Equity (law)

This article is about the area of law. For remedies offered by this area of law, such as injunctions and specific performance, seeequitable remedy.For other uses, seeEquity.

Legal equity: TheCourt of Chancery,in early 19th-century London.

In the field of jurisprudence,equityis the particular body of law, developed in the EnglishCourt of Chancery,with the general purpose of providing legal remedies for cases wherein the common law is inflexible and cannot fairly resolve the disputed legal matter.Conceptually, equity was part of the historical origins of the system ofcommon lawof England,yet is a field of law separate from common law, because equity has its own unique rules and principles, and was administered bycourts of equity.

Equity exists in domestic law, both incivil lawand incommon lawsystems, and ininternational law.The tradition of equity begins in antiquity with the writings ofAristotle(epieikeia) and withRoman law(aequitas).Later, in civil law systems, equity was integrated in the legal rules, while in common law systems it became an independent body of law.

Equity in common law jurisdictions (general)

In jurisdictions following theEnglishcommon law system,equity is the body of law which was developed in the EnglishCourt of Chanceryand which is now administered concurrently with thecommon law.In common law jurisdictions, the word "equity" "is not a synonym for 'general fairness' or 'natural justice'",but refers to" a particular body of rules that originated in a special system of courts ".

For much of its history, the English common law was principally developed and administered in the central royal courts: theCourt of King's Bench,theCourt of Common Pleas,and theExchequer.Equity was the name given to the law which was administered in theCourt of Chancery.TheJudicature Actsof the 1870s effected a procedural fusion of the two bodies of law, ending their institutional separation. The reforms did not fuse the actual bodies of law however. As an example, this lack of fusion meant it was still not possible to receive an equitable remedy for a purely common law wrong. Judicial or academic reasoning which assumes the contrary has been described as a "fusion fallacy".

Jurisdictions which have inherited the common law system differ in their treatment of equity. Over the course of the twentieth century some common law systems began to place less emphasis on the historical or institutional origin of substantive legal rules. In England and Wales, Australia, New Zealand, and Canada, equity remains a distinct body of law. Modern equity includes, among other things:

• the law relating toexpress,resulting,andconstructive trusts;
• fiduciary law;
• equitable estoppel(including promissory and proprietary estoppel);
• relief againstpenaltiesand relief against forfeiture;
• the doctrines ofcontribution,subrogationandmarshalling;and
• equitableset-off.

Black's Law Dictionary,10th ed., definition 4, differentiates "common law" (or just "law" ) from "equity".Before 1873,Englandhad two complementary court systems: courts of "law" which could only awardmoney damagesand recognized only the legal owner of property, and courts of "equity" (courts of chancery) that could issueinjunctive relief(that is, acourt orderto a party to do something, give something to someone, or stop doing something) and recognizedtrustsof property. This split propagated to many of the colonies, including the United States. The states of Delaware, Mississippi, South Carolina, and Tennessee continue to have divided Courts of Law and Courts of Chancery. In New Jersey, the appellate courts are unified, but the trial courts are organized into a Chancery Division and a Law Division. There is a difference of opinion in Commonwealth countries as to whether equity and common law have been fused or are merely administered by the same court, with the orthodox view that they have not (expressed as rejecting the "fusion fallacy" ) prevailing in Australia,while support for fusion has been expressed by theNew Zealand Court of Appeal.

For most purposes, the U.S. federal system and most states have merged the two courts.

The latter part of the twentieth century saw increased debate over the utility of treating equity as a separate body of law. These debates were labelled the "fusion wars".A particular flashpoint in this debate centred on the concept ofunjust enrichmentand whether areas of law traditionally regarded as equitable could be rationalised as part of a single body of law known as thelaw of unjust enrichment.

History of equity in common law jurisdictions

Main article:History of equity and trusts

After theNorman Conquestof England in the 11th century, royal justice came to be administered in three central courts: theCourt of King's Bench,theCourt of Common Pleas,and theExchequer.The common law developed in these royal courts, which were created by the authority of theKing of England,and whose jurisdiction over disputes between the King's subjects was based upon the King's writ.Initially, a writ was probably a vague order to do right by the plaintiff,and it was usually a writ of grace, issued at the pleasure of the King.

