MGL Chapter 2

CHAPTER 2
The Judicature System
The enactment of the Judicature Act 1873 (UK) [2-005]

Lord St Leonards’ warning [2-005]
Proposals for reform [2-010]
Influence of New York reforms [2-015]
The enactment of the Judicature Act 1873 [2-020]
Fusion of administration under a common procedure [2-025]
The Judicature system [2-030]
Contemporary reactions [2-035]
Protests from the bar [2-045]
Concurrent procedure under the Judicature Act [2-060]
Conflicts or variances between rules of law and equity [2-070]
Subsections 25(1)–(10) [2-075]
Subsection 25(11) [2-080]
Thirteen examples of conflicts and variances resolved by s 25(11) [2-085]
Contrast between ss 24 and 25 [2-090]
The Judicature system in Australia [2-100]
Law and equity under the Judicature system [2-110]
England [2-110]
New South Wales [2-125]
The fusion fallacy [2-130]
Fusion properly understood [2-130]
Orthodox authorities on fusion [2-135]
Fusion fallacy defined [2-140]
Reaction to criticism of fusion fallacy reasoning [2-145]
Copyright © 2014. LexisNexis. All rights reserved.
Conflict or variance between law and equity [2-155]

Conflicts and variances [2-160]
‘Rules’ [2-175]
Differences without conflicts [2-185]
Examples of the fusion fallacy [2-190]
Potential scope of the fusion fallacy [2-190]
Four introductory examples [2-195]
Innocent misrepresentation [2-200]
Hedley Byrne & Co Ltd v Heller & Partners Ltd [2-205]
Mortgagee’s power of sale [2-215]
Damages in equity [2-235]
Passing off [2-240]
Damages for part performance [2-250]
35
Heydon, J D, et al. Meagher, Gummow and Lehane's Equity : Doctrines and Remedies, LexisNexis, 2014. ProQuest Ebook Central,
http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=6221417.
Created from usyd on 2021-08-22 07:55:01.
[2-005] Equity: Doctrines and Remedies
Refusal of damages for breach of voluntary covenant [2-255]

Misapplication of equitable defences [2-265]
The doctrine of Walsh v Lonsdale [2-270]
Consequences of Walsh v Lonsdale [2-285]
Jurisdiction of inferior courts [2-320]
Was it a mistake? [2-325]
Success in removing procedural complexities [2-325]
Pessimism in earlier editions [2-330]
Optimism for the future [2-340]
Contributory negligence as a defence to breach of fiduciary duty [2-345]
Exemplary damages for breach of fiduciary duty [2-350]
More reasoned approach to these issues [2-355]
Canson Enterprises v Boughton & Co [2-360]
United Kingdom [2-365]
Academic writings [2-370]
Common ground [2-375]
Fusion by analogy? [2-380]
The enactment of the Judicature Act 1873 (UK)

[2-005] Lord St Leonards’ warning
The English reforms in procedure made in the mid-nineteenth century, discussed in
[1-280]–[1-305], were designed to facilitate in equity the adjudication of legal titles and the
award of legal remedies, and to permit at law the admission of some equitable defences and
the award of equitable relief. All these reforms presupposed the continued existence of dual
administrations of law and equity and attempted no modification in substantive principles. But
it was clear that the old system was doomed. True, it retained influential supporters, including
the aged but formidable Lord St Leonards. In 1865 he warned the House of Lords, when it was
debating the proposed construction of new court buildings, of the harm to basic principle which
could follow ‘the fusion — or confusion — of law and equity’.1 Indeed, to Lord St Leonards
it appeared unnecessary and unwise if not dangerous for parliament to authorise the erection
of one set of courts for all of the superior courts in London. With propinquity would come
doctrinal laxity.2
[2-010] Proposals for reform
However, the Lord Chancellors of the period 1866–76 (Lords Chelmsford, Cairns, Hatherley
and Selborne) were all proponents of further reform. They spoke for Liberal and Conservative
administrations, and lawyers of both political persuasions were members of a Judicature
Commission appointed under Lord Chelmsford. The Commission presented its First Report
in 1869 and recommended the establishment of a single Supreme Court in which would be
1. Hansard, 3rd Series, Vol 178, p 1182.

2. Conversely, to Lord Westbury, it seemed that the breaking down of ‘this great division’ would be one of the
consequences of the building. All this seems very strange, given that during the formative period of English
equity, the courts of common law and equity had been located on opposite sides of Westminster Hall: see
M Leeming, ‘Equity, the Judicature Acts and Restitution’ (2011) 5 J Eq 199 at 225 and J Atlay, The Victorian
Chancellors, Smith, Elder & Co, London, 1908, Vol II, p 414.
36
The Judicature System [2-015]
vested all jurisdiction then exercised by the superior courts of law, equity, probate, admiralty
and divorce. The intended result was that ‘[n]o suitor could be defeated because he commenced
his suit in the wrong Court, and sending the suitor from equity to law and from law to equity,
to begin his suit over again in order to obtain redress, will be no longer possible’, to be achieved
by giving to each division of the court ‘all the jurisdiction of the Supreme Court with respect
to the subject-matter of the suits and with respect to every defence which may be made thereto,
whether on legal or equitable grounds and [each division] should be enabled to grant such relief
or apply such remedy or combination of remedies as may be appropriate or necessary in order
to do complete justice between the parties in the case before the Court or, in other words, such
remedies as all the present courts combined would have now jurisdiction to administer’.3
[2-015] Influence of New York reforms
In truth the solution proposed by the Judicature Commission was not an autochthonous
panacea. It was an importation from the State of New York. There the administration of law
and equity had since 1848 been combined into the one system of procedure in the same system
of courts. The First Report of the Commissioners Inquiring into the Court of Chancery, which
was delivered in 1852, contains in its appendix a wealth of evidence collected from New York
as to the nature and effect of the 1848 reforms and the conditions preceding them.4
3. First Report of the Judicature Commissioners (1869), p 9, reproduced in British Parliamentary Papers, Legal
Administration, General, Vol 13, Irish University Press, Shannon, 1970.
4. See the supplement to the appendix to First Report of Commissioners Inquiring into the Court of Chancery (1852)
pp 5–18, and see the accounts by M Lobban, ‘Preparing for Fusion: Reforming the Nineteenth-Century
Court of Chancey’ (2004) 22 Law and History Review 389 and 565 and P Polden in W Cornish, S Anderson,
R Cocks, M Lobban, P Polden and K Smith (eds), Oxford History of the Laws of England, Oxford University
Press, Oxford, 2010, Vol XI, p 757. The central provision in the New York law of 1848 (c 379, para 62)
provided: ‘The distinction between actions at law and suits in equity, and the forms of all such actions and
suits heretofore existing are abolished; and there shall be in this state, hereafter, but one form of action,
for the enforcement or protection of private rights and the redress or prevention of private wrongs, which
shall be denominated a civil action’. Other States of the Union followed at varying speeds. The Delaware
Court of Chancery still flourishes with a Chancellor, four Vice-Chancellors and two Masters: see Stevens
v The Wilmington Medical Center Inc 421 A 2d 1334 (1980); W T Quillen and M Hanrahan, ‘A Short History
of the Delaware Court of Chancery — 1792-1992’, in Court of Chancery of the State of Delaware — 1792-
1992, Historical Society for the Court of Chancery of the State of Delaware, Delaware, 1993; R Holland,
The Delaware State Constitution, Oxford University Press, New York, 2011, pp 154–5. The states eschewed
any change to substantive law and few even adopted any analogue to s 25 of the English legislation of
1873: J N Pomeroy, A Treatise on Equity Jurisprudence and Equitable Remedies, 5th ed, S W Symons (ed),
Bancroft-Whitney, San Francisco, 1941, pp 45–55; S P Simpson, ‘Fifty Years of American Equity’ (1936)
50 Harv L Rev 171 at 180; J H Beale, ‘Equity in America’ [1921-23] 1 CLJ 21. The distinction between
law and equity is still of procedural moment because the Constitution (by the 7th Amendment) preserves
in the federal courts the right of trial by jury in ‘suits at common law’ and there are similar state statutory
and constitutional provisions. See Ross v Bernhard 396 US 531 (1970) and Granfinanciera SA v Nordberg
492 US 33 (1989), and see generally W W Cook, ‘Equitable Defenses’ (1923) 32 Yale LJ 645; C E Clark,
‘The Union of Law and Equity’ (1925) 25 Col L Rev 1; W F Walsh, ‘Is Equity Decadent?’ (1938) 22 Minn
L Rev 479; H L McClintock, Handbook of the Principles of Equity, 2nd ed, West Pub Co, St Paul, 1948,
pp 12–19; R Leavell et al, Equitable Remedies and Restitution, 7th ed, West Pub Co, St Paul, 2005, Ch 8;
C A Bane, ‘The Uses of English Legal History in America’ (1982) 2 OJLS 297; S N Subrin, ‘How Equity
Conquered Common Law: The Federal Rules of Civil Procedure in Historical Perspective’ (1987) 135
U Penn L Rev 908; D Laycock, ‘The Death of the Irreparable Injury Rule’ (1990) 103 Harv L Rev 687 at
757–9 and ‘The Triumph of Equity’ (1993) 56 Law and Contemporary Problems 53; T Main, ‘Traditional
Equity and Contemporary Procedure’ (2003) 78 Wash L Rev 429. S Bray has identified a resurgence of
equitable learning, focusing on remedies, in ‘The Supreme Court and the New Equity’, 68 Vanderbilt L Rev
(forthcoming 2015). What was said of the New York system by J N Pomeroy, Remedies and Remedial Rights,
2nd ed, Little, Brown & Co, Boston, 1883, p 62 is equally true of the Judicature system which it inspired:
‘Not a provision is to be found in the code of any State adopting the new system which requires, suggests
or even intimates an abrogation of equitable primary rights or equitable remedies and remedial rights; nor,
in fact, can a provision be found which expressly contemplates an absolute unification of law and equity
into a single homogeneous whole. The change provided for is not in primary rights nor in remedies, but
in the methods, means and instruments by which these primary rights are to be maintained and these
remedies secured’.
37
[2-020] The enactment of the Judicature Act 1873

The culmination of the reform movement occurred in the House of Lords on 13 February 1873.
On that day Lord Selborne introduced into parliament the Bill which became the Judicature
Act 1873. Reference to this statute is intended when the term ‘Judicature system’ is used, and
it has provided the model for legislation throughout Australia and elsewhere.
[2-025] Fusion of administration under a common procedure
Speaking of this legislation, Lord Selborne was later to say that if he left any monument behind
him which would bear the test of time, this might be it.5 Thus it is of first importance to observe
the changes wrought by the Judicature Act. The most famous of these concerned the fusion in
administration of law and equity and the abolition of the old courts: s 16 ‘transferred to and
vested in’ the new High Court of Justice all the jurisdiction which at the commencement of the
Act ‘was vested in or capable of being exercised by’ the former tribunals. Thus the peculiarly
English division of functions and principles between the Court of Chancery and the common
law courts was no more. But, as has been seen when examining the New South Wales position,6
while there may be but one court administering law and equity the division may be preserved
by separate procedural rules for each jurisdiction. To avoid any such result, the Judicature Act
went on to provide for concurrent administration of law and equity in the new High Court
under a unified code of procedure set out in the Schedule to the Act.
The Judicature system

