Equity & Trusts in The Legal Field Free Essay Samples & Outline

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Sample Essay On EQUITY AND TRUSTS IN THE LEGAL FIELD

To say that equity seeks to assist the law rather than create it implies that equity is not a form of law on its own. For many years, the argument about the relationship between common law and equity has created a highly polarized situation in the academic world of law. There are those that believe that equity and common law can be combined, those that disagree with this position and those that identify the two as entirely different from each other.

After the 1873 Judicature Act was enacted, legal experts began having issues determining whether the statute had facilitated the fusion of equity and common law. The impact of fusion of these two aspects of law would be the creation of legal remedies that applied to equitable rights. However, those that hold a different view hold that the Act did not intend to create such a fusion.

The Act seems to advocate for the fusion of the administrative function of both common law and equity. Common law and equity are very parallel. They work well hand in hand but can never merge.

This paper is centered on looking at the equity-common law relationship in three perspectives: to merge equity and common law there would be need for the creation of a statute that cements such a relationship, merging the two will create a shift from the foundations of both common law and equity, and third that the merge would lead to an inconsistent treatment of cases.

Impact of the Judicature Act

One of the issues that was attributed to the Judicature Act was whether it allowed for common law to apply equitable remedies. Notably, that the fusion was not limited to remedies but to case law as well which recognizes that equitable defenses can be used to remedy a common law dispute. For instance, acquiescence and laches can be relied upon in a claim for breach of copyright which is classified under common law. One argument is that equity is not meant to create law or destroy it but merely supplement it.

There are a number of international cases that have remedies which required the fusion of common law and equity. In the case of Aquaculture Corporation v NZ Mussel Company Limited, the Court of Appeal awarded exemplary damages for breach of confidence where the conduct of the defendant was so contemptible that compensation in the form of damages would not be adequate enough.

There is also case law in Canada that has applied the same rationale of fusion of equity and common law to provide a sufficient remedy. Those that dissent with the position that the two jurisdictions can be fused have influenced precedent where common law is applied. In Harris v Digital Pulse Pty Ltd (Harris) the New South Wales Court of Appeal reversed the decision of the trial court which determined that the defendant’s should pay equitable compensation or if the plaintiff so preferred, they could account for profits.

The trial judge further made an award of exemplary damages against the defendants for the breach of their fiduciary duty. Spigelman CJ and Heydon JA determined that the trial court did not have the power to award exemplary damages for the breach of the fiduciary relationship that the defendant had. Majority of the Court of Appeal Bench chose this position based on the argument that equitable relief does not apply to penal objectives. However Mason P held a different position from the other two reasoning that legal policies which resonated with a particular remedy in equity and applied to tort required the award of exemplary damages to remedy the breach of a fiduciary duty.

The other argument is that the purpose of the Judicature Act was to merge the procedures of both equity and old common law thereby doing away with the common law system of pleading as well as old tribunals; the latter of which would be replaced by a single tribunal that had jurisdiction over equity and administrative law. It was also meant to establish the power of equity over common law in cases where the two aspects of law were in conflict. The impact therefore would not include a change in the substantive rules for both jurisdictions but only to create a single tribunal that would have jurisdiction to apply both common law and equity. This therefore defeats the argument that the two jurisdictions were fused into one.


Historical distinctions of Equity and Common law

Equity and Common law have been in existence from as far back as the Seventeenth century. This is one of the reasons why the argument that the two cannot be fused into one jurisdiction persists to date in spite of the changes that the legal system has experienced over time. Those that hold this position hold fast to the principle that equity has had a more superior position in law since the early seventeenth century.

Fusion of equity and common law is therefore regarded as impossible as it would disconnect equity from its historical foundations. This approach was applied in Harris v Digital Pulse where the decision by the trial court to award exemplary damages for the breach of a fiduciary duty was reversed by the Court of Appeal. In his dissent, Mason P. determined that the decision by the majority of the bench overlooked the evolving nature of the law and the need to be able to provide answers to solve present legal problems that are in no way related to historical doctrines that have been passed down from one generation to another.

