What is equity? Purpose of equity: to work alongside/supplements the common law, rather than overwhelm it. Equity and justice Principle: Equity ameliorates the harshness of the common law by proposing fair solutions rather than just solutions (i.e. strictly in accordance with the law. Equity refers to an intangible sense of justice It has both ethical and legal connotations Distributive justice Rewards are distributed according to merit. The greater ones input, the better the treatment one deserves. Problem: to divide the distributable honour or reward into parts which are to one another as are the merits of the persons who are to participate. The just is the proportional; the unjust is what violates the proportion. Aristotle Aristotle claims that the just is a species of the proportionate and the unjust violates proportionality. Equity and justice are effectively the same thing because they are both concerned with balance and proportionality and with what is right and good. Legal justice represents that which is distributive and corrective and which enunciates collective proportionality. On the other hand, equitable justice considers the proportionality of conduct in private, individual transactions. Equitable justice refers to individual equality and fairness. Equity as a body of law The application of equitable justice has gradually resulted in the evolution of tangible, equitable principles which embellish the common law by alleviating the deficiencies of the absolute law. The primary difference between common law and equity today lies in the method of implementation. Equity corrects the law: it has discretionary operation and operates to meet demands of individual circumstances. Acts as corrective to the law where the law operates harshly (summum ius, summa iniuria est) Substance over form: equity follows substance over form because an appeal to equity is an appeal to natural law principles. Equity ensures that the written word of the law is construed according to reason and spirit, rather than according to precise interpretation. *(see also equitable maxim below) Standards of conduct: equity operates on the precepts of good faith, honesty and generosity. o Requires the judge to discover the facts of a situation and assess them in terms of purposes or social values o o A court must assess the relational fairness between the applicants. The underlying rationale of equity is to prevent unconscionable conduct- Legione v Hately (Mason and Deane JJ).
Dudley v Dudley (1875) per Lord Cowper- equity is moral virtue, which qualifies, moderates, and reforms the rigour, hardness, and edge of the law, and is a universal truth; it does also assist the law where it is defective and weak in the constitution Supremacy of equity: established in Earl of Oxford s Case (1615)- the office of the Chancellor is to correct Men s conscience for [wrongful acts] of what nature soever they be, and to soften and mollify the extremity of the law Equitable relief is discretionary Levels of discretion: 1) Discretion to determine whether particular circumstances warrant equitable relief 2) Discretion to determine the type or measure of relief to be granted The court may consider: Hardship on the defendant Laches/delay Overall conduct of both parties Adequacy of common law relief equitable relief only available where common law relief inadequate Adequacy of the relief being sought Overall consequences of the relief on both parties Subjective conscience: Re Diplock s Estate [1948]- [I]f the claim in equity exists it must be shown to have an ancestry founded in history and in practice and precedents of the courts admini stering 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. The origins of equity The legal evolution of equity is commonly identified as having occurred during three major periods: the medieval period; the formative period; and the period of systemisation. The medieval period (13 th -15 th centuries) The Chancellors were still forming their own practices and procedures for dealing with individual petitions, but did not consider themselves bound by precedent. The Court of Chancery was established in the 15 th century The formative period (16 th - 17 th centuries) Equity became a formalised body of law, and established clear ground in Earl of Oxford s Case (1615) Court of chancery had well and truly assumed judicial functions The period of systemisation Equity went from being a concept into a tangible nbody of law The doctrine of use (TRUSTS) emerged o Exclusive jurisdiction developed over uses and trusts by enforcing the duty of the feoffees to uses to hold their legal title for the benefit of the cestui que use o Equity reflects the right of the cestui to enforce the use against the foefee (whereas common law would only recognise the foefee as the absolute owner of the use o Used as a way of getting around the doctrine of tenure and doctrine of estates
Equitable jurisdiction The exclusive jurisdiction Applies to all equitable principles and remedies exclusively recognised by equity such as trusts and fiduciary relationships. Where a principle is exclusively recognised by equity, it can only be enforced by an equitable remedy. The concurrent jurisdiction Applies where both equity and the common law recognise unfairness and are prepared to apply relief Relief can only be provided concurrently with the common law where it is established that relief under common law would be inadequate Example: the award of specific performance for the enforcement of a contract The auxiliary jurisdiction Provides assistance for the enforcement of legal rights Example: common injunctions, the doctrine of discovery in equity o common injunction - an equitable injunction issued to restrain a judgment being obtained in law by a plaintiff when equitable defences were available to the defendant (note- now abolished) The judicature system and fusion What is the judicature system? Introduced with the aim of merging the administration of the common law and equitable jurisdiction to address impracticalities of the earlier system and establish a single court to exercise both