[2-030] The new procedures necessitated the end of the common law system of pleading, an
art so recently taken to its highest pitch by Baron Parke. Furthermore, the Judicature Act in its
original form dealt with the vexed question of appeals by abolishing the Courts of Exchequer
Chamber and Appeal in Chancery and setting up a general Court of Appeal to entertain cases
from all divisions of the new High Court of Justice.7 This excited controversy on two counts.
In place of the Court of Appeal in Chancery, which under Knight-Bruce and Turner LJJ
had attained an enviable reputation, the suitor was presented with an appellate court whose
members might have little equity experience. And by s 20 there was to be no further appeal to
the House of Lords.
[2-035] Contemporary reactions
In 1873 there was little discussion in either parliament or the legal press of any direct impact
these changes might have on substantive law. It is particularly noticeable that no impression
was created, and indeed pains were taken to dispel any suspicion, that the Judicature Act would
effect an alteration in principle such that in any litigation a different result would now be
obtained to that under the old system. The effect of the new legislation was succinctly put to
the House of Commons by the Attorney-General, Sir John Coleridge: ‘To talk of the fusion of
Law and Equity was to talk ignorantly. Law and Equity were two things inherently distinct …
All they could do was to secure that the suitor who went to one Court for his remedy should
not be sent about his business without the relief he could have got in another Court’.8
[2-040] Complaint rather was directed at those provisions of the legislation which abolished
the appeal to the House of Lords, and which permitted equity matters to come before judges
versed mainly in common law. Agitation concerning the former delayed the commencement
5. R Palmer, Earl of Selborne, Memorials — Part II, Personal and Political, Macmillan, London, 1898, Vol 1,
p 300.
6. See [1-150].
7. Sections 18, 19, 20.
8. Hansard, 3rd Series, Vol 216, p 1601. The same point was later made by Palles CB in Antrim County Land
Building and Investment Co Ltd v Stewart [1904] 2 IR 357 at 366–7, and see H W R Wade, ‘An Equitable
Mortgagee’s Right to Possession’ (1955) 71 LQR 204; Mills v Lewis (1985) 3 BPR 9421.
38
of the new system until 1 November 1875. That same delay permitted a reworking of the
new uniform rules of court,9 reinforcing what has come to be known as ‘fact pleading’.10 By a
compromise devised by Disraeli and Lord Cairns and implemented by the Appellate Jurisdiction
Act 1876, a final appeal to the House of Lords was preserved.11 But there was no amendment
of the Judicature Act to preserve equity from the hands of common lawyers. They sat on equity
appeals to the Court of Appeal and House of Lords, and, despite the existence of the Chancery
Division, many cases in the other branches of the High Court involved elements of equity.
[2-045] Protests from the bar
It was this fear that in 1873 had moved both inner and outer equity bars to present Lord Selborne
with memorials protesting against the effects of his proposed legislation.12 The senior bar
foresaw a deterioration in standards:
By the Bill, as now framed, the administration of a system of law in which Equity is to predominate,
and the power of settling the mode of procedure, are committed to a body of Judges, three-
fourths of whom are Common Law Judges, and to an Appeal Court in which no provision is
made for a due proportion of Judges trained in the doctrines and practice of Equity. We cannot
help apprehending that the result of such a system will be not to effect the desired fusion, but to
endanger the very existence of Equity jurisprudence. We think it right to address your Lordship at
this moment lest our silence should be interpreted as acquiescence in the view that the Bill in its
present form is calculated to effect a beneficial fusion of Law and Equity.
[2-050] The junior bar continued the vein:
Equity Jurisprudence has been maintained up to the present time solely by the paramount
authority of the Court of Chancery, the life and essence of which have been derived from its
association with the Lord Chancellor. The Bill proposes to sever this association and destroy this
authority. It does not, as it seems to us, substitute any means of preserving intact the spirit of the
jurisprudence created by the long line of your Lordship’s illustrious predecessors.
Equity has hitherto been administered by Judges learned in its doctrines and imbued with its
traditions. The scheme of the Bill appears to be to occupy the Judges who have studied Equity
mainly with administrative work, and to entrust litigation involving the gravest equitable
questions to tribunals unfamiliar with the doctrines and out of harmony with the traditions of
that branch of Jurisprudence.
We cannot think that any law can survive unimpaired unless administered by Courts habituated
to grasp and sympathise with its highest doctrines.
[2-055] Those signing the memorials included the future Lords Lindley, Wrenbury,
Macnaghten and Davey, Fry, Romer, Kay, Cotton, Rigby and Farwell LJJ, and Sir Frederick
Pollock. Some decisions have vindicated their fears. In Nocton v Lord Ashburton,13 Viscount
Haldane LC hinted that ‘if among the great common lawyers who composed the House in
Derry v Peek there had been someone learned in the principles of equity, the result might have
been different’,14 while Lord Warrington said, in his dissenting speech in Russian Commercial
and Industrial Bank Ltd v British Bank for Foreign Trade Ltd:15
9. There was a more than tenfold lengthening in the 1875 rules compared to those annexed to the 1873 Act:
see M Leeming, ‘Equity, the Judicature Acts and Restitution’ (2011) 5 J Eq 199 at 210.
10. See Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; 258 ALR 14 at [15].
11. See D Steele, ‘The Judicial House of Lords: Abolition and Restoration 1873-6’ in L Blom-Cooper, B Dickson
and G Drewry (eds), The Judicial House of Lords 1876-2009, Oxford University Press, Oxford, 2009, and
M Leeming, ‘Five Judicature Fallacies’ in J Gleeson, J Watson and R Higgins (eds), Historical Foundations of
Australian Law, Vol 1, Federation Press, Sydney, 2013, 169 at 170–1.
12. See (1872-73) 17 Sol Jo 521 at 522. To this (pro-fusion) the Solicitors’ Journal responded: ‘It is much more
like a theological effusion, say a speech in Convocation on the Athanasian Creed. It is full of that happy
mixture of righteous indignation and ardent devotion which in theologians always finds vent in a profusion
of vague metaphor’: 17 May 1873, p 552.
13. [1914] AC 932; [1914-15] All ER Rep 45.
14. [1914] AC 932 at 951; [1914-15] All ER Rep 45 at 51.
15. [1921] 2 AC 438 at 463; [1921] All ER Rep 329 at 339.
39
My Lords, I have felt my responsibility in this case to be the greater because not one of the four
judges before whom this case has come below is a judge who has been trained in Courts of Equity,
and (a fact which is to myself the keenest matter of regret) not one of your Lordships … has been
so trained either. Under these circumstances, I feel my voice to be indeed a voice crying in the
wilderness, but I have felt bound to cry even though I cry in vain.
Take a decision of such great importance as Phipps v Boardman.16 The majority held a solicitor
liable to account as a fiduciary for a profit his client did not wish to make and would have found
it virtually impossible to make. Of the five judges who sat on the appeal, only two, Lords Cohen
and Upjohn, had come from the Chancery Division and they disagreed. Or consider that the
House which in United Scientific Holdings Ltd v Burnley Borough Council17 was emboldened to
essay opinions upon the significance of the Judicature system, contained not one equity lawyer
and was led by one common lawyer (Lord Diplock) who was so ill-informed as to state that
the Statutes of Uses and of Quia Emptores played no contemporary part in English property
law.18 More recent years have seen a resurgence of distinguished contributions to equitable
jurisprudence from the House of Lords, Privy Council, Supreme Court and Court of Appeal.
The balance of this chapter explains what the Judicature legislation did, what it did not do, and
what misuse has been made of it in some quarters.
[2-060] Concurrent procedure under the Judicature Act
The Judicature Act 1873 divided the new High Court into the five divisions: Queen’s Bench,
Chancery, Common Pleas and Exchequer (the latter two both abolished in 1880 when
Cockburn LCJ and Kelly LCB departed) and Probate, Divorce and Admiralty. But although
business was classified for distribution between the divisions, no party could now be required
to start again because the proceeding had come to the wrong judge. It might be transferred
to another division but should not be dismissed. Furthermore, the relationship between legal
and equitable procedures was worked out at length in s 24, with the general object of securing
a complete and final determination of all matters in controversy between the parties and
avoiding multiplicity of legal proceedings. Section 24 was as follows:
24 In every civil cause or matter commenced in the High Court of Justice law and equity shall
be administered by the High Court of Justice and the Court of Appeal respectively according to
the Rules following:
(1) If any plaintiff or petitioner claims to be entitled to any equitable estate or right, or to relief
upon any equitable ground against any deed, instrument, or contract, or against any right,
title, or claim whatsoever asserted by any defendant or respondent in such cause or matter,
or to any relief founded upon a legal right, which heretofore could only have been given by
a Court of Equity, the said Courts respectively, and every Judge thereof, shall give to such
plaintiff or petitioner such and the same relief as ought to have been given by the Court of
Chancery in a suit or proceeding for the same or the like purpose properly instituted before
the passing of this Act.
(2) If any defendant claims to be entitled to any equitable estate or right, or to relief upon any
equitable ground against any deed, instrument, or contract, or against any right, title, or
claim asserted by any plaintiff or petitioner in such cause or matter, or alleges any ground
of equitable defence to any claim of the plaintiff or petitioner in such cause or matter, the
said Courts respectively, and every Judge thereof, shall give to every equitable estate, right
or ground of relief so claimed, and to every equitable defence so alleged, such and the same
effect, by way of defence against the claim of such plaintiff or petitioner, as the Court of
Chancery ought to have given if the same or the like matters had been relied on by way of
defence in any suit or proceeding instituted in that Court for the same or the like purpose
before the passing of this Act.
(3) The said Courts respectively, and every Judge thereof, shall also have power to grant to any
defendant in respect of any equitable estate or right, or other matter of equity, and also in
16. [1967] 2 AC 46; [1966] 3 All ER 721.

17. [1978] AC 904; [1977] 2 All ER 62.
18. See [1978] AC 904 at 924; [1977] 2 All ER 62 at 68.
40
respect of any legal estate, right, or title claimed or asserted by him, all such relief against any
plaintiff or petitioner as such defendant shall have properly claimed by his pleading, and as
the said Courts respectively, or any Judge thereof, might have granted in any suit instituted
for that purpose by the same defendant against the same plaintiff or petitioner; and also all
such relief relating to or connected with the original subject of the cause or matter, and in like
manner claimed against any other person, whether already a party to the same cause or matter
or not, who shall have been duly served with notice in writing of such claim pursuant to any
Rule of Court or any Order of the Court, as might properly have been granted against such
person if he had been made a defendant to a cause duly instituted by the same defendant for
the like purpose; and every person served with any such notice shall thenceforth be deemed a
party to such cause or matter, with the same rights in respect of his defence against such claim,
as if he had been duly sued in the ordinary way by such defendant.
(4) The said Courts respectively, and every Judge thereof, shall recognise and take notice
of all equitable estates, titles, and rights, and all equitable duties and liabilities appearing
incidentally in the course of any cause or matter, in the same manner in which the Court of
Chancery would have recognised and taken notice of the same in any suit or proceeding duly
instituted therein before the passing of this Act.
(5) No cause or proceeding at any time pending in the High Court of Justice, or before the Court
of Appeal, shall be restrained by prohibition or injunction; but every matter of equity on
which an injunction against the prosecution of any such cause or proceeding might have been
obtained, if this Act had not passed, either unconditionally or on any terms or conditions,
may be relied on by way of defence thereto …
(6) Subject to the aforesaid provisions for giving effect to equitable rights and other matters of
equity in manner aforesaid, and to the other express provisions of this Act, the said Courts
respectively, and every Judge thereof, shall recognise and give effect to all legal claims and
demands, and all estates, titles, rights, duties, obligations, and liabilities existing by the
Common Law or by any custom, or created by any Statute, in the same manner as the same
would have been recognised and given effect to if this Act had not passed by any of the Courts
whose jurisdiction is hereby transferred to the said High Court of Justice.
(7) The High Court of Justice and the Court of Appeal respectively, in the exercise of the
jurisdiction vested in them by this Act in every cause or matter pending before them
respectively, shall have power to grant, and shall grant, either absolutely or on such reasonable
terms and conditions as to them shall seem just, all such remedies whatsoever as any of the
parties thereto may appear to be entitled to in respect of any and every legal or equitable
claim properly brought forward by them respectively in such cause or matter; so that, as far as
possible, all matters so in controversy between the said parties respectively may be completely
and finally determined, and all multiplicity of legal proceedings concerning any of such
matters avoided.
[2-065] The significance of s 24 should briefly be noted. Subsection (1) gave all branches
of the court power to administer equitable remedies;19 subss (2) and (3) enabled equitable
defences to be pleaded and relief given thereupon;20 subs (4) required all branches of the court
to recognise equitable titles;21 subs (5) prohibited the issue of common injunctions within the
court;22 subs (6) gave general power of determination of legal titles;23 and the final subsection
was designed to catch up anything missed by an expression of general benevolent intent.
[2-070] Conflicts or variances between rules of law and equity
The Judicature Act did not stop at providing in s 24 and in its rules for a new joint procedure.
It went on in s 25 to state what was called in the side-note ‘Rules of law upon certain points’
and concluded in subs (11) by stating:
19. See [1-300].

20. See [1-315].
21. See [1-315].
22. See [1-315].
23. See [1-285].
41
(11) Generally in all matters not herein-before particularly mentioned, in which there is any
conflict or variance between the Rules of Equity and the Rules of the Common Law with reference
to the same matter, the Rules of Equity shall prevail.
Ironically, it seems that Sir Alexander Cockburn, Chief Justice of the Queen’s Bench, who
had led opposition to Lord Hatherley’s failed measures in 1870, was the source of s 25(11).24
[2-075] Subsections 25(1)–(10)
There were a number of conflicts between law and equity in respect of the same subject matter
and seven of them expressly were dealt with in the earlier subsections of s 25. They concerned
assignments of choses in action, stipulations as to time in contract, the custody of infants,
equitable waste, merger of estates, administration of insolvent estates, and actions for trespass
by mortgagors in possession. Some of the subsections of s 25 (for example, that dealing with
custody of infants) simply stated that the equitable rule should prevail. Others, notably subs (6),
relating to assignments of choses in action, set out a new statutory regime which differed both
from the previous position at common law and that in equity. Some subsections did not deal
with equity at all. For example, s 25(9) resolved a conflict between the common law and
admiralty, providing that the latter’s ‘half-damages under the both-to-blame rule’ in collision
cases would prevail over the absolute defence of contributory negligence at common law.25
[2-080] Subsection 25(11)
But most of the provisions in s 25(1)–(10) resolved conflicts between precisely stated rules
at common law and in equity,26 and subs (11) was designed to catch any instances of conflict
between law and equity which had escaped specific treatment in the preceding subsections.
Lord Selborne explained the scheme of s 25 in his first reading speech in the House of Lords
as follows:27
There are some points, however, in which, from this division of jurisdiction, unnecessary
discrepancies have been introduced by reason of arbitrary rules established in different courts.
They are not very numerous. It is possible that some may have been overlooked: and on the
suggestion of a high authority, I have added in the Bill general words to provide that where there
is any variance between the rules of law and those of equity, and the matter is not expressly dealt
with, the rules of equity shall prevail.
[2-085] Thirteen examples of conflicts and variances resolved by s 25(11)

