THE ORIGIN AND DEVELOPMENT OF EQUITY

PART I
What is Equity?
Part I of this text examines the nature and current operation of equity. When
considering the question ‘what is equity?’ it must be borne in mind that there is no
single, definitive answer. The concept of equity has different meanings according to
the social, ethical or legal context in which it is examined. Some of the more common
interpretations include: symmetry, balance, harmony, morality, justice, fairness, a
form of property interest and a recognised and established legal principle. In a legal
sense, however, equity is primarily associated with justice. Equity has become a legal
paradigm for the implementation of individual justice; equitable justice has both a
palpable legal presence and an indefinite legal potential. Equity represents a nascent
body of law which has developed to cater for the needs of individual justice as they
have arisen in the past, and a system of justice capable of adapting to individual needs
in the future. This does not mean that equity has an exclusive province over legal
justice. The principles which have evolved under the common law also aim for
justice; however, under the common law, justice is attained through more generalised
legal norms. The vitality of equity lies in its individuality.

Nature of Equity
The concept of equity has different social and legal interpretations. Its primitive
meaning, if traced back to its Latin source aequum, is physical equality or evenness.
In this purely neutral sense equity refers to a balance or an equilibrium; just as the
origin of rightness is straightness, the origin of equity is equality.
This primary understanding of equity is also used in an ethical context. What is
equitable has come to represent behavioural neutrality; this in turn is equated with fair
and just conduct. A person who has acted equitably will be presumed to have acted
justly because ‘just conduct’ is associated with balanced, proportionate conduct.
Conduct, which is not balanced and neutral, is likely to be considered inequitable;
such conduct is, in turn, likely to be described as being either immoral or unethical.
This ethical understanding of equity is of great relevance to our legal system. Whilst
in a social context equity represents morally balanced behaviour, in a legal context
equity represents what is legally just. Legal morality is encapsulated within the notion
of justice. Conduct found to be equitable would generally be found to be just,
although legal justice is not the exclusive province of equity. This is well explained
by Aristotle who claims that the ‘just’ is a species of the proportionate and the unjust
violates proportionality.
Aristotle concludes that equity and justice is effectively the same thing because they
are both concerned with balance and proportionality and with what is right and good.
According to Aristotle, however, different forms of legal justice exist: that which is
distributive and that which is corrective. The articulation and application of common
law principles may be broadly termed ‘distributive justice’. Corrective justice refers
to individual equality and fairness. It is reflected, not in the creation of generalised
principles of proportionality, but in the equalisation of particular instances of
injustice.
Aristotle felt that the form of justice which ‘equity’ most represents is corrective
justice because it rectifies the unfairness flaw from distributive justice. According to
Aristotle, equitable justice is superior because it individualises a legal justice. Whilst
law is universal, it is not possible to make a universal statement which shall be correct
about all things; equity ensures that the law as generally stated is not applied unjustly
to individual situations. Equitable justice is superior because it is not absolute in
nature. Unlike the common law, equity is determined individually rather than
collectively; it is therefore able to correct the law by considering particular
applications.

Equity as a body of law

The application of equitable justice has gradually resulted in the evolution of tangible,
equitable principles which embellish the common law by alleviating the deficiencies
of the absolute law. The most common legal understanding of ‘equity’ today is not as
an intangible sense of justice, but rather as a discernible body of law, developed by
the early Courts of Chancery and administered by modern Courts of Justice. Equity
has become a source of legal principles in much the same way as the common law.
The primary difference between common law and equity today lies in the method of
implementation. Equitable principles are administered according to processes which
have evolved in the courts of equity: equitable discretions, maxims and remedies will
only be relevant to the administration and application of equitable principles.
The evolution of equity into a body of law has not, however, destroyed the
functioning of equitable justice. Whilst current legal references to equity are usually
to the legal principles administered by courts of equity rather than the form of
corrective justice that equity represents, this is not to suggest that equity is no longer
synonymous with corrective justice. The equitable principles which have developed
embody this justice and retain the inherent discretionary capacity to adapt to new
forms of individual unfairness.

Equity is discretionary
One of the primary identifying features of the equitable jurisdiction is its discretionary
approach to the determination of relief. There are generally seen to be two different
levels to this discretion. On the first level, a court of equity has a discretion to
determine whether or not the particular circumstances warrant any relief being issued
at all; on the second, once it has been determined that some form of relief is
appropriate, the court has a discretion to determine the type or measure of relief to be
granted.

PART II
Origin of Equity Jurisdiction
In Part II, we trace the historical evolution of the equitable jurisdiction. The legal
evolution of equity is identified in three major periods: the medieval period; the
formative period; and the period of systemisation. The body of law we currently refer
to as equity progressed gradually throughout these periods from a broad-based
discretion in the very early stages to a well-structured administration in the end. The
modern equitable jurisdiction is vastly different from its predecessors; the differences
are better appreciated through a careful examination of these historical processes.

