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Development of equity law and distinction from common law

"The peculiar nature of equity is only in part due to its historical development. It is also necessary to understand that equitable principles are distinctive from, but not necessarily incompatible with, those of common law" Discuss

Equity came into existence during the 13th century[1]. At that time the courts of law had froze the types of claims they would hear as well as the procedure governing the hearing of those claims. The range of claims that would be heard became narrow and the processes to bring the actions to court became so technical with jurors often being bribed. As a result of these changes plaintiffs with meritorious claims were often denied relief[2].

To attempt to counteract this discrepancy remedies could be obtained by petitioning the King, who had residual judicial power to deal with such matters. The King began delegating the function of dealing with such petitions to the Chancellor. The post of Chancellor at this time was usually a clergyman and King’s confessor. The Chancery evolved into a judicial body known as the Court of Chancery, until by the end of the 15th century the judicial power of the Chancery was fully recognised. The Court of Chancery was in effect developed as a court of conscience to counteract the defects that existed in the common law system. The rules of equity varied from Chancellor to Chancellor until the end of the 16th century[3].

As equity developed it began to conflict with common law. Litigants used equity to their advantage often seeking an equitable injunction prohibiting the enforcement of a common law order. If a common law judgment was enforced in disobedience of a common injunction then the person enforcing the judgment could face imprisonment[4].

In the Earl of Oxford’s Case (1615)[5] the Court of Chancery issued a common injunction prohibiting the enforcement of a common law order. The matter was referred to the Attorney General Sir Francis Bacon when no resolution could be reached between the 2 courts. Sir Francis upheld the common injunction and stated that

in the event of any conflict between the common law and the law of equity, equity would prevail’.

Lord Ellesmere pointed out in the above case why there was a need for a Chancery. He stated

‘Men’s actions are so diverse and infinite that it is impossible to make any general law which may aptly meet with every particular and not fail in some circumstances. The office of the Chancellor is to correct men’s consciences for frauds, breaches of trust, wrongs and oppression of what nature so ever they be, and to soften and mollify the extremity of law.’

By the 17th century only lawyers were appointed to the office of Chancellor. From 1529 onwards when Sir Thomas Moore was appointed as Chancellor records of proceedings in Courts of Chancery were kept which led to the development of equitable doctrines. Prior to his appointment no such records were kept and decisions made by the Chancellors were discretionary and erratic.

By the beginning of the 19th century the Court of Chancery had become a court of equity. In the case of Gee v Pritchard[6] Lord Eldon made the comment that

The doctrines of the Court of Chancery ought to be well settled, and made as uniform, almost, as those of the common law, laying down fixed principles, but taking care that they are to be applied according to the circumstances of each case. I cannot agree that the doctrines of this court are to be changed by every succeeding judge. Nothing would inflict on me greater pain in quitting this place than the recollection that I had done anything to justify the reproach that the equity of this court varies like the Chancellor’s foot.

The primacy of equity as stated by Sir Francis was later enshrined in the Judicature Act 1873 s25 which also joined the courts of equity and the courts of common law into one under the title of the Supreme Court. The Supreme Court was divided into 2 forming the High Court and the court of Appeal. The High Court was further divided under 5 different headings giving rise to the Chancery Division, King’s Bench Division, Common Pleas Division, Exchequer Division and the Probate, Divorce and Admiralty Division.

The central feature of these reforms was that every court would now possess the power and have the duty to decide cases in line with common law and equity[7]. Where there is a discrepancy between the common law solution and an equitable one the precedent of the Earl of Oxford’s case still applies meaning that equity will be paramount in the decision making process. The Supreme Court Act 1981 s49 has embodied this principle and instructed that

(1) Every court exercising jurisdiction in England and Wales in any civil cause or mater shall continue to administer law and equity on the basis that wherever there is any conflict or variance between the rules of equity and the rules of common law with reference to the same matter, the rules of equity shall prevail[8].

Before the common law courts and the Court of Chancery became one common law actions could only be commenced by means of a writ whereas actions in the Court of Chancery were commenced by an informal bill of complaint and the process begun by the use of a subpoena[9]. Chancery hearings were informal and were not restricted to being able to sit at certain times as was the case with the Common Law Courts. Hearings could even take place within the Chancellor’s house.

It would appear that common law and equity were effectively fused together by the Judicature Acts. Ashburner’s view of this was

The two streams of jurisprudence though they run in the same channel, run side by side, and do not mingle their waters[10].

Although equity and common law are fused together in that a court is entitled to award equitable remedies or common law remedies or a combination of both within the same court[11] there are still some areas of law where the distinction between legal ownership and equitable ownership still thrive[12]. One such area is in the formation and management of trusts.

