Equity In English Law
Definition of Equity
The word equity has more than one meaning. It is used in diverse ways and connotes a
variety of definitions. The appropriate meaning depends on the context on how it is used.
The term equity is derived from the Latin expression Aequitas Aequuas, suggesting the
sense of leveling or equalization.
General: equity implies fairness; right as founded on the laws of nature; recourse to
principles of justice to correct or supplement common law or positive law
Related to judicial decisions where cases should be decided in a way which is fair and
right so justice is achieved between parties.
Definition: “A system of law originating in the English chancery and comprising a settled
and formal body of substantive and procedural rules and doctrines that supplement, aid,
or override common and statutory law”.
“A body of doctrines and rules developed to enlarge, supplement, or override any narrow
or rigid system of law”.
Origin of equity
Before 1066, all laws were local and enforced in the manorial, shire and hundred courts
(old administrative districts of England).
Under the Normans, Royal Courts began to emerge from the King’s Council (Curia
Regis), but these did not take over the jurisdiction of the local courts immediately.
However, over a long period of time the local courts lost jurisdiction over cases and a
practice was started of sending judges around the country to hold assizes (or sittings) to
hear cases locally.
This enabled the judges, over a period of roughly 200 years, to take the best local laws
and apply them throughout the land, thus creating law which was “common to the whole
country”, i.e., the “Common Law”.
Before 1066, all laws were local and enforced in the manorial, shire and hundred courts
(old administrative districts of England).
Under the Normans, Royal Courts began to emerge from the King’s Council (Curia
Regis), but these did not take over the jurisdiction of the local courts immediately.
However, over a long period of time the local courts lost jurisdiction over cases and a
practice was started of sending judges around the country to hold assizes (or sittings) to
hear cases locally.
This enabled the judges, over a period of roughly 200 years, to take the best local laws
and apply them throughout the land, thus creating law which was “common to the whole
country”, i.e., the “Common Law”.
Selected Issues with common law procedures –Judicial precedent
The doctrine of judicial precedent is concerned with the fundamental importance of
case law that when a judicial precedent articulates with authority, the principle which it
embodies would be binding in future cases,
This is usually referred to as stare decisis. which can be translated simply as “Let the
decision stand”.
Judicial precedents become one of the sources of law.
Judicial decisions become binding precedents for the determination of like cases in the
future and so contribute to the material content of the legal system.
In a hierarchical courts structure, inferior courts are bound by decisions of superior
courts in cases of same or similar facts and/or issues.
Horizontal and Vertical Operation
Theories of Judiciary Law
The traditional view in England was that judges do not make law; rather they simply
interpret the law.
Later, this position had changed and it had significantly supported to the development of
common law.
Based on this changed, there are two theories come into exist in judicial system
concerning to judicial precedent, namely, the declaratory theory of precedents and the
theory that judges are law-makers.
Merits
William Geldart: Certainty, Possibility of growth, Great wealth of detailed rules;
Practical character of these rules.
The advantage is the judicial consistency as lawyers and their clients are able to predict
what would be the outcome of a particular legal question is likely to be in the light of
previous judicial decisions.
Judges can manipulate the Common law provide them with an opportunity to develop
law in particular areas without waiting for Parliament to enact legislation.
Case law is richer in legal detail than statute law.
It is more flexible when compared to statute law which is enacted by the legislative as
law once enacted can only be amended or repealed and legislative proceedings are often
cumbersome and time consuming.
Demerits
Due to the hierarchy of binding precedents, the law becomes rigid.
There is also a danger of passing illogical judgments which will bring hardship as a
precedent.
In situation where there are over 1000 volumes of law reports containing some 400,000
cases, they may be regarded as burdensome and the legal rules difficult to learn and
apply.
Judicial precedent also promotes the sense of uncertainty as it can stilled be distinguish
and overruled.
In practice, flexibility is achieved through the possibility of previous decisions being
either overruled or distinguished, or the possibility of a latter court extending or
modifying the effective ambit of a precedent.
The writ system
The judges also developed the writ system in which a writ is simply a document setting
out the details of a claim.
Over a period of time, the writ system became extremely formal and beset with
technicalities and claims would only be allowed if they could fit into an existing writ as
the rule then was “no writ, no remedy”.
Even if a writ was obtained, the judges would often spend more time examining the
validity of the writ than the merits of the claim.
Writs were later issued by the clerks in the Chancellor’s Office and they began to issue
new writs to overcome these difficulties, in effect creating new legal rights.
In 1258, the Provisions of Oxford forbade the issue of new writs without the permission
of the King in Council.
As a result, the common law became more rigid.
In 1285, the Statute of Westminster II authorised the clerks to issue new writs but only if
claims were in “like cases” to those before 1258.
This was restrictive and made further development of the common law very technical.
Other defects
The common law paid too much attention to formalities, e.g. if a contract was made
which required written evidence for its enforcement, then lack of such evidence meant
that the common law courts would grant no remedy.
The common law had only one remedy: damages, which was often considered
inadequate.
The common law courts used judges and juries which could be intimidated and
corrupted.
Development of equity
The word “equity” means fair or just in its wider sense, but its legal meaning is the rules
developed to mitigate the severity of the common law also known as the gloss of
common law.
Petitioning the King
Disappointed litigants began to petition the King as the “Fountain of Justice”, the
procedure being to present a petition (or bill) asking him to do justice in respect of some
complaint.
For a time, the King in Council determined these petitions himself, but as the work
increased he passed them to the Chancellor as the “Keeper of the King’s Conscience”.
The Chancellor was usually a clergyman, generally a bishop, and learned in the civil and
canon law.
The King, through his Chancellor, eventually set up a special court, the Court of
Chancery, to deal with these petitions.
