Equity

By Fraser Matcham

Published on February 21, 2017

“Equity is no part of the law, but a moral virtue, which qualifies, moderates, and reforms the rigour, hardness, and the edge of the law, and is a universal truth; it does also assist the law where it is defective and weak…. and defends the law from crafty evasions, delusions, and new subtleties intended as contrived to evade and delude the common law, whereby such as have undoubted right are made remediless; and this is the office of equity, to support and protect the common law from shifts and crafty contrivances against the justice of law. Equity therefore does not destroy the law, nor create it, but assists it.”

Sir Nathan Wright, Lord Dudley v Lady Dudley (1705) Prec.Ch. 241 at 244.

Abstract

This article explores the views of the purpose and effect of equity in the application of the common law in contemporary society and compares equity’s current purpose with that when it was first established, also considering equity as a moral virtue, universal truth and as a protector, supporter and assistant to the common law today. The article will demonstrate that equity is applied in the same way, but to different and developing contexts, in contrast to cases centuries ago. It aims to highlight the significance and importance of the Judicature Acts in correlation with equity’s current purpose and relationship with the common law.

Introduction

The judiciary, advocates and academics continually debate the nature of equity probably due to the historical complexity it has caused in the English legal system, but also more inherently, the historical significance that equity plays in today’s courts. Equity has manifested itself into legal principles, rules and legislation demonstrating the popularity of equitable elements in modern society and providing some guidance that equity has, in one way or another, assisted the common-law system. The context of cases brought before the Chancery Courts is vastly different from centuries ago and without equity, many cases would indeed be without remedy. It is clear the Judicature Acts have had a significant effect on the modern position of equity, and, to a degree, confirmed equity’s superiority in circumstances where it conflicts with the common law. It can then already be agreed that equity has provided the English legal system with another option where the common-law fails, but the main debate is to what degree is equity part of the law? Does it repair more holes in the common-law, than it creates?

Equity will prevail

When the Judicature Acts became effective in 1873, judges no longer had discretion when a conflict arose between the common law and equitable rules. The Judicature Acts provided clear instructions, that:

“….in all matters not hereinbefore particularly mentioned in which there is any conflict or variance between the rules of equity and the rules of common law with reference to the same matter, the rules of equity shall prevail.”

This provision ensures that where common law rules and rules of equity conflict, equity will have superiority over the common law. Considering Sir Nathan Wright’s statement in respect to this provision, it could be said that the Judicature Acts support the idea that equitable rules assist the law where it is otherwise weak and defective and that this superiority is necessary to ensure that an effective remedy is available. However, the provision can be interpreted in two different ways.

Firstly, the fact that equity steps in when conflict arises, gives legitimacy to Sir Nathan Wright’s statement, in so far as, where the common-law conflicts with equity, it will conflict with the notion of fairness and justice, avoiding any potential common-law result without remedy, which, in all purposes, would otherwise defeat the court’s role in society as a social control and administer of justice.

It can therefore be argued that equity could act as a moral virtue within the legal system, to the extent that, equity will stop those “individuals benefiting from taking bribes, from committing fraud, from unduly influencing other people, and so forth” , which would, without equity’s existence, result in injustice and crafty evasions. This is supported by John McGhee’s statement that equity had a duty “[t]o correct or mitigate the rigour, and in what proper sense may equity determine the injustice of the common law” and Mr Justice Blackstone’s statement “that it is the business of a Court of Equity in England, to abate the rigor of the common-law.”

The rigour of the common-law is demonstrated in the case of Walsh v Lonsdale, where a lease was not legally valid even when payments were being excepted monthly on the same terms as the lease set out. Equity looked “upon that as done which ought to be done” in order to come to a just finding; in this case, an equitable lease. If the common-law alone were applied, the lease would not have been given legal effect allowing the freeholder to dispense with his obligations and unfairly benefit from the claimant’s innocent loss. Where Sir Nathan Wright says that equity assists the common-law, it can be seen clearly in the above case that equity does assist the common-law in principle and also shows that Sir Nathan Wright’s statement is still an accurate observation of equity today as we see this principle enshrined in a significant portion of land law.