Lord Selborne’s caution was justified: there are a number of conflicts resolved only by virtue of
his ‘general words’. Some 13 are stated below.
(a) A variation of a deed for good consideration, but not under seal, was ineffective at law, but
effective in equity.28 Also, accord and satisfaction, while no bar to an action at law upon a
deed, would attract equitable intervention to restrain the defendant raising the plea
at law.29
24. He wrote, in answer to Selborne’s invitation for comments on the draft Bill, ‘I cannot but suggest that a
clause similar to that of last year should be added to your Bill, to enact that whenever law and Equity are
in conflict, Equity should supersede the Law’: Lambeth Palace Library, MS 1865, ff 216–17, quoted in
M Leeming, ‘Equity, the Judicature Acts and Restitution’ (2011) 5 J Eq 199 at 214.
25. See L Webb, The Practice of the Supreme Court of Judicature and of the House of Lords on Appeals, Butterworths,
London 1877, p 57; M Leeming, ‘Equity, the Judicature Acts and Restitution’ (2011) 5 J Eq 199 at 211.
26. For details, see M Leeming, ‘Equity, the Judicature Acts and Restitution’ (2011) 5 J Eq 199 at 212.
27. Hansard, 3rd Series, Vol 214, pp 339–40.
28. Berry v Berry [1929] 2 KB 316; [1929] All ER Rep 281; Pappas v Rimar Pty Ltd (1984) 55 ALR 327 at 333;
aff’d Rimar Pty Ltd v Pappas (1986) 160 CLR 133; 64 ALR 9; Energy Brix Australia Corp Pty Ltd v National
Logistics Coordinators (Morwell) Pty Ltd (2002) 5 VR 353 at [33].
29. Steeds v Steeds (1889) 22 QBD 537; [1886-90] All ER Rep 1021; Murray-Oates v JJADD Pty Ltd (1999)
76 SASR 38 at [87].
42
(b) At law, the co-surety’s liability to contribution was assessed by dividing the amount
involved between all sureties, solvent or insolvent; in equity the burden was divided
between solvent sureties, presumably without prejudice to their rights to prove in the
administration of the insolvent surety.30 Thus, if A, B and C were liable to X for $9000,
A met a call for that sum, C were insolvent, and A called on B in equity to contribute
$4500, then both A and B might prove in C’s estate for $1500, whereas at law B would be
obliged to contribute only $3000 and A might prove in B’s estate for $3000.
(c) At law, the co-surety had to pay the creditor before seeking contribution; in equity, it was
sufficient that proceedings had been instituted by the creditor.31
(d) At law, the executor was liable for loss of the testator’s assets if they had come into the
executor’s hands, but in equity it was necessary to show wilful default.32
(e) The rules as to estoppel by deed operated differently at law and in equity; in Wilson
v Keating,33 the plaintiff had failed at law to recover purchase money incorrectly stated in a
deed to have been received by him, but he succeeded in equity and payment was ordered.
Sir John Romilly MR said: ‘… at law you cannot contradict the deed, but … in this Court
… the vendor would have a lien on the estate for the unpaid purchase money, and which
would also be a debt due from the purchaser to the vendor’.34
(f) At law, the general rule was that one party could not recover money paid to the other under
an illegal contract, but in equity where the defendant who obtained the money was under a
fiduciary duty to the plaintiff (for example, a director of a plaintiff company) it was
unconscionable for the defendant to insist on the legal obstacle and refuse payment.35
(g) Payment under mistake of law was a defence to claims at law for money paid, but equity
would permit recovery where the mistake was one as to legal rights.36
(h) At law, after the commencement of a creditor’s administration action, a payment by the
executor or administrator to one creditor in preference to the others was not allowed, but in
equity if such a payment were made before a decree was granted in the action it would be
allowed in the passing of the executor’s or administrator’s account.37
(i) At law, a power of attorney, although coupled with a grant to the donee of an interest, was
necessarily revoked by the death of the donor, even if the donee had no notice thereof, but
semble in equity it was not so revoked.38
(j) At law, a continuing guarantee, under seal, of future indebtedness might not at any stage, in
the absence of express provision therein, be determined as to the future; in equity if the
consideration was ‘fragmentary, supplied from time to time and therefore divisible’, the
surety might so determine future liability (for example, for further advances to the debtor)
even though the guarantee was under seal.39
(k) At law, a deed could not be delivered in escrow to the party benefiting under it, because an
oral attempt to limit the operation of the deed was repugnant to the delivery; whereas in
equity the escrow was considered valid, the person benefiting being restrained from
enforcing the deed until the condition of the escrow was fulfilled and the party delivering
30. Lowe & Sons v Dixon & Sons (1885) 16 QBD 455 at 458.
31. Wolmershausen v Gullick [1893] 2 Ch 514; [1891-4] All ER Rep 740; Dimdore v Leventhal (1936) 36 SR
(NSW) 378; 53 WN (NSW) 127; McLean v Discount and Finance Ltd (1939) 64 CLR 312 at 341; Friend
v Brooker (2009) 239 CLR 129; 255 ALR 601 at [42]; Lavin v Toppi [2014] NSWCA 160.
32. Job v Job (1877) 6 Ch D 562; Bovaird v Trustee of the Bankrupt Estate of Frost (2010) 118 ALD 263; [2010]
FCA 1159 at [19]–[20].
33. (1859) 27 Beav 121; 54 ER 47; aff’d 4 De G & J 588; 45 ER 228.
34. (1859) 27 Beav 121 at 126; 54 ER 47 at 49; cf Gower v Waples [1930] SASR 120, and see [3-160].
35. Re Ferguson [1970] ALR 177 at 181–2.
36. Dempsey v Piper [1921] NZLR 753 but see now [14-015].
37. Re Radcliffe (1878) 7 Ch D 733; Vibart v Coles (1890) 24 QBD 364.
38. Lepard v Vernon (1813) 2 Ves & B 237; 35 ER 237; Watson v King (1815) 4 Camp 273; 171 ER 87.
39. Re Crace [1902] 1 Ch 733 at 738.
43
the deed being relieved from liability under the deed once it was ascertained the condition
had not been fulfilled.40
(l) At law, the accommodation acceptor was principally liable on a bill of exchange, while in
equity the drawer for whose accommodation the bill was accepted was regarded as the
principal debtor in substance, so that a grant of time to the drawer discharged the acceptor.41
(m) At law, a creditor holding security for a debt was permitted to sue to recover the debt even if
the security could not be handed over; in equity, such an action would be restrained.42
[2-090] Contrast between ss 24 and 25
Section 25 of the Judicature Act 1873 spoke of ‘the law to be hereafter administered in England’.
It was not confined to that law as it fell for application in the new High Court of Justice and
may be contrasted with the purely procedural matters dealt with by s 24.43 A provision such as
s 25 was made necessary by s 24(5) which abolished the common injunction, the mechanism
by which previously the supremacy of equitable rules had been assured in these cases of conflict.
The principles of unified administration and the predominance of equity are dealt with in an
economical fashion by the present English legislation, s 49 of the Senior Courts Act 1981
(UK).44 This provides:
(1) Subject to the provisions of this or any other Act, every court exercising jurisdiction in
England or Wales in any civil cause or matter shall continue to administer law and equity on
the basis that, wherever there is any conflict or variance between the rules of equity and the
rules of the common law with reference to the same matter, the rules of equity shall prevail.
(2) Every such court shall give the same effect as hitherto—
(a) to all equitable estates, titles, rights, reliefs, defences and counterclaims, and to all
equitable duties and liabilities; and
(b) subject thereto, to all legal claims and demands and all estates, titles, rights, duties,
obligations and liabilities existing by the common law or by any custom or created by
any statute, and, subject to the provisions of this or any other Act, shall so exercise its
jurisdiction in every cause or matter before it as to secure that, as far as possible, all
matters in dispute between the parties are completely and finally determined, and all
multiplicity of legal proceedings with respect to any of those matters is avoided.
[2-095] It will be seen immediately that s 25(11) of the Judicature Act45 assumes the
continued existence of separate bodies of rules, for if this were not to be there would be no
need to stipulate for the resolution of conflicts between them. Nor is there anything in the
provision which assumes that the content of these rules will never thereafter change. It is not
a consequence of the Judicature system that the rules of equity were ossified in 1873 any more
than were those of the common law. Thus the remedy of injunction may be available today in
cases where in the nineteenth century it may have been refused.46 The burgeoning equitable
jurisdiction to restrain breaches of confidence47 and the plethora of cases applying doctrines of
equitable estoppel48 indicate that equitable doctrine has not stood still in recent years any more
than it did before 1873.
40. See Halsbury’s Laws of England, 5th ed, LexisNexis, London, 2012, Vol 32, [238] and cases there cited. See
also [3-175], [3-185].
41. Coles Myer Finance Ltd v Federal Cmr of Taxation (1993) 176 CLR 640 at 657, 684; 112 ALR 322 at 327, 348.
42. Ellis & Co’s Trustee v Dixon-Johnson [1925] AC 489 at 493–4; [1925] All ER Rep 715 at 719; Re Bank of
Credit and Commerce International SA (No 8) [1995] Ch 46 at 60–1; [1994] 3 All ER 565 at 576–7.
43. See [2-060].
44. Formerly the Supreme Court Act 1981 (amended by the Constitutional Reform Act 2005).
45. See [2-070].
46. For example, Hawick v Flegg (1958) 75 WN (NSW) 255; Buckley v Tutty (1971) 125 CLR 353; [1972] ALR
370; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; 162 ALR 294 at [30].
47. See Chapter 42.
48. See Chapter 17.
44
[2-100] The Judicature system in Australia

All the Australian colonies, with the exception of New South Wales, followed fairly quickly
in their parent’s steps by enacting statutes modelled on the Judicature Act. The first colony to
bring in the new system was Queensland with the Judicature Act 1876; the others followed.49
The present statutory equivalents of ss 24 and 25 in the English Act of 1873 are found in
New South Wales in ss 57–64 of the Supreme Court Act 1970 and the Law Reform (Law and
Equity) Act 1972.50 In some states various paragraphs of s 25 of the 1873 English Act, other
than s 25(11), are reproduced in general property legislation.
[2-105] Although ‘New South Wales took its great leap forward to the nineteenth century
by enacting the Supreme Court Act 1970’,51 most of the changes contained in s 25 of the
English Act were adopted in New South Wales long before the 1970 legislation.52 Therefore,
s 25(11) appeared in the Supreme Court Act 1970 as s 64 without the other subsections and
without the opening words in the English provision which declared ‘the law thereafter to be
hereafter administered in England’. It was thus arguable that s 64 was limited to disputes in the
Supreme Court and did not achieve a general settlement of the substantive law throughout
New South Wales as effected by the earlier New South Wales provisions as s 25 of the Judicature
Act did for England. The doubt was removed by the Law Reform (Law and Equity) Act 1972
which repealed s 64 of the Supreme Court Act 1970.53 Section 5 of the 1972 Act applies
generally; it reads as follows:
In all matters in which there was immediately before the commencement of this Act or is any
conflict or variance between the rules of equity and the rules of common law relating to the same
matter, the rules of equity shall prevail.
This section lacks the clear introductory words of its English counterpart, but it remains
plain that the words ‘in all matters’ clearly refer to matters howsoever arising under the law of
New South Wales.
Law and equity under the Judicature system

[2-110] England
So far as the intentions of those who drafted the Judicature Act as to the relationship between
law and equity are relevant, they clearly appear from a letter by one of them, Sir Arthur Wilson.54
He put the matter in three steps:
The relation of equity to common law is shortly this: First, it recognises and enforces rights and
duties of which the common law takes no notice. The two do not clash; but one takes up the
matter where the other leaves it off. Property is settled under a marriage settlement and vested
in trustees. The common law courts give the trustees every facility for protecting the property
and for all their dealings with third persons; but if the husband, or wife, or children wish to
49. Supreme Court Act 1878 (SA); Supreme Court Act 1880 (WA); Judicature Act 1883 (Vic); Legal
Procedure Act 1903 (Tas), extended by the Supreme Court Civil Procedure Act 1932 (Tas); Supreme
Court Act 1970 (NSW). For reform in New Zealand, see S Dorsett, ‘Reforming Equity: New Zealand
1843-1856’ (2013) 34 J Leg Hist 285.
50. For provisions in other states, see Supreme Court Act 1995 (Qld) ss 244–245; Supreme Court Act 1935
(SA) ss 17–28; Supreme Court Civil Procedure Act 1932 (Tas) ss 10–11; Supreme Court Act 1986 (Vic)
s 29; Supreme Court Act 1935 (WA) ss 24, 25.
51. Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702 at 707; K Mason, ‘Fusion Fallacy, Future or Finished?’
in S Degeling and J Edelman (eds), Equity in Commercial Law, Lawbook Co, Sydney, 2005, p 55.
52. See s 46C of the Probate and Administration Act 1898 (insolvent estates) and ss 9–13 of the Conveyancing
Act 1919 (equitable waste, merger, actions for trespass by mortgagors, assignments, stipulations as to time).
53. See New South Wales Law Reform Commission, Law and Equity, Report 13 (1971), [8]. (‘[I]t may perhaps
be open to argument that s 64 is confined to the rules to be applied in the determination of proceedings in
the Supreme Court. Such an argument might be founded on the context provided by the Supreme Court
Act generally.’)
54. Reprinted in (1875) 19 Sol Jo 633–4.
45
enforce their rights they must go to the Court of Chancery. And so it is in other cases. Hence the
rights of the trustee as the representative of the whole group of persons interested are called legal
rights, and the individual rights of the several beneficiaries are called equitable rights. Whatever
names we choose to use, the distinction between these rights is an obviously convenient one,
and will certainly be permanent; and the adjustment of the last class of rights, like much other
administrative work, requires the aid of a staff of officers which it is not necessary that every
court should possess, and which may therefore be usefully assigned to a particular court. This is
all that is meant by any sensible man who says that you cannot fuse law and equity. What can be
done and ought to be done is to secure that every court shall recognize every kind of right, and,
as occasion arises, either deal with it itself or hand it over to some more convenient tribunal; and
this is exactly what the Judicature Act provides. Secondly, the common law and equity courts
apply different remedies to the same case. If you are content with damages because your neighbour
refuses to sell you the house he agreed to sell, or sickens you by burning bricks before your door,
you may bring an action at law; but if you want to compel him to give you the house, or prevent
his beginning to burn bricks, you must go into chancery. What is reasonable is that each court
should apply any remedy which the circumstances of the case may require; and so says the Act.
Thirdly, there are some cases, not as many as is sometimes thought, in which the rules of common
law and equity actually conflict. Here it is clear that one ought to supersede the other; and the
Act provides that in such cases the rule of equity shall prevail. These are the changes advised by
the commission and carried out by the Act. You may call the thing fusion or not, as you like; but
what is important is this — that what is now called law and what is now called equity are placed
upon exactly the right footing.
[2-115] There was nothing in the Judicature Act which attempted to codify law and equity
as one subject matter or which severed the roots of the conceptual distinctions between law
and equity. The term ‘fusion’, which was frequently used in discussion at the time, referred to
the establishment of the new court with, by virtue of s 26, the jurisdiction of the old courts, and
the single procedure which by virtue of s 24 was to obtain therein. It did not describe some new
body of law which was neither law nor equity. It was not susceptible of a construction that in
any given case the new court had jurisdiction to produce a result which could never have been
reached in any one or more of the old courts. Lord Selborne himself made this quite clear when
introducing the legislation into parliament:55
It may be asked … why not abolish at once all distinction between law and equity? I can best
answer that by asking another question — Do you wish to abolish trusts? If trusts are to continue,
there must be a distinction between what we call a legal and an equitable estate … The distinction,
within certain limits, between law and equity, is real and natural, and it would be a mistake to
suppose that what is real and natural ought to be disregarded.
[2-120] The procedural character of the Judicature Act explains why the discussion at the time
centred upon issues such as the future of the appeal to the House of Lords and the unwisdom
of entrusting suits in equity to uninitiated judges,56 rather than upon fears of subversion of
substantive principle. Even s 25(11) did no more than put on a permanent footing what had
long been achieved in favour of equity by use of its common injunction.

