A Long Tradition and Role of Equity in English Law - Term Paper Example

EQUITY IN LEGAL SYSTEM - ORIGIN, DEVELOPMENT AND SIGNIFICANCE Equity, understood as "fairness" or "justness," ought to be vitally ingrained in any legal system, the essential purposes of which is to secure justice, to promote the common good, and to provide for certainty of law.1 The English legal system has recognized the significance of equity since the Middle Ages, as legal concepts based on equitable principles began to be developed; it is significant to note that equity had precedence of over common law in the event of a conflict. While Equity has emerged as a separate branch of law, and was applied and administered independently by Courts of Chancery, the overriding precedence of equity and the unqualified need for the "certainty of law" led to the fusion of the administration of law and rules of equity by the Judicature Act of 1873. Today equity apparently has lost its significant correlation to 'justice,' as rules of equity are settled in much the same way as the common law.2 However creations of equity such as including the rights, interests and remedies continue to be of significance in English legal system3 The paper attempts to understand the origin and development of equity as a source of law in the English legal system and analyze the significance of rules of equity and equitable doctrines and remedies in legal proceedings today. While analyzing the significance of equity, it would be imperative to understand its percepts as well as the principles and remedies of equity; hence a discussion on the same is also included. Origin and Development of Equity The historical origin of equity in English legal system dates back to the late 13th and 14th centuries. The English legal system of the time - the common law system developed by the judges on the basis of unwritten customary rules and precedents or past judicial decisions - were very rigid and too technical with the procedures such as the writ. The procedural compliance and the legality of the writ often surpassed the merits of the case in legal decisions. The inadequacy of the common law remedy of damages was another issue with the system. Also, the common law only recognized certain kinds of cases; for example, the common law courts did not recognize the Trust deed.4 The defects in common law obviously led to distress, as disappointed litigants directly petitioned the King for justice. The King, considered the 'Fountain of Justice,' either determined the petitions himself or referred the cases to the King's Chancellor, usually a clergyman and priest, known as "Keeper of King's conscience." The petitions were decided on the basis of principle of natural justice and "moral rightness," considering the merits of the case rather than any precedent.5 The broad principles used by the King and his Chancellor's became to be known as rules of equity. Equity was not a complete system of law and as Jacqueline Martin observes, it "merely filled the gaps in the common law and softened the strict rules of the common law." 6 As the volume of cases increased separate courts called Court of Chancery, also called Courts of Equity, were established and administered by the Chancellor. The Chancellors developed new and flexible procedures, as well as new and appropriate remedies to compensate the plaintiffs, which are applicable to this day. However, the jurisdictional overlap of the two systems - common law and equity - led to an inevitable conflict between the two, impinging the certainty of law. The conflict was finally resolved by the King in Earl of Oxford's Case (1615) it was ruled that equity should prevail in case of conflict.7 While the equity courts continued to enjoy supremacy over common law courts, with the enactment of Judicature Acts 1873-75, the common law courts and the court of equity merged together to form the Supreme Court of Judicature, which would concurrently administer common and equity. The supremacy of equity in legal decisions was affirmed in Section 25 of the Judicature Act 1873 and continues to be followed by the Supreme Court. Nature of Equity - Principles and Remedies Long before the development of equity as a system of law in English legal system, Aristotle has suggested the intrinsic superiority of equity over common law: "[T] his is the nature of the equitable, a correction of law where it is defective owing to universality."8 Many systems of law, including the English law "have had recourse to a separate body of equitable or discretionary jurisdiction in order to make exceptions to the uniform operation of law,"9 as well as to correct the problems in common law. However, as equity was developing, it had no fixed rules of its own and each Chancellor gave judgment according to his own conscience. The discretionary nature of equity and the authority of Chancellor in deciding equity led to widespread criticism; the comment by John Selden, an eminent seventeenth century jurist, is noteworthy, "equity varies with the length of the Chancellor's foot". 10 Subsequently, in the eighteenth century Chancellor began to introduce a more systematic approach to cases and by the nineteenth century, equity had become as rigid as the common law, paradoxically as rigid as those which equity had been created to avoid. Thus 'with the passage of time the 'free', indefinite sense of equity disappeared and in its place there grows up a code of rules just as 'inflexible' as those of law, so that in the result there are two complementary bodies of rules working together to mutual advantage.' 11 In understanding the significance of equity, it would be imperative to know the maxims or the rules of equity. The Maxims of Equity12 include: Equity acts in personam Equity will not suffer a wrong without a remedy Equity follows the law Equity looks to substance not form Equity will not permit a statute to be used as an instrument of fraud Those who come to equity must come with clean hands Those who come to equity must do equity Equity sees as done that which ought to be done Equity imputes an intention to fulfill an obligation Where the equities are equal the first in time prevails Where equity and law conflict, equity shall prevail While a detailed review of the different cases decided on the basis of the above-stated maxims, may be too exhaustive and beyond the scope of the paper, some pertinent cases shall be discussed in the subsequent section. 