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1
An overview of equity

What is equity?
A map of equity
The maxims of equit y
What ' s online?

What is equity?
[1 .1] The word 'equity' is one of the most ambiguous in the law. Its most obvious meaning is fairness
and justice.! Many would argue that equity is the overriding goal of all law. How could the law ever justify
unfair or inequitable outcomes? But a moment's thought will show that applying, without more, the criterion
of 'fairness' to solve all legal problems is open to serious objections. Decisions will inevitably reflect the
subjective beliefs and values of the decision-maker as to what Is fair. In a pluralist democracy disputes about
what Is fair or equitable are settled by elected legislators, not by unelected judges, except where legislation
has explicitly authorised judges to determine cases by reference to considerations of fairness.! Judges do not
assess what is equitable without reference to some standard or benchmark.
[1.2] Secondly, equity sometimes refers to the principles applied by judges where the law is deficient
for some reason. Aristotle is the first recorded writer to define 'equity' in these terms. In Nicomachean Ethics,
Aristotle contrasted law, which was said to be 'universal' in its application, with equity which was seen as 'a
correction of law where it was defective owing to its universality',! We might nowadays say that the law is only
'universal' in the sense that in a society based on the rule of law there is an expectation that like cases will be
treated in a like way. The complexity of society in practice means that few legal rules, unless stated at a high
level of generalisation, can be described as being of 'universal' application. Even if they can, it is doubtful
whether equity should today be invoked in order to correct specific injustices caused by their over-rigid appli-
cation. The preferable response in a democratic society to a legal rule that cannot do justice in an individual
case is to invite the legislature to reform the law. But Aristotle anticipated the lawyer's idea of equity in two
respects. First, equity corrects, or supplements, the law but does not replace it. The fact that equity modifies
the application of the law in specific instances does not impair the legitimacy of the law in those cases where
there is no need of equity. Secondly, some equitable doctrines can be explained in terms of the dilemma of
'universality' in the law: a soundly based legal rule of general application can on occasions be exploited for
improper purposes. For example, where the law requires some contracts to be in writing equity can modify the
writing requirement where its application would cause injustice.!

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Although some applications of Australian equity can be explained in Aristotelian terms, the Australian
model of equity, taken as a whole, does not fit Aristotle's notion of equity. Instead, in common with equity in
other common law jurisdictions, the model applied is that of institutional equity.

Institutional equity
[1.3] The essence of Institutional equity Is the creation of a special court, distinct from the courts ad-
ministering the general law, having the power to modify or correct the general law. In England that court was
the Court of Chancery until the enactment of the mid-nineteenth-century judicature legislation. In Australia it
is the several courts - which include the High Court, the Federal Court, the Supreme Court of every State and
Territory, and numerous Inferior courts - which have inherited the jurisdiction of the Court of Chancery. Al-
though that court no longer exists, its defining characteristics have been transmitted to other courts.
[1.4] This section provides a brief account of the history of equity. In reading this history, two points
should be kept in mind.
First, the paradox of institutional equity is that it Is premised on the existence of a court which no
longer exists. The Court of Chancery, which administered equity doctrines developed by chancellors and other
equity judges, was abolished by the judicature legislation of the mid-nineteenth century.! The legislation was
enacted in all States except New South Wales which retained a separate court of equity until 1972.! Courts
applying equity today do not have to administer equity In exactly the same way as It was administered by the
Court of Chancery Immediately before its abolition. Equitable principles are flexible and respond to changes
In social and economic conditions. For example, the law of resulting and constructive trusts has had to be
adapted to changes in patterns of family home ownership in the late twentieth century brought about by the
ready availability of mortgage finance..!
Secondly, the Court of Chancery never had, save possibly in the earliest period of the Chancellor's jurisdic-
tion, any general power to correct a common law rule when the rule caused injustice. Equitable intervention is
significant in some areas of law, particularly property law, but slight in others, such as tort law. Precisely when
equity modifies the law is not deducible by logical proposition. The scope of equity's jurisdiction can only be
determined by reference to the history of the jurisdiction - although, as with all judge-made law, It Is possible
to infer that equity will modify the law on one matter from the fact that it already intervenes in another,
closely-related, matter. For example, once it had been established that a contract was voidable for duress, no
great extension of principle was involved in holding that a contract was also voidable for undue influence.

