Equity
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This article is written by Ananya Garg, a student at Chanakya National Law University. In this article, the author has discussed the principles upon which the Law of Equity is based.

Introduction

Equity is a separate system of law from the Common-Law. It has different rules, principles, and remedies. Thus, to understand the principles on which the Law of Equity is based, we must understand its origin and the reasons for its requirement despite the presence of a system of law, i.e. the Common Law. Common Law is the body of customary law which originated in the Curia Regis (King’s Court), London. English Common Law was primarily developed by judges and was based on judicial decisions and precedents. The country saw the need for the Law of Equity because of the following two main reasons:

  • Under Common Law, there was only one remedy available, i.e., damages. Thus, a just and fair remedy couldn’t always be given through Common Law where monetary compensation was not suitable. This remedy did not always have a significant concluding impact within cases.
  • A civil action under Common Law could only be started by the means of a writ which was a legal document where it was written why and on what legal basis a person was being sued. Problems arose when a matter was not covered by any writ. Making of the writs with every new case was stopped in the 13th century and this meant that if a case was not already covered by the writs, it was not carried forward.

This generated a huge amount of dissatisfaction among the public because many times they had to settle with the inappropriate remedies or their cases were not even carried to the court as the writs were too narrow or rigid. Subsequently, the Court of Chancery was directed to take up the case which was referred to the king by petition and the Chancery Court developed the Law of Equity. Equity was mainly thought of as fairness and it was a very powerful law as it overcame the conflicts with the Common Law. The Chancellor decided the cases of which the King had taken note, he did so by largely relying on his sense of fairness and justice and thus developed a large body of principles which became the Law of Equity. It was very important to solve the conflict between the Law of Equity and the Common Law, this was achieved in the 1615 Earl of Oxford’s Case. In this case, the King decided that between the conflict of Common Law and Equity, Equity should prevail.

This article mainly discusses the general principles on which the Law of Equity is based and the remedies available therein.

Principles of equity

The body of the Law of Equity is preserved in the following twelve maxims. These maxims are general principles adopted to administer justice and fairness. They govern the Law of Equity and are discretionary.

Equity will not suffer a wrong to be without a remedy

This maxim, in Latin, is “Ubi Jus Ibi Remedium ” which means “where there is a right there is a remedy”. The maxim states that in situations where the common law confers a right, it also gives a remedy for infringement of that right. It must be kept in mind that this principle is applicable only where the right and the remedy both are within the jurisdiction of the court. In the Law of Equity, injunction and specific performance are also the types of remedies available. In Ashby v. white a qualified voter was not allowed to vote and thus he sued the returning officer, this case deals with the principle laid down in this maxim, i.e. if a person has been granted a right, he is also granted with a remedy.

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Equity follows the law

This maxim is also expressed as “aequitas sequitur legem”, which means that equity will not allow a remedy that is contrary to the law. This maxims lays down that equity supplements law and does not supersede it. The discretion of the court is governed by law and equity which are subservient to one another. Wherever the law can be followed, it must be followed. In the cases where the law does not apply specifically, this maxim suffers limitation. But in modern-day England and Wales, the law follows equity. Section 49(1) of the Senior Courts Act,1981 clearly specifies that in case there is a conflict between the rule of law and equity, equity shall prevail.

He who seeks equity must do equity

This maxim states that the plaintiff is also subject to the powers of the court and is thus obligated to perform his duties following the principle of equity. The concern of this maxim is the future conduct of the plaintiff. Thus, this maxim applies to the party who seeks equitable relief as it stipulates that the plaintiff must also recognize and submit to the right of his adversary. This maxim was attracted in the case of Lodge v. National Union Investment Company Limited where Lodge borrowed money from an unregistered moneylender and thus upon an action by him to recover the securities, the court refused to make an order except upon the terms that Lodge should repay the money which had been advanced to him. This maxim is also applicable in the following legal provisions:

  • Section 19A of the Indian Contract Act – the plaintiff must restore all the benefits arising from the contract which is rescinded by him.
  • Section 35 of Transfer of Property Act – the doctrine of election says that a benefit under a legal instrument must be adopted with all of the provisions and obligations under such an instrument.
  • The Doctrine of Consolidation of Mortgages- where a borrower has mortgaged different properties to secure separate debts, and he defaults on one of those debts, this doctrine allows for the lender to pool the assets which were secured by the borrower and to realise those secured assets against the total sum owing.
  • Order 8, Rule 6 of the CPC, the doctrine of set-off – in case of mutual debt between two litigating parties, the amount due to one party shall be set-off by the same amount which is due to the other party and only the residuary amount shall be claimed.

He who comes to equity must come with clean hands

This doctrine relates to the past conduct of the parties and states that the person who comes to the court seeking equity must not have involved in an inequitable act himself in the past. This maxim is concerned with the past behaviour of the plaintiff. The maxim does not concern the general behaviour of the plaintiff, the defence of unclean hands is only applicable in situations where there is nexus between the applicant’s wrongful act and the right that he wishes to enforce.
This principle was upheld in the case of D & C Builders Ltd v. Rees where the claim of the plaintiff to apply promissory estoppel was rejected because he had taken unfair advantage of the poor financial position of the defendant’s builder company and thus had not come with clean hands.

