EQUITY AND EQUITABLE REMEDIES Flashcards
Subject matter of equity
There is no exhaustive list, however certain matters have been assigned by the Senior Courts Act 1981:
- The sale, exchange or partition of land, or the raising of charges on land
- The redemption or foreclosure of mortgages
- The execution of trusts
- The administration of the estates of deceased persons
- Bankruptcy
- The dissolution of partnerships or the taking of partnership or other accounts
- The rectification, setting aside or cancellation of deeds or other instruments in writing
- Probate business, other than non-contentious or common form business
- Patents, trade-marks registered designs, copyright or design right
- The appointment of a guardian of a minor’s estate
- All causes and matters involving the exercise of the High Court’s jurisdiction under the enactments relating to companies
How equity works
IN PERSONAM
On the person of the defendant
Equity undermines the Rule of law in its ex-post, in personam, discretionary adjudication
Under and over inclusiveness of legal language
The law, to be useful, must use language that is under or over inclusive in some cases
Equity is what allows the judge to apply the law so that it fits with the demands of morality
The lawmaker may be unaware of a problem with the application of the legal in some cases, or notice it and nevertheless choose to stick with the rule (e.g. the rule is useful, laziness, ideology)
Example of commercial law in the inadequacies of the legislation
What is really important is that business people can read and understand the rule and know exactly where they stand. The rules must be predictable and clear, there should be no dependence on the judge. Prioritising the swiftness of the market
Aristotle on Equity
Equity is fixing a fault in the law that results from the inability or unwillingness of the legislator to precisely explain to us how the law applies to every individual case
The law maker may be unaware of the problem. But sometimes they know that their rule is going to lead to injustice if it applies straight to the case without the litigation of equity
The rule could be easy to apply
Writs
History of Equity
From the mid-14th Century, the categories of Writs and procedures are sealed. The common law becomes a rigid system of rules
Forms which dictated whether or not your case goes to court
- The form is all that matters
- There is legal certainty and predictability
- The rigidness of the form made people complain, and so the Lord Chancellor is called upon to do justice. The LC’s authority is based on ‘conscience,’ an objective moral judgment on the facts
Equity’s notion of conscience
Completely objective: it is an objective duty on people not to act in certain ways
Selden - conscience is subjective, and thus is dangerous to use as a standard in law
Creation of Court of Chancery
To mitigate the rigidity of the common law
At the beginning, all decisions were ad hoc
What was equity
A set of unrecorded, in personam, ex-post decisions
Aim of the Judicature Acts
19th Centry reform
Judicature Commission - First Report of the Commissioners:
reforms aim to tackle the evils of the double system of Judicature and the confusion and conflict which has resulted from it
Nature of the common law and law of equity courts before the Judicature Acts
Common law - took criticisms of reform seriously; applied more open-ended standards so that the law could be changed in the outskirts to match specific cases
Courts of equity - come off with rules and thus by the 19TH century they were very bureaucratic, whilst the Common Law courts were more flexible
Result of the Judicature Acts
Older higher courts were abolished, creation of the Supreme Court of Judicature
Unified the courts and the procedure - administrative fusion
Administrative fusion
Courts and procedures remained the same
The rules stayed the same, only if there is collision will equity prevail [Senior Courts Act, s49]
Nature of a beneficiary’s remedy against the trustee
A beneficiary’s remedy against the trustee is a right in personam
Are trust interests in rem or in personam
English law has been incapable of determining conclusively whether they are in rem or in personam
Equitable interests under a trust
Equitable proprietary interests corresponding to legal estates
The beneficiary can be regarded as the owner of the beneficial interest
Penn v Lord Baltimore
A court of equity can exercise jurisdiction to order specific performance of a contract for the sale of land abroad
Ewing v Orr-Ewing
A court of equity can exercise jurisdiction to administer assets abroad if the executors are in England
Orthodox view on fusion
Only the jurisdictions have been fused - the changes made by the Judicature Act gave rise to no new causes of action, remedy or defence
The nature of legal and equitable rights have not changed, all that has happened is that they are now administered in the same court
Tinsley v Milligan
Lord Browne-Wilkinson explained that legal and equitable interests had different incidents for historical reasons, but that ‘fusion’ resulted in the adoption of a single rule
The rule was the same whether the claim is to a legal or equitable title
Complete fusion - Burrows
Advocates that there is still some way to go regarding complete fusion:
- identification of the wrong
- compensation and its restrictions
- restitution for wrongs
- punishment
- anticipated wrongs
- general defences
It would require only a small step forward to assimilate common law and equitable monetary remedies for common law and equitable wrongs
Burrows
Identification of the wrong
A wrong is a breach of duty; the law treats conduct as such breach if compensation is available for the loss caused by this conduct
