Equity Summary

The origins of the law of equity date back to the period just after the Norman conquest of England in 1066. Prior to that the only law that existed, as far as the courts were concerned, was common law, and it strictly adhered to the principle of Stare Decisis, a Roman legacy which established the system of judicial precedent which is based on the principle that like cases should be decided in like manner.

Strict adherence to the doctrine however deprived the law of any sort of flexibility, and it resulted in some unfair decisions, and equity, which in the normal sense of the word means fairness, stepped in to mitigate the harshness and the rigidity of the common law system and to make the law more flexible.

Litigants who were denied justice started petitioning the king and the king would hear their pleas and make a decision based on his conscious, setting aside the common law, if he had to, in that particular instance. Equitable decisions do not create a binding precedent.

In time the number of cases began to increase and the king delegated the task to the Lord Chancellor who decided each case on its merits and his decisions were based on what was fair and just, as opposed to previous common law decisions.

That however led to two separate adjudicating mechanisms that ran concurrently and in order to remedy the drawbacks of having a dual court system and to create some sort of uniformity parliament passed the Judicature Acts of 1873 and 1875.

Under the 1873 Act the old higher courts were abolished and a new Supreme Court of Judicature was created consisting of the High Court of Justice and the Court of Appeal. The High Court was divided into five specialist divisional courts based on the old central courts (King’s Bench, Common Pleas, Exchequer, and Chancery), with the addition of the new Probate, Divorce and Admiralty division.

Equity was administered by the Court of Chancery and any litigant seeking an equitable remedy post the implementation of the 1873 and 1875 acts could bring his or her claim before the Chancery Division of the High Court.

In order to facilitate the workings of equity, a set of rules were developed. These rules developed organically, and they became known as equitable maxims. They are as follows:-

1) Equity varies with the length of the Lord Chancellor’s foot. This maxim simply means that equity does not operate on a system of binding precedent and a court of equity does not decide like cases in like manner but rather decides each case on its facts, keeping in mind or taking into account what is fair and just. Therefore there is always the possibility with regards to equitable decisions, that even if the facts were the same in two cases, the decisions might be different.

2) Equity follows the law i.e. it works to mitigate and tamper the harshness of the law. Equity does not overrule common law judgments or decisions but rather acts in personam and equitable decisions effect only those who are party to it and do not affect others. In Re Diplock (1948) for example, the rightful beneficiary was entitled to trace monies that were wrongfully paid to a charity. Despite the fact that the transfer was legal, the beneficiary had an equitable right to it and therefore the beneficiary was allowed to trace (tracing allows the rightful owner to recover property and monies that were wrongly given to another or transferred without the consent of the rightful owner) the monies.

3) The following two maxims are concerned with priorities: -

a) Where the equities are equal the law prevails i.e. when two parties have acted equitably, and there is no evidence of either party acting in bad faith (mala fide) or there is no evidence of fraud, then equity cannot provide a remedy and the law will prevail.

b) Where the equities are equal the first in time prevails. The second maxim is slightly more complicated than the first. When there are two equities i.e. two parties with equal interests than the first party that registered his or her interest or the original equity will succeed as opposed to the later equity. It goes back to the issue of notice and at times when there is an equitable interest involved it is best to give notice to others that such a right or interest exists.

4) Equity looks at substance rather than form. Equity looks into the subject matter and decides on the facts rather than merely complying with the legal formalities. In Parkin v Thorold (1852) Lord Romilly (MR) recognized the fact that equity will distinguish between what is a matter of form and what is a matter of substance. If the court finds that by looking at the form or by merely adhering to formalities, the substance will be defeated, then equity will go further and look into the substance of the matter.

5) Equity will not permit a statute to be used as an instrument of fraud. If a court finds that by insisting that the provisions of a statute be complied with will facilitate or permit fraud then equity will intervene on behalf of the aggrieved party. In Banister v Banister (1948) Mrs. Banister inherited two cottages upon the death of her husband and she sold both cottages to her brother in law for £150 less than the market value on the promise that she could live in the cottage that she was occupying for the rest of her life.

Upon the completion of the sale her brother in law sought to evict her, and Mrs. Banister claimed that she had a beneficial life interest that arose when her brother in law gave her an oral undertaking that she could remain in the property for life.

Her brother in law sought to rely on s. 53 (1) (b) of the Law of Property Act 1925 which reads as follows:- “a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;”

Because the undertaking was not evidenced in writing as per s 53 (1) (b) of the Law of Property Act (1925) her brother in law was of the belief that he could legally evict Mrs. Banister.

It was held that Mrs. Bannister held the cottage on constructive trust and she could remain there rent free for the rest of her life. A valid trust had been created despite the fact that s. 53 (1) (b) of the Law of Property Act 1925 had not been complied with.

6) Equity imputes an intention to fulfill an obligation: - Where a person has an obligation and the person acts, towards fulfilling the obligation or in furtherance of fulfilling the obligation, whether intentionally or otherwise, equity will deem that the person has intended to fulfill his or her obligation.

7) Equity regards what ought to be done as done. This maxim applies to remedies like specific performance i.e. where the courts will compel a party to perform its stipulated duties.

