LAWS5980 Equity and Trusts

From the time of the inception of the Judicature Acts of 1873 and 1875, there have been different perceptions regarding the nature of equity and common law as being the separate jurisprudential traditions. Therefore it is important to evaluate the position of common law and equity before the Judicature Act of 1873 and 75, as well as its effect and the various perceptions regarding if it was a fallacy or not concerning Harris v Digital Pulse Pty Ltd.

Equity and common law before the Judicature Act, 1873 and 75: In the early stages of the development of equity, it has been classified as a separate system that was distinct from the common law of that time. As a result of the Norman Conquest, a number of common law courts have appeared in the following centuries. But gradually the intervention of the Lord Chancellor, resulted in the development of a separate body of law, which was known as equity and by the 15th century, it was well established in the legal system. From that time onwards, the Chancellor's jurisdiction was exercised through the court, which was later on, known as the Court of Chancery. Sometimes, there was a conflict as a result of the presence of these two distinct legal systems due to the difference that was present in the way in which the two courts operated. As a result of section 79, Common Law Procedure Act, 1854, the common law courts had arrested the power to issue injunctions. While on the other hand, as a result of the Chancery Amendment Act, 1858, a power has been granted to the court of Chancery to issue or award damages as compared to injunctions or specific performance. In Corin v Patton a maxim is a summary of broad theme which underlies equitable concepts and principles.

There was a lot of conflict present between these two systems. This conflict increased to such an extent that by the 19th century, there were a number of parliamentary reports which resulted in the Judicature Acts, 1873 and 1875. These two legislations can be considered as being responsible for the amalgamation of present superior courts in the single Supreme Court of Judicature. It was illustrated in Re Diplock or Ministry of Health v Simpson if the claim in equity exists, it should be shown to have ancestry founded in history and in practice.

 It was this Supreme Court that had taken the place of the courts of the Queen's Bench, the Court of Exchequer chamber, Exchequer and Common Pleas and also the court of Chancery and the court of appeal in Chancery. Both the High Court and the Court of Appeal have been compromised by the Supreme Court. This Court has administered the equity as well as the rules of common law and in this way, resulting in the question if this was the amalgamation of administration or it needs to be treated as a fusion of the rules.

It was mentioned in Cowcher v Cowcher in the field of equity, the length of the Chancellor's foot has been measured or is capable of measurement.

Amalgamation of administration/fusion of rules?: Different academicians have different perceptions regarding the issue if the Judicature Acts have fused the rules of common law and equity for the purpose of making them one or if it only needs to be considered as simply the amalgamation of the two rules so that each set can keep its individual identity, but they can be administered by the same court. According to some legal experts, it is believed that the rules of equity and common law have been completely fused and the result is that these two rules can no longer be distinguished. On the other hand, there are certain experts who think that effect of the Judicature Act on equity and, law can be described as procedural. In the present task, various perspectives in this regard have been discussed to find out if it was a fusion of rules or it was merely the amalgamation of administration.

In Stewart v Atco Controls Pty Ltd. the court said by the rules of equity are not rigid or inflexible, when faced with the novel situations but this does not mean that courts are required to proceed on the basis of general notions of justice without considering the settled principles.

Fusion of administration and not of rules: This is the first view and in Salt v Cooper, it was stated by Sir George Jessel MR that the intention behind the introduction of the judicature it was not to cause a fusion of the rules of equity and common law but the intention was to administer law and equity by a single tribunal. In the same way, some other experts have claimed that although common law and equity are the streams of jurisdiction that runs through the same channel but it is also worth mentioning that they ran side-by-side and their waters do not mingle. It is also being claimed that if due to the historical reasons, the law of equity acquired a peculiar position in the court of Chancery, it can also be said that equity was the way to provide justice under particular circumstances regarding which there was no provision in the common law.

It has been revealed by Mummery LJ in MCC Proceeds Inc v Lehman Bros International that it was a fact that the intention behind the introduction of the Judicature Acts was to ensure procedural improvements related with the administration of law and equity. Therefore, it was not intended to transform the present equitable rights into legal titles or to fuse the rules of equity with that of the common law.

Recently, the fusion fallacy has undergone judicial scrutiny in the form of the decision given by the NSW court of appeal in Harris v Digital Pulse Pty Ltd. The Court arrived at the conclusion in this case that the contractual and also the fiduciary obligations of loyalty have been breached by the defendants when they diverted certain projects, away from their employer, who was the plaintiff in this case. It was held by the judge at the trial court that the defendant should be held liable for either providing an equitable compensation or to account for the profits at the election made by the plaintiff. At the same time, exemplary damages were also awarded by the trial judge against the defendants as the court concluded that a fiduciary duty has also been breached by the defendants. When an appeal was made against this decision, the majority reversed this decision. It was found by the majority in the appeal that the court did not have the power to grant exemplary damages against the defendants on the basis of the breach of a fiduciary relationship. Therefore the reasoning behind this decision of the court was that cannot be said that an equitable relief should pursue penal objectives as this would be inappropriate.

