Equitable Interest in Business: A Case Study of Aarushi & Chen

This case study delves into the concept of equitable interest within the context of a business partnership dispute between Aarushi Patel and Laquan Chen, who started a web design business. The analysis focuses on Chen's equitable rights after being excluded from the business and the property where it was based, despite contributions and agreements. The study references relevant legal cases and principles, highlighting the differences between legal and equitable titles, and explores potential equitable remedies such as account of profit that Chen could pursue. The document emphasizes that while Chen doesn't have ownership, he possesses rights that equity protects, offering a detailed overview of equitable interest application in business partnerships. Desklib provides a platform to access similar solved assignments and study resources for students.

Running head: EQUITY AND TRUST
Equitable Interest
Name of the Student
Name of the University
Author Note

1EQUITY AND TRUST
Considering the subject matter of the case, it can be stated that the case is based on
equitable interest. The basis of the interest is depending on the equitable title that denotes a title,
which is occupied for beneficial interest and that, gives the possessor an opportunity to hold a
formal legal title. The term equitable interest is a part of equity and it protects the possessor by
certain equitable remedies1. Equity is a part of the common law system that evolved with the
quality of being fair and impartial judicature. However, the rights mentioned in the equity are
quite different from the legal rights. It depends on the natural law. The interest of the beneficiary
can be established by the system of trust. A trustee is enjoying all the rights and interest over the
trust property and all his rights are legal in nature. It has been mentioned in the case of Canson
Enterprises ltd v Boughton & CO2 that in case of equitable interest it can be assumed that the
interest of some other people is confined in the territory. However, it has been observed by the
court that in case a person has both the legal and the equitable interest over the property, he
could not enjoy the equitable interest regarding the property. The presiding officer of the case
has stated, "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".
It has further been observed in the case of Burns Philip Trustee Co Ltd v Viney 3 that
“The administration of equity has always paid regard to the infinite variety of interests and has
refrained from formulating or adhering to fixed universal and exhaustive criteria with which to
deal with such varying situations. The approach traditionally adopted by equity has been to retain
1 Evans, Steve. "A Scrutiny of Powers of Sale Arising Under an Equitable Mortgage; A Case for Reining These in." Browser
Download This Paper (2015).
2 [1991] 3 S.C.R. 534
3 [1981] 2 NSWLR 216

2EQUITY AND TRUST
flexibility so as to accommodate the multitudinous instances in which fundamental equitable
rules fail to be applied”.
It has been mentioned under the Consumer Law, Australia that no business should be
depended on the unconscionable conduct of either the parties.
It has been observed in the case of Chan v Cresdon Pty Ltd 4 it has been mentioned that
in case of lease the court can provide relief to the parties under the provision of specific
performance. It has been observed in Walsh v Lonsdale5. The main importance of equitable
interest is that it provides all the interest to the parties that are not covered under the deed of
conveyance. The equitable interest provides all the ethical rights to the parties that are based on
impartial process of law. Further in the case of DKLR Holding Co (No 2) Pty Ltd v
Commissioner of Stamp Duties6, it has been observed by the court that equitable interest can be
applied in case of trustship.
There are certain differences in between the legal title and equitable title. Under the
provision of legal title, the possessor has certain duties regarding the property and he is obliged
to maintain the duties. On the other hand, in case of equitable title, the possessor is enjoying the
title over the property7. It gives a right to the property holder to enjoy his possession over the
property. However, it should be kept in mind that equitable interest does not establish the
doctrine of true ownership. Under this principle, the possessor of the property could enjoy legal
rights and can get consistent control over the property. It can also be observed that in case of
equitable interest, the possession holder could enjoy his possession without ownership rights. In
4 (1989) 168 CLR 242
5 (1882) 21 Ch D 9
6 [1980] 1 NSWLR 510 at 518
7 Gil Sander, Frederico, et al. "Fiscal Policy for Equitable Growth." (2015).

