The Rise and Fall of Equity

Joe Sellman (3L)

Equity is often given lip service in our legal education as something that once mattered, was once problematic, and is now limited to a few specific instances where it is useful. That is, equity was once a problem, and that problem was solved long ago.

During my first year of law school, I was confused by equity. I did my best to learn the equitable doctrines, maxims, and remedies we are taught in class, but understood no more than I had been taught. At the end of 1L, I tried to think about what I had learned about equity. I tried to build my own method of understanding (a framework) that connected and explained the different parts of equity that arose in the different 1L classes. I failed.

Specifically, I could not understand or reconcile how:

  • On the one hand, we are taught that equity is a flexible doctrine that blunts the harshness of the law in favour of fairness; and,
  • On the other hand, the equitable doctrines that we studied were formulaic and dogmatic.

To illustrate my confusion, consider the two following examples: unconscionability and trusts. Unconscionability requires: 1) unequal bargaining position arising from ignorance, need, or distress of the weaker party; 2) the stronger party using their position of power to their advantage; and 3) that the agreement reached is substantially unfair[JS1]. My question is, why does the unequal bargaining power need to arise from ignorance, need, or distress? If the conduct is unfair, based on an unequal bargaining position, is that not sufficient for equity to need to redress the balance?

The doctrine of trusts is unquestionably a doctrine which arises from equity. However, it seems to me that trusts are used in society without being held to the maxims of equity. For example, if trusts are used to reduce tax owed, is there not an argument that the individual seeking the trust is not coming to equity with clean hands? Or more broadly, what wrong is equity remedying when a trust is used as a tax sheltering vehicle? Paying tax?

Since 1L, I have kept coming back to equity. In this article, I provide a brief overview of my personal journey in understanding the rise and fall of equity, and how it explains (but does not reconcile) the two seemingly contradictory natures of equity.

Origins of Equity

Equity is not a new concept. Aristotle considers what is just, and determines there is a need for equity. This need is for a form of justice that can be applied when the application of a just universal rule in a specific scenario results in an unjust result. As such, equity is a correction of the law to prevent such injustices. Aristotle argues that the need for equity does not arise from an error in law, i.e. the universal rule. Instead, the nature of the scenario is what gives rise to the need for equity[JS2].

Roman Equity

Yes, the Roman Empire had equity in their laws. Sir Henry Summer Maine tells us that the origin of Roman equity essentially arose from a conflict of laws problem[JS3]. The Roman system had 1) civil laws, which were laws enacted by the people; and 2) natural laws, which were laws that arose from natural reason and apply to “all of mankind.” In early Rome, civil law applied to Roman citizens, not foreigners. Instead of the Roman Court looking to the laws of where a foreigner came from to determine what laws applied to the foreigner, the Courts looked to the natural laws of reason, which were common to all (Italian) nations. Unlike the civil law, the natural law did not distinguish between groups or classes of people and, in that sense, equity was a levelling out of the law and was connected to the Greek theory of equity.

Common Law & Equity

To understand equity in the context of the common law system, we first must understand the common law. Roscoe Pound tells us that the common law originates in England as a formal declaration by the courts administering the customs of the land[JS4]. However, Pound tells us that the customs of the land are illusionary in the sense that customs were local rather than general. Therefore, the declaration by the courts of the common law was either: 1) determining common customs through examining customs throughout the realm (as a side note, this sounds very similar to Roman equity arising from the law of reason common to all nations); or 2) a declaration which superseded local customs. Maine argues, that for this reason, the common law is a fiction. The fiction is that courts claim to follow the common law, whereas the reality is that courts are tribunals that legislate the common law.

The attempts to find the common law of the land and the goal of uniformity of the common law created a rigid legal system in England. This created both the need and space for equity in our legal system. The justification for equity in England arose as the Monarch had the “[…] power to dispense with the operation of common-law rules in particular cases for special reasons of hardship or inadequacy of the law […]” (Pound). Maine points out that this means equity is based upon a rather unpalatable foundation: that the Monarch has moral superiority over all others at all times.

Over time, the Monarch’s equitable power was delegated and wielded by the chancellor, as the keeper of the King’s conscience. This in turn was delegated and wielded through the chancellors courts. Equity was originally a discretionary justice which could be criticized for being unprincipled, evidenced by the King’s (via the  Chancellor) conscience changing over time[JS5]. However, during the 17th and 18th centuries, the court of equity changed. The court started applying principles in similar cases (i.e. following precedents) and a system of rules was created.

This time period is where equity as fairness was replaced with equity as dogma.

Maine points out that this process turned equity into the same type of system that it was created to temper. That is, equity was no longer a flexible doctrine. In the 19th century, there were two parallel courts, the common law courts and the courts of equity. Often, neither could completely resolve an issue and there were concerns of the mischiefs that arose from the two parallel systems of equity and common law. The mischiefs included: litigants being moved between the two courts, high fees, and general inefficiencies[JS6].

Finally, in the late 19th century the courts were fused. In Alberta, the Judicature Act provides the Court of Queen’s Bench with all the powers that had previously been exercised by the court of equity. Generally, this fusion seems to have kept the two legal systems separate. For example, equitable remedies apply to equitable causes of action and common law remedies apply to common law actions. However, there is jurisprudence that argues that fusion means a complete fusion, rather than just one court wearing two hats.

[JS1] From Blackmore v Cablenet, and Snell’s Equity.

[JS2] Aristotle’s Nicomachean Ethics

[JS3] Maine, Ancient law: its connection with the early history of society and its relation to modern ideas

[JS4] The National Law Library 1939

[JS5] Fox in Snell’s Equity

[JS6] Fox in Snell’s Equity