The reasons behind the creation of equity
Common law refers to the body of legal precedent that is compiled by a number of past court decisions and or similar tribunals as opposed to executive action or through legislative statutes. These legal precedents are the rules that common law judges use to decide on legal disputes.
In the common law legal system, laws are created by and/or refined by judges. This implies that a ruling in a case currently pending depends on the rulings made in previous cases and affects the law to be applied in future cases. Whenever an authoritative statement of the law does not exist, common law judges have a provision to make laws by creating precedent.
This body of precedent is what is called "common law" and it is binding to all future decisions the court has to make. However, the decisions of a court are binding only in a particular jurisdiction. Common law legal systems are in widespread use, particularly in those nations which trace their legal heritage to Britain, including the United Kingdom, most of the United States and Canada, and members of the Commonwealth of Nations ( Holmes O. W., 1881)
Equity is a term denoting a system of justice, that is administered in particular court, whose nature and extent can only be understood and explained after studying both the history and principles upon which that court acts. It was developed and administered in England by the high court of chancery in the exercise of its extraordinary jurisdiction. Equity defines a set of legal principles, in all the jurisdictions that follow the English common law tradition, that supplements strict rules of law where their application would operate harshly, and this is done to achieve "natural justice (Anon. Historical Outlines of Equity).
This document elaborates on the historical reasons behind creation of equity as a system of law, the differences that exist between equity and common law. In addition, the nature of the present relationship between common law and equity is also discussed.
The reasons behind the creation of equity.
Historically, the High Court of Chancery in England administered the equity system of justice in the exercise of its extraordinary jurisdiction. The much older system of law was the common law, which was administered by the King’s Benches. Equity was viewed essentially as a more modern body of legal doctrine that served to supplement the coercive old law. It is worth noting that these two systems of law were largely identical and in harmony. This is because the rules already established in the common law courts were readily adopted by the chancellor and incorporated into the systems of equity.
There was also provision for the rejection and modification of some of these rules if justified by sufficient reason. Creation of the equity as a system of law was to serve as a means through which a legal system could strike the balance between the rule-making process and the need to achieve fair results in individual and separate circumstances (Megha K., 2008).
The equity system is attributed for contributing significantly towards the development of law. These contributions are particularly evident in the areas of auxiliary (new procedures), exclusive, and concurrent jurisdictions. These three categories are elaborated as follows:
Auxiliary jurisdiction: equity has contributed to the rise of new procedures created from discoveries made by the court of chancery in documents, subpoena of witnesses, interrogates, and from testimonies made on oath.
Exclusive jurisdiction: these are new rights also created by the court of chancery but which the common law courts had failed to enforce e.g. partnerships, mortgages, bankruptcy, company law, trusts and administration of estates.
Concurrent jurisdiction: refers to the new wide range of remedies that the equity system developed for the enforcement of rights both at law and in equity. Some examples include the following:
Rectification; this is an order that requires the defendant to promptly modify a document to reflect the agreement made between the defendant and the claimant.
Injunctions: refers to an order given by a court to restrain a party from committing a wrong.
Account: refers to a court order requiring that a party, which has control of money belonging to the claimant, reports on the way in which the funds have been spent.
Specific performance: this is an order that seeks to force the defendant to fulfill his/her bargain (Anon. Historical Outlines of Equity).
Difference between equity and common law.
As earlier stated, common law is a body of law that is developed in many cases and over a long period. Throughout the many centuries of civilization, law courts have considered cases and defined what should be done in each one. Over this duration of time, it was indeed possible to discern principles of law or precedents from the mass of those cases. Therefore, common law evolved over time as judges made law (according to doctrine of precedent). Common law rules are very formal and rigid, whereas equitable principles/maxims are more amenable to changes. The rigidities of common law can only be addressed by making use of equitable maxims, provided by the equity system, in certain cases.
On the contrary, equity refers to a set of legal principles, in jurisdictions following the English common law tradition, which supplement strict rules of law where their application would operate harshly. Where the law is found to be essentially correct but proving to be too severe or unfair, the equity system serves to allow for a different course of events in the legal world. Equity essentially does not contradict the common law, but rather it aims at securing substantial justice when the rule of common law might see injustice.
The most significant distinction that exists between the two systems is based on the remedies that each offers. In the common law, decisions are made by reference to existing legal doctrines or statutes, whereas in the equity system, the emphasis is laid on fairness and flexibility, which are known as the maxims of equity. For instance, the most common remedy a court of law can award is money in lieu of damages caused. Equity, on the other hand, enters injunctions or decrees directing someone either to act or to forbear from acting, which are in practical terms more valuable to a complainant. These equitable remedies can be only be dispensed by a judge as it is a matter of law. Another important distinction between equity and common law lies in the source of the rules governing the decisions that are made in each of the systems (Suryanarayana V. 2007)
Nature of the present relationship between common law and equity.
Common law proves to be a self-sufficient legal system or source of law when compared to equity. This can be attested by the fact that equity presupposes the existence of common law and if we abolished the equity system, we would still have a coherent system of law, common law, but not vice versa.
The equity system of law was developed as a measure to address the rigidity of the common law system. Therefore, in its early years, the equity system was largely viewed as being against common law. The general feeling among a majority of people in legal circles was that the common law system would be equity abrogated by the inception of equity. On the contrary, it is evident that the modern development of equity is has in no way come to abrogate the common law but instead it serves to strengthen it.
Because of the nature of equity, a conflict between the two systems was in the offing and so between the years 1873-75, the court of chancery abolished the courts that propagated the equity system of law, by means of the Judicature Act (Holmes O. W., 1881). This was done through the transfer of their jurisdiction to the new supreme court of judicature, which in its administration led to the fusing of both the common law and equity. However, the substantive body of rules or laws found in the two systems was still maintained as separate entities. It is worth noting that the relationship between equity and common law is today is not one of contradiction but rather one of complementarily. The Judicature Acts (1873–75) succeeded in the merge of the administration of both equity and common law. This means that a majority of modern day law courts apply the two set of rules in their proceedings.
Whenever conflict still existed between the rules of the two systems, the rules of equity were to prevail in favor of those of common law. The overall effect of the Judicature Act that merged the two systems was the conversion of the exclusive and separate jurisdiction of equity into a concurrent jurisdiction. It also served to abolish the auxiliary jurisdiction, which meant that there was no longer need to go to a separate court if one wishes to obtain an equitable remedy. This change applied not only in the United Kingdom but also in the Commonwealth Nations.
However, the equity system continues to perform its core function, which is to complement and supplement the common law, in accordance with the morally accepted notions of justice and fairness (Antoine R. B. 2008).
Before the unification of equity and common law, achieved by the enactment of the Judicature Acts (1873–75), the latter provided some stability for the English legal system. This was in spite of its characteristic rigidity, whereas the former, due to its original unprincipled and loose application, led to serious instability and inconsistencies. The nature of the relationship between the two systems today is that they strive to balance each other. This is accomplished without having either of the two systems being accorded less significance than the other is.
It is evident that there exists a mutual relationship between the two systems of law. This is in the interest of providing fair and just rulings and arbitration in any given legal dispute.