In law, particularly in common law jurisdictions, equity is the body of law that historically developed in the English Court of Chancery, which created a set of equitable doctrines distinct from the rest of English common law.
The equitable jurisdiction of a court of equity spanned much of English private law, particularly the law of property, contract, tort, and restitution, resulting in the development of equitable principles (e.g. good faith), interests (e.g. those under trust), remedies (e.g. injunctions), and maxims, that continue to this day.
Beginning in the Medieval ages, equitable rules were historically developed largely in cases before the courts of equity, which provided relief where the inflexible legal rules of the Court of Common Pleas and King's Bench were thought to be inequitable or unconscionable. In the late 19th-century, the Judicature Acts abolished the split system of courts in England, whilst retaining the laws of equity within English common law as a distinct but complementary set of rules.
The tradition of equity as a flexible system of adjudication can be traced to the writings of Aristotle (epieikeia) and Roman law (aequitas). Later, in some civil law systems, equity was integrated in the legal rules, but in common law systems it became an independent body of law. Today, equitable legal rules exists in both civil law and common law systems as well as in international law.
Terminology The use of the terms "equity" and "common law" in legal discourse refers to a number of different concepts.
Political and philosophical concept Equity, in a general sense, is often used to describe notions of fairness, justice, and equality. In his Nicomachean Ethics, Aristotle introduced the concept of epieikeia (equity), describing it as a necessary correction to the law when the law's "universality" makes its application unjust in a specific case. Courts often use "equity" in this sense and not specifically in relation to the law of equity.
In civilian jurisdictions In ancient Roman law, magistrates, in particular the Praetors, would sometimes reference the concept of aequitas in performing their adjudicative and legislative functions. Over time, a body of law (ius honorarium) created by the Praetors emerged that supplemented the relatively inflexible civil law (ius civile).María José Falcón y Tella, Equity and Law (Peter Muckley tr, Martinus Nijhoff 2008)Aemilius Papinian from his Definitions, as excerpted in the Corpus_Juris_Civilis of Emperor Justinian: Digest, 1.1.7.1, translated in Alan Watson, editor, The Digest of Justinian (Philadelphia: University of Pennsylvania 1985, 1998). The development of this body of discretionary and relatively flexible rules, however, slowed over time, and by the time of Hadrian, had essentially been codified into a set of fixed ruled amendable only by the emperor.Johnson, Coleman-Norton, Bourne at 182–204.
In modern civil law jurisdictions, the concept of a split system of 'equitable' and 'legal' rules is not widely found or applied.
In common-law jurisdictions Common law jurisdictions are those that trace its historical origins to medieval English law. Unlike many of the civilian jurisdictions in continental Europe, English law did not originate in the Roman law ius civile codes. Rather, much of English law was and is a result of the decisions of judges, and this judge-made law is described as the "common law" as it was common to all the English courts.
In common-law jurisdictions Medieval Lord Chancellors, drawing upon the ancient distinction between the ius honorarium and ius civile in Roman law, began to assert a similar jurisdiction over legal matters where it was believed that the common law courts were too inflexible or could otherwise not deliver a just result. Over time, a separate body of rules began to emerge from the Lord Chancellor's Court of Chancery, which came to be known as rules of "equity".
The use of "equity" in relation to "common law" refers to the distinction between rules that originated in the "common law" (or just "law") from those in "equity". Modern equity includes areas of law such as injunctive relief, trusts, fiduciary law, estoppel, relief against penalties and forfeiture,There is currently a divergence of opinion between the High Court of Australia and the Supreme Court of England on this point. In Australia, the continuing existence of the equitable jurisdiction to relieve against penalties has been confirmed: . In England, this view was not adopted: . the doctrines of contribution, subrogation and marshalling, and the set-off.
As equitable interests The term "equity" may also be used to refer to an equitable interest. The High Court of Australia in Latec Investments Ltd v Hotel Terrigal Pty Ltd identified three kinds of equities: equitable interests, mere equities and personal equities.. A mere equity, for example, may arise when one party has been unjustly disadvantaged by the unconscionable behaviour of another. Importantly, however, a 'mere equity' will not prevail over an actual bona fide equitable interest – such as an equitable charge. In English law, 'mere equities' are codified in statute.Land Registration Act 2002 ss 115–116(b)
Financial concept
History
After the Norman Conquest of England in the 11th century, royal justice came to be administered in three central courts: the Court of King's Bench, the Court of Common Pleas, and the Exchequer. The common law developed in these royal courts, which were created by the authority of the King of England, and whose jurisdiction over disputes between the King's subjects was based upon the King's writ. Initially, a writ was probably a vague order to do right by the plaintiff, and it was usually a writ of grace, issued at the pleasure of the King.