In common law, breach of contract and torts are the main types of wrongs, whilst in equity, breach of fiduciary duty, breach of confidence, dishonestly procuring or assisting a breach of fiduciary duty (the wrong recognised by the Privy Council in Royal Brunei Airlines v Tan) and estoppel that constitutes causes of action (particularly proprietary estoppel) are wrongs
Both common law and equity recognise what, at root, is exactly the same phenomenon, namely wrongs or breaches of duty triggering compensation
All equitable wrongs should be treated as examples of breach of contract or torts
Burrows
Compensation and its restrictions
The primary remedy for the common law wrongs is compensatory damages. There are restrictions on compensatory damages, particularly: remoteness, intervening cause, the duty to mitigate and contributory negligence
The courts have a wide discretion in deciding the losses to be compensated by damages for common law wrongs
Because it involves dishonesty, the tort of deceit has been treated differently and a wider remoteness test than reasonable foreseeability applies in this tort
A trustee would be liable for breach of trust even if the immediate cause of the loss was a third party
Restrictions on compensatory damages do not apply to equitable compensation. However, some argue that the restrictions apply in the same way to equitable compensation as to compensatory damages
Compensatory damages and equitable compensation should be regarded as identical
Burrows
Restitution for wrongs
The common law remedies are an action for money had and received and restitutionary damages; while the equitable remedy is an account of profits
As the Law Commission has pointed out, it would be much simpler to recognize fusion and to have one remedy instead of three
Burrows
Punishment
Punitive damages have only ever been awarded for torts
We should put into effet the Law Commissions proposed reform, which will mean that the courts would have the power to award punitive damages for torts and equitable wrongs according to the same principled basic test of whether there was an outrageous and deliberate disregard of the claimant’s rights
Burrows
Anticipated Wrongs
Common law damages give relief only for an accrued wrong, albeit that the relief given can extent to future as well as past consequences
Equitable damages can be awarded, albeit exceptionally, for anticipated, as well as accrued, wrongs
It is clear that equitable damages can be awarded for common law, as well as equitable wrongs
Target Holdings v Redfern
There can be no equitable compensation where the loss in question would have been suffered even if there had been no breach of duty by the defendants solicitors
Bristol & West Building Soc v Mothew
The suggestion that equitable compensation may sometimes have a special more restrictive restorative aim than compensatory damages should be resisted – it confuses the aim of the remedy with the application of that aim to different duties broken
Rookes v Barnard
The present law allows the award of punitive or exemplary damages (unless statutorily authorized) in two restricted categories only: where the wrong comprised oppressive, arbitrary or unconstitutional action by a servant of the government or was committed cynically to make a profit
Burrows
General Defences
Equitable remedies are subject to discretionary general defences that simply do not apply to common law remedies
It is false to imagine that there are irreconcilable differences between common law and equitable defences
A defence may operate to rule out specific performance or an injunction while not ruling out damages, whether equitable or common law
Nature of remedies in equity and at common law
At common law, the normal form of relief is an award of damages
Equity has a range of discretionary remedies; their availability depends upon the inadequacy of common law remedies, and they are governed by the doctrine that equity acts in personam
Specific performance
When the courts require performance of the contract
A remedy in personam (as against the person); the obligation is owed by the contracting party
Only available where the common law remedy of damages for breach of contract is inadequate
Co-Operative Insurance Society v Argyll Stores
The claim was brought to enforce a covenant in a lease of a supermarket
The owners of the shopping centre wanted to force the owners of the supermarket (who were running at a loss) to continue running the supermarket for a further 19 years (the time left on the lease)
The court here declined specific performance because they said it would be oppressive on the defendant
It is impractical for the courts to have to check the performance, it is a waste of court resources
Settled practice of the court: the fact that the judge has discretion to give specific performance, it is still based of general practices of the courts
Lord Hoffmann in Co-Operative Insurance Society v Argyll Stores
The principle upon which English judges exercise the discretion to grant specific performance are reasonably well settled and depend upon a number of considerations, mostly of a practical nature, which are of very general application”
Albeit that it is still a matter of the judge’s discretion whether it is awarded, depending on the facts of the case
Ratio in Cavendish Square Holding BV v Talal El Makdessi
The minimum condition for an order of specific performance is that the innocent party should have a legitimate interest extending beyond pecuniary compensation for the breach”
If damages would be adequate as a remedy for the breach, you are not entitled to specific performance
Beswick v Beswick
FACTS
An uncle sells his coal business to his nephew for a certain amount per week to his uncle, and then was to pay his aunt after his uncle died (which he stopped). The aunt sought to sue for specific performance after her nephew stopped paying.