Before the introduction of equity into the legal system persons wishing to dispose of their property by way of a trust where faced with the difficulty or passing ownership to their intended beneficiaries without giving them the property outright[13]. Under the common law system the transfer of the property into the hands of the trustees’ could only be read as giving full title to the trustees and no account could be given for the concerns of the beneficiaries. The whole process of the trust system is firmly rooted in equity with the trustees holding the land on trust for the beneficiaries[14].

In order that the trustees can invest or deal with any of the property the ownership of the property transfers to them under common law rulings and equity creates a beneficial interest for the beneficiaries to ensure that when the beneficiaries reach the age of maturity as dictated by the trust document that the full title of the property becomes vested in them[15]. The essential element that the trustees have to be aware of is that despite the fact that they have the power to invest or sell trust property that they are in fact acting on behalf of the beneficiaries[16]. Trustees who make unwise investments are breach the trust can and often are made to compensate the beneficiaries for any losses incurred by their actions[17]. In these matters equity will usually favour the beneficiaries.

Although there is an apparent fusion of common law and equity there is still a difference in the way in which common law remedies and equitable ones are administered. Common law remedies are available as of right[18] whilst equitable remedies are discretionary and awarded at the will of the court[19]. Equitable remedies can also be affected by the behaviour and position of the party claiming the remedy. As the courts are allowed to take into account the conduct of the party seeking the award they can decide not to award an equitable remedy where it considers their conduct should deprive them of such an award[20].

Problems arose in the case of Tinsley v Milligan[21] where the question raise was whether the plaintiff could assert a claim to an equitable interest in land by way of a resulting trust where she had acted illegally. The maxim as set down by equity that a person seeking to assert an equitable entitlement must come with clean hands prevented the plaintiff from asserting her right. Under common law a plaintiff would be entitled to assert their common law right to ownership provided that they did not need to rely on their illegal conduct to establish title. As the plaintiff in this case did not need to rely on their illegal conduct to establish title her claim succeeded.

To assist the court in making equitable decisions certain maxis of equity have been established. These are not binding rules and do not provide guidance in every situation. They are intended as illustrations based on principles established in recurrent themes.

One of the maxims of equity is that it will not suffer a wrong without a remedy[22]. This is of particular importance in trust law, where without the influence of equity the beneficiaries may lose the benefit assigned to them by way of the trust document[23]. Another maxim was that equity follows the law[24], although as has been previously stated statute favours equity as prevailing when the 2 are at a variance to each other.

Further maxims exist in the following circumstances. Where the equities of the parties are equal one with a legal right and the other an equitable right the common law rules will prevail[25]. Where both only possess equitable rights the first in time right to the item prevails[26].

It was also laid down that he who seeks equity must do equity. This means that the person seeking the equitable relief must act fairly towards the person he is seeking the relief from[27]. As mentioned above anyone coming to equity must come with clean hands. Any illegality or inequitable conduct could effect their entitlement to an equitable remedy[28].

Failing to act swiftly could also prevent a plaintiff from asserting his equitable rights[29]. Where the division of property is not clear equity would dictate that the property is divided in equal shares[30]. When making equitable decisions the court will look to the intent of the parties and will regard that as done that which ought to have been done[31]. There is an imputed intention in equity to fulfill obligations[32]. Decisions made on the basis of equity are in personam which enforces decisions by means of a personal order against the defendant[33].

The types of equitable remedies that can be awarded by the courts include injunctions, specific performance, rectification and rescission. With an injunction the courts can either stop the party from doing something or require them to do something[34]. An order of specific performance requires one of the parties to a contractual agreement to complete their part of the contract. Usually awards of this kind relate to specific articles such as land and will not be awarded where the court cannot supervise the operation of the order[35]. Rectification is concerned with the alteration of contractual documents[36]. An order for rescission is issued with the intent of returning the parties in a contractual agreement to the position they were in before having entered into the agreement. This can be distinguished from the common law award of damages. In an award for damages the intention of the court is to put the parties in the place they would have been in had the contract been completed.

It can be seen from the above that equity was introduced to fill the void that was lacking in common law. Under the old system of common law from the 13th century until the courts combined there was no leeway for the courts to order specific performance or injunctions[37]. The common law system functioned merely on the awarding of damages and so therefore if the plaintiff wanted to order someone to do something or to stop doing something but could not show that any specific monetary loss would result from the action of the defendant then the common law courts did not have the power to deal with such issues[38].