The Chancellor dealt with these petitions on the basis of what was morally right.
The Chancellor would give or withhold relief, not according to any precedent, but
according to the effect produced upon his own individual sense of right and wrong by the
merits of the particular case before him.
In 1474, the Chancellor issued the first decree in his own name, which began the
independence of the Court of Chancery from the King’s Council.
New procedures
Equity was not bound by the writ system and cases were heard in English instead of
Latin.
The Chancellor did not use juries and he concerned himself with questions of fact.
He could order a party to disclose documents.
The Chancellor issued subpoenas compelling the attendance of the defendant or
witnesses whom he could examine on oath.
New rights
Equity created new rights by recognising trusts and giving beneficiaries rights against
trustees (A trust arises if one party gives property to trustees to hold for the use of
beneficiaries.).
The common law did not recognise such a device and regarded the trustees as owners.
Equity also developed the equity 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.
This right to redeem the property is known as the equity of redemption.
New remedies
Equity created new remedies:
a) Specific performance, which is an order telling a party to perform their part of a
contract. This was useful where damages were not adequate, e.g. in the sale of land.
Thus, if the seller refused to sell after signing a contract, the buyer could obtain an order
of specific performance making the seller sell the house.
b) Rectification, which allowed a written document to be changed if it did not represent the
actual agreement made by the parties.
c) Rescission, which allowed parties to a contract to be put back in their original position in
the case of a contract induced by a misrepresentation.
d) Injunctions, usually an order to stop a person doing a particular act, like acting in breach
of contract (a prohibitory injunction).
Conflict between equity & common law
Rivalry between the Courts
The Court of Equity (or Chancery) became very popular because of its flexibility; its
superior procedures; and its more appropriate remedies.
Problems arose as to the issue of injunctions: the common law courts objected to the
Chancellor issuing injunctions restraining the parties to an action at common law either
from proceeding with it or, having obtained judgment, from entering it in cases where, in
the Chancellor’s opinion, injustice would result.
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 judgment.
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.
As equity was developing, it had no fixed rules of its own and each Chancellor gave
judgment according to his own conscience.
This led to criticism about the outcome of cases and John Selden, an eminent 17th
Century jurist, declared, “Equity varies with the length of the Chancellor’s foot”.
To combat this criticism, Lord Nottingham (Lord Chancellor 1673-82) started to
introduce a more systematic approach to cases and by the 19th Century, equity had
become as rigid as the common law.
Delays were caused by an inadequate number of judges and the officials depended on
fees paid by the litigants so that there was every incentive to prolong litigation for
individual tasks and mulitply these tasks.
Some attempts were made to assimilate the remedies granted by the Court of Chancery
and 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.
Fusion of law and equity
During the 17th to 19th Centuries, the fundamental principles of equity were developed
and followed in the court of chancery by way of precedent.
However, the common law and equity continued to be administered by separate courts
and litigants who had commenced their claim in the wrong jurisdiction were forced to
start again in the other.
The cost and time implications of this duality led to the enactment of the “Judicature Act
1873” which fused the administration of the common law and equity.
The judicature Acts 1873 - 1875
The Judicature Acts 1873-75 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.
The Supreme Court of Judicature consists of the High Court divided into divisions known
as the Queen’s Bench Division, Chancery Division, and other Divisions; and the Court of
Appeal, etc.
Each Division exercises both legal and equitable jurisdiction.
Thus, the court “is now not a Court of Law or a Court of Equity, it is a Court of complete
jurisdiction”. (Pugh v. Heath, (1882), per Lord Cairns.)
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”
(see Walsh v. Lonsdale (1882) 21 Ch D 9.).
The Relationship of Equity and Common Law
Section 25 of the Judicature Act clearly contemplated the continued existence of separate
bodies of rules for the common law and equity although their administration had been
fused.
Nevertheless, a series of cases are argued to be evidence of the proposition that the bodies
of law themselves had been combined so that after the Judicature Act, decisions that
would have been impossible under the separate systems of law were now possible.
This is referred to by academics as the fusion fallacy, and a series of cases is used as
examples of the courts implementing this fallacy and combining equitable and common
law rights inappropriately (see Redgrave v. Hurd (1881) 20 Ch; Seager v. Copydex Ltd.
[1967] 2 All ER).
Equity under English Law Today
In recent times, the courts have used their equitable jurisdiction to develop new remedies:
Mareva Injunctions: In Mareva v. International Bulkcarriers [1975] 2 Lloyd’s Rep
509, a shipowner let the ship named, ‘Mareva’, to a foreign charterer, with payment half
monthly in advance. The charterer defaulted on a payment. The shipowner found out that
the charterers had money in an English bank and sought an injunction freezing the
account.
It was held that an order would be granted to stop the charterers from moving the money
abroad before the case was heard.
Normally, the application will be ex parte, which means that one party applies without
giving notice to the other side for if the other party did have notice, they could move the
assets.
In the Due Process of Law (1980), Lord Denning described the Mareva injunction as
“The greatest piece of judicial law reform in my time”.
Anton Piller Orders: In Anton Piller v. Manufacturing Processes Ltd. [1976] Ch 55,
the plaintiffs made electrical equipment and employed the defendants as their agent in the
UK. They suspected that he was selling their technical drawings to competitors and so
applied for an order. The court held that an ex parte mandatory injunction would be
granted, to the effect that the plaintiff could enter the defendant’s premises and inspect
relevant documents.
This aims to stop the defendant removing or destroying vital evidence.
The defendant may refuse entry, but such action would be regarded as contempt of court,
for which the defendant could be sent to prison.
These orders have been used for breach of copyright, passing off and matrimonial
disputes.