Beswick v Beswick
RULING
Normally, (because of privity of contract), a third party cannot enforce contractual terms. But, the aunt was able to claim as the administratrix of the estate, and thus obtained order for specific performance
Because it was a contract for periodic payments that it was eligible for specific performance
Lord Hodson - because there was an unconscionable breach of faith, the equitable remedy sought is apt
Lord Upjohn in Beswick v Beswick
“Equity will grant specific performance when damages are inadequate to meet the justice of the case”
Damages will be inadequate if the property is unique
Generally used in contracts for the sale of land because each piece of land is regarded as unique
Can the sale of company shares be specifically enforceable?
The sale of company shares can be specifically enforceable when those shares are not generally on the open market (i.e. with a private company)
Beswick v Beswick
RATIO
Contracts for periodic payments (immunities or pensions) can be specifically enforceable
Penn v Lord Baltimore
FACTS
The parties had entered into a contract fixing the boundaries of Pennsylvania (claimant) and Maryland (defendant)
Normally in land disputes, you bring it to the courts of where the land is. But here, the claimants brought the dispute in England (because Lord Baltimore was in England)
Penn v Lord Baltimore
RULING + RATIO
Because equity acts in personam, the courts could order him to comply with the contract. It does not matter that the land was elsewhere, it was about his contractual obligation and he was in England
Equity’s jurisdiction is as against the person
Factors counting against SP
An ongoing obligation - a contract to continue doing something (e.g. employment contracts)
Factors that will bear on the exercise of the courts discretion
Claimant’s conduct – “he who comes to a court of equity, he must do so with clean hands”
Laches of delay: not limitation period
Unnecessary hardship
Types of injunctions
Prohibitive or mandatory
Perpetual (i.e. permanent, or final) or interim (i.e. interlocutory – between claim being lodged and trial)
Application for injunction without notice
An application for an injunction may be made without notice if notice would enable the defendant to take steps to defeat the purpose of the injunction
Discretionary remedies
Injunctions are based on the inadequacy of common law remedies
The court may award damages under Lord Cairn’s Act, either in lieu of or in addition to an injunction
In a rare case, the court will grant a declaration that a person who has yet to seek an injunction has no entitlement to it [Greenwich Healthcare NHS Trust v London Quadrant Trust]
Remedy in Personam
It is possible to enjoin a defendant who is not personally within the jurisdiction, provided service out of the jurisdiction can properly be done under the civil procedure rules
But, as a general rule, no injunction will be granted in connection with the title to land outside the jurisdiction, even if the defendant is within the jurisdiction
An injunction may be granted against an unnamed defendant, or against all members of a class or organisation to restrain the unlawful acts of unidentified members
Contempt (re: SP)
Non-compliance with an injunction, or an undertaking given in lieu [Hussain v Hussain], is contempt of court [Parker v Camden LBC; Contempt of Court Act], punishable by imprisonment [Hale v Tanner], in the case of a corporation the sequestration of property, or a fine
Acts done in breach of an injunction may be void for illegality [Clarke v Chadburn]
Crown proceedings (re: SP)
An injunction will not normally lie against the Crown. The proper remedy in such cases is the declaration
Locus Standi
“It is a fundamental rule that the court will only grant an injunction at the suit of a private individual to support a legal right” [Thorne v British Broadcasting Corp]
The general rule is that public rights are protected by the Attorney General acting either on their own initiative, or in relation of a member of the public.