During the 12th and 13th centuries, writ procedure gradually evolved into something much more rigid. All writs to commence actions had to be purchased by litigants from theChancery,the head of which was theLord Chancellor.After writs began to become more specific and creative (in terms of the relief sought),Parliamentresponded in 1258 by providing in theProvisions of Oxfordthat the Chancellor could no longer create new writs without permission from the King and the King's Council (thecuria regis).Pursuant to this authorization,litigants could purchase certain enumerated writsde cursu(as a matter of course) which later became known as writsex debito justitiae(as a matter of right).Each of these writs was associated with particular circumstances and led to a particular kind of judgment.Procedure in the common law courts became tightly focused on theform of action(the particular procedure authorized by a particular writ to enforce a particular substantive right), rather than what modern lawyers would now call thecause of action(the underlying substantive right to be enforced).

Because the writ system was limited to enumerated writs for enumerated rights and wrongs, it sometimes produced unjust results. Thus, even though the King's Bench might have jurisdiction over a case and might have the power to issue the perfect writ, the plaintiff might still not have a case if there was not a single form of action combining them. Lacking a legal remedy, the plaintiff's only option would be to petition the King.

Litigants began to seek relief against unfair judgments of the common law courts by petitioning the King. Such petitions were initially processed by the King's Council, which itself was quite overworked, and the Council began to delegate the hearing of such petitions to the Lord Chancellor.This delegation is often justified by the fact that the Lord Chancellor was literally theKeeper of the King's Conscience,althoughFrancis Palgraveargued that the delegation was initially driven by practical concerns and the moral justification came later.The moral justification went as follows: as Keeper of the King's Conscience, the Chancellor "would act in particular cases to admit 'merciful exceptions' to the King's general laws to ensure that the King'sconsciencewas right before God ".This concern for the King's conscience was then extended to the conscience of the defendant in Chancery, in that the Chancellor would intervene to prevent "unconscionable" conduct on the part of the defendant, in order to protect the conscience of the King.

By the 14th century, it appears that Chancery was operating as a court, affording remedies for which the strict procedures of the common law worked injustice or provided no remedy to a deserving plaintiff. Chancellors often had theological and clerical training and were well versed inRoman lawandcanon law.During this era, the Roman concept ofaequitasinfluenced the development of the distinctly different but related English concept of equity: "The equity administered by the early English chancellors... [was] confessedly borrowed from the aequitas and the judicial powers of the Roman magistrates."By the 15th century, the judicial power of Chancery was clearly recognised.

Early Chancery pleadings vaguely invoked some sort of higher justice, such as with the formula "for thelove of Godand in way ofcharity".During the 15th century, Chancery pleadings began to expressly invoke "conscience", to the point that English lawyers in the late 15th century thought of Chancery as a court of "conscience", not a court of "equity".However, the "reasoning of the medieval chancellors has not been preserved" as to what they actually meant by the word "conscience",and modern scholars can only indirectly guess at what the word probably meant.The publication of the treatiseThe Doctor and Studentin the early 16th century marked the beginning of Chancery's transformation from a court of conscience to a court of equity.

Before that point in time, the word "equity" was used in the common law to refer to a principle ofstatutory interpretationderived fromaequitas:the idea that written laws ought to be interpreted "according to the intentionrather than the letter "of the law.What was new was the application of the word "equity" to "the extraordinary form of justice administered by the chancellor", as a convenient way to distinguish Chancery jurisprudence from the common law.

A common criticism of Chancery practice as it developed in the early medieval period was that it lacked fixed rules, varied greatly from Chancellor to Chancellor, and the Chancellor was exercising an unbounded discretion. The counterargument was that equity mitigated the rigour of the common law by looking to substance rather than to form.

The early chancellors were influenced by their training in theology and canon law, but the law of equity they applied was not canon law, but a new kind of law purportedly driven by conscience.Whatever it meant in the medieval era, the word "conscience" clearly carried a subjective connotation (as it still does today).Complaints about equity as an arbitrary exercise of conscience by nonlawyer Chancellors became quite frequent under the chancellorship ofThomas Wolsey(1515–1529), who "had no legal training, and delighted in putting down lawyers".

In 1546, ChancellorThomas Wriothesley,a nonlawyer, was accused of trying to inject thecivil lawinto Chancery.This was a "wild exaggeration", but as a result, the Crown began to transition away from clergy and nonlawyers and instead appointed only lawyers trained in the common law tradition to the position of Lord Chancellor (although there were six more nonlawyer chancellors in the decades after Wriothesley).The last person without training in the common law before 2016 to serve as Lord Chancellor wasAnthony Ashley Cooper, 1st Earl of Shaftesbury,who served briefly from 1672 to 1673.(Liz Trusswas appointed as Lord Chancellor in 2016, but this was after the position had been stripped of its judicial powers by theConstitutional Reform Act 2005,leaving theChancellor of the High Courtas the highest judge sitting in equity in England and Wales.)

