Equity Came Not to Destroy Law

‘Equity Came Not To Destroy The Law But To Fulfil It’

Equity is a set of rules that exists alongside the common law and is applied where the normal form of dispute resolution, namely damages (monetary compensation), would not be sufficient, and provides an alternative most often through specific performance or an injunction, but also by rescission and reformation. Specific performance is an order to fulfil contractual obligations, in order to obtain the remedy of specific performance; the plaintiff must prove that he has fulfilled his obligations. An injunction can be sought where the plaintiff has property interest in need of protection and if monetary compensation would be an inadequate remedy. Rescission means voiding a contract, parties may seek rescission if both parties were mistaken about the facts or the laws related to the subject of the contract. Reformation, or rectification, is a remedy that changes the terms of an existing written contract so that it is consistent with what the parties had originally intended when they struck their deal.

For most of the history of the common law, there were two sets of courts, the courts of common law and of equity. Equity had a vigorous separate existence for nearly 500 years, though some attempt was made to assimilate the remedies granted by the Court of Chancery into the common law courts. Thus under the Common Law Procedure Act 1854 the common law courts were given some power to award equitable remedies and the Chancery Amendment Act 1858 gave the Chancellor the power to grant damages in addition to, or in substitution for, an injunction or a decree of specific performance. Consequently, a certain rivalry developed between the two courts and this came to a head in the Earl of Oxford’s Case (1616) 1 Rep Ch 1 in which the common law court gave a verdict in favour of one party and the Court of Equity then issued an injunction to prevent that party enforcing that judgement. The dispute was referred to the King who asked the Attorney-General to make a ruling. It was decided that in cases of conflict between common law and equity, equity was to prevail. From that time on the common law and equity worked together, side by side. The Judicature Acts 1873-75 rationalised the position. They created one system of courts by amalgamating the common law courts and the court of equity to form the Supreme Court of Judicature which would administer common law and equity. It was foreseen that a court which applied the rules both of common law and of equity would face a conflict where the common law rules would produce one result, and equity another. Section 25 of the Judicature Act 1873 provided that if there was any conflict between these principles, then equity was to prevail. However, this did not fuse the principles of common law and equity, which still remain as separate bodies of rules. “The two streams have met and still run in the same channel, but their waters do not mix” (Maitland).

Equity was introduced as a means of providing remedies that would correctly redress the situation in a way that the common law remedy of damages could not, such as in the case of Inwards v Baker [1965] 2 Q.B. 29. Despite the superiority of equity, it was intended to prevail over common law decisions, it was only ever to be applied where damages would be insufficient to solve the state of affairs.

It is also important to remember that the common law courts strictly applied the doctrine of stare decisis, the legal principle by which judges are obliged to obey the precedents established by prior decisions, this meant the law did not develop even when it was obviously in need of change. As such, equitable remedies were introduced in order to allow the law to develop in time with changing social, political and personal opinion, whilst still retaining a vast majority of the stable and certain common law system. Equity has constantly striven to update the law and to this day continues to develop certain areas in order to maintain the objective of fairness, this can be seen in cases such as Mareva v International Bulkcarriers [1975] 2 Lloyd’s Rep 509 and Anton Piller v Manufacturing Processes Ltd [1976] Ch 55, which introduced the Mareva injunction and the Anton Piller order, respectively.

In the past, the juries used in deciding cases in the common law courts could often be intimidated, thus, the development of equity can be seen as an attempt to remove the corruption from the system, as the Chancellor concerned himself with questions of fact, a case could not be won by appealing to the jury rather than providing substantial evidence to prove their point.

Equity can also be seen to “fill the gaps of the common law” in the new rights it created in relation to trusts and mortgages. Equity created new rights by recognising trusts, which arise where one party transfers property to one person (the trustee) to hold on trust for another (the beneficiary), and giving beneficiaries rights against trustees. The common law did not recognise such a device and regarded the trustees as owners, whereas in equity, the trustee’s hold the legal title, but the beneficiaries hold the equitable title, so the trustees are bound to act in the interests of the beneficiaries and must act to their advantage. Equity also developed the principle of redemption. At common law, under a mortgage, if the mortgagor had not repaid the loan once the legal redemption date had passed, he would lose the property but remain liable to repay the loan. Equity allowed him to keep the property if he repaid the loan with interest.

