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Equitable Remedies Prevent or Redress Harm

Info: 2766 words (11 pages) Law Essay
Published: 7th Aug 2019

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Jurisdiction(s): Australian Law

Equitable remedies seek to prevent or redress harm caused by the breach of equitable and legal principles. Unlike the common law remedy of damages, they are not punitive in either nature or intent. Is this an accurate statement? Support your arguments with reference to at least three (3) equitable remedies.

The basis behind equitable remedies is to distinguish it from the readily available common Law Remedies. Equitable remedies in comparison to common law is not limited or constrained by common law concepts such as remoteness of damage or causation etc and that allows it to go further then common law in addressing harm. This aim of equity was affirmed in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298, where the NSW CA (court of appeal) came to the decision that that exemplary (or punitive) damages are not available for breach of fiduciary duty or any other equitable principle.

His honour McLachlan J in Norberg v Wynrib (at 295) [1] also addressed this intention of equity by stating the aim of equity is to redress the harm caused to the plaintiff by putting them back to the position they would have been if not for the breach of equitable and legal principles. Therefore in reference to the above two decisions, the purpose of equitable remedies is to address the imbalance between punishment and justice and not just rely on punitive measures where punishment is the main focus.

The decision by CJ Spiglmen in the Harris v Digital pulse stated that common law damages or exemplary damages are both contradictory with the equitable principles as the focus of equity‘ is to come up with an outcome that is consistent with obtaining justice for both parties [2] , and so in that regards a balancing exercise is needed to place the plaintiff back to the position they were in before the breach of equitable principle and also it has to prevent harm from occurring.

specific performance remedy goes towards meeting this intention of equity, to do more to redress a breach of duty and this ideal is inconsistent with common law remedies. The nature of specific performance orders, requires the defendant to perform the promise made to the plaintiff as otherwise common law relief of damages is too inadequate a remedy in this situation to fully remedy the problem.

As was held in Pakenham v Crosby, the application of specific performance in equity is the purpose of placing the parties back in their legal position before the breach of obligation occurred [3] . Specific performance is ordered only when it has been established that common law award of damages would be inadequate to address the harm suffered here and would not prevent the breach from reoccurring. In placing restrictions on the use of specific performance it shows how the main focus through equity is to firstly address the harm that occurred to the plaintiff then look at preventative measures.

In this way Specific performance order is granted by court in right of its exclusive equity jurisdiction and this remedy can only apply where monetary compensation as provided by damages is so inadequate as to affect this remedy. This remedy is granted to supplement the common law remedy of damages and to provide relief for the wronged party without being too pecuniary in nature.

Through limiting the decreeing of specific performance to specific categories such as land contracts, equity here through its application of equitable remedies is concerned with protecting the rights and interests of the promisee by looking at whether other remedies apply to that situation [4] . This way the right remedy will be applied where it is important for the plaintiff to have the promise carried out rather than seek compensation. That is this way specific performance applies directly to the breach of legal and equitable principles without needing to resort to compensation which can be punitive in nature.

Specific performance is the right equitable remedy in comparison to common law damages as it provides the right outcome of compensation but not to the same degree as damages whilst not providing a penal outcome that distinguishes it from its common law counterpart. Specific performance is slightly prophylactic in that, in instances where there is a breach of contract obligations it gives the right outcome by enabling the party that made the promise to do what they ‘freely’ contracted to do while not ordering a punitive remedy.

Furthermore, specific performance protects the promisee’s interests by balancing the right to a remedy with performance of the contract where damages are assessed in light of the breach of equitable principle. This way it is not creating a windfall for one party at the expense of another as the value of the promise or breach of contractual obligation is awarded after much consideration of factors that take into account interests of justice with a prophylactic or preventive need. Hence a “promisee’s expectations are disregarded and instead the ‘fair’ value of the performance is awarded” [5] and so it purely addresses the breach of equitable obligations without extending into punitive measures.

Account of profits is a another such remedy that goes beyond the common law remedies to address breach of equitable and legal obligations that are at issue. In the equity jurisdiction a person in breach of their fiduciary duty or obligations as a trustee must account for their profits and enables the wronged party to recover profits made in breach of an equitable duty. [6] This equitable remedy of account of profits though usually applicable in cases of fiduciary relationship but however it can extend to certain other situations where it’s needed to redress a wrong that the common law is unable to do [7] .

The basis of this remedy is not punitive in nature and so when this remedy is applied a fiduciary or a trustee will have to account for any profit then they received through their breach of equitable obligation. This way there is no unjust enrichment or punitive remedy as it promotes fiduciaries and trustees’ to act in such away so that their interests don’t conflict with their official duty [8]

Following from above, in the case of Warman v Dwyer [9] the high court held that if the profit was made through the conduct of business it would be inappropriate as well as being unjust for “the errant fiduciary to account for the whole of the profit…over an indefinite amount of time”. [10]

Thus account of profits can’t be seen as punitive remedy as it did not set out to punish the errant fiduciary , but sought to redress the harm suffered by the plaintiff by characterising between the types fiduciaries who misappropriate property for own benefit and fiduciaries who have diverted business opportunities to themselves to gain an improper benefit.