functions Both divisions had the power to determine legal rights and recognise equitable rights and provide legal and equitable remedies Reflected in Australia in Supreme Court Act 1986 (Vic) s 29 o Every court exercising jurisdiction in Victoria in any civil proceeding must continue to administer law and equity on the basis that, if there is a conflict or variance between the rules of equity and the rules of the common law concerning the same matter, the rules of equity prevail. o This reflects s25(11) of the Judicature Acts o NOTE: the rules of equity only prevail when there is a conflict between those rul es or some element of those rules, and some common law rule; the rule that equity should prevail does not apply to the relationship between equity and the common law generally. Result of the judicature system is that equitable defences can be pleaded in all branches of the court and appropriate relief given
Fusion fallacy The introduction of a merged process has been inaccurately referred to as the fusion of law and equity This description is erroneous as it suggests a substantive union between common law and equity The provisions of the Judicature Act did not affect any substantive operation to the rules of common law or equity In Australia, the distinction of common law and equity prevails o There are many sufficient causes of action and sufficient remedies to provide any plaintiff with adequate redress for any complaint, so fusion itself is unnecessary Only a fusion of jurisdiction was intended under the act, not a substantive fusion Judicial attempts and interpretations of fusion Walsh v Lonsdale (1882) 21 Ch. D 9 A tenant holding an agreement for lease of which specific performance would be decreed stands in the same position as to liability as if the lease had been executed. The lease was to be treated as if it was legal in character, even though it could only be enforced in equity because it had not complied with all legal formalities. The judgement elevated equitable leases to the status of common law leases. According to Jessel MR, the Judicature Act resulted in the complete merger of legal and equitable estates. There were no longer two estates (law and equity) but rather only one court in which the equity rules prevailed. Redgrave v Hurd (1881) 20 Ch D 1 Jessel MR concluded that a conflict provision entitled him to award common law damages for innocent misrepresentation, which was traditionally recognized and enforced only in equity. Segger v Copydex Lord Denning concluded that an award of damages was available for a purely equitable breach of confidence action. Substantive impact view View that equity and the law are coming closer together through years of working closely together, but are not fused Recognizes that fusion is an ongoing process, and that the law and equity are not unresponsive to change Fusion as fact view Believes that fusion has been achieved and that the judicature system effective a substantive merger of law and equity United Scientific Holdings Ltd v Burnley Borough Council- Lord Diplock expressed the view that law and equity had surely mingled now Seggar v Copydex (above) Waltons Stores Ltd v Maher- Deane J held that law and equity are fused and to think otherwise would be to put at risk the orderly development of a simplified legal system. Deane J also disapproved of Lord Diplock s view in United Scientific Holdings
Legitimate fusion developments The introduction of a merged administration has resulted in greater interaction and association between law and equity producing an inevitable intermingling of ideas. The mingling of the different jurisdictional streams does not mean that the confluent streams have joined completely. Digital Pulse Pty Ltd v Harris (2002) 40 ASCR 487 Facts: They were fiduciaries to DP Held: Harris and Eden signed employment contracts with DP which contained non-compete clauses. In 1999, Harris and Eden left DP to start company Juice of which they were directors In 2000, DP terminated Harris contract and the next day Eden resigned Projects and clients were diverted from DP to juice DP claimed damages for breach of employment contract, equitable compensation or account of profits for breach of fiduciary duty, compensation for breach of duty under Corporations Act 2001, damages or an account of profits for misleading conduct under FTA 1987, damages or account of profits for breach of copyright, delivery up of business records and equipment, exemplary damages for breach of fiduciary duties (most controversial). Exemplary damages for a breach of fiduciary duty was available because the re was no authority to suggest that such relief could not be awarded where necessary to stop a wrongful and reprehensible breach. For breach of contract and fiduciary duty DP could receive equitable compensation of account of profits APPEAL: Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 (CoA) Issue: Appeal against the award of exemplary damages given for equitable breach of fiduciary duty Should common law damages be available for equitable wrongs? o Heydon J- no, Mason J- yes o has since been held in Giller v Procopets that this decision does not stand in the way of an award of aggravated damages for breach of confidence as they can be classified as compensatory rather than punitive. Does the court of appeal have the jurisdiction to make this finding? o Heydon J- no, Mason J- yes- the court of equity can develop new remedies, therefore equitable exemplary damages should be awarded (note- minority judgement) Legal remedies are not available for an equitable action, and any change to this is a matter for the HCA (Spiegelman J) Held that fusion has not occurred, equity and law remain distinct It is desirable that the jurisdictional origins of rules of law become less and less important as those rules are adapted to changing social realities by courts in fused jurisdictions, where the relationship of those rules inter se and their overall purpose in the legal system as a whole can be better appreciated. After all, what can be done with rules is much more important than where they came from.