Therefore while equity was meant to substitute common law where it seemed to lack remedies, it by no means implies that applying it in a case where common law remedies were insufficient would result in common law being sidelined or overruled in any way. The purpose of equitable remedies is to supplement common law to ensure that no gaps exist in common law[]. In Aquaculture Corporation v New Zealand Green Mussel Co. Ltd, the court of appeal showed that it is possible to apply common law remedies for the breach of an equitable duty therefore why should it not be possible to apply an equitable remedy to a duty identified under common law? The purists narrow it down to one thing; the process.

The courts of common law have the power to prescribe a common law remedy for the breach of an equitable principle but lack the jurisdiction to prescribe an equitable remedy[]. The assumption however would be that since the court administering both the equity and common law systems has been merged, it would be occur for them to apply either of the above approaches.

Notably, the courts seem to lean towards a narrow approach in as far as the application of common law remedies to a breach in an equitable principle[]. This narrow approach is meant to preserve the historical foundations that separate equity and common law. However, the result is that the remedies available are unsatisfactory in as far as the tortious breach of a fiduciary duty is concerned. Though the facts of the case showed that the defendant was at contributory fault, Kirby J was unwilling to accommodate the unifying concepts of Common law with respect to contributor negligence and the equitable remedies that applied on the premise that this would create a disconnect with the historical foundations that distinguish the two concepts.

The slippery slope effect in the event that the court chose this approach would be to create more challenges for judges in future when dealing with cases where similar fact in law were in issue. The result is courts giving an unsatisfactory response which does not match up to the standards of justice that equity is meant to encourage. The concept of fusion of common law and equity is meant to prevent situations where the law is unsatisfactory or silent on issues that require the courts to present a remedy that ensures that fairness is maintained.


The power of the courts to create a fusion of equity and common law

Heydon JA and Sir Mason P lean towards the possibility of fusion of the doctrines of equity and common law through the creation of statute with that particular objective in mind[]. Both judges seem to agree on the position that the legislation is what is capable of creating a fusion of the two doctrines. Heydon JA opined that awarding a common law remedy in support of an equitable principle is only possible if legislation specifically authorizes such a remedy.

The argument by purists seems to imply that the courts lack the jurisdiction to handle issues where fusion is bound to be a question that arises and that they lack the statutory authority to determine that such fusion exist. This supports their core objective which is to ensure that the courts do not create ‘bad law’. Purists also hold that fusion of the two jurisdictions will lead to importation of foreign maxims and applied in cases where they do not fit. Burrows however argues that fusion cannot be entirely avoided in instances where the two jurisdictions do not co-exist such as monetary remedies for civil wrongs. He holds that fusion is not altogether a bad thing in cases where it will result in a more beneficial outcome that is fair for both parties.

The arguments for and against fusion have their weaknesses. one of the notable factors that we the audience are made aware of is the dangers that are associated with readily altering a remedy as it can lead to the fusion of the rights that underpin those particular remedies.However, given the ever evolving nature of the law, Ashburner’s metaphor of the two jurisdictions having a parallel relationship that ensured no mingling is too restrictive and cannot stand in the 21st century. It is inevitable that the courts will have to face other cases in future that challenge their interpretation of the fusion fallacy. This is all the more reason why a conscious effort should be made to establish rules and remedies that allow the jurisdictions of common law and equity to merge where it is clear that the most appropriate remedy can only be achieved through such an approach.


Conclusion

The Judicature Act of 1873 did not give a green light for fusion of equity and common jurisdictions. After the 1873 Judicature Act was enacted, legal experts began having issues determining whether the statute had facilitated the fusion of equity and common law. The impact of fusion of these two aspects of law would be the creation of legal remedies that applied to equitable rights. However, those that hold a different view hold that the Act did not intend to create such a fusion. The Act seems to advocate for the fusion of the administrative function of both common law and equity.