The development of a court of equity as a remedy for the rigid procedure of the common law courts meant it was inevitable that the two systems would come into conflict. Litigants would go 'jurisdiction shopping' and often would seek an equitableinjunctionprohibiting the enforcement of a common law court order. The penalty for disobeying an equitable injunction and enforcing an unconscionable common law judgment was imprisonment.

The 1615 conflict between common law and equity came about because of a "clash of strong personalities" between Lord ChancellorEllesmereand the Chief Justice of theKing's Bench,SirEdward Coke.Chief Justice Coke began the practice of issuing writs ofhabeas corpusthat required the release of people imprisoned for contempt of chancery orders. This tension reached a climax in theEarl of Oxford's case(1615) where a judgment of Chief Justice Coke was allegedly obtained by fraud.Chancellor Ellesmere issued an injunction from the Chancery prohibiting the enforcement of the common law order. The two courts became locked in a stalemate, and the matter was eventually referred to theAttorney General,SirFrancis Bacon.Sir Francis, by authority ofKing James I,upheld the use of the equitable injunction and concluded that in the event of any conflict between the common law and equity, equity would prevail.

Chancery continued to be the subject of extensive criticism, the most famous of which was 17th-century juristJohn Selden's aphorism:

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. 'Tis all one 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 thing in a Chancellor's conscience.

After 1660, Chancery cases were regularly reported, several equitable doctrines developed, and equity started to evolve into a system of precedents like its common law cousin.Over time, equity jurisprudence would gradually become a "body of equitable law, as complex, doctrinal, and rule-haunted as the common law ever was".

One indicator of equity's evolution into a coherent body of law wasLord Eldon's response to Selden in an 1818 chancery case: "I cannot agree that the doctrines of this court are to be changed with every succeeding judge. Nothing would inflict on me greater pain, in quitting this place, than the recollection that I had done anything to justify the reproach that the equity of this court varies like the Chancellor's foot."

Equity's primacy over common law in England was later enshrined in the Judicature Acts of the 1870s, which also served to fuse the courts of equity and the common law (although emphatically not the systems themselves) into one unified court system.

Statute of Uses 1535

One area in which the Court of Chancery assumed a vital role was the enforcement ofuses,a role that the rigid framework ofland lawcould not accommodate. This role gave rise to the basic distinction betweenlegalandequitable interests.

In order to avoid paying land taxes and other feudal dues, lawyers developed a primitive form of trust called 'the use' that enabled one person (who was not required to pay tax) to hold the legal title of the land for the use of another person. The effect of this trust was that the first person owned the land under the common law, but the second person had a right to use the land under the law of equity.

Henry VIII enacted theStatute of Usesin 1535 (which became effective in 1536) in an attempt to outlaw this practice and recover lost revenue. The Act effectively made the beneficial owner of the land the legal owner and therefore liable for feudal dues.

The response of the lawyers to this Statute was to create the 'use upon a use'. The Statute recognized only the first use, and so land owners were again able to separate the legal and beneficial interests in their land.

Comparison of equity traditions in common law countries

Australia

Equity remains a cornerstone of Australian private law. A string of cases in the 1980s saw theHigh Court of Australiare-affirm the continuing vitality of traditional equitable doctrines.In 2009 the High Court affirmed the importance of equity and dismissed the suggestion thatunjust enrichmenthas explanatory power in relation to traditional equitable doctrines such assubrogation.

The state ofNew South Walesis particularly well known for the strength of its Equity jurisprudence. However, it was only in 1972 with the introduction of reform to the Supreme Court Act 1970 (NSW) that empowered both the Equity and Common Law Division of the Supreme Court of NSW to grant relief in either equity or common law.In 1972 NSW also adopted one of the essential sections of the Judicature reforms, which emphasised that where there was a conflict between the common law and equity, equity would always prevail.Nevertheless, in 1975 three alumni ofSydney Law Schooland judges of the NSW Supreme Court,Roddy Meagher,William Gummowand John Lehane producedEquity: Doctrines & Remedies.It remains one of the most highly regarded practitioner texts in Australia and England.The work is now in its 5th edition and edited byDyson Heydon,former Justice of the High Court, JusticeMark Leemingof theNew South Wales Court of Appeal,and Dr Peter Turner ofCambridge University.