The emergence of Institutional equity: medieval origins

[1.S] Institutional equity has Its origins In the state of fourteenth-century English common law and, In
particular, In the rigidity of the procedures for initiating writs to commence a common law action.!
Medieval common law was a highly centralised system of justice, with processes initiated by the issue of a
writ by Chancery, which functioned principally as the royal secretariat. The issue of writs was the basis of the
formulary system of law - claims could only be brought before a common law court if the facts fitted within
the formula, or wording, of a writ issued by Chancery. Once a writ had been issued, the complaint would be
heard by jury trial)~
[1.6] The strictness of the formulary system meant that not all complainants could obtain a writ giving
them access to the common law courts. Some litigants who could not bring their complaint within the formula
of the writ petitioned the king, who retained an overriding power to administer justice. The king investigated
some of these complaints himself but increasingly adopted the practice of referring petitions to the Chan-
cellor, who was the king's first minister and the head of the Chancery. The petitions which the Chancellor

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investigated were varied and not confined to what we would now term equity. If there was any pattern, it was
that the administration of justice had broken down and that the petitioner needed the king's assistance in
enforcing his or her rights. From the late fourteenth century the Chancellor began hearing petitions in his own
right.11
[1 .7] Most early chancellors were churchmen who had legal training in civil and canon law and in some
cases had practised In ecclesiastical courts. They did not apply civil or canon law but their rulings were Inev-
itably influenced by their knowledge of these systems. Although some chancellors, such as Sir Thomas More
(1529-33), had a common law background, the practice of appointing legally qualified chancellors with com-
mon law experience only became settled in the late seventeenth century.
[1.8] There was no question at that time of chancellors correcting or modifying the common law -
there was little common law which could meaningfully have been corrected. The common law writs did not
presuppose the existence of detailed legal rules, such as we now apply in the law of tort and contract. Any
doctrinal issue raised by the plaintiff's proof of the matters alleged in the writ were in practice settled by the
jury verdict, not by judicial ruling. As Sir Thomas More remarked,

'[the common law judges] may by the verdict of the jury cast off all quarrels from themselves upon them,
which they account their chief defence•.!!

[1.9] The real differences between the common law and equity in its formative stage concerned not
substantive law but the procedures applied by chancellors to obtain evidence. The action was begun not by a
writ but by a simple summons to appear before the Chancellor. Failure to comply with the summons would
render the defendant liable for contempt of court. Evidence was taken by interrogatories (questionnaires) or
written depositions. The Chancellor did not work with a jury. In practice he collected evidence until he had ob-
tained enough to justify taking action.
[1.10] The fifteenth century, when these procedures were developed, was the period in which uses (or
trusts) of land were enforced by chancellors. Disputes typically arose when the feoffee (trustee) of land,
who was bound to hold the land for the benefit of the cestui que trust (beneficiary), claimed the land for
himself. The common law courts could do little to prevent the trustee from obtaining a personal advantage
from the trust, because its methods for obtaining evidence were not suited to discovering the terms on which
the trustee had agreed to hold the land. They could be ascertained, however, as a result of interrogatories
administered by the Chancellor. Upon proof of the terms of the trust, the Chancellor made orders to protect
the beneficiary's interest in the land. The basic features of the law of trusts therefore emerged from the orders
made by chancellors to protect the interests of beneficiaries.
Chancellors enjoyed considerable discretion In making orders. Chancery was a court of conscience in
which defendants could be compelled to do whatever conscience required. 'Conscience' did not, however,
mean 'arbitrary justice', and chancellors generally followed the practices of their predecessors, where these
were known. The Chancellor's decrees were fashioned to meet the circumstances of the case. They bound the
parties to the case but no one else. 12

Competition between common law and equity

[1 .11] The period from the sixteenth century to the early seventeenth century In England was one of
Jurisdictional conflict and Jealousy between the common law courts and Chancery. The Chancellor's court was
caught up in the great constitutional struggles of that age. Chancery jurisdiction rested on the sovereign's
prerogative power to administer justice, which was challenged by a parliament increasingly inclined to test the

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limits of the prerogative. The resolution of the dispute between the Chancellor and the common lawyers es-
tablished the basis of the relationship between the common law and equity which still exists today.
[1.12] A particular grievance of common law judges was the Chancellor's power to grant an order
known as a 'common Injunction' to prevent the enforcement of a judgment obtained in a common law court.n
If P obtained a common law judgment against D which the Chancellor considered had been procured by uncon-
scionable conduct, an Injunction would be granted to prevent P from enforcing the judgment. The Injunction,
although not formally an appeal, enabled D to avoid the consequences of the adverse judgment against him
or her.
[1 .13] The dispute culminated in the celebrated Earl of Oxford's ca# in which Chief Justice Coke chal-
lenged the jurisdiction of the Chancellor, Lord Ellesmere, to award common injunctions. Although Coke had
the law on his side, 15 King James I ruled in favour of equity, accepting Ellesmere's argument 'that when a
judgment is obtained by oppression, wrong and a bad conscience, the Chancellor will frustrate and set it aside,
not for any error or defect in the judgment, but for the hard conscience of the party'.16 The king's ruling was
a landmark in the development of equity because it established for the first time the supremacy of Chancery
over the common law in cases of conflict between the jurisdictions. The practical significance of the decision
was, however, limited. Seventeenth-century chancellors were sparing in their award of common injunctions,
which remained of doubtful legality in spite of the royal ruling. 17 The Court of Chancery might have been
abolished in the course of the constitutional upheavals of that century, but the chancellors of the late seven-
teenth century were careful to respect the boundaries between Chancery and the common law courts).!
[1.14] By the end of the seventeenth century, Chancery's work, particularly in enforcing uses and pre-
venting oppression in exercising contractual rights, was recognised as being indispensable to the landholding
society of the time. The political turbulence of the century was succeeded by a period of reform and consoli-
dation undertaken by lawyer chancellors such as Lord Nottingham (1673-82), Lord Hardwicke (1736-56) and
Lord Thurlow (1778-83 and 1783-92). Lord Nottingham, for example, was responsible for the development of
the mortgagor's equity of redemption, the rule against perpetuities, and for formulating the principles gov-
erning relief against unconscionable bargains. 19
[1.1 S] By the end of the eighteenth century most of the basic equitable doctrines applied today had
been established, although they have inevitably undergone a continual process of renewal and restatement
to meet the needs of industrial and post-industrial society. In one vital respect the constitutional battles of
the seventeenth century had left their imprint on the shape of the legal system. The relationship between
the common law and equity was settled. Equity was said to be a 'gloss' on the common law, modifying the
common law where the enforcement of legal rights was harsh or oppressive, but not claiming to be a parallel
or rival system of law.20

