Equity and common law

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Equity evolved to cover the cracks within the common law. Over the years it has evolved a separate but parallel set of legal rules which complement the common law. The case of Dudley v Dudley illustrates this by announcing that ‘Equity…does not destroy the law, nor create it, but assist it’[1]. The common law was prone to reaching an unjust outcome, due to the rigid constraints. This was combated by the introduction of equity. During the reign of King James I, the public would petition the King appealing as it were to his conscience. The King dealt with these matters in conjunction with the Chancellor. This then led to the creation of the court of Chancery in the fourteenth century to administer the new set of complimentary rules. This led to confusion over which set of rules took precedent over the other. This was defined in The Earl of Oxfords Case (1615)[2] in which King James I stated that ‘if there is a conflict between common law and equity, then equity should prevail’. Lord Ellesmore LC went on to clarify the position of equity by stating ‘The office of the chancellor is to correct mans conscience’s for fraud, breach of trusts, wrongs and oppressions of whatever nature and to soften and mollify the extremity of the law…when judgement is obtained by hard conscience.’[3] The equitable maxims also known, as rules of conscience are different than their Common Law counterparts, this is evident within the way in which evidence and facts are treated. The common law judges are limited to providing only one remedy, that of damages. Equity in contrast has a range of remedies available, allowing the judge to consider the individual circumstances on a case by case basis. The remedies available in equitable judgements are specific performance[4], rescission[5], rectification and injunctions[6]. So what are the equitable principles under discussion? This paper will now consider them in turn. The first considered is equity follows the law. Beever explains that ‘equity fills the gap between legal justice and absolute justice’[7] he went on to explain further by stating that ‘the content of equity consists of those judgements required to reconcile the former with the latter.’[8] They further back this explanation by the following words from Aristotle. ‘[W]hen the law states a general rule, and a case arises under this that is exceptional, then it is right, where the legislator owing o the generality of his language has erred in not covering that case, to correct the omission by a ruling such as the legislator himself would have been there, and as he would have enacted if he had had been aware of the circumstances’[9] This highlights equity’s position within the law. It points out that when there is a dispute between the common law and equitable principles; the common law will prevail. When considering this one must also take into account the maxim that Equity acts in personam. This is especially so when remedies are being considered. This is due to the fact that equity unlike the common law acts in the interests of the parties involved. It is important to note that equity does not change any common law ruling. It simply puts them aside for the sake of justice and fairness at a micro not macro level. Equity will not enforce an unconscionable contract. Where equities are equal the law prevails. In this one must look to see if common law solution is equal to that of the equitable one then the common law will take priority. The solution at common law if considered to be an inadequate remedy, then equitable solutions will be considered. Equity looks to substance rather than form shows that the equitable solutions are available even though they may not be protected by the common law. The court will look to what the parties before them intended. It does not require, unlike the common law specific formalities to have occurred before the law will be able to aid the claimant. This is discussed in the case Parkin v Tharold in which it stated that if formalities are required by statute, then equity could not override it. This is a direct link to the maxim that equity follows the law, providing yet more evidence that the maxims must be considered as a whole within each individual case. The following maxim, Equity regards as done that which ought to have been done relates to the equitable remedies available. Examples of this can be seen in Howe v Lord Dartmouth[10] and AG for Hong Kong v Reid[11]. The following maxim is concerned with the character of the defendant; He who comes to court must come with clean hands. This is best explained by Woods J in the case of Cross v Cross[12] in which it states ‘…any conduct of the plaintiff which would make a grant of specific performance inequitable can prove a bar.’ In other words, past behaviour will be taken into account. However, this is limited to behaviour that is directly related to the case in hand, see Dering v Earl of Winchester[13]. Statutory instruments generally proved guidance upon the maxim that Delay defeats equity. However, where the Limitation Act 1980 is silent on the issue at hand then it will be governed by the equitable doctrine of ‘laches’. A delayed response can prove to be a bar to equitable remedies as it can indicate that there has been acceptance of the new status quo. The application of justice and fairness is the cornerstone of equity. It will come as no surprise that the maxim equity is equality provides equal division of assets, unless this would prove to be unconscionable. The maxim equity will not aid a volunteer insists that consideration must have taken place for an agreement to have taken place. Equity will only be available to those party to the agreement.