Secondly, it may be argued that equity in the same situation defeats the common law and undermines the purpose of judicial precedents; an established system that is a fundamental element of the English legal system, and creates a degree of certainty within the law and judicial findings. Lord Chancellor Ellesmere in the famously recognised case of Earl of Oxford regarded that equity’s function in the Chancery Court was “to soften and mollify the extremity of the law” This case triggered strong scrutiny at the time by the law courts as it directly ignored the judgement of the common-law courts.

Despite this suggested aim, only a few decades later, members of the judiciary were still unconvinced that equity was assisting the common-law but instead circumventing it, and placing too much power in possession of the Courts of Equity. This was shown in Honourable Mr Justice Story’s commented on equity’s position in 1884, stating:

“It would literally place the whole rights and property of the community under the arbitrary will of the judge, acting, if you place, arbitrio boni judicis, and, it may be, ex cequo et bono, according to his own notions and conscience.”

This expresses the view that, without constraints, equity can allow the judiciary to ignore previous findings or legal rules and make a conclusion in accordance with his/her own beliefs, defeating the purpose of the rule of law. This could potentially lead to evasions and delusions within equity itself as faith and reliance are placed on the judiciary. If any bias was held by a judge, it could impede the prospect of a fair result. Lord Templeman in the late 18th Century said “Equity is not a computer. Equity operates on conscience” , again explicitly stating that the administration of equity is based on a judge’s conscience, but it also implies that the common-law is, in a sense, robotic in nature, which could link with Sir Nathan Wright’s description of the common laws as rigour and hardness.

This then raises the concern that with equity providing the power to depart from a previous judicial decision, judges can make a determination on the rights and property of everyone based on their own preferences and values even when directly in contradiction to the common law. Two characteristics are unique to each individual, installing uncertainty in our legal system; an otherwise key component of the common law that upholds our entire legal system and facilitates the doctrine of the rule of law. This shows an opposing view of equity’s effect on the courts compared with Sir Nathan Wright’s view.

However, there is a noteworthy development since Mr Joseph Story’s statement which should be considered. Equity has since vastly integrated and fused with the everyday application of the common-law courts, enabling a distinctively more consistent and standardised application of equitable rules, interests and provisions.

The Fusion of Equity and the Common Law

One of the fundamentally debated issues concerned equity’s role in the English legal system and the degree of integration or ‘fusion’ of the two. Back in equity’s adolescence, judges specialising in equitable rules were commonly referred to as sitting at the “equity bar.” However, since the 18th Century, modern society identifies one court and one bar but with divisions that are only concerned with certain areas of law. It has been debated as to what degree a merger of the common-law Courts and Courts of Equity amounts to.

The proposed fusion of equity and the common law arose from the assent of the Judicature Act 1873, which allows claimants to apply to one court which had the discretion to administer both the common law and equity. Prior to this Act, a claimant would be required to determine whether to apply to the common-law courts or the Courts of Equity. Fredric Maitland supported this analogy saying:

“Equity now is that body of rules administered by our English courts of justice which, were it not for the operation of the Judicature Acts, would be administered only by those courts which would be known as Courts of Equity.”

It could be said that Lord Diplock in the case of United Scientific Holdings v Burnley BC considered and supported this view that the law and equity are now fused; a more defined and inclusive view of equity compared with Ashburner’s view that equity and the common law were two separate streams running in parallel.

Alternatively, it is argued that the Judicature Acts merely identified and settled the issue concerning the conflict of precedent between equity and the common law. The evidence of this is shown in the division of the courts. We still have a Chancery Division of the High Court which deals mainly with trusts and property and separate divisions such as the Queen’s Bench Division which deals with contractual and tortious claims. Although Lord Denning commented on the position of integration of the Chancery Court with the common-law courts, saying “the Courts of Chancery are no longer courts of equity…They are fixed and immutable as the Courts of law ever were.” This is a clear position by Lord Denning that Courts of Equity no longer exist, but have become one in the same with the Courts of Law.

