November 12, 2024
We have posted several articles that refer to “equity” or its cousins, such as “equitable principles” or “equitable remedies”. We have tried to give short explanations, but some readers may want the full story. If so, read on.
Equity has its roots as a corrective for harsh or unfair results from the rule of law. It is characterized by flexibility, and a concern with the behaviour of the parties. There are written records expressing the concept of equity going back at least to the time when Greece was the centre of European civilization.
Other legal systems developed the concept of equity as an
inherent part of their system of laws. It was a historical anomaly that in England, a separate set of courts developed to administer equity. They were called the Courts of Chancery because they were originally presided over by the Chancellor, a key crown official.
Equity has many meanings, both within law and in everyday usage. In the sense in which we use the term in modern times in law, equity is the set of rules or principle recognized by our system of law which are derived from the jurisdiction formerly administered by the Courts of Chancery of England, and then Canada.
The history in brief:
• the common law had become rigid and inflexible in both procedural and substantive law
• litigants were required to frame their disputes within a writ system, limited to defined causes of action (for example, negligence did not exist as a known cause of action)
• the law was primarily concerned with the protection of property, and avoidance of civil unrest
• our modern concept of contracts based upon offer acceptance and consideration did not exist.
Only contracts under seal were enforceable. The advent of the Industrial Revolution in the 1800s led to the modern common law.
• Equity and chancery Courts arose out of the right of citizens to petition the King for relief from the harsh results of common law.
• The King in turn delegated this power to a court official known as the Chancellor.
• Chancellors were drawn from church officers. Their training was in canon(church) law, which emphasized the individual conscience.
• For example, in equity, a promise was important because breaking your promise was a sin. This principle leads to modern concepts of fiduciary duty; protection of confidential information; and specific performance of contracts
• Initially, the power rested personally in the chancellor, and relief was granted on a case by case basis, as the Chancellor saw fit
• but as the volume of requests grew, a formal structure, the Court of Chancery, grew up to administer claims
• as more decisions were given, the outlines of a set of principles emerged
• for a long time, the Lord Chancellor remained the only judge of this court, thus creating a slow process
• The decision making of chancery has been described as pragmatic, robust and highly contextualized
• chancery courts developed the concept of property ownership by “use” or trust, to avoid common law restrictions on transfer of property, and high taxes associated with legal transfers. A trustee could hold the “fee” or legal title, while the “use” or beneficial interest could be transferred
separately.
• as chancery became more popular, it established its own set of procedural rules and substantive doctrines, which made the process more predictable, but reduced the flexibility and speed
• the Industrial Revolution led to population growth, the growth of cities and towns, and a commercial class.
• Principles of laissez faire or free market economics influenced the common law, seeing the rise of focus on freedom to contract
• common law courts responded to new forms of business organization by dealing with concepts surrounding employment law, shareholdings, and manufacturing.
• Trusts were used to operate businesses or hold investments. This required a set of rules to govern their operation. The law regulating the powers of a trustee began to develop.
• Significantly, equity began to think about “rules”, not “principles”.
- You might think that as agriculture became less important in the economy, land might become less important. In fact, the opposite happened. Property disputes exploded. Equitable remedies
were necessary to enforce duties and rights (specific performance and injunctions). - Chancery became bogged down, but it also began to develop the modern law of trusts.
- The stage was set for the unification of the courts.
Calls for the fusion of law and equity began as early as the 1600s, then based upon the desire to resolve the conflicts that the courts reflected both political (King versus Parliament) and religious.
In addition to the broad concept of equity, the term is sometimes applied in a technical sense an example is the term “equity of redemption” from mortgage law. This term arises from the Court of Chancery
protecting holders of the beneficial interest from abuse of the power that legal title conveys. Without this development, mortgages would not be possible. Without the growth of mortgages, the entire modern
law of secured transactions would not exist.
Equity is also the concept that gives rise to the doctrines of unjust enrichment and proprietary estoppel, situations in which equity recognizes rights arising from the conduct of the parties.
A series of statutes in England and Canada enacted structural reforms which by 1873 led to the merger of the courts. After that time, other unified system of courts had jurisdiction to administer both the common
law and equity. In Ontario, the Courts of Justice Act give all Superior Court and Court of Appeal judges powers over both common law and equity. If common law and equity conflict, equity takes precedence.
At Weilers LLP, our lawyers know both common law and equity. We understand the power of equity and where possible, know how to use equity to advance your cause. If this appeals to you, give us a call. We might be the right lawyers for you.