During the 12th and 13th centuries, writ procedure gradually became much more rigid. All writs to commence actions had to be purchased by litigants from the Chancery, the head of which was the Lord Chancellor. In 1258, Parliament provided in the Provisions of Oxford that the Chancellor could no longer create new writs without permission from the King and the King's Council (the curia regis). Pursuant to this authorization, litigants could purchase certain enumerated writs (as a matter of course) which later became known as writs (as a matter of right).
Each of these writs was associated with particular circumstances and led to a particular kind of judgment. Procedure in the common law courts became tightly focused on the form of action (the particular procedure authorized by a particular writ to enforce a particular substantive right), rather than the cause of action (the underlying substantive right to be enforced). Because the writ system was limited to enumerated writs for enumerated rights and wrongs, it sometimes produced unjust results because of its rigidity. Lacking a legal remedy, the plaintiff's only option would be to petition the King. Such petitions were initially processed by the King's Council, which itself was quite overworked, and the Council began to delegate the hearing of such petitions to the Lord Chancellor. This delegation is often morally justified by the fact that the Lord Chancellor was literally the Keeper of the King's Conscience, although Francis Palgrave argued that the delegation was initially driven by practical concerns and the moral justification came later.
Court of Chancery (c. 1350–1875) By the 14th century, it appears that the Chancery was operating as a court, affording remedies for cases in which the strict procedures of the common law worked injustice or provided no remedy to a deserving plaintiff. Chancellors often had theological and clerical training and were well versed in Roman law and canon law. During this era, the Roman concept of influenced the development of the distinctly different but related English concept of equity: "The equity administered by the early English chancellors ... [was] confessedly borrowed from the aequitas and the judicial powers of the Roman magistrates." By the 15th century, the judicial power of Chancery was clearly recognised.
Early Chancery pleadings vaguely invoked some sort of higher justice, such as with the formula "for the love of God and in way of charity". During the 15th century, Chancery pleadings began to expressly invoke "conscience", to the point that English lawyers in the late 15th century thought of Chancery as a court of "conscience", not a court of "equity". However, the "reasoning of the medieval chancellors has not been preserved" as to what they actually meant by the word "conscience", and modern scholars can only indirectly guess at what the word probably meant. As the title implies, this source is a 314-page treatment of the history of the concept of conscience in the Court of Chancery, to the extent that such history can be inferred from surviving sources. The publication of the treatise The Doctor and Student in the early 16th century marked the beginning of Chancery's transformation from a court of conscience to a court of equity.
Before that point in time, the word "equity" was used in the common law to refer to a principle of statutory interpretation derived from : the idea that written laws ought to be interpreted "according to the intention rather than the letter" of the law. What was new was the application of the word "equity" to "the extraordinary form of justice administered by the chancellor", as a convenient way to distinguish Chancery jurisprudence from the common law.
The early chancellors were influenced by their training in theology and canon law, but the law of equity they applied was not canon law, but a new kind of law purportedly driven by conscience. Complaints about equity as an arbitrary exercise of conscience by nonlawyer Chancellors became quite frequent under the chancellorship of Thomas Wolsey (1515–1529), who "had no legal training, and delighted in putting down lawyers". A common criticism of Chancery practice as it developed in the early medieval period was that thus it lacked fixed rules, varied greatly from Chancellor to Chancellor, and the Chancellor was exercising an unbounded discretion. The counterargument was that equity mitigated the rigour of the common law by looking to substance rather than to form. The most famous criticism of equity was written by 17th-century jurist John Selden, who compared equity to "a Chancellor's foot" because of how "an uncertain measure... a Chancellor's conscience" was.J. Selden, Table Talk; quoted in
In an 1818 chancery case, Lord Eldon's wrote, in response to Selden : "I cannot agree that the doctrines of this court are to be changed with every succeeding judge. Nothing would inflict on me greater pain, in quitting this place, than the recollection that I had done anything to justify the reproach that the equity of this court varies like the Chancellor's foot."Gee v Pritchard (1818) 2 Swan 402, 414. Indeed, as early as 1660, Chancery cases were regularly reported, several equitable doctrines developed, and equity started to evolve into a system of precedents like its common law cousin. Over time, equity jurisprudence would gradually become a "body of equitable law, as complex, doctrinal, and rule-haunted as the common law ever was". At pp. 7-8.
Relationship with common law