Equity and

trust
Assignment topic:-

“Equity”

Submitted to:-
Akshay Singh

Submitted by:-
Rahul
865
LL.B.(4TH SEM.)
Equity (law)
In jurisdictions following the English common law system, equity is the body of
law which was developed in the English Court of Chanceryand which is now
administered concurrently with the common law.[1]
For much of its history, the English common law was principally developed and
administered in the central royal courts: the Court of King's Bench, the Court of
Common Pleas, and the Exchequer. Equity was the name given to the law which
was administered in the Court of Chancery. The Judicature Reforms in the 1870s
effected a procedural fusion of the two bodies of law, ending their institutional
separation. The reforms did not effect any substantive fusion, however. Judicial or
academic reasoning which assumes the contrary has been described as a "fusion
fallacy".[2]
Jurisdictions which have inherited the common law system differ in their current
treatment of equity. Over the course of the twentieth century some common law
systems began to place less emphasis on the historical or institutional origin of
substantive legal rules. In England, Australia, New Zealand, and Canada, equity
remains a distinct body of law. Modern equity includes, among other things:[2][3]

 The law relating to express, resulting, and constructive trusts;

 Fiduciary law;
 Equitable estoppel (including promissory and proprietary estoppel);
 Relief against penalties and relief against forfeiture;[4]
 The doctrines of contribution, subrogation and marshalling; and
 Equitable set-off.
The latter part of the twentieth century saw increased debate over the utility of
treating equity as a separate body of law. These debates were labelled the "fusion
wars".[5][6] A particular flashpoint in this debate centred around the concept
of unjust enrichment and whether areas of law traditionally regarded as equitable
could be rationalised as part of a single body of law known as the law of unjust
enrichment.[7][8][9]

