Development of Equitable Remedies
The Chancery Courts were established in Ireland, in the 13th century in parallel with the Common law courts, in accordance with the English model. In the early years of the Common Law, it was extremely rigid. Cases would fail unless they could be brought squarely within the terms of certain pre-existing “writs” or forms of claim. Justice, fairness or discretion was not central to the process.
The Chancery courts, (otherwise described as Courts of Equity), developed separately from the Common Law courts. They grew up as a counter-balance and originally operated as courts of conscience.
The earlier Chancellors who presided over the Chancery Courts were clerics. In contrast to the Common Law courts, they were prepared to consider the circumstances of a case and impose a fair and equitable solution.
Equitable remedies are generally discretionary. This does not mean discretionary in the sense of being arbitrary. Equity is dispensed in accordance with reasonably predictable criteria. However, equitable remedies are not granted, as of right. The Judge may withhold an equitable remedy if justice requires. Certain broad principles apply to the withholding of equitable remedies.
Development of Equity
By the early 17th century, it was established that the Chancery court would take priority over the Common Law courts. By this time, the Chancery courts themselves became more uniform and less flexible in the manner in which they applied the principles of equity.
The flexibility and discretion decreased, and the rules became more systemised and predictable. It was seen as undesirable that the rules would vary from Chancellor to Chancellor or judge to judge.
In the mid-19th century, legislation was passed, giving the common law courts the power to grant equitable remedies such as injunctions. At the same time, the Chancery courts were granted the powers to order the common law remedy of damages, instead of or in addition to an injunction or other equitable order.
The Supreme Court of Judicator (Ireland) Act, 1877 followed identical legislation in England and Wales, in unifying the Chancery Courts and Common Law Courts, into a single High Court, with a number of divisions. Both common law and equity were administered in all courts.
By the turn of the 20th Century, the number of divisions was reduced to two. The High Court was divided into the Chancery and Queens Bench divisions. Both divisions were equally, the High Court. However, the Chancery division concentrated on proceedings of an equitable nature whereas the Queens Bench division concentrated on Common Law matters.
The Irish Free State Constitution provided for a High Court and Supreme Court, in succession to the High Court and the Courts of Appeal. The Courts of Justice Act 1924 remains the foundational courts legislation.
The 1937 Constitution continued and ultimately re-established, the High Court and Supreme Court, in which the common law and rules of equity were enforced. The High Court was not formally divided into two divisions, but the informal division of Chancery and Common law business remains to this day.
Equitable Rules Prevail
The 1877 Act provides that where there is a conflict between the common law rules and the equitable rules, the equitable rules are to take precedence. The common law and rules of equity were fused so that each is given effect in the Courts. The common law and rules of equity run side by side and remain distinct, notwithstanding the fusion.
Many important remedies are equitable remedies. They include the injunction and orders of specific performance, rectification, rescission, declaration, tracing. These remedies are of general application across the range of contract, tort, restitution and other areas of civil law.
Equitable principles apply to the exercise of equitable remedies and their application. The so-called “maxims of equity” are general principles which the Chancery Courts, and the modern courts apply, in granting and withholding equitable remedies. The maxims are broad principles, applied in the exercise of the Court’s discretion.
Equity will not suffer wrong without a Remedy
The broad principle is that Equity will remedy a wrong, even if the common law does not provide a right or remedy. The principle does not allow the Courts a broad discretion, for a judge to dispense justice as he sees fit. In the application of this principle, the equitable rules have become more defined.
A common law right (e.g. compensation by damages) may be inadequate, in the circumstances. An equitable remedy, such as an injunction or specific performance may be more flexible and effective. An equitable remedy may issue in addition to a common law remedy. For example, an injunction may be granted in addition to damages by way of compensation.
In recent years, the principles of Equity have proved their vitality by providing injunctions to enforce new intellectual property rights. An injunction may be issued to protect confidential information and know how. In this context, the injunction has remained a flexible remedy for protecting new rights as they have developed.
The so-called “constructive” trust is another illustration a flexible remedy developed by the Courts of Equity in accordance with the above broad principle. It allows the courts, in certain circumstances, to impose a trust which is not been expressly or even impliedly agreed, in order to prevent a patent injustice.
