KALINGA UNIVERSITY NAYA RAIPUR

DEPARTMENT OF LAW
Course: LLB Sem-III
Subject: Law of Equity and Trust
Subject Code- LLB 3.3
Unit-I
INTRODUCTION:
The word “equity” is derived from the Latin word “aequitas” which means ‘leveling’. Equity is the name
that we give to the set of rules that traditionally supplemented the common law where the application of
the common law would have operated too harshly. This was done to achieve what is sometimes
referred to as natural justice, or more simply speaking, fairness.
A Court of Equity, Equity Court or Chancery Court is a court that is authorized to apply principles of
equity, as opposed to law, to cases brought before it. These courts began with petitions to the Lord
Chancellor in England.
Equity as a source of Law:
In England, equity originated in Chancery, where the Chancellor sat as the “Keeper of the King’s
conscience” to give relief to the King’s subjects in cases of hardship, by the application of the principles
of morality or conscience. But equity is not identical with morality. Rather it is synonymous to justice.
The law enacted by the legislature, is susceptible to be influenced by the policies of the state whereas
the rules and principles of justice are not dominated by such character.
They contain the principles of natural justice. The principles and rules emerging from the exercise of the
residuary power, forms an important, distinct and living source of law in the state.
Nature and Scope of Equity:
The literal meaning of equity is “right as founded on the laws of nature, fairness, justice. Equity as
defined by some of the jurists may be quoted as under:-
Aristotle, “Equity is the correction of the law where it is defective on account of its generality”.
Sir Henry Maine, “Equity means anybody of rules existing by the side of the original civil law, founded
on distinct principles and claiming incidentally to supersede the civil law by virtue of a superior sanctity
inherent in those principles”.
Henry Levy Ulman, “Equity is a body of rules, the primary source of which, was neither custom nor
written law, butthe imperative dictates of conscience and which had been set forth and developed in the
courts of Chancery.
Blackstone, “Equity, in its true and genuine meaning, is the soul and spirit of all law; positive law is
construed and natural law is made by it. In this way, equity is synonymous with justice, in that, it is the
true and sound interpretation of the rule”.
Essence is to be given more importance than the form of a legal provision and the essence of equity as
defined by the maxim is “equity will not suffer a wrong to be without a remedy”.
Equity under Roman Law:
The Praetor was the supreme judicial magistrate of the Roman Republic. Jurisdiction of the Praetor
was exercised by means of formulae or written statement. A judex or judge was required to be bound
by the terms of the formulae. The judgments or the administration of justice, according to ‘jus civile’ or
civil law and the technicalities of the proper formula or kind of action were strictly followed. Gradually
the Praetor began exercising another jurisdiction, called his extra-ordinary jurisdiction whenever an
adherence to the old jus civile would do a moral wrong. In course of time, the cases and the modes in
which he would thus interfere (based on natural law), grew more and more common and certain and
thus a body of moral principles was introduced in the Roman Law which constituted equity (aequitas)
by the side of jus civile. Strict adherence to the technicalities of law was thereby softened.
Equity under English Law:
By the middle of the thirteenth century, in England, came into existence three great courts namely, the
King’s Bench, the Common Bench or the Court of Common Pleas and the Exchequer. The law which
these courts administered was in part traditional or customary law and in part statute law and was
named as “common law”. Owing to the narrowness, extreme rigidity and formalism that is to say,
adherence to the forms and precedents, of the traditional common law courts, there used to raise cases
for which the common law gave either inadequate or no remedy.
In such peculiar cases, a petition was made to the King in Council to exercise his extraordinary judicial
powers. This trend developed as a custom of referring these petitions to the Chancellor, who was the
chief of the King’s Secretaries and has been aptly described by Maitland as “the King’s Secretary of
state for all developments” and was usually a bishop and this custom later on confirmed by an order of
