FACULTY OF JURIDICAL SCIENCES

E- CONTENT
COURSE: BALLB-Vth Sem

SUBJECT: EQUITY AND TRUST

SUBJECT CODE: BAL 506

NAME OF FACULTY: DR. ANKUR SRIVASTAVA
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Lecture-10
 LECTURE-10

WHAT IS EQUITY?
Equity to the layman means fairness and justice, but in
the legal context its meaning is much more strictly defined.
There are rules of equity: it must obey the rules of precedent
as does the common law, and its development may appear
equally rigid and doctrinal.
Yet, because of its historical development and the
reasons underlying this, there does remain an element of
discretion and the potential for judges to retain some
flexibility in the determination of disputes.
There are well-established principles which govern the
exercise of the discretion but these, like all equitable
principles, are fl exible and adaptable to achieve the ends of
equity, which is, as Lord Selborne LC once remarked, to ‘do
more perfect and complete justice’ than would be the result
of leaving the parties to their remedies at common law:
Wilson v Northampton and Banbury Junction Railway Co.
(1874) LR 9 Ch App 279, 284 (and see Lord Hoffmann, Co-
operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd
[1998] AC 1). Principles of unconscionability underpin much of
equity in its modern context.
In Westdeutsche Landesbank Girozentrale v Islington
LBC [1996] AC 669, Lord Browne Wilkinson described the
operation of equity in relation to the trust as working on the
conscience of the legal owner. Equity developed as a result
of the inflexibility of the common law; it ‘wiped away the
tears of the common law’ in the words of one American
jurist. When the common law developed the strictures of the
writ system through the twelfth and the thirteenth centuries
and failed to develop further remedies, individuals aggrieved
by the failure of the common law to remedy their apparent
injustice petitioned the King and Council. The King was the
fountain of justice and if his judges failed to provide a remedy
then the solution was to petition the King directly. The King,
preoccupied with affairs of state, handed these petitions to
his chief minister, the Chancellor. The Chancellor was head of
the Chancery, amongst other state departments. The
Chancery was the offi ce which issued writs and, therefore,
when the courts failed to provide a remedy, it was
appropriate to seek the assistance of the head of the court
system. Originally the Chancellor was usually an ecclesiastic.
The last non-lawyer was Lord Shaftesbury who retired in
1672. Receiving citizens’ petitions, the Chancellor adjudicated
them, not according to the common law, but according to
principles of fairness and justice; thus developed equity.
Early on, each individual Chancellor developed personal
systems of justice giving rise to the criticism that equity had
been as long as the Chancellor’s foot. The Lord Chancellor did
indeed sit alone in his court of equity, or Chancery, as it
became known. It was not until 1813 that a Vice-Chancellor
was appointed to deal with the volume of work. Equity began
to emerge as a clear set of principles, rather than a personal
jurisdiction of the Chancellor, during the Chancellorship of
Lord Nottingham in 1673. By the end of Lord Eldon’s
Chancellorship in 1827 equity was established as a precise
jurisdiction.
But the development of a parallel yet separate system of
dispute resolution was inevitably bound to create a conflict.
An individual aggrieved by a failure of the common law to
remedy a gross injustice would apply to the court of equity.
The Chancellor, if the case warranted it, would grant a
remedy preventing the common law court from enforcing its
order.
The catharsis occurred in the Earl of Oxford’s Case (1615)
1 Rep Ch 1, where the court of common law ordered the
payment of a debt. The debt had already been paid, but the
deed giving rise to the obligation had not been cancelled. The
court of equity was prepared to grant an order preventing
this and rectifying the deed.
The clash was eventually resolved in favour of equity;
where there is a confl ict, equity prevails. This rule is now
enshrined in the Senior Courts Act 1981, s. 49.
A series of maxims underlies the operation of equity,
establishing a series of principles. For example: ‘equity looks
upon that as done which ought to be done’; ‘he who comes
to equity must come with clean hands’; ‘equity will not allow
a statute to be used as a cloak for fraud’, are all examples of
the maxims.
The remedies developed by equity, such as injunctions
and specific performance, are, unlike the common law
remedy of damages, subject to the discretion of the judge.
Thus a judge may decide that, although a breach of contract
has been established, the conduct of the claimant is such that
an equitable remedy should not be granted. In addition, if
damages are an adequate remedy, then there is no need to
substitute an equitable remedy.
In substantive law, equity has frequently refl ected the
reality of transactions between private citizens. It recognised
the trust when the common law had refused to acknowledge
the existence of a benefi ciary and provide remedies for
breach of trust against a defaulting trustee. The concept of
the trust has been the vehicle for much creative activity on
the part of the courts of equity. The trust has developed from
an express agreement between parties to situations where
the conduct of parties has led the courts to infer or to impose
a trust.
So, equity remains a separate system of rules operating
independently of the common law. Until the late nineteenth
century it operated in a separate set of courts. So, a plaintiff
seeking both legal and equitable remedies would be obliged
to pursue an action in separate courts. Much delay and
expense ensued. The position was eventually resolved in the
Judicature Acts 1873 and 1875 which established a system of
courts in which both the rules of equity and common law
could be administered. The position had already been
ameliorated to some degree by the Common Law Procedure
Act 1854, which gave the common law courts power to grant
equitable remedies, and the Chancery Amendment Act 1858
(Lord Cairns’ Act), which gave the Court of Chancery power
to award damages in addition to, or in substitution for, an
injunction or a decree of specific performance. A claimant
can, therefore seek both damages and an injunction in the
same court.
The equitable jurisdiction is, in fact, a personal
jurisdiction operating against the conscience of the
individual, whereas the common law jurisdiction operates
against real property. Thus, an order from a court based on
equitable principles preventing a legal order being enforced
operates against the conscience of the defendant. In theory,
therefore, there is no clash between the jurisdictions. In
practice, there is a significant constraint on the common law
jurisdiction. The historical distinction does remain, however,
in the existence of separate divisions of the High Court, viz.,
the Chancery Division (which deals primarily with matters
which involve equitable rights and remedies) and the Queen’s
Bench Division (which deals primarily with matters involving
rights and remedies at common law).
So, equity represents a later development of law, laying
an additional body of rules over the existing common law
which, in the majority of cases, provides an adequate remedy:
‘Equity, therefore, does not destroy the law, nor create it,
but assists it’ (per Sir Nathan Wright LJ in Lord Dudley and
Ward v Lady Dudley (1705) Pr Ch 241 at p. 244).

MCQs
1. There are rules of equity: it must obey the rules of
precedent as does the common law, and its development
may appear equally rigid and doctrinal.
i. True
ii. False
iii. Cannot say
iv. None of these

2. The equitable jurisdiction is, in fact, a personal

jurisdiction operating against the conscience of the
 individual, whereas the common law jurisdiction
operates against real property.
i. True
ii. False
iii. Cannot say
iv. None of these

3. Equity remains a separate system of rules operating

independently of the common law. Until the late
nineteenth century it operated in a separate set of
courts.
i. True
ii. False
iii. Cannot say
iv. None of these
4. An individual aggrieved by a failure of the common law
to remedy a gross injustice would apply to the court of
equity.
i. True
ii. False
iii. Cannot say
iv. None of these

5. Lord Browne Wilkinson described the operation of

equity in relation to the trust as working on the
conscience of the legal owner.
i. True
ii. False
iii. Cannot say
iv. None of these

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