Equity follows the Law
This principle, on first glance, might seem to contradict what is said above in terms of Equity being a distinct body of rules and principles, which takes precedence over the law, in the event of a conflict. However, the principle refers to the fact that equity operates, by mitigating the harshness of the common law.
Equitable remedies do not deny the existence or validity of common law rules. Rather, Equity acknowledges the common law rules, but grants injunctions or make orders limiting the exercise of those rights.
The principle is also reflected in the fact that Equity will not lightly overrule legal requirements, even where they are strict and formalistic. Equity follows the law in most circumstances. It applies in relatively defined circumstance, in which there is a compelling reason, to depart from the law.
He who seeks Equity must do Equity
This maxim embodies the principle that a claimant seeking equitable relief, must act in an honourable and honest manner. Equitable remedies are discretionary.
An order granting equitable relief will usually require that the claimant also act equitably. For example, when seeking an interlocutory injunction, the claimant must generally give an undertaking for damages for which he may be liable, if he is ultimately unsuccessful.
A person who seeks an equitable remedy must be willing and able to carry out his own obligations. An order for specific performance of a contract will usually be refused unless it can apply to both parties. If this is not possible, there is said to be a lack of mutuality, and an equitable remedy is likely to be refused.
In granting equitable relief, the Court will consider the conduct of the parties. It may deny the relief, and leave legal remedies only if the claimant’s conduct so merits.
In certain circumstances, the person seeking an equitable order may be given relief only on terms that do not give an unfair advantage to him. For example, a claimant may be allowed a period of time to perform an obligation that is overdue, at law. However, in doing so, he may have to pay interest or endure that the respondent is not fairly prejudiced.
He who comes to Equity must come Clean Hands
This famous principle is similar to the last mentioned principle. Equitable remedies or relief are discretionary and a person who seeks them, must not have engaged in dishonest or disreputable conduct. The dishonesty, misrepresentation or disreputable conduct must relate to the particular transaction, rather than the general character or disposition of the person concerned.
Where a claimant seeks specific performance of a contract, it may be refused if his conduct has been dishonest, notwithstanding that it is not unlawful in a legal or criminal sense. If, for example, a person procures a land sale by unfair pressure and subsequently seeks to enforce it by specific performance, the Court may refuse the order, if it deems it unjust to grant it.
The conduct of the claimant need not adversely impact upon the respondent. For example, if the claimant has acted dishonestly, for example, by transferring property to avoid tax, the Courts are likely to refuse equitable relief. Generally, the dishonesty must relate to the transaction concerned.
This maxim is also reflected in the contract law principle that a Court will refuse relief, where there is an element of illegality or where it is against public policy. Where both parties are equally to blame, the Court may refuse relief. In contrast, where one party only is at fault in relation to the illegality, it may give relief to the innocent party but refuse it to the other party.
Delay defeats Equity
The Statute of Limitation provides the time limits in which legal action must commence. However, equitable relief will often be denied, if the applicant does not act promptly.
Equity does not allow parties to sleep on their rights or acquiesce in a particular situation for a significant length of time. If there is an unreasonable delay in taking action, the Court may decide that it is unjust to grant equitable relief. Legal relief by way of damages may be granted, but for example, specific performance may be refused.
Generally, the delay must be significant and inexcusable, if it is to be a basis for denial of equitable relief. If there are personal factors which explain the delay, it may not operate to bar the remedy. This illustrates the personal aspect and flexibility of equitable remedies. The conduct of the claimant, by way of delay or acquiesce with a state of affairs must be such that it would be unjust to give him a remedy.
There must be an unreasonable delay and prejudice, to the detriment of the other party. Such circumstances may also be interpreted as an acceptance of the position or an agreement to settle the matter. This is sometimes referred to as waiver or acquiescence. Waiver is the strict common law principle and which requires a contract with consideration.
Where the respondent incurs expense or otherwise acts to his determent, under the belief that no objection has been taken, the party who has been induced the belief may be denied equitable relief on the basis of acquiescence. The principle will apply if the claimant knows his rights and fails to take steps to assert them.
The Statute of Limitations specifically recognises that equitable principles may apply, so as to deny particular types of relief. Where the relief sought is a common law right, outside of the traditional areas administered by the Chancery Courts, the principle will not usually apply.
