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70517
Autumn 2012
equity qualifies, moderates and reforms the rigour, harshness and edge of the law.
[T]he office of equity [is] to support and protect the common law from shifts and crafty
contrivances against the justice and the law. Equity therefore does not destroy the law, nor
create it, but assist it.
Therefore, it can be generally said that Equity supplements the general law by intervening in cases
where the CL is in some respect deficient.
[Equity] corrected, supplemented and amended the Common Law. It softened and modified many of
the injustices in Common Law, and provided remedies where at law they were either inadequate or
non-existent. (MHL p.3)
Remedial distinctions:
o CL- damages (monetary compensation)
o Equity- discretionary remedies e.g. specific performance, injunction, restitution
Procedural distinctions:
o Jury- decides fact
o Chancellor- sat alone with no jury! argument in equity is more sophisticated than CL.
Gave reasons for decisions- equitable decision to develop precedent
o Method of pleadings- CL plaintiff had to find an existing writ suitable to the grievance
otherwise it would not be addressed. Equity provided an alternative- where the case was
appealed to the King
! 14th/15th C! Court of Chancery allowed application to the King for use of equity
! Originally little distinction between two jurisdictions
! End of medieval period= separation of jurisdictions
(b) Formative period
! 1529- Henry VIII appointed Sir Thomas Moore as Chancellor- only legally trained appointments
and resulted in a jurisprudential approach (legal reasoning)
! 1557- Reports of Chancery published (practice of following precedent began and systematic
recording of equitable approach)
! CL action could be commenced but if an equity was successfully raised, the proceedings in CL
must be withdrawn or injuncted
! Confrontation between leading CL (Sir Edward Cooke) and Equity (Lord Ellesmere) judges in
The Earl of Oxfords case (1615) Mich 13 Jac 1; 21 ER 485:
Lord Ellesmere LC:
The cause why there is a Chancery is, for that Mens Actions are so diverse and infinite, that
it is impossible to make any general Law which may aptly meet with every particular Act and
not fail in some circumstances.
The Office of the Chancellor is to correct Mens Consciences for Frauds, Breach of Trusts,
Wrongs and Oppressions, of what Nature soever they be, and to soften and mollify the
Extremity of the Law
when a Judgment is obtained by Oppression, Wrong and a hard Conscience, the
Chancellor will frustrate and set it aside, not for any error or Defect in Judgment, but for
the hard Conscience of the party
! Royal Decree- equity should prevail over CL ! where there was a clash of jurisdictions equity
shall prevail
(c) Systemization period
! Development of classification of rules and principles in Equity (Lord Nottenham particularly
prevalent)
Maxims of Equity
! The maxims of Equity are general statements of basic equitable principles upon which the rules of
Equity have been established.
! Corin v. Patton (1990) 169 CLR 540 at 557, per Mason CJ and McHugh J:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Equality is equity
(viii)
(ix)
(x)
(xi)
! Penn v. Lord Baltimore (1750) 1 Ves Sen 444; 27 ER 1132; [1558-1774] All ER Rep 99
! Chellaram v. Chellaram [1985] Ch 409; [1985] 1 All ER 1043
! Baker v. Archer-Shee [1927] AC 844
! s. 24 (1): gave all branches of the court power to administer equitable remedies
! s. 24 (2) and (3): enabled equitable defences to be pleaded and equitable relief to be given on such
defences
! s. 24 (4): required all branches of the court to recognise and take notice of all equitable estates,
titles, and rights and all equitable duties and liabilities
! s. 24 (5): prohibited the use of the common injunction within the court (however: the equitable
grounds that might have provided the ground for such an injunction prior to the passing of the Act
may be relied on by way of defence in the proceedings)
! s. 24 (6): provided the Court with a general power to recognise and give effect to all legal
claims, estates, titles, rights, duties and liabilities existing by the CL or by custom or created by
Statute.
! In conclusion: Judicature Act in s 24 provided a new joint, concurrent procedure for both CL and
Equity.
! Furthermore, the Judicature Act included another very important provision:
o s. 25(11) stated that in cases where there is any conflict or variance between the
Rules of Equity and the Rules of the Common Law with reference to the same subject
matter, the Rules of Equity shall prevail.