In Nutbrown v Thornton (1805) the plaintiff entered into a contract with the defendants to purchase some machines. Subsequently the defendants refused to deliver the machines and because the defendants were the sole vendors for that type of machines, the plaintiff brought an action against the defendants and sought specific performance as a remedy. The court granted specific performance and compelled the defendants to perform their duties as stipulated by the contract.

8) Equity acts in personam. Equity acts against a person as opposed to acting in rem i.e. acting against a thing or acting over something that the court does not have jurisdiction over or acting against the world at large. Hence equity does not interfere with common law but rather acts in tandem with it or alongside it to ensure that justice is done. When acting in personam, the courts generally will not interfere with land or titles abroad, or decide on matters which do not fall within the scope, ambit or jurisdiction of the court.

9) Equity will not suffer a wrong to be without a remedy i.e. where there is a wrong equity will intervene to right the wrong. Equity will intervene to remedy the defects of the common law and this maxim is in line with the Latin legal maxim ubi jus ibi remedium (“where there is a wrong, there must be a remedy”).

10) He who seeks equity must do equity. As per the maxim, an applicant or a litigant who is relying on equity must have acted equitably himself or herself before he or she can petition a court of equity to intervene on his or her behalf. If the applicant’s or litigant’s actions are tainted with fraud or malice then a court of equity certainly would not intervene on his or her behalf.

Whether a court of equity chooses to intervene or otherwise is entirely at the discretion of the court and a court of equity will be reluctant to intervene or will be hesitant to intervene if it finds that the actions of the applicant or the litigant are tainted with fraud and malice.

In Haywood v Cope (1858), it was decided that, as per Lord Romilly MR, - the discretion of the Court must be exercised according to fixed and settled rules; you cannot exercise a discretion by merely considering what, as between the parties, would be fair to be done; what one person may consider fair, another person may consider very unfair; you must have some settled rule and principle upon which to determine how that discretion is to be exercised.

According to the rules and established principles (equitable maxims), mentioned above, a court of equity will only be prepared to intervene if they find that the applicant or the litigant has acted equitably himself or herself.

11) He who comes to equity must come with clean hands. As per the maxim any applicant or litigant who seeks the aid and assistance of a court of equity must do so with clean hands i.e. his or her actions cannot be tainted with fraud or malice and there cannot be a hidden agenda behind the scenes. He or she cannot have acted unfairly or unjustly, oppressively or arbitrarily prior to seeking the aid and assistance of a court of equity.

12) Delay defeats equity. The Limitation Act 1980 lays down a limitation period after which time the applicant or the litigant may not be successful. For example, Section 22 and 23 of the Act read as follows: -

Section 22 Time limit for actions claiming personal estate of a deceased person.

Subject to section 21(1) and (2) of the Act—

(a) no action in respect of any claim to the personal estate of a deceased person or to any share or interest in any such estate (whether under a will or on intestacy) shall be brought after the expiration of twelve years from the date on which the right to receive the share or interest accrued; and

(b) no action to recover arrears of interest in respect of any legacy, or damages in respect of such arrears, shall be brought after the expiration of six years from the date on which the interest became due.

Actions for an account

Section 23 Time limit in respect of actions for an account.

"An action for an account shall not be brought after the expiration of any time limit under this Act which is applicable to the claim which is the basis of the duty to account"

13) Equity will not allow a trust to fail for want of a trustee – the maxim speaks for itself and as far as a trust is concerned, it takes precedence regardless of whether the settlor has appointed a trustee or not and in the absence of a trustee, whoever has legal title will be considered or regarded as a trustee or the court will appoint someone to act as trustee and in instances where the appointed trustee is dead, the court will step in to appoint a new trustee.

14) Equity is equality. When there is nothing to indicate otherwise equity will divide any funds equally among all those who are entitled to it. In Burrough v Philcox the testator left the proceeds of his trust to any relative his child should nominate, and his child died without nominating any relatives and when the matter was brought before the courts it was held that the proceeds should be divided equally among all those who are entitled to it.  However, if such a division was not possible then the proceeds would not be divided because it is clearly not what the settlor would have intended see McPhail v Doulton.

15) Equity will not assist a volunteer. A volunteer in this context is a person who has not given consideration. In Currie v Misa (1875) it was held that consideration from the perspective of the law may consist of some right, benefit, interest or profit accruing to the party or some loss, sufferance, detriment, or responsibility incurred by the party.

16) Equity will not perfect an imperfect gift. With regards to gifts unless some form of consideration has been given equity will not intervene or compel the donor or his estate to make good on a gratuitous promise. There are however certain exceptions to this maxim for example the rule in Strong v Bird (1874) – where the donor intends to pass his property to another and maintains that intention until his death but for some reason or other fails to make the transfer during his lifetime, the property becomes vested in the intended donee as the donor’s executor, and the vesting of the property is deemed to be or is seen as completing the gift.

17) Equity is a shield and not a sword. As per the maxim equity is a defensive mechanism and not an offensive mechanism and an applicant seeks an equitable remedy when the applicant is deprived of something the applicant is genuinely entitled to and not otherwise for example when the doctrine of promissory estoppel is invoked. According to the doctrine, when one party makes a promise to another party and the second party relies on the promise and acts to his or her detriment than that promise is a valid promise and is a promise that is enforceable at law.

Copyright © 2019 by Dyarne Jessica Ward