Kara Sears
Equity is a separate body of law that supplements, corrects, and controls the rules of common law. It is a discretionary system, developed in the Court of Chancery, that provides remedies in situations where common law or statutory law might not apply or be equitable. Equity is a distinct component of judge-made law, with a different relationship to statute, and is considered to be more flexible and adaptable to achieve justice and fairness. While common law and equity were once rival systems, they have since been unified under the administration of a single tribunal, such as the Supreme Court, which can apply both rules of common law and equity.
| Characteristics | Values |
|---|---|
| Nature | Equity is a separate body of law that supplements, corrects, and controls the rules of common law. |
| Jurisdiction | Equity was exercised through the Court of Chancery, which was headed by the Chancellor. |
| Precedent | Common law courts are bound by precedent and strict legal rules, while the Court of Chancery was not. |
| Flexibility | Equity is flexible and adaptable to achieve justice and fairness in specific cases. |
| Remedies | Equity provides remedies in situations where common law fails to act or provide adequate relief. |
| Trust | Equity recognizes the concept of a trust, which is not acknowledged by common law. |
| Judicial Technique | Equity and common law employ different judicial techniques. |
| Fusion | The Judicature Acts of 1873-1875 fused the administration of common law and equity, with the Supreme Court overseeing both. |
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What You'll Learn
Equity's distinctiveness in the 21st century
Equity is a separate body of law that supplements, corrects, and controls the rules of common law. It developed in the Court of Chancery in the 15th century and was seen as a rival system of common law. The Chancellor was not bound by precedent or strict legal rules, allowing him to use discretion to administer justice in a particular case.
The introduction of new technologies has enabled traders to implement traditional strategies more efficiently. For instance, dark pools and indications of interest are modern adaptations of tactics previously employed by NYSE floor traders to find counterparties while minimizing the exposure of their clients' trading interests.
Another distinctive aspect of equity in the 21st century is the increased market depth. The U.S. equity market mechanism successfully managed the surge in trading volume and volatility without disruption, demonstrating its ability to handle increased market depth. However, the lack of a comprehensive risk management system to address computer-generated chaos in real time remains a concern.
Furthermore, the concept of trusts remains a distinctive feature of equity in the modern era. A trust imposes an equitable obligation on a trustee to manage property for the benefit of a beneficiary or a specific purpose. The three essential elements of a trust are the trustee, the trust fund or property, and the beneficiary, especially in the case of charitable trusts.
In conclusion, equity continues to retain its distinctiveness in the 21st century through its evolution in areas such as the U.S. equity market, the application of new technologies, and the ongoing recognition of trusts. While certain challenges persist, such as the need for improved risk management systems, equity remains a dynamic and adaptable system of law.
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Equity as a supplement to common law
Equity is a distinct body of law that supplements, corrects, and controls the rules of common law. It emerged in the 14th century to address the shortcomings of common law, which had limited remedies and failed to adapt to new and complex situations.
Equity was developed in the Court of Chancery, where the Lord Chancellor, as the king's principal minister, administered justice with discretion, unbound by precedent or strict legal rules. This flexibility allowed for the achievement of fairness and justice in individual cases, even when common law remedies were inadequate or unavailable.
One notable difference between common law and equity is the concept of trust. Equity recognises the existence of a beneficiary and provides remedies for breach of trust against a trustee who fails to fulfil their duties. Additionally, equitable remedies are subject to the discretion of the judge, who may require claimants to demonstrate equitable behaviour and timely intervention before granting relief.
Equity's distinctiveness has been maintained even after the Judicature Acts of 1873-1875, which established the Supreme Court's authority to administer both common law and equity. Equity continues to be a separate component of judge-made law, influencing the structure and decision-making processes of legal systems, particularly in Australia.
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The role of judges in common law and equity
The remedies developed by equity are subject to the discretion of the judge. For example, a judge will decide that for claimants to be granted equitable remedies, they must come to court with clean hands, having behaved equitably and not delayed in seeking the intervention of equity. In the early 20th century, the balance of equity evolved into a more flexible tool that judges used to conduct wide-ranging factual inquiries, taking into account factors such as the public interest and a community's quality of life. This often resulted in outcomes more favourable to petitioners.
