Rereading 'The Intersection of Companies and Trusts' (Harold Ford Memorial Lecture 2019) by Melbourne Chief Justice Allsop AO.
The CJ states
The intersection of companies and trusts is statute and equity. The focus of what I wish to discuss tonight was the subject of an influential (and still well-read) article which Professor Ford wrote in 1981. The article was entitled "Trading Trusts and Creditors' Rights". The article appeared to have been spurred by the then recent High Court decision in Octavo Investments and the growing development, at least from the 1960s for fiscal reasons, of the use of the so-called trading trust as a vehicle for the conduct of business, in apparent preference to the limited liability company in its own right and in its own interests. This union of trust and company and the interaction of statutory and equitable rules led Professor Ford to refer to the hybrid as a "commercial monstrosity".
More recent growth of superannuation savings, managed superannuation funds and the statutory and the regulatory frameworks of superannuation trusts, as well as managed investments schemes, mandate close attention to equitable principle and to relevant statutes, and to the inter-relationship between the two.
For 38 years, with an intervening Australian Law Reform Commission report, the "commercial monstrosity" has given life to a body of jurisprudence requiring the careful conceptualisation and expression of legal, statutory and equitable concepts. Judgments have been written by eminent commercial and equity judges. The High Court has, on a number of occasions, contributed to the development of the jurisprudence. Recently, in Carter Holt, in an appeal from a five member bench of the Victorian Court of Appeal, in three separate but broadly conforming judgments, the High Court has settled, hopefully once and for all, the major disputes which divided Supreme Courts in the 1980s and 1990s, which appeared to be settled by the end of the first decade of the 21st century, and which then erupted once again in the second decade of this century.
Equity, equitable principle and statute lie at the heart of company law. The genius of the 19th century development of the limited liability company as an institution that mixed contract, fiduciary loyalty and capitalist risk-taking has always called for a command of legal skills that encompass the common law, equity and statute.
Equity and equitable principle have a justification and coherence that is not merely historical and rooted in the organisation of English courts of centuries past. A conception of equity is an inhering part of any civilised system of law and justice. It involves the adaption of the general rule to the circumstances of the case informed by equity's principles. As a body of law directed to, and concerned with, the conscience of parties, in particular with fraud, accident and mistake, equity maintained, through particular application to the relationships of the parties before it, the requirements of justice, fairness, and conscionable conduct.
The distinctiveness of equity is a reflection of law's inherent societal and human character, affected by the deep and complex relationships of rule, principle and values. Equity is the part of the legal fabric which ameliorates hardship of rule, that accommodates structure to justice, and which provides the flexibility of rule and principle to the sometimes competing demands of the occasion, certainty, and changing values. As a matter of history in our legal system, equity had a separate existence in a separate body of courts, and so, clear separate institutional coherence. That should be recognised still, not to maintain outdated organisational structures, but to recognise the true sources of different parts of our law, which recognition assists in coherent legal development.
For instance, I venture to suggest that many of the commercial problems of corporate and financial regulation exposed in the recent Royal Commission would be made more ruthlessly manageable by a full understanding and a daily application of the fiduciary principle, rather than by ever more detailed regulation which has as its (false) working assumption the ability exhaustively to define good faith, fiduciary responsibility, and behaviour in good commercial conscience.
Equity and its doctrines are built on maxims and principles. Its informing norms are timeless. They arise from a view as to what ought be the case: equity regards as done, that which ought to be done; fairness and equality: equality is equity. Notions of fairness and justice and a demand on the person before the court to act, or to have acted, in good conscience, are reflected in equity's concern with fraud, accident and mistake, and with the strength of the demands for faithfulness and confidence in the fiduciary relationship. Its doctrines reflect the interplay of personal obligation, trust and confidence, and the translation of known circumstances and relationships that are subject to doctrine and personal obligation into rights that are expressed and recognised as proprietary in character. Thus, the interest of the cestui que trust was assignable by the early 16th century when an assignment of a chose in action was illegal on the ground of maintenance.
Considerations of the nature of equity affect the technique of its application, as expressed by two masters of equity (Dixon CJ and Kitto J) in Jenyns v Public Curator which emphasised the precise identification of all relevant facts being every connected circumstance relevant to the justice of the case.
The passage should not be misunderstood. Equity is not to be viewed as based on personal choice, or mere intuitive human or personal responses. It is a body of doctrine and rules with thematic coherence, directed often at subjects that are abstracted and intricate, but even then equity and any intricacies or subtleties in doctrine will be informed by the practical realities of the problem at hand, by underlying principles and their purposes, and by the values that underpin them. This relationship of rule, principle, and values, especially fairness, justice in the notion of conscience, is no better expressed than by another master of equity, Deane J, in Muschinski v Dodds and his demand for the application of principle and doctrine, not the formless void of individual moral opinion. Yet he recognised that notions of fairness and justice "remain relevant to the traditional equitable notion of unconscionable conduct which persists as an operative component of some fundamental rules or principles of modern equity".