In this regard, and has been blamed by some experts that the Australian authority is in favor of the orthodox position which is represented by the fusion fallacy. There has been a division between the English and the Commonwealth authorities on this matter. For example, in Re Harris case, it was seen that there was a crossover of remedies that have accrued due to the holding that even in case of the breach of equitable obligations, the court may award exemplary damages.

Fusion of rules, as compared to mere administration: on the other hand, there are many scholars and judges who are of the opinion that the Judicature Act had not only fused the administration of the rules of common law and equity, but instead it has also fused these two types of rules themselves. In this regard, it has been pointed out by Lord Denning in Errington v Errington that the rules of common law and equity were combined together for nearly 80 years. Similarly, Lord Browwne-Wilkinson had stated in Tinsley v Milligan that now the English law needs to be considered as a single law that has both legal and equitable interests. As a result, according to the statement made by Lord Browwne-Wilkinson, it can be considered that the person who is the ownership of either type of estate had the right of property that can be considered as a right in rem as against being merely a right in personam. Therefore, it has been stated that the equitable principle governing the situation where property or a title has been affected by illegality has now become one after they have been merged with the rules of common law.

In the same way, a clarification was made by Lord Denning in Boyer v Warbey what is the meaning of being fused. In his judgment, he stated that before the Judicature Act, 1873, the doctrine of covenants concerned with land was only applicable to the covenants that were under seal as compared to the agreements. But it was stated by the judge that after the fusion of common law and equity, the position was not different.

In the case titled United Scientific c Holdings Ltd v Burnley Borough Council, an attempt was made while on the clock to explain his perception of the way in which equity and law were the two streams that were growing in the same channel but never mixed with each other. According to the view expressed by the judge in this case, the second metaphor has acquired the form of being deceptive and mischievous. He further mentioned that as a result of the Judicature Act, 1873, there has been a fusion of adjectival legal system and the substantive law that were earlier administered by reports of Chancery and the court of law. Under these circumstances, it was pointed out by the Lord Diplock that now it can be said that certainly these two streams have mingled. In the same way, Lord Goff had stated in the case titled Lord Napier and Hunter that nowadays, the task of the judiciary is to consider the two strands of authority, which are law and equity, as one coherent whole.

On the basis of the present case law, it can be said that the Commonwealth jurisdictions were more in favor of the fact that the Judicature Act has not only fused the administration of the common law and equity, but instead it had used these two rules. However, the decisions that have been delivered by the English courts prevail on the decisions that are given by the courts from the Commonwealth jurisdictions. For example, in Aquaculture Corpn New Zealand v Green Mussel Co Ltd, the issue before the New Zealand Court of Appeal was to see if the damages that were traditionally considered as a remedy under the common law should be avoided in case of a breach of trust. In the same way, the principal provided by Lord Diplock in Re United Scientific Holdings case has also been followed by the courts in Canada. This was seen in Le Mesurier v Andrus as well as in the case of Canson Enterprises Ltd v Broughton & Co. In these cases, the common law principle related with the remoteness of damages was considered to be applicable in case of equitable claims related with the fiduciary breach of duty. In this way, the position in the Commonwealth jurisdiction is in favor of the fact that the Judicature Act has in fact resulted in the fusion of the rules of equity and common law itself.

The orthodox view which provides that the Judicature Act, 1873 has resulted in the fusion of the administration of the rules of equity and common law as it has amalgamated the superior courts in the Supreme Court, which has jurisdiction over the matters of law as well as equity, was reaffirmed by Mummery LJ pointed out the fact that the intention behind the Judicature Act was to achieve procedural improvements concerning the administration of equity and law in all the courts and not only to transform the equitable interest in their titles or to completely sweep away the rules of common law. Therefore, it can be said that the decision in a case relies on the amalgamation of the rules of equity and common law, as was the case in Walsh v Lonsdale where a tenancy agreement has been created by the defendant landlord with the plaintiff tenant related with the lease of a mill for a period of seven years. It was agreed upon by the parties that the rent will be paid in advance. However, the lease was not granted by the as was the requirement of the law in case of a lease that exceeded three years. As there was no lease that has been exhibited under seal, the tenancy has to be considered as void under the law. The plaintiff took possession and paid the rents quarterly interiors. However, the defendant asked for the rent for a year in advance and when the plaintiff failed to do so, he detrained from rent. Under these circumstances, an action for damages was filed by the plaintiff for a legal distress. The argument made by the plaintiff was that after entering into possession and paying the rent by reference to a year, he should be considered as a yearly tenant, on such terms that were not inconsistent with the yearly tenancy and therefore the provisions of yearly rent in advance was not consistent with these terms. It was held by the court that the agreement relating with the lease was as good as the lease due to the reason that it is an agreement regarding which specific performance can be decreed and it can be said that the discussion regarding the fusion of equity and law is misleading. By virtue of the Judicature Act, 1873, this assertion has been substantiated, where the administration of equity and common law has been fused into a Court and not the substantive laws themselves. Therefore, the two separate systems of law were not intended to be fused but instead they were intended to run side-by-side in the courts for the development and providing room for more remedies and also to allow the equity to serve as a lubricant for the wheels of justice.