Equity is Equality
Equity favours equality in the division of assets. On the death of a joint tenant, the other co-owners take by survivorship. In contrast, tenants in common takes and hold their shares equally, so that when one dies, his shares pass to his successors under his will or intestacy.
In accordance with the maxim, equity leans towards finding tenancy in common, in some circumstances in which the Common law courts would find a joint tenancy. The result is that there may be surviving legal joint tenants who hold as trustees for themselves and the successors of the deceased co-owner as tenants in common.
Equity looks to Intent rather than Form.
It is a characteristic of common law that legal formalities may prevail over substance. Statute or common law may require strict formalities, so that where they are not complied with, the legal right may not be available. However, equity tends to look at the substance of the matter, and may not look at the strict form where this is irrelevant to the substantive justice of the transaction.
An early example was the development of the right or “equity” of the mortgagor to redeem the mortgage over a property. Under common law, a mortgage was the transfer of legal ownership to the mortgagee. However, equity looks on it as a financing arrangement and favours the right of the mortgagor to redeem the mortgage, even if the repayment is late and the mortgage contract has been breached. The strict position of the common law is modified to reflect the commercial reality and substance of the arrangement.
Equity does not favor penalties in a contract. Where a penalty applies for failure to perform an obligation, equity will disallow the claim unless it is a genuine pre-estimate of loss. It will not allow contract law to act in a penal way.
Where a contract provides time limits, the common law presumes them to be strict. Time will be presumed to be of the essence. The Courts of equity will allow completion of the contract late, provided that he may be obliged to pay interest by way of compensation so as to do justice to the other party.
See our chapter on the remedy of rectification. Where a document does not reflect the agreement of the parties,the equitable remedy of rectification may allow it to be corrected. This is an example of equity looking to substance over form.
Equity regards as done what ought to be done.
This reflects the principle of substance over form. This sometimes arises in the context of a lease. If an agreement for lease is sufficiently certain, it may be specifically enforced in equity as the equivalent of a lease.
Therefore, it is sometimes said that an agreement for lease is as good as a lease. Similarly, where a person enters a contract to purchase land, he may be entitled to an order of specific performance to have it performed.
Equity Acts Personally
Traditionally, the Courts of Equity act by way of personal order. Breach of an order is contempt of Court.
A trust is an obligation which is personally binding on the trustee. Although he may be the legal owner as against the world, he is personally compellable by the Courts of Equity, at the behest of the beneficiaries, to perform the terms of the trust.
In some cases, where a property is outside the jurisdiction of the Irish courts, an order may be made against the individual personally obliging him to deal with foreign assets in a manner ordered notwithstanding of the assets themselves are outside the jurisdiction of the court.
Where the Equities are equal, the law prevails.
This principle is relevant to the concept of priorities in relation to legal rights. To a large extent, these rules have been superseded by rules on registration and notice.
The principle applies where a purchaser of a legal right interest buys, having made all the requisite and prudent investigations. If he does not come on notice of the equitable rights of a third party, he may take free from them. This also reflects the above principle whereby equity will often defer to the law.
This principle will only apply in favour of a purchaser for value who has made the proper enquiries. A person taking under a gift would not gain priority to defeat an earlier equitable right. A person who would have discovered the equitable right had he or his advisors made proper enquiries, will similarly take subject to it.
The trust was one of the key institutions developed by the Courts of Equity. Equity imposes a personal obligation on a person, the trustee, to hold the legal title to an asset, usually real property, in accordance with the terms of a written trust, an implied trust or a trust imposed by law, for the purpose of doing justice and avoiding an inequitable result.
The injunction is and has always been, a remedy which is characteristic of the Chancery Courts. It may issue to restrain a person who has legal rights, from exercising those rights, in the interests of justice and fairness.
In some cases, equitable remedies are available, almost as of right. For example in a trespass or in nuisance cases, an injunction will generally be granted where it is necessary to protect against infringements of property rights.
Even when a judgment is held, the traditional means of enforcement may be sometimes inadequate and ineffective. The remedy of receiver by way of equitable execution may be used, where the legal rights are insufficient to enforce a judgment against complex assets such as receivables and shares etc.
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