinement of p$tent, 5i7 p$tent not c!$&&ene#: 5ii7 v$&i#ity of p$tent
previous&y #etermine#: 5iii7 v$&i#ity of p$tent sent to &$w for ;ury tri$&, Bovill v
Hitchcock 519/97 +) 3 C! 8pp 410.
Ferguson v ilson 519//7 +) 2 C! 8pp 00
F$0)*! C!e p&$intiff fi&e# $ %i&& in t!e Court of C!$ncery $$inst $ comp$ny inter alia
seeFin specific perform$nce of $ #irectorsE reso&ution to $&&ot p$rticu&$r s!$res to
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!im. However6 t!e p&$intiff $&so c&$ime# #$m$es un#er in t!e $&tern$tive 5ie6 if6 $s in
t!is c$se6 specific perform$nce cou&# not %e !$# for t!e re$son %ein t!$t t!e
p$rticu&$r s!$res !$# $&re$#y %een $&&otte# to $ 3
r#
p$rty7 Lord Cairns! Act. C!e 8ct
$&&owe# t!e court to m$Fe $n $w$r# of #$m$es in $##ition to or in su%stitution for $n
$w$r# of specific perform$nce
C/2)($5 I**'/! W!et!er Lord Cairns! Act empowere# t!e C!$ncery to $w$r#
#$m$es in circumst$nces w!ere it cou&# not #ecree specific perform$nce $t t!e
commencement of t!e suit in equity.
H/5.! 5*y Curner +'7 t!$t t!e p&$intiff !$# no c$se in equity w!en t!e %i&& w$s fi&e#6 it
%ein $ mere question of contr$ct %etween t!e p&$intiff $n# t!e comp$ny6 t!e 5so&e7
reme#y on t!$t contr$ct w$s $t &$w6 $n# not in equity6 $n# 5t!erefore7 t!$t t!e %i&& w$s
improper&y fi&e# in equity6 $n# it w$s proper&y #ismisse# %y t!e Aice.C!$nce&&or. +or#
'ustice Curner re$sone#,
[Lord Cairns! Act] never was intended to transfer the &urisdiction of a 'ourt of
(aw to a 'ourt of Equity! $f% therefore% a plaintiff in a suit in equity had no
equitale right [presumaly to have specific performance decreed ) although
there never is any *right+ in the strict sense% for equitale remedies are granted
on a discretionary asis] at the time of filing the ill ) for the case would e
different if there was an equitale right at the time of filing the ill ) so that the
ill was altogether improperly filed in equity% $ am of the opinion that the ,ct has
no application- otherwise the consequence would necessarily e% that everyody
who had a doutful case at law would come into equity for specific performance%
and when it appeared [as in this case] that he had no case in equity at all he
would as# for damages% and so almost every action of contract would e
transferred from a 'ourt of (aw to a 'ourt of Equity!
#0% E3'-)7 H$. N& P&,/( )& A,$(. D$9$1/*
8$in see, Ferguson v ilson 519//7 +) 2 C! 8pp 00
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In "olds#orough Mort $ Co Ltd v %uinn 51=1>7 1> C+) /046 t!e Hi! Court
sueste# t!$t #$m$es m$y %e $w$r#e# un#er (ord 'airns+ ,ct even t!ou! t!e
reme#y of specific perform$nce is wit!!e&# on #iscretion$ry roun#s 5ie6 in $##ition to
or in su%stitution forE7.
R v Poggioli 51=237 32 C+) 222
F$0)*! C!e ven#or H $ppe&&$nt contr$cte# to se&& p$stor$& &$n# t!$n t!en refuse# to
#e&iver possession. C!e purc!$ser w$s un$%&e to o%t$in su%stitute p$stur$e for !is
c$tt&e $n# some #ie# of st$rv$tion. C!e purc!$ser sue# for specific perform$nce $n#
#$m$es6 wit! t!e &$tter %ein #e#ucte# from t!e purc!$se price. C!e purc!$ser w$s
not Dre$#y $n# wi&&inE to comp&ete perform$nce of t!e contr$ct $t t!e time w!en t!e
$ction w$s commence#.
I**'/! W!et!er #$m$es were $v$i&$%&e un#er Lord Cairns! Act4
H/5.! St$rFe ' first #istinuis!e# %etween equit$%&e compens$tion $n# #$m$es $t
common &$w 5now see, Harris v Digital Pulse Pty Ltd ?2>>3@ NSWC8 1>7. His
Honour t!en #eci#e# t!$t t!e Court w$s not entit&e# to #ecree specific perform$nce
$n#6 t!erefore6 it $&so !$# no power to $w$r# #$m$es un#er Lord Cairns! Act.
o Compens$tion %y w$y of $%$tement of t!e purc!$se price is inte&&ii%&e
w!ere t!e property !$# #iminis!e# or #eterior$te# %y re$son of $ %re$c!
of t!e contr$ct6 %ut it is not inte&&ii%&e for &oss or #$m$e $risin from
t!e contr$ct. In t!e &$tter c$se t!e in;ure# p$rty to t!e contr$ct is &eft to
t!eir reme#y %y counter.c&$im or cross.$ction $t &$w.

