Does Talk of Fusing Law and Equity Only Result in Confusing and Confounding the Law - Case Study Example

I greatly fear that talk of fusing law and equity only results in confusing and confounding the law.” per Stevenson J. in Canson Enterprises Ltd. v. Boughton (1991) 85 D.L.R. (4th) (Canson) Critically evaluate the above statement. Introduction In Canson Stevenson J. delivered his own reasons as he disagreed with the decisions reasoning “on two points.” The second point related to the fusion of law and equity. It was in that set of reasons that Stevenson J. wrote, “talk of fusing law and equity only results in confusing and confounding the law.” He concludes that issues of linkage and causality are not frozen by the Judicature Acts, but the Judicature Acts are not a new Statute of Uses.1 In simplest terms, legislation and precedent determine what is legal or illegal. Neither provide any grounds for determining the outcome of the judicial process on questions of equity. The establishment of equity as a fundamental principle in the justice system demands that a second train of liability, rules of evidence, linkages and values be initiated, and requires performance metrics be developed. It places judges in a situation where they have to measure two issues – strict application of legislation and precedent and equitability – and then calculate their relative importance to determine a judgment A man cannot serve two masters, nor can the law pursue both legal rigor and equity in the opinion of Stevenson J. Ian E Davidsons “The Equitable Remedy of Compensation” (1982), defends equity as a principle within the law suggesting that, “compensation or damages in equity were traditionally said to aim at restoration or restitution, where as common law tort damages are intended to compensate for harm done.... [And] that is a difference without a distinction.”2 He contends that equity has always been an aspect of lawmaking and that claiming otherwise is merely semantics. Canson, the Reasons of La Forest J La Forest J quotes Lord Diplock on integrating or fusing law and equity: “Law and equity have mingled or are interacting.... The evolution of Judge-made law may be influenced by the ideas of the legislature as reflected in contemporary statutes and by other current trends.” La Forest J. concurs, “That the maxims of equity can be flexibly adapted to serve the ends of justice as perceived in our days.” He perceives of them as self-reinforcing or synergistic: “law and equity have long over lapped in pursuit of their common goal of affording adequate remedies...” 3 La Forest J cites Le Meusrier v. Andrus, supra (Meusrier) “whatever the original intention of the Legislation, the fusion of law and equity is now real and total”.4 In Meusrier “the court abated the damages award, a common law remedy, in a fashion similar to how a court may abate the purchase price when making a decree of the equitable remedy of specific performance” according to Thomson Carswell.5 The principle was also enunciated in the New Zealand case of Day v. May [1987]. In that case the court apportioned the costs of the breach of fiduciary duty and abated the defendants fiscal responsibility by the percentage of responsibility it applied to the plaintiff, Day.6 Also in 1991, Lipkin Gorman v Karpnale (1991) 2. A.C. 548 (Gorman) the court abated the reward in a similar manner in pursuit of equity. Lord Templeman approvingly quoted Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32, 61, (Fibroasa) on equity. In Fibrosa Lord Wright reasoned: "It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep."7 Fibrosa had ordered machinery from Fairbairn Lawson Combe Barbour Ltd. And paid Ƚ1,000 deposit. World War I intervened and shipping the machinery to Poland became an impossibility and Fibrosa requested that its deposit be returned. Fairbairn Lawson Combe Barbour Ltd. refused. The issue ended up before the House of Lords. Lord Wright explicitly stated that forgoing precedents were not enough if they did not meet the test of a civilised system of law and provide remedies: “I think, therefore, that we ought to regard ourselves as at liberty to examine the challenged proposition freely, and to lay down what we regard as the true doctrine in English law without being hampered by a course of practice based on previous decisions in the Court of Appeal.” Wright was proposing that providing remedies was equitable and equity required remedies. Wright was asserting that a civilised system of law was one that took equity as a fundamental guiding principle. Therefore, Fairbairn Lawson Combe Barbour Ltd. was ordered to return the deposit. A significant coda was attached to the decision: “While this result obviates the harshness with which the previous view in some instances treated the party who had made a pre-payment, it cannot be regarded as dealing fairly between the parties in all cases, and must sometimes have the result of leaving the recipient who has