Lord Diplocks Key Contributions to Equity Law - Essay Example

?The Influence of Lord Diplock on the Development of Equity The Fusion of Equity and the Common Law The debate over the fusion of equitable and common law principles originates from the early development of equity as a separate system from the common law. The Judicature Acts of 1873-5 established the Supreme Court which could administer both equity and common law rules. Equitable principles were principally formulated was to ensure that the legal rights owner’s conscience coincides with the interests of justice. It is this to which Lord Diplock made the greatest contributions in his legal career; and in particular, to the debate over equity’s involvement in property ownership and in propriety in procedural law in the arenas of both private and public law. In both areas Lord Diplock can be seen to challenge the validity of legal technicalities and create a more just legal system with a move away from ‘natural justice’ in individual determinations to general principles of fairness towards the wider public. Lord Diplock’s key contributions to equity law occurred in: 1) In United Scientific Holdings Ltd v Burnley Borough Council [1978]1, Lord Diplock proclaimed that the systems had, quite simply, become fused and that no distinction was to be drawn between law and equity. This statement by Lord Diplock was accepted unanimously by the judges in the House of Lords and propelled the debate on this issue further. The case concerned the timing of the service of notices triggering rent-review clauses. 2) In Gissing v Gissing [1971]2; on the subject of equitable rights and the interests of the beneficiary in a trust case, Lord Diplock suggested that it did not matter whether the trust was seen as a constructive, resulting or other form of implied trust. Lord Diplock's judgment in Gissing effectively created what is now referred to as a common intention constructive trust. Essentially Diplock held that where the legal title to a property was owned by one person, cohabitees would be held to share a beneficial interest in the property even if they had not contributed directly to the purchase price (thus falling beyond the protection of the resulting trust) as long as they could provide evidence that both cohabitees had a common intention that the beneficial interest would be shared, and that the legal owner had induced the beneficiary to act to his own detriment in reliance of this agreement. Crucially, however, he saw no need to properly establish the boundaries of this principle, or to distinguish common intention constructive trusts from implied or presumed resulting trusts. Lord Diplock's failure to properly distinguish between resulting and constructive trusts has led to a very dangerous ambiguity and uncertainty in this area of law, which has arguably, ever since threatened to defeat precisely what Lord Diplock set out to achieve: the protection of the cohabitee with no legal title. 3) Pettitt v Pettitt [1970]3; this case established that a person who claims to have contributed to the purchase price of property which stands in the name of him/herself and another can rely on the well known presumption of equity that a person who has contributed a share of the purchase price of property is entitled to a corresponding proportionate beneficial interest in the property by way of implied or resulting trust. This ‘presumption of advancement rule’ in resulting trusts has been widely criticised as anachronistic. In particular, the gender bias of the rule is no longer acceptable; in fact it contravenes Article 5 of the Seventh Protocol to the European Convention on Human Rights.4 Lord Diplock described it as being based on the mores of propertied classes of the nineteenth century with little relevance to modern life. As Lord Diplock put it; “The emergence of a property-owning, particularly a real-property-mortgaged-to-a-building-society-owning, democracy requires the presumption to be reconsidered.”5 4) Hadmor Productions Ltd v Hamilton [1982]6; in this case Lord Diplock held that the Court of Appeal was not in general entitled to reverse the decision of the Administrative Court in granting discretionary interlocutory relief7. As Diplock said: “...it is, I think, appropriate to remind your Lordships of the limited function of an appellate court in an appeal of this kind. An interlocutory injunction is a discretionary relief and the discretion whether or not to grant it is vested in the High Court judge...” He continued: “Upon an appeal...the Court of Appeal or your Lordship's House, is not to exercise an independent discretion of its own...the function of the appellate court is initially one of review only...”8 5) China Pacific S.A v The Food Corporation of India [1982]9: Here a claim for promissory estoppel was rejected on the grounds that no unambiguous promise had been made. Lord Diplock gave the leading judgment, stressing that the plaintiff should not be characterised as an agent of necessity, since he considered that the notion of agency should be confined to where the agent was deemed to have authority to create contractual rights and obligations between the principal and a third party. He did not regard the term as being appropriate where the plaintiff's claim was for reimbursement, as it was here. Despite this change in terminology, it is still important to draw a distinction between those cases in which a stranger has intervened in circumstances of necessity and those in which the plaintiff who intervened has a pre-existing relationship with the defendant.  