[2-125] New South Wales
In New South Wales, with the benefit of almost a century of the Judicature system in operation,
the intended operation of the Acts of 1970 and 1972 was manifest. Benjafield, who could ‘truly
be said to be the architect of the scheme’,57 said that:58
The English judicature system … has the appearance of fusing the substantive law. Nevertheless,
as the system has been interpreted, it has in reality involved fusion of the substantive law only to
a very limited extent.
55. Hansard, 3rd Series, Vol 214, p 339. See also Pugh v Heath (1882) 7 App Cas 235 at 237 per Lord Cairns.
56. See [2-040]–[2-050].
57. NSW Law Reform Commission, Report on Supreme Court Procedure, tabled 9 September 1969, [19].
58. Memorandum of the Attorney-General’s Law Reform Committee Subcommittee No 1, undated, p 3
(Copy in Joint Law Courts Library, Sydney).
46
59
He quoted Lord Evershed:
The truth of the matter is, I am sure, that the so-called ‘fusion’ of law and equity was a procedural
matter and (save incidentally and because procedural matters cannot under our system sensibly be
divorced from substantive law) the function of equity in relation to common law was not changed.
The fusion fallacy

[2-130] Fusion properly understood
The true position of a court exercising a ‘fused’ jurisdiction of law and equity may be likened to
the structure of the Australian legal system as explained by Windeyer J in Felton v Mulligan:60
Mine may be an ingenuous view, but to me it seems that the law that a court must apply and
administer, in the exercise of whatever jurisdiction pertains to it, may be derived from different
sources, but that it is still, so far as any particular case is concerned, a single though composite
body of law. It is the law of the land, governing the parties in their relation to a case in hand. The
law of the land for us … is made up of inherited common law principles and equitable doctrine,
Imperial statutes, Commonwealth statutes and State statutes and delegated legislation of various
kinds. The topic has lent itself to metaphors, although physical metaphors can be misleading
when applied to concepts … In the present case counsel in the course of argument described
[federal and state jurisdictions] as ‘interwoven’. At other times they have been said to exist ‘side
by side’. All this is reminiscent of the statement in Ashburner on Equity [2nd ed, p 18] that the
result of the ‘fusion’ of law and equity by the Judicature Act is that ‘the two streams of jurisdiction,
though they run in the same channel, run side by side and do not mingle their waters’.
[2-135] Orthodox authorities on fusion

The Judicature procedure was not designed of itself to be a source of change of substantive
rules, whether legal or equitable. In Salt v Cooper, Sir George Jessel MR said:61
It is stated very plainly that the main object of the [Judicature] Act was to assimilate the transaction
of Equity business and Common Law business by different Courts of Judicature. It has been
sometimes inaccurately called ‘the fusion of Law and Equity’; but it was not any fusion, or anything
of the kind; it was the vesting in one tribunal the administration of Law and Equity in every cause,
action, or dispute which should come before that tribunal. That was the meaning of the Act.
Then, as to that very small number of cases in which there is an actual conflict, it was decided that
in all cases where the rules of Equity and Law were in conflict the rules of Equity should prevail.
In Ind Coope & Co v Emmerson,62 Lord Watson said of the Judicature Act: ‘It was not intended
to affect, and does not affect, the quality of the rights and claims which [parties] bring into
Court’. Arthur Dean, as he then was, put the matter crisply:63
… [I]t is easy to lose sight of the principle enunciated by Lord Watson and to suppose that the
Judicature Act has in some manner altered substantive law as well as procedure. The error can
only be avoided by steadily keeping in mind that except in respect of matters specifically dealt
with by the Act, and in cases within the ‘conflict or variance’ rule, common law claims and
equitable claims stand in the same position as before.
The same conclusions have been re-emphasised by appellate courts in more recent times.
In O’Rourke v Hoeven,64 Glass JA described the Supreme Court Act 1970 (NSW) as effecting
a fusion not of two systems of principle but of the courts which administer the two systems.
Speaking for the House of Lords, Lord Brandon of Oakbrook applied ‘the principle that the
Judicature Acts, while making important changes in procedure, did not alter and were not
59. Lord Evershed, ‘Reflections on the Fusion of Law and Equity after 75 Years’ (1954) 70 LQR 326 at 327.
60. (1971) 124 CLR 367 at 392; [1972] ALR 33 at 46.
61. (1880) 16 Ch D 544 at 549; [1874-80] All ER Rep 1204.
62. (1887) 12 App Cas 300 at 309.
63. ‘What Did the Judicature Act Really Do?’ (1935) 1 Res Judicata 13.
64. [1974] 1 NSWLR 622 at 626.
47
intended to alter the rights of parties’.65 In MCC Proceeds Inc v Lehman Bros International
(Europe),66 Mummery LJ said that the Judicature Acts ‘were intended to achieve procedural
improvements in the administration of law and equity in all courts, not to transform equitable
interests into legal titles or to sweep away altogether the rules of the common law, such as the
rule that a plaintiff in an action for conversion must have possession or a right to immediate
possession of the goods’.67 In Giller v Procopets,68 Maxwell P said: ‘The Judicature Act 1873 was
intended to deal with administrative and procedural problems. Its object, it has been said, was
not “the fusion of two systems of principle but of the courts which administer the two systems”.
From that starting point, the notion of the “fusion fallacy” has taken root’.
[2-140] Fusion fallacy defined
Since 1875, some decisions on substantive rights and obligations have been made which would
not have been open under the system of separate administration. Such a decision may be the
consequence of a change in the relevant rules of law or equity. It could scarcely be suggested
that those rules have remained fixed and are removed from development by the case law.
However, in many instances it is stated or implied that the change is a consequence of the
Judicature system and thus is dictated by statute. This is the ‘fusion fallacy’.69 The risk that the
new system would encourage it had anguished Lord St Leonards.70 All editions of this work
have denounced the fusion fallacy in the following trenchant prose:
The fusion fallacy involves the administration of a remedy, for example common law damages for
breach of fiduciary duty, not previously available either at law or in equity, or the modification of
principles in one branch of the jurisdiction by concepts which are imported from the other and
thus are foreign, for example by holding that the existence of a duty of care in tort may be tested
by asking whether the parties concerned are in fiduciary relations. Those who commit the fusion
fallacy announce or assume the creation by the Judicature system of a new body of law containing
elements of law and equity but in character quite different from its components. The fallacy is
committed explicitly, covertly, and on occasion with apparent inadvertence. But the state of mind
of the culprit cannot lessen the evil of the offence.
[2-145] Reaction to criticism of fusion fallacy reasoning

It is not intended to survey the judicial and academic reaction to the denunciation of fusion
fallacies in previous editions of this work, still less to attempt to gauge the extent to which those
editions influenced debate. However, reference should be made to an international conference
held in 2004: ‘Fusion: The interaction of common law and equity’. The papers, delivered by
authors from throughout the common law world, are published in Equity in Commercial Law.71
The opening words of that work (by Chief Justice McLachlin) are:
More than 130 years ago, the British Parliament enacted the Judicature Act 1873, ending the
segregation of common law and equity in different courts. However, as Sir Anthony Mason notes
65. Bank of Boston Connecticut v European Grain and Shipping Ltd (The Dominique) [1989] AC 1056 at 1109;
[1989] 1 All ER 545 at 557.
66. [1998] 4 All ER 675 at 691.
67. See also Riseda Nominees Pty Ltd v St Vincent’s Hospital (Melbourne) Ltd [1998] 2 VR 70 at 77 at 10–11;
Muscat v Smith [2003] 1 WLR 2853 at [45]; Masri v Consolidated Contractors International Co SAL [2009]
QB 450; [2008] 2 All ER (Comm) 1099 at [141]–[184].
68. (2008) 24 VR 1 at [134].
69. It has been said that ‘arguably the greatest legacy of Meagher, Gummow and Lehane, certainly its most
renowned feature, is its exposition of the “fusion fallacy” ’: M Tilbury, ‘Fallacy or Furphy?: Fusion in a
Judicature World’ (2003) 26 UNSWLJ 357; see also D Hughes, ‘A Classification of Fusion After Harris v
Digital Pulse’ (2006) 29 UNSWLJ 38.
70. See [2-005].
71. S Degeling and J Edelman (eds), Lawbook Co, Sydney, 2005. See also J Edelman, ‘A “Fusion Fallacy”
Fallacy?’ (2003) 119 LQR 375; M Leeming, ‘Five Judicature Fallacies’ in J Gleeson, J Watson and R Higgins
(eds), Historical Foundations of Australian Law, Vol 1, Federation Press, Sydney, 2013; M Leeming, ‘Equity,
the Judicature Acts and Restitution’ (2011) 5 J Eq 199.
48
in the opening chapter of this book, it is clear that the Act, and its progeny in the Commonwealth
countries, merely had a procedural effect and did not bring about fusion of the substantive rules
of common law and equity. Therefore, despite the passage of time, the fusion of law and equity
remains a live issue today, subject to debate by academics, practitioners and judges alike.
[2-150] Those opening words reflect a remarkable fact, not readily anticipated when earlier
editions of this work were written. As will be seen below, it was far from clear until recently that
there would be curial and academic resistance to radical legal change, sometimes implemented
casually, and even seemingly ignorantly of the fact that change was being made, by reason
of what was perceived to flow from the Judicature legislation. It may be unduly optimistic to
say this, but there seems to be a widely held view that it is no longer persuasive to apply such
reasoning. For that reason, what follows is more abbreviated than previous editions of this
work, although its essence has been retained.
[2-155] Conflict or variance between law and equity
Section 25(11) of the Judicature Act does not speak of inconsistent remedies reached upon
consideration of the same facts. Section 25(11) speaks of conflict or variance between rules
with reference to the same matter. This poses the questions (a) when is there a conflict or
variance, (b) what are ‘rules’, and (c) what is ‘the same matter’? The term ‘matter’ might,
conceivably, mean ‘cause of action’ in the sense understood in pre-Judicature Act common
law pleading. But that would be an unlikely meaning for s 25(11) which was directed to both
law and equity by authors who well knew that in Chancery one proceeded by bills raising
an equity and not confined to any mechanistic concept of cause of action. A much more
plausible meaning of ‘matter’ is one which embraces ‘right’, ‘title’, ‘duty’, ‘privilege’, ‘liability’,
‘protection’, ‘immunity’ and ‘defence’, or, more generally, ‘the subject matter for determination
in a legal proceeding’.72
[2-160] Conflicts and variances
Thus, to return to the topics outlined above, if in an action on a deed at law the defendant
pleaded a parol variation for value, that was a bad plea at law but one which in equity attracted
the common injunction. In such a case there was a conflict with respect to the ‘immunity’ or
‘defence’ asserted by the defendant to defeat the claim.73 Again, a plaintiff seeking contribution
had a choice of forum, because rights to contribution existed at law and in equity, but the
quantum recovered and the number of those from whom contribution might be recovered
would vary from law to equity if one or more contributors were insolvent. In this sense there
was a variance in the measure of liability of the contributors.
[2-165] Section 25, as already mentioned, postulates a distinction between procedure and
substance, between rules and the means whereby they are implemented in any given case. All
of the topics mentioned in [2-065] and [2-075] satisfy this criterion. Finally, it is apparent that
there is no significant difference in meaning between ‘conflict’ and ‘variance’; the shading
between them is perhaps best illustrated by treating a conflict as a disagreement resolved by
the use of the common injunction and a variance as one where (as in the above example of
contribution) a plaintiff might obtain relief of the same character at law and in equity, but less
at law than in equity; with that state of affairs a defendant at law would not seek to quarrel by
means of common injunction.
[2-170] Section 24 dealt with litigated disputes by providing in effect for the same result
to be reached in the one hearing in the new court as previously had followed only after the
passage of the parties between the old courts. But s 25(11) went further. It eliminated conflict
72. Cf Crouch v Cmr for Railways (Qld) (1985) 159 CLR 22 at 37–8; 62 ALR 1 at 11–12.
73. For a different view of conflict, see W N Hohfeld, ‘The Relations between Equity and Law’ (1913) 11 Mich
L Rev 537.
49
between rules wheresoever arising by, in effect, destroying the legal rule and replacing it for
all purposes by the equitable rule. This now prevailed not by virtue of a common injunction
or the procedural innovations in Supreme Court litigation wrought by s 24, but by force of
s 25(11).
[2-175] ‘Rules’
It is with ‘rules’ in the sense considered above that s 25(11) is concerned. There were before
1873 other conflicts arising by reason of the dual system but these were not the product of
incompatible rules. They were collisions of remedies caused by the commencement of legal
and equitable processes from different postulates rather than inconsistent rules. If A was at law
entitled to exclusive possession of land, A could exclude other parties from entry; in equity
A might be a trustee of the legal rights for those who might be entitled to enter upon the land
as beneficiaries. Thus at law the rights of the parties proceeded from A’s right to exclusive
possession by reason of real property law; in equity the central feature was A’s obligations
as trustee to B as beneficiary. As Maitland observed, there was no necessary conflict in
this: A could permit B to enter the land, but if A did not do so, B persisted and A obtained
ejectment or damages at law against B for trespass, there was a conflict. The act which was
wrongful at law might in equity be permissible (depending on the terms of the trust) and indeed
might be the subject for complaint by B against A. Thus the remedies available at law and in
equity to support rights which in themselves were capable of enjoyment without necessary
conflict, produced a collision. The solution was for B to obtain a common injunction against
A enforcing the judgment at law. Similarly, equity might decree rectification of a contract
otherwise enforceable at law in its explicit terms.74
[2-180] With the removal of the common injunction, matters were resolved by the new
procedures in s 24. One view is that s 25(11) was the applicable provision but that subsection
was concerned with conflicts in rules rather than the administration of different remedies.
The latter may be the result of a conflict in rules but this is not necessarily so. Where it is not
so caused then s 25(11) could have no operation. Yet as will be seen, various decisions have
assumed the existence of such a conflict to be resolved by application of the provision, where
in truth there was no call for it, only for the new procedures to obtain the old result.
[2-185] Differences without conflicts
A further and vital distinction is to be drawn between inconsistent remedies and different
results obtained at law and in equity upon the same facts:
(a) Equity might give a remedy but law none: if a contract did not satisfy the Statute of Frauds it
was unenforceable at law, but in equity with the assistance of the doctrine of part
performance, specific performance might be decreed; again at law a remainderman could
not recover damages against a life tenant committing waste (that is, legal waste) if there
were an intervening life estate, but equity could award an injunction.75

(b) Law might give a remedy but equity none: a contract under seal would attract damages for
breach but no assistance in equity for a volunteer, and a contract for personal services
likewise would attract the legal but not equitable remedy.
(c) Both systems might give remedies. For example, in cases of tort, such as nuisance, equity
might award an injunction and law damages. If A fraudulently induced B to contract with
A, B might obtain rescission of the contract in equity and damages at law in deceit.
74. Daley v White [1911] QWN 1.

75. D E C Yale (ed), Lord Nottingham’s ‘Manual of Chancery Practice’ and ‘Prolegomena of Chancery and Equity’,
Cambridge University Press, Cambridge, 1965, Ch XX, p 11.
50
In none of these cases is there any conflict between rules; nor is there any collision between
remedies calling for any common injunction. The two systems gave different remedies but each
left the plaintiff free to enjoy what was allowed by the other. Further, it was possible for the
defendant to comply with the requirements of both systems. There would have been a collision
in remedies if, in example (c) above, equity held B entitled to rescission but denied damages
at law. In such cases the new system would apply to effect equity’s paramountcy in the manner
already discussed. But here there were no conflicts or variances in any sense to be resolved. The
new system merely provided for the concurrent administration of both sets of remedies in the
one proceeding.
Examples of the fusion fallacy

[2-190] Potential scope of the fusion fallacy
The scope for the fusion fallacy is as infinite and varied as that seen by Lord Hardwicke for
fraud;76 the price for continued purity in doctrine will be an assiduity in exposing and rooting out
false doctrine equal to that demanded by this great Lord Chancellor in pursuing the fraudulent.
The extent to which the mischief has gone since 1873 may be observed in the short examples
dealt with immediately below, as well as in the more extended examples which follow.
[2-195] Four introductory examples
The first is that there was a view in Chancery before 1873 that in the one suit it was not
possible both to rectify a contract and specifically to enforce the contract thus reformed;
whether that be correct or not it cannot be the case that it is now possible to do so by dint of
the Judicature system, for while that permits to be done in one action what might previously
have taken an action at law and a suit in equity, it cannot permit what could not be done in the
one proceeding in equity.77 A second is the treatment of promissory estoppel in equity ‘as but an
emanation of the general doctrine of estoppel by conduct’ at law, since ‘the confinement of a
developing doctrine to one or other of law and equity’ does not exist ‘in a modern system where
the law represents fusion and interaction of both disciplines and is administered by courts of
both law and equity’.78 A third is the claim that fraudulent concealment could be an answer to
the application of a statute of limitations to a legal claim.79 A fourth was the notion espoused
by Denning LJ in Boyer v Warbey,80 though crisply rejected by the Victorian Court of Appeal
in Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd,81 that ‘since the fusion of law and
equity’, there is no difference between the enforcement of a covenant running with the land in
an agreement under hand or a covenant under seal.
[2-200] Innocent misrepresentation
At common law a misrepresentation inducing a party to enter a contract only resulted in a
contractual remedy of damages if the misrepresentation were included as a term of the contract.
There was a remedy of damages in tort, but only if the misrepresentation were fraudulent. But in
equity the contract could be rescinded even if the misrepresentation were innocent. However,
equity gave no damages. Did the Judicature Act give what before did not exist, damages for
innocent misrepresentation? An attempt to achieve such a result was made by Sir George
Jessel MR in Redgrave v Hurd,82 where he relied upon the Judicature Act. But this could not
76. Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82.