However, this does not mean that such a fusion cannot occur in the future. The pre-occupation of many common law jurisdictions such as Australia with the history and the fear that fusion will create a disconnect with the historical foundations of these two doctrines lacks substance especially when considering the views of Professor Tilbury who identifies the ever evolving nature of society and therefore the need for the law to be flexible enough to change even if this translates to the intertwining of equity and common law jurisdictions.

Notably, the courts seem to lean towards a narrow approach in as far as the application of common law remedies to a breach in an equitable principle. This narrow approach is meant to preserve the historical foundations that separate equity and common law. However, the result is that the remedies available are unsatisfactory in as far as the tortious breach of a fiduciary duty is concerned. Rather than focusing on where the laws came from, the courts should concern themselves with what can be done with the rules to ensure that they remain relevant in an ever changing society.


References

Cases
Aquaculture Corporation v NZ Green Mussel Co. Ltd [1990] 3 NZLR 299
Attorney-General v Blake [2001] 1 AC 268
Autocaps (Aust) Pty Ltd v Pro-Kit Pty Ltd (1999) AIPC 91-516 at 39,971 (FCA)
A-G v Wellington Newspaper Ltd [1988] 1 NZLR 172
Cadbury Schweppes Inc. v FBI Foods Ltd (1999) 167 DLR p. 602-605
Felton v Mulligan (1971) 124 CLR 367
G R Mailman & Assoc. Pty Ltd v Wormald (Aust) Pty Ltd (1991) 23 NSWLR 80 at 99, per Meagher JA
Habib Bank Ltd (Australia) v Habib Bank AG Zurich [1981] 1 WLR 1265
Harris v Digital pulse (2003) 56 NSWLR, 298, 444
Hoover plc v George Hulme (Stockport) Ltd [1982] FSR 565
Lord Dudley and Ward v Lady Dudley (1705) Pr Ch. 241
Pilmer v the Duke Groups Ltd [2001] HCA 31
United Scientists Holdings Ltd v Burnley Borough Council [1978] AC 904
Books
Dal Pont G.E. and Chalmers D.R, Equity and Trusts in Australia, Pyrmont, Lawbook Co., 2007
Heydon, J C & Loughlan, P I, Cases and Materials on Equity and Trusts, Sydney, Butterworths LexisNexis, 2007
Meagher R P, Heydon J D and Leeming M J, Meagher Gummow and Lehane’s Equity Doctrines and Remedies, Sydney, Butterworths LexisNexis, 2002
Journals
Burrows, A., We do this at Common Law but that in Equity, Oxford journal of Legal Studies, Vol. 22, No. 1, 2002, p.1-16
Burrows, A., Fusing Common Law and Equity: Remedies, Restitution and Reform (2001)
Dietrich, J., Attempting Fusion: Professor Worthington’s Equity and its Integration with the Common Law, Common Law World Review, Vol. 34 No. 1, 2005, p.62-84
Edelman, J. and Degeling, S., Fusion: The Interaction of Common Law and Equity, Australian Bar Review, Vol. 25, No. 3, 2004, p.195-204
Hughes, D. A., A Classification of Fusion after Harris v Digital Pulse, University of New South wales Law Journal, Vol. 29, No.6, 2006
Lynch, A., Equitable Compensation for breach of Fiduciary Duty: Causation and Contribution – The High Court Dodges a fusion Fallacy in Pilmer, Australian Bar Review, Vol.29, 2001, p.173-190
Tillbury, M., Fallacy or Furphy? Fusion in a Judicature World, University of New South Wales Law Journal, Vol. 26, No. 2, 2003
Tilbury, M., ‘Principles of Civil Remedies’, Sydney, Butterworths, Vol. 1, 1990
Statutes
Judicature Act 1873 (UK)