The change in terminology in respect of the latter doctrine emphasises that the pre-existing relationship between the parties need not have been an agency relationship. Lord Diplock did suggest that the conditions which need to be satisfied before an agency of necessity is established will not necessarily have to be satisfied before the plaintiff obtains reimbursement from the defendant. Consequently, for example, restitution will not be denied simply because the plaintiff was in fact able to communicate with the defendant, it being sufficient, as occurred in The Winson itself, that, despite the communication with the defendant by the plaintiff, the defendant had failed to give any instructions to the plaintiff as to what to do with the wheat. Where there is a pre-existing legal relationship between the parties, restitution may be awarded by reason of necessity if certain conditions are satisfied, as was recognised in The Choko Star. However, as Lord Diplock recognised in The Winson, the key issue for the courts to determine is whether the plaintiff's conduct was reasonable, so the fact that one of these conditions is not satisfied does not mean that the plaintiff's conduct must automatically be considered to have been unreasonable.  How Have Diplock’s Judgments Influenced Legal Theory? The Law of Property Act 1925, s.41 provides that ‘stipulations in a contract, as to time or otherwise, which according to rules of equity are not deemed to be or to have become ‘of the essence’ of the contract, are also construed and have effect at law in accordance with the same rules. The section clearly states that a rule of equity is to be adopted within the substantive body of legal rules. Diplock’s views were at the more extreme end of the spectrum, however it is on that is shared by other eminent judges. Lord Denning, for example, in ‘Landmarks in the Law’, states that “the fusion is complete”10. Similarly, Sir George Jessel MR in Walsh v Lonsdale [1882]11, one of the first cases on this issue to be heard subsequent to the Judicature Acts 1873-75, said that “there are not two estates” rather, “one estate at common law by reason of the payment of rent from year to year, and an estate in equity under the agreement. There is only one court, and the equity rules prevail in it.”12 In Tinsley v Milligan [1994]13 Lord Browne-Wilkinson made the point that English law was now a ‘single law’ which was made up of legal and equitable interests, and a person owning either type of estate had a right of property amounting to a right in rem not merely a right in personam. Despite the physical fusion of the courts it is difficult to advocate Diplock’s statement in United Scientific Holdings further to the point of saying that the substantive rules of law and equity are indistinguishable. In trusts law there is a clear distinction between legal and equitable interests – the right to trace property depends on the existence of a fiduciary relationship. In property law the equitable doctrine of part performance was only enforceable by an equitable remedy. Except for where statute has intervened, legal and equitable interests are indistinguishable in that legal interests are rights in rem that bind the ‘whole world’ whereas equitable rights are lost against ‘equity’s darling’, i.e. the bona fide purchaser of a legal estate for value without notice. In land law, the Land Charges Act 1972 made a number of equitable interests in unregistered land, registrable, and indeed had the effect of determining that such interests, that are not registered, are void against certain types of purchasers. Nevertheless, a number of equitable interests that fall outside the scope of this statute are still subject to the equitable doctrine of notice, for example, the equitable interests behind a trust, pre-1926 equitable easements and restrictive covenants. It is possible to cite examples where the distinction between equity and common law has become irrelevant. In registered land, the categories of registered, minor and overriding interests imposed by the Land Registration Act 1925 cut across the distinction between legal and equitable interests. In turn, the importance of the Land Registration Act 2002 does not rest on distinctions between these interests. Statute has rendered the distinction which has grown between law and equity; a distinction which arose out of ‘an accident of history’14. In general, legal rights and remedies remain distinct from equitable ones. Some overlap does occur, however, where for example, an injunction- an equitable remedy – can be sought for an anticipatory breach of contract or to prevent a nuisance - both Common Law claims. Tinsley v Milligan [1994]15 highlighted the conflict of law and equity in a modern setting. Two women agreed that house should be held in the name of one so that the other could fraudulently