77. See Craddock Bros v Hunt [1923] 2 Ch 136 at 166; [1923] All ER Rep 394 at 412; Montgomery v Beeby
(1930) 30 SR (NSW) 394 at 396–7; 47 WN (NSW) 163; B Sugerman, ‘Equity’s Capacity for Child Bearing
— A NSW Addendum’ (1954) 1 Syd L Rev 174 at 182–3.
78. Commonwealth v Verwayen (1990) 170 CLR 394 at 440; 95 ALR 321 at 353 per Deane J.
79. See Commonwealth v Cornwell (2007) 229 CLR 519; 234 ALR 148 at [9] and see Chapter 36.
80. [1953] 1 QB 234 at 245–6.
81. [2013] VSCA 106 at [26]–[27].
82. (1881) 20 Ch D 1 at 12.
51
stand after the decision of the House of Lords in Smith v Chadwick83 which restored orthodoxy.
The argument which appealed to Sir George Jessel MR was that because the equitable remedy
of rescission would be available so also now should be damages at law. This would have the
effect of eliminating fraud from the tort of deceit and replacing it by ‘equitable fraud’. There
was of course no conflict between the legal and equitable positions to call for s 25(11); and
indeed the consequence of applying the section would appear to have been to give only the
equitable remedy rather than expand the ambit of the legal remedy.
[2-205] Hedley Byrne & Co Ltd v Heller & Partners Ltd
Much has been written of the ‘progress’ (meaning ‘change’) achieved here by the House of
Lords in the law of negligence. With that, of course, equitable rules should have nothing to do.
The reasonable man labours at law not in equity, which sets higher standards for fiduciaries.
However, in Hedley Byrne & Co Ltd v Heller & Partners Ltd,84 the House of Lords derived
support for its decision from:
(a) the authorities in negligence (which were weak);
(b) its view of current social needs;85
(c) authorities such as Nocton v Lord Ashburton86 which dealt with a fiduciary’s obligation to
indemnify his or her principal for prejudice suffered from following advice which was
fraudulent in the equitable sense of the term;87 the unstated but implicit assumption in the
Hedley Byrne case is that principles of law and equity are fused in the sense that rules from
one field may be used to indicate what should be the position in the other;
(d) the decision in Woods v Martins Bank Ltd.88 In that case Salmon J awarded damages for
breach of an obligation indicated in the unauthorised reports of the case as resting in
negligence, but when his Lordship came to revise his judgment for the Law Reports, he
included the momentous sentence: ‘In my judgment a fiduciary relationship existed
between the plaintiff and the defendants’.89
The assumptions here were that (i) damages was a remedy against misbehaving fiduciaries;
(ii) the position of fiduciaries can be assimilated to that of persons owing duties of care in
negligence; (iii) therefore there can be an action at law in negligence for certain kinds of
advice.90 But how can one have a common law remedy of damages for breach of an equitable
duty which the common law does not recognise?
[2-210] Thus there is in this development of the law a fusion fallacy of a more subtle kind
than is evident in the frontal assaults of Sir George Jessel MR in Redgrave v Hurd.91 Where
he failed to give a remedy in damages for non-fraudulent ex-contractual misrepresentation
the House of Lords has succeeded. The process continued in the Privy Council which in
Mutual Life & Citizens Assurance Co Ltd v Evatt92 referred to Woods v Martins Bank Ltd with
approval. Happily, in Daly v Sydney Stock Exchange Ltd,93 it was held that the so-called Hedley
Byrne principle ‘neither depends upon the existence of a fiduciary relationship nor converts a
relationship which was not, at its inception, a fiduciary one into such a relationship’.
83. (1884) 9 App Cas 187; [1881-85] All ER Rep 242.

84. [1964] AC 465; [1963] 2 All ER 575.
85. See [1964] AC 465 at 536–7; [1963] 2 All ER 575 at 615–6 per Lord Pearce.
86. [1914] AC 932; [1914-15] All ER Rep 45.
87. See Chapter 12.
88. [1959] 1 QB 55; [1958] 3 All ER 166.
89. See [1959] 1 QB 55 at 72.
90. Cf the orthodox approach in British Mutual Investment Co v Cobbold (1875) LR 19 Eq 627.
91. See [2-200].
92. [1971] AC 793 at 805; [1971] 1 All ER 150 at 157.
93. [1981] 2 NSWLR 179 at 197–8. See also Lloyd’s Bank v Bundy [1975] QB 326 at 340; [1974] 3 All ER 757
at 766.
52
[2-215] Mortgagee’s power of sale

Cuckmere Brick Co Ltd v Mutual Finance Co Ltd94 affords another example of confusion of
thought. It had been clearly explained by Jordan CJ in Coroneo v Australian Provincial Assurance
Association Ltd95 that any complaint by a mortgagor as to the manner of exercise of his or her
power of sale by the mortgagee must be made in equity, not at law. This is because the interest
sold includes the equity of redemption, the invention of the Court of Chancery. In Colin D Young
Pty Ltd v Commercial and General Acceptance Ltd,96 the New South Wales Court of Appeal held
that a claim for damages for wrongful exercise of a mortgagee’s power of sale was misconceived
and that there was ‘no such proceeding, known to New South Wales law’. Coroneo’s case was
said to mean that in such cases the only proceedings available are (a) if the sale has not been
completed, for an injunction with an offer to discharge and (b) if completed, for an account
between the parties. But by what standard is the conduct of the mortgagee judged?
[2-220] The established view has been that while the mortgagee must not sacrifice the
mortgagor’s interest the mortgagee does not hold the power as trustee for the mortgagor.97
But in the Cuckmere Brick decision, the Court of Appeal strove to reassess the obligations of
the mortgagee in terms drawn from the tort of negligence and treated the remedy as lying in
damages.98 The High Court of Australia has left open the question of the correctness of the
Cuckmere Brick case.99 So also has the New Zealand Court of Appeal.100 However, it has been held
that the reasoning in the English decision does not represent the law in New South Wales.101
The same is true in South Australia.102
[2-225] There has more recently been some shift in ground by the English Court of Appeal.
Parker-Tweedale v Dunbar Bank plc (No 1)103 indicates that while the mortgagee owes the
mortgagor a duty to obtain a proper price (and not merely an obligation to act in good faith and
not wilfully or recklessly to sacrifice the interests of the mortgagor), this duty is equitable, not
tortious, in character. Thus the content of the equitable duty has been changed in England by
reference to concepts taken from the law of torts. In similar vein is the Privy Council decision
in China and South Sea Bank Ltd v Tan Soon Gin.104 Their Lordships rejected the argument
that by parity of reasoning with that as to the duty of a mortgagee in the Cuckmere Brick
case, the equitable defence based on loss or wasting of securities held by the creditor for the
obligation guaranteed by the defendant surety105 was now subsumed by the law of negligence.
Their Lordships said in terms that the tort of negligence had not supplanted the principles
of equity.106 Most encouragingly, in Downsview Nominees Ltd v First City Corporation Ltd,107
Lord Templeman for the Privy Council held in terms that there was no room for the imposition
of any general duty to exercise reasonable care upon a receiver or manager appointed by a
94. [1971] Ch 949; [1971] 2 All ER 633.

95. (1935) 35 SR (NSW) 391 (and see also Isaacs J in Pendlebury v Colonial Mutual (1910) 13 CLR 676 at
700–2).
96. [1982] NSW Conv R 55-097.
97. Kennedy v De Trafford [1897] AC 180 at 185; [1895-9] All ER Rep 408 at 411; Davis v Taylor (1948) 48 SR
(NSW) 514; 65 WN (NSW) 209.
98. See esp [1971] Ch 949 at 966; [1971] 2 All ER 633 at 643–4.
99. Forsyth v Blundell (1973) 129 CLR 477; 1 ALR 68; The ANZ Banking Group Ltd v Bangadilly Pastoral Co Pty
Ltd (1978) 139 CLR 195; 19 ALR 519; Commercial and General Acceptance Corp Ltd v Nixon (1981) 152
CLR 491 at 494–5, 502–5, 515–16, 521, 522–3; 38 ALR 225 at 226, 233–5, 243–4, 247–8, 248–9.
100. Sullivan v Darkin [1986] 1 NZLR 214 at 222.
101. Expo International Pty Ltd (recs & mgrs apptd) (in liq) v Chant [1979] 2 NSWLR 820 at 834–5; Westpac
Banking Corp v Kingsland (1991) 26 NSWLR 700 at 707–9. See also Ultimate Property Group Pty Ltd v Lord
(2004) 60 NSWLR 646 at [26]. See generally [29-180].
102. Citicorp Australia Ltd v McLoughney (1984) 35 SASR 375 at 381.
103. [1991] Ch 12; [1990] 2 All ER 577, noted in P Butt, ‘Mortgagee’s Duty to Third Parties’ (1990) 64 ALJ 209.
104. [1990] 1 AC 536; [1989] 3 All ER 839.
105. As to which, see [9-315].
106. [1990] 1 AC 536 at 543; [1989] 3 All ER 839 at 841.
107. [1993] AC 295; [1993] 3 All ER 626.
53
mortgagee in dealing with the assets of a company, save only for the qualification that the
Cuckmere Brick case was ‘Court of Appeal authority for the proposition that, if the mortgagee
decides to sell, he must take reasonable care to obtain a proper price but is no authority for any
wider proposition’.108
[2-230] Undeterred by the above, in Medforth v Blake109 the Court of Appeal held that the
Cuckmere Brick duty extends to a duty upon a receiver or manager to manage the property with
due diligence, asserting that Lord Templeman had cited the Cuckmere Brick case with approval
and concluding that it did not matter ‘one jot whether the duty is expressed as a common
law duty or as a duty in equity’.110 The last proposition is doubtless true if changes in the law
are to be effected by judicial ukase, rather than principled development. Medforth v Blake has
been roundly, and soundly, criticised,111 but has been embraced by the New Zealand Court of
Appeal.112 If the law is to be changed in this manner, it should be by legislation, as has occurred
in much of Australia.113
[2-235] Damages in equity
The judgment of the English Court of Appeal in Seager v Copydex Ltd114 is open to the
construction that damages for breach of a purely equitable obligation are available under the
successor provisions to Lord Cairns’ Act.115 If so, this applies an interpretation of the legislation
which may be open, although the better view is against it.116 On the other hand, it is suggested
that Lord Denning MR acted on the assumption that under the Judicature system remedies
available in one but not the other of the old jurisdictions are now generally available no matter
what the jurisdiction concerned. This would mean that, quite irrespective of Lord Cairns’ Act,
a complaint against a trustee or other fiduciary now sounds in common law damages as well as
for indemnification or an account.117 There is nothing supporting this in the Judicature system.
Further, there is nothing to indicate the principles by which damages are to be quantified and
it will be remembered that the rules used at law in contract and tort differ.
[2-240] Passing off
This tort is committed when one trader passes off its goods or services as those of another. Before
AG Spalding and Bros v AW Gamage Ltd,118 the position appeared to be that (a) at law it was
necessary for a plaintiff to show fraud in the defendant, but equity granted injunctions against
innocent defendants to protect the plaintiff’s property in the goodwill so that the innocent
defendant would have a defence at law but not in equity; and (b) at law the tort was completed
only with a sale by the defendant, as distinct from a representation, but equity could of course
grant quia timet injunctions.119 In that case, Lord Parker decided damages were available even
though the defendants had only advertised and not sold. This is to be explained on one of
two bases: (i) damages were awarded under Lord Cairns’ Act in substitution for a quia timet
108. [1993] AC 295 at 315; [1993] 3 All ER 626 at 637.

109. [2000] Ch 86; [1999] 3 All ER 97.
110. [2000] Ch 86 at 102; [1999] 3 All ER 97 at 111.
111. By L S Sealy, ‘Mortgages and Receivers — A Duty of Care Resurrected and Extended’ [2000] CLJ 31; see
also S Frisby, ‘Making a Silk Purse out of a Pig’s Ear — Medforth v Blake’ (2000) 63 MLR 413.
112. Apple Field Ltd v Damesh Holdings Ltd [2001] 2 NZLR 586 at [40]–[52].
113. In the case of corporate mortgagees, by s 420A of the Corporations Act 2001 (Cth), and more generally in
Queensland by s 85 of the Property Law Act 1974, considered in Emerson v Custom Credit Corp [1994] 1 Qd
R 516 and in New South Wales by s 111A of the Conveyancing Act 1919 (applicable to sales by mortgagees
for defaults occurring after November 2011).
114. [1967] RPC 349; [1967] 2 All ER 415.
115. See [24-090], [42-195].
116. The authorities are discussed in [42-195] below.
117. Cf Re Dawson (dec’d) (1966) 84 WN (Pt 1) (NSW) 399 at 404–5, discussed by W M C Gummow,
‘Compensation for Breach of Fiduciary Duty’ in T G Youdan (ed), Equity, Fiduciaries and Trusts, Law Book
Co, Toronto, 1989, pp 70 ff.
118. (1915) 32 RPC 273; [1914-15] All ER Rep 147.
119. See generally W L Morison, ‘Unfair Competition and “Passing Off ” ’ (1956) 2 Syd L Rev 50 at 54–7.
54
injunction (which would anticipate by 10 years the interpretation of Lord Cairns’ Act given
by the House of Lords in Leeds Industrial Co-operative Society Ltd v Slack)120 or (ii) the action
was regarded as complete at law when equity would award a quia timet injunction. Subsequent
decisions assume that the tort is complete at law when there is only a representation and thus
effect a change in principle.
[2-245] In Draper v Trist,121 the defendant consented to an inquiry as to damages. There was
debate in the Court of Appeal as to the quantum that should be awarded. It appeared that
the plaintiff had not established fraud by the defendant. Counsel adverted to the effect of the
Judicature Act. Clauson and Goddard LJJ said they doubted whether damages were available at
all in such a case, but relied upon the defendant’s consent to the inquiry as obviating a decision
on the point.122 But Sir Wilfrid Greene MR was prepared to hold that fraudulent intent was not
necessary on a claim purely for damages123 and Blackburne J so held in Gillette UK Ltd v Edenwist
Ltd.124 This assumes that the divergence between law and equity was in truth a conflict in rules
with reference to the same matter, calling for the application in all cases only of the equitable
rule. That is debatable, for in Norwich Pharmacal Co v Commissioners of Customs & Excise,125
the Court of Appeal appeared clearly to recognise that there may be tortious conduct which
attracts only equitable remedies and thus is never actionable for damages at law.126 This may be
compared with passing off without fraud which was treated as actionable only in equity. The
concept of an ‘equitable tort’ is, to say the least, curious.127
[2-250] Damages for part performance
Part performance is a doctrine of equity which, if successfully asserted by a plaintiff, will deny
the availability of a defence of non-compliance with s 4 of the Statute of Frauds. There have
been various attempts to argue that where (a) a contract is unenforceable at law because of, for
example, non-compliance with the Statute of Frauds, (b) there were acts of part performance
but (c) equity would not decree specific performance because of delay or the character of the
contract, the acts of part performance could now be relied upon at law to overcome the statute
and give a remedy in damages.
If this were so, the plaintiff would be asserting a right which before 1873 existed neither at
law nor in equity.128 This new right could not be based upon the Judicature system because
it arose from a situation that posed no conflict in rules for s 25(11), merely a difference in
remedies. Therefore these attempts have failed both in England and Australia.129
[2-255] Refusal of damages for breach of voluntary covenant
The difficulty here comes from ill-considered remarks by Eve J in Re Pryce.130 That case required
his Lordship, inter alia, to consider the position of a party suing at law for damages for breach of a
120. [1924] AC 851; [1924] All ER Rep 259.