History
Origins of the common law
After the Norman Conquest of England in the 11th century, royal justice came to
be administered in three central courts: the Court of King's Bench, the Court of
Common Pleas, and the Exchequer. The common law developed in these royal
courts. To commence litigation in these royal courts, it was necessary to fit one's
claim within a form of action. The plaintiff would purchase a writ in the Chancery,
the head of which was the Lord Chancellor. If the law provided no remedy (or no
efficacious remedy), litigants could sometimes appeal directly to the King.
Eventually, the King would delegate resolution of these petitions to the King's
Council. These petitions were eventually delegated to the Lord Chancellor himself.
In the early history of the United States, common law was viewed as a birthright.
Both the individual states and the federal government supported common law after
the American Revolution. U.S. courts draw on decisions of English courts,
individual state courts, and federal courts in formulating common law.[10]
Emergence of the Court of Chancery
By the 14th century it appears that Chancery was operating as a court, affording
remedies for which the strict procedures of the common law worked injustice or
provided no remedy to a deserving plaintiff. Chancellors often had theological and
clerical training and were well versed in Roman law and canon law.[11]
By the 15th century the judicial power of Chancery was clearly recognised. Equity,
as a body of rules, varied from Chancellor to Chancellor, until the end of the 16th
century. After the end of the 17th century, only lawyers were appointed to the
office of Chancellor. Over time, Equity developed a system of precedent much like
its common-law cousin.
One area in which the Court of Chancery assumed a vital role was the enforcement
of uses, a role that the rigid framework of land law could not accommodate. This
role gave rise to the basic distinction between legal and equitable interests.
Development of equity in England
It was early provided that, in seeking to remove one who wrongfully entered
another's land with force and arms, a person could allege disseisin (dispossession)
and demand (and pay for) a writ of entry. That writ gave him the written right to
re-enter his own land and established this right under the protection of the Crown if
need be, whence its value. In 1253, to prevent judges from inventing new
writs, Parliament provided that the power to issue writs would thereafter be
transferred to judges only one writ at a time, in a "writ for right" package known as
a form of action. However, because it was limited to enumerated writs for
enumerated rights and wrongs, the writ system sometimes produced unjust results.
Thus, even though the King's Bench might have jurisdiction over a case and might
have the power to issue the perfect writ, the plaintiff might still not have a case if
there was not a single form of action combining them. Therefore, lacking a legal
remedy, the plaintiff's only option would be petitioning the King.
People began petitioning the King for relief against unfair judgments, and as the
number of petitioners rapidly grew, so the King delegated the task of hearing
petitions to the Lord Chancellor. As the early Chancellors lacked formal legal
training and showed little regard for precedent, their decisions were often widely
diverse. In 1529, a lawyer, Sir Thomas More, was appointed as Chancellor,
marking the beginning of a new era. After this time, all future Chancellors were
lawyers. Beginning around 1557, records of proceedings in the Courts of Chancery
were kept and several equitable doctrines developed. Criticisms continued, the
most famous being 17th-century jurist John Selden's aphorism:
Equity is a roguish thing: for law we have a measure, know what to trust to; equity
is according to the conscience of him that is Chancellor, and as that is larger or
narrower, so is equity. 'Tis all one as if they should make the standard for the
measure we call a foot, a Chancellor's foot; what an uncertain measure would this
be? One Chancellor has a long foot, another a short foot, a third an indifferent foot:
'tis the same thing in a Chancellor's conscience.[12]
A criticism of Chancery practice as it developed in the early medieval period was
that it lacked fixed rules and that the Lord Chancellor was exercising an
unbounded discretion. The counter-argument was that Equity mitigated the rigour
of the common law by looking to substance rather than to form.
Litigants would go 'jurisdiction shopping' and often would seek an
equitable injunction prohibiting the enforcement of a common law court order. The
penalty for disobeying an equitable ‘common injunction’ and enforcing a common
law judgment was imprisonment.
The Chief Justice of the King's Bench, Sir Edward Coke, began the practice of
issuing writs of habeas corpus that required the release of people imprisoned for
contempt of chancery orders.
This tension climaxed in the Earl of Oxford's case (1615) where a judgment of
Chief Justice Coke was allegedly obtained by fraud.[13] The Lord Chancellor, Lord
Ellesmere, issued a common injunction from the Chancery prohibiting the
enforcement of the common law order. The two courts became locked in a
stalemate, and the matter was eventually referred to the Attorney-General,
Sir Francis Bacon. Sir Francis, by authority of King James I, upheld the use of the
common injunction and concluded that in the event of any conflict between the
common law and equity, equity would prevail. Equity's primacy in England was
later enshrined in the Judicature Acts of the 1870s, which also served to fuse the
courts of equity and the common law (although emphatically not the systems
themselves) into one unified court system.
Ecclesiastical laws
Ecclesiastical laws are a branch of English law and were English laws that dealt
with matters concerning the church, this was so that religion and law was
differentiated. These laws are considered an unwritten law of England and cannot
be withheld in the court of law. Ecclesiastical laws are not currently established in
the U.S as Common law.[10]
Statute of Uses 1535
In order to avoid paying land taxes and other feudal dues, lawyers developed a
primitive form of trust called ‘the use’ that enabled one person (who was not
required to pay tax) to hold the legal title of the land for the use of another person.
The effect of this trust was that the first person owned the land under the common
law, but the second person had a right to use the land under the law of equity.
Henry VIII enacted the Statute of Uses in 1535 (which became effective in 1536)
in an attempt to outlaw this practice and recover lost revenue. The Act effectively
made the beneficial owner of the land the legal owner and therefore liable for
feudal dues.
The response of the lawyers to this Statute was to create the 'use upon a use'. The
Statute recognized only the first use, and so land owners were again able to
separate the legal and beneficial interests in their land.
For an example, see Godwyne v. Profyt (after 1393): a petition to the Chancellor[14]

Comparison of equity traditions in common law countries[edit]

Australia
Equity remains a cornerstone of Australian private law. A string of cases in the
1980s saw the High Court of Australia re-affirm the continuing vitality of
traditional equitable doctrines.[15] The High Court has recently affirmed the
importance of Equity and dismissed the suggestion that unjust enrichment has
explanatory power in relation to traditional equitable doctrines such as subrogation.
[16]

