The Principle of Equity
An essay by Jon Lewis
There is in the nature and mind of man an innate recognition of law and of justice. If he lives lawfully, then life is just and he can live freely, in peace and in happiness. However this freedom may also lead to disobedience and unlawfulness. “In ignorance, injustice abounds”. [1] Ethical principles, moral standards and the law of the land all offer guidance to unite law and justice, but the substance, or letter, of the law is only a guide and the true spirit of the law may still be ignored.
In courts of law, claims of injustice are heard and tried, and in England the Common Law is a record of the best rules, procedures and remedies arising from practical experience. It is based on the wisdom of the past, custom and the precedents declared in case law. As such it can be relied upon, but equally it may be slow and difficult to change. Justice may be denied. The coming together, as in Sandhi, of law and justice in the courts of law gave rise to a new development in English Law, and its name was Equity.
The word Equity is derived from the Sanskrit word “eka”, which means one or unity. It reappears in Greek and Latin with the additional meanings of being fair, just, even, including the sense of equality and equanimity. It is a rich and full description of the qualities needed to complement law with justice and so restore the unity. “Equity is Advaita”.
One of the powers attributed to the kings of England was to serve as the “fountain of justice”. Any subject with a grievance had a right to petition the king. In Mediaeval times this power to dispense justice was delegated to the Chancellor, whose office was to act as “the keeper of the king’s conscience”. A separate Court of Chancery was established as a court of conscience. At this time the Chancellor was a churchman rather than a lawyer, and so was ready to apply spiritual and moral principles to the cases before him. His department not only issued the writs of claims, but granted remedies over and above the Common Law. New procedures were introduced and new rights created, all under the name of Equity. But equitable justice was viewed by some as too variable and too dependent on the conscience of the Chancellor of the time, and this caused conflict with the predictability of the more strict Common Law courts.
Which approach on balance was the more just?
Eventually in 1615 the king was requested to rule upon the primacy of these two systems, and the decision was that the Law of Equity should prevail. If anything this increased the workload of Chancery and its reputation for excessive delays, sometimes for years, was further evidence of justice denied. In 1869 a Royal Commission recommended the establishment of a single High Court of Justice capable of applying Common Law and Equity in the same proceedings. This reunited the two systems. All judges were empowered to supplement the Common Law with the “gloss” of Equity, and this has continued to this day. The jurist, Maitland, had once echoed the words of an earlier teacher when he stated that “Equity came not to destroy the law but to fulfil it.”
This brief outline of the evolution of the Law of Equity itself needs to be supplemented now by examples of how in practice this new approach did enhance law and justice in the realm. Claims under the Common Law were based on a writ system, which was strict and unforgiving. If the wrong writ was issued, or there was an error in the procedure, then the claim failed. Nor was there a writ for every wrong. Here was an opportunity for Equity to step in. “Equity will not suffer a wrong to be without a remedy”. This was one of a number of Maxims of Equity, statements of principle, used to justify its intervention. They were used to develop wholly new areas of law, like Trusts, which will be examined later. However the approach was still cautious. Equity did not seek to override the Common Law. Other Maxims declared that “Equity follows the law” and “Where there is equal equity the law shall prevail”. Due deference was shown to the law of the land. Another Maxim stated that “He who seeks equity must do equity”. Claims were treated even-handedly. Good conscience was expected from both sides. Equally “He who comes to equity must come with clean hands”. A case from 1965 illustrates this rule. Mrs. Rees owed her builders a substantial sum, but threatened to go bankrupt unless they accepted a lesser sum in full satisfaction of the debt. They felt obliged to accept, but later sued for the outstanding amount.
Which way should the court decide?
Equity ruled that Mrs. Rees should pay the full amount. Her hands were not clean! Another Maxim declared that “Equity is a shield but not a sword”. It should not be used to justify bringing a claim, only as a defence to an unconscionable action.
Court procedures under the Common Law were always strictly in accordance with the letter of the law. Technical errors or omissions could be fatal. However “Equity looked to the intent rather than to the form”. This is the Bhavana of the action. Plato had written that justice lay in the intent of an action.
Should one party be allowed to profit from the other’s failure to sign a document by the agreed date?
In particular circumstances Equity might allow a signature to be late. Similarly “Equity looks on that as done which ought to be done”. The so called Rule in Walsh v Lonsdale stated that the parties to a contract that had remained unsealed may still be bound by its terms. The law was not being ignored, rather Equity would not allow either party to derive an unfair advantage thereby.
If a contract omitted to include terms that had been agreed earlier, should the court allow those terms to be re-included?