The equitable maxims also ensured that it could not be used to escape an agreement now that it is no longer advantageous and also that equitable relief would not be granted to those who sought to use it for inequitable purposes. The maxim “one who seeks equity must do equity” ensures that In order to receive some equitable relief, the party “must be willing to complete all of their own obligations as well, this overlaps with the maxim one who comes into equity must come with clean hands”, which guarantees that those who have acted wrongly, through violating the terms of a contract, for example, are not entitled to equitable relief. The maxim “equity follows the law” clearly states that equity will not allow a remedy that is contrary to law, hence proving that equity was not meant to supersede common law where there was already an established, certain and ,most importantly, fair imperative that already existed.

However, as the law of equity developed, it began to rival and conflict with the common law. Litigants would go ‘jurisdiction shopping’ and often would seek an equitable injunction prohibiting the enforcement of a common law court order. The penalty for disobeying an equitable ‘common injunction’ and enforcing a common law judgment was imprisonment. This is obviously in contrast with the equitable principles of fairness, and is just one way in which equity has come to erode at the power and status of the common law.

Although some equitable maxims may seem to protect the integrity of the common law, the maxim “equity will not allow a statute to be used as a cloak for fraud” which prevents a party from relying upon a statutory provision if to do so would be unconscionable and unfair, whilst this may seem to be an equitable principle, it visibly allows equity to ignore common law, and as equity’s concern is with individual justice, the common law delivers universal justice, which means that whilst the decision may be fair under the circumstances of one particular case, the opposite could be true for many other scenarios, as in Dillwyn v Llewelyn (1862) 45 E.R. 1285, although the intention here was, presumably, for the son to gain ownership, in other settings, this may not be the intent.

Equity can also be seen to destroy the common law in a plethora of case law, Gee v Pritchard (1818) 2 Swans. 402, Dillwyn v Llewelyn (1862) 45 E.R. 1285, ER Ives Investment Ltd v High [1967] 2 Q.B. 379, Errington v Errington [1952] 1 K.B. 290, Earl of Oxfords Case (1616) 1 Rep Ch 1 and Inwards v Baker [1965] 2 Q.B. 29 are just some of the cases where what would normally be a straightforward decision under the common law, has become a confusing decision based upon the highly subjective notion of “fairness”.

In conclusion, I believe that equity “came not to destroy the law but to fulfil it’”, as allowing courts to use their discretion and apply justice in accordance with natural law merely mitigates “the rigor of common law”, I would agree with the words of Cardozo in Graf v. Hope Building Corporation, 254 N.Y 1 at 9 (1930), in which he states that “equity works as a supplement for law and does not supersede the prevailing law”.

Bibliography

Journal Articles

J. Martin “Fusion ,Fallacy and Confusion” [1994] Conv 13

“Equity in the Modern Law: an Exercise in Taxonomy” (1996) 26 W.A.U.L.R.

Graeme Watt, “The proprietary effect of a chattel lease” Conv. 2003

“One day all this will be yours” – the development of proprietary estoppel” T.Q.R. 2003

“I have bought it all for you” Fam. L.J. 2007

F. W. Maitland, Equity – Also the Forms of Action at Common Law – Two Courses of Lectures

Lord Eldon on “Equity” J. Leg. Hist. (1999), 20(3), 51-74.

A “Fusion Fallacy” Fallacy? James Edelman, L.Q.R. 2003, 119(Jul), 375-380

Textbooks

Principles of Equity and Trusts, S. Hepburn, 2001, pg 21 – 40

Gray and Gray, Land Law, 5th Edition, pg 224 – 264

Cases

Gee v. Pritchard (1818) 2 Swans. 402

Dillwyn v Llewelyn (1862) 45 E.R. 1285

ER Ives Investment Ltd v High [1967] 2 Q.B. 379

Errington v Errington [1952] 1 K.B. 290

Earl of Oxfords Case (1616) 1 Rep Ch 1

Inwards v Baker [1965] 2 Q.B. 29

Walsh v Lonsdale (1882) 21 ChD 9

Graf v. Hope Building Corporation, 254 N.Y 1 at 9 (1930)

Statutes

Judicature Acts 1873 and 1875

Common Law Procedure Act 1854

Chancery Amendment Act 1858