The state of New South Wales is particularly well known for the strength of its
Equity jurisprudence. However, it was only in 1972 with the introduction of reform
to the Supreme Court Act 1970 (NSW) that empowered both the Equity and
Common Law Division of the Supreme Court of NSW to grant relief in either
equity or common law.[17] In 1972 NSW also adopted one of the essential sections
of the Judicature reforms, which emphasised that where there was a conflict
between the common law and equity, equity would always prevail. [18] Nevertheless,
in 1984 three alumni of Sydney Law School and judges of the NSW Supreme
Court, Roderick Meagher, William Gummow and John Lehane produced Equity:
Doctrines & Remedies. It remains one of the most highly regarded practitioner
texts in Australia and England.[19][20] The work is now in its 5th edition and edited
by Dyson Heydon, former Justice of the High Court, Justice Mark Leeming of the
NSW Court of Appeal, and Dr Peter Turner of Cambridge University.[2]
United Kingdom
England and Wales
Equity remains a distinct part of the law of England and Wales. The main
challenge to it has come from academic writers working within the law of unjust
enrichment. Scholars such as Professor Birks and Professor Burrows argue that in
many cases the inclusion of the label "legal" or "equitable" before a substantive
rule is often unnecessary.[6] Many English universities, such
as Oxford and Cambridge, continue to teach Equity as a standalone subject.
Leading practitioner texts include Snell's Equity, Lewin on Trusts, and Hayton &
Underhill's Law of Trusts and Trustees.
Scotland
The courts of Scotland have never recognised a division between the
normal common law and equity, and as such the Court of
Session (the supreme civil court of Scotland) has exercised an equitable
and inherent jurisdiction and called the nobile officium.[21] The nobile
officium enables the Court to provide a legal remedy where statute or the common
laware silent, and prevent mistakes in procedure or practice that would lead
to injustice. The exercise of this power is limited by adherence to precedent, and
when legislation or the common law already specify the relevant remedy. Thus, the
Court cannot set aside a statutory power, but can deal with situations where the law
is silent, or where there is an omission in statute. Such an omission is sometimes
termed a casus improvisus.[22][23]
India
In India the common law doctrine of equity had traditionally been followed even
after it became independent in 1947. However, in 1963 the "Specific Relief
Act" was passed by the Parliament of India following the recommendation of
the Law Commission of India and repealing the earlier "Specific Relief Act" of
1877. Under the 1963 Act, most equitable concepts were codified and made
statutory rights, thereby ending the discretionary role of the courts to grant
equitable reliefs. The rights codified under the 1963 Act were as under:

 Recovery of possession of immovable property (ss. 5–8)