Reform and the judicature legislation

[1 .16] In the early nineteenth century the Chancery court attracted criticism, principally on account of
its delays in hearing and disposing of cases. The Chancellor for most of this period, Lord Eldon, did valuable
work in restating existing doctrine.21 But he was slow to decide cases, and the caseload of Chancery was too
heavy to be carried by a single judge.22 The delays of Chancery were condemned by Charles Dickens in Bleak
House, with its extended metaphor of the 'fog of Chancery' enveloping the Chancellor and his court.23
[1 .17] One defect was that claimants might have to bring more than one set of proceedings in order to
obtain the relief they wanted. A plaintiff who wanted to obtain an order of specific performance of a contract
would have to sue in a common law court in order to establish the validity of the contract, unless its validity
was conceded, and then obtain an order of specific performance in Chancery. It was not equity that was defect-

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ive in such a case but the system of civil justice that separated the administration of equity from adjudication
by the common law courts. A steady flow of mid-nineteenth-century legislation patched up the system of sep-
arate equity.~ Nonetheless, it was becoming obvious that more radical reform was needed.
[1.18] The Judicature Acts 1873-6 enacted reforms which improved the administration of common law
and equity but which, with a few exceptions, 25 did not change the substantive law of either. The Supreme Court
of Judicature Act 1873 (Imp), the principal Act, made the following major changes:

(1) The old superior common law courts were abolished and replaced by divisions of a new High Court
of Justice, including common law divisions, such as t he Queen's Bench, as well as the Chancery Div-
ision. The divisions reflected the conveniences of legal specialisation rather than the nature of the re-
lief available. Every division was empowered to administer common law and equity.

(2) A unified code of procedure applied to both common law and equitable claims. Equity's discovery
and Interlocutory procedures were extended to the common law.

(3) Section 24 made provision for giving effect to equitable estates, interests and defences In legal pro-
ceedings in the manner that the Court of Chancery would have done. The section also provided for the
recognition and enforcement of legal estates, interests and titles as they had been recognised before
the enactment of the section. Section 24(5) abolished the 'common injunction', which had been the
flashpoint for judicial disagreement in the Earl of Oxford's Case, while preserving the power to issue in-
junctions In cases in which the jurisdiction to do so was established.

(4) Section 25 resolved a number of conflicts between common law and equity either by providing that
the equitable rule was to prevail or by enacting new law. Section 25(11) provided:

Generally, in all matters not herein-before mentioned, in which there is any conflict or variance
between the Rules of Equity and the Rules of the Common Law with reference to the same matter, the
Rules of Equity shall prevail

The section confirmed the supremacy of equity in the event of a conflict between common law and equity
which was not otherwise resolved by the judicature legislation. At first sight It might seem that the subsection
added nothing to the Earl of Oxford's Case, which had established the primacy of equity more than 250 years
earlier. But s 24(51 of the 1873 Act had abolished the common injunction, which had been Chancery's means
of ensuring that its principles prevailed in cases of conflict, and a statutory basis for preserving that suprem-
acy was needed.
[1. 19] The enactment of the Judicature legislation Is a landmark In equity, but the limits of the legisla-
tion need to be kept clearly In mind. The legislation was never Intended to fuse or Integrate legal and equitable
rights. To justify the merger of legal and equitable rights by reference to the legislation has been described
as 'fusion fallacy'.26 An example of 'fusion fallacy' is to assume that a contract to create a lease, enforceable
in equity because it has been partly performed by the tenant, confers the same rights and imposes the same
duties as a common law lease created by the execution of a deed. 27 Regardless of whether or not it is a fallacy,
it is certainly a misreading of history. The legislation would not have been enacted in the first place if its de-
clared purpose had been to merge the substance of common law and equity.
[1.20] Arguments about the intention of the English legislature in 1873 are irrelevant to deciding
whether particular common law and equitable doctrines should be merged in twenty-first-century Australia,
as proposals to fuse or merge doctrines must be considered on their merits. The history of the application of a
legal or equitable doctrine is obviously relevant to the analysis, and the fact that the dual system of common
law and equity has worked satisfactorily for many years supports the well-known adage 'if it ain't broke, don't