[14] This is by no means an exhaustive list of the equitable maxims available, it does, however cover the main establish uncontended maxims. This paper will concentrate on the following two maxims. Equity Imputes an intention to fulfil an obligation and Equity will not suffer a wrong to be without a remedy. These have been chosen due to their intertwined and substantial impact. The Former helped to build an entirely new area of law; the trust. This has proved very important in all areas of the legal system. This evolved from the antiquated concept of the ‘use’; the abuse of this concept became ever more apparent during the Crusades. The legal title was all that mattered to the courts. This led to grave injustices as the common law refused to recognise anything but the holder of the legal title. The only remedy afforded to it by the common law was that of damages due to a breach of confidence. This did not aggrieve the true owner of the property, as they would still have lost the proprietary interest. The chancellor of the time developed a system that invented the concept of duality of land ownership. This did not interfere with the common law interest it merely complimented them, minimising the risk of injustices occurring. The method adopted was to ensure that honesty and modesty prevailed over unconscionable conduct. Equity Imputes an intention to fulfil an obligation bridged the gap that had been left by inflexible remedies at common law; that of damages. This needed to be addressed by the law as it was creating many instances of unjust verdicts. Equity brought with it a whole new set of remedies. Equity acts very differently than the common law. Equity acts in personam unlike the common law, which acts in rem. Equity will not suffer a wrong to be without a remedy indicates that equity will not allow technicalities to act as a bar to justice. It has evolved to strengthen the defects in the common law system. There are many examples that could be put forward to bolster this papers claims that this is one of the most influential equitable maxims. However, this paper will concentrate on the introduction of equitable remedies. The common law could only recognised the holder of the legal title and not the person for whose benefit he agreed to hold the property. Equity considers the interests of and rights of the beneficial owner. Such remedies are numerous, however it is specific performance and injunctions that are the most common and discussed within this paper. This maxim also covers equitable doctrines and how they can help in ensuring justice is done. In this area the two maxims under discussion can be seen to overlap. This makes it very difficult to assess their individual impact upon the law, with regards to this matter. Many of the cases that show this maxim in action are property law cases. This does not mean this maxims influence is limited to this area of law. It is extremely far reaching, encompassing contract and commercial laws. As discussed above the creation of the trust has allowed unconscionable conduct to come under the long arm of the law and prevent wrongs from being committed with the blessing of the legal system. A trust can either be created orally or in writing. There only needs to be (like in contract law) an intention to create. In equity the intention to create a trust in all that is needed. This is discussed in the case Paul v Constance [1977][15] and elaborated upon more recently in the case of Rowe v Prance [1999][16]. The trust developed over the years to have its own set of established rules and precedent. The common law aspects of each case were never in question. Equity is concerned with ensuring that the trustee uses the property for the benefits of beneficiary. In doing this equity imposed upon the trustee a multitude of fiduciary obligations. We can see this in action in the case of Boardman v Phillips[17] in which an extremely strict application of this was applied. This equitable remedy is mostly prevalent within Property and Contract Law. Specific performance is best described as when the court orders a person to perform a specific action. This will only be if the remedies available at Common Law are considered to be of an inadequate nature. For instance, this is illustrated best when a written contract for the sale of land has taken place. If left to the Common Law, one would merely receive damages. It is considered in this instance by the courts that a piece of land is considered to be unique and damages would not compensate the potential purchaser. Failure to comply with an order for specific performance will render the defendant in contempt of court and thus be likely to face criminal proceedings. When applying equitable remedies such as specific performance one must take into account the following; would damages be a suitable remedy, the requirement of mutuality, the exercise of discretion and whether or not the claimant is a volunteer. This important as it prevents wrongs from going unpunished and allows the common law to be flexible without allowing the floodgates to open. The injunction is simply another way in which an action can be prevented or forced. The case of Shelfer v City of London Electric Lighting Co[18]. In this case Smith J sdescribed the principles in which would distinguish which remedy was appropriate. “In my opinion, it may be stated as a good working rule that: (i) if the injury to the [claimant's] legal rights is small; (ii) and is one which is capable of being estimated in money; (iii) and is one which can be adequately compensated by a small money payment; (iv) and the case is one which it would be oppressive to the defendant to grant an injunction, then damages in substitution for an injunction may be given.”[19] Again it must be proved that Common Law remedies would be inadequate before applying for an injunction of any kind. Since the Chancery Amendment 1858[20] the court has been able to grant damages as an additional remedy if the case proves it fulfils the correct criteria. This is now governed by the Supreme Court Act 1981.