3EQUITY AND TRUST
simple terms, the term equitable interest does not mean transfer of interest. Rather it gives a
direct access to the property8.
The term equity was the creation of the British Chancellors and the establishment of trust
was made in that period. If the interest of the equitable possessor has been violated, the court can
provide certain equitable remedies to the person. Under the system of judicial remedy, it has
been observed that the provisions of judicial remedy and equitable remedies can be given at the
same time9. There are certain methods that are included under the version of equitable remedy
such as specific performance, account of profit, constructive trust, injunction, rescission and
declaratory relief.
One of the most common remedy in case of equitable interest is specific performance. It
allows a party to perform any specific act according to the stipulated criteria. It is a part of the
law of contract. In Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd10, it has been
mentioned by the Court that equitable charge is created by an appropriation of specific property.
It secures the interest of the parties to the contract. It restrains a party to the contract to do an act
that is against the law of equity; however, the order for specific performance of the contract is
discretionary in nature11. Besides specific performance, there is another remedy namely account
of profit. According to this remedy, if any breach of duty has been made by any of the parties,
such remedy can be obtained from the violating parties. Under this system, the plaintiff brings an
action against the defendant to recover his portion of profits. Another form of remedy is
8 Beale, Joseph H. "Equitable Interests in Foreign Property." Harvard Law Review 20.5 (1907): 382-397.
9 Davidson, Ian E. "The Equitable Remedy of Compensation." Melb. UL Rev. 13 (1981): 349
10 [1985] Ch 207 at 227
11 Singer, Joseph William. "The reliance interest in property." Stanford Law Review (1988): 611-751.

4EQUITY AND TRUST
constructive trust. Under this system, if any party violates a fiduciary duty and wrongfully
deprives the plaintiff from all the rights, constructive trusts will be imposed on them. further, it
has been observed in Squires v SA Steel and Sheet Pty12 that notice should be served to the
aggrieved party before ousted him from the property and it is his equitable right.
In this given case study, it has been observed that a business has been started with
Aarushi and Chen in a garage that was taken in the name of the Aarushi’s father. They have
borrowed the connection from the Aarushi’s father and borrowed money from Chen’s mother.
The business was proved profitable for them and they had agreed to pay all the money and
borrowing together. However, a pat has been cropped up in between them in the mid-season of
their business. it has been observed that Chen becomes neglected by Aarushi and her father
disallow Chen entering into the property. Further, the password of the web content that has been
made by both of them changed by Aarushi. Therefore, it is hard to him to entering into the
property.
Considering the subject matter of the case, it can be stated that Chen has certain equitable
interest over the property that has been denied by Aarushi and her father. Chen has the right to
enjoy the property under the principle of equity and he could not oust from the garage without
any notice and from the business as the business was incorporated by both of them13. Further,
father of Aarushi could not solely make any step against Chen as his daughter was also involved
in the business. it is obvious to state that equitable interest does not give ownership to Chen, but
he can enjoy the rights over the property.
12 (1987) 45 SASR 142
13 Clark, George Luther. Principles of equity: with supplement. Johnson & Hardin, 1937.

5EQUITY AND TRUST
Further, it can be advised to Chen that he can ask for his portion of profit from Aarushi
by account of profit. According to this rule, if in a business, a party refused to share the profit
and denied to give the plaintiff his portion of profit, plaintiff can ask for his portion under
account of profit. It is a remedy under the equitable interest.

6EQUITY AND TRUST
Reference:
Beale, Joseph H. "Equitable Interests in Foreign Property." Harvard Law Review 20.5 (1907):
382-397.
Burns Philip Trustee Co Ltd v Viney [1981] 2 NSWLR 216
Canson Enterprises ltd v Boughton & CO [1991] 3 S.C.R. 534
Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207 at 227
Chan v Cresdon Pty Ltd (1989) 168 CLR 242
Clark, George Luther. Principles of equity: with supplement. Johnson & Hardin, 1937.
Davidson, Ian E. "The Equitable Remedy of Compensation." Melb. UL Rev. 13 (1981): 349.
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR
510
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510 at
518
Evans, Steve. "A Scrutiny of Powers of Sale Arising Under an Equitable Mortgage; A Case for
Reining These in." Browser Download This Paper (2015).
Gil Sander, Frederico, et al. "Fiscal Policy for Equitable Growth." (2015).
Latec Investment Ltd v Hotel Terrigal Pty Ltd [1965] HCA 17
Lysaght v Edwards (1876) 2 Ch D 499

7EQUITY AND TRUST
Singer, Joseph William. "The reliance interest in property." Stanford Law Review (1988): 611-
751.
Squires v SA Steel and Sheet Pty (1987) 45 SASR 142
Walsh v Lonsdale (1882) 21 Ch D 9