In brief, equity is the conscience of our common law system.
It is a series of rules and remedies developed by the English Courts of Chancery (aka Courts of Equity) which historically grew up parallel to the English Courts of Law.
Even after the merger of the two court systems, both legal and equitable rules and remedies continue to exist. Modern courts are said to have two jurisdictions, i.e. legal and equitable, and our courts are now responsible for administering both sets of rules and remedies.
Historical Perspective of Equity
Following the Norman Conquest in 1066, our common law was developed based on precedents established in the King’s courts (the Courts of Law) set up by William the Conquerer. Nevertheless, access to justice remained limited. An aspiring litigant had few options as only a few, narrowly framed legal actions could be brought . For example, for centuries there was no action for tort. Even for the successful litigant, legal remedies were basically limited to financial awards and judgments were difficult to enforce With decisions based on past precedents, the system was relatively fixed and inflexible.
As a result, many meritorious claims fell through the cracks and disappointed parties began to petition the monarch (usually a King) for relief. As the numbers grew, the King began to refer these petitions to the Chancellor –the cleric who was historically the keeper of the King’s conscience.
In time the Chancellor delegated these petitions to his vice-Chancellors, Roman Catholic clergy who became the first judges of equity. By the fifteenth century this system had developed into an independent court system known as the Courts of Equity or the Courts of Chancery.
Canon law played an important role in the development of equity because of the influence of the clergy whose perspective was rooted in canon law and the ecclesiastical courts. They were largely trained on the continent and thus they borrowed ideas from the continental civil law and transplanted them into the Courts of Equity. Trusts are one example of this borrowing and another example is the remedy of an order for specific performance.
The chief focus of the Courts of Equity was not legal technicalities but rather matters of individual conscience. Above all, its judges were concerned with the laudable task of saving souls from eternal perdition. Equity was concerned with the person and would grant orders that would bind individuals. If a defendant disobeyed the court’s direction, in an effort to save his soul, the court would likely imprison him for contempt of court — a particularly effective incentive to enforce judgments of the court.
The Courts of Equity were concerned to see that individuals kept their promises and that justice was done between the parties. As a result, the equitable principles developed by the courts have a distinctive ethical quality. For example, defences such as unfair delay or sharp practice could be used to defeat an equitable claim (but not a legal claim).
The rules and remedies of equity were developed to alleviate the hardships wrought by decisions of the relative inflexibilty of the common law. The Courts of Equity developed the maxim “equity follows the law”. This meant that their decisions would not directly contradict the common law courts. Instead if they felt the legal result was unconscionable , they would exercise their discretion to circumvent the law by granting equitable relief . Even today, if there is an adequate remedy at common law, the courts will refuse to grant a remedy in equity.
A key distinction between the legal remedies and equitable remedies remains the discretionary nature of equitable remedies. In equity, the paramount consideration is seeking justice in the circumstances of the particular case.
Eventually the English courts of law and equity were merged into one joint system by the English Judicature Act of 1875. Since then, law and equity courts have been merged by similar statutes in most common law jurisdictions. Nonetheless modern day courts continue to consider and apply both different sets of rules and remedies.
The previous blog re the Merchant Law Group is an excellent example of how the common law approach is different from that of equity, and that under the rules of equity, the law firm was denied the equitable right of quantum meruit, a reasonable fee for services delivered, by reason of it coming to court with “unclean hands”.