The Creation of Equity - Assignment Example

Explain the reasons behind the creation of equity. What is it and how is it different from common law? What is the present relationship between common law and equity? Legal equity developed through Chancellors who originally acted as private aides to the King. Their task was to ensure that the common law, enforced in the King’s name, was applied with justice in individual cases. In this way, equity was a way of exercising a royal prerogative of mercy and ensuring that the King’s conscience was clear before God (Watt (2007) pg 3). Eventually, the Court of Chancery was formed, of which the Chancellor was head, and it was here that equity developed as a branch of law distinct from the common law. It has been said that in the fourteenth century the common law was overly rigid and unable to provide justice in individual cases (Duddington 9). Particular cases of injustice arose because: juries were bribed or inhibited; juries inhibited law in civil cases because the judge had to spend a lot of time explaining the law to them; the procedures of the common law courts were ill-suited to deal with cases which required personal attendance of parties and witnesses, and; the writ system had developed in such a way that any new one had to fit within the formula of a previous one (Duddington 9-10). It was for these reasons that litigants took to petitioning the King’s Council, and later the Chancellor directly, to do justice. The advantages of this over the common law were that: the Chancery was able to deal with the case without a jury; the procedure did not require any particular form; it was relatively informal; the Chancellor acted in personam, as against a person, so remedies of specific performance or injunction could be granted, and; the Chancellor recognised trusts (Duddington 10). The concept of equity was not completely new, developed systems of law have often been assisted by the introduction of a discretionary power to do justice in particular cases where the strict rules of law cause hardship (Martin 4). This is because rules formulated to deal with particular situations may subsequently work unfairly as society develops. Equity has therefore been defined as the “body of rules which evolved to mitigate the severity of the rules of the common law”. The distinction between equity and the common law can therefore be seen to be one of function. The function of the common law is “to establish rules to govern the generality of cases; the effect of those rules is to recognize that certain persons will acquire certain legal right and powers in certain circumstances” (Watt (2008) 13). In this way, common law rules allow legal rights to be exercised and create certainty in the law. The function of equity, on the other hand, is to “restrain or restrict the exercise of legal rights and powers in particular cases, whenever it would be unconscionable for them to be exercised to the full.” (Watt (2008) 13-14) However, it should not be thought that equity equates with justice in a wide sense. Rather, equity operates in a rather narrow sphere of unconscionability in the law, and is not necessarily involved with social justice. In the view of Buckley J, no court of law, not even the old Court of Chancery, is in any moral sense a court of conscience. (Re Telescriptor Syndicate [1903] 2 Ch 174 at 196) As a starting point, unconscionability as the subject of equity will “commonly involve the use of or insistence upon legal entitlement to take advantage of another’s special vulnerability or misadventure… in a way that is unreasonable or oppressive to an extent that affronts ordinary minimum standards of fair dealing”(The Commonwealth v Verwayen [1990] 170 CLR 394, per Deane J at 441). Equity will not always intervene where a case may be considered to be unfair. For example, in Liverpool Marine Credit Co v Hunter (1868) LR 3 Ch App 479, the defendants, who were owners of a ship which was subject to a mortgage, sent the ship to Louisiana where the mortgaging of ships was not recognized. The plaintiff argued that the defendant had committed a fraud, but the judge found against him because: “[the judge did] not… see how Equity could properly interfere to restrain the actions which, however oppressive… arose out of remedies employed by the plaintiff for the recovery of his dept, of which the law entitled him to avail himself” (at 487). Until the Judicature Acts of 1873 and 1875, the Court of Chancery had almost exclusive equity jurisdiction and the rules of equity were not enforced in the common law courts. If a defendant to a common law action had an equitable defence to it, the way of establishing it was to go to Chancery to obtain an injunction to stay the proceedings in the common law court and then start a new action in Chancery to establish his equitable rights (Martin 4-5). Under the Judicature Acts of 1873 and 1875, the old Court of Chancery was abolished, along with some of the old common law courts. In their place was a new High Court with different divisions, including the Chancery Division. By virtue of section 24 of the Judicature Act, each division had, and still has, jurisdiction for both law and equity. It is this that has led to commentators examining the extent to which the common law and equity have become ‘fused’. The traditional view on the fusion of equity and common law, is that the Judicature Acts fused merely