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fix it'; however, the reason this dual system has worked has nothing to do with the judicature legislation.
Arguments about whether the common law and equity ought to be merged, and if so how complete the mer-
ger ought to be, arouse surprisingly strong emotions.28

The reception of equity in Australia

[1.21] The immediate need of the earliest British settlers in AustraUa was to establish a stable legal
order. The First Charter of Justice in 1787 created a Court of Civil Judicature which did not distinguish between
common law and equity. The New South Wales Act 1823 conferred on the newly created Supreme Court the
power to exercise locally the jurisdiction that the Chancellor exercised in England.29 The influence of particular
personalities shaped the administration of equity within the Supreme Court framework as much as any con-
sideration relating to the place of equity within a common law system. It was pressure exerted by the State's
first equity judge, Willis J, which resulted in the provision for the appointment of a Primary Judge in Equity
by the Admi nistration of Justice Act 1840.30 Thereafter, instead of steps being taken to integrate common law
and equity procedures, the tendency throughout the nineteenth century was to emphasise the separation of
equitable business from common law matters.31 The identification of a judge as the Primary Judge in Equity
(later the Chief Justice in Equity) encouraged the growth of an Equity Bar specialising in matters coming within
the judge's jurisdiction, just as Chancery in England stimulated the creation of a Chancery Bar.
[1.22] The Supreme Court structure created by other States required judges to administer both com-
mon law and equity; however, this did not mean that the common law and equity were fused procedurally or in
substance. The pre-Judicature Act institutional model of English equity was strictly applied. In practical terms
it meant that judges who devoted most of their time to deciding common law claims were sometimes required
to hear equity suits determined by equity procedures. In the nineteenth century it was unusual for a Supreme
Court to consist of more than two judges, and confining the work of a single judge to equity matters would
have been considered a misallocation of judicial resources. The New South Wales experience was different
both because judicial resources permitted equity specialisation, and the specialisation in turn reflected the
volume of commercial and property litigation in Sydney which ensured a heavy workload for the equity judge.

The judicature legislation in Australia

[1.23] While most Australian States were content to apply the English system of equity there were some
imaginative early attempts to improve on the model. The most interesting of these was the South Australian
Supreme Court Procedure Act 1853, enacted 20 years before the English judicature scheme was introduced.32 It
anticipated that legislation by conferring power on the Supreme Court in any proceedings to make orders of
specific performance of agreements or to grant injunctions. Section 175 went even further in permitting ac-
tions at law to be brought to enforce exclusively equitable obligations, such as breach of trust.
[1.24] Another experiment in the substantive fusion of common law and equity was Queensland's
Equity Procedure Act 1873, promoted by Sir Samuel Griffith.33 This measure permitted common law courts
to grant monetary relief in cases where an 'equitable claim or demand' had been made. Unusually, it made
the monetary award dependent upon the plaintiff establishing an entitlement to a discretionary equitable
remedy.
Both experiments were soon overtaken by the rapid adoption of English-style judicature legislation in all
States except New South Wales. The judicature legislation of each State and Territory is set out on the compan-
ion website to this book.
[1.25] In New South Wales legislative inertia combined with influential opposition to postpone the en-
actment of the judicature legislation for the best part of a century. The State legislature in the 1870s has

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been said to have been 'almost immune from concern for law reform'.54 Moreover, Chief Justice Stephen pro-
nounced the judicature legislation 'a great bungle'.JS Even though a Select Committee had found the equity
branch of the Supreme Court 'dilatory, expensive, ruinous to suitors and not in accord with the judicial process
of the age', the effect of the Equity Act 1880 (NSW) was to preserve the separate division of common law and
equity administration even though other English reforms were introduced, such as empowering equity judges
to determine questions of legal title and to award damages instead of, or in addition to, an injunction or spe-
cific performance.
[1.26] In most States the judicature legislation has been reduced to a short common form. A typical
provision is section 29 of the Supreme Court Act 1986 (Vic).

Law and equity to be concurrently administered

(1) Subject to the provisions of this or any other Act, every court exercising jurisdiction in Victoria in
any civil proceeding must continue to administer law and equity on the basis that, if there is a conflict
or variance between the rules of equity and the rules of the common law concerning the same matter,
the rules of equity prevail.
(2) Every court referred to in subsection (1) must give the same effect as before the commencement of
thisAct-
(a) to all equitable estates, titles, rights, reliefs, defences and counter-claims, and to all equitable
duties and liabilities; and
(b) subject thereto, to all legal claims and demands and all estates, titles, rights, duties, obligations
and liabilities existing by the common law or created by any Act-
and, subject to the provisions of this or any other Act, must so exercise its jurisdiction in every pro-
ceeding before it as to secure that, as far as possible, all matters in dispute between the parties are
completely and finally determined, and all multiplicity of proceedings concerning any of those mat-
ters is avoided.

