Equitable Rememedies in Law of Contract

Title: Law Of Contract: ‘The whole purpose of equitable remedies is that they should operate where an award of damages is an inadequate remedy and justice is not served.’ Chris Turner

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eq·ui·ty (ek’wi-tÄ“)

n., pl. -ties.

The state, quality, or ideal of being just, impartial, and fair.

Something that is just, impartial, and fair.

Law.

Justice applied in circumstances covered by law yet influenced by principles of ethics and fairness.

A system of jurisprudence supplementing and serving to modify the rigor of common law.

From the latin aequitas meaning fairness, equity is the title accorded to a field of law embedded in the legal system of countries that have adopted the English common law tradition. The raison dՕĻtre of the law of equity is the resolution of disputes between litigants on the grounds of principles of natural justice and fair play. Equity can be contrasted with law, which can be defined as the body of legal principles derived from government legislation, the common law, and case law Рwhich emanates from judicial opinions delivered in deciding cases. Equity typically intervenes in situations where neither of the disputing parties has done anything against the law, but their rights or claims are in conflict.^[1]

The Normans conquered England in 1066. At that time there was no such thing as an English legal system, rather each region, town and even village had developed its own system of law based on local custom and tradition. Eager to exert control over the country the Norman kings dispatched officials drawn from the Royal Court at Westminster on journeys around England. These officials travelled from town to town hearing disputes and dispensing justice in the King’s name. Decisions were compiled by these early judges and to establish certainty and consistency in the emerging law it became their practice to follow each other’s rulings where the same point of law arose in a case. This policy was known as stare decisis^[2] or judicial precedent, and it still underpins the system of case law today.^[3] Over time a coherent and comprehensive legal system that was common to the entire country was created and the English common law system was born.

Towards the end of the 13th century, for the sake of simplicity and ease of use the law courts stopped adding to the list on the types of claims they would hear, and cemented the now elaborate procedures that governed the hearing of those claims.

Unfortunately, the range of possible legal claims at that time was fairly limited and legal procedures became mired in technicality. Judges and jurors were often bribed, with the result that many meritorious plaintiffs were denied satisfaction.^[4]

However, potential litigants that were unhappy about the prospect of bringing their claim before the common law courts had another option. They turned to the King for justice. Remedies could also be secured by filing a petition with the Crown, which retained the ultimate judicial authority. Such petitions were typically phrased in terms of throwing oneself upon the King’s mercy or conscience.

As dissatisfaction with the laborious and clumsy processes of common courts grew the popularity of the royal route to justice increased. With a burgeoning workload, the King decided to delegate the function of resolving such petitions to his chaplain, otherwise known as his Chancellor, a powerful and influential member of the King’s Council. Usually a clergyman and the King’s confessor, the Chancellor was literally the keeper of the King’s conscience. Soon the Chancery, originally the Crown’s secretarial department, began to take on the form of a judicial body and took the title: the Court of Chancery.

The judicial power of the Chancery had grown to constitute a major source of law by the end of the fifteenth century and the body of equitable maxims, which remained in a state of flux as Chancellor replaced Chancellor was largely settled by the end of the sixteenth century. From the turn of the eighteenth century onwards only lawyers were appointed to the office of Chancellor.^[5]

It is true to say, therefore, that equity grew as a source of law in response to dissatisfaction with the rigidity and complexity of the common law. In one sense Equity can be thought of as the mortar between the blocks of the common law, filling the gaps left in the superstructure of England’s ancient system of case law.

