History and Development of Equity
1
I. INTRODUCTION It is important to appreciate, especially when reading older cases on the law of trusts, that there were, until 1873 in England, two main separate courts – courts of law and courts of equity. Trust law was a product of courts of equity. We will thus look at:
(i) the meaning of “equity” that is associated with courts of equity;
(ii) the origins of courts of equity;
(iii) the development of the law of uses and trusts;
(iv) the transfer of equity jurisdiction to Canada;
(v) the current status of the fusion of law and equity.
II. THE MEANING OF EQUITY
Objective:
Be able to describe four different meanings that might be associated with “equity” and the definition of “equity” that is important for our purposes. The word “equity” has several different meanings. Let’s examine some of those meanings and then focus on the meaning that is important to us in understanding the law of trusts.
A. Equity as “Fairness” One meaning of the word “equity” is “fairness” or “justice”. This is often reflected in expressions such as “employment equity”, “pay equity” or “distributional equity”. People speak in terms of what is “fair” or “just” but there is often considerable disagreement as to what is fair or just. This concept of “equity” is not the concept of
“equity” that we mean when we speak of what courts of equity did.
B. Equity as Net Worth The word “equity” is also used to mean net worth. That is, the amount one retains after creditors have been paid. For instance, shares in a corporation are often described as “equity investments”. The shareholders are entitled to what is left over after the creditors are paid off. Similarly, people speak of having “equity” in their house. For example, a person might buy a $400,000 house by making a $100,000 downpayment and borrowing the remaining $300,000 to pay the rest giving the lender a security interest (or collateral) in the house by way of a mortgage. The $100,000 would be
I. INTRODUCTION It is important to appreciate, especially when reading older cases on the law of trusts, that there were, until 1873 in England, two main separate courts – courts of law and courts of equity. Trust law was a product of courts of equity. We will thus look at:
(i) the meaning of “equity” that is associated with courts of equity;
(ii) the origins of courts of equity;
(iii) the development of the law of uses and trusts;
(iv) the transfer of equity jurisdiction to Canada;
(v) the current status of the fusion of law and equity.
II. THE MEANING OF EQUITY
Objective:
Be able to describe four different meanings that might be associated with “equity” and the definition of “equity” that is important for our purposes. The word “equity” has several different meanings. Let’s examine some of those meanings and then focus on the meaning that is important to us in understanding the law of trusts.
A. Equity as “Fairness” One meaning of the word “equity” is “fairness” or “justice”. This is often reflected in expressions such as “employment equity”, “pay equity” or “distributional equity”. People speak in terms of what is “fair” or “just” but there is often considerable disagreement as to what is fair or just. This concept of “equity” is not the concept of
“equity” that we mean when we speak of what courts of equity did.
B. Equity as Net Worth The word “equity” is also used to mean net worth. That is, the amount one retains after creditors have been paid. For instance, shares in a corporation are often described as “equity investments”. The shareholders are entitled to what is left over after the creditors are paid off. Similarly, people speak of having “equity” in their house. For example, a person might buy a $400,000 house by making a $100,000 downpayment and borrowing the remaining $300,000 to pay the rest giving the lender a security interest (or collateral) in the house by way of a mortgage. The $100,000 would be