The Medieval Period

The administration of justice in England was originally given to the Aula Regis, also
known as the ‘Great Court’ or the ‘Council of the King’, which ultimately came to be
known as the Supreme Court of Judicature. When that court was dispersed at the end
of the 13th century, different jurisdictions were created in separate courts. These
jurisdictions were as follows: Common Pleas; the King’s Bench; and the Exchequer.
The notion of the ‘common’ law as a distinct body of law was gradually emerging.
However, during this very early period the equitable jurisdiction could not be
contrasted with the common law because it had no substantial existence.
The King had developed what was loosely referred to as a ‘Chancery Division’ in the
13th century. However, it did not handle actual cases, but merely operated as the
King’s secretariat department. At the head of the Chancery Division was the
Chancellor, who was usually a bishop. The function of the Chancellor was to look
after the administrative tasks of the King; the Chancellor was the secretary of all of
the King’s departments; he performed all of the King’s writing and, more importantly,
kept the King’s seal.
The King’s seal was required for all writs bringing an action in one of the courts of
law. The Chancellor was not, at this point, a judge, although his work did bring him
into a close association with the legal system and the administration of justice. As the
Chancellor controlled the King’s seal, it was necessary for all legal writs to go to the
Chancery to be stamped before commencement. In this way it was the Chancellor
who actually initiated legal proceedings.
In most situations, the writs which were issued in the courts of law were based upon
well established legal principles. However, in some situations, writs were issued
claiming actions that the court had never before considered. In such cases, the
Chancery jurisdiction was given a limited power, where the justice of the
circumstances demanded it, to recognise the validity of such writs and issue relief.
This power was not a judicial process because there was no formal adjudication
between the two sides; the Chancellor would simply hear the plaintiff’s application
and, in his discretion, make a determination. Where such writs were issued, they were
often only temporarily enforced; courts of law were always capable of quashing these
writs if they were found to be contrary to the actual law of the land. Hence, despite
the beginnings of a judicial process, the Chancery jurisdiction could still only be
properly described as administrative at this stage.
Nevertheless, the administrative functions of the Chancery increased and gradually
became more judicially orientated. This was particularly assisted when the Chancery
jurisdiction assumed control of the King’s residuary power to grant justice in
individual cases. Apart from administering the writs, the King also retained a reserve
of justice. When no other relief was available, an applicant could present a petition to
the King and pray for relief.
The practice of ‘praying’ for relief became very popular in the latter part of the 13th
and early 14th centuries, and most of the ‘petitions’ were dealt with by the
Chancellor. In the examination of such petitions, the Chancellor began to assume a
more judicial approach; consideration was given to the alleged injustice, the
parameters of the existing law and the necessity for according justice in the particular
circumstances. Furthermore, the practice of issuing such petitions was growing.
Whilst the great courts of law administered the bulk of the writs, the Chancellor dealt
with the increasing number of petitions praying for relief at the behest of the King.
The petitions to the Chancellor generally assumed two primary forms. The first,
covering the vast majority of writs, were against the King. It was impossible to bring
a writ against the King directly because he could not be sued; instead, the individual
had to make a ‘humble’ petition for justice to the Chancellor. The second form was
more important for the evolution of equity. In this form of writ, rather than seeking
relief against the King, the applicant sought relief at the expense of another person.
The petition generally set out the nature of the injustice and the necessity for relief;
relief was petitioned for in this way because the applicant was unable to obtain a
remedy in the ordinary course of justice, yet believed (in all justice and fairness) that
it should be granted. In such a petition, the King (and therefore the Chancellor) were
asked ‘out of charity and for the love of God’ to grant relief and prevent the injustice
from continuing.
In both of these types of petitions, the Chancellor had the option of creating a new
writ (which was liable to be quashed by a court of law), or ordering the other party to
appear and then making a determination on the validity of the claim. The procedure
for hearing these petitions (which came to be known as ‘bills’) was that the
Chancellor would order the other party to come before him so that the complaint
could be heard. The writ ordering the party to appear became known as a subpoena.
Once the party appeared, the charge was given and the other party had to answer the
charge.
Eventually, the practice of issuing bills in the Chancery jurisdiction began to grow.
The rigidity and inflexibility of the common law meant that the common law writs
were increasingly unable to adapt to new situations of unfairness. The hardship that
this caused forced more applicants to issue bills for relief in the Chancery jurisdiction.
A body of equitable decisions began to accumulate and equity started to assume the
task of correcting the deficiencies of the common law. No clear limitations were
imposed on the ambit of the equitable petitions during this period, although it was
clear that the Chancellor was not to interfere where an adequate remedy was already
available in the common law courts.