the administration of the two branches of the law, rather than their substance. In Salt v Cooper, Jessel MR commentated: “the main object of the Act was to assimilate the transaction of Equity business and Common Law business by different Courts of Judicature. It has been sometimes inaccurately called “the fusion of Law and Equity”; but it was not any fusion, or anything of the kind; it was the vesting in one tribunal of the administration of Law and Equity in every cause, action or dispute which should come before that tribunal” ((1880) 16 Ch D 544 at 549). However, more recently judicial comment has departed from this traditionalist perspective. Throughout the middle of the twentieth century Lord Denning seemed to regard law and equity as unified, and used this as a justification for law reform. In Errington v Errington and Woods [1952] 1 KB 290 at 298 he stated that “law and equity have been fused for nearly eighty years. Similarly, in Boyer v Warbey [1953] 1 QB 234, he extended the principle of privity of estate to equitable leases: “I know that before the Judicature Act 1873 it was said that the doctrine of covenants running with the land only applied to covenants under seal and not to agreements under hand… But since the fusion of law and equity the position is different. The distinction between agreements under hand and covenants under seal has largely been obliterated” (at 245-246). In the more modern case of United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, the House of Lords apparently agreed that the two branches of law had become ‘fused’, with Lord Diplock stating: “The innate conservatism of English lawyers made them slow to recognise that by the Supreme Court of Judicature Act 1873 the two systems of substantive and adjectival law formerly administered by the Courts of Law and Courts of Chancery… were fused” (at 930). Lord Simon considered that there were institutional reasons why lawyers had not fully accepted this conclusion. First, there had been some dovetailing of the systems before the Acts, second, the High Court had continued to be separated into divisions, and thirdly, the conservativism of lawyers and their training tended to minimise changes. It is thought by some commentators that the central problem is not a fundamental disagreement between the two approaches, but rather a difference in rhetoric (Pearce and Stevens 14). It can be said that if ‘fusion’ is to mean that any distinction between equity and the common law has been removed, then that has not happened (Pearce and Stevens 15). The law in its operation still distinguishes between legal and equitable ownership, most obviously in the form of the trust. However, because the law has, since the Judicature Acts, developed as a whole under united courts, “there has been some synthesis of legal and equitable rights and remedies and cross-fertilisation between them, and some of the old distinctions between rights and remedies historically equitable in origin and those historically of common law origin have ceased to be significant” (Pearce and Stevens 15). Pearce and Stevens (15) argue that the approach to this issue today is that the fusion of the administration of the two branches of law has produced a single and coherent body of rules which operate harmoniously together, despite their different origins. Those different origins may be discerned and in some cases will remain significant, whereas in others the two branches will be merged so that they are not. In Tinsley v Milligan [1993] 3 All ER 65, the House of Lords were asked to consider the question whether a plaintiff could assert a claim to an equitable interest in land by way of a resulting trust where she had acted illegally. It was argue that the maxim that a person seeking to assert an equitable entitlement must come with ‘clean hands’ prevented the plaintiff asserting her right. The common law position was that a person whose acquisition of property was tainted with illegal conduct could assert his right provided that he did not rely on his illegal conduct to establish his title. Lord Browne-Wilkinson did not see any continuing distinction between the two branches of law, saying: “If the law is that a party is entitled to enforce a proprietary right acquired under an illegal transaction, in my judgment the same rule ought to apply to any property right so acquired, whether such right is legal or equitable” (at 86). However, he also stated that English law has “one single law of property made up of legal and equitable interests” (at 86), thereby maintaining some distinction. Equity may therefore be summarised as originating to keep a check on the common law, providing justice in individual, rather than general cases. Since the Judicature Acts courts have been able to make use of both equitable and common law principles and remedies at the same time. This has led to the administration becoming fused, and the law as a whole can now be said to be one, with the two elements making up that whole. References Duddinton, J. Essentials of Equity and Trust Law London: Pearson 2006 Martin, J.E., Hanbury and Martin: Modern Equity 17th Edition London: Sweet and Maxwell 2005 Pearce, R. and Sevens, J. The Law of Trusts and Equitable Obligations 4th Edition Oxford: OUP 2006 Watt, G. Todd & Watt’s Cases and Materials on Equity and Trust 6th Edition Oxford: OUP 2007 Watt, G. Trusts and Equity Oxford: OUP 2008-10-23 Read More