claim housing benefit. When a disagreement arose, the legal owner sought to evict her partner. The defendant claimed that she had an equitable interest. The House of Lords held that the defendant had a right to asset her equitable ownership. The principle that a claimant cannot rely on an illegal purpose to rebut the presumption of advancement was confirmed however the equitable presumption of a resulting trust was still upheld to apply. The presumption of advancement in the area of illegal transactions is currently under review by the Law Commission.16 Lord Diplock on Substantive Law versus Procedural Fairness The most influential encapsulation of the grounds of judicial review which sought to refine the doctrine of ultra vires17 was provided by Lord Diplock in the ‘GCHQ’ case (Council of Civil Service Unions v Minister for the Civil Service [1985])18, which concerned a ban on trade union membership among civil servants employed at Government Communications Headquarters in Cheltenham: “[O]ne can conveniently classify under three heads the grounds, upon which administrative action is subject to control by judicial review. The first ground I would call ‘illegality’, the second ‘irrationality’ and the third ‘procedural impropriety’.”19 Lord Diplock went on to define ‘illegality’ in procedural law as requiring that the decision-maker should understand the law that regulates his power and give effect to it. The term ‘procedural impropriety’ covered the failure to meet express legislative requirements as well as the rules of natural justice, that is, the right to a fair hearing before an impartial decision-maker. ‘Irrationality’ was Lord Diplock’s term for what was and remains more commonly called Wednesbury unreasonableness. In Photo Productions Ltd v Securicor Transport Ltd [1980]20 Lord Diplock made a much-cited reference to the distinction between the primary right to performance in contract and the remedial right or claim to compensation for breach of contract. Photo Productions Ltd sued Securicor Transport Ltd after Securicor's employee, Mr Musgrove, started a fire at Photo Production's factory which caused significant damage to the premises, Securicor argued that an exclusion clause in its contract meant they were not liable, as the contract said ‘under no circumstances be responsible for any injurious act or default by any employee… unless such act or default could have been foreseen and avoided by the exercise of due diligence on the part of [Securicor].’ Photo Productions argued that the clause could not apply under the doctrine of fundamental breach, that the breach of the contract went to the root of the contract and invalidated the whole agreement, and extinguished the exclusion clause. Lord Diplock held in Photo Productions Ltd v Securicor Transport Ltd [1980] that the clause’s effectiveness was a question of construction of the contract and that it did cover the damage. He noted that the reports are full of cases in which ‘strained constructions’ have been placed upon exclusion clauses though the need should have gone since the passage of the Unfair Contract Terms Act 1977. In summary, Lord Diplock is said to have led one of the most influential and involved careers of all the Law Lords of his era. Diplock inevitably had the opportunity to make some vital decisions on specific points of law, the question is – did he fashion anything more systematic? The area of Administrative Law seems to have benefited the most from Diplock’s input however the purpose of this short essay is to assess his contribution to the general law of equity and equitable reasoning which by comparison is less significant. Nonetheless, Diplock had a marked influence on the development of equity in the context of property ownership. The concepts of promissory estoppel, unjust enrichment and restitution are abstract, ambiguous, and nebulous concepts, nonetheless they are important in the administration of administrative and commercial laws and an enlightened and inquisitive remedy seeker could lift the veil and discover ample legal relief. The systems of equity and the common law are now administered in the same courts, but in opposition to Lord Diplock’s assertion, the distinction appears to remain relevant and continues to produce conflicts. Bibliography W.Ashburner (1933) Principles of Equity 2nd Edition, London, Butterworths Cheshire & Burn (2000) The Modern Law of Real Property 16th Edition London, Butterworths P. Ferguson (1993) Constructive Trusts – a Note of Caution, 109 LQR 530, Article D.W.M Waters (1967) The Nature of Trust Beneficiary’s Interest, 45 CBR 219-283 Meagher, Gummow & Lehane (1992) Equity: Doctrines & Remedies 3rd Edition, London, Butterworths. A Burrows, “Proprietary Restitution: Unmasking Unjust Enrichment? (2001) 117 Law Quarterly Review 412. R. Probert (2001) ‘Trusts and the Modern Woman – establishing an interest in the family home’, CFam 13.3.275 P. Jaffey, ‘In Rem Claims to Wealth and Surviving Value”, Brunel University, Essay; this can be found at < http://bura.brunel.ac.uk/bitstream/2438/4038/1/jaffeyCLP.pdf> P Sparkes, ‘Walsh v Lonsdale: The Non-Fusion Fallacy’, (Oxford Journal of Legal Studies) Vol.8 No.3 (OUP Oxford 1988) Read More