In the same way, if it was intended that the rules of common law and the doctrines of Equity were to be amalgamated by the judicature act, there should be no need for section 25(11). According to which, in case of conflict between Equity and common law, equity should prevail. If this argument is stretched to its logical end, the provision of this section. Simply revealed that it was the intention of the legislature that the two systems should not be fused, but the individual systems should be allowed to be administered by the same Court at the same time. This means that if there was any intention on the part of the legislature to fuse these two systems, it could not have foreseen the possibility of a conflict between the two systems and therefore further mentioned that a singular system (Equity) should prevail in case of a conflict.

In the same way, those who generally referred to the fusion of law and equity have made very little efforts for explaining exactly what they mean by the phrase. In the same way, they have not dealt with the argument mentioned above. In Tinsley v Milligan, Lord Browne-Wilkinson carefully referred to the amalgamation of the administration of law and equity. It has also been stated that the effect of the Judicature Acts is to fuse law and equity to the extent that they become a single body of law instead of being considered as two distinct systems of law that administered together, does not find much force these days.

In the end, it can be said that it is true that since there application, the Judicature Acts of 1873 and 1875 has resulted in different views regarding the future of equity and law being separate jurisprudential traditions. On the basis of the above mentioned discussion, it is clear that some scholars and judges are in favor of the fact that as a result of the Judicature Acts, there has been a fusion of the administration of the rules of law and equity as compared to the fusion of these rules themselves. But at the same time, there are others. According to whom the judicature act has resulted in a fusion of the rules of common law and equity as compared to nearly the administration of these rules. There are authorities in support of both the views and a strong justification during which confusion is present regarding which side is right. But despite having divergent opinions of the scholars and judges, it is clear that the rules of equity in, or being administered by a single court and it has been seen in the cases mentioned above, that they are also subjected to cross-remedies as was the case in Harris v Digital Pulse Pty Ltd. This means that even if it was not entirely the same, still there are certain instances is where the rules of equity and common law can be applied interchangeably. This perception arises, in view of the observation that the Judicature Act has not authorized any significant fusion between equity and law and in the same way does not reveal any restriction imposed on the occurrence of such a fusion.

Bibliography:

Festus Emiri and Ayuba Giwa “Equity and Trusts in Nigeria” Malthouse Law Books (2012) p2

Philip H Petit, Equity and the Law of Trusts, 9th Edition

Case Law

Aquaculture Corpn New Zealand v Green Mussel Co Ltd, [1990] 3 NZLR 299

Austotel Pty ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582

Boyer v Warbey [1953] 1 QB 234 Re

Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534

Conlan v Register of Titles (2001) 24 WAR 299

Corin v Patton (1990) 169 CLR 540

Cowcher v Cowcher (1972) 1 WLR 425

DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1978] 1 NSWLR 268

Farah Constructions v Say-Dee (2007) 230 CLR 89

Festus Emiri and Ayuba Giwa “Equity and Trusts in Nigeria” Malthouse Law Books (2012) p2

Hanson v Keating ((1844) 4 Ha 1

Harris v Digital Pulse Pty Ltd [2003] NSWCA 10

Harris v Digital Pulse Pty Ltd [2003] NSWCA 10

Le Mesurier v Andrus (1986) 54 OR (2d) 1

Lord Napier and Hunter [1993]1 ALLER 385 at 401

MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 ALL ER 675

Mercedes-Benz AG v Leiduck [1995] 3 All E.R. 929

Michael Realty v Carr (1977) 1 NSWLR 553

Parkin vs. Thorold [1852] 16 Beav 59

Philip H Petit, Equity and the Law of Trusts, 9th Edition

Re Diplock or Ministry of Health v Simpson [1951] AC 251

Re Wait [1927] 1 Ch 606

Salt v Cooper (1880) 16 Ch D 545

Stewart v Atco Controls Pty Ltd (in Liquidation) [2014] HCA 15

Tinsley v Milligan [1994] 1 AC 340

Tinsley v Milligan [1994] 1 AC 340

United Scientific Holdings Ltd v Burnley Borough Council ([1978] A.C. 904

United Scientific Holdings Ltd v Burnley Borough Council ([1978] A.C. 904

Walsh v Lonsdale (1882) 21 Ch D 9