 Specific performance of contracts (ss. 9–25)
 Rectification of Instruments (s. 26)
 Recession of Contracts (ss. 27–30)
 Cancellation of Instruments (ss. 31–33)
 Declaratory Decrees (ss. 34–35)
 Injunctions (ss. 36–42)
With this codification, the nature and tenure of the equitable reliefs available
earlier have been modified to make them statutory rights and are also required to
be pleaded specifically to be enforced. Further to the extent that these equitable
reliefs have been codified into rights, they are no longer discretionary upon the
courts or as the English law has it, "Chancellor's foot" but instead are enforceable
rights subject to the conditions under the 1963 Act being satisfied. Nonetheless, in
the event of situations not covered under the 1963 Act, the courts in India continue
to exercise their inherent powers in terms of Section 151 of the Code of Civil
Procedure, 1908, which applies to all civil courts in India.
There is no such inherent powers with the criminal courts in India except with
the High Courts in terms of Section 482 of the Code of Criminal Procedure, 1973.
Further, such inherent powers are vested in the Supreme Court of India in terms of
Article 142 of the Constitution of India which confers wide powers on the Supreme
Court to pass orders "as is necessary for doing complete justice in any cause of
matter pending before it".
United States
In modern practice, perhaps the most important distinction between law and equity
is the set of remedies each offers. The most common civil remedy a court of law
can award is monetary damages. Equity, however, enters injunctions or decrees
directing someone either to act or to forbear from acting. Often, this form of relief
is in practical terms more valuable to a litigant; for example, a plaintiff whose
neighbor will not return his only milk cow, which had wandered onto the
neighbor's property, may want that particular cow back, not just its monetary value.
However, in general, a litigant cannot obtain equitable relief unless there is "no
adequate remedy at law"; that is, a court will not grant an injunction unless
monetary damages are an insufficient remedy for the injury in question. Law courts
can also enter certain types of immediately enforceable orders, called "writs" (such
as a writ of habeas corpus), but they are less flexible and less easily obtained than
an injunction.
Another distinction is the unavailability of a jury in equity: the judge is the trier of
fact. In the American legal system, the right of jury trial in civil cases tried in
federal court is guaranteed by the Seventh Amendment in Suits at common law,
cases that traditionally would have been handled by the law courts. The question of
whether a case should be determined by a jury depends largely on the type of relief
the plaintiff requests. If a plaintiff requests damages in the form of money or
certain other forms of relief, such as the return of a specific item of property, the
remedy is considered legal, and a jury is available as the fact-finder. On the other
hand, if the plaintiff requests an injunction, declaratory judgment, specific
performance, modification of contract, or some other non-monetary relief, the
claim would usually be one in equity.
Thomas Jefferson explained in 1785 that there are three main limitations on the
power of a court of equity: "If the legislature means to enact an injustice, however
palpable, the court of Chancery is not the body with whom a correcting power is
lodged. That it shall not interpose in any case which does not come within a
general description and admit of redress by a general and practicable rule."[24] The
US Supreme Court, however, has concluded that courts have wide discretion to
fashion relief in cases of equity. The first major statement of this power came
in Willard v. Tayloe, 75 U.S. 557 (1869). The Court concluded that "relief is not a
matter of absolute right to either party; it is a matter resting in the discretion of the
court, to be exercised upon a consideration of all the circumstances of each
particular case."[25] Willard v. Tayloe was for many years the leading case
in contract law regarding intent and enforcement.[26][27] as well as equity.[26][28]
In the United States today, the federal courts and most state courts have merged
law and equity in the courts of general jurisdiction, such as county courts.
However, the substantive distinction between law and equity has retained its old
vitality.[29] This difference is not a mere technicality, because the successful
handling of certain law cases is difficult or impossible unless a temporary
restraining order (TRO) or preliminary injunction is issued at the outset, to restrain
someone from fleeing the jurisdiction taking the only property available to satisfy a
judgment, for instance. Furthermore, certain statutes like Employee Retirement
Income Security Act specifically authorize only equitable relief, which forces US
courts to analyze in lengthy detail whether the relief demanded in particular cases
brought under those statutes would have been available in equity.[30]
Equity courts were widely distrusted in the northeastern US following the
American Revolution. A serious movement for merger of law and equity began in
the states in the mid-19th century, when David Dudley Field II convinced New
York State to adopt what became known as the Field Code of 1848.[31][32] The
federal courts did not abandon the old law/equity separation until the promulgation
of the Federal Rules of Civil Procedure in 1938.
Today three states still have separate courts for law and equity; the most notable
is Delaware, whose Court of Chancery is where most cases involving Delaware
corporations are decided.[33] However, merger in some states is less than complete;
some other states (such as Illinois and New Jersey) have separate divisions for
legal and equitable matters in a single court. Besides corporate law, which
developed out of the law of trusts, areas traditionally handled by chancery courts
included wills and probate, adoptions and guardianships,
and marriage and divorce. Bankruptcy was also historically considered an
equitable matter; although bankruptcy in the United States is today a purely federal
matter, reserved entirely to the United States Bankruptcy Courts by the enactment
of the United States Bankruptcy Code in 1978, bankruptcy courts are still officially
considered "courts of equity" and exercise equitable powers under Section 105 of
the Bankruptcy Code.[34]
After US courts merged law and equity, American law courts adopted many of the
procedures of equity courts. The procedures in a court of equity were much more
flexible than the courts at common law. In American practice, certain devices such
as joinder, counterclaim, cross-claim and interpleader originated in the courts of
equity. Also, the modern class action evolved out of the equitable doctrine of
virtual representation, which enabled a court of equity to fully dispose of an estate
even though it might contain contingent interests held by persons over which the
court did not have direct jurisdiction.
The reasons behind the creation of equity
Common law refers to the body of legal precedent that is compiled by a number of
past court decisions and or similar tribunals as opposed to executive action or
through legislative statutes. These legal precedents are the rules that common law
judges use to decide on legal disputes.