[1.27] In New South Wales the system of separate equity, administered in a court applying special
equity procedures, continued until 1972. It was made workable by the enactment of 'scissors and paste' meas-
ures which ameliorated the worst defects of a separate system of equity. Judicature legislation was eventually
enacted in 1970 and 1972.~

The place of equity in the modem law

[1.28] Two related conclusions can be drawn from this brief account of the history of equity.
The first is that the subject-matter of equity can only be determined by reference to legal history. It cannot
be logically deduced from general propositions.
The second is that the existence of a separate body of equitable principles means that much of Australian
private law exhibits a dual character. Large parts of the law, including contract and property law, are drawn
from both common law and equity. Whether the dual system of common law and equity should be preserved,
in whole or In part, in the twenty-first century is a question that every lawyer and law student interested In the
rational development of the law should consider.37

:A map of equity
[1.29]

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We now turn to t he task of describing the existing dual system of common law and equity. The equity student's
most immediate need is an overview which identifies those areas of private law which are equitable in charac-
ter. The remainder of this chapter sketches out such a map.

Equitable remedies
[1.30] Most equity books relegate discussion of equitable remedies to the final chapters. This approach
carries the risk that the significance of the remedies will be underestimated. It has been said that in equity,
'right and remedy are indissolubly connected',~ and equitable doctrines cannot be properly understood
without a good understanding of the remedies available to the successful plaintiff. For example, a claim for
breach of fiduciary obligation may be tacked onto an action for breach of contract in an attempt to compel the
defendant to account for gains made, or property acquired, as a consequence of the breach.1! Equitable claims
-------- . --------
are 'remedy driven', in the sense that attempts are somet imes made to characterise defendants as equitable
wrongdoers for the purpose of obtaining a distinctive equitable remedy such as an account of profits or a
constructive trust. The number and distinct remedial aims of equitable remedies, sometimes referred to as a
'smorgasbord', in contrast to the common law which only makes damages awards, encourages attempts to fit
the facts of a case to the criteria of a particular doctrine in order to achieve the remedial outcome desired by
the plaintiff. If the 'remedy driving' is successful it may result in the distortion of the fundamental ideas of
equity. Generally speaking, Australian judges have not permitted basic equitable concepts to be stretched or
distorted solely for the purpose of enabling a plaintiff to obtain relief which is unavailable at common law. It
is, however, important for the student to be aware of the remedies available for all equitable claims. An under-
standing of equitable relief is the key to understanding equitable doctrines and principles. For this reason a
discussion of equitable remedies is dealt with early in this book.
[1.31] A fundamental distinction is made between the exclusive jurisdiction and the auxiliary jurisdic-
tion of equity. The exclusive jurisdiction of equity consists of matters which prior to the judicature legislation
could only be adjudicated upon by Chancery, and not by common law courts. They include the enforcement of
trusts and other fiduciary obligations, equitable obligations of confidence, and the rescission of contracts on
equitable grounds such as misrepresentation and unconscionable conduct.
Only equitable remedies can be awarded when equity acts in its exclusive jurisdiction. Common law
damages are not available, although equitable compensation - a monetary remedy compensating for financial
loss caused by a breach of equitable obligation - can be ordered.~
Equity acts in its auxiliary jurisdiction when it acts in support of legal rights. This most often occurs when
a tort or breach of contract has been committed and common law damages are an inadequate remedy for the
plaintiff. The plaintiff's legal rights are then enforced by the award of an equitable remedy. The remedy of
specific performance will be granted, for example, to enforce a contract for the sale of land because damages
are, as a matter of course, considered inadequate to compensate for the breach. Similarly, an injunction will
be awarded to restrain the commission of trespass to land because damages will usually be an insufficient
remedy.
[1.32] The distinction between the exclusive and auxiliary jurisdictions of equity creates a hierarchy of
remedies. Only equitable remedies can be awarded in the exclusive jurisdiction; common law damages are
never available. In the auxiliary jurisdiction, however, a court considers whether damages will adequately
compensate for the plaintiff's loss, and only if that remedy is not adequate will the award of an equitable
remedy be considered. Damages are inadequate if a money award will not enable the plaintiff to purchase a
market substitute for the defendant's performance. The order of specific performance or an injunction com-

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pels the defendant to perform his obligations under a contract or prevents a breach of a duty owed by the
defendant to the plaintiff.
Whether a hierarchy of remedies ought to exist is a controversial question which equity students should
consider. Opponents of the hierarchy argue that the only basis on which any remedy should be awarded is its
appropriateness to do justice on the facts of the case.41
[1.33] The objective of most common law claims is simple: it is to obtain compensation for the plain-
tiff's loss.42 Equitable relief, on the other hand, pursues a variety of aims, which are discussed in the next
chapter.43
[1.34] The following is a brief summary of the principal grounds of equitable intervention and the relief
available.