to return the money at a grave disadvantage.”8 The decision attempted to redress the harshness of previous judgments: That is to say that it was designed to address undue harshness. To do so is, by definition, an attempt to realize equity, to moderate harshness. Additionally, in moderating the harshness of previous judgments the reasoning also states plainly that this can hardly be considered a precedent. That moderating harshness and pursuing equity is a very case specific exercise: “While this result obviates the harshness... it cannot be regarded as dealing fairly between the parties in all cases, and must sometimes have the result of leaving the recipient who has to return the money at a grave disadvantage.”9 The precedent is not that the plaintiff will always be the beneficiary of moderation, it is that the principal of moderation will be considered from both parties perspectives. The precedent is that equity is to be considered along with the narrower legal issues. Returning to Canson L Forest J. also references P Cooke, “compensation or damages in equity were traditionally said to aim at restoration or restitution, where as common law tort damages are intended to compensate for harm done.... [And] that is a difference without a distinction.”10 Cooke contends that equity has always been an aspect of lawmaking and that claiming otherwise is merely semantics.11 Thus, he traces the roots of the consideration of equity to deep roots that pre-date Fibrosa, clearly establishing that in the common law equity has been present throughout. Millets Response to Equity In Foskett Millet L. J. spoke out strongly against the debate between law and equity entering into the evidentiary process. “Two of the Law Lords contemplated the abolition of the distinction between the rules for tracing in law and tracing in equity,” according to the Melbourne University Law Review.12 Abolition of the distinction means that standard operating procedures (SOPs) for tracing in law and tracing in equity need to become congruent. To Lord Millet that initiative seems to have been directed to keeping any debate about equity, an ideal that is anathema to Lord Millet, out of the evidence and investigation process. This he succeeded in doing. Lord Millet was unequivocal that tracing is an aspect of evidence collection and property rights are not discretionary and “do not depend upon ideas of what is fair, just and reasonable.”13 According to the Melbourne University Law Review Lord Millet meant, “the transmission of a claimant’s property rights from one asset to its traceable proceeds is part of our law of property... The claimant succeeds if at all by virtue of his own title, not to reverse unjust enrichment. Property rights are determined by fixed rules and settled principles. They are not discretionary.”14 They do not depend upon concepts of equity, equity is a legal policy issue and unrelated to the law of property. According to Millet, “Given its nature, there is nothing inherently legal or equitable about the tracing exercise. There is thus no sense in maintaining different rules for tracing at law and in equity.”15 Millet may have unknowingly swallowed a poison pill with his vigorous defense of the independence and objectivity of investigation, specifically tracing. Implicit in this discussion of the law of property and traceability is that equity is a fundamental legal principle. To specifically exclude equity from consideration in the appraisal of rules of evidence implies it is fundamental to other legal processes. That said, “law and equity have long over lapped in pursuit of their common goal of affording adequate remedies...” 16 Equity Since Stevenson Js assertion in 1991 “that talk of fusing law and equity only results in confusing and confounding the law” a large body of legal theory and precedent has developed supporting the view that law and equity over lap in pursuit of a common goal. Lipkin Gorman v Karpnale, [1991] (Lipkin) was decided within months of Canson and it too fell on the equity side of the debate. Lipkin Gorman was a compulsive gambler who spent over Ƚ325,000 in fraudulently obtained funds in casinos in and around New York City. He sued the Casino. The decision included a very case specific and detailed audit of Gormans spending at the casino and, occasionally winning, that came up with an accounting of his economic performance as a gambler:17 So, when in such circumstances the plaintiff seeks to recover from the casino the amount of several bets placed with it by a gambler with his money, it would be inequitable to require the casino to repay in full without bringing into account winnings paid by it to the gambler on any one or more of the bets so placed with it. The result may not be entirely logical; but it is surely just. The last sentence of the preceding passage is a concise recognition of wrestling with the principle of equity, the result may not be entirely logical; but it is surely