(A)    History
What is “Equity”?

Legal rules v Equitable discretion

•    “Equity…corrected, supplemented and amended the common law. It softened and modified many of the injustices of the common law, and provided remedies where at law they were either inadequate or non-existent” – Meagher, Gummow & Lehane’s Equity Doctrines and Remedies 4th ed 2002

•    Aristotelian concept that equity is a correction of the law where it is defective owing to its universality

Distinguish between equity’s exclusive jurisdiction and auxiliary jurisdiction

•    Exclusive jurisdiction: “Church” matters (eg marriage, deaths, oaths).
o    In modern times, matters relating to breach of confidence & trusts
•    Auxiliary jurisdiction: Supplementing the common law (eg equitable remedies in matters of contract, equitable property interests). Equity is “tapping the common law on the shoulder”

A potted history

•    The Earl of Oxford’s Case
•    Equity provides discretionary relief from various forms of oppression or injustice, including harsh or unjust judgments in the common law courts
•    Lord Ellesmere: The reason why there is a Court of Equity is because men’s actions are so diverse and infinite. It is impossible to make any general law which can be properly applicable to every particular action and not fail in some circumstances. The purpose of Equity is to correct men’s consciences for frauds, breach of trusts, wrongs & oppressions, and to soften and mollify the extremity of the law.

Note: Concerning this case, James I took the side of the Chancellor and decreed that Equity should take precedence over the common law.

•    The decree of James I unambiguously established the supremacy of equity over the common law

The persistent criticism of Equity: it leaves too much to judicial discretion

•    Seldon’s famous criticism of equity: “Equity is a roguish thing; for law we have a measure, know what to trust to. Equity is according to conscience of him that is Chancellor; and as that is larger or narrower, so is equity. Equity varies like the Chancellor’s foot”

•    As a reaction to these criticisms, Lord Eldon (Chancellor from 1801 – 1806) said: “It is my duty to submit to the authority of those who have gone before me…I cannot agree that the doctrines of this Court are to be changed by every succeeding judge. Nothing would inflict on me greater pain than the recollection that I had done anything to justify the criticism that the equity of this court varies like the Chancellor’s foot.”

(B)    The Effects of the Judicature Acts and the “Fusion Fallacy”

The Effect of the Judicature Acts

•    The Judicature Act provided that in all divisions, law and equity should be administered together
•    The Act provided that in all matters in which there was any conflict or variance between the rules of equity and the rules of common law, the rules of equity should prevail

•    Ashburner has said: “the two streams of jurisdiction, through they run in the same channel, run side by side and do not mingle their waters”

•    Hence, the judicature system has two essential & conceptually distinct effects
o    It fuses the procedures of the old common law & equity jurisdictions
o    It embodies in statutory mandate the supremacy of equity over law in cases of conflict
between the rules
•    Neither of these changes will give a plaintiff a cause of action or remedy (or a defendant a defence) which he lacked under the old system. The same result will occur now, but without the passage from one court to another

The doctrine in Walsh v Lonsdale

•    This developed to resolve problems of tenancies, where writing requirements and formalities made a lease void or unenforceable at common law

•    Facts: A landlord granted a seven year lease of a mill to a tenant. The lease was not under seal & was therefore void at law. After the tenant had gone into possession, the landlord demanded, pursuant to the terms of the written lease, a year’s rent payable in advance. The tenant refused to pay the rent demanded. The landlord distrained the tenant’s goods & the tenant sued for damages for wrongful distress. The tenant argued that he was merely a tenant from year to year, in possession without a lease, with rent payable quarterly, not in advance.

•    It was held that the distress was not unlawful. The court held that equity prevails & ordered specific enforcement of the lease (the tenant had to pay the rent in advance).
•    “If a person goes in & occupies property as a tenant under an agreement, it is taken as if an instrument giving effect to the new tenancy on the agreed terms has been executed” (this is a valid equitable lease)

•    However, an equitable lease is not a legal lease
•    See Chan v Cresdon: “An equitable right is not equivalent to a legal right; between the contracting parties, an agreement for a lease may be as good as a lease. But, if you introduce a third party, then you will see the difference.”

Example:
•    A landlord and tenant execute an agreement that the landlord will grant a lease over the landlord’s property to the tenant, for a term exceeding three years. No lease is ever registered.
o    The terms of the lease agreement are binding on the landlord & tenant (there is a valid equitable lease): See Tottenham Hotspur; doctrine in Walsh v Lonsdale
o    If a guarantor has guaranteed the tenant’s obligations under the lease, the guarantor is not bound by the guarantee: See Chan v Cresdon

•    In Chan v Cresdon, the guarantor only guaranteed a registered lease. Since the lease was unregistered, the guarantor was not obligated to discharge the tenant’s obligations.

The “fusion fallacy”

•    The issue is whether the Judicature legislation fused Equity and the Common Law, so that equitable and common law principles are merged.
•    Our authorities say “no”

(C)    The Maxims of Equity
The Maxims of Equity

•    A maxim is “not a specific rule or principle of law. It is a summary statement of a broad theme which underlines equitable concepts and principles.” (Mason CJ and McHugh in Corin v Patton)

•    From Meagher Gummow and Lehane Equity Doctrines and Remedies:
o    Equity will not suffer a wrong to be without a remedy
o    Equity follows the law
o    When the equities are equal the law prevails
o    He who seeks equity must do equity
o    He who comes to equity must come with clean hands
o    Equity assists the diligent, not the tardy
o    Equity is equality
o    Equity looks to the intent rather than the form
o    Equity looks on that as done which ought to be done
o    Equity imputes an intention to fulfill an obligation
o    Equity acts in personam (see Penn v Baltimore)

•    Pat Loughlan lists also:
o    Equity does not allow a statute to be made an instrument of fraud
o    Equity will not assist a volunteer [i.e. a person who has given no value for promise or an incomplete gift]