In the common law legal system, laws are created by and/or refined by judges.
This implies that a ruling in a case currently pending depends on the rulings made
in previous cases and affects the law to be applied in future cases. Whenever an
authoritative statement of the law does not exist, common law judges have a
provision to make laws by creating precedent.

This body of precedent is what is called "common law" and it is binding to all
future decisions the court has to make. However, the decisions of a court are
binding only in a particular jurisdiction. Common law legal systems are in
widespread use, particularly in those nations which trace their legal heritage to
Britain, including the United Kingdom, most of the United States and Canada, and
members of the Commonwealth of Nations ( Holmes O. W., 1881)

Equity is a term denoting a system of justice, that is administered in particular

court, whose nature and extent can only be understood and explained after studying
both the history and principles upon which that court acts. It was developed and
administered in England by the high court of chancery in the exercise of its
extraordinary jurisdiction. Equity defines a set of legal principles, in all the
jurisdictions that follow the English common law tradition, that supplements strict
rules of law where their application would operate harshly, and this is done to
achieve "natural justice (Anon. Historical Outlines of Equity).

This document elaborates on the historical reasons behind creation of equity as a

system of law, the differences that exist between equity and common law. In
addition, the nature of the present relationship between common law and equity is
also discussed.

The reasons behind the creation of equity.

Historically, the High Court of Chancery in England administered the equity

system of justice in the exercise of its extraordinary jurisdiction. The much older
system of law was the common law, which was administered by the King’s
Benches. Equity was viewed essentially as a more modern body of legal doctrine
that served to supplement the coercive old law. It is worth noting that these two
systems of law were largely identical and in harmony. This is because the rules
already established in the common law courts were readily adopted by the
chancellor and incorporated into the systems of equity.

There was also provision for the rejection and modification of some of these rules
if justified by sufficient reason. Creation of the equity as a system of law was to
serve as a means through which a legal system could strike the balance between
the rule-making process and the need to achieve fair results in individual and
separate circumstances (Megha K., 2008).

The equity system is attributed for contributing significantly towards the

development of law. These contributions are particularly evident in the areas of
auxiliary (new procedures), exclusive, and concurrent jurisdictions. These three
categories are elaborated as follows:

Auxiliary jurisdiction: equity has contributed to the rise of new procedures created
from discoveries made by the court of chancery in documents, subpoena of
witnesses, interrogates, and from testimonies made on oath.

Exclusive jurisdiction: these are new rights also created by the court of chancery
but which the common law courts had failed to enforce e.g. partnerships,
mortgages, bankruptcy, company law, trusts and administration of estates.

Concurrent jurisdiction: refers to the new wide range of remedies that the equity
system developed for the enforcement of rights both at law and in equity. Some
examples include the following:

Rectification; this is an order that requires the defendant to promptly modify a

document to reflect the agreement made between the defendant and the claimant.

Injunctions: refers to an order given by a court to restrain a party from committing

a wrong.

Account: refers to a court order requiring that a party, which has control of money
belonging to the claimant, reports on the way in which the funds have been spent.

Specific performance: this is an order that seeks to force the defendant to fulfill
his/her bargain (Anon. Historical Outlines of Equity).

Difference between equity and common law.