United Kingdom

England and Wales

Equity remains a distinct part of thelawofEngland and Wales.The main challenge to it has come from academic writers working within thelaw of unjust enrichment.Scholars such asPeter BirksandAndrew Burrowsargue that in many cases the inclusion of the label "legal" or "equitable" before a substantive rule is often unnecessary.Many English universities, such asOxfordandCambridge,continue to teach Equity as a standalone subject. Leading practitioner texts includeSnell's Equity,Lewin on Trusts,andHayton & Underhill's Law of Trusts and Trustees.

Limits on the power of equity in English law were clarified by theHouse of LordsinThe Scaptradecase (Scandinavian Trading Tanker Co. A.B. v Flota Petrolera Ecuatoriana[1983] 2 AC 694, 700), where the notion that the court's jurisdiction to grant relief was "unlimited and unfettered" (perLord Simon of GlaisdaleinShiloh Spinners Ltd v. Harding[1973] A.C. 691, 726) was rejected as a "beguiling heresy".

Scotland

Thecourts of Scotlandhave never recognised a division between the normalcommon lawand equity, and as such theCourt of Session(the supremecivil courtofScotland) has exercised an equitable andinherent jurisdictionand called thenobile officium.Thenobile officiumenables the Court to provide alegal remedywherestatuteor thecommon laware silent, and prevent mistakes in procedure or practice that would lead toinjustice.The exercise of this power is limited by adherence toprecedent,and whenlegislationor the common law already specify the relevant remedy. Thus, the Court cannot set aside astatutory power,but can deal with situations where the law is silent, or where there is an omission in statute. Such an omission is sometimes termed acasus improvisus.

India

InIndiathecommon lawdoctrine of equity had traditionally been followed even after it became independent in 1947. However, in 1963 theSpecific Relief Actwas passed by theParliament of Indiafollowing the recommendation of theLaw Commission of Indiaand repealing the earlier "Specific Relief Act" of 1877. Under the 1963 Act, most equitable concepts were codified and made statutory rights, thereby ending the discretionary role of the courts to grant equitable reliefs. The rights codified under the 1963 Act were as under:

• Recovery of possession of immovable property (ss. 5–8)
• Specific performance ofcontracts(ss. 9–25)
• Rectification of instruments (s. 26)
• Recession of contracts (ss. 27–30)
• Cancellation of instruments (ss. 31–33)
• Declaratory decrees (ss. 34–35)
• Injunctions(ss. 36–42)

With this codification, the nature and tenure of the equitable reliefs available earlier have been modified to make them statutory rights and are also required to be pleaded specifically to be enforced. Further to the extent that these equitable reliefs have been codified into rights, they are no longer discretionary upon the courts or as the English law has it, "Chancellor's foot" but instead are enforceable rights subject to the conditions under the 1963 Act being satisfied. Nonetheless, in the event of situations not covered under the 1963 Act, the courts in India continue to exercise their inherent powers in terms of Section 151 of theCode of Civil Procedure, 1908,which applies to allcivil courtsin India.

There is no such inherent powers with the criminal courts in India except with theHigh Courtsin terms of Section 482 of the Code of Criminal Procedure, 1973. Further, such inherent powers are vested in theSupreme Court of Indiain terms of Article 142 of theConstitution of Indiawhich confers wide powers on the Supreme Court to pass orders "as is necessary for doing complete justice in any cause of matter pending before it".

United States

In modern practice, perhaps the most important distinction between law and equity is the set of remedies each offers. The most common civil remedy a court of law can award is monetary damages. Equity, however, enters injunctions or decrees directing someone either to act or to forbear from acting. Often, this form of relief is in practical terms more valuable to a litigant; for example, a plaintiff whose neighbor will not return his only milk cow, which had wandered onto the neighbor's property, may want that particular cow back, not just its monetary value. However, in general, a litigant cannot obtain equitable relief unless there is "no adequate remedy at law"; that is, a court will not grant an injunction unless monetary damages are an insufficient remedy for the injury in question. Law courts can also enter certain types of immediately enforceable orders, called "writs"(such as a writ ofhabeas corpus), but they are less flexible and less easily obtained than aninjunction.

Another distinction is the unavailability of a jury in equity: the judge is thetrier of fact.In the American legal system, the right ofjury trialin civil cases tried in federal court is guaranteed by theSeventh Amendmentin Suits at common law,cases that traditionally would have been handled by the law courts. The question of whether a case should be determined by a jury depends largely on the type of relief the plaintiff requests. If a plaintiff requests damages in the form of money or certain other forms of relief, such as the return of a specific item of property, the remedy is considered legal, and a jury is available as the fact-finder. On the other hand, if the plaintiff requests aninjunction,declaratory judgment,specific performance,modification of contract, or some other non-monetary relief, the claim would usually be one in equity.

