ABSTRACT
Equity is the means by which a system of law balances out the need for certainty in rule-making with the need to achieve fair results in individual circumstances. An expression which has been commonly used to describe the way in which equity functions is that equity ‘mitigates the rigour of the common law’ so that the letter of the law is not applied in so strict a way that it may cause injustice in individual cases. 1 English equity does this by examining the conscience of the individual defendant. 2 Equity, then, is that part of English private law which seeks either to prevent any benefi t accruing to a defendant as a result of some unconscionable conduct or to compensate any loss suffered by a claimant which results from some unconscionable conduct, and which also seeks to ensure that common law and statutory rules are not manipulated unconscionably. At its broadest, equity appears to imbue the courts with a general discretion to disapply statutory or common law rules whenever good conscience requires it; 3 however, in practice, modern equity is comprised mainly
of substantive and procedural principles which only permit the courts a limited amount of discretion. 4
There are three different ways of understanding equity’s role as part of the English legal system. 5 First, equity can be understood as the means by which English law ensures that the strict application of a common law or a statutory rule does not result in any unfairness when applied in a specifi c case. To this extent equity is a form of natural justice, 6 which means that it has a moral basis. 7 Equity’s particular moral purpose was described by Lord Ellesmere in the Earl of Oxford’s Case 8 as being to ‘correct men’s consciences for frauds, breach of trusts, wrongs and oppressions . . . and to soften and mollify the extremity of the law’. 9 This is a moral purpose in that it both prevents a defendant from taking unconscionable advantage of a situation and also in that it prevents the law from inadvertently permitting an unconscionable result. Secondly, equity can be considered, in its formal sense, as constituting the collection of substantive principles developed over the centuries by the Courts of Equity, principally the Court of Chancery, 10 to judge people’s consciences. 11 In this sense, equity should be understood as being a code of technical, substantive rules and not simply as a reservoir of general, moral principles. 12 Thirdly, equity can be understood as comprising the procedural rules and forms of action developed by the Courts of Chancery over the centuries under the authority of the Lord Chancellor. 13 The main equitable principles are considered in
section 1.4 below. It should be noted that these second and third aspects of equity differ from the apparent breadth of the fi rst in that they constitute technical rules of law rather than abstract philosophical principles. It is common for English and Australian writers on equity to focus on these latter senses of equity in preference to a consideration of more philosophical notions of natural justice theory; although, it is suggested, an appreciation of these philosophical underpinnings is important if equity is to be understood as a collection of coherent principles and not simply as a ragbag of different doctrines. 14
In all legal systems the following problem arises: how can we create general common law or statutory rules without treating some individual circumstances unjustly? In the context of the English legal system it is equity which performs this balancing act when set against the rigidity of the common law. In this regard, the work of the German philosopher Hegel has generated the following defi nition of equity:
Equity involves a departure from formal rights owing to moral or other considerations and is concerned primarily with the content of the lawsuit. A court of equity, however, comes to mean a court which decides in a single case without insisting on the formalities of a legal process 15 or, in particular, on the objective evidence which the letter of the law may require. 16 Further, it decides on the merits of the single case as a unique one, not with a view to disposing of it in such a way as to create a binding legal precedent for the future. 17
Hegel was one of the foremost philosophers of the last 200 years, not a lawyer, but this defi - nition of the activities of equity in its legal sense is nevertheless particularly useful because it shows us how equity permits the achievement of ‘fair’ or ‘just’ results in situations in which the literal application of statute or common law might otherwise lead to unfairness or injustice. As mentioned, this summary should be treated with some caution because he wrote as a German philosopher rather than as an English lawyer; and yet, Hegel captures the fact that the court is concerned only with the merits of the case between the claimant and the defendant, and not necessarily with the broader context of the law. In this way the court can focus on reaching the best result in the circumstances even where a literal application of statute or common law might seem to require a different result. 18 Despite this ostensible fl exibility, this book will consider some areas in which equity generally (and the trust in particular) seem to have become rigid institutions more akin to contract than to the underlying spirit of equity which treats each case as a unique one. 19
The underlying argument of this book is that there is a need to understand the elegant simplicity of equity at the same time as the legal system is asked to consider questions asked of it by an ever more complex society. We shall see this development, for example, when we consider how equity allocates rights in the home between members of the same family. 20 That will require us to resist the siren call of those who argue for ever more formalistic tests for doctrines like the trust 21 which were originally formed in the grand tradition of equity by the Courts of Chancery. It has been said that certainty is the hallmark of every effective legal system, 22 but it is also true to say that chaos and complexity are the common characteristic of every problem which confronts such a legal system. People only go to court when their problems have become too diffi cult for them to sort out on their own. Therefore, I would suggest that equity’s fl exibility is important in ensuring that the law retains suffi cient suppleness to cope with the social developments over which the court is asked to sit in judgment.