Equity ordered the rectification of the document. This somewhat generous approach was always subject to the full facts of the case and in the interests of justice. It encouraged Equity to extend its interest into other areas of the erstwhile strict principles of the Law of Contract.
In simple terms a contract is a legally binding exchange of promises. But what if later on one party promises to pay extra for the same amount of work? Should Equity enforce the new promise? There is extensive case law on this topic, each dependent on its particular facts, as the judges have striven to declare what the just law should be. The plea of mistake in a contract was not recognised by the Common Law, but Equity was empowered to rescind, or rectify, the contract. If both parties believed wrongly that a painting was an original, the contract for sale could be set aside when the truth was discovered. However Equity would not support unconscionable delay, in this case it was five years later. “Delay defeats Equity.” The use of duress or force would invalidate a contract at Common Law. Equity extended this to the use of Undue Influence by one party over the other.
If a husband mortgaged the family home as security for a business loan without the wife’s agreement could she plead this as a defence to eviction?
Currently there are moves to establish a new doctrine of Economic Duress, but the line between legitimate and illegitimate pressure is hard to draw, and the concept of good faith is often cited instead. Equity would not countenance any use of deceit, and it always refused to enforce illegal or immoral contracts even if the parties were in agreement.
Equity was able to make a significant contribution to another area of the Common Law as well, the Law of Real Property. Traditionally land and buildings were protected by formal rules and procedures. These were not overruled, but supplemented by new concepts like the law of Trusts. If A conveyed property to B on the understanding that he should hold it for C, the old law did not accord any rights to C, but Equity was prepared to enforce C’s rights against B for breach of trust for failure to fulfil his responsibilities. Trusts were created to protect the interests of minors and the mentally ill, and the beneficiaries of wills and intestacies, as today. They are often implied to resolve injustice in property matters, and the duties of trustees are judged by the highest moral standards. Mortgages is another area where Equity intervened to avoid unjust consequences. Under Common Law failure to redeem the mortgage by the due date entitled the mortgagee to keep the property. Equity upheld the spirit of the law by allowing him to redeem late and recover his land. In fact a whole raft of equitable rights was developed alongside their legal equivalent: equitable leases, equitable easements, equitable liens and the doctrine of equitable waste. Vendors could sell adjoining land with confidence that Equity would enforce restrictive covenants on the future use of that land upon successors in title. These and other rights will be explained further in the section on Real Property Law.
In addition to the recognition of many new rights and responsibilities in law, Equity offered new, practical remedies in the search for more effective solutions to claims for justice. Common Law remedies were limited to damages and the recovery of the specific property in question. Equity developed other safeguards both before and during the trial and indeed in the judgement itself. Injunctions perform this function, and are in common use today. Courts could now order the Discovery of relevant documents and compel parties to answer pre-trial questions under oath. The issuing of a subpoena to compel a witness to attend court is another development of Equity. A Search Order prevents a defendant from destroying evidence in his possession, and even allows the claimant to enter premises and search for goods or documents belonging to him or relevant to his claim. A Freezing Order prevents a debtor disposing or removing his assets before a court judgement is made or enforced against him. Damages were awarded at Common Law only where a loss could be proved. Equity added its own remedy of Quantum Meruit, by which a sum could be calculated to reimburse a party for loss incurred. There are even moves today to allow seizure of unlawful profit on the grounds of “unjust enrichment”. The Common Law was always reluctant to order the Specific Performance of a contract, but Equity recognised that damages were often an inadequate remedy, and ordered that a contract should be carried out where justice demanded it, for example to return a specific area of land or an item of unusual beauty or rarity. A contract could be set aside in the event of fraudulent conduct or misrepresentation, and so the parties could be returned to their pre-contractual positions. A contract could be corrected by the court if it did not reflect the true intention of the parties, for example if having agreed a price the wrong amount was written in the document. It serves as a reminder that the spirit of the law should override the letter of the law in the interests of justice.
The balance between law and justice demands careful attention at all times. If the Common Law was fixed and limited in its ability to develop then justice was denied. Equity evolved to supplement these limitations and hence to fulfil the law. In his Commentaries on the Laws of England Blackstone had perceived this: “Equity then in its true and genuine meaning, is the soul and spirit of all law; positive law is construed, and rational law is made, by it. In this equity is synonymous to justice; in that, to the true sense and sound interpretation of the rule.”
Equity needs to be understood and practised by everyone in their daily lives. In the words of HH :- “As long as the equitable laws are not seen and are not put into practice with universal justice, life will not be blissful and the search will go on. In order to bring about this equity with justice, people are trying to enter this illustrious Self, the Atman. Once the Self is known, the injustices will come to an end.”
[1] His Holiness Sri Shantananda Saraswati Conversations 1987