Here the ‘errant fiduciary’ must account for profits made , as if common law remedy like damages was applied as they will still be unjustly enriched at the expense of the plaintiff and so the remedy will not have focussed on the need to redress harm [11] .

In Dart industries v Decor corp, the high court came to the decision that account of profits role is not to punish (the defendant) but to “prevent their unjust enrichment” [12] So the distinction between this remedy and common law damages is that although the defendant will be required by the law to compensate the other party (plaintiff) for the loss suffered as a result of them (defendant) breaching their legal obligation, they will still be unjustly enriched in that they will still have their ill gotten profits [13] . Thus through account of profits the defendant will no longer be unjustly enriched and equity will have addressed the harm suffered by putting the plaintiff back to the position they were previously in.

This application of account of profits is an exercise of purely equitable purpose as there are not penal measures or penalty involved. It just seeks to remove and account for all ill gotten gains made through breach of equitable principles such as breach of fiduciary or trustee duties [14] .

Hence in distinguishing between account of profits and damages or common law compensation it is a personal remedy that the wrong party receives that seeks to compensate for the loss suffered. [15] This way it can clearly be seen that the common law remedy is punitive in nature as it seeks to punish the defendant. However account of profits means that the defendant must return all profit (through apportionment) made as a consequence of infringing the plaintiffs’ rights and this way the equitable remedy clearly meets the plaintiffs concern by directly addressing the infringed obligations.

Another remedy this intention can be seen is equitable compensation. In relation to equitable wrongs and breach of equitable principles such as fiduciary duties, equitable compensation is awarded to the wronged party by balancing ‘enforcing obligations with the need for preserving freedom so that the balance works in favour of the wronged party [16] . His honour Heydon JA in his judgment in the Harris case held the aim of exemplary damages was to deter, punish and to an extent “vindicate the victim’s feelings” and so through his judgement he acknowledged exemplary damages went against the purpose of equity [17] .

However here equitable compensation is quite different to the above common law damages as ‘‘equity has an inherent jurisdiction to award monetary compensation for loss” [18] through equitable compensation. As equity is concerned with balancing rights and needs of both parties pursuant to the cause of action, exemplary damages which are seen as being punitive has no role to play.

According to the judgement in Vyse v Foster [19] equity does not punish and here exemplary damages impose a punitive burden and so the punishment intent goes further than the benefit the defaulting party received thus it is inconsistent with the purpose of equitable compensation. Equitable compensation here serves the same ostensible purpose as ordinary damages at common law, that is the purpose of compensating the plaintiff for loss suffered by focussing on restitution and not compensation.

The application of equitable compensation and how it differed from common law in nature and intent was further clarified by Jacobs J in Palmer v Monk [20] . Here his honour stated “the court of equity does not penalise a person dealing with a trustee in breach of trust, nor does it penalize a constructive trustee… merely requires person or party to do equity then equity will step in” to move the beneficiary back to the position they would’ve been if not for this situation. [21] Following on from Jacobs J, Handley JA Houghton v Immer (No 155) Pty Ltd [22] stated when equity compensates then it “should only compensate the plaintiff”, and cannot step in to strip profits or punish the defendant for the wrongdoing in the sense that it is equitable compensation and not a punitive measure.

Furthermore equitable compensation goes further than its common law counterpart in that it may be denied or reduced so as not to be seen as punitive in nature when taking into account the above considerations that are held to be immaterial at common law. Other considerations such as unjust enrichment, fairness and acquiescence is also taken into account by

this remedy so that the wronged party can receive greater compensation through equitable remedy then what might be entitled to through common law remedies based on the same facts.

Lord Reid in the UK case of Broome v Cassell & Co Ltd [23] considered how equitable compensation and common law damages differed in intention and nature from each other. He stated that “by awarding exemplary damages the court gave the plaintiff more than what they had to be compensated for and in doing so made the defendant liable for punishment” [24] . That is here equity took on the merged role of criminal law in the equity jurisdiction and so the decision established merged the role of equity and civil law which is compensation with criminal sanctions of punishing the wrongdoer.

As equity is concerned with the balancing exercise of rights and interests of both parties involved in the matter, it follows that the punitive nature of common law damages has no role in equity. As this way equitable compensation serves a dual purpose; being a compensatory element which extends further than common law remedy as it seeks to put the plaintiff back to position they were in before the breach (though not through punitive measures) as well as serve a prophylactic or preventative measure. As Kirby J stated in Maguire v Makaronis, “The purpose of equity is relief is not punishment”. [25]

Thus in conclusion when taking into account the intention of equity it can be seen that measures that are punitive in nature that is aimed at punishing, deterring or vindicating rights etc have no place in equitable remedies as they are not warranted in equitable matters. As punitive measures are inconsistent with the principles of equity they provide a windfall to the plaintiff; which contradicts the general purpose of equity which is too redress harm by placing the plaintiff back to the position they were in before the breach of equitable principles.

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