Equitable Interest and Remedies in Law: A Case Study of Laquan and Aarushi's Partnership

This article discusses the establishment of equitable interest and the remedies available for breach of fiduciary duty, undue influence, unconscionable conduct, and unjust enrichment in a case study of Laquan and Aarushi's partnership. It explains the equity test and the presence of item 1 and 2 that entitles Laquan to equitable interest. It also discusses the breach of fiduciary duty by Aarushi and the available remedies such as equitable compensation, equitable mandatory injunction, and resulting trusts. The article also mentions the aspects of undue influence, unconscionable conduct, and unjust enrichment in the case.

LAW Equity and Trusts
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Establishment of equitable interest
For the purpose of advising Laquan regarding equitable interests and the remedies which may be
taken into consideration on his part, it is needed to determine if the interest is that of an equity
interest. In order to determine this, equity test is needed to be performed that has been set out in
Subdivision 974-C of the Income Tax Assessment Act 1997. It is with the help of equity test
with the help of which financial arrangement issued on the part of a company which rather than
having returns which may be deductible, may have frankable distributions1. A scheme leads to an
equity interest when the scheme satisfies in addressing the aspects of equity test. When it comes
to existence it is also subject to satisfying debt test. Until an interest may satisfy the debt test
when issuing it, on the part of the entities equity interest may be issued when they issue:
 An interest that focuses on providing with return which is subjected to the economic
performance of the issuer [item 2]
 Membership interest like share [item 1]
 An interest wherein providing return is subjected to the issuer’s discretion [item 3]
Or
 An interest which may or will convert into such a share or interest. [item 4]
Thus considering the presence of item 1 and 2 in case of Aruche Web Masters i.e. the issue of
membership interest and issue of an interest providing returns which was subjected to the
economic performance entitles Laquan to equitable interest.
Remedies
Considering the above made discussion it may be stated that equity in regards to law has two
meanings that includes natural or fairness of justice and other term which refers to set of rules
formulated on the part of courts of equity which makes the procedures and rules of common laws
flexible2. Thus, in case of Laquan, equitable interest occurs from the relationship between
Laquan and Aarushi that is enforced by equity and not by common law. Equitable interest
incorporates the beneficiary’s interest in a fixed trust in which the trustee, within a fixed trust
1 Debt And Equity Tests: Guide To The Debt And Equity Tests (2018) Ato <https://www.ato.gov.au/Business/Debt-
and-equity-tests/In-detail/Guides/Debt-and-equity-tests--guide-to-the-debt-and-equity-tests/?page=6>.
2 Janis Pearl Sarra, Creditor Rights And The Public Interest (University of Toronto Press, 2007).
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wherein trustee has a legal interest, the partner’s interest in a property, the partnership along with
the interest which under a will intestacy is expected on the part of beneficiary for the purpose of
receiving the deceased’s property. Referring to the case of Laquan it may be observed that the
partners had borrowed the needed capitals for the establishment of the business in partnership
which makes it essential to pay the borrowed amounts in partnership which may be seen to be
performed in this case3. However, it is noticeable in this case that, Laquan and Aarushi shared a
relationship of mutual trust and confidence that was not backed by any formal partnership
agreement. It is due to this fact, that the Laquan and Aarushi shared a relationship of mutual trust
and confidence that was not backed by any formal partnership agreement which resulted in
establishment of Aaruche Web Masters results in establishment of partnership onus on the part
of the involved parties which is applicable on Aarushi and Laquan as well. It is this partnership
onus, which results on the part of the involved parties owning fiduciary duty. Fiduciary duty
implies the duty of loyalty wherein profit or compromise is present. In case of Laquan, it may be
noticed that on falling out of the business, Aarushi had updated the business website wherein she
took off the references of Laquan4. This is a clear reflection of the fact that the actions taken on
the part of the Aarushi were against the interest of her partner which lead to breach of fiduciary
duty. In this case it may be stated that the conflict between the duty of Aarushi as a partner and
individual interest lead to breach of the duty.
In addition to that, other onus asserting duty can also be seen to be associated with Aarushi. To
get in depth of the matter, in case of commercial relationships on the part of the involved part
may usually have fiduciary duties which are dependent on individual situation5. Herein, on the
part of Laquan it is needed to establish that there existed a relationship of mutual confidence and
trust between Laquan and Aarushi and that they were not involved in a sophisticated business
relationship, were not advised by lawyers and no formal agreement.
Thus, on the basis of the above made discussion it may be observed that certain duties on the part
of Aarushi have been breached in this case. In against this, breach, Laquan may seek remedy
under equitable compensation which focuses on restoration and restitution due to breach of
fiduciary duty that was material to losses associated with profits.
3 Paul Latimer, Australian Business Law 2006 (CCH Australia, 2007).
4 Roger Vickery and MaryAnne Flood, Australian Business Law (Pearson Australia, 2012).
5 Lars Kaiser, "Public Trust And Equity Returns" [2015] SSRN Electronic Journal.
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Essentially, the act of Aarushi i.e. acting against the interest of her partner Laquan by updating
the business website and taking off references to Laquan establishes infringement of equitable
interest and ongoing infringement as the business was a joint venture of Aarushi and Laquan. In
this context Laquan may seek remedy for the infringement of equitable interest under equitable
mandatory injunction which would result in compelling Aarushi to pay to Laquan6. In this
context the aspects which are needed to be taken into consideration are infringement of equitable
interest, due to the absence of any apparent contract between them specific performance
probably was not available.