Contract

[1.35] The common law determines the existence of a contract, and the rights and obligations of the
contracting parties, but equity modifies contractual obligations and provides relief both for breach and where
the plaintiff's consent to the agreement has been vitiated. The principal areas of equitable intervention are as
follows:

The creation and modification of enforceable promissory obligations. The common law rules of offer
and acceptance, consideration and intention to create legal relations determine which promises are
legally enforceable. In contrast, the equitable doctrine of estoppel prevents the enforcement of some
promises which would otherwise give rise to legal obligations. Although not developed as a mode
of promise enforcement, estoppel doctrines, particularly proprietary estoppel, sometimes have the
effect of enforcing promises.

Setting aside contracts44 on the ground that a party's consent was vitiated by fraud, duress,
unconscionable conduct, undue influence, mistake, misrepresentation, and in some cases where a
guarantee is entered into without a full understanding of its nature and effect. Rescission restores the
parties to their pre-contractual position.

Rectification of the terms of a written contract where they do not conform to the agreement the par-
ties made.

Assigning the benefit of the performance of contractual obligations in equity. The judicature legisla-
tion introduced a procedure for assigning the benefit of contracts;~ it did not supersede the equit-
able principles of assignment which continue to apply when the statutory criteria are not met.

Preventing disproportionate relief of a plaintiff as a result of the defendant's breach of contract.

Where a contractual term specifies a sum payable by the defendant upon breach of contract, and the
sum exceeds the maximum loss that might be incurred on breach, equity may strike down the term
on the ground that it constitutes a penalty. Similarly, equity will give relief against a contractual pro-
vision entitling the plaintiff to forfeit the defendant's property upon breach of a contractual term if
forfeiture would be a disproportionate response to the breach.

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•
Enforcement of the contract or of its particular provisions. The remedy of specific performance
compels performance of a contract according to its terms. Particular provisions of a contract can also
be enforced, positively or negatively, by the award of an injunction. In contrast to the other examples
of equitable intervention listed in this section, equity here acts in its auxiliary, not its exclusive, juris-
diction. The basis of equitable intervention is that common law damages would be inadequate.

Property

[1.36] Equity's principal contribution to property law is the trust, which imposes obligations on a title-
holder of property to manage the property for the benefit for other individuals or for legally approved
purposes, such as charitable purposes. But while the trust was equity's earliest and most enduring contribution
to property law, there are many others. Even legislation, such as the Torrens system of registered land titles,
has not significantly modified the importance of equity in property law. Apart from the trust, equitable inter-
vention includes:

The recognition and enforcement of equitable titles to property. The common law fee simple, life
estate, lease and mortgage can also be created as equivalent equitable interests in property.46

•
Equity also recognises and enforces new interests in property which have no common law counter-
part. One example is the mortgagee's equity of redemption which not only entitles a mortgagor to
redeem a mortgage after the legal date for repaying the mortgage debt has passed but also consti-
tutes a marketable property interest.47 Another is the restrictive covenant affecting land. A promise
by D made to P that D and his successors in title will not undertake an activity on D's land, such as
constructing more than one dwelling, will, if it benefits P's land, be enforceable not only by P against
D, but also by P's successors to the land against D's successors. The characteristics of equitable prop-
erty interests are considered in chapter 8.

The creation of special rules governing the assignment of property interests. An assignment is
the immediate transfer of an interest in property. Property, for this purpose, includes intangible
property, such as a chose in action, for example the right to enforce a contract. Common law and
statute prescribe formalities for the transfer of most forms of property. Equity enables property to be
assigned where the method of assignment does not comply with these rules. It also enables 'future
property', meaning property to which the transferor does not at present have title, to be assigned.
This does not mean that equity disregards form or adopts an 'anything goes' approach to the assign-
ment of property. As chapter 9 shows, equity applies its own requirements, in some cases by requir-
ing the assignee to provide valuable consideration for the assignment, and in other cases by requiring
the assignor to have taken all the legal steps necessary for him to complete the assignment, even if
other legal steps have not been taken by the assignee or by a third party.

The recognition and enforcement of proprietary interests by application of the doctrine of equitable
estoppel. Suppose that D promises P that he will grant P an interest in his (D's) property if P builds on
D's land. P takes D at his word and builds a house on D's land. If D refuses to give P any interest in the

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property, equity will grant P equitable relief. This can include awarding Pan interest in D's land.48
The nature of P's interest will, like all equitable relief, be determined by the exercise of equitable dis-
cretion. Estoppel is discussed in chapters 7 and !!-

The application of special rules, known as tracing rules, to identify a claimant's property. If P's prop-
erty has been mixed with D's, or with the property of a third party, before being given to D, then P
can only recover the property, or a share of it, if she can show that it is hers. The common law elabor-
ated some basic rules for tracing property, but for most purposes they have been replaced by equity's
identification rules. They are explained in chapter 21 .

