Chapter 2 Customs , Common Law and Equity

Chapter 2  

Customs , Common Law and Equity  

Introduction 

In this chapter you will learn about : 

• Different types of customs 
• Introduction to common law 
• Defects of common law 
• Reasons for the growth of equity 
• Contributions of equity 
• Doctrine of promissory estoppel 

2.1 Customs 

1. Customs are rules of behaviour that develop in a community without being deliberately invented. They can broadly be divided into general customs and local customs. 

2. General customs are effectively the basis of the common law. It is thought that after the Norman Conquest , judges who travelled around the land making decisions in the King's name based at least some of their decisions on the common customs .General customs are no longer an important source of law as most general customs have long since been absorbed into legislation or case law. 

3. Local customs only operate in a particular area. For example , when a person claims that he is entitled to some local right , such as a right of way. For the court to recognise any local custom the following had to be satisfied : 

• the custom must have existed since ' time immemorial' 
• the custom must have been exercised peaceably , openly and as of right 
• the custom must define as to locality , nature and scope 
• the custom must be reasonable 

2.2 Common Law 

1. The legal system in England and Wales could not rely merely on customs. 

2. After the Norman Conquest in 1066 , a more organised system of courts emerged. The idea was to standardise the law. William the Conqueror set up the Curia Regis ( the King's Courts) and appointed his own judges. 

3. Other that the central court , judges were sent to major towns to decide any important cases . Later Henry II (1154-89) divided the country up into 'circuits' or areas for the judges to visit. 

4. Over time judges selected the best customs which were to be used by judges throughout the country. The result was law which applied to the whole country which became known as the common law , since it was common to the whole county. 

5. By 1250 , a common law had developed from the cases heard in the King's Courts (Curia Regis) which applied to the whole country. 

6. However the common law gradually changed from a dynamic and adaptable system to one that was excessively formalised , inflexible and inadequate. 

7. Among the defects of the common law were that : 

• The common law was inflexible as actions had to be begun by writ but there were only a limited range of writs. Hence , only certain cases were recognised. 
• The only remedy at common  law was damages ( monetary compensation) which were often inadequate. 
• Under the common law , legitimate grievances were often lost owing to procedural defects and technicalities. 
• The common law was rigid as a result of binding precedent . The tools now available to avoid the effects of precedent such as distinguishing  and overruling were not available then. 
• The common law was expensive. 

8. The term 'common law' also has different meanings depending on the context in which it is used : 

• The law developed by the early judges to form a common law in the country as opposed to local laws used prior to the Norman conquest. 
• Law developed by judges through the doctrine of precedent as opposed to laws made by the legislative body such as Acts of Parliament or delegated legislation. 
• The law operated in the common law courts as opposed to the Court of Chancery before the reorganisation of the courts in 1873-75. 

2.3 Equity 

Equity refers to the specific set of legal principles which came into existence to complement and fill gaps in the common law. 

 2.3.1 The Growth of Equity 

1. Before the Norman Conquest in 1066 , different areas of England were governed by different systems of law. When William the Conqueror gained the English throne in 1066 , he established a strong central government and began to standardise the law. By about 1250 a 'common law ' had developed that ruled the whole country. The common law gradually changed from a dynamic and adaptable system to one that was expensive , inflexible and inadequate.  

2. Among the defects of the common  law were that : 

• The common law was inflexible as actions had to be begun by writ but there were only a limited range of writs. 
• The only remedy at common law was damages (monetary compensation) which were often inadequate. 
• Under the common law , case were often lost owing to procedural defects and technicalities. 
• The common law was rigid as a result of binding precedent. The tools now available to avoid the effects of precedent such as distinguishing and overruling were not available then. 
• The common law was expensive. 

3. Dissatisfied parties petitioned the King , who later passed these petitions to the Lord Chancellor who as the number of petitions rose, established the Court of Chancery. 

4. Among the reasons for the growth of equity were that: 

• Equity ensured justice as the court could grant remedies other that damages. Discretionary remedies granted include specific performance , injunctions , rectification and rescission. 
• Decisions were based on good sense and fairness. 
• Equity adapted and expanded to meet new needs. 
• The Court of Chancery was less formal and cheaper than the common law court. 