121. (1939) 56 RPC 429; [1939] 3 All ER 513.
122. (1939) 56 RPC 429 at 441, 443–4; [1939] 3 All ER 513 at 525, 528.
123. (1939) 56 RPC 429 at 434; [1939] 3 All ER 513 at 517.
124. [1994] RPC 279. Cf Angelides v James Stedman Henderson’s Sweets Ltd (1927) 40 CLR 43 at 60–1; [1927]
ALR 427 at 433; Kettles and Gas Appliances Ltd v Anthony Hordern and Sons Ltd (1934) 35 SR (NSW) 108;
51 WN (NSW) 190. See also Radio Corp Pty Ltd v Henderson (1960) 60 SR (NSW) 576; 77 WN (NSW)
585.
125. [1974] AC 133; [1972] 3 All ER 813.
126. [1974] AC 133 at 140, 146, 151; [1972] 3 All ER 813 at 817, 823, 828.
127. Cf Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; 201 ALR 359 at [24], and see further Chapter 43.
128. Marsh v Mackay [1948] St R Qd 113.
129. Britain v Rossiter (1879) 11 QBD 123; Lavery v Pursell (1888) 39 Ch D 508; [1886-90] All ER Rep 1583;
J C Williamson Ltd v Lukey (1931) 45 CLR 282; [1931] ALR 157; Marsh v Mackay [1948] St R Qd 113;
O’Rourke v Hoeven [1974] 1 NSWLR 622; cf Douglas v Hill [1909] SALR 28; Ellul v Oakes (1972) 3 SASR
377 at 382–3, 395; Carr v McDonald’s Australia Ltd (1994) 63 FCR 358 at 367, 390; Penrith Whitewater
Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 176. See also Batey v Gifford (1997) 42 NSWLR 710 at 718.
130. [1917] 1 Ch 234 at 241.
55
voluntary covenant under seal; the covenant was contained in a settlement of which that party
was trustee. After observing that equity would not assist a volunteer by ordering against the
settlor specific performance of his covenant to settle upon the trustee, his Lordship continued:
Nor could damages be awarded either in this court, or I apprehend, at law, where, since the
Judicature Act 1873, the same defences would be available to the defendant as would be raised in
an action brought in this court for specific performance or damages.
[2-260] This passage has contributed to much of the confusion which now surrounds
the subject of trusts of voluntary covenants.131 It makes false assumptions, contains various
inaccuracies, and, if correct, would have extraordinary results:
(a) It assumes that there remain various ‘courts’ rather than one body exercising concurrent
jurisdictions.
(b) Eve J could not rely upon s 25(11), for while it is trite that before 1873 equity would not
decree specific performance of a voluntary covenant but that the law would award damages
for breach, this was an instance of a difference in remedies which did not proceed from any
conflict in rules to which s 25(11) could apply.
(c) Eve J could not rely on s 24 because the difference in remedies involved no inconsistency
calling for any deadlock to be broken by that provision, as before 1873 it would have been
by common injunction.
(d) If Eve J were correct then the Judicature system would have altered the substantive law by
making voluntary covenants no longer the subject of actions at law so that a promise under
seal was unenforceable without valuable consideration.
(e) If Eve J’s remarks are taken at face value all traditional equitable defences to suits in equity
would be defences at law; thus (for example) hardship could be pleaded to an action
in debt.132
[2-265] Misapplication of equitable defences
The misconceived notion that equitable defences to suits in equity are ipso facto defences to an
action at law is further illustrated by certain authorities dealing with valuations. Where a party
sought specific performance of an agreement for sale or transfer at a price to be the valuation
fixed by a third party, equity might, in its discretion, withhold a decree if the valuation,
although honest and impartial, was mistaken. But equity would not set aside the agreement;
it left the plaintiff to his or her remedy at law. At law it would usually be impossible to imply
a term that the valuation was to be set aside for honest mistake of the valuer. But in decisions
following upon Dean v Prince,133 it was assumed that a defence to an equitable remedy must be
a sufficient answer to an action at law for damages. That, as McHugh JA explained in Legal
& General Life of Australia Ltd v A Hudson Pty Ltd,134 was a fusion fallacy. His Honour reviewed
the numerous English and Australian authorities in which Dean v Prince had been discussed.
His Honour’s reasoning has often been applied and approved.135
131. See J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia, 7th ed, LexisNexis Butterworths,
Sydney, 2006, [611]–[615].
132. See generally D W Elliott, ‘The Power of Trustees to Enforce Covenants in Favour of Volunteers’ (1960)
76 LQR 100; J A Hornby, ‘Covenants in Favour of Volunteers’ (1962) 78 LQR 228; R P Meagher and
J R F Lehane, ‘Trusts of Voluntary Covenants’ (1976) 92 LQR 427.
133. [1954] Ch 409; [1954] 1 All ER 749.
134. (1985) 1 NSWLR 314 at 331–6.
135. See the decisions referred to by Bryson J in Orti-Tullo v Sadek [2001] ATC 4688; [2001] NSWSC 855
at [15]–[18].
56
136
[2-270] The doctrine of Walsh v Lonsdale
L entered into a written agreement for lease of a weaving shed to T for seven years with rent
payable in advance by T upon demand by L. T went into possession and paid rent quarterly
(not in advance) but there was no lease for the term of seven years binding at law because there
was no deed as required at law.137 At law T was, it seems, merely a tenant from year to year.
However, it was conceded that in equity specific performance would be decreed; L demanded
rent in advance as permitted by the agreement but not by the legal tenancy. T refused and L
entered and distrained by seizing the goods of T. These were legal remedies. T then sought in the
one action damages for wrongful distress and an injunction against sale by L under distress and
L continuing in possession. On a motion for interlocutory relief Fry J held that L was entitled
to distrain but that T was entitled to relief against forfeiture. He granted an interlocutory
injunction directing L to withdraw from possession upon payment of rent claimed in advance.
The Court of Appeal, subject to variation as to amount of rent, confirmed the interlocutory
orders. All members of the court stressed that they were not finally deciding the rights of the
parties. But implicit in the decision of Fry J was the holding that L was entitled to distrain;
under the old system this could only be so if T was lessee at law on the terms as to payment set
out in the agreement. This T would not become until specific performance of the agreement
had been decreed and obeyed; L would have obtained a common injunction restraining T’s
action at law for damages conditional upon L instituting a suit for specific performance. The
lease when executed would furnish a good defence at law to T’s claim.
[2-275] Observations in the Court of Appeal, particularly by Sir George Jessel MR, are open
to the construction that the rights of L and T were to be assessed as if all these steps had already
been taken and that this was a consequence of the new system. This would mean that a party
who asserts in the course of proceedings a right to specific performance is to be treated as if this
had already been decreed without the examination usually undertaken before that remedy is
awarded. His Lordship further observed that:138
A tenant holding under an agreement for lease of which specific performance would be decreed,
stands in the same position as to liability as if the lease had been executed. He is not since the
Judicature Act a tenant from year to year, he holds under the agreement, and every branch of the
Court must now give him the same rights … There are not two estates as there were formerly, one
estate at common law … and an estate in equity under the agreement. There is only one Court,
and the equity rules prevail in it.
It will be seen that there is nothing in s 24 or s 25 of the Judicature Act 1873 to support
these statements, which contradict the orthodox statements made in Salt v Cooper reproduced
above,139 because:
(a) if taken literally, Sir George Jessel MR’s words would mean that the distinction between
legal and equitable estates and interests in land was abolished and the institution of the
trust destroyed;
(b) the reference to rules of equity prevailing assumes a conflict of rules within s 25(11) between
these legal and equitable interests which does not exist, though, as has been seen, the rules
could produce in some situations an impasse from inconsistent remedies;
(c) s 24 does not appear to contemplate that the court could treat a party as having obtained
specific performance without the right to it being established. Not all agreements for lease
will be the subject of such an order. In the words of Lord Macnaghten, applications for specific
performance involve ‘some of the nicest distinctions and most difficult questions that come
before the Court’.140 The decision of the court is thus unlikely to be a matter of course.
136. (1882) 21 Ch D 9; [1881-5] All ER Rep Ext 1690.

137. By the Real Property Act 1845 (8 & 9 Vict c 106) s 3.
138. (1882) 21 Ch D 9 at 14; [1881-5] All ER Rep Ext 1690 at 1693.
139. See [2-135].
140. Tailby v Official Receiver (1888) 13 App Cas 523 at 547; [1886-90] All ER Rep 486 at 498.
57
[2-280] The significance to be attached to Sir George Jessel MR’s remarks has attracted a
body of learned discussion.141 In weighing what was said by the Master of the Rolls and putting
it into context, it must be remembered that the appeal came from an interlocutory motion,
the right to specific performance was conceded, and Lindley LJ, at least, considered that if
the matter went to a hearing the successful defence by Lonsdale would involve the settlement
in proper form of a lease. When taken together, later decisions142 establish the following
seven propositions.
[2-285] Consequences of Walsh v Lonsdale
First, the distinction between legal and equitable interests in land remains.143 The clearest
demonstration of this was the result in the unanimous judgment of the High Court in Chan
v Cresdon Pty Ltd: the guarantors of their company’s legal lease were not liable on the identical
covenants to pay rent in the specifically enforceable agreement to grant a lease.144
[2-290] Secondly, unless the right is admitted,145 specific performance is always an issue even
after the Judicature Act.146 The South Australian Full Court put it thus:147
Equity regards as done that which ought to be done, but it does not jump to conclusions. If the
right to specific performance is resisted, there is authority for saying that even in a Court of ample
jurisdiction the right to this relief must be raised on the pleadings in order that it may be made the
subject of a considered decision …
This may be contrasted with the approach of Blair CJ in the Queensland decision Ahern v LA
Wilkinson (Northern) Ltd,148 in which Walsh v Lonsdale was treated as supporting an action at
law for rent under an agreement for lease not registered or in registrable form as required by the
Torrens legislation, and an application, after reservation of judgment, by the party relying on
that case for specific performance was considered to have been unnecessary.
[2-295] Thirdly, although most of the cases in which Walsh v Lonsdale has been discussed
or applied involved agreements for lease and it may be that the case is limited to that area,
similar considerations arise with contracts for sale of land unenforceable at law but sustained
in equity by acts of part performance. In Patti v Belfiore (a case of sale of land),149 Fullagar J
expressed the view that Walsh v Lonsdale was relevant there also, because equity treats the
agreement as appropriate for specific performance. Appropriateness for specific performance
is the same concept which underlies the somewhat different treatment of vendors in ordinary
contracts for sale of land as having an equitable interest in the land before completion.150
The generally accepted view has been that the interest of the purchaser as ‘beneficiary’ is ‘in
141. See particularly S Gardner, ‘Equity, Estate Contracts and the Judicature Acts: Walsh v Lonsdale Revisited’
(1987) 7 OJLS 60; P Sparkes, ‘Walsh v Lonsdale: The Non-Fusion Fallacy’ (1988) 8 OJLS 350; P Sparkes,
‘Back-dating Specific Performance’ (1989) 10 J Leg Hist 29. See also D O’Keefe, ‘Sir George Jessel and the
Union of Judicature’ (1982) 26 Am J Leg Hist 227.