Equitable intervention in the law of deceased estates. A number of equitable doctrines deal with
the distribution of property under wills and intestacies. Several enable a deceased's intended dis-
positions to take effect notwithstanding her failure to comply with statutory formalities.49 These
doctrines can be rationalised as instances of equity looking to the intent of a transaction, and not to
its form. A discussion of these doctrines belongs to books on succession, and accordingly they are not
discussed in this text.

Civil wrongs
[1.37] Equity also relieves against the consequences of forms of wrongdoing that are only recognised
in equity. These can be considered the counterparts to common law torts, but with the important qualifica-
tions that equitable bars and remedies are not comparable to common law defences, and that the grant of
common law damages is not an available remedy. The principal equitable wrongs are:

Breach of fiduciary obligation. The principles of liability for breach of fiduciary obligation are
explained in chapter 1o. The idea of a breach of fiduciary obligation can be explained by a simple
example. Suppose that a solicitor, S, misappropriates money belonging to a client, C, and pays it into
his personal bank account. Our first response is that Swill be criminally liable for theft and, depend-
ing on the facts, other offences such as obtaining a financial advantage by deception. He will also
have acted in breach of professional disciplinary rules.so The civil (i.e. non-criminal) wrong that Swill
have committed, however, is a breach of fiduciary duty. He has betrayed the trust the client placed in
him. He must of course compensate C for any loss caused by the misappropriation. But in some cases
alternative equitable relief will be relevant. For example, if S has successfully invested C's money
he must account to C for the profitable investment even if it is unlikely that C would have made the
profit for herself. The availability of gains-based remedies is one of the characteristics of breaches of
equitable obligation that distinguishes them from torts.

Equitable relief is not limited to the fiduciary who has committed the breach of obligation. Second-
ary parties, such as those who receive the proceeds of fiduciary wrongdoing, or who assist in the
breach, can also be held liable to make restitution of benefits received or to compensate for loss. The
principles of accessory liability are discussed in chapter 11.

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Breach of confidence. Suppose that P discloses a trade secret or other confidential information to
D. D then passes on the information, without authority or justification, to X. D will be liable to P in
equity for breach of confidence; X will also be liable once he becomes aware that the information had
initially been disclosed in confidence. In some cases D will be subject to a contractual obligation of
confidence; the unauthorised disclosure will then be a breach of contract. Equitable obligations of
confidence are relevant where there is no contract, for example where the disclosure was made in the
course of negotiations which were broken off without agreement being reached between the parties.
It is also a remedy for some invasions of privacy. Liability for breach of confidence is examined in
chapter 12.

Civil procedure
[1.38] The final category of equitable intervention is equity's regulation of civil litigation. Though not
covered in this book, the topic must be mentioned for the sake of completeness. Equity's inquisitorial pro-
cesses for taking accounts were superior to the common law's accounting methods in adjusting rights and li-
abilities, particularly where there were multiple parties to litigation. The principal applications are:

Contribution. Equity, operating in conjunction with the common law and statute, provides that two
or more persons who are liable for a loss are rateably (In other words, proportionately) liable to com-
pensate the plaintiff for that loss.

•
Subrogation. Where legal rights are taken over by one person from another by operation of the law,
the transferee is said to be subrogated to the rights of the transferor. A common example is that of an
insurer who is entitled to have the benefit of any claim the assured has against a tortfeasor.51 Some
applications of subrogation keep proprietary rights alive for the benefit of a party discharging an-
other's debt. If P discharges a mortgage over D's property, for example, P will take over the security
for her own benefit unless the evidence shows that the parties did not intend P to become D's secured
creditor.52

Marshalling. This doctrine regulates the enforcement of securities against a debtor where a creditor
is entitled to enforce his security against more than one asset of the debtor. Where two creditors, A
and B, are entitled to security over one asset of a debtor, and A has security over a second asset of the
debtor to satisfy his debt, A will not be allowed to exercise his rights to the first security to the preju-
dice of B who only has that security available to enforce her claim. If A exercises his rights against the
jointly secured asset, B will be entitled to security over the second asset in priority to the debtor's un-
secured creditors.

[1.39] The purpose of this list is to give the reader an overview of the principal areas of equitable inter-
ventlon. The focus has been on the contribution equity has made to private law. Equity has also made signifi-
cant contributions to public law, particularly in making available declaratory relief and injunctions against the
Crown. These are not covered in this book.
[1.40] A disadvantage of lists, shopping lists being a notable exception, is that they are apt to become
fixed and unalterable. Some aspects of equity are not included in the list set out above. Being a list of dis-
crete items, it fails to record examples of overlapping areas of intervention. For example, liability for breach
of confidence sometimes overlaps with liability for breach of fiduciary obligation. Similarly, some contracts

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which are voidable as being unconscientious bargains are also voidable on the ground of undue influence.
Moreover, some applications of equity belong under more than one heading. Assignments, for example, have
been discussed under both the contract and property headings. The student must not only understand the
subject-matter of equity; she must also understand how the different parts of equity relate to each other.

