Origins of Equity

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Before we go any further with our discussion of equity, let me explain that when we use the phrase the common law and equity, we are employing a specialised sense of the word equity. Indeed, in many publications you will find the words capitalised Common Law and Equity.

In its general or everyday sense, equity means fairness or justice. However, as used in the present context, equity refers to a particular set of principles that are the product of one set of English courts. The principles of equity had quite a different origin from the rules of common law. These principles were developed by the Lord Chancellors of the King in response to petitions from people dissatisfied, for one reason or another, with the decisions of the courts established by the King (i.e. the Courts of Common Pleas, Exchequer and Kings Bench), which were applying the common law, as we have already seen. The Lord Chancellor, who in medieval times was the principal adviser and minister of the King, was from the fourteenth century increasingly requested to examine such petitions received by the King or members of his Council. At first, the Lord Chancellor reported back with advice as to what should be done, but by the end of the fifteenth century it was usual for him to deal with these petitions himself, and for the petitions to be addressed to him directly. He then set up a separate court called the Court of Chancery (i.e. of the Chancellor) where he dealt with these matters.

The Lord Chancellors at that time were usually high officers of the Roman Catholic Church, not lawyers, so the principles they expressed were originally largely based on Christian principles and morality. As time went by, however, the Lord Chancellors and the judges who were appointed in the Court of Chancery ceased to be Churchmen and were usually lawyers who had practised in the Court, so that the principles of equity which they developed were modified and not so closely linked with Church teaching. The principles adopted by the Lord Chancellors and the Court of Chancery were, however, consciously based upon notions of fairness or equity, so they came to be described as principles of equity.

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Effects on rules of the common law

The principles of equity had basically three different effects upon the rules of common law to confirm them, to supplement them, or to contradict them.

confirm the common law

If the court of Chancery saw nothing unfair or inequitable in a decision based on the common law, would reject the petition, and decline to intervene in the matter. In such cases, equity was said to confirm or follow the common law.

supplement the common law

Sometimes the Court of Chancery would intervene in proceedings in the common law courts, not to interfere with the decision, but to provide some procedures or remedies that were better than the common law courts could provide. Thus, the Court of Chancery held that it could order a party to proceedings to answer questions on oath (called interrogatories) about facts within his or her knowledge relating to the claim; to reveal all documents relevant to the proceedings in his or her possession (discovery of documents); and then to produce them for inspection by the other party so that the other party could see them, and copy them (discovery of documents). (In this usage, the word discovery is used in the sense of disclosure or revealing.) In this way, trials could be speeded up, and adjournments on the grounds of surprise largely eliminated.

Again, the Court of Chancery held that it could issue an order prohibiting a party to proceedings from doing something unlawful (injunction), and an order directing that a party specifically perform the terms of a contract (order of specific performance). Both these remedies were often much more useful for enforcing the rights of a party than was an order that the other party pay damages, which was all that a court of common law could provide.

In such cases, Equity was not following the common law, nor was it contradicting it; rather it was said to supplement the common law.

contradict the common law

Sometimes the Court of Chancery would intervene to contradict certain rules of common law that it considered produced a very unfair or inequitable result. Some examples will demonstrate how such principles of equity evolve.

a) property to be held on trust for benefit of another

The Court of Chancery held that if property was given to a person on the basis of that persons assurance that the property would be used for the benefit of certain persons or purposes, it would be quite unfair or inequitable if that person should use that property for his or her own benefit, even though under the common law he or she was the lawful owner of the property. In this way the Council of Chancery evolved the equitable principle of trust that overrode the common law rights of ownership of property.

• An example of this is seen in Aberdeen Town Council v Aberdeen University (187) App Cas 544 (Reading .8).

The House of Lords held that the Aberdeen Town Council, which had been given certain property to hold in trust for the endowment of four professorships at Aberdeen University, could not later lease that property to itself, and use the income for its own purposes.

b) prudence in dealing with trust property

The Courts of Chancery went further and held that a person who has been given property to hold in trust for the benefit of others must not only act within the terms of the powers given by the person establishing the trust, but must also act with reasonable prudence with regard to the trust property, bearing in mind that it is held for the benefit of the persons or purposes indicated by the person establishing the trust.