Edward lllin 1349. The Chancellor used to act initially in the name of the King in Council, but in 1947 a
decree was made in his favour through which on his own authority, he exercised his jurisdiction and
such practice continued and finally led to the establishment of the court of Chancery besides the courts
of common law. It may be mentioned here that the Chancellor, in entertaining these petitions, acted
according to his judicial conscience or the principles of natural justice. The petitions were filed before
the Chancellor, the head of Chancery only in the cases where no remedy was available in common law
and the equitable jurisdiction in England grew up because the Chancellor tried to give remedies in
those cases. Up to the year 1873, there remained, in England, two separate sets of courts with two
distinct jurisdictions- the common law courts and the chancery courts. Such a double justice delivery
system was inconvenient to the litigants from practical point of view.
Therefore the Judicature Act, 1873 was passed whereby the two classes of courts were amalgamated
and reconstituted. There after all the courts acted as courts of complete jurisdiction recognizing and
enforcing all the rights and remedies irrespective of legal or equitable. By virtue of the Judicature Act of
1873 and 1875, one High Court of Judicature was constituted for administration of both law and equity.
It was provided tin general terms that in cases where there was a conflict or variance between the rules
of equity and the rules of common law with reference to the same matter, the rules of equity would
prevail over that of the common law.
Equity under the Indian Legal System:
In India, it has been provided by the Hindu Law that, “in case of a conflict between the rules of Smritis,
either may be followed, as reasoning’s on the principles of equity (Yuktivichar) shall decide the
solutions”. Hindu law has never been static and has consequently introduced equitable principles to
meet the exigencies of the time. The latter Smrikaras, namely, Narada and Brihaspati have
categorically acknowledged the importance of equitable principles. Brihaspati has said that “decisions
should not be based merely on scriptures. There would be failure of justice if the principles based on
reasons are not followed.” These principles of reasons can be called principles of equity. Kautilya also
provides that if the Dharma-text is found opposed to judicial reason, it fails and there the authority of
reason prevails. Yajnavalkya does not allow a possibility of conflict between Reason and Text. He limits
the superiority of reason or equity to a conflict between the Sastras themselves.
The Mohammedan law also partly owes its origin to the principles of equity. The principles are known
as istehsan or juristic equity. Hanafi sect of Sunnis was founded by Abu Hanifawho expounded the
principle that the rule of law based on analogy could be set aside at the option of the judge on a liberal
construction or juristic preference to meet the exigencies of a particular case.
Under the British Rule and administration of justice, the law commission for preparing a body of
substantive law for India, recommended that the judges should decide these case for which there is no
provision in law “in the manner they deem most consistent with the principles of justice, equity and
good conscience”.
The Indian legal history is silent about the double justice delivery system unlike it was in vogue in
England before 1873 for exercising equitable jurisdiction the courts of Equity as well as law as enjoined
to decide those cases for which there is no provision under the existing body of law, based on the
principles of “justice, equity and good conscience”. Even in places where there was no statutory
provision to the effect, judges could conform and act according to the principles of justice, equity and
good conscience in the absence of specific law on the point.
In India the common law doctrine of equity had traditionally been followed even after it became
independent in 1947.However, in 1963 the Specific Relief Act was passed by the Parliament following
the recommendation of the Law Commission and repealing the earlier “Specific Relief Act” of1877.
Under the 1963 Act, most equitable concepts were codified and made statutory rights, thereby ending
the discretionary role of the courts to grant equitable reliefs. The rights codified under the 1963 Act
were as under:
• Recovery of possession of immovable property (ss. 5–8)
• Specific performance of contracts (ss. 9–25)