o B$m$es were not $v$i&$%&e un#er Lord Cairns! Act $s t!e purc!$ser
w$s not re$#y $n# wi&&in to perform t!e contr$ct G so t!e court &$cFe#
t!e power to r$nt specific perform$nce in t!$t c$se, ie6 t!e power to
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$w$r# #$m$es un#er Lord Cairns! Act is continent upon t!e power to
#ecree specific perform$nce.

#.% C&'()* &+ L$, C&'5. N&) G($2) I2)/(5&0')&(7 R/5-/+.
#/% C&'() &+ L$, C&'5. N&) G($2) S8/0-+-0 P/(+&(9$20/
#+% C&'()* &+ L$, C&'5. N&) M$:/ D/05$($)-&2*
#1% N& P&,/( )& T($2*+/( C$*/* F(&9 O2/ J'(-*.-0)-&2 )& )6/ O)6/(
#6% C&99&2 L$, -2 C6$20/(7! L-9-)/. 8&,/( )& $,$(. .$9$1/*
8$in see, Ferguson v ilson 519//7 +) 2 C! 8pp 00: "olds#orough Mort $ Co
Ltd v %uinn 51=1>7 1> C+) /04: R v Poggioli 51=237 32 C+) 222.
#-% E3'-)7 -2 C&'()* &+ L$,! E3'-)$45/ R-16)*, T-)5/* & I2)/(/*)* W/(/ I12&(/.
8$in see, Castlereagh Motels Ltd v Davies-Roe ?1=//@ 2 NSW) 0= 5NSW C87:
Coroneo v Australian Provincial Assurance Assoc Ltd 51=3(7 3( S) 5NSW7 3=1:
;. JUDICATURE SYSTEM! <FUSION FALLACIES=
2ener$&&y see, Harris v Digital Pulse Pty Ltd ?2>>3@ NSWC8 1>.
In Seager v Co&yde' ?1=/0@ 2 8&& E) 41(6 +or# Bennin ") suests t!$t t!e
;u#ic$ture system entit&es $ court to $w$r# #$m$es 5presum$%&y in tort6 since +or#
Bennin !$# e&imin$te# $n Dimp&ie# contr$ctu$& #utyE47 for t!e %re$c! of $n equit$%&e
#uty4
H/5.!
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o The law on this su&ect does not depend upon any implied contract! $t
depends on the road principle of equity that he who has received
information in confidence shall not ta#e ufair advantage of it! .e must
not ma#e use of it to the pre&udice of him who gave it without otaining
his consent!

o The 'ourt grants neither an account of profits nor% nor an in&unction%
ut only damages to e assessed y the master! Damages should e
assessed on the asis of reasonale compensation for the use of
confidential information which was given to the defendant company!
Boes it fo&&ow6 t!erefore6 t!$t $ny %re$c! of contr$ct c$n %e restr$ine# %y in;unction:
t!$t #$m$es $t common &$w wi&& &ie $$inst $ trustee4 NO G see (nglish v De#ha)
*ale Pro&erties Ltd ?1=09@ 1 8&& E) 393 $t 3==6 w!ere S&$#e +' #ou%te# t!$t t!e court
!$# t!e ener$& power to $w$r# #$m$es in its e1c&usive ;uris#iction 5e6 trustees7.
8&so see Harris v Digital Pulse Pty Ltd ?2>>3@ NSWC8 1>.
In Cuck)ere Brick Co Ltd v Mutual Finance Ltd ?1=01@ C! =4=6 t!e issue w$s
w!et!er t!e mort$orEs were entit&e# to receive #$m$es $$inst t!e mort$ee w!o
!$# 517 so&# t!e property wit!out $#vertisin t!e f$ct t!$t t!e property !$# p&$nnin
permission for f&$ts $n# 527 refuse# t!e mort$orEs request t!$t t!e s$&e %e
postpone#. It s!ou&# %e rec$&&e# from Coroneo v Australian Provincial Assurance
Assoc Ltd 51=3(7 3( S) 5NSW7 3=16 t!$t t!e power of s$&e,
is an equitale power which is inserted to enale the mortgagee to convey
a title which is not only good at common law ut is good in equity to defeat
the equitale rights of the mortgagee! The operation of the equitale
power is simply this% that if it is exercised in a way that a 'ourt of Equity
regards as unexceptionale% that court will not treat the title of the
purchaser as eing encumered y any equity of redemption in the
mortgagor!