• This is exemplified in re Whiteley (1886) Ch D 47

In this decision the Court of Appeal held that trustees had failed to act in accordance with principles of equity when, although empowered by the trust instrument to make investments of trust monies, they made a loan to a brick making business that shortly afterwards went bankrupt. Since this investment was considered by the court to be imprudent because the business was a speculative enterprise and not financially sound, the trustees were required to make good the loss they had caused.

c) misrepresentation or mistake in making of contract

The Court of Chancery further held that if a person entered into a contract on the basis of a misrepresentation made by the other party to the contract, or on the basis of a mistake that was induced by, or known to, the other party, then it was inequitable that that person should be bound by the contract, even though under the common law he or she was absolutely bound by the contract.

• This can be demonstrated by Solle v Butcher [14] All ER 1107 (Reading . 10). The Court of Appeal of England held that a contract for the tenancy of a flat could be rescinded by the landlord since both the landlord and the tenant thought when making the agreement that the flat was, because of alterations made to it, no longer bound by the restriction on rent imposed by rent restriction legislation, which in fact was not correct.

In such cases, when the principles of equity were in conflict with the rules of common law, the Court of Chancery would issue an injunction to prevent the common law decision being enforced, and would provide its own remedies, e.g. injunction, order to account.

Relationship between Equity and Common Law

Naturally the courts of common law, i.e. the Courts of Common Pleas, Exchequer and Kings Bench, were not happy about the intervention of the Courts of Chancery when they overrode their decisions and the Chief Justices of the courts of common law protested vigorously to the King. In 1601, however, the King ruled that if there was conflict between the rules of common law and the principles of equity, the principles of equity must prevail. This ruling was based partly upon the fact that the Chancellors were historically exercising powers delegated to them by the King and Council; partly upon the fact that the principles of equity were supposed to be more fair and equitable then the rules of common law; and partly upon a belief by the King, James I, that the Lord Chancellor would be more likely to support the interests of the Crown than would the stiff-necked Chief Justices of the common law courts at that time, who had started to show a tendency to question the extent of the Kings legal powers.

From then on, the Court of Chancery continued to exercise its Jurisdiction and develop the principles of equity, sometimes endorsing and following the rules of common law, sometimes supplementing the common law to make court proceedings more expeditious and effective, but sometimes contradicting it and providing rights or duties that overrode the rights and duties established by the common law.

Merger of Common Law and Equity

As we have seen, by the nineteenth century there were in England two systems of laws and two systems of courts common law, which was applied by the Court of Common Pleas, Court of Exchequer and Court of Kings Bench; and equity, which was applied by the Court of Chancery.

It was clearly unsatisfactory for litigants to have to take proceedings in two different courts, first a common law court, and then the Court of Chancery, before they could have access to all the fights, procedures and remedies that were available to them, and before they could be sure that their legal rights and duties had been fully and finally determined.

In the early nineteenth century, steps were taken to deal with this situation by enacting legislation that provided that

• the Court of Chancery could provide the remedy of damages available in the common law courts, i.e. Chancery Amendments Acts 185 and 1858; and

• the common law courts could provide the procedures and remedies available in the Court of Chancery, i.e. Common Law Procedure Acts 185 and 1858.

A much more radical step was taken in 1875 when the Judicature Act 187, which came into force in 1875, abolished the common law Courts of Common Pleas, Exchequer and Kings Bench and also the Court of Chancery. At the same time it merged their jurisdiction into a High Court, which was to sit in divisions corresponding to the former Courts, but any judge of which could exercise any of its jurisdiction.

From then on the separate court system was abolished, and although at first the rules of common law and principles of equity still tended to be handled rather separately, in time they have become intermingled and inter-mixed so as to make up one composite body of law, which is often nowadays referred to as common law, but in fact contains the modifications introduced by equity.Please note that this sample paper on Origins of Equity is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on Origins of Equity, we are here to assist you. Your cheap research papers on Origins of Equity will be written from scratch, so you do not have to worry about its originality.

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