Thomas Jeffersonexplained in 1785 that there are three main limitations on the power of acourt of equity:"If the legislature means to enact an injustice, however palpable, the court of Chancery is not the body with whom a correcting power is lodged. That it shall not interpose in any case which does not come within a general description and admit of redress by a general and practicable rule."The US Supreme Court, however, has concluded that courts have wide discretion to fashion relief in cases of equity. The first major statement of this power came inWillard v. Tayloe,75 U.S. 557 (1869). The Court concluded that "relief is not a matter of absolute right to either party; it is a matter resting in the discretion of the court, to be exercised upon a consideration of all the circumstances of each particular case."Willard v. Tayloewas for many years the leading case incontractlaw regarding intent and enforcement.as well as equity.

In the United States, the federal courts and most state courts have merged law and equity into courts of general jurisdiction, such as county courts. However, the substantive distinction between law and equity has retained its old vitality.This difference is not a mere technicality, because the successful handling of certain law cases is difficult or impossible unless a temporary restraining order (TRO) or preliminary injunction is issued at the outset, to restrain someone from fleeing the jurisdiction taking the only property available to satisfy a judgment, for instance. Furthermore, certain statutes like theEmployee Retirement Income Security Actspecifically authorizeonlyequitable relief, which forces American courts to analyze in lengthy detail whether the relief demanded in particular cases brought under those statutes would have been available in equity.

Equity courts were widely distrusted in the northeastern United States following the American Revolution. A serious movement for merger of law and equity began in the states in the mid-19th century, whenDavid Dudley Field IIconvinced New York State to adopt what became known as theField Codeof 1848.The federal courts did not abandon the old law/equity separation until the promulgation of theFederal Rules of Civil Procedurein 1938.

Three states still have separate courts for law and equity:Delaware,whoseCourt of Chanceryis where most cases involvingDelaware corporations(which includes a disproportionate number of multi-state corporations) are decided;Mississippi;andTennessee.However, merger in some states is less than complete; some other states (such as Illinois andNew Jersey) have separate divisions for legal and equitable matters in a single court. Virginia had separate law and equity dockets (in the same court) until 2006.Besidescorporate law,which developed out of thelaw of trusts,areas traditionally handled by chancery courts includedwillsandprobate,adoptionsandguardianships,andmarriageanddivorce.Bankruptcywas also historically considered an equitable matter; althoughbankruptcy in the United Statesis today a purely federal matter, reserved entirely to theUnited States Bankruptcy Courtsby the enactment of theUnited States Bankruptcy Codein 1978, bankruptcy courts are still officially considered "courts of equity" and exercise equitable powers under Section 105 of the Bankruptcy Code.

After US courts merged law and equity, American law courts adopted many of the procedures of equity courts. The procedures in a court of equity were much more flexible than the courts at common law. In American practice, certain devices such asjoinder,counterclaim,cross-claimandinterpleaderoriginated in the courts of equity.

See also

• Court of equity
• Case law
• Common law
• Court of Chancery
• Delaware Court of Chancery
• Economic equity
• Equitable right
• Equitable remedy
• Ex aequo et bono
• Inequity aversion
• Maxims of equity
• Plea in equity
• Politics (Aristotle)
• Restitution
• Statutory law
• Trust Law
• Undue influence
• Unjust enrichment

References

For a history of equity in England, including the Statute of Uses 1535:

• Cockburn, Tina; Shirley, Melinda (14 November 2011).Equity in a Nutshell.Sydney: Lawbook Co.ISBN978-0455228808.
• Cockburn, Tina; Harris, Wendy; Shirley, Melinda (2005).Equity & Trusts.Sydney: LexisNexis Butterworths.ISBN0409321346.

For a general treatise on Equity, including a historical analysis:

• Worthington, Sarah (12 October 2006).Equity.Clarendon Law Series (2nd ed.). Oxford University Press.ISBN0199290504.

For a brief outline of the maxims, doctrines and remedies developed under equity:

• Watt, Gary (29 March 2007).Todd & Watt's Cases and Materials on Equity and Trusts(6th ed.). Oxford University Press.ISBN978-0199203161.

External links

• Christopher St. Germain's Doctor and Student (1518)Archived2014-04-07 at theWayback Machine,the classic common law text on equity.
• Delaware Court of Chancery: Official site
• Equity and TrustsHudson, Alastair, 5th edition, Routledge-Cavendish, London, 2007ISBN978-0-415-41847-8