5. Equity was initially unpredictable as the court was not bound by precedent. The quality of decisions also varied from Chancellor to Chancellor as fairness was a subjective quality . However , by the 19th century equity too became ruled by precedent and standard principles. 

6. Equity also created maxims (designed to ensure that decisions were morally fair) which had to be satisfied before equitable rules could be applied. Some examples of these maxims include: 

• He who comes to equity must come with clean hands  

D&C Builders V Rees - Lord Denning . A small building firm did some work on the house of a couple named Rees. The bill came to £732 , of which the Rees had already paid £250. When the builders asked for the balance of £482 , the Rees announced that the work was defective , and they were only prepared to pay £300. As the builders were in serious financial difficulties (as the Rees knew). they reluctantly accepted the £300 ' in completion of the account'. The decision to accept the money would not normally be binding in contract law , and afterwards the builders sued the Rees for the outstanding amount. The Rees claimed that the court should apply the doctrine of equitable estoppel, which can make promises binding when they would normally not be . However , Lord Denning refused to apply the doctrine , on the grounds that the Rees had taken unfair advantage of the builders' financial difficulties , and therefore had not come 'with clean hands'. 

• Equity will not suffer a wrong without a remedy 

This maxim indicates that equity will not allow the technical defects of the common law to prevent worthy plaintiffs from obtaining redress. It could be seen , therefore , as the opposite of the maxim that equity follows the law. There are numerous examples of the development of  equitable doctrines and remedies intended to override the unjust result arising from the enforcement of legal rights . Perhaps the most obvious is the trust itself: the enforcement of the rights of the legal owner as against the person for whose benefit he had agreed to hold the property would clearly lead to injustice and so equity recognised the rights of that beneficial owner. Other examples include the use of specific  c performance to enforce contracts not enforceable at law and the use of injunctions to restrain threatened wrongs or to protect the plaintiff's interests pending trial. 

• Equity follows the law 

This is an attempt to indicate the relationship between common law and equity , which is a complex one . The traditional role of equity , as stated in ' Doctor and Student' 1523 by Christopher St German was ' to temper and mitigate the rigour of the law' , which implies that equity would intervene and overrule the common law if justice required it . It was stressed m even at that time; however , that it did not attempt to overrule common law judgments , but rather to act in  personam on the parties to prevent injustice ( as explained below , it is also a maxim of equity  that it acts in personam). This maxim indicates that , where possible , equity will ensure that its own rules are in line with the common law one . Examples of equity  overcoming the effect of the common law are frequent enough , but it should be noted that in most cases the principle is that equity supplements but does not contradict the common law. Thus, in the case of the trust , the interest of the beneficiary are recognised , but so too , of course , is the status of the trustee as legal owner . The trust exists, as it were , behind the legal ownership. 

• Where there is equal equity , the law shall prevail 

These two maxims are concerned with priorities that are to say which of various interests prevails in the event of a conflict. The general rule , as one might expect , is that interests take effect in order of their creation , but , as regards equitable interests, these may be defeated if a bona fine purchaser acquires a subsequent legal estate without notice of the equitable one . This is turn raises the issue of notice, and to that extent the maxims have been affected by legislation of the question of what constitutes notice . For the purchaser of the legal estate to gain priority , however , it will be necessary for him to show that he is bona fi de . If there fraud then the equities (of the legal owner and the equitable one ) will not be equal and the equitable one will prevail 

• Where the equities are equal , the first in time shall prevail 

The maxim operates where there are two or more competing equitable interests ; when two equities are equal the original interest will succeed. 

• He who seeks equity must do equity 

Though the previous maxim indicates equity's willingness to intervene where the common law will not , it should not be thought that equity will automatically intervene whenever a certain situation arises. In general , one can say that wherever certain facts are found and a common law right or interest has been established , common law remedies will be  available whether that produces a fair result or not . By contrast , equitable remedies are discretionary and the court will not grant them if it feels established an equitable right or interest. The maxim that he who seeks equity must do equity , together with the next two maxims , concerning  'clean hands' and delay , are aspects of this discretionary quality . It should not be supposed that the discretion is entirely unfettered. 