One of the established characteristics of the early Chancery jurisdiction was that the
Chancellors did not consider themselves bound by precedent. The absence of
precedent can be attributed to a number of factors. First, there was really no need for
equity to follow precedent because, acting as a correction of the law, in the early
stages it did not actually constitute a body of law itself. Secondly, the Chancellors
were still in the process of forming their own practices and procedures for dealing
with individual petitions. Rigid adherence to previous determinations would have
been contrary to the fundamental nature of equity during this time.
Gradually, however, as the equitable jurisdiction grew and an accumulated body of
decisions emerged, the practice of following a previous equitable decision became
quite common. This was partly due to the natural desire of the court to establish some
consistency in their decision-making, particularly with the growing number of
petitions.
The use of precedent in early equity differed markedly, however, from its common
law counterpart where, depending upon the status of the particular court involved, the
precedent had actual authority. In the early stages of Chancery, the use of precedent
was primarily for the purposes of analogy. Quite often, if substantial factual
differences existed, previous decisions were ignored altogether. Hence, the use of
precedent did not hinder the discretion of the Chancellor; it simply conferred a greater
range of considerations. No Chancellor felt bound to reach the same conclusion as
had previously resulted. However, comparing and contrasting the previous reasoning
was often found to be extremely helpful.
The relevance of precedent increased during the later years as a greater body of cases
accumulated. By the 18th and 19th centuries, substantive equitable principles had
emerged and, inevitably, previous decisions assumed a far greater significance.

The Formative Period

It was not until the 16th century that the Chancellor and his Office of Chancery
acquired the characteristics of a court. By the second half of the 15th century, the
Chancellor had the power to issue a decree upon his own authority without reference
to the King’s Council. This gave the equitable jurisdiction greater autonomy and, by
the second half of the 16th century, the Court of Chancery had well and truly assumed
judicial functions; the determination of petitions was more organised and a judicial
foundation was forming.
It became more usual to appoint a Chancellor who was legally trained. Inevitably, the
appointment of legally trained Chancellors produced a more legal and formalised
environment. Petitions were determined by Chancellors trained in the law and,
therefore, more readily capable of discerning its deficiencies. The creation of a more
definite court of Chancery created a sense of unease in the courts of law. Common
law judges felt threatened by the accumulation of power in the Chancery Courts and
became extremely protective of their jurisdiction.
Particular hostility was displayed by the common law courts concerning the power of
Chancery to issue injunctive relief. This controversy was given renewed vigour
during the reign of James I when the common law claimed that equity did not or
should not have the jurisdiction to issue injunctive relief for or against a judgment at
common law. During this period, equity had assumed a practice of issuing what was
called a ‘common injunction’ to prevent a person from proceeding at common law or
executing a judgment obtained at common law where it would interfere with an
equitable right.
In the celebrated case of The Earl of Oxford, the King found in favour of the Court of
Chancery’s right to issue a common injunction. This did not, however, mean that the
Court of Chancery asserted any superiority over common law injunctive relief.
Equitable injunctive relief, if granted, was to be directed personally against the parties
where it would be inequitable for the common law judgment to be enforced. This
decision was a landmark for the Chancery jurisdiction as it prevented common law
judgments or rights from overwhelming the operation of the equitable jurisdiction.
The Earl of Oxford’s case gave the equitable jurisdiction a clear legal mandate.
Following this decision, little development occurred in the Court of Chancery up until
the appointment of the Earl of Nottingham as Chancellor in 1673. Lord Nottingham
was a very learned man who was responsible, over a course of nine years, for
establishing a rationalised body of equitable principles and remedies. For this reason,
Lord Nottingham is often referred to as the ‘father of equity’.
A similar successor, Lord Hardwicke, was appointed in 1736. He presided in the
equity jurisdiction for a period of 20 years, during which time he developed the
foundation introduced by Lord Nottingham. A clear spirit of equity began to develop.
Not only did equity emerge as a significant body of law, it also established a more
identifiable methodology. Together, Lords Nottingham and Hardwicke transformed
equity into a formalised body of law, structured and legalised but still retaining its
essential discretionary, corrective character. Under the stern guidance of these two
Chancellors, equity became a more identifiable source of law.

