ABSTRACT
This chapter analyses the use of mortgages and charges to take security in commercial transactions. A range of equitable doctrines, from floating charges to equitable mortgages, is analysed. Unlike trusts, which split title between the legal owner and the equitable owner, the structures considered in this chapter express a similar distinction between legal and equitable ownership but without concepts of trusteeship. The discussion in this Part of commercial uses of trusts and equity has three core aims. First, to examine the ways in which principles of equity are capable of plugging the gaps between the parties’ common intentions and the commercial structures which they eventually produce. This discussion will therefore highlight the nature of equitable mortgages, which are inferred in situations in which no formally valid mortgage has been created at law. Secondly, to consider the manner in which the proprietary rights created by a mortgage, a fixed charge or a floating charge differ substantively from the proprietary rights generated by a trust. Thirdly, to consider the way in which equity is able to rewrite unconscionable bargains using the equity of redemption: that is, a principle that the mortgagor must be capable of terminating the mortgage so that the mortgagee’s security interest disappears and the mortgagor recovers unencumbered title. These themes will demonstrate both how equity can support the common intention of the parties and also how it can unpick such bargains on grounds of public policy.
