History and Nature of Equity

History and Nature of Equity Professor Cameron Stewart

The Blind Men and the Elephant • John Godfrey Saxe

The Anglo-Saxon Invasions c500AD

The Battle of Hastings 1066

Norman Reorganisation • Sovereignty • Absolute beneficial title • Reception of laws • Conquering • Settling; • Cessession • Feudalism

Henry II – the Father of the Common law • Curia Regis • General Eyre and Assizes • Assize of Clarendon 1166 – 12 freemen from the hundred and 4 from the town • Henry, Richard Coeur-de-Lion and John Lackland

A’Beckett’s Legacy The Church Courts • The benefit of the clergy

Edward Longshanks Hammer of the Scots • Parliament begins 1275 • The use of statute as opposed to ordinance • Nisi Prius • Quia Emptores

Curia Regis – embryonic courts • Court of Exchequer – revenue • Court of Common Pleas – civil actions • Court of King’s bench – crime • Remaining Council functions split into King’s Council later Concilium Regis and then Privy Council

The Writ System • Bureacracy • Organisation of wrongs • Remedies • Popularity • Recording • Stare Decisis • Common law

What’s the common law meant to do? • Persons & Property • Quick, efficient, fair and effective • Real property – real actions- real relief • Seisin • Remedies – return the seisin, pay monetary damages • Contract and tort

What goes wrong?

The Office of the Lord Chancellor • Around since Norman times • Keeper of the King’s Conscience • Cleric and Keeper of the Great Seal • Member of Lords, Judge and Church

Chancery as a Court • Around the 15th century • Function to repair the failings of Common law • Principles of Christian fairness/conscience • Maxims of equity • Substance not form • Does not assist a volunteer • Equity follows the law • Clean hands • Discretion and the Chancellor’s foot • The two streams – law and equity

What does Equity do? Parkinson: (i) the exploitation of vulnerability or weakness, as exemplified in principles relating to unconscionable dealing and undue influence; (ii) the abuse of positions of trust or confidence, as exemplified in the law of trusts and fiduciary obligations generally; (iii) the insistence upon rights in circumstances which make such insistence harsh or oppressive as exemplified in relief from penalties and forfeiture, the law of equitable set-off, and the refusal of specific performance on the discretionary ground of hardship; (iv) the inequitable denial of obligations, as exemplified in the doctrine of part performance and the principle of equitable estoppel; (v) the unjust retention of property, as exemplified in certain constructive trusts and principles of subrogation

The relationship between CL and Eq • James VI of Scotland • The rise of protestantism • Absolutism of sovereign – Divine Right of Kings or King-in-parliament? • Bacon & Ellesmere: Earl of Oxford’s case

Earl of Oxford’s case • The Office of the Chancellor is to correct Men’s consciences for Frauds, Breach of Trusts, Wrongs and oppressions, of what Nature soever they be, and to soften and mollify the Extremity of the Law ... [W]hen a Judgment is obtained by Oppression, Wrong and a hard Conscience, the Chancellor will frustrate and set it aside, not for any error or Defect in the Judgment, but for the hard Conscience of the Party.

The legalisation of equity • The Civil War – equity nearly destroyed • Lord Nottingham (1673-82)– father of equity • Lord Eldon – (1801-27) modern rules • Precedent and fixation • Appointment of VC • Poor administration • Infamous delay – record 16 years and still interlocutory

19th Century reforms • Bentham and the ‘dog law’ • Judicature Acts 1870s – 1970s • The two streams in one courtWindeyer J in Felton v Mulligan (1971) 124 CLR 367 at 392; [1972] ALR 33 at 46 • Fusion fallacies • Salt v Cooper (1880) 16 ChD 545 at 549, Jessel MR said of the effect of the Act: • It has been sometimes inaccurately called 'the fusion of Law and Equity'; but it was not any fusion, or anything of that kind; it was the vesting in one tribunal the administration of Law and Equity in every cause, action, or dispute which should come before that tribunal. … To carry that out, the Legislature did not create a new jurisdiction, but simply transferred the old jurisdictions of the Courts of Law and Equity to the new tribunal, and then gave directions to the new tribunal as to the mode in which it should administer the combined jurisdictions.