Equity courts have been seen as a rival system to common law, and conflicts between the two systems have arisen. In the Earl of Oxford's Case, the court of common law ordered the payment of a debt that had already been paid, but the deed giving rise to the obligation had not been cancelled. The court of equity was prepared to grant an order preventing this and ratifying the deed. It was ruled that equity would prevail in conflicts between the two systems.
The Judicature Acts of 1873-1875 resolved these conflicts by allowing the Supreme Court to administer both rules of common law and equity. This led to the two jurisdictions becoming indistinguishable, with rules in equity being considered as common law. However, some common law jurisdictions in the United States, such as Delaware, Mississippi, and New Jersey, continue to preserve the distinctions between law and equity and between courts of law and courts of equity.
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The evolution of common law and equity
The concept of equity has its origins in ancient writings, such as Aristotle's "epieikeia" and Roman law's "aequitas". However, it was in the Court of Chancery that equity truly developed and became well-established by the 15th century. This court system recognised trusts of property, something that the common law courts did not. The remedies developed by equity are distinct from common law remedies, as they are subject to the discretion of the judge.
The differences between the two systems led to conflicts, with one notable example being the Earl of Oxford's Case. In this instance, the court of common law ordered the payment of a debt that had already been paid, but the deed had not been cancelled. The court of equity intervened and granted an order to prevent this, ratifying the deed. It was decided that in such conflicts between common law and equity, equity would take precedence.
The Judicature Acts of the 1870s brought a procedural fusion of the two legal systems, with the Supreme Court now administering both rules. However, the actual bodies of law remained separate, and the debate over the fusion of law and equity continued well into the 20th century. In some jurisdictions, such as Australia, the orthodox view is that equity and common law have not fused but are merely administered by the same court. In contrast, other jurisdictions, like New Zealand, express support for the fusion of the two systems.
Over time, equity acquired some rigidity, and while it still maintains its own rules and principles, it now also follows the rules of precedent like common law. Modern equity includes various aspects, such as the law relating to express, resulting, and constructive trusts, and it continues to play a significant role in jurisdictions that follow the English common law system.
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Equity and trusts
Trusts, on the other hand, are a legal device where one person (the trustee) holds property for the benefit of another (the beneficiary). Trusts impose a personal equitable obligation on the trustee to manage the property for the beneficiary's benefit or for specific purposes, such as charitable endeavours. The three essential elements of a trust are the trustee, the trust fund or property, and the beneficiary or charitable purpose.
The history of equity and trusts is intertwined. Equity, established in the Court of Chancery by the 15th century, sought to address the deficiencies of common law. It recognised the concept of trusts, which common law did not, and provided remedies for breaches of trust against trustees who failed to perform their duties. The evolution of trusts can be traced back to the medieval 'use', where there was a simultaneous holding of equitable and legal interests in property. Over time, the jurisdiction of the Court of Chancery came under scrutiny as deciding cases based on the Chancellor's conscience was seen as arbitrary and contrary to common law.
The tension between common law and equity persisted until the 19th century when the two systems were amalgamated into what are now the Senior Courts of England and Wales. Despite their fusion, equity and common law retain distinct characteristics. Equity, for instance, is more flexible and adaptable, while common law is known for its rigidity.
Studying equity and trusts in a legal context involves understanding their historical origins, the types of trusts, the powers and obligations of trustees, remedies for breaches of trust, and the ethical and societal considerations surrounding these concepts.
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Frequently asked questions
Equity law is a separate body of law that supplements, corrects, and controls the rules of common law. It provides remedies in situations where precedent or statutory law might not apply or be equitable.
Equity law is more flexible and adaptable than common law, as it is subject to the discretion of the judge. It also recognises new rights and remedies where common law fails to act.
Equitable remedies include specific performance of contract, enforcement of trusts, injunction to prevent a wrong, restitution of benefits, correction and cancellation of written instruments, and equity of redemption.
Equity became well-established by the 15th century and was seen as a rival system to common law. Over time, equity acquired its own set of rules and precedents, moving away from its purely discretionary nature. In some jurisdictions, such as Australia and the United States, equity and common law have been fused into a single procedural system.
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