However, there is a different opinion to that of Lord Denning. The use of ‘immutable’ is disputed by Sir George Jessel MR in Re Hallett’s Estate stating that like the common law, equitable rules are established, but from time to time they will be altered and improved, making the older precedents of lesser value, and so, in modern times, the courts should take the most recent cases as templates rather than historical ones. As in the common-law system, this identifies a similarity between the two, compared with equity when it was born. With this new approach to equitable principles, it could make the application of equitable rules more flexible to modern legal issues. This again coincides with Sir Nathan Wright’s view that equity is no part of the law, a distinction supported by Hon. Beverley McLachlin who said [equity is] “doctrinally distinct from the law”.

This view shows that almost half a century after the Judicature Acts came into effect, the Courts of Equity and the common-law Courts were seen to come under the same roof. This could be attributed to some of the provisions in the Judicature Acts that recognise certain benefits to equitable remedies and rules. Section 24 specifically provides that a claimant seeking redress would not need to apply to a separate court in order to obtain an equitable remedy, such as an injunction or specific performance. This shows a growing warmth towards the recognition of equity and the benefit it can provide to litigants. Not long after the Judicature Acts became effective, a barrister at the criminal bar commented on the merger of the two courts, saying:

“The amalgamation of the common law and equity systems is now an accomplished fact, although the procedure is still very different in the different courts, and judges are called upon to deal with causes by means utterly novel to them…”

This historical insight is a criminal law barrister’s view at the time the systems were beginning to merge, and identifies certain elements of the amalgamation that have been debated since.

Mr Ballantine states that the amalgamation of the two systems, is an “accomplished fact” yet makes clear that the procedure is “still very different in the different courts.” This shows that although the systems have merged it is far from the idea of fusion. This is because the procedures of the two are not indistinguishable nor are the judges sitting on equity-based cases experienced with equitable rules, in Ballantine’s view. Ballantine’s thesis assists Sir Nathan Wright’s statement, confirming that ‘Equity is no part of the law’ but recognising at least that equity plays a significant role in supporting our legal system. This can be inferred from the adoption and use of equitable remedies in the common law Courts, showing equity’s usefulness and value.

The perception that the courts have fused as one could then be heavily criticised, so far as the courts are established as one in the same and identify with each other a common goal. However, to view the two systems as indistinguishable would be inaccurate as we still see the division of the two systems. I would use the words of Mr Ballantine in describing the combination of the two systems, that being, the amalgamation of the common law, and equity is more fitting to reflect the current system as we see equity branch out into more modern legislation, but maintain its primary position in the Chancery Division.

Conclusion

From the differing views considered above and the multiple factors that influence equiy’s role within the legal system, it can be identified that it plays a significant, inclusive and established role with a respected purpose that is indicated in an abundance of legislation and procedural rules. However, it has been identified that equity and the common law have not fused, as they are, and always will be, distinguishable from one another in order to be effective. Equity must act on different procedures and principles if it is to defend and heal the common law’s weaknesses, and from this, the power equity has over the common law is logical.

In addition, equity can indeed be seen to act as a mechanism to influence and produce outcomes that are based on moral values, and in all purposes, equity acts now more than ever as a supporter and protector of the common laws as both have the goal of justice. After all, the creation of the trust, which is wholly based on equitable rules and principles, is considered to be: “the greatest and most distinctive achievement performed by Englishmen in the field of jurisprudence.”

The Author

Fraser Matcham is the Founder and CEO of Legal Utopia a venture utilising artificial intelligence and natural language processing to solve contemporary access to justice challenges in collaboration with Westminster Law School and the School of Computer Science and Engineering, the University of Westminster.

Fraser is also the CEO and Co-founder of RegChain, a regulation technology vendor applying disruptive technologies to data protection laws to provide white-label innovative solutions. Fraser studied law for five-years obtaining his law degree from Westminster Law School, the University of Westminster. Fraser was an Editor and Author for The New Jurist with published works on legal digital technologies, English jurisprudence and environmental law and policy.

Article picture: Nathan Wright, 1700 portrait by A. Grace. Source: Wikipedia