The Period of Systemisation

The third historical period of equity traces the evolution of the Court of Chancery
down to the introduction of the Judicature Acts in 1873.
It was during this period that equity began more definitely to lose its arbitrary and
capricious approach that had so clearly characterized its early operation and become a
more positive, systemised body of law.
Some of the primary developments that emerged during this period included the
creation of the ‘use’ (the modern equivalent being the trust) – the emergence of an
organised body of principles dealing with the implementation of the use and the
introduction of the modern rule against perpetuities.
It was during this time that equity first represented a real challenge to the common
law, and the possibility of a conflict between legal and equitable principles became
more realistic. The emergence of equity as an independent, systemised body of law
meant that for the first time it could actually challenge the operation of common law.
Nevertheless, despite the fears expressed by many common law judges, it was very
unlikely that equity would ever threaten the operation of the common law; the whole
purpose of equity was to work with the common law in order to achieve a more
universalised justice. Equity was dependent upon common law and was not set up to
overwhelm it. If the common law was abolished or destroyed, equity could no longer
operate as a correction of the existing law; it would have no foundation. Considered in
this light, the possibility of a conflict was improbable. Nevertheless, this did not
prevent the development of widespread fear and uncertainty about the exact character
of the relationship between common law and equity. This was one of the primary
incentives for the introduction of the Judicature system in 1873.
Eventually, however, it was felt that a complete administrative overhaul of both
systems was necessary, and discussions concerning the introduction of the Judicature
system were initiated. The primary purpose underlying the implementation of the
Judicature system was administrative efficiency. There were many practical
difficulties associated with the administration of two separate courts, and it was felt
that these might be ironed out within a system of merged administration.
Before the Judicature system was introduced, the common law courts were generally
unable and unwilling to administer any part of the equitable jurisdiction. This
effectively meant that each court professed an understanding of principles and
remedies within their own jurisdiction, but refused to examine, apply or administer
principles existing in separate jurisdictions.
Inevitably, the segregation between two systems of law produced substantial
difficulties (particularly as equity was dependent upon the common law). A common
law judge faced with an equitable matter would simply refer the matter to the Court of
Chancery rather than confront the equitable principle; it was as if equity did not
actually exist for the common law.
A further difficulty was that there was always a danger that an applicant with an
equitable matter would mistakenly commence an action in a court exercising common
law jurisdiction and have the matter dismissed altogether. The Court of Chancery
disclaimed all authority to sit as a court of appeal from the courts of common law, or
to exercise any power over their judgments. In order to achieve a final result, in many
cases it was necessary for the applicant to bring two separate actions. This process
was costly and time-consuming. The connection between principle and remedy
became disjointed and unduly technical. Inevitably, these difficulties engendered a
great deal of criticism and demands for change.

The English Judicature Act of 1873 abolished the old courts so that a High Court of
Justice with a Court of Appeal replaced Chancery, Common Pleas, Queen’s Bench
and Exchequer Courts. This High Court of Justice was divided into five divisions (one
court with five separate sections): Chancery, Queen’s Bench, Common Pleas,
Exchequer and Probate, Divorce, and Admiralty. The divisions of the new court were
utterly different from the old independent courts. Business was divided between the
courts and every judge of each division was bound to administer whatever rules of
law (meaning common law or equity) were applicable in the circumstances. It was no
longer possible for a division to refuse a matter because it was legal or equitable in
nature; each division had jurisdiction over both areas expressly conferred upon it.
Overview of the Judicature System
An overview of the provisions of the English Judicature system is set out below:
• The Act introduced a new court which had both a legal and an equitable
jurisdiction
The old Court of Chancery was abolished and one Supreme Court with two
divisions was established. This effectively meant that an action with legal and
equitable components no longer had to be brought in two separate courts; it
could be completely dealt with in the one jurisdiction.
• The Act introduced a single, consistent method of procedure
The Judicature system ensured that every division of the new merged
jurisdiction administered a single method of procedure. All old forms of
procedure were abolished. A ‘statement of claim’ replaced the declaration and
bill in equity; a ‘defence’ for a plea and answer and a ‘reply’ for the
replication.
• The Act introduced concurrent jurisdiction over law and equity in all divisions
• The Act set out that equity would prevail over the common law whenever there
was a conflict
• The Act abolished the common injunction and replaced it with a new
jurisdiction giving the court the right to grant an injunction in all cases where
the court felt it to be ‘just and convenient’
The common injunction was necessary where two separate courts existed so
that equity could prevent the common law from overwhelming its jurisdiction.
It became redundant in a merged system administering law and equity
concurrently.

Development of Merged Administration

The fusion introduced by the Judicature system was purely administrative in nature,
as it was only intended to merge the courts and court procedure rather than the
substantive principles existing within common law and equity. Nevertheless, this does
not prevent the conclusion that, within such a framework, a greater conceptual
interaction is likely to occur, encouraging an increased interaction or communication
between existing principles, whatever their jurisdictional origin. Whilst both
jurisdictions are displaying an increasing interest in each other, encouraged by the fact
that both are administered in the same court by the same procedures, this interest
refers more to the desire for guidance and analogy rather than any categorical
doctrinal fusion. Courts are beginning to consider how the two jurisdictions can be
rationally coordinated rather than indiscriminately merged.