The maxims of equity

[1.41] A peculiarity of equitable legal method is that some of the principles applied by courts are en-
capsulated in 'maxims' which are often recited in judgments applying the principles. What are these maxims,
and what is their status in equity adjudication?
[1.42] To answer the second question first, the maxims are not equitable principles, still less rules, and
equity and trust problems cannot be solved solely by reference to a maxim. In fact, maxims are apt to mislead,
without knowledge of the authorities which give practical application to their content. The maxims express in
concise form certain equitable principles and themes. The principles and themes are more important than the
maxims which articulate them.
While in some cases the decision and the maxim may readily align~ the opposite is frequently so. For
example, the application of the maxim that 'equity will not assist a volunteer' (in other words, it will not assist
a party who has not provided consideration) was rejected by the High Court in Corin v PattonH .The case raised
the issue of when equity will give effect to a transfer of property when the transfer is not legally effective
because there has not been full compliance with statutory formalities. The principle of not assisting parties
who have not provided consideration was held to be irrelevant to the resolution of that issue.
[1.43] Returning to the first question, there is no fixed list of maxims, and some are more significant
than others. Commonly invoked maxims include the following:

(a) She who seeks equity must do equity. A plaintiff claiming equitable relief must perform, or be
ready to perform, her obligations arising out of the subject-matter of the dispute. For example, a
purchaser of land under an instalment purchase contract will only be entitled to equitable relief from
forfeiture of her interest in the land for non-payment of an instalment on condition that she pays all
outstanding money due to the vendor.~

(b) He who comes to equity must come with clean hands. A plaintiff will be refused equitable relief if
his conduct in the transaction in respect of which he is claiming relief has been improper. The maxim is
discussed in chapter 6 at [6.13].

(c) Equity looks to intent, rather than to form. This maxim is open to several interpretations. One is
that a court of equity examines the substance of a transaction, and not its form. This meaning is not
particularly 'equitable' because courts applying common law, as well as equity, will focus on the sub-
stance of a transaction, where it has been concealed by its form. All courts have the power to ignore
'sham' transactions, and focus on the true rights and duties created by the parties or imposed by
law.~ The maxim Is more accurately applied to discrete areas where equity can modify strict common
law rights without subverting the reality of a bargain the parties have made. One example concerns
time stipulations in contracts. Under a contract for the sale of land the parties must, at common law,
complete on the day fixed for completion of the contract. A court of equity, on the other hand, permits
completion within a reasonable time afterwards unless time has been explicitly stated to be of the es-
sence of the contract.~

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(d) Equity treats as done that which ought to be done. The idea informing this maxim is that a transac-
tion may give rise to equitable rights even though no legal rights have been created because there has
not been compliance with the necessary legal formalities. For example, an oral contract for the sale of
land is not enforceable at common law but it may nonetheless be enforced in equity if has been partly
performed by one of the parties doing acts which are exclusively referable to the contract.58

(e) Equity acts in personam. The principal significance of the maxim is historical in that all equitable
rights were once considered to be personal, rather than proprietary, just as the right to performance
of a contract is personal. On this view, a court of equity makes personal orders which operated on
the conscience of the legal title-holder. It is, however, now generally recognised that some equitable
rights, such as the rights of a beneficiary under a fixed trust, are proprietary.59 The maxim Is of some
practical importance in private international law where equitable claims are made to land outside Aus-
tralia. Courts can make personal orders affecting foreign land but cannot adjudicate directly on title to
the land.60

(f) Equity follows the law. Courts of equity recognise legal rights, interests and estates although they
will prevent the unconscientious exercise of these entitlements. Equity also sometimes applies limita-
tion statutes by analogy to applications of the statutes at common law.61 A more accurate proposition
is, however, that 'equity follows the law, but not slavishly nor always'.62

(g) Equity does not assist a volunteer. The word 'volunteer' means, in this context, someone who has
not provided consideration. In general terms, equitable relief is confined to those who have given value
in a transaction. Consideration has a broader meaning in equity than at common law, so that, for ex-
ample, in nineteenth-century marriage settlements the children of a marriage were held to be within
the 'marriage consideration' even though they had not given consideration of a kind recognised by
contract law. There are numerous exceptions to this maxim, and it has been suggested that it would be
a mistake to set too much store by it.63

(h) Delay defeats an equity. The impact of a claimant's delay in bringing an equitable claim is discussed
at [6.3]-[6.11 ],

[1.44] The maxims are discussed in greater detail where relevant to other discussion in this book and
on the companion website.

What's online?
•
Recommended further readings

Appendix of Judicature legislation

! 'I think it likely that over the years words such as unconscionable and inequitable have drawn closer to more
objective concepts such as fair, reasonable and just', Somers Jin Elders Pastoral Ltd v Bank of New Zealand [1989)
2 NZLR 180, 193.

~ An example, drawn from trusts law, is the court's statutory power to excuse a trustee from liability where 'the
trustee has acted honestly and reasonably, and ought fairly to be excused for the breach of trust .. .', Trustee Ad
1925 (NSW} s 85: see [20.20].

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