142. Including Swain v Ayres (1888) 21 QBD 289; Manchester Brewery Co v Coombs [1901] 2 Ch 608; Dockrill
v Cavanagh (1944) 45 SR (NSW) 78 at 83; 62 WN (NSW) 94 at 97; Warmington v Miller [1973] QB 877;
[1973] 2 All ER 372; McMahon v Ambrose [1987] VR 817; Chan v Cresdon Pty Ltd (1989) 168 CLR 242; 89
ALR 522.
143. Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 250–2, 261–2; 89 ALR 522 at 526–8, 535; Royal Botanic
Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289; 76 ALJR 436 at [27]. See also
Welford v Transport for London [2010] RVR 200; [2010] UKUT 99 at [70] (‘In the absence of a deed, the lease
took effect in equity only …’).
144. Chan v Cresdon Pty Ltd (1989) 168 CLR 242; 89 ALR 522.
145. As in Walsh v Lonsdale itself and R v Tower Hamlets London Borough Council; Ex parte von Goetz [1999] QB
1019.
146. Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252, 261; 89 ALR 522 at 528, 535.
147. Moore v Dimond [1929] SASR 274 at [281].
148. [1929] St R Qd 66. Cf Zimbler v Abrahams [1903] 1 KB 577 at 582; Smith v Ritchie (No 1) (1919) 15 Tas
LR 60; White v Kenny [1920] VLR 290; (1920) 26 ALR 187.
149. (1958) 100 CLR 198 at 210.
150. Brown v Heffer (1967) 116 CLR 344 at 348–9; [1968] ALR 89 at 90–1; Booker Industries Pty Ltd v Wilson
Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 605–6; 43 ALR 68 at 70–2.
58
every case commensurate only with what would be decreed to him by a court of equity in
specifically performing the contract, and could only be defined by reference to the relief which
the court would give by way of specific performance’.151 The distinction is that in the usual
vendor/purchaser situation the ‘constructive trust’ will arise and continue for purposes such as
beneficial succession without specific performance first being decreed. It is enough that, at the
time the beneficial ownership is alleged to have arisen or devolved, the contract is appropriate
for specific performance, without the remedy now being administered in the proceedings in
which the question of beneficial ownership has become material. The dispute will frequently
not be between the vendor and purchaser but for example between competing claimants to the
estate of the vendor (as in Brown v Heffer) and so there will be no possibility of resolving any
dispute as to specific performance between vendor and purchaser.
The question remains of what is meant by ‘specific performance’ in this context. In Progressive
Mailing House Pty Ltd v Tabali Pty Ltd,152 Mason J approved what had been said by Jordan CJ
in Dockrill v Cavanagh153 that involved the use of ‘specific performance’ in the strict sense of
a decree requiring execution of a lease in proper form. But what if the agreement for lease is
subject to an unfulfilled condition, not being one the lessor is obliged to perform? Examples
are consents by authorities under relevant legislation. The contract cannot be specifically
performed until the consent has been received, and the lessor may be obliged by order to do
what the lessee reasonably requires of the lessor to bring about fulfilment of the condition; in
the meantime, the lessee may enforce by injunction the obligation of the lessor to do nothing
to the prejudice of the lessee.154 This may be said to be specific performance in the ‘loose
sense’ and in Chan v Cresdon Pty Ltd,155 Mason CJ, Brennan, Deane and McHugh JJ held that
this would suffice to attract the operation of Walsh v Lonsdale. In so doing, they relied upon a
footnote in Sir Frederick Jordan’s Chapters on Equity in New South Wales,156 although this has
subsequently received a less than enthusiastic reception.157
[2-300] Fourthly, Walsh v Lonsdale158 applies where there is a contract to transfer a legal title
and an act of either party can be justified at law against the other only by force of that legal
title as transferred. Further, it has been held by the Court of Appeal159 that the operation of
Walsh v Lonsdale is not limited to direct contractual relations between the lessee in equity and
the holder of the reversion. Where A contracted to lease Blackacre to B and, although A held
not the legal title but only a contract with X to convey it to A, and the fact was that specific
performance would be granted of both contracts and all parties were joined in the instant suit,
B was held liable in damages for breach of a covenant in the lease as if both agreements had
been specifically enforced.
[2-305] Fifthly, the act will be treated as justified at the time of its commission if specific
performance is now available in the proceedings in which this justification has become an
issue. This is perhaps an extension of the maxim by regarding equity as treating as done at
the earlier stage what then ought to have been done (that is, transfer of the legal title) but
is in fact only done in the later litigation. If, at the time of the subject proceedings, specific
performance could not be had because, for example, the term of the subject lease would
already have expired, no equitable rights can then exist by virtue of Walsh v Lonsdale. The
decision of Lawson J in Tottenham Hotspur Football & Athletic Co Ltd v Princegrove Publishers
151. Central Trust and Safe Deposit Co v Snider [1916] 1 AC 266 at 272.
152. (1985) 157 CLR 17 at 26–7; 57 ALR 609 at 616.
153. (1944) 45 SR (NSW) 78 at 83; 62 WN (NSW) 94 at 97.
154. Cf Brown v Heffer (1967) 116 CLR 344 at 351; [1968] ALR 89 at 92–3.
155. (1989) 168 CLR 242 at 252–3; 89 ALR 522 at 528–9.
156. 6th ed, University of Sydney, Sydney, 1947, p 52.
157. See W M C Gummow, ‘The Equity of Sir Frederick Jordan’ (1991) 13 Syd L Rev 263 at 270–6; Chief Cmr of
Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 at 654; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217
CLR 315; 201 ALR 359 at [57].
158. (1882) 21 Ch D 9; [1881-5] All ER Rep Ext 1690.
159. Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd [1977] QB 580; [1977] 2 All ER 293.
59
Ltd, which assumes the contrary, must be regarded as incorrect.161 The true position is
160
illustrated by McMahon v Ambrose,162 where the majority of the Victorian Full Court held
that it was not possible to grant specific performance of an oral agreement for the assignment
of a lease where the term had expired before the commencement of proceedings. In Chan
v Cresdon Pty Ltd,163 the High Court approved the observations of Lord Cranworth LC in
Walters v Northern Coal Mining Co,164 that the circumstances would have to be ‘very special’
for the court to decree the specific performance of a lease after the term had expired. After
all, there will be significant delay to be explained. However, in S & E Promotions Pty Ltd
v Tobin Bros Pty Ltd,165 the Full Federal Court said that expiry or imminent expiry of the term
of an agreement to lease was no bar to the jurisdiction to grant relief in the nature of specific
performance.
Where the remedy of specific performance of an agreement to grant a term would not be
available, may the lessee still at least rely upon a periodic tenancy?166 In Warmington v Miller,167
the Court of Appeal upheld refusal of specific performance of an agreement for sub-lease
because to grant it would have exposed the head lessee (the defendant) to forfeiture of the
head lease for breach of a covenant against sub-letting. The court also refused to make a
declaration that the plaintiff had equitable rights in respect of the premises. He had equitable
rights only insofar as he had a right to specific performance and that remedy would not be
decreed him.
[2-310] Sixthly, it is necessary to accept the present possibility of specific performance as
sufficient title for past conduct if Walsh v Lonsdale168 is to stand. That is because the basic
issue in the case was whether at law L was entitled to distrain. He was if he were to be treated
as having had at the earlier time the rights at law contained in the agreement. Some of the
authorities discussed in Chan v Cresdon Pty Ltd169 would support that position. However,
the judgment of Starke J in Cowell v Rosehill Racecourse Co Ltd,170 although directed to
another situation, contains an indication that, at least in a pre-Judicature system he would
not so treat a party in the position of L and there is no reason why that system should alter
his view.
[2-315] Finally, Walsh v Lonsdale171 cannot apply where the interest asserted is unknown to
the law as a proprietary right and thus not the possible subject of a grant by deed pursuant to
a decree for specific performance. This was the defect found by the High Court of Australia in
Cowell’s case in one of the bases upon which the majority of the Court of Appeal rested in Hurst
v Picture Theatres Ltd.172 The so-called right of a patron to view a film or sporting event cannot
be the subject of a grant at law conferring an interest in the relevant premises. Therefore, an
agreement for admission to any such spectacle does not attract Walsh v Lonsdale.
[2-320] Jurisdiction of inferior courts
A difficult theoretical problem, although one readily resolved in practice, has arisen because
of the limited grants of jurisdiction to inferior courts to order specific performance. That is
160. [1974] 1 All ER 17; [1974] 1 WLR 113.

161. See M Albery, Note (1974) 90 LQR 149.
162. [1987] VR 817.
163. (1989) 168 CLR 242 at 254–6; 89 ALR 522 at 529–31.
164. (1855) 5 De G M & G 629 at 638–9; 43 ER 1015 at 1019.
165. (1994) 122 ALR 637 at 656.
166. The (unresolved) issue is discussed by J E Adams, ‘Occupiers Pending Agreement: Periodic Tenants or
Not?’ [1988] Conv 16.
167. [1973] QB 877; [1973] 2 All ER 372.
168. (1882) 21 Ch D 9; [1881-5] All ER Rep Ext 1690.
169. (1989) 168 CLR 242 at 254–6; 89 ALR 522 at 529–31.
170. (1937) 56 CLR 605 at 628–9; [1937] ALR 273 at 280–1.
171. (1882) 21 Ch D 9; [1881-5] All ER Rep Ext 1690.
172. [1915] 1 KB 1; [1914-15] All ER Rep 836: see [21-245]–[21-255].
60
illustrated by s 134(1)(b) of the District Court Act 1973 (NSW), which confers the same
jurisdiction as the Supreme Court in proceedings for, inter alia, the specific performance of
the sale or purchase of property at a price not exceeding $20,000, or the lease of property
whose value does not exceed $20,000. Can the doctrine in Walsh v Lonsdale be invoked in
courts whose powers are limited in that fashion? It is submitted that the correct procedure
is for the inferior court to postpone granting relief, and for the matter to be transferred to
the Supreme Court, it being noted that the legislative restrictions on the inferior courts’
jurisdiction reflect a legislative policy for those courts not to resolve questions of ownership of
valuable interests in land.173
Was it a mistake?
[2-325] Success in removing procedural complexities
The proponents of the Judicature system at the time of its introduction claimed for it the ending
of the procedural complexities which were bound to continue so long as distinct principles
were administered by separate courts. Litigants would no longer be sent from one court to the
other. At this level there can be no doubt that the system has achieved what was sought from
it. Further, the history of the 1957 amendments in New South Wales shows how difficult it was
to achieve, short of a Judicature system, smoothly running concurrent but separate jurisdictions
in law and in equity.174
[2-330] Pessimism in earlier editions
Previous editions of this work expressed a pessimism which, although apt at the time, may no
longer be called for. The first and all subsequent editions included this unsanguine passage:175
But for this a price has been paid and at a higher level of expense than that of administrative
inconvenience. The English legal system draws its principal sustenance from common law and
equity and each of these has quite distinct origins producing contours which must perforce change
as they are weathered by altered circumstances. The development of both law and equity in a
manner consistent with the past, said to be the genius of the English case law system, is distorted
by the mirage of a new body of principle, neither common law nor equity, but partaking of some
of each. The ‘fusion fallacies’ revealed in this chapter but otherwise embodied in the case law are
depressing evidence of the damage done to equity in England since 1873.
And in addition to the opportunity presented (and seized) for the distortion of equitable principle, it
is now possible to see the prejudice to the common law flowing from the introduction of deleterious
and foreign matter. For example, to say with Salmon J in Woods v Martins Bank Ltd,176 that a fiduciary
relationship existed between banker and customer with the consequence that the banker had a duty
to exercise care and skill in advising the customer in relation to his investments, breach of which was
actionable in tort for negligence, is — if intentional — to adopt a shabby subterfuge to overcome
the authorities which in 1959 appeared clearly to mean that there was no duty of care in those
circumstances and, if unintentional, to distort the development of the law without appreciating the
consequences of his action. It is also to ignore the capacity of the common law for self-renovation
by examination and reinterpretation of old authorities in changed circumstances. To such instances
Sir Owen Dixon is to be taken as referring when criticising the Judicature system as cramping the
development of the common law by importation of equitable concepts.177
173. For an analysis of the precise provisions, and decisions bearing on them, the reader is referred to
[2-230]–[2-265] of the 4th edition of this work. Cognate issues are considered in Bushby v Dixon Holmes
du Pont Pty Ltd [2010] NSWSC 234 (proprietary estoppel asserted in District Court).
174. See [1-320] above.
175. 1st edition, [254].
176. [1959] 1 QB 55 at 72; [1958] 3 All ER 166.
177. See J D Merralls, ‘The Rt Hon Sir Owen Dixon, OM, GCMG, 1886-1972’ (1972) 46 ALJ 429.
61
[2-335] One example proffered was the changes to the law of trespass effected by Diplock J
in Fowler v Lanning178 and Lord Denning MR in Letang v Cooper,179 who justified a substantive
change to the law of trespass by reason of the change to the rules of pleading effected by the
Judicature legislation. Lord Denning MR said:180
I know that in the last century Maitland said ‘the forms of action we have buried but they still
rule us from their graves’ …, but we have in this century shaken off their trammels. These forms of
action have served their day. They did at one time form a guide to substantive rights; but they do
so no longer. Lord Atkin … told us what to do about them: ‘When these ghosts of the past stand
in the path of justice clanking their mediaeval chains, the proper course for the judge is to pass
through them undeterred.’181
Previous editions of this work castigated Lord Denning MR’s explanation for judicial
legislation:182
Imagery of graves and ghosts standing in the path of justice and clanking antique chains is
colourful and perhaps amusing to the uninstructed, with the infernal vision of Lords Atkin and
Denning worsting Bela Lugosi in unequal fight, but it is not permissible to distort the common law
as a side effect of the abolition of the old system of pleading.
[2-340] Optimism for the future

On occasion there can be a need for criticism to be forceful, colourful, memorable and indeed
at its most extreme, pungent. As Sir Frederick Jordan once said, in a different context, ‘there
are mistakes and mistakes’,183 and some mistakes warrant a more severe censure than others.
However, the position in the twenty-first century seems much less dire than it appeared in the
final quarter of the twentieth century. As much is readily shown by taking two New Zealand
examples of judicial law-making through fusionist reasoning from the law of fiduciary
obligations.
[2-345] Contributory negligence as a defence to breach of fiduciary duty
First, in Day v Mead,184 Cooke P attempted to import the concept of contributory negligence
into claims for compensation for breach of fiduciary duty.185 The Supreme Court of
South Australia took the same step in Duke Group Ltd (in liq) v Pilmer,186 until corrected crisply
by the High Court.187 For why ever should a statute designed to enhance the rights of a plaintiff
at common law (by abrogating an absolute defence) produce the result in a legal system with
a fused administration of common law and equity that the rights of a plaintiff in equity should
be diminished by the analogous application of the statute to a defendant who has breached
fiduciary obligations owed to the plaintiff?
[2-350] Exemplary damages for breach of fiduciary duty
Secondly, in Aquaculture Corporation v New Zealand Green Mussel Co Ltd,188 four members of
the New Zealand Court of Appeal, apparently without argument, held that monetary awards for
breach of equitable obligation (in this case breach of confidence) were fully equated with those
applicable to awards of damages at common law, so that it was unnecessary to decide whether
the obligation in the instant case was founded in equity or contract. The four New Zealand
178. [1959] 1 QB 426; [1959] 1 All ER 290.

