Brief History of Equity

To understand why we have two different

streams of judge- made law at Common
Law and in Equity we need to go back in
time to the medieval ages. This was the
period during which judge- made law
started to develop rapidly. Before this
period, the law was local, being
administered in local courts. The King
developed a legal system that was
common to all of England, known as
‘common law’.
It was during this period that legal principles, some of
which are still relevant today, started to emerge.
However, the general attitude of the judges was
strict and inflexible. Although there was room for
judicial creativity, the judges tended to interpret the
law rigidly and developed it through the elaboration
of ever more complicated rules.
In particular, claims brought by individual litigants had
to fall within clearly established forms of action; if
they did not, they would fail. Claims were initiated
by writs, and cases were heard in front of a judge
and jury. Claimants were bound by very strict rules
of pleading and proof.
This common law system was restrictive. But if no
remedy was awarded, or was even available, it was
possible to petition the King to seek justice in a
particular case. Eventually, this function was
delegated by the King to his chief minister, the Lord
Chancellor. Originally, the Lord Chancellor was an
ecclesiastical figure who presumably had regard to
biblical notions of fairness and justice to determine
whether a remedy should be awarded in an
individual case, but he was clearly influenced by
Greek and Roman authors too, notably the works of
Aristotle and Homer.
Ultimately, however, the Chancellor’s
decision was influenced by the exercise of
his own conscience. It was through the
exercise of conscience that the
characteristic of Equity as a discretionary
system emerged. This was famously
described by John Selden, a legal author
in the seventeenth century, as follows:
“Equity is a roguish thing: for law we have a
measure, know what to trust to; equity is
according to the conscience of him that is
chancellor, and as that is larger or
narrower, so is equity. [It is] as if they
should make the standard for the
measure we call a foot a chancellor’s foot;
what an uncertain measure would this be!
One chancellor has a long foot, another a
short foot, a third an indifferent foot. ‘Tis
the same in the chancellor’s conscience.”
Eventually, so many petitions came to the
Chancellor that it was necessary to establish a
separate court, known as the Court of
Chancery, to deal with them and it was the
law that was developed and applied in this
Court that became known as Equity. This law
was very different from that administered by
the Common Law courts. It was much more
discretionary, but, crucially, the judges in the
Court benefited from distinct powers and
remedies that had been developed by the
Chancellors.
Two of these were especially significant. First, the Court
could subpoena the litigants to enable them to be
interrogated in the Court. That made it easier to
determine what the fair result should be as between
the particular parties. Secondly, whereas the remedy
typically awarded in the Common Law courts was
monetary to compensate for loss suffered, in Equity
the Chancellors had fashioned the injunction, which
enabled the Court to compel a party to act or to
desist from acting in a particular way. Failure to
comply with the terms of the injunction would
constitute contempt of court, for which the sanction
could be imprisonment.
• Over the years, the distinction
Over the years, the distinction between the Common
Law and Equity approaches to decision- making
became so marked that there developed a struggle
between the Common Law and Chancery courts, with
each considering that its approach should prevail
over the other. This struggle came to a head in the
Earl of Oxford’s case, in which Equity prevailed. Lord
Chancellor Ellesmere in that case recognized that
Equity’s function was ‘to soft en and mollify the
extremity of the law’. Later Lord Chancellor Cowper
summarized the relationship between Common Law
and Equity well when he said: ‘Equity is no part of the
law, but a moral virtue which qualifies, moderates
and reforms the rigour, hardness and edge of the law.
From the seventeenth century onwards,
Equity as a body of law became more
systematic. Various Lord Chancellors
made their mark in the Court of Chancery
in rationalizing the law. For example, in
the eighteenth century Lord Nottingham
developed the law of perpetuities, which
still applies today, and early in the
nineteenth century Lord Eldon
consolidated many equitable rules to
make Equity much more principled.
Even though Equity’s function in moderating the
rigours of the Common Law remained clear, the
legal system that emerged in the nineteenth
century was far from ideal. The dual court structure
resulting from having distinct Common Law and
Chancery courts, in which different bodies of law
were applied, caused great inconvenience and
injustice: it meant that the claimant had to choose
the right court in which to pursue the claim. If the
wrong court were chosen, the claimant would then
have to start all over again in the other court. This
resulted in lengthy delays and inordinate costs in
pursuing litigation.
• The complexity of litigation in the nineteenth
century was to some extent resolved by the
enactment of the Judicature Acts of 1873 and 1875.
The effect of these statutes was to abolish the
Common Law and Chancery courts and replace
them with a single High Court, which was divided
into what is now known as the Chancery Division,
the Queen’s Bench Division, and the Family Division.
Each Division is responsible for its own area of the
law, with the Chancery Division tending to deal with
the Equity business, the Queen’s Bench Division
dealing with contract and tort, and the Family
Division dealing with matrimonial and other family
disputes.
• However, because the Divisions together form the
High Court, the claimant does not have to choose in
which court to sue. Th e Divisions are a matter of
administrative convenience and do not have any
jurisdictional significance. This was made absolutely
clear by the Judicature Act 1873, which stated that
Equity, as a body of law, could be applied in any
Division of the High Court. The effect of this was
that remedies that derived from Common Law or
Equity could be awarded, regardless of the court in
which the claim was heard.
• The Judicature Acts were highly significant in
English legal history, but their significance
must not be exaggerated. Th e eff ect of this
legislation was to fuse the administration of
Common Law and Equity, but they did not
fuse the two bodies of law. Equity was not
abolished by these statutes. Indeed, the
Judicature Act 1873 recognized that Equity
prevailed where there was a conflict or
variance between the rules of Common Law
and Equity.
One of the most important applications of this
principle occurred almost a decade later in Walsh v
Lonsdale. In this case, a lease was purported to be
made, but was unenforceable at Common Law
because the formalities for its creation were never
completed. But, because the parties had agreed to
enter into a lease, Equity was able to enforce the
agreement and treat the lease as having been
validly made. In other words, the flexibility of Equity
was able to make the agreement work despite the
failure to comply with the requirements of the
Common Law.
Equity is still sometimes described as operating to modify
the rigidity of the Common Law. But, to the extent that
this indicates that Equity is vague and unprincipled, it is
untrue: much of Equity today is rule- based and certain;
precedent is followed and there are identifiable principles.
Further, the characterization of the Common Law as being
rigid and unyielding in the face of injustice is
unconvincing, since the rapid advances of the Common
Law during the twentieth century in, for example, the
laws of negligence and unjust enrichment, show that it is
creative and nuanced. Today, rather than seeing the
Common Law and Equity as being in conflict, the better
characterization is that they are complementary, working
together, although sometimes
• contradicting each other.
 Is Equity still relevant today?
• The crucial question is whether Equity remains
relevant today. It clearly is, both in terms of
explaining long- established doctrines of private law
and also as a mechanism for providing new
solutions to contemporary problems: Equity is not,
as it is sometimes quaintly put, ‘past the age of
child- bearing’. Equity can still be used to create
new doctrines and to develop existing ones to
provide solutions to contemporary problems that
are ignored by the Common Law.
• The best way of illustrating the continued
relevance of Equity to English law is by
reference to particular legal subjects,
some of which you may already have
studied. As you will see, the modern
contribution of Equity relates both to the
identification of significant rights and
duties, but also to important remedies.
THE LAW OF CONTRACT
Many aspects of the law of contract have been
influenced by Equity. Th is infl uence has taken
three main forms.
(i) Validity of consent
(ii) Fairness of the transaction
(iii) Supplementing the law of contract
TORT
Equity recognizes a variety of civil wrongs, especially
claims for breach of trust or breach of fi duciary
duty.26 Although it is rare to describe these as torts,
many of those wrongs have much in common with the
torts that are recognized at Common Law. For
example, whereas the Common Law recognizes a tort
of inducing a breach of contract, Equity recognizes the
equivalent ‘tort’ of inducing a breach of trust or
breach of fiduciary duty, commonly called the ‘action
for dishonest assistance’. Although there is an analogy
with the Common Law tort, they are not identical,
since the Common Law tort is one of strict liability,
whereas the equitable tort requires proof of fault.
• Equity recognizes an action for breach of confi dence
in cases in which the defendant is in a relationship
with the claimant by virtue of which there is a duty to
maintain confi dences and the defendant breaches
that duty, for example by disclosing the confidential
information to another. A duty of confidence may
relate to trade secrets, national security, and even
personal confidences. This action for breach of
confidence is gradually being expanded from the
protection of secret information to encompass liability
for the protection of privacy. The essence of this
extension of the action for breach of confidence is
that the abuse of personal information that was not
intended to be made public will result in civil liability.
UNJUST ENRICHMENT
The law of unjust enrichment was recognized by the House of
Lords in 1991,34 but this was simply the formal recognition of a
principle the elements of which had been developing for many
hundreds of years. Much of this development had occurred in
the Common Law, but Equity has had a significant influence on
that development too. The essence of the law of unjust
enrichment is that where the defendant has been enriched at
the expense of the claimant in circumstances that fall within
one of the recognized grounds of restitution, a restitutionary
remedy will be awarded that is assessed by reference to the
value of the enrichment received by the defendant. The
recognized grounds of restitution include mistake, duress, and
total failure of consideration. These were all developed by the
Common Law. But Equity has influenced the interpretation and
recognition of the grounds of restitution too.
LAND LAW
Equity has had a profound influence on the development
of land law, both as regards the recognition of different
interests in land and by protecting particular property
interests. This is illustrated by three examples. The first
concerns the law of mortgages. At Common Law, a
mortgagee would be able to retain the mortgaged
property if there were the slightest delay in the
mortgagor discharging the mortgage. This was
considered to be unfair in Equity and so the equity of
redemption was developed as a mechanism for
avoiding the harshness of the Common Law, to enable
the mortgagor to redeem the mortgaged property
having repaid the loan to the mortgagee.
Secondly, where the defendant represented to the
claimant that the latter would obtain an interest in land
and, in reliance on that representation, the claimant
acted to his or her detriment, Equity would fashion a
remedy to satisfy the expectations of the claimant by
means of the doctrine of proprietary estoppel. Here,
Equity could create an interest in property because of
the defendant’s unconscionable conduct in reneging on
his or her representation. Thirdly, where a couple have
cohabited and the property is registered in the name of
one of them, if the relationship ends, Equity will
provide the party who does not have registered title
with an interest in the family home by means of a
common intention constructive trust
COMMERCIAL LAW
Equity has been especially influential in the
development of modern commercial law. For
example, Equity recognizes that there are certain
relationships that are characterized as relationships
of trust and confidence, in which one party, known
as the ‘principal’, is dependent on another, known
as the ‘fiduciary’. The fiduciary is expected to be
loyal to the principal and to maintain the highest
standards of behaviour in looking after the
principal’s interests. Failure to maintain these
standards will mean that the fiduciary is liable to
the principal for breach of duty.
A wide variety of relationships have been
characterized as fiduciary, but many of them
are relevant in the commercial world. So, for
example, an agent owes fiduciary duties to his
or her principal, a director owes fiduciary
duties to the company, and solicitors are in a
fiduciary relationship with their clients.
• Equity has also proved to be significant in the
recognition of a variety of security interests,
such as the floating charge and the lien to
secure a debt owed to the claimant.
EQUITABLE REMEDIES
Equity has had a profound influence on the development of English
law by virtue of its remedial jurisdiction. Equity has created a
wide variety of remedies that are available where common law
compensatory damages are inadequate, including specific
performance of contracts and account of profits to require the
defendant to disgorge to the claimant any profits made as a
result of a breach of an equitable duty.
• One of the most significant contributions of Equity to the
remedial arsenal is through the creation of the injunction to
make the defendant act or refrain from acting in a particular way.
The creative function of Equity is especially well illustrated by the
freezing order, which was created in the 1970s to deal with the
problem of a defendant who seeks to hide his or her assets or to
take them out of the jurisdiction to prevent the claimant from
enforcing a judgment for damages against him or her.
THE TRUST
The most important contribution of Equity to English
law is undoubtedly the trust. The crucial feature of
the trust is that property is held by one person for
the benefit of another. This is recognized through
the division of property rights. One person, known
as the ‘trustee’, holds the legal title to the property.
As far as the Common Law is concerned, that
person is the absolute owner of the property. But
Equity can see that the legal owner holds the
property for the benefit of somebody else, the
beneficiary.
PERSONAL RIGHTS IN EQUITY
Although the major contribution of Equity to English law has been
the recognition of
equitable proprietary interests, the recognition of equitable
personal rights has also been of real signifi cance to the
development of the law. Probably the most significant rights are
those that arise from a fiduciary relationship, which is a particular
relationship that can be characterized as one of trust and
confidence, such as the relationship of solicitor and client.
Fiduciaries owe their principals particular duties, which are
distinct from, and additional to, the ordinary common law
negligence standard of skill and care. In particular, fiduciaries owe
their principals a duty of loyalty and self- denial. In addition to
the proprietary connotations of the trust, where there is a
division between legal and equitable proprietary interests, the
fiduciary obligation is an essential characteristic of the trust, for
all trustees owe fiduciary duties to their beneficiaries.