Although equitable remedies are awarded without reliance on legislation for their enforcement there are many ways in which the aims of equitable remedies mirror those of the common law. Under common law the aim is to compensate the plaintiff for any financial loss tat they have incurred as a result of a wrong being done to them. Under equity the courts are addressing the situations where monetary compensation may not be appropriate. An injunction may prevent a future monetary loss for the plaintiff. An example of this would be an injunction preventing someone from building a factory on land adjacent to that of the plaintiff. If the factory is allowed to be built the knock on effect could result in a depreciation of the value of the property of the plaintiff[39]. Similarly an injunction against a trustee preventing him from dealing with the assets of the trust in a certain way might prevent the beneficiaries from a financial loss on their inheritance[40].

It could be viewed in some circumstances that equitable remedies may prevent the need for a future claim under common law. This would particularly be the case in the issuing of an injunction as mentioned in the paragraph above. Similarly an order for specific performance could prevent a claim in the future for breach of contract[41]. Frequently the plaintiff would prefer that the contract was carried out as originally agreed rather than be awarded damages for the non performance of the contract[42]. This could well be the case where the order of specific performance centres around building work being undertaken on the plaintiff’s property. Although damages would compensate the plaintiff for the work not being completed the plaintiff would still need to employ someone else to complete the contract.

Although the principles of equitable remedies can be widely different to common law remedies they are not totally incompatible with common law remedies. One of the common aims of both is a restoration of natural justice either by way of monetary compensation, where no other method would suffice, or by way of equitable remedies or occasionally by the use of both. The conclusion can therefore be drawn that equity and common law remedies are working together to establish natural justice for the plaintiff and that although they have different remedies for achieving that aim the end result is that the plaintiff has a greater chance of getting the award best suited to their situation.

On occasions it may seem that they are working against each other. This might particularly be the case in trust law where the equitable interests of the beneficiaries supersede that of the trustees. This is more the case in the instance of constructive trusts that have been created as the result of mutual wills. In such cases as these the survivor of the deceased might only have a life interest in their own property as they have agreed in the mutual will to hold the property on trust for the beneficiaries[43]. However, if equity did not intervene in this area then the surviving testator of a mutual will could alter their will upon the death of their partner and totally disinherit the beneficiaries that the deceased testator specifically wanted to inherit[44].

Despite the arguments against equity and the problems caused by the insertion into the Supreme Court Act 1981 that equity should prevail if the two areas of law are in conflict with each other, it is very rare that the judges are placed in such a position, especially since they now have the power to decide issues under either common law rules or equity. From the point of view of plaintiffs the inclusion of equity is a good thing as it gives them a greater likelihood of achieving their desired outcome.

Bibliography

Ashburner, W, Principles of Equity, 2nd Ed, 1933, Butterworths

Butterworths

Civil Procedure, The White Book, Volumes 1 & 2, 2002, Sweet & Maxwell

Cockburn, T & Shirley, M Equity in a Nutshell, 2005, Lawbook Co

Cockburn, T, Harris, W, & Shirley, M, Equity & Trusts, 2005,Butterworths

Harris, P, An introduction to Law, 4th Ed, 1995, Butterworths

Hayton, D J, The Law of Trusts and Equitable Remedies, 11th Ed, 2001, Sweet & Maxwell

Holdsworth, W, History of English Law, 7th Ed, 1956, Mathuen & Co Ltd

Pearce, R and Stevens, J, The Law of Trusts and Equitable Obligations, 2nd Ed, 1998,

Slapper, G & Kelly, D, The English Legal System, 4th Ed, 1999, Cavendish Publishing Ltd

Thomas, M, Statutes on Property Law, 8th Ed, 2001, Blackstone’s

Zander, M, The Law-Making Process, 3rd Ed, 1988, Weidenfield & Nicolson

Table of Cases

Beswick v Beswick [1968] AC 58

Brace v Duchess of Marlborough (1728) 2 P Wms 49

Burgess v Wheate (1759) 1 Eden 177

Cannon v Hartley [1949] Ch 213

Co-op Insurance v Argyll Stores [1997] 3 All ER 297

Cooper v Joel (1859) 1 de G F & J 240

D and C Builders v Rees (1965)

Earl of Oxford’s Case (1615) 1 Rep Ch 1 at 6

Gee v Pritchard (1818) 2 Swan 402 at 414

Hopkins v Hopkins (1739) 1 Atk 581

Jackson v Normanby Brick Co [1899] 1 Ch 438

Jocscelyne v Nissen (1970)