179. [1965] 1 QB 232; [1964] 2 All ER 929.
180. [1965] 1 QB 232 at 239–40; [1964] 2 All ER 929 at 932.
181. See United Australia Ltd v Barclay’s Bank Ltd [1941] AC 1 at 29; [1940] 4 All ER 20 at 37.
182. 1st edition, [257].
183. Ex parte Hebburn Ltd; Re Kearsley Shire Council (1947) 47 SR (NSW) 416 at 420.
184. [1987] 2 NZLR 443 at 451–2.
185. This was applied in Taylor v Schofield Peterson [1999] 3 NZLR 434.
186. (1999) 73 SASR 64.
187. Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; 180 ALR 249 at [86].
188. [1990] 3 NZLR 299; (1990) 19 IPR 527.
62
judges then went on to hold that exemplary damages may be awarded for actionable breach of
confidence, with the remaining member of the court, Somers J, reminding his colleagues that
‘equity and penalty are strangers’.189
[2-355] More reasoned approach to these issues
With the scant reasoning of a majority of the New Zealand Court of Appeal may be contrasted
all four judgments in the Supreme Court of New South Wales in Digital Pulse Pty Ltd v Harris.190
Employees had, in breach of their contracts of employment and fiduciary obligations, diverted
opportunities from their employer, the plaintiff, to themselves. In addition to ordering equitable
compensation or an account of profits at the plaintiff’s election, the primary judge ordered
exemplary damages, and with him one member of the Court of Appeal agreed. However, none
of the four judges who heard and determined the litigation did so on any basis other than that
they were being asked to make new law. Neither the trial judge nor the dissenting appellate
judge claimed that the result he favoured amounted to giving effect to what had already been
achieved by the Judicature legislation or the fused administration of law and equity.
[2-360] Canson Enterprises v Boughton & Co
Similarly, in the decision of the Supreme Court of Canada in Canson Enterprises Ltd v Boughton
& Co,191 there may be seen an appreciation of what is in truth involved in assimilating common
law rules and equitable principles. All eight judges favoured dismissing the appeal from the
British Columbia Court of Appeal.192 The issue was the measure of compensation to be awarded
against a solicitor for breach of his fiduciary duty to his clients. La Forest J (with whose reasons
Sopinka, Gonthier and Cory JJ agreed) spoke approvingly of the judgments of Lord Diplock
in United Scientific Holdings Ltd v Burnley Borough Council193 and of Cooke P in Day v Mead,194
but also said that concepts of remoteness and mitigation of loss might have been developed in
equity, and that the same measure of damages might, in a given case, of which the present was
one, be awarded both in equity and in tort or contract. However, La Forest J added:195
In time the common law outstripped equity and the remedy of compensation became atrophied.
Under these circumstances, why should it not borrow from the experience of the common law?
Whether the courts refine the equitable tools such as the remedy of compensation, or follow the
common law on its own terms, seems not particularly important where the same policy objective
is sought.
The answer is that of course the scope for equity to adapt common law principles by analogy
is not spent. But caution is required. Equity may borrow from the common law, but it should do
so in a way which accords with the different motivating principles and objectives of each body
of law. The judgment of McLachlin J (with whom Lamer CJ and L’Heureux-Dubé J agreed)
reached the heart of the matter, as to why, even if the common law was propounded only by
way of analogy, it was inapt. Her Ladyship said:196
My first concern with proceeding by analogy with tort is that it overlooks the unique foundation
and goals of equity. The basis of the fiduciary obligation and the rationale for equitable
compensation are distinct from the tort of negligence and contract. In negligence and contract
the parties are taken to be independent and equal actors, concerned primarily with their own
self-interest. Consequently, the law seeks a balance between enforcing obligations by awarding
189. [1990] 3 NZLR 299 at 302; (1990) 19 IPR 527 at 530, noted in P W Michalik, ‘The Availability of
Compensatory and Exemplary Damages in Equity: A Note on the Aquaculture Decision’ (1991) 21 VUWLR
391 at 408.
190. [2002] NSWSC 33 (trial); (2003) 56 NSWLR 298 (CA).
191. [1991] 3 SCR 534; (1991) 85 DLR (4th) 129.
192. (1989) 61 DLR (4th) 732.
193. [1978] AC 904; [1977] 2 All ER 62.
194. [1987] 2 NZLR 443.
195. [1991] 3 SCR 534 at 588; (1991) 85 DLR (4th) 129 at 153.
196. [1991] 3 SCR 534 at 545; (1991) 85 DLR (4th) 129 at 154.
63
compensation and preserving optimum freedom for those involved in the relationship in question,
communal or otherwise. The essence of a fiduciary relationship, by contrast, is that one party
pledges herself to act in the best interest of the other. The fiduciary relationship has trust, not
self-interest, at its core, and when breach occurs, the balance favours the person wronged. The
freedom of the fiduciary is diminished by the nature of the obligation he or she has undertaken
— an obligation which ‘betokens loyalty, good faith and avoidance of a conflict of duty and self
interest’.197 In short, equity is concerned, not only to compensate the plaintiff, but to enforce the
trust which is at its heart.
[2-365] United Kingdom

The change in judicial reasoning in the United Kingdom is perhaps starkest of all. The approach
to the historical distinction between common law and equity is recognised by many decisions
at the highest level. (Recent examples are the careful treatment of limitation provisions for
fraudulent breach of trust by a defendant liable under Barnes v Addy in Williams v Central Bank
of Nigeria198 and the overturning of Tyrrell v Bank of London199 and Lister & Co v Stubbs200 in
FHR European Ventures LLP v Cedar Capital Partners LLC.201) No longer does there seem to be a
pressing need to rail against casual or uninformed judicial reasoning based on a misconception
of the Judicature legislation.
[2-370] Academic writings
The same is true, though perhaps less true, in universities. The difficulties confronting those who
might once have contended that the Judicature legislation was of itself a reason for substantive
legal change appear to be well recognised. Earlier editions of this work had been at pains to
expose gaps in the processes of legal reasoning whose major premise, sometimes unstated, was
the enactment of Judicature legislation. As Lehane wrote long ago, those who assert that law
and equity are fused rarely (if ever) explain what they mean, how it happened and what follows
from it.202 And, as Gummow J has observed, explanations have been slow in coming.203 The
reason is that the legislation is not sufficient of itself to sustain the argument. That is not to
gainsay that there continues to be a wide range of academic views as to whether, and as to the
extent to which, substantive fusion is a good idea, which is a healthy state of affairs.
The point is that the debate seems to have moved on to broader questions relating to legal
change, rather than the narrow question as to the changes effected by the Judicature legislation.
[2-375] Common ground
There is, in truth, much common ground.204 First, probably no one today seriously asserts that
the Judicature legislation itself effected a substantive fusion of equity and common law and
there is nothing in the statutes to support that conclusion, and statements suggestive of it,
notably by Sir George Jessel in Walsh v Lonsdale and Redgrave v Hurd, have been rejected and
the ‘accepted view’ (to use Sir Anthony Mason’s phrase) is that the legislation had a merely
procedural operation.205 That common ground is reflected by Maxton:206
197. Canadian Aero Service Ltd v O’Malley [1974] SCR 592 at 606; (1973) 40 DLR (3d) 371 at 382.
198. [2014] 2 All ER 489; [2014] 2 WLR 355.
199. (1862) 10 HL Cas 26; 11 ER 934.
200. (1890) 45 Ch D 1.
201. [2014] 2 All ER (Comm) 425; [2014] 3 WLR 535. See also, by way of example, Masri v Consolidated
Contractors International Co SAL [2009] QB 450; [2008] 2 All ER (Comm) 1099.
202. See J R F Lehane [1987] CLJ 163 at 165.
203. ‘Equity: Too Successful?’ (2003) 77 ALJ 30 at 33.
204. The following six paragraphs are substantially taken from M Leeming, ‘Equity, the Judicature Acts and
Restitution’ (2011) 5 J Eq 199 at 222–5.
205. A Mason, ‘Fusion’, in S Degeling and J Edelman (eds), Equity in Commercial Law, Lawbook Co, Sydney,
2005, pp 11–12, see also ‘Introduction’ at p 1 of the same work where this is described as a ‘core consensus’.
206. J Maxton, ‘Intermingling of Common Law and Equity’ in M Cope (ed), Equity: Issues and Trends, Federation
Press, Sydney, 1995, p 25, citing Lord Evershed, ‘Reflections on the Fusion of Law and Equity after 75 Years’
(1954) 70 LQR 326 at 327.
64
Although the debate continues, there seems to be little doubt that the Judicature Acts did not
effect a substantive merger of law and equity. The weight of evidence supports Lord Evershed’s
view that the so-called ‘fusion’ of law and equity was a procedural matter. The function of equity
in relation to the common law was not thereby changed.
Secondly, probably no one seriously asserts, as Lord Diplock had asserted in United Scientific
Holdings Ltd v Burnley Borough Council,207 that it has become meaningless to speak of the rules
of equity as an identifiable part of the present law. Some nineteenth century reformers wanted
a ‘singleness and oneness of jurisprudence’ and wished to overthrow ‘the distinction between
trusts and legal estates’,208 but that was antithetical to the Judicature Act, whose premise was
that there were such things, and one of whose functions was to make clear the relationship
between them. It is also contrary to what its proponents said at the time, and contrary to most
of the decisions following its enactment.
Thirdly, if by ‘fusion’ it is meant that there was a rule for resolving conflicts or variances
between the bodies of common law and equity, then that was not as a matter of substance
effected by the Judicature Act — it had occurred centuries before, no later than the resolution
of the Earl of Oxford’s case.209 Section 25(11) replaced the common injunction, but did not alter
the outcome of conflicts between legal and equitable rules.
Fourthly, if by ‘fusion’ it is meant all judges within the one court administering both common
law and equity, according to the same procedural rules, then that was achieved.
[2-380] Fusion by analogy?
What remains contestable is whether the fused administration of common law and equity has
made it possible, and appropriate, no longer to rely on historical distinctions, and for there
to be a program of change in substantive law, with common law and equity each drawing
on the other by analogy, perhaps most clearly seen in aspects of the modern restitution
project. For sensible reasons, most scholars supportive of that project invoke a muted ‘fusion
by analogy’ approach to the Judicature legislation.210 Burrows’s statement may be taken as
representative:211
… the fusion of the administration of the courts brought about by the 1873-5 Acts, while not
dictating the fusion of the substantive law, rendered this, for the first time, a realistic possibility.
Unobjectionable though that may seem, it is respectfully suggested that the proposition is
wrong. First, the proposition asserts factually that the Judicature legislation brought about, for
the first time, courts which exercised both common law and equitable jurisdiction. Secondly,
it is a proposition directed in terms to the way in which judge-made law should be changed by
judges, as opposed to statute, something on which the Judicature legislation had no bearing.
[2-385] Factually, the proposition is incorrect. It is wrong in respect of the Court of
Exchequer, whose members were of very varying ability, but who, for most of the history of that
court (for centuries prior to 1841) exercised both a common law and an equitable jurisdiction.
Sir John Romilly said of this that ‘the Judges, endowed with all the powers, and entrusted to
exercise all the functions necessary for determining actions at law and suits in equity, were
more sedulous in keeping up the distinction than any other Court in the kingdom’.212 And
it was wrong in respect of the Supreme Court of New South Wales prior to 1972. To take
one example, Sir Frederick Jordan’s famous judgment in Coroneo’s case on the nature of the
207. [1978] AC 904 at 924; [1977] 2 All ER 62 at 68.

208. C Trower, The Anomalous Condition of English Jurisprudence considered with especial reference to a proposed
fusion of Law and Equity, Hatchard, London, 1851.
209. See [1-065].
210. J Edelman, ‘A “Fusion Fallacy” Fallacy?’ (2003) 119 LQR 375 at 377.
211. A Burrows, ‘We do this at Common Law but that in Equity’ (2002) 22 OJLS 1 at 4.
212. Parliamentary Debates, House of Lords, 18 March 1870 (High Court of Justice Bill), p 187.
65
mortgagee’s power of sale determined a common law appeal.213 In short, there was nothing
flowing from the Supreme Court’s concurrent administration of law and equity prior to 1972
which stood in the way of the commencement of a program of substantive fusion by analogy.
[2-390] Moreover, why should the fact that the same judge exercises both a common law
and an equitable jurisdiction have any bearing upon legitimate judicial law-making? Perhaps it
might be said that the Judicature legislation led to a change in legal culture, which more readily
permitted a more rational, and less historical, approach to the articulation of judge-made law.
Once again, although that might sound superficially attractive, ultimately there is a heavy
burden to prove something as amorphous as a ‘change in legal culture’. But let it be assumed
that proposition is made out. In its application to a reformulation of law around a principle of
unjust enrichment, for example, the difficulty is that the rules of precedent dictate that most
of the judicial law-making that is required is to be undertaken by ultimate appellate courts,
especially at the areas of divergent common law and equitable rules and principles which are
central to the project. Rare will be the circumstances where even an intermediate court of
appeal, let alone a trial judge, will have sufficient leeway of choice.214 And of course the ultimate
courts of appeal from Chancery in the nineteenth century, and from the Supreme Court of
New South Wales until 1972, had been the House of Lords, the Privy Council and the High
Court of Australia, courts with familiarity with all branches of the law. Judicature legislation
dramatically affected the running of trials, but how precisely is it said to influence ultimate
appellate courts?
[2-395] At the level of the trial judge, it will have been seen from the earlier parts of this
chapter that the Judicature legislation in terms preserved the separate bodies of common law
and equity, and its text provides no support for a substantive merger of common law and equity.
If it is to be said that administrative fusion created conditions ripe for ‘borrowing by analogy’,
is it not somewhat condescending to the judge who is being asked to develop the law, and to
the party whose self-interest supports that development, to assert that the judicial decision
will be influenced, and perhaps influenced decisively, by the circumstance that the same judge
exercises two jurisdictions? And how is that change in legal doctrine to be explained to the
losing litigants? Of course neither common law nor equity is frozen, of course in an appropriate
case both may be developed, and that development may be informed by analogies elsewhere,
of course all four judgments in Harris v Digital Pulse Pty Ltd are examples of precisely this,215 but
none of this has anything to do with the Judicature legislation.
[2-400] In short, for all the heat and light generated by the fusion fallacy in the twentieth
century, the time has come to look forwards to the development of principle in the twenty-first.
The issues that seem most likely to matter have already been considered, in the section ‘Equity
in the Twenty-first Century’.216
213. Coroneo v Australian Provincial Assurance Assn Ltd (1935) 35 SR(NSW) 391.
214. See Farah Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209.
215. (2003) 56 NSWLR 298; (2002) 40 ACSR 487, and see [2-355].
216. See, above, ‘Equity in the Twenty-first Century’.
66

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CHAPTER 2

The Judicature System

The enactment of the Judicature Act 1873 (UK) [2-005]

Conflict or variance between law and equity [2-155]

Refusal of damages for breach of voluntary covenant [2-255]

The enactment of the Judicature Act 1873 (UK)

1. Hansard, 3rd Series, Vol 178, p 1182.

[2-020] The enactment of the Judicature Act 1873

The Judicature system

16. [1967] 2 AC 46; [1966] 3 All ER 721.

19. See [1-300].

[2-085] Thirteen examples of conflicts and variances resolved by s 25(11)

[2-100] The Judicature system in Australia

Law and equity under the Judicature system

long been achieved in favour of equity by use of its common injunction.

The fusion fallacy

[2-135] Orthodox authorities on fusion

[2-145] Reaction to criticism of fusion fallacy reasoning

were an intervening life estate, but equity could award an injunction.75

74. Daley v White [1911] QWN 1.

Examples of the fusion fallacy

76. Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82.

83. (1884) 9 App Cas 187; [1881-85] All ER Rep 242.

[2-215] Mortgagee’s power of sale

94. [1971] Ch 949; [1971] 2 All ER 633.

108. [1993] AC 295 at 315; [1993] 3 All ER 626 at 637.

120. [1924] AC 851; [1924] All ER Rep 259.

136. (1882) 21 Ch D 9; [1881-5] All ER Rep Ext 1690.

Union of Judicature’ (1982) 26 Am J Leg Hist 227.

160. [1974] 1 All ER 17; [1974] 1 WLR 113.

[2-340] Optimism for the future

178. [1959] 1 QB 426; [1959] 1 All ER 290.

[2-365] United Kingdom

procedural operation.205 That common ground is reflected by Maxton:206

207. [1978] AC 904 at 924; [1977] 2 All ER 62 at 68.

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