• He who comes into equity must come with clean hands 

The rather picturesque language of this maxim means that a party seeking an equitable remedy must not himself be guilty of unconscionable conduct. The court may therefore consider the past conduct of the claimant. Most cases concern illegal or fraudulent behaviour on the part of the claimant and it is not clear to what extent the maxim is applicable outside such behaviour. 

• Delay defeats equities 

Delay may be evidence of acquiescence , so the two issues cannot be separated. A failure to bring an action may tend to confirm other slight evidence that the innocent party has accepted or agreed to the breach of contract or other ground  for seeking relief , thus preventing  him from enforcing his right to remedies for that breach. 

• Equality is equity 

In the absence of any evidence to the contrary, equity will tend towards the adoption of equal division of any fund to which several persons are entitled. 

• Equity looks to the intent rather that the form 

Courts of Equity make a distinction in all cases between that which is matter of substance and that which is matter of form ; and if it finds that by insisting on the form , the substance will be defeated , it holds it inequitable to allow a person to insist on such form , and thereby defeat the substance. 

• Equity looks on that as done which ought to be done  

This relates most obviously to specific performance . If vendor and purchaser have entered into a specifically enforceable contract ( for example , for the sale of land ), in equity , the purchaser acquires a beneficial interest and the vendor holds the land on constructive trust for the purchaser. However , it should ne noted that the duty of the constructive trustee is simply to convey the land to the purchaser in accordance with the terms of the contract. The trustee does not take on all the other duties normal to trusteeship , nor , for example , is the purchaser entitled to rents from the property until sale. 

• Equity imputes an intention to fulfil an obligation 

Generally speaking , near performance of a general obligation will be treated as sufficient unless the law requires perfect performance , such as in the exercise of an option . Text writers give an example of a debtor leaving a legacy to his creditor equal or greater to his obligation . Equity regards such a gift as performance of the obligation so the creditor cannot claim both the legacy and payment of the debt. 

• Equity acts in personam 

It is in the nature of equitable remedies that they generally operate against the person of the defendant, being enforceable by imprisonment for contempt . It is in this way that , as discussed above, equity could claim not to be interfering with the common law.  The judgment at law in effect was binding on the whole world and equity intervened only against the individual defendant, who was prevented from enforcing his legal rights. Another feature of this principle is that equitable rights were not enforceable against everybody  but could be defeated by the interest of the bona fi de purchaser. The in personam nature of the operation of equity also has specific relevance in relation to property and interests abroad. As a general rule , English courts will not entertain actions concerning title to foreign land. 

• Equity will not asssit a volunteer 

Where a person voluntarily submits to a request or performs an act for another without any form of consideration in return he is regarded as a volunteer. A volunteer has no rights against the person he assists. 

7 . The Judicature Acts 1873-75 fused the administration of the common law courts and the Court of Chancery and created a unified system of courts and procedures. There were no longer different courts and procedures for those seeking equitable and common law remedies. 

8 . Where there is a conflict between the common law and equity , equity prevails (S.25 Judicature Act 1873,S.49 (1) Supreme Court Act 1981.) 

2.3.2 Contributions of Equity 

New rights 

1. While the common law only recognises legal ownership , the law of trust recognises dual ownership . The legal and equitable ownership in the same property may vest in different people in different ways at the same time. Hence equity recognised the rights of the beneficiary under the law of trusts. Trusts are used in setting up pension funds and settling property on younger members of the family. 

2. The common law only recognised the legal owner of property . Equity recognised the rights of the mortgagor to redeem his property . The equity of redemption allows the mortgagor to redeem his property from the mortgagee upon payment of the principal and interest outstanding . The majority of homeowners buy their property with the aid of a mortgage. 

New remedies 

1. An injunction is an order of the court compelling the defendant to do or not to do something . A mandatory injunction is an order of the court compelling the defendant to do something whereas  a prohibitory order is an order of the  court prohibiting or preventing the defendant from doing something. Injunctions are often ordered in cases of domestic violence as a protection for the abused partner. Injunctions are also used to prevent nuisances. 