• Rectification of Instruments (s. 26)

• Recession of Contracts (ss. 27–30)

• Cancellation of Instruments (ss. 31–33)

• Declaratory Decrees (ss. 34–35)

• Injunctions (ss. 36–42)

With this codification, the nature and tenure of the equitable reliefs available earlier have been modified
to make them statutory rights and are also required to be pleaded specifically to be enforced. Further to
the extent that these equitable reliefs have been codified into rights, they are no longer discretionary
upon the courts or as the English law has it, “Chancellor’s foot” but instead are enforceable rights
subject to the conditions under the 1963 Act being satisfied. Nonetheless, in the event of situations not
covered under the 1963 Act, the courts in India continue to exercise their inherent power in terms of
Section 151 of the Code of Civil Procedure, 1908,which applies to all civil courts in India.
There is no such inherent power with the criminal courts in India except with the High Courts in terms of
Section 482 of the Code of Criminal Procedure, 1973. Further, such inherent powers are vested in the
Apex Court in terms of Article 142of the Constitution of India, which confers wide powers on the
Supreme Court to pass orders “as is necessary for doing complete justice in any cause of matter
pending before it”.
Origin and growth of equity in England
Equity came into existence during the 13th century. At that time the courts of law had froze the types of
claims they would hear as well as the procedure governing the hearing of those claims. The range of
claims that would be heard became narrow and the processes to bring the actions to court became so
technical with jurors often being bribed. As a result of these changes plaintiffs with meritorious claims
were often denied relief.
To attempt to counteract this discrepancy remedies could be obtained by petitioning the King, who had
residual judicial power to deal with such matters. The King began delegating the function of dealing with
such petitions to the Chancellor. The post of Chancellor at this time was usually a clergyman and King’s
confessor. The Chancery evolved into a judicial body known as the Court of Chancery, until by the end
of the 15th century the judicial power of the Chancery was fully recognized. The Court of Chancery was
in effect developed as a court of conscience to counteract the defects that existed in the common law
system. The rules of equity varied from Chancellor to Chancellor until the end of the 16th century.
As equity developed it began to conflict with common law. Litigants used equity to their advantage often
seeking an equitable injunction prohibiting the enforcement of a common law order. If a common law
judgment was enforced in disobedience of a common injunction then the person enforcing the judgment
could face imprisonment.
In the Earl of Oxford’s Case (1615) the Court of Chancery issued a common injunction prohibiting the
enforcement of a common law order. The matter was referred to the Attorney General Sir Francis
Bacon when no resolution could be reached between the 2 courts. Sir Francis upheld the common
injunction and stated that
‘in the event of any conflict between the common law and the law of equity, equity would prevail’.
Lord Ellesmere pointed out in the above case why there was a need for a Chancery. He stated
‘Men’s actions are so diverse and infinite that it is impossible to make any general law which may aptly
meet with every particular and not fail in some circumstances. The office of the Chancellor is to correct
men’s consciences for frauds, breaches of trust, wrongs and oppression of what nature so ever they
be, and to soften and mollify the extremity of law.’
By the 17th century only lawyers were appointed to the office of Chancellor. From 1529 onwards when
Sir Thomas Moore was appointed as Chancellor records of proceedings in Courts of Chancery were
kept which led to the development of equitable doctrines. Prior to his appointment no such records
were kept and decisions made by the Chancellors were discretionary and erratic.
By the beginning of the 19th century the Court of Chancery had become a court of equity. In the case of
Gee v Pritchard Lord Eldon made the comment that
The doctrines of the Court of Chancery ought to be well settled, and made as uniform, almost, as those
of the common law, laying down fixed principles, but taking care that they are to be applied according to
the circumstances of each case. I cannot agree that the doctrines of this court are to be changed by
every succeeding judge. Nothing would inflict on me greater pain in quitting this place than the
recollection that I had done anything to justify the reproach that the equity of this court varies like the
Chancellor’s foot.
The primacy of equity as stated by Sir Francis was later enshrined in the Judicature Act 1873 s25 which
also joined the courts of equity and the courts of common law into one under the title of the Supreme
Court. The Supreme Court was divided into 2 forming the High Court and the court of Appeal. The High
Court was further divided under 5 different headings giving rise to the Chancery Division, King’s Bench
Division, Common Pleas Division, Exchequer Division and the Probate, Divorce and Admiralty Division.
The central feature of these reforms was that every court would now possess the power and have the
duty to decide cases in line with common law and equity. Where there is a discrepancy between the
common law solution and an equitable one the precedent of the Earl of Oxford’s case still applies
meaning that equity will be paramount in the decision making process. The Supreme Court Act 1981
s49 has embodied this principle and instructed that
(1) Every court exercising jurisdiction in England and Wales in any civil cause or mater 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 common law with reference to the same matter, the rules of equity shall
prevail.
Before the common law courts and the Court of Chancery became one common law actions could only
be commenced by means of a writ whereas actions in the Court of Chancery were commenced by an
informal bill of complaint and the process begun by the use of a subpoena. Chancery hearings were
informal and were not restricted to being able to sit at certain times as was the case with the Common
Law Courts. Hearings could even take place within the Chancellor’s house.
It would appear that common law and equity were effectively fused together by the Judicature Acts. Ash
burner’s view of this was
The two streams of jurisprudence though they run in the same channel, run side by side, and do not
mingle their waters.
Although equity and common law are fused together in that a court is entitled to award equitable
remedies or common law remedies or a combination of both within the same court there are still some
areas of law where the distinction between legal ownership and equitable ownership still thrive. One
such area is in the formation and management of trusts.
Before the introduction of equity into the legal system persons wishing to dispose of their property by
way of a trust where faced with the difficulty or passing ownership to their intended beneficiaries without
giving them the property outright. Under the common law system the transfer of the property into the
hands of the trustees’ could only be read as giving full title to the trustees and no account could be
given for the concerns of the beneficiaries. The whole process of the trust system is firmly rooted in
equity with the trustees holding the land on trust for the beneficiaries.
In order that the trustees can