(f) The Judicature system in Australia
! The present statutory equivalents of ss. 24 and 25 in the English Judicature Act of 1873 are found
in NSW legislation in:
o the Supreme Court Act 1970 ss 57-64 and
o the Law Reform (Law and Equity) Act 1972
! s. 5 of the 1972 Law Reform (Law and Equity) Act reads as follows:
In all matters in which there was immediately before the commencement of this Act or is
any conflict or variance between the rules of equity and the rules of Common Law relating to
the same matter, the rules of equity shall prevail.
was the meaning of the Act. The Legislature did not create a new jurisdiction, but simply
transferred the old jurisdictions of the Courts of Law and equity to the new tribunal, and then
gave directions to the new tribunal as to mode in which it should administer the combined
jurisdiction.
! Felton v. Mulligan (1971) 124 CLR 367 at 392, Windeyer J referred with approval to the
statement in the classic text Ashburner on Equity [2nd ed., p.18] that the two streams of
jurisdictions, though they run in the same channel, run side by side and do not mingle their
waters.
! In ORourke v. Hoeven [1974] 1 NSWLR 622 at 626, Glass JA said that the effect of the Supreme
Court Act 1970 (NSW) was not a fusion of the two systems of principle but of the Courts which
administer the two systems.
(c) Substantive fusion
! Equitable and common law doctrines were merged
! Seager v. Copydex [1967] 2 All ER 415- Lord Denning: even for a breach of an equitable right
common law damages could be properly given. Does not matter what the nature of the breached
right is, the remedy that would follow can be either from equity or CL
! In United Scientific Holdings Ltd v. Burnley Borough Council [1978] AC 904 at 924; [1977] 2 All
ER 62 at 68, Lord Diplock said:
[T]o perpetuate the dichotomy between rules of equity and rules of common law, which it
was a major purpose of the Judicature Act 1873 to do away with, is, in my view, conducive of
erroneous conclusions to the ways in which the law of England has developed in the last hundred
years.
The waters of the confluent streams of law and Equity have surely mingled now.
(d) Criticism against the substantive fusion theory
! In the House of Lords case of Bank of Boston Connecticut v European Grain and Shipping Ltd
(The Dominique) [1989] AC 1056 at 1109; [1989] 1 All ER 545 at 557. Lord Brandon applied
the principle that the Judicature Acts, while making important changes in procedure, did not alter
and were not intended to alter the rights of the parties.
! In the NSW Court of Appeal case of GR Mailman & Associates Pty Ltd v. Wormald (Aust) Pty
Ltd (1991) 24 NSWLR 80 at 99, Meagher JA described the view of Lord Diplock as so
obviously erroneous as to be risible.
! In the English Court of Appeal case of MCC Proceeds Inc v. Lehman Brothers International
(Europe) [1998] 4 All ER 675, Mummery LJ said (at 691) that the Judicature Acts were intended
to achieve procedural improvements in the administration of law and equity in all courts, not to
transform equitable interests into legal ones or to sweep away altogether the rules of common
law.
(e) Support for the substantive fusion theory
! In A-G v. Wellington Newspapers Ltd [1988] 1 NZLR 129 [NZ CA] at 172, per Cooke P, spoke of
the duty of confidence of members of the State Security Service as follows:
As law and Equity are now mingled it does not seem to me to matter whether the duty can
be classified as equitable or not. The full range of remedies deriving historically from either CL or
Equity should be available. They include injunction, damages and account of profits.
! In Aquaculture Corp v New Zealand Green Mussel Co [1990] 3 NZLR 299 at 301, Cooke P, in
the context of a confidential information case before the NZ Court of Appeal, said:
For all purposes now material, equity and common law are mingled or merged. The
practicality of the matter is that, in the circumstances of the dealings between the parties, the law
imposes a duty of confidence. For its breach, a full range of remedies should be available as
In the judgment of the High Court, reference is made to the existence of severe
conceptual difficulties in the path of acceptance of notions of contributory Negligence as
applicable to diminish awards of equitable compensation for breach of fiduciary duty.