However, an individual may seek an injunction if interference with a public right, created by statute or existing at common law, would also infringe some private right of his or would inflict special damage on him
American Cyanamid v Ethicon
FACTS
The claimant alleged that the defendant violated their patent to an absorbable surgical suture (the products were not yet on the market). They requested for an interim injunction, which they were granted
American Cyanamid v Ethicon
TEST
Will c be irreparably harmed if the injunction were not given
Lord Diplock in American Cyanamid v Ethicon
It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises
Mareva Compania Naviera SA v International Bulkcarriers SA
QUESTION
Could the courts freeze the accounts of a company pending the results of a trial
Lord Denning in Mareva Compania Naviera SA v International Bulkcarriers SA
“If it appears that the debt is due and owing, and there is a danger that the debtor may dispose of his assets so as to defeat it before judgment, the court has jurisdiction in a proper case to grant an interlocutory judgment so as to prevent him disposing of those assets.”
Mareva Compania Naviera SA v International Bulkcarriers SA
RULING
Rather than needing to establish the claim in your favour at trial first, we can award a freezing injunction pending trial in order to prevent the defendant from dispersing their assets
Damages in lieu of an injunction
Where ordinarily the courts would have ordered an injunction by Lord Cairn’s Act / Chancery Amendment Act 1858 - if the court thinks it fit to award damages in addition to or in substitution for an injunction or SP, the court shall do so
Senior Courts Act, s50
Where the Court of Appeal or the High Court has jurisdiction to entertain an application for an injunction or specific performance, it may award damages in addition to, or in substitution for, an injunction or specific performance.
Damages in lieu of an injunction - old test
Shelfer v City of London Electric, AL Smith
(1) If the injury to the plaintiff’s legal rights is small,
(2) And is one which is capable of being estimated in money,
(3) And is one which can be adequately compensated by a small money payment,
(4) And the case is one in which it would be oppressive to the defendant to grant an injunction”
Then damages in substitution for an injunction may be given
Now only seen as guiding principles
Damages in lieu of an injunction - new test
In Lawrence v Fen Tigers, Lord Neuberger emphasised that even if there are guiding principles, it is still a question of discretion which should not be limited
First, the application of the four tests must not be such as “to be a fetter on the exercise of the court’s discretion.
Secondly, it would, in the absence of additional relevant circumstances pointing the other way, normally be right to refuse an injunction if those four tests were satisfied.
Thirdly, the fact that those tests are not all satisfied does not mean that an injunction should be granted.”
These are not tests, but they are elements
Jaggard v Sawyer, Millet LJ
Millet LJ ruled that: “the grant of an injunction, like all equitable remedies, is discretionary. Many proprietary rights cannot be protected at all by the common law. The owner must submit to unlawful interference with his rights and be content with damages. If he wants to be protected he must seek equitable relief, and he has no absolute right to that
Rescission
Setting aside a transaction
The right to rescind means a contract is voidable until it is set aside. Rescission is sometimes used more loosely to deal with repudiation or other forms of termination or void contracts – this is not the case here
When does rescission apply
Applies as between the parties to a contract
o Unilateral or bilateral
May apply in the cases of a gift
A principal may also rescind a transaction into which their fiduciary has entered in breach of a fiduciary duty
It varies depending on time of the transaction involved
Restitutio in intergrum
Putting things back as they were; making things whole again
You can get back whatever you paid, but you must pay back anything received
Rescission on the ground of mistake
Voluntary dispositions
When the other party has not given consideration
Usually dealing with tax
Use Pitt v Holt
Pitt v Holt
FACTS
Mrs Pitt was involved in setting up a trust for her husband, who was involved in an accident (in which there was a personal injury settlement). She set up the trust to manage the sum she was awarded. The way the trust was set up, it had unintended inheritance taxation (the professional taxers did not appreciate this). The SC considered in what circumstances can you rescind a trust and start again and not have to pay the tax. Earlier cases distinguished between transactions you knew what was going on and the consequences of the transaction (such as tax). Here, Mrs Pitt understood the nature of the transaction. The SC created a new concept:
Pitt v Holt
TEST
The court must consider in the round:
1. the existence of a distinct mistake
2. the degree of centrality to the transaction
3. the seriousness of the consequences
Then make an evaluative judgment whether it would be unconscionable to leave the mistake uncorrected
Pitt v Holt
RULING
Taking the matter in the round, it would have been unconscionable not to set aside the mistake
Great Peace Shipping - opinion on broadening doctrine of mistake
It would be a good thing if there was a broader doctrine on mistake, but the courts do not have the power to create one
Damages in lieu of rescission
Misrep Act, s2(2)
If it is equitable to do so, the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission
Salt v Stratstone Specialist
FACTS
The claimant bought a car that he was told was brand new. However, it was not brand new and it had been involved in an accident. The claimant wanted to reject the car and stopped using it.
