View source for Equitable interest

{{short description|Concept in common law legal systems}}
{{Equitable doctrines}}
{{refimprove |date=May 2025}}
In [[law]], an '''equitable interest''' is an "interest held by virtue of an equitable title (a title that indicates a beneficial interest in property and that gives the holder the right to acquire formal [[legal title]]) or claimed on equitable grounds, such as the interest held by a trust [[beneficiary]]".<ref>Black's Law Dictionary. Second Pocket Edition. p. 361. 2001 West Group. [[Bryan A. Garner]] (editor in chief)</ref> The equitable interest is a right in [[Equity (law)|equity]] that may be protected by an [[equitable remedy]]. This concept exists only in systems influenced by the [[common law]] (as opposed to [[Civil law (legal system)|civil law]]) tradition, such as [[Law of New Zealand|New Zealand]], [[English law|England]], [[Law of Canada|Canada]], [[Australian legal system|Australia]], and the [[Law of the United States|United States]].

==Equity==
{{Main|Equity (law)}}

Equity is a concept of [[rights]] distinct from legal (that is, [[common law]]) rights; it is (or, at least, it originated as) "the body of principles constituting what is fair and right ([[natural law]])".<ref name="Black1">Black's Law Dictionary. Second Pocket Edition. p. 241. 2001 West Group. [[Bryan A. Garner]] (editor in chief)</ref> It was "the system of law or body of principles originating in the [[English Court of Chancery]] and superseding the common and [[statute law]] (together called 'law' in the narrower sense) when the two conflict".<ref name="Black1"/> In equity, a judge determines what is fair and just and makes a decision as opposed to deciding what is legal.

Perhaps the most common example of an equitable interest is the interest of a beneficiary under a [[Trust law|trust]]. Under a trust, the [[trustee]] has a legal interest in the trust property and all of the rights and powers that follow from that legal interest (for example, rights to deal with that trust property and to invest trust property), subject to the interest of the beneficiary and the terms of the trust ([[Trust instrument|deed]]). The [[Beneficiary (trust)|beneficiaries]] under the trust have an equitable interest in the trust property.

The precise nature of the interests and rights of the beneficiary under a trust is contested. [[Ben McFarlane]] states that there are three principal theses about the nature of equitable rights:<ref>Ben Mcfarlane and Robert Stevens, ''The Nature of Equitable Property'' (2010) 4 ''Journal of Equity''</ref>
#Equitable interest is a right against a right, rather than right against a thing or right against a person.
#Whenever a party B has a right against a right of another A, B's right is ''[[prima facie]]'' binding on anyone who acquires a right that derives from A's right.
# B will acquire such a persistent right whenever A is under a duty to hold a specific claim-right or power, in a particular way, for B.

The rights and [[obligation]]s of the beneficiary, trustee, third parties contracting with the trust and potentially of other parties (such as the settlor of the trust or, if the trust provides for such, a protector or enforcer of the trust) depend on the terms of the trust deed. Trust law includes both mandatory law (that is, law which cannot be excluded, such as the irreducible core, [[Freedom of information|information rights]] and the supervisory [[jurisdiction]] of the court) and [[default law]] (that is, law which can be excluded by express provision in the trust deed). The trust deed, therefore, has a significant role to play in determining the rights and obligations of the parties in that default law (such as fiduciary obligations and rights of recourse against non-entitled third parties) may be excluded or modified by the trust deed.

In ''[[DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW)]]'',<ref name="DKLR ">{{cite AustLII|HCA|14|1982|litigants=[[DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW)]] |parallelcite=(1982) 149 [[Commonwealth Law Reports|CLR]] 431 |date=21 April 1982 |courtname=auto}}.</ref> the [[High Court of Australia]] held that if a person has an equitable interest in property, this implies that some other person has the legal interest in that property. If one person has both the legal and equitable interest in the relevant property, he or she has no 'equitable interest' in that property as such. [[Keith Aickin|Aickin J]] said "If one person has both the legal estate and the entire beneficial interest in the land he holds an entire and unqualified legal interest and not two separate interests, one legal and the other equitable".<ref name="DKLR"/>{{rp|p 463 [7]}} <ref>{{cite AustLII|VSCA|182|2011|litigants=Commissioner of State Revenue v Lend Lease Funds Management Pty Ltd |date=21 June 2011 |courtname=auto}}.</ref> As stated by Brennan J held that "[an] equitable interest is not carved out of a legal estate but impressed upon it".<ref name="DKLR"/>{{rp|p 474 [8]}}

''[[Latec Investments Ltd v Hotel Terrigal Pty Ltd]]''<ref name="Latec HCA"/> establishes that, in New South Wales, there are 3 classes of equitable interests: equitable interest, mere equity and personal equity.<ref name="Latec HCA">{{cite AustLII|HCA|17|1965|litigants=[[Latec Investments Ltd v Hotel Terrigal Pty Ltd]] |parallelcite=(1965) 113 [[Commonwealth Law Reports|CLR]] 265 |date=12 April 1965 |courtname=auto}}.</ref> Mere equity, for example, may arise when one party has been unjustly disadvantaged by the unconscionable behaviour of another. Importantly, however, a 'mere equity' will not prevail over an actual bona fide equitable interest – such as an equitable charge.

==Land law==
An enforceable contract for sale confers an equitable interest on the purchaser of the land, as per the rule established in ''[[Lysaght v Edwards]]''<ref>''[[Lysaght v Edwards]]'' (1876) 2 [[Chancery Division Law Reports|Ch D]] 499.</ref> It was similarly held in ''[[Walsh v Lonsdale]]'' that 'equity looks on as done that which ought to be done'.<ref>''[[Walsh v Lonsdale]]'' (1882) 21 [[Chancery Division Law Reports|Ch D]] 9.</ref> A contract, which does not meet the requirements of a deed, required by the [[Law of Property Act 1925]] s.52(1), may be [[specific performance|specifically enforced]] to convey the equitable interest to the new purchaser. This rule has had a significant impact because it allows interests that have not been conveyed by a deed to still be binding on future purchasers, through the doctrine of [[constructive notice]]. However, the [[Parliament of the United Kingdom|UK Parliament]] has weakened the impact of this rule, with the Law of Property (Miscellaneous Provisions) Act 1989 s.2,<ref>{{Cite web|url=https://www.legislation.gov.uk/ukpga/1989/34/section/2|title=Law of Property (Miscellaneous Provisions) Act 1989, section 2}}</ref> which requires all contracts for the sale of land (which could be specifically enforceable) to be in writing, to contain all the terms of the agreement and be signed by both parties. Any contracts that are not in writing and signed by both parties cannot be specifically enforced and so will not create or transfer an equitable interest in land.

==See also==
*[[Equitable servitude]]
*[[Overriding interest]]

==References==
<References/>

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[[Category:Property law]]
[[Category:Equity (law)]]