! On appeal, previously ordered that the appellant pay the respondent exemplary damages for
breach of fiduciary duty
! Facts:
o There was an express term in the defendants employment contract that he has the
employee would not compete with his corporate employer during his employment
o During his employment the employee worked secretly for the benefit of his own business
in competition with his employer
o The employer terminated the employment contract and brought an action seeking
exemplary damages for a breach of fiduciary duty
! Issue:
o whether a punitive monetary award can be made in equity (whether exemplary damages
apply in equity)
o Whether a power to make a punitive monetary award should be acknowledged with
respect to the kind of fiduciary relationship (employer/employee- characterised by a
contract between two parties = may have wider application) in the case before the Court.
! Spigelman CJ
o Not appropriate at this level of generality to draw analogies with common law doctrines
of tort and contract- but if there were to be one contract is the more appropriate
o a punitive monetary award is incompatible with the law relating to penalties in contracts
of this character, in the sense that an express provision in the precise terms of the court
order in the present case would be regarded as of no effect, both at law and in equity.
o Agreed with Heydon JA
! Mason P
o The tort analogy is forceful and should be followed in the interests of conceptual
coherence.
o Agreed with trial judge Palmer J
! Heydon J- REVISIT
Dal Pont & Chalmers (5th ed, 2011): Prologue pp 1-32
! Some types of relationships are presumed at law to give rise to influence, others can be proved by
evidence.
! Not all influence in a relationship will result in a transaction being set aside. The influence must
be undue within the meaning of the term derived from the cases. Actual undue influence can
also be proved outside of a relationship of influence.
Unconscionable Dealing:
! Doctrine which focuses upon the existence of a special disadvantage in one party to a transaction.
! If the other party to the transaction takes unconscientious advantage of that special
disadvantage, the transaction may be set aside.
! It does not turn on any pre-existing relationship between the parties, but looks at their personal
characteristics and the bargaining process between them.
1. UNDUE INFLUENCE
General Principles
! Where a party is in a position of influence over another, equity presumes that a transfer from the
subordinate to the dominate party is the result of undue influence and the transaction will be
struck down unless the dominant party can prove that it was done with the free and independent
will of the other.
! Equity seeks to prevent relationships which give rise to influence from being abused
! No person should be allowed to retain a profit arising from his or her own fraud
! Doctrine of undue influence is an example of a particular application of the equitable concept of
fraud
! The stronger party does not have to have overtly influenced the weaker party- it is about the
quality of the consent of the weaker party
! Aims of the Doctrine:
o Directed to transfers of property which cannot be explained on grounds of
friendship, clarity or other ordinary motives on which people ordinarily act:
National Westminster Bank plc v Morgan [1985]
o Examines how intention is produced (not intention of either parties- it is an examination
of the nature of the relationship and whether this influenced the action of entering the
transaction)
o Transfers of real or personal property can be set aside whether by gift or for consideration
! Allcard v. Skinner (1887) 36 Ch D 145; [1886-90] All ER Rep 90:
o Facts:
" Women gave away her property to her convent
o Held:
" Two classes of undue influence:
Actual: must prove the influence exerted (type of fraud)
Presumed: complainant needs to prove a relationship of trust and
confidence from which it is fair to presume that the benefit was obtained
by the defendant by use of influence (presumption raised on public policy
grounds to prevent abuse of confidence
! Johnson v Buttress (1936): Independent and well understood act of a man in a position to
exercise free judgement based on information as dull as that of the donee
! Commercial Bank of Australia Ltd v Amadio (1983) per Deane J:
o Undue influence looks to the quality of the consent or assent of the weaker party
o Unconscionable conduct looks to the conduct of the stronger party in attempting to
enforce, or retain the benefit of, a dealing with a person under a special disability in
circumstances where it is not consistent with equity or good conscience that he should.
! Commercial Bank of Australia Ltd v Amadio (1983) per Mason J:
o In undue influence the will of the innocent party is not independent and voluntary
because it is overborne
o In unconscionable conduct the will of the innocent party, even if independent and
voluntary, is the result of the disadvantageous position in which he is placed and of the
other party unconscientiously taking advantage of that position
! UI also applied where the party exercising the influence is not the recipient of the transaction, the
benefit goes to another party-it must be shown that the party who takes the benefit knows the
weaker party is acting under the influence of the influential party