McPhail v Doulton [1971] AC 424

Parkin v Thorold (1852) 16 Beav 59

Phillips v Phillips (1861) 4 De GF & J 208

Re Beloved Wilkes’ Charity (1851) 3 Mac & G 440

Re Cleaver [1981] 2 All ER 1018

Re Dale [1993] 4 All ER 129

Ryan v Mutual Tontine Westminster Chambers Association (1893)

Sinclair v Brougham [1914] AC 398

Smith v Clay (1767) 3 Bro CC 639

Solle v Butcher [1950] 1 KB 671

Tempest v Lord Camoys (1882) 21 Ch D 571

Thynne v Glengall (1848) 2 HL Cas 131

Tinsley v Milligan [1993] 3 All ER 65

Torrance v Bolton (1872) 8 Ch App 118

Walsh v Lonsdale (1882) 21 Ch D 9

Walsingham’s Case (1579) 2 Plowd 547

Warner Bros v Nelson (1937)

Webb v Webb [1994] QB 696

Willoughby v Willoughby (1756) 1 Term Rep 763

Wilson v Northampton and Banbury Junction Railway Co (1874) 9 Ch App 279

Wortley v Birkhead (1754) 2 Ves Sen 571

Table of Statues

Judicature Act 1873

Supreme Court Act 1981

1


Footnotes

[1] Pearce, R and Stevens, J, The Law of Trusts and Equitable Obligations, 2nd Ed p4 - 7

[2] T. Cockburn, T, Harris, W, & Shirley, M, Equity & Trusts, 2005,Butterworths

[3] Cockburn, T & Shirley, M Equity in a Nutshell, 2005, Lawbook Co

[4] Co-op Insurance v Argyll Stores [1997] 3 All ER 297

[5] 1 Rep Ch 1 at 6

[6] (1818) 2 Swan 402 at 414

[7] Judicature Act 1873 s24

[8] Supreme Court Act 1981 s49(1)

[9] Pearce, R and Stevens, J, The Law of Trusts and Equitable Obligations, 2nd Ed p4 - 7

[10] Ashburner, W, Principles of Equity, 2nd Ed, 1933, Butterworths

[11] Supreme Court Act 1981 s49

[12] Holdsworth, W, History of English Law, 7th Ed, 1956, Mathuen & Co Ltd

[13] Walsingham’s Case (1579) 2 Plowd 547

[14] Hopkins v Hopkins (1739) 1 Atk 581

[15] Pearce, R and Stevens, J, The Law of Trusts and Equitable Obligations, 2nd Ed p97

[16] Tempest v Lord Camoys (1882) 21 Ch D 571

[17] Re Beloved Wilkes’ Charity (1851) 3 Mac & G 440

[18] Sinclair v Brougham [1914] AC 398

[19] Co-op Insurance v Argyll Stores [1997] 3 All ER 297

[20] D and C Builders v Rees (1965); Tinsley v Milligan [1993] 3 All ER 65

[21] [1993] 3 All ER 65

[22] Cooper v Joel (1859) 1 de G F & J 240; Torrance v Bolton (1872) 8 Ch App 118

[23] Cannon v Hartley [1949] Ch 213

[24] Burgess v Wheate (1759) 1 Eden 177

[25] Wortley v Birkhead (1754) 2 Ves Sen 571

[26] Willoughby v Willoughby (1756) 1 Term Rep 763: Brace v Duchess of Marlborough (1728) 2 P Wms 491: Phillips v Phillips (1861) 4 De GF & J 208

[27] Solle v Butcher [1950] 1 KB 671

[28] Tinsley v Milligan [1993] 3 All ER 65

[29] Smith v Clay (1767) 3 Bro CC 639

[30] McPhail v Doulton [1971] AC 424

[31] Parkin v Thorold (1852) 16 Beav 59; Walsh v Lonsdale (1882) 21 Ch D 9

[32] Thynne v Glengall (1848) 2 HL Cas 131

[33] Webb v Webb [1994] QB 696

[34] Warner Bros v Nelson (1937)

[35] Ryan v Mutual Tontine Westminster Chambers Association (1893)

[36] Jocscelyne v Nissen (1970)

[37] Ryan v Mutual Tontine Westminster Chambers Association (1893)

[38] Pearce, R and Stevens, J, The Law of Trusts and Equitable Obligations, 2nd Ed p4 - 5

[39] Jackson v Normanby Brick Co [1899] 1 Ch 438

[40] Re Beloved Wilkes’ Charity (1851) 3 Mac & G 440

[41] Wilson v Northampton and Banbury Junction Railway Co (1874) 9 Ch App 279

[42] Beswick v Beswick [1968] AC 58

[43] Re Dale [1993] 4 All ER 129

[44] Re Cleaver [1981] 2 All ER 1018


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