2. Specific performance refers to an order of the court compelling a party to perform his part of an agreement that he had promised to fulfil. 

3. Rectification is an order which alters the words of a document, which does not express the true intention of the parties to it. 

4. Rescission refers to an order that restores the parties to a contract to the position that they were in before the contract was entered into.  In the 1970s , two important new remedies were created extending the scope of injunctions. 

5. A mareva injunction ( freezing order ) is a court order to a third party to freeze the assets of a party to a dispute where there is a danger that they may be removed from the court's jurisdiction. 

6. An anton pillar order ( search order ) provides that the court can order defendants to allow their premises to be searched and for relevant documents to be removed. 

2.4 The Doctrine of Promissory Estoppel 

The doctrine of promissory estoppel which originated from Lord Denning's obiter statements in Central London Property Trust v High Trees House is another contribution of equity . In 1937 , High Trees House Ltd leased a block of flats in Balham , London , for a rate £ 2,500/ year from Central London  Property Trust Ltd. Due to the conditions during the beginning of World War II occupancy rates were drastically lower that normal . In January 1940 , to ease the situation the parties made an agreement in writing  to reduce rent by half . However , neither party stipulated the period for which this reduced rental was to apply . Over the next five years, High Trees paid the reduced rate while the flats began to fill , and by 1945 , the flats were back at full occupancy . Central London sued for payment of the full rental costs from June 1945 onwards ( i.e. for two quarters of 1945). Based on previous judgments such as Hughes v Metropolitan Railway Co, Denning J held that the full rent was payable from the time that the flats became fully occupied in mid -1945 . However , he continued in an obiter statements that if Central London had tried to claim for the full rent from 1940 onwards , they would not have been able to . This was reasoned on the basis that if a party leads another party to believe that he will not enforce his strict legal rights, then the Courts will prevent him from doing so at a later stage. This obiter remark was not actually a binding precedent , yet it essentially created the doctrine of promissory estoppel. 

2.5 Conclusion 

Equity refers to a specific set of legal principles which came into existence to fill gaps in and supplement to common law by providing just and practical remedies where the common law was not adequate. Equity is not and was never intended to be a complete system of law. The equitable rights, interests and remedies discussed above remain relevant and important today. The discretionary nature of the remedies and equitable maxims ensure that the remedies are granted where they are felt to be genuinely and justly deserved. 

Learning outcome 

By now you should know : 

• Laws were initially customs i.e. general customs and local customs 
• The history leading to the introduction to common law 
• The benefits of the standardization of law 
• The defects of the common law 
• The definition of equity 
• The reasons for the growth of equity 
• The equitable rights and remedies 
• The application of the doctrine of promissory estoppel 
• Whether equity is still relevant 

Self-Assessment 

1. What are the benefits of the standardization of the law ? 

2. What is defined as general customs? 

3. List the equitable remedies. 

4. State the new equitable rights recognized by the law. 

5. When equity and common law conflict does equity prevail ? 

6. What are the various definitions of common law ? 

7. Which case states he who comes to equity must come with clean hands ? 

8. What are the reasons for the growth of equity ? 

9. What were the defects of equity? 

10. Name the classic case on the doctrine of promissory estoppel. 

Further Reading 

Jacqueline Martin , The English Legal System , 6th Edition , pgs. 15-21 

Appendix A - Relevance of Equity Today 

Remedies 

Injunction 

Parbulk II As v PT Humpuss Intermoda Transportasi TBK 2011 

An application was made for the courts to grant a freezing injunction against all respondents restraining them from dissipating the assets of Humpuss Sea Transport Pte.Ltd (HSTPL) worldwide. 

Rescission 

Howard-Jones v Tate 2011 

Where a vendor had breached a post-completion condition in a contract for the sale of land , the purchaser was not entitled to rescind the contract ab initio : the proper remedy was in damages. The recorder had erred in awarding damages on the basis that the purchaser should be put back into the position he would have been in had the contract never been entered into , as that was akin to rescission , and damages would, therefore, be reassessed.