The nature and history of equity

This is an extract from Lawbook Company's Nutshell: Equity by Tina Cockburn & Melinda Shirley (Sydney: LBC, 2001). LBC Nutshells are the essential revision tool: they provide a concise outline of the principles for each of the major subject areas within undergraduate law. Written in clear, straightforward language, the authors clearly explain the principles, and highlight key cases and legislative provisions for each subject.

Introduction The body of law called equity is founded upon the principles of fairness and conscience. Its piecemeal development took place over many years as a direct result of the injustices often caused by a strict application of the common law. As a result, equitable principles have also developed in a piecemeal and responsive way. The principles of equity are founded on the conceptof 'unconscionability' that is, where an act or omission is considered to be contrary to good conscience. In those circumstances equity will often step in and grant relief to a party whose trust has been breached or whose disadvantage has been used to the advantage of another. Equitable remedies are both flexible and specific to the circumstances of each case and the granting of equitable relief is always discretionary. An understanding of the history and development of equity is fundamental to an understanding of this area of the law. Medieval period In the medieval period, the doctrine of precedent required the common law to be applied strictly and uniformly.

 Common law proceedings were commenced by the writ which was only available for specified causes of action, so that if a plaintiff could not bring his or her action within those categories, the common law courts could not deal with it. Due to corruption within the court system and the nature of the common law, many decisions of the
common law courts were considered to be harsh and unjust. Dissatisfied litigants began petitioning the King for relief and leniency. As the number of petitions grew, the King delegated that review function to the Lord Chancellor and it was from that function that the Court of Chancery was established. The first chancellors were ecclesiastics with no formal legal training whose decisions were largely shaped by questions of conscience and fairness. The decisions issued by the Court of Chancery in its formative stages were framed according to church law, rather than the common law and as a result this area of the law was not developed upon any clear doctrinal foundations.

 During the 16th century the character of the Court of Chancery changed with the appointment of a lawyer, Sir Thomas Moore as Chancellor. From that point in time all future chancellors were lawyers, reports of proceedings were kept and equitable doctrines began to develop. Conflict between common law and equity The two court systems were soon in conflict and there are many examples of this conflict as the two bodies of law wrestled with the issue of supremacy. The common injunction Dissatisfied litigants from the common law system would seek relief from the Court of Chancery. Equity would then often give relief by way of the common injunction which would either restrain the plaintiff from continuing with his or her common law action or restrain them from enforcing a common law judgment. The penalty for disobeying the common injunction was imprisonment. The response of the common lawyers to the common injunction was to issue writs of habeus corpus which ordered the release of people who had been imprisoned for disobeying Chancery decrees. The use The use was an embryonic form of trust. It was a creation of equity that enabled the division of the legal and beneficial interests in land and took the form: "To A to the use of B". In such a conveyance A (the feoffee) held the legal title and was the only owner recognised by the common law. B (the cestui que use) had no recognised legal interest, but was recognised by equity as having the right to the benefit of the land
which became known as the beneficial interest. The use became an effective tool for the avoidance of feudal taxes and in 1535 the Statute of Uses was passed in an attempt to negate it. That Act executed or abolished the use and deemed the beneficial owner to hold the legal interest. In response, equity lawyers created the use upon a use which took the form: "To A to the use of B to the use of C". The Statute of Uses only executed the first use which left B with the legal title. Equity then recognised the obligation on B to hold the property to the use of C and so the legal and beneficial interests were again successfully separated.

 The Earl of Oxford's case The growing tension between the two bodies of law culminated in the Earl of Oxford's case in 1615. In that case, Coke CJ gave judgment in a common law action which was alleged to have been obtained by fraud. The Lord Chancellor, Lord Ellesmere, then issued a common injunction from the Court of Chancery, preventing proceedings to enforce the common law judgment.

 As the two courts were deadlocked the matter was referred to the Attorney -General, Sir Francis Bacon, who upheld the use of the common injunction and determined that whenever there was conflict between the common law and equity, that equity would prevail. The Judicature Act 1873 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. This Act abolished the old court system and replaced it with a new High Court of Justice which was vested with all of the jurisdiction previously exercised by the separate courts. There was one code of procedure for all claims and the ascendancy of equity in any situation of conflict with the common law was specifically preserved in s 25.

 The fusion fallacy 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:

 Redgrave v Hurd (1881) 20 Ch; Seager v Copydex Ltd [1967] 2 All ER; Walsh v Lonsdalenbsp; (1882) 21 Ch. Many academics argue that the development of the fusion fallacy has harmed equity, however, the modern reality is that the dual administration has led to a convergence of the two bodies of law in relation to a number of doctrines (see: Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (3rd ed, Butt, 1992) para 259. Tina Cockburn BCom LLB (Hons), LLM (QUT) Lecturer in Law Queensland University of Technology Melinda Shirley BA LLB (Hons), LLM (Bond) Lecturer in Law Queensland University of Technology 2001