For the purpose of available equitable remedies Laquan may seek remedy under resulting trusts.
Resulting trust will be taken into consideration when in regards to joint ownership,
disproportionate amount has been provided in context to purchase price to the partner’s
registered interest or when purchase monies have been provided by an individual who is not
vested in legal title. In this case it may be observed that Aaruche Web Masters was a case of joint
ownership wherein it was the individual decision of Aaruchi to part her ways followed by which
she updated the business website, taking all the references of Laquan. It was due to this joint
ownership that resulted in making both the parties severally and jointly liable and make all the
repayments7. This makes Aaruche equally liable to make all the repayments as Laquan. Other
than that, in case of Aaruchi and Laquan it may be noticed that the establishment of Aaruche
Web Masters occurred jointly at the garage of Aaruchi’s parents home. As they jointly took the
occupancy at the garage, it is under equitable presumptions which make them hold the legal
estate in common in shares in equal proportions as they had equal contributions in it. In this
regard Calverley v Green [1984] 155 CLR 242 is mentionable, wherein, on the part of court it
was held that in case in which two or more individuals contributes in the purchase process of a
property, that is conveyed to the involved parties in their joint names, in such cases the equitable
presumptions is that the involved parties who contributed to the ownership holds the legal estate
for themselves in common as tenants in shares proportionate in regards to their individual
contributions apart from cases wherein the contributions are equal in nature8.
6 Margaret Wilkie, Rosalind Malcolm and Peter Luxton, Equity & Trusts (OUP Oxford, 2012).
7 Equitable Claims Against Interests In Property (2008) tved <http://www.tved.net.au/index.cfm?
SimpleDisplay=PaperDisplay.cfm&PaperDisplay=http://www.tved.net.au/PublicPapers/
November_2008,_Lawyers_Education_Channel,_Equitable_Claims_Against_Interests_in_Property.html>.
8 Calverley V Green [1984] HCA 81; (1984) 155 CLR 242; 59 ALJR 111; 56 ALR 483 (6 December 1984) (2007) Trusts
<http://www.trusts.it/admincp/UploadedPDF/200903021746220.jAustralia_Calverley%20v
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In regards to the case of Laquan, he may also seek remedy due to the presence of aspects
associated with undue influence, unconscionable conduct and unjust enrichment. Aspect of
unconscionable conduct may be seen from the fact that followed by failure of joint venture of
Aaruchi and Laquan the payment needed to be made to Laquan was not recognized on the part of
Aaruchi. In this regard the case of Muschinski v Dodds [1985] HCA 78; 160 CLR 583; 60
ALJIIR 52; 62 ALR 429; 11 Fam LR 930 is mentionable here. In this case it was held that a
trust is needed to be imposed due to the fact that it is considered to be unconscionable followed
by the failure of a joint venture for Dodds asserting his legal entitlements wherein the payments
of Muschinski were not recognized9. This is also applicable in case of Aaruchi. Other than that,
the fact that followed by failure of their business, Aaruchi has updated business websites and
took off all his references also reflects unjust enrichment, and changing of the garage’s lock
establishes undue influence. Thus, it makes it essential for the imposition of a trust.
%20Green19841206.pdf>.
9 LA302 - Muschinski V Dodds (2007) Vanuatu
<http://www.vanuatu.usp.ac.fj/courses/la302_equity_trusts_and_succession_1/LA302_Cases/
Muschinski_v_Dodds.html>.
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Bibliography
Calverley V Green [1984] HCA 81; (1984) 155 CLR 242; 59 ALJR 111; 56 ALR 483 (6
December 1984) (2007) Trusts
<http://www.trusts.it/admincp/UploadedPDF/200903021746220.jAustralia_Calverley%20v
%20Green19841206.pdf>
Debt And Equity Tests: Guide To The Debt And Equity Tests (2018) Ato
<https://www.ato.gov.au/Business/Debt-and-equity-tests/In-detail/Guides/Debt-and-equity-
tests--guide-to-the-debt-and-equity-tests/?page=6>
Equitable Claims Against Interests In Property (2008) tved <http://www.tved.net.au/index.cfm?
SimpleDisplay=PaperDisplay.cfm&PaperDisplay=http://www.tved.net.au/PublicPapers/
November_2008,_Lawyers_Education_Channel,_Equitable_Claims_Against_Interests_in_Prope
rty.html>
Kaiser, Lars, "Public Trust And Equity Returns" [2015] SSRN Electronic Journal
LA302 - Muschinski V Dodds (2007) Vanuatu
<http://www.vanuatu.usp.ac.fj/courses/la302_equity_trusts_and_succession_1/LA302_Cases/
Muschinski_v_Dodds.html>
Latimer, Paul, Australian Business Law 2006 (CCH Australia, 2007)
Sarra, Janis Pearl, Creditor Rights And The Public Interest (University of Toronto Press, 2007)
Vickery, Roger and MaryAnne Flood, Australian Business Law (Pearson Australia, 2012)
Wilkie, Margaret, Rosalind Malcolm and Peter Luxton, Equity & Trusts (OUP Oxford, 2012)
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