If the plaintiff is involved in fraud or misrepresentation that concerns the respective case then he cannot demand equity. This principle is also adopted in Section 17, 18, and 20 of the Specific Relief Act, which lay down that a plaintiff’s unfair conduct will disentitle him to the equitable relief of specific performance of a contract.

Delay defeats equity

The Latin maxim for this principle is “Vigilantibus non dormientibus aequitas subvenit” which means that Equity assists the vigilant and not those who sleep on their rights. Unreasonable delay in bringing forth a claim is known as laches. Laches may also result in dismissal of the claims. Thus, a party must assert an action within a period of reasonable time. There are certain situations where the law of limitation is expressly applied, in such cases, there is a particularized legal situation where a time period, which has been expressly prescribed, has elapsed and the party is barred from bringing a suit of action.
In case of laches, the defence of acquiescence can be applied by the court and the plaintiff may be disallowed from seeking an equitable remedy as the court would assume that he has acquiesced to the questionable actions of the defendant. The equitable rule of acquiescence and laches was first introduced in the case of Chief Young Dede v. African Association Ltd. 

Equality is equity

This principle is expressed by the Latin maxim Aequitas est quasi aequalitas which means equality is equity. This maxim implies that as far as possible, equity strives to put the litigating parties on an equal level and equate their rights and responsibilities. The ordinary law may give one party advantage over the other but the court of equity, wherever possible, puts the parties on an equal footing.

Equity looks to the intent rather than the form

This is the maxim by the means of which an equitable remedy was established which allows for the terms of a contract to be interpreted by taking into account the intention of the parties. The common law was very rigid and could not respond favourably to demand of time, this meant regarding the form of the contract more important than the substance. Equity, on the other hand, looks to the spirit and not the letter of the contract. This principle is enshrined in the provision for relief against penalty and forfeitures which states that the object of a contract is to perform it and not the compensation, thus the compensation must be proportionate to the damage and not benefit the receiver (Section 74 of the Indian Contract Act provides for claiming reasonable compensation). In the case of the contract for the sale of land, if the party fails to complete within a fixed period, equity allows reasonable time to the party to complete it (Parkin v. Thorold).

Equity looks on that as done which ought to have been done

This maxim states that in cases where individuals are required, by law or by agreement, to perform any act of legal significance, equity will regard that act as having been done as it ought to have been done even before it actually happened. This principle results in the legal phenomenon of equitable conversion under which the buyer obtains the equitable title to the property even before the sale has been legally effected.

 

Equity imputes an intention to fulfill an obligation

This maxim means that if a person is obligated to do one act and does another, the act done by him will be taken as a close enough approximation to the fulfillment of the required obligation. For example, if a debtor leaves a legacy to his creditor which is equal to or greater than the debt owed by him, then equity would regard such legacy as the fulfillment of the obligation of the payment of the debt owed by the person.

Equity acts in personam

This maxim states the equity applies to a person rather than a property. In England, the Court of Common law and Chancery Courts were distinguished by the fact that the former had authority over the person as well as property but the latter only acted over people. The Equity court’s coercive power arose from their authority to hold the violator in contempt of court and punish accordingly. Since the law of equity was applicable to the persons and not the property, it could also apply to the property outside a jurisdiction, provided that the person was within the jurisdiction. In the case of Penn v. Lord Baltimore, an order of specific performance was made for the plaintiff who brought a boundary dispute case to an English Court, yet the land was situated in Maryland, USA. the jurisdiction of the court was applicable to the parties as they both were English and lived in England.

Where the equities are equal, the first in time prevails

Where the legal estate is absent in the matter and the contest is among equitable estate only, the person whose equity is attached to the property first in time will be entitled to priority over others. Here, the term equities refer to multiple equitable interests. Thus, in case two equities are equal, the original interest, i.e., the first in time will succeed. For example, if A grants an equitable mortgage to X and then subsequently grants the same mortgage to Y, X’s mortgage shall take priority.

Where the equities are equal, the law prevails

In case neither of the parties has been wronged and both stand at an equitable position, the legal remedy will be prioritized. Equity shall not provide any specific remedy in case both the parties have equal causes. Thus, in such cases, the parties must bring a legal action rather than an equitable action.

Conclusion

The laws related to equity have evolved through precedent and the intention is to grant equitable rights and remedies to the parties. The decisions of equity have largely been based on the judge’s discretion and understanding of the fair and just cause. Equity dates back to the centuries ago and is still as relevant, so is the case with law. Law and equity both are important for justice. Where the rigidities of the law threaten justice, equity prevails, and where equity has no remedy the letter of law is followed. Justice, thus, depends upon both and thus, both must be consulted in order to deliver justice.

References


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