just. The reasoning so far, established that equity has deep roots in the common law; that it is a fundamental principle in a civilised system of law; and, that moderating harshness on a case by case basis is its role and responsibility. These are all important issues to have been carefully assembled on precedent, including precedent breaking precedent in the case of Fibrosa, and a solid body of recent case law confirming that, Law and equity have mingled or are interacting. However, it would be unwise to assume that the issue is settled. Arriving at this point only answers part of the question posed in the introduction. That equity is embedded in current legal reasoning in the United Kingdom is apparent. However, Stevens introductory quote opines that the presence of the fundamental principle of equity is confusing and confounding the law. This question has yet to be addressed Confusing and Confounding, Equity Recognition of the fundamental principle need not be confusing and confounding. It is challenging and elusive. Furthermore, Stevenson J.s fears that it will be confusing and confounding are demonstrably false two decades after he raised them. In 2010 alone both The Cambridge Law Journal and the Melbourne University Law Review devoted significant portions of an issue to the topic. The Cambridge Law Review considered issues as diverse as “Identification of Money at Common Law” and “Subrogation, Accounting and Unjust Enrichment”, the latter based largely on judgments considered in this discussion.18 Similarly, the Melbourne University Law Review published analysis of ‘Foskett’.19 Since Stevens J questioned emphasis on equity a vast body of are law and analysis has filled the void. However, balanced consideration of equity is complicating. Throughout the fact that equity has to be developed on a case – by – case basis has been emphasised and that is demanding and time consuming. The re-balancing of judicial practice and precedent that is inevitably required during a transition like this is also a complicating factor. Finally, as noted in the introduction performance metrics must be developed to insure that attempts to increase the relative weight given to equity are actually producing results. The process is challenging and complicated but it is not confusing and confounding. Ultimately, therefore. “fear that talk of fusing law and equity only results in confusing and confounding the law,” is misplaced. Stevens J. was right to note that the ruling in Canson was pushing the issue of equity to the fore and pushing reasoning predicated on greater emphasis being placed on equity as a fundamental principle. Stevens J. was not needlessly crying that the sky is falling. However, twenty years later the concerns that he raised have been overcome. The concept of fusing law and equity is now supported by twenty years of judgments and a thriving academic debate around its theory and application. References Cases Cited Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534. (Canson). http://scc.lexum.umontreal.ca/en/1991/1991scr3-534/1991scr3-534.html. Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32, 61. http://www.bailii.org/uk/cases/UKHL/1942/4.html. Foskett v. McKeown, [2000] 3 All ER 97 (‘Foskett’). LeMesurier v. Andrus, [1986], 25 D.L.R. (4th) 424, 54 O.R. (2d) 46 (S.C.). (LeMesurier) Lipkin Gorman v Karpnale, [1991] 2. A.C. 548. (Lipkin). http://www.bailii.org/uk/cases/UKHL/1988/12.html. Day v. Mead, [1987] 2 N.Z.L.R. 443 (C.A.). Trustee of the Property of F C Jones and Sons (a Firm) v Jones. [1997] Ch 159, 170. http://webjcli.ncl.ac.uk/1996/issue5/erchu5.html. Secondary Sources Berryman, Jeff. (May, 1999). “Equitable Compensation for Breach by Fact-Based Fiduciaries: Tenatative Thoughts on Clarifying Remedial Goals.” Alberta Law Review 37: 95+. https://litigation-essentials.lexisnexis.com/webcd/app?action=DocumentDisplay&crawlid=1&doctype=cite&docid=37+Alberta+L.+Rev.+95&srctype=smi&srcid=3B15&key=5817dfca8e6642c9ee5f0e4644b4de4b. Conaglen, Matthew and Peter Turner. (2010). “Subrogation, Accounting and Unjust Enrichment”. The Cambridge Law Journal, 69:(1), 30-33. Davidson, Ian E. [1982]. “The Equitable Remedy of Compensation”.Melbourne University Law Review 13: 349+. “Foskett v. McKeown: Hard-nosed Property Rights or Unjust Enrichment”. (2010) Melbourne University Law Review, 8: http://www.austlii.edu.au/au/journals/MULR/2001/8.html#fn1. Fox, D. M. (2010). “Identification of Money at Common Law”. The Cambridge Law Journal, 69:(1), 28-30. Hosios, Arthur J. and Lawrence B. Smith. (Spring, 2010). “Whitefish: An Economic Primer”. Queens Law Journal 35: 679+. https://litigation-essentials.lexisnexis.com/webcd/app?action=DocumentDisplay&crawlid=1&doctype=cite&docid=35+Queen%27s+L.J.+679&srctype=smi&srcid=3B15&key=2f60c62281fd37d6c17e05be4ea089ee. Rotherham, Craig. [2000]. ‘Trust Property and Unjust Enrichment: Tracing into the Proceeds of Life Insurance Policies’. Cambridge Law Journal, 59: Read More