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Equitable remedies in common law, an analysis

In order to answer this question one must assess and consider the law relating to the equitable remedies afforded under the civil system of the legal process. This will require an in-depth view of the technical workings from the quotation from Lord Hoffman in the case of Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd[1]. This will be aimed at whether the remedies afforded under equity are more reliable and fairer than that under the common law and whether this conforms to the overriding principles of a just outcome.

The principles of equity where created and administered by the Court of Chancery[2]. These were predominately created as a way of mitigating the harshness of the common law and acted as the conscience of the common law[3]. It is clear that laws are enacted as a way of preserving a lawful society, but rules can be totally inflexible without a fluid lubricating their effectiveness. Thus, equity is a set of principles that helps a litigate achieve what is the most sensible and workable outcome in a commercial driven world.

In the case of Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd[4], a covenant was installed into the lease which required the main unit to be ‘kept open’. As the supermarket was operating at a significant loss, the defendants sought closure. The claimants applied for the remedy of specific performance and damages to keep the supermarket open and compensate the claimants. At first instance, the district judge ordered damages for breach of covenant, but held that specific performance would be inappropriate due the nature of the requirements. This decision was overturned by the Court of Appeal, and the defendants subsequently appealed to the House of Lords. It was held by the House that ordering the remedy of specific performance would not be appropriate in cases such as this due to the policing and supervision of the order. It is clear from this case that although specific performance is a more suitable remedy for enforcing terms of an agreement, it will not be classed as a correct outcome if the order requires constant supervision and policing by the courts. However, the previous ruling from the case of Giles (C. H) & Co Ltd v Morris[5], held that the rules which stated that the ordering of continuous enforcement of terms would not be advisable, was not an absolute rule. Thus, any equitable remedy has its usage when the common law remedies fail to adhere to the fundamentals of an appropriate outcome. However, the idea of equity is not to be confused with the ideas and principles of justice, as a claimant must show that any claim has ‘an ancestry founded in history and in the practice and precedents of the court administering equity jurisdiction. It is not sufficient that because we may think that the ‘justice’ of the present case requires it, we should invent such a jurisdiction for the first time[6]’. Thus, equity must be seen as a device to achieve an appropriate outcome where common law remedies are inadequate.

The usage of damages is granted to a successful claimant as a matter of right; the historical basis of equity is to provide a softer outcome from this very static approach of the common law rights. The principles of equity have assisted in situations that common law remedies would have been unable to help in. In the case of Lipkin Gorman v Karpnale Ltd[7], a casino, who had received stolen money from a firm of solicitors client accounts[8], were held to be liable to repay the owed money. The technique used to recover the money was that of tracing. This is a technique which allows the claimant to follow or trace the property into another’s possession. This can be conducted under both the common law and equity. Under the common law, tracing can only occur when the funds are placed into a separate account, which in law, is classed as unmixed funds. Whereas under the rules of equity, tracing can occur even into a mixed account, thus being unidentifiable property. Had the rules of equity, coupled together with the notions of fairness, not been in operation then the firm of solicitors would have been liable for the loss incurred by the rogue solicitor. However, it is unfair that the casino was ordered to repay the money that they had accepted in good faith as a way of punishment. The true culprit of this action should have been the rogue solicitor. Thus, equity can be seen as a hindrance to an individual who is said to have been unjustly enriched at another’s expense. Had equity not intervened in this case then the casino would not have had to work at an operational loss. However, had equity not intervened then the clients of the firm of solicitors would have had substantial losses in their money, and it is arguable that on a practical point of view, the rogue solicitor may not have had sufficient funds to repay the debt, thus the innocent clients would have suffered to their detriment.

The fairness of equity and the conflicts that arise within the common law structure were examined in two fairly recent cases. In the case of Attorney General of Hong Kong v Reid[9], a solicitor and deputy Crown prosecutor, from New Zealand, had accepted bribes, which also included three freehold properties. Due to how the property had been appropriated, the Attorney General sought to enforce the right that property should not be used until a constructive trust was placed over the properties. The presiding judge in the New Zealand Court of Appeal held that this should not be permitted. On further appeal, it was held that the appeal was to be allowed, as equity insists that when a fiduciary[10] breaches his position of trust, he should not be permitted to benefit from this breach. Thus, had the fairness of equity not stepped in then the misappropriated property could have been used to the detriment of the state. Thus, the common law remedy of damages would have been totally inappropriate in this case. Equally, in the case of Foskett v McKeown[11], held that equitable property rights are in no way discretionary and are absolute. Further, property can be traced into an insurance policy and then the proceeds of the insurance policy, hence the beneficiaries have the right to gain from the misappropriated trust property. Thus, had the roles of equity not intervened then it is arguable that the property concerned in this case would never have been recovered. The legal roles of property ownership are concerned purely with the possession of the property. However, it is worth noting that equity does not always intervene to assist in what would be a more appropriate outcome[12]. Equally, equity does overturned it’s own rules in favour of possession claims under the common law. This is the notion known as Equity’s Darling. This occurs where an individual buys property not being aware of an equitable right existing upon the legal estate. In such a case the equitable right does not bind the unaware purchaser. Clearly, this is fair for the purchaser but what of the individual who has entered into an agreement with a previous vendor to have an equitable right?

In conclusion, equitable remedies are not to be used by the legal process as a stick to beat the opposition into submission. The principles that govern the rules of equity are thus discretionary in nature. In certain cases, outlined above, the role of equity has been seen to deliver a fairer outcome then just damages being awarded. However, in other situations equity does deliver what can be said to be a perverse outcome, when strict legal rules may be a more appropriate response.


Footnotes

[1] [1997] 3 All ER 297 at 300.

[2] This was before the Judicature Act of 1873 was enacted.

[3] Thus, a claimant must demonstrate that they are above reproach when seeking the help of equity.

[4] [1997] 3 All ER 297.

[5] [1972] 1 WLR 307.

[6] Re Diplock [1948] Ch 465 at 481 and 482

[7] [1991] 2 AC 548.

[8] Paid in by a rogue solicitor.

[9] [1994] 1 AC 324.

[10] i.e. a person who occupies a position of trust against another.

[11] [2000] 2 WLR 1299.

[12] Lloyds Bank Plc v Independent Insurance Co Ltd [2000] QB 110.


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