As earlier stated, common law is a body of law that is developed in many cases and
over a long period. Throughout the many centuries of civilization, law courts have
considered cases and defined what should be done in each one. Over this duration
of time, it was indeed possible to discern principles of law or precedents from the
mass of those cases. Therefore, common law evolved over time as judges made
law (according to doctrine of precedent). Common law rules are very formal and
rigid, whereas equitable principles/maxims are more amenable to changes. The
rigidities of common law can only be addressed by making use of equitable
maxims, provided by the equity system, in certain cases.

On the contrary, equity refers to a set of legal principles, in jurisdictions following

the English common law tradition, which supplement strict rules of law where their
application would operate harshly. Where the law is found to be essentially correct
but proving to be too severe or unfair, the equity system serves to allow for a
different course of events in the legal world. Equity essentially does not contradict
the common law, but rather it aims at securing substantial justice when the rule of
common law might see injustice. 

            The most significant distinction that exists between the two systems is
based on the remedies that each offers. In the common law, decisions are made by
reference to existing legal doctrines or statutes, whereas in the equity system, the
emphasis is laid on fairness and flexibility, which are known as the maxims of
equity. For instance, the most common remedy a court of law can award is money
in lieu of damages caused. Equity, on the other hand, enters injunctions or decrees
directing someone either to act or to forbear from acting, which are in practical
terms more valuable to a complainant. These equitable remedies can be only be
dispensed by a judge as it is a matter of law. Another important distinction between
equity and common law lies in the source of the rules governing the decisions that
are made in each of the systems (Suryanarayana V. 2007)

Nature of the present relationship between common law and equity.

Common law proves to be a self-sufficient legal system or source of law when

compared to equity. This can be attested by the fact that equity presupposes the
existence of common law and if we abolished the equity system, we would still
have a coherent system of law, common law, but not vice versa.

The equity system of law was developed as a measure to address the rigidity of the
common law system. Therefore, in its early years, the equity system was largely
viewed as being against common law. The general feeling among a majority of
people in legal circles was that the common law system would be equity abrogated
by the inception of equity. On the contrary, it is evident that the modern
development of equity is has in no way come to abrogate the common law but
instead it serves to strengthen it.

Because of the nature of equity, a conflict between the two systems was in the
offing and so between the years 1873-75, the court of chancery abolished the
courts that propagated the equity system of law, by means of the Judicature Act
(Holmes O. W., 1881). This was done through the transfer of their jurisdiction to
the new supreme court of judicature, which in its administration led to the fusing of
both the common law and equity. However, the substantive body of rules or laws
found in the two systems was still maintained as separate entities. It is worth noting
that the relationship between equity and common law is today is not one of
contradiction but rather one of complementarily. The Judicature Acts (1873–75)
succeeded in the merge of the administration of both equity and common law. This
means that a majority of modern day law courts apply the two set of rules in their
proceedings.

Whenever conflict still existed between the rules of the two systems, the rules of
equity were to prevail in favor of those of common law. The overall effect of the
Judicature Act that merged the two systems was the conversion of the exclusive
and separate jurisdiction of equity into a concurrent jurisdiction. It also served to
abolish the auxiliary jurisdiction, which meant that there was no longer need to go
to a separate court if one wishes to obtain an equitable remedy. This change
applied not only in the United Kingdom but also in the Commonwealth Nations.

However, the equity system continues to perform its core function, which is to
complement and supplement the common law, in accordance with the morally
accepted notions of justice and fairness (Antoine R. B. 2008).

Conclusion

Before the unification of equity and common law, achieved by the enactment of
the Judicature Acts (1873–75), the latter provided some stability for the English
legal system. This was in spite of its characteristic rigidity, whereas the former,
due to its original unprincipled and loose application, led to serious instability and
inconsistencies. The nature of the relationship between the two systems today is
that they strive to balance each other. This is accomplished without having either
of the two systems being accorded less significance than the other is.

It is evident that there exists a mutual relationship between the two systems of law.
This is in the interest of providing fair and just rulings and arbitration in any given
legal dispute.