It is submitted therefore that equity was created to deal with deficiencies and omissions in the common law. It should be noted that the rules of equity do not, however, collectively constitute a complete system of law. Instead, equity relies on and presupposes the existence of the common law, serving as a supplement to it in certain well-defined circumstances. On the other hand the common law is a complete system and could survive (although not very well) in the absence of equity. Maitland, one of the foremost scholars of equity, observed that:

‘At every point equity presupposed the existence of common law … Equity without common law would have been a castle in the air, an impossibility.’^[6]

Inter alia, the Court of Chancery made an important contribution in the enforcement of real property and land law in the field of uses, something that the inflexible and convoluted framework of common land law had failed to achieve on its own. It was this function which settled the fundamental distinction between equitable and legal interests.^[7]

As a consequence of the inevitable differences between the rules of law and equity, conflicts arose between the courts administering the respective systems. A definitive decision was needed as to which source of law should prevail and in 1615, in the Earl of Oxford’s case^[8], it was held by King James I that where the rules of common law and equity conflict, the rules of equity will prevail. This remains the law today, enshrined in s.49 of the Supreme Court Act 1981.

In the early years Chancellors purported to dispense equity in sympathy with its original sense of fair play and natural justice, cutting through the scruples and technicalities of the common law to ensure a just decision was ascertained. Both Roman and Canon law yielded inspiration for some of the fundamental principles of equity. Before too long, however, the law of equity had accumulated its own body of precedents and it gradually became less flexible.

That said, even in the modern sense of the concept, equity, can still be defined by the founding principle that no wrong should be without an adequate remedy. Moreover, the point that equity cases were adjudicated without a jury was deemed highly advantageous in difficult and complex cases. Equitable remedies are the provenance of the judge as the question is a matter of law and not subject to the intervention of the jury as the arbiter of fact. Among the most important inventions of equity are the injunction and the trust. Due to the fact that the final order (or decree) of an equity court constituted an order of the King, disobedience might be punished as contempt. On the other hand, in legal remedies, the plaintiff was typically restricted to enforcing a (monetary) judgment.

However, the coexistence of different systems of justice and growing delays in the courts of chancery^[9] came to present such great procedural difficulties that the separate courts of common law and equity were merged under the Supreme Court of Judicature Act 1873. It is a moot point (known as the fusion debate) as to whether that merger was purely administrative, leaving the different set of rules intact and the enforcement of those separate rules vested in the one judge, or alternatively whether there was a substantive merger, with the result that our system no longer operates on distinguished rules of equity and law but merely rules classified as law. As to this vexed question, while a growing number judges including the prominent Lord Diplock, and Lord Cooke in the New Zealand Court of Appeal^[10], have articulated the latter view, Professor Ashburner was clear in his own views. In an oft-quoted analysis he stated:

‘…the two streams of jurisdiction, though they run in the same channel, run side by side, and do not mingle their waters’.^[11]

Leaving that essentially academic dichotomy to one side, arguably the most significant distinction between law and equity, certainly in terms of modern practice, is the basket of remedies that each offers. The most common remedy a court of law can award is an order for pecuniary damages. However, there are occasions when damages will not constitute an effective remedy in the circumstances of a particular case.

Equity, provides alternatives, including injunctions, which are decrees directing someone either to perform an action or to omit from acting in a certain way. This form of relief is often, in practical terms, far more valuable to a litigant. For example complainant seeking to obtain the return of a rare stud bull, which has strayed onto a neighbour’s property, may prefer the return of the animal rather than compensation to the amount of its value in monetary terms. It is true to say that law courts are also empowered to make orders, otherwise known as writs – including for instance a writ of habeas corpus – but these are far less easily obtained and less malleable in application than an injunction.

Another key distinction between equity and law is the source of the rules governing the decisions. In law, decisions are guided by reference to statute, precedent or legal doctrine. In contrast, governed by justice and fairness, equitable decisions are swayed only by general principles which are known as the maxims of equity. Indeed, it is submitted that one of the most enduring historic criticisms of equity was that it was too amorphous, comprising no fixed rules of doctrines of its own. Chancery courts handed down decisions that predominantly reflected the judge’s own conscience. John Selden, an eminent seventeenth century jurist, famously declared, “Equity varies with the length of the Chancellor’s foot.”

It should be noted that, despite the ruling in the Earl of Oxford’s Case, equity never states that the common law is erroneous or at fault. Instead it merely provides alternative solutions to legal disputes. Good illustrations can be found throughout the law of contract. In particular, decisions such as Central London Property Trust Ltd v High Trees House Ltd^[12] and Solle v Butcher^[13] amply demonstrate equity’s ability to offer a different remedy, complementing that provided by the common law.