Salt v Stratstone Specialist
HELD
“The words ‘in lieu of rescission’ must… carry with them the implication that rescission is available (or was available at the time the contract was rescinded). If it is not (or was not available in law) … rescission is not available and damages cannot be said to be awarded ‘in lieu of rescission.”
If there are barriers to awarding rescission, you cannot get the damages
If there are any equitable reasons why there cannot be rescission, that will prevent the ability to award damages
Losing the right to rescind
AFFIRMATION
Knowing the facts but nonetheless proceeding
Where there is a reason for setting aside the contract, the contract is voidable. But, if you treat K as valid, then you will be treated as having confirmed the contract, and the right to rescind will be lost
Amounts to waiver of the right
Also subject to the doctrine of laches
Losing the right to rescind
LACHES (DELAY)
It is unfair to rescind a transaction after a long period of time
The time limit is not fixed, and it depends on the circumstances of the case
Losing the right to rescind
WHERE RESTITUTIO IN ITEGRUM CANNOT OCCUR
Putting the parties back in the position that they were
Halpern v Halpern - you can take a broad view of the matter of practical justice
Rogge v Rogge - the court can require a party to take certain steps to undo a transaction
Losing the right to rescind
THIS PARTY ACQUIRES RIGHT
A bona fide purchaser for value has a good defence against equitable claims
Where a third party has acquired a right acting in good faith, you cannot rescind the original transaction
Lord Selborne in Lindsay Petroleum v Hurd
“Where it would be practically unjust to give a remedy … lapse of time and delay are most material”
- If the conduct of the party is equivalent to that of a waiver
- Where providing the remedy would “put the other party in a situation in which it would not be reasonable to place him”
- The longer you take, the more likely it is to be unjust on the other party
The mere passage of time is not enough to engage the doctrine of laches
- The validity of the defence of delay “must be tried upon principles [that are] substantially equitable.”
- Delay is just a factor; it will not warrant rescission if it is not put together with other things, such as reliance
Rectification
The correction of mistakes in a written document
Common mistake
Where documents do not accurately record the agreement.
The written agreement does not reflect the agreement between the parties
Rectification will be awarded
Unilateral mistake
Where only one other party is aware of the mistake.
Rectification is available where either the other party knew a mistake was made and was trying to profit from that, or the mistake of the person creating the document can be rectified
Sir Terence Etherton in Day v Day
With voluntary unilateral transactions, it does not matter what the person receiving thought, it only matters about what the person implementing the transaction thought
In the cases of contractual agreements, we are looking at the intention of both parties (the intention at the time of the agreement)
Basis for rectification in FSHC Group Holdings v Glas Trust Corporation
The basis for rectification is “entirely concerned with the parties’ subjective state of mind”
“Before a written contract may be rectified on the basis of a common mistake, it is necessary to show either:
(1) that the document fails to give effect to a prior concluded contract or
(2) that, when they executed the document, the parties had a common intention in respect of a particular matter which, by mistake, the document did not accurately record”
s9 Wills Act
Gives formality requirements for wills
s20 Adminstration of Justice Act
“If a court is satisfied that a will is so expressed that it fails to carry out the testator’s intentions, in consequence –
(a) of a clerical error; or
(b) of a failure to understand his instructions,
It may order that the will shall be rectified so as to carry out its intentions”
Marley v Rawlings
If it is a question of interpretation, then the document in question has, and has always had, the meaning and effect as determined by the court, and that is the end of the matter.
On the other hand, if it is a question of rectification, then the document, as rectified, has a different meaning from that which it appears to have on its face, and the court would have jurisdiction to refuse rectification or to grant it on terms