13 The other significant aspect of equity was the introduction of new and more befitting and discretionary remedies - the equitable remedies - that compensated the plaintiffs more fully than the common law remedy of damages. The Equitable Remedies include:14 Injunctions - Order stopping a person from doing a particular act, as in trespassing, breach of contract etc. Specific performance - Refers to an order instructing a party to perform their part of a contract, particularly in cases involving breach of contract, where damages proved inadequate. Rectification - Permits the alteration of a written document, if it did not represent the actual agreement made by the parties. Rescission - Allows parties to a contract to be put back in their original position in the case contracts induced by a misrepresentation & Account - Order instructing a person in control of plaintiff's money to report the way in which the funds were spent15 Contributions and Applications of Equity Equity has contributed significantly to the development of law since the 18th and 19th centuries, the significance of which continues to this day. The three fundamental contributions of equity16 has been classified as: Exclusive jurisdiction - creation of new, enforceable rights such as in trusts, mortgages, partnerships, administration of estates, bankruptcy, company law, which the common law did not recognize. Concurrent jurisdiction - Equity developed new remedies as discussed above, which had concurrent jurisdiction at common law and equity. The discretionary nature of equity facilitated effective enforcement of rights and remedies. Auxiliary jurisdiction - Equity developed new procedures such as discovery of documents, subpoena of witnesses and interrogatories and testimony of oath Applications of Equity -Trusts etc. Equitable principles find application in many legal situations, both in exclusive and concurrent jurisdictions, however the most significant application of Equity is the Trust, characterized by a dual ownership, which common law considered legally invalid. The split in the ownership has been traced down to the nature of double estate ownership of land and chattels in England.17 The significance of equity in Trust law is apparent in the very definition of Trust. Trust is defined as an "equitable obligation binding a person to deal with property over which he has control for the benefit of persons of whom he himself may be one and any of whom may enforce the obligation."18 The English law, apparently based on the maxims, 'equity follows the law' and 'equity acts in personam,' states that in the operation of trusts, while the legal ownership of trust property is vested in the trustees of the settlement, the equitable ownership is transferred to the beneficiaries, and imposes an in personam obligation on the trustee to act for the benefit of the beneficiary.19 The other most significant applications of equity include mortgages, company law, partnerships, contract law estate administration, bankruptcy;20 the equitable remedies such as injunction, specific performance are effectively applied in many legal issues related to employment, marriage and divorce, domestic violence and abuse, trespass to land, and a wide range of cases where damages are inadequate in compensating the wrong and illegal actions against plaintiff.21 A few of the most prominent cases, suggesting the significance of equity in legal proceedings is discussed: Hughes v. Metropolitan Railway Co.22 - The case perceivably introduced the concept of promissory estoppel. The implied promise of the landlords not to enforce strict legal rights, such as the eviction of the tenant for their breach of contract by the tenants, was upheld by the House of Lords. The tenants, Metropolitan Reailway, falied to act in accordance with the contract in relation to repair clause; however, the court suspended the landlord's right temporarily and allowed the tenants more time for repair on grounds of equity. D&C Builders v Rees23 - The contractor's claim for balance payment as per contract, despite having accepted a reduced amount in full and final settlement due to financial constraints, was upheld. The court refused to grant promissory estoppel in favor of Rees' couple on the grounds of their inequitable action of taking unfair advantage of the builders. The court referred to Pinnel's Case24 and also applied the maxim, 'those who come to equity must come with clean hands,' in deciding the case. The application of equitable doctrine protects a creditor from the economic duress of the debtor. Central London Property Trust Ltd v High Trees House Ltd25 -- The case marked the revival of promissory estoppel. A landlord company promised reduced rate to the tenant during the period of the war. However, later when the company went into receivership, the receiver demanded arrears for the period when reduced rent was paid. The legal validity of the landlord's promise was put to test; Judge Denning relied on the Hughes case, as the landlord was estopped from claiming the arrears of rent; it was decided that the rent was payable at the original rate once the war had ended. Since Lord Denning's ruling in High Trees, the equitable doctrine of promissory estoppel has been applied in deciding many cases. Significance of Equity in the Present Times The doctrines of equity, equitable rights and remedies continue to be of significance in English law and legal system. Though equity has lost its original correlation with 'justice' and 'fairness,' equitable principles and doctrines as well as the discretionary remedies, facilitating appropriate compensations in many legal issues both at common law and within the exclusive jurisdiction of equity. In the present times, characterized by new and innovative ways of transactions including mortgages for purchase of home and property, trusts for pension funds etc, 26the importance of equitable doctrines and remedies in legal system cannot be diluted. However, it is significant to note that in English legal system, despite efforts to fuse equity with common law, the two continue to remain separate streams, the Chancery Division administering the cases of equity. Today many specific cases and subjects related to land and estate administration, trusts, mortgages, partnerships, company affairs including patents and trademarks, etc are specifically assigned to the Chancery Division by the Supreme Court Act 1981, as rules of equity have become to be decided in the same way as common law. Conclusion Equity in English law has a long tradition and its significance in deciding cases judiciously have been proved beyond question. The equitable principles and doctrines developed by Chancellor and the House of Lords influence many legal decisions even today, and also provide for the certainty of law. The discretionary remedies in equity enable courts in securing justice more effectively. In conclusion, the significance of equity, which aims to fulfill law, cannot be undermined, considering the exclusive jurisdiction of equity and innovative nature of transactions in the present times. Bibliography 1. Allen, C. K. 1964. Law in the Making (7th Edition) Oxford: Oxford University Press 2. Hanbury and Martin. 1997 Modern Equity Martin Jill E., (Ed). (15th Edition), London: Sweet and Maxwell 3. Heffey, Paterson & Hocker. 1998. Contract Commentary And Materials (8th Edition) Sydney: LBC Information Services 4. Hudson A. 2001 Equity and Trusts, (2nd Edition) London: Cavendish Publishing 5. Lee, O. 2004. "Systems Dynamics in the Law: A Comparative Approach to Certainty in the Common Law and Reviewability of Past Decisions" Oxford University Comparative Law Forum, 5 Available at http://ouclf.iuscomp.org/articles/lee2.shtml#fn65anc Accessed 10/13/05 6. Ramjohn, M. 1998. Sourcebook On Trusts Law (2nd Edition) Cavendish Publishing 7. Martin, J. 2002. The English Legal System (3rd Edition) London: Hodder and Stoughton Educational 8. Watt, G. 2003 Trusts & Equity (5th Edition) Oxford: Oxford University Press Read More