As stated, the law of equity was devised by judges eager to preserve natural justice in the application of the law. This source of law significantly increased the range of remedies available to a wronged party where common law damages fail properly to address the problem in such a way as to satisfy the litigant in terms of justice. The most important equitable remedies include:

Injunction: ordering a party to do or not do something.

Specific Performance: compelling a party to fulfil a prior agreement.

Rectification: altering the words of a document which does not express the true intentions of the parties to it.

Rescission: restoring the parties to their original pre-contractual positions.

In recent decades equity has shown itself capable of adapting to modern conditions and demands, and proved that it is still a useful supplement to the common law regime. In the 1970s two effective new remedies were created by extending the scope of the injunction: the Mareva Injunction is a court order to a third party, such as a bank, to freeze the assets of a party to a dispute where there is a danger of flight from the court’s jurisdiction; and the Anton Piller Order, by which the court can order a party to allow their premises to be searched and relevant documents to be removed.

These new remedies underline the point that the whole purpose of equitable remedies is that they should operate where an award of damages is an inadequate remedy and justice is not served.

In closing it should be noted that equitable remedies are discretionary only, not available as of right as is the case with a common law award of damages. As Lord Denning emphasised in D & C Builders v Rees (1966) 2 QB 617 “he who comes to equity must come with clean hands”. That is to say the party seeking to rely on principles of fairness must be able to demonstrate he or she has not behaved colourably in his or her own actions. Moreover “he who seeks equity must do equity”, which means that anyone seeking equitable relief must be prepared to act fairly towards their opponent: Chappell v Times Newspapers Ltd.^[14] Lastly, it is worth stressing that “delay defeats equity”. This refers to the fact that where a complainant takes an unreasonably long time to bring an action equitable remedies may be forfeit: Leaf v International Galleries.^[15]

THE END

WORD COUNT: 2236 (excluding footnotes)

BIBLIOGRAPHY

• English Legal System, Catherine Elliot and Frances Quinn, Longman
• English Legal Method, LLB Text Cases and Materials, Erika Kirk, Blackstone Press
• Smith and Keenan’s English Law, Dennis Keenan, Pitman Publishing
• Snell, E., Principles of Equity, 30th edn, London: Sweet & Maxwell
• English Legal Process, Ingman T., Blackstone Press
• The Machinery of Justice in England, Jackson R.M., Cambridge University Press
• Ashburner’s Principles of Equity, 2nd ed
• Equity and the Law of Trusts, Pettit, 9th ed

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Footnotes

^[1] See for further: Smith and Keenan’s English Law, Dennis Keenan, Pitman Publishing.

^[2] Literally: let the decision stand.

^[3] See for insightful comment: English Legal Method, LLB Text Cases and Materials, Erika Kirk, Blackstone Press

^[4] For discussion and background see: English Legal System, Catherine Elliot and Frances Quinn, Longman.

^[5] See: Snell, E., Principles of Equity, 30th edn, London: Sweet & Maxwell, 2000.

^[6] See for supporting comment: The Machinery of Justice in England, Jackson R.M., Cambridge University Press.

^[7] For contextual comment see: English Legal Process, Ingman T., Blackstone Press.

^[8] (1615) 1 Rep. Ch. 1.

^[9] In the book Bleak House Charles Dickens lampooned the excessive time and expense associated with the courts of equity of 19th century England.

^[10] See Mouat v Clark Boyce [1992] 2 NZLR 559; TV3 Network Ltd v Eveready NZ Ltd [1993] 3 NZLR 435 at 438.

^[11] Ashburner’s Principles of Equity, 2nd ed, 18, cited in Pettit, Equity and the Law of Trusts, 9th ed, 2001

^[12] (1947) 1 KB 130.

^[13] (1950) 1 KB 671.

^[14] [1975] 1 WLR 482.

^[15] (1950) 2 KB 86.