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C!e issues in Cuck)ere Brick Co Ltd were twofo&#, 517 w!et!er t!e mort$or !$# $
#uty to t$Fe D#ue c$reE to o%t$in t!e true m$rFet price $s we&& $s $ #uty to $ct in oo#
f$it!: $n# 527 w!et!er $n $w$r# of #$m$es w$s $n $v$i&$%&e reme#y for $ny %re$c! of
#uty. On t!e first issue S$&mon +' !e&#,
The proposition that the defendant owes oth duties% in my opinion% represents
the true view of the law! ,pproaching the matter first of all on principle% it is to
e oserved that if the sale yields any surplus over the amount owed under the
mortgage% the mortgagee holds this surplus in trust for the mortgagor! $f the sale
shows a deficiency% the mortgagor has to ma#e it good out of his own poc#et! The
mortgagor is vitally affected y the result of the sale ut its preparation and
conduct is left entirely at the hands of the mortgagee!
C!e fin#in t!$t t!e mort$or owe# $ #uty to t!e mort$or is not o%;ection$%&e in
itse&f. W!$t is question$%&e $%out t!is #ecision6 !owever6 is t!e $ttempt to tr$nspose
t!e ;urispru#ence re$r#in t!e tort of ne&ience into t!e equit$%&e re&$tions!ip
cre$te# %y t!e power of s$&e. <or e1$mp&e6 S$&mon +' st$te#,
The proximity etween them could scarcely e closer! /urely they are
*neighours+! 0iven that the enefit of the power of sale is for the mortgagee and
that he is entitled to choose the moment to sell which suits him% it would e
strange indeed if he were under no legal oligation to ta#e reasonale care to
otain what $ would call the true mar#et value at the date of sale!
Ie&&in ' opine# in Citicor& Australia Ltd v McLoughney 51==47 3( S8S) 304 $t
3916 t!$t Dt!e %$sic f&$w in t!e re$sonin in Cuck)ere Brick is to formu&$te t!e test $s
equ$tin common &$w ne&ience wit! t!e equit$%&e #uty on $ mort$ee to t$Fe
re$son$%&e steps in e1ercisin !is power of s$&e to o%t$in t!e %est possi%&e price.E In
Parker-+,eedale v Dun#ar Bank PLC ?1==1@ C! 126 t!e En&is! Court of 8ppe$&
confirme# t!$t t!e mor$eeEs #uty is equit$%&e r$t!er t!$n tortious6 %ut it t!en
#escri%e# t!e su%st$nce of t!e #uty usin concepts w!ic! $re #r$wn from t!e common
&$w of torts.
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Simi&$r to Seager v Co&yde' Ltd 5$%ove76 !owever6 t!e more contentious issue in
Cuck)ere Brick is w!et!er $n $w$r# of #$m$es w$s t!e $ppropri$te reme#y, since
t!e %re$c! of $n equit$%&e #uty s!ou&#6 wit!out more6 on&y $ttr$ct $n equit$%&e reme#y.
alsh v Lonsdale 519927 21 C! B =
F$0)*! 8 &$n#&or# r$nte# $ 0 ye$r &e$se in writin to t!e ten$nt %ut t!e &e$se w$s voi#
$t &$w %ec$use it w$s not st$mpe#. C!e ten$nt entere# possession $n# t!en t!e &$n#&or#
#em$n#e# one ye$rEs rent in $#v$nce pursu$nt to t!e $ree# terms of t!e written &e$se.
8fter t!e ten$nt refuse# to p$y6 t!e &$n#&or# seiJe# t!e ten$ntEs oo#s6 $n# t!e ten$nt
t!en sue# t!e &$n#&or# for6 inter alia6 #$m$es for wronfu& #istress of oo#s. C!e
ten$nt $rue# t!$t !e w$s mere&y $ ten$nt in possession Dfrom ye$r to ye$rE wit!out $
&e$se6 wit! rent p$y$%&e qu$rter&y r$t!er t!$n $nnu$&&y in $#v$nce.
H/5.! 5*y 'esse& ")7 t!$t t!ere w$s $n $reement for $ &e$se for w!ic! possession
!$# %een iven 5$n# !ence t!e #octrine of p$rt perform$nce en$%&e# $ #ecree of
specific enforcement7. 8fter commentin on t!e imp$ct of t!e -udicature Act6 'esse&
") st$te#,
The tenant holds under an agreement for a lease! .e holds% therefore% under the
same terms in equity as if a lease had een granted% it eing a case in which oth
parties admit that relief is capale of eing given y specific performance! That
eing so% he cannot complain of the exercise y the landlord of the same rights
as the landlord would have had if lease had een granted! 1n the other hand% he
is protected as if a lease had een granted! That eing so% it appears to me
that eing a lessee in equity he cannot complain of the exercise of the right of
distress merely ecause the actual parchment has not een signed and sealed!
Chan v Cresdon Pty Ltd 51=9=7 1/9 C+) 242 G t!is c$se wi&& %e comp$re# in
tutori$&s.
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>. EQUITABLE MA?IMS
"$1ims wi&& %e #iscusse# in tutori$&s.
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