[21] Equity Imputes an intention to fulfil an obligation and equity will not suffer a wrong to be without a remedy have established and developed many of the equitable remedies which have found their way slowly in to nearly all aspects of the law. It could be said that the Supreme Court of Judicature Acts 1875 caused this once the two systems of law were merge[22]. It has been argued that at this point the two systems were fused together. Meagher and Gummow describe this assumption as follows ‘Those who commit the fusion fallacy announce or assume the creation by the Judicature system of a new body of law containing elements of law and equity but in character quite different from its components. The fallacy is committed explicitly, covertly, and on occasion with apparent inadvertence. But the state of mind of the culprit cannot lessen the evil of the offence.’[23] The restatement in law in this form merely helped to clarify both sets of rules and how they work together in relation to each other. After all if equity follows the law it can not be considered as an entrench part of it. They go on to elaborate further on this later on in their article. The case concluded that ‘[The fusion fallacy] involves the conclusion that the new system was not devised to administer law and equity concurrently but to "fuse" them into a new body of principles comprising rules neither of law nor of equity but of some new jurisprudence conceived by accident, born by misadventure and nourished by sour but high-minded wetnurses.’[24] When compared the two systems show that they complement each other and together allow the law to provide a more fair and effective legal system. At common law judges have to take into consideration bureaucracy and this proves to be unforgiving and rigid. Unlike the common law equity is more flexible as it allows the judge to base his judgement on consciousness, fairness and moral substance[25]. The influence upon the common law by equity is a complex one. Donovon describes the relationship as ‘the desire of the most well-regarded equity judges has been [to keep] equitable doctrines flexible and responsive, without the oppressiveness of procedure and … attempting to keep factual consideration within the realm of principle, equity doctrine has always been certainly more amorphous than that of law’[26]. The most positive outcome to emerge from the evolution of the equitable maxims is the addition of a flexible component in which judgements could be made. It allowed for the law to be flexible, minimising the risks of unconscionable acts receiving the backing of the law. The impacts of the remedies available if applied have no actual impact on the common law as such. They do have an impact upon the individual claimant. Birks describes the impact of the following equitable remedies as ‘weakly discretionary’[27]. Thus, the impact is dependent upon the exercise of discretion. Equity evolved naturally to ensure that justice is not a victim to common law and will continue to influence the law on a personal level without effecting the status quo for countless years to come. Bibliography Thompson, MP. ‘Modern Land Law’. Oxford University Press. 2001 Edwards, R and Stockwell, N. ‘Trusts and Equity’. Longman University Press. Burn, EH. ‘Trusts and Trustees. Cases and Materials’. Butterworths Press. 5th Edition. Spry. ‘The Principle of Equitable Remedies, Injunctions, Specific Performnce and Equitable Remedies.’ Sweet and Maxwell. 3rd Edition 1984. Thomas, M. ‘Blackstones statutes on Property Law – 2006 – 2007’. Blackstones Press. 14th Edition. A Beever. ‘Aristotle on Equity, Law and Justice’ 10 Legal Theory 33 Waters, D. ‘The Future of the Trust From a Worldwide Perspective’. 11 ITCP 4(199). 2004 Birks, P ‘Rights, Wrongs and Remedies’. 2000 OJLS 20(1). Burrows, A. ‘We Do This at Common Law But That In Equity’ 2002 OJLS 22(1). Pawlowski, M. ‘Building in Breach of Covanent: Injunction or Damages?’ 154 NLJ 1896. 2004. 1

Footnotes

[1] Dudley v Dudley (1705) Pr Ch 241 [2] Earl of Oxfords Case (1615) 1 Rep Ch 1. [3] Per Lord Ellsemore LC. Earl of Oxfords Case (1615) 1 Rep Ch 1 [4] This is when the court demands a specific act must take place. This will more often than not involve a previously agreed action. [5] The cancellation by the court of a contract with the intention of placing the parties involved into a position akin to that as if the contract had never existed. [6] A judicial order restraining an action from taking place, or to enforce action. [7] A Beever. ‘Aristotle on Equity, Law and Justice’ 10 Legal Theory 33 at 35. [8] ibid [9] Ibid [10] Howe v Lord Dartmouth cited in Edwards, R and Stockwell, N. ‘Trusts and Equity’. Longman University Press at 34. [11] AG for Hong Kong v Reid [1994] 1 All ER 1. [12] Cross v Cross (1983) 4 FLR 235. [13] Dering v Earl of Winchester (1787) 1 Cox 318. [14] Edwards, R and Stockwell, N. ‘Trusts and Equity’. Longman University Press. [15] Paul v Constance [1977] 1 WRL 527 [16] Section 53 (1)(b) of the Law of Property Act 1925. [17] Boardman v Phillips 1967] 2 AC 46 [18] Shelfer v City of London Electric Lighting Co. [1895] 1 Ch D 287 [19] Pawlowski, M. ‘Building in Breach of Covanent: Injunction or Damages?’ 154 NLJ 1896. 2004. [20] Thomas, M. ‘Blackstones statutes on Property Law – 2006 – 2007’. Blackstones Press. 14th Edition. [21] The Law Of Property Act 1925. Section 50. [22] Thomas, M. ‘Blackstones statutes on Property Law – 2006 – 2007’. Blackstones Press. 14th Edition. [23] R. P. Meagher, W. M. C. Gummow and J. R. F. Lehane, Equity, Doctrines and Remedies (3rd edn, 1992) at para 221 in Burrows, A. ‘We Do This at Common Law But That In Equity’ 2002 OJLS 22(1). [24] Ibid. [25] Ibid. [26] Waters, D. ‘The Future of the Trust From a Worldwide Perspective’. 11 ITCP 4(199). 2004. [27] Birks, P ‘Rights, Wrongs and Remedies’. 2000 OJLS 20(1).
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