Fusion? • United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 at 924; [1977] 2 All ER 62 at 68, where Lord Diplock said: • If by ‘rules of equity’ is meant that body of substantive and adjectival law that, prior to 1875, was administered by the Court of Chancery but not by courts of common law, to speak of the rules of equity as being part of the law of England in 1977 is about as meaningful as to speak similarly of the Statute of Uses or of QuiaEmptores. Historically all three have in their time played an important part in the development of the corpus juris into what it is today; but to perpetuate the dichotomy between rules of equity and rules of common law which it was a major purpose of the Supreme Court of Judicature Act 1873 to do away with, is, in my view, conducive of erroneous conclusions as to the ways in which the law of England has developed in the last hundred years. Your Lordships have been referred to [Ashburner’s] vivid phrase ... [on] the effect of the Supreme Court of Judicature Act … My Lords, by 1977 this metaphor has in my view become both mischievous and deceptive … If Professor Ashburner’sfluvual metaphor is to be retained at all, the waters of the confluent streams of law and equity have surely mingled now.

Walsh v Lonsdale (1882) 21 Ch D 9 • It was held that a person who enters into possession of land under a speciﬁcally enforceable contract for a lease is regarded, by a court having jurisdiction to enforce the contract, as being in the same position, as between itself and the other party to the contract, as if the lease had actually been granted • Remedy of distress granted

Chan v Cresdon Pty Ltd (1989) 168 CLR 242 • Cresdon agreed in writing to lease land to Sarcourt. • The agreement contained the terms of the lease as an annexure. • The lease was duly executed but never registered. • Sarcourt defaulted under the lease and Cresdon took action against Chan as guarantor of the unregistered lease. • Cresdon’s action against Chan was stated as being one taken on the guarantee ‘under this lease’. • Cresdon’s action was unsuccessful. • The court held that as there was no registered lease there was no enforceable guarantee. Cresdon’s alternative claim was based upon the rule in Walsh v Lonsdale.

Chan v Cresdon Pty Ltd (1989) 168 CLR 242 • This claim also was unsuccessful. In coming to its conclusion the court ruled that, although the rule in Walsh v Lonsdale meant that an agreement to lease gave rise to an equitable lease, it did not create a legal interest. A consequence of this is that the equitable lessee will be defeated by a bona ﬁde purchaser of the legal estate who acquires the legal estate for valuable consideration and without notice of the equitable lease

Chan v Cresdon Pty Ltd (1989) 168 CLR 242 • The court also confirmed that the operation of the rule depended upon the availability of specific performance of the agreement to lease. • In the circumstances of the case, two facts raised doubts as to the availability of specific performance. First, Cresdon had in the meantime mortgaged the property. Second, the lease had come to an end before the expiration of the term due to Sarcourt’s breach.

Aquaculture Corp v New Zealand Green Mussel Co [1990] 3 NZLR 299 • Cooke P, in the context of a conﬁdential information case, said: • For all purposes now material, equity and common law are mingled or merged. The practicality of the matter is that in the circumstances of the dealings between the parties the law imposes a duty of conﬁdence. For its breach a full range of remedies should be available as appropriate, no matter whether they originated in common law, equity or statute.

Day v Mead [1987] 2 NZLR 443 • Mead had been Day's solicitor for 25 years. • He was also a director and shareholder of a newly-formed company, Pacific Mills Ltd. • Acting on Mead's advice, Day purchased 20,000 shares, at $1 per share, in Pacific Mills, knowing that Mead was a shareholder and that his firm's nominee company had lent money to Pacific Mills. • Day actively participated in the management of the company • Day subscribed for a further 80,000 shares in the company at a cost of $80,000. • Company went into receivership, and Day lost both investments. • Day sued Mead for his loss plus interest, claiming breach of fiduciary duty. • Was his contribution to the loss relevant?

Day v Mead [1987] 2 NZLR 443 • Cooke P stated: • Whether or not there are reported cases in which compensation for breach of a fiduciary obligation has been assessed on the footing that the plaintiff should accept some share of the responsibility, there appears to be no solid reason for denying jurisdiction to follow that obviously just course, especially now that law and equity have mingled or are interacting. It is an opportunity for equity to show that it has not petrified and to live up to the spirit of its maxims

G R Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 • Roderick P Meagher JA, as a member of the Court of Appeal in New South Wales, opined that the views of Lord Diplock in United Scientiﬁc Holdings v Burnley Borough Council were ‘so obviously erroneous as to be risible’

Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 • Breach of confidence case • Can you get exemplary damages? • Mason P, at 335–9, argued that an award of exemplary damages in cases of equitable wrongs was justiﬁed. His Honour suggested that the rationale for exemplary damages in tort law could be applied by analogy to equitable wrongs, and characterised this approach as an example of ‘fusion by analogy’ with the law of torts.

Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 • However, the majority of the Court of Appeal disagreed. Spigelman CJ, at 307–10, stressed that if ‘fusion by analogy’ was to be used, then the appropriate analogy was with contract law, where exemplary damages are not available. • HeydonJA, in a lengthy and detailed analysis of the relevant authorities and arguments, rejected the proposition that exemplary damages should be available for breaches of equitable obligations. His Honour, at 402, also suggested that such a view, if based upon the view that the fusion of the courts allowed the new single court to award common law remedies for breaches of equitable obligations, amounted to a ‘crude fusion fallacy’

Areas of conflict • Mortgagee’s power of sale • Damages in equity (especially in breach of confidence and breach of fiduciary duty) • Causation in breach of fiduciary duty

Maxims Spry has written the following in relation to the maxims: [T]he maxims of equity are of significance, for they reflect the ethical quality of the body of principles that has tended not so much to the formation of fixed and immutable rules, as rather to a determination of the conscionability or justice of the behaviour of the parties according to recognised moral principles. This ethical quality remains, and its presence explains to a large extent the adoption by courts of equity of broad general principles that may be applied with flexibility to new situations as they arise. I C F Spry, The Principles of Equitable Remedies, Specific Performance, Injunctions, Rectification and Equitable Damages, 7th ed, Lawbook Co, Sydney, 2007, p 6.

Maxims • Kirby J in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 271; 185 ALR 1 at 49: ‘It is a commonplace that equity is a living force and that it responds to new situations. It must do so in ways that are consistent with equitable principles. If it were to fail to respond, it would atrophy.’

Maxims • In Corin v Patton (1990) 169 CLR 540 at 557; 92 ALR 1 at 12, in relation to the maxim ‘equity will not assist a volunteer’, Mason CJ and McHugh J said: • Like other maxims of equity, it is not a speciﬁc rule or principle of law. It is a summary of a broad theme which underlies equitable concepts and principles. Its precise scope is necessarily ill-deﬁned and somewhat uncertain.

Equity will not suffer a wrong to be without a remedy • A common approach of judges is exemplified in the statement in In re Diplock’s Estate; Diplock v Wintle [1948] Ch 465 at 481–2; [1948] 2 All ER 318 at 326, where the English Court of Appeal said: • [I]f the claim in equity exists, it must be shown to have an ancestry founded in history and in the practice and precedents of the courts administering equity jurisdiction. It is not sufficient that because we may think that the ‘justice’ of the present case requires it, we should invent such a jurisdiction for the first time.

Equity will not suffer a wrong to be without a remedy • Cowcher v Cowcher [1972] 1 All ER 943 at 948, Bagnall J said: • So in the ﬁeld of equity the length of the Chancellor’s foot has been measured or is capable of measurement. This does not mean that equity is past childbearing; simply that its progeny must be legitimate — by precedent out of principle. It is well that this should be so; otherwise no lawyer could safely advise on his client’s title and every quarrel would lead to a law suit.

Equity will not suffer a wrong to be without a remedy • Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 151–2, 155; 236 ALR 209 at 252–3, 255–6, made it clear that trial judges and intermediate appellate courts should not depart from decisions of intermediate appellate courts in other Australian jurisdictions, nor radically change existing law unless such decisions or existing law were plainly wrong. The High Court made it clear that such changes to the law were properly within the domain of the High Court only

Equity follows the law • Equity recognises common law rights, estates, interests and titles and does not say that such common law interests are not valid. Thus, in Leech v Schweder (1873) 9 LR Ch App 463 at 475, Mellish LJ said that ‘where a right existed at law, and a person came only into equity because the Court of Equity had a more convenient remedy than a Court of Law … there equity followed the law, and the person entitled to the right had no greater right in equity than at law’

Equity follows the law • In DKLR Holdings Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510 at 519, Hope JA said: • Where the trustee is the owner in fee simple, the right of the beneficiary although annexed to the land, is a right to compel the legal owner to hold and use the rights which the law gives him in accordance with the obligations which equity has imposed upon him. The trustee, in such a case, has at law all the rights of the absolute owner in fee simple, but he is not free to use those rights for his own benefit in the way he could if no trust existed. Equitable obligations require him to use them in some particular way for the benefit of other persons.

Equity follows the law • Time stipulations inn contract • s 25(7) of the Judicature Act 1873 (UK) resolved the conﬂict between the common law and equity approaches to the effect of a contractual time stipulation by giving statutory effect to the equitable rules, effectively transforming a time stipulation from an essential term of a contract to an intermediate term of a contract: Zaccardi v Caunt [2008] NSWCA 202 at [92]. • Consideration in common law vs consideration in equity • Co-ownership when there is a 50:50 contribution – Delehunt v Carmody

Where the equities are equal, the ﬁrst in time shall prevail, and, Where there is equal equity, the law shall prevail • Remember these?

One who seeks equity must do equity • Plaintiffs in equity must fulﬁl their legal and equitable obligations before seeking a remedy. The maxim represent’s equity’s version of the biblical ‘golden rule’ set out in the Book of Matthew (7:12): ‘do unto others as you would be done by’. The maxim emphasises that the Court of Chancery originated as a ‘court of conscience’.

One who seeks equity must do equity • In Hanson v Keating (1844) 67 ER 537 at 538–9, Wigram V-C said the following in relation to this maxim: • It decides in the abstract that the court giving the plaintiff the relief to which he is entitled will do so only upon the terms of his submitting to give the defendant such corresponding rights (if any) as he also may be entitled to in respect of the subject matter of the suit; what these rights are must be determined aliunde by strict rules of law, and not by any arbitrary determination of the court. The rule, in short, merely raises the question of what those terms (if any) should be.

One who comes to equity must come with clean hands • This maxim is closely related to and descends from the maxim just discussed: FAI Insurances Ltd v Pioneer Concrete Services Ltd [1987] 15 NSWLR 552 • It requires a plaintiff in equity not to be guilty of some improper conduct, or else relief will be denied • This maxim confirms that equity is not solely concerned with preventing unconscientious conduct by a defendant, but also requires conscientious behaviour by a plaintiff.

Delay defeats equity • In seeking equitable relief a plaintiff must act promptly and diligently: Smith v Clay (1767) 27 ER 419 at 420. Equity will not allow defendants to remain for too long in a position of not knowing whether equitable relief will be ordered against them because it would be unconscientious to do so. • Laches • Acquiescence

Equality is equity • Idea of proportionate equality • Co-ownership • Resulting trusts • Also, equity will generally, but not always, execute a trust power of appointment equally among the objects of the power if the donee of the power has failed to exercise the power: McPhail v Doulton [1971] AC 424

Equity will not assist a volunteer • In Colman v Sarrel (1789) 30 ER 225 at 227, Lord Chancellor Thurlow said that a plaintiff seeking equitable relief has to have ‘a valuable or at least meritorious consideration’. This requirement is expressed in the maxim that ‘equity will not assist a volunteer’, a volunteer being a person who has not given valuable consideration. The maxim does not require that the consideration be paid or executed: Reef & Rainforest Travel Pty Ltd v Commissioner of Stamp Duties [2001] QCA 249 at [10].

Equity will not assist a volunteer • The rationale for this maxim is that it would not be unconscientious for equity to decline equitable assistance to a plaintiff who is a volunteer, whereas it would be so if he or she had provided valuable consideration: Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 96. Thus, it is the presence of valuable consideration that ‘will attract the intervention of equity’: Director of Public Prosecutions for Victoria v Le (2007) 232 CLR 562 at 575; 240 ALR 204 at 215. However, in Conlan v Registrar of Titles (2001) 24 WAR 299 at 338, Owen J suggested that this rationale was ‘a little strange given that the common law would (and will) accept something that is entirely inadequate or lacking in actual value as being “good” consideration’.

Equity will not assist a volunteer • The maxim is primarily associated with ‘the rule that a voluntary covenant is not enforceable in equity’: Corin v Patton (1990) 169 CLR 540 at 557 • Valuable consideration • In The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 225 FLR 1 at 741, Owen J said: • The notion of valuable consideration usually requires finding some economic worth as compared with something that is purely nominal, trivial or colourable … Valuable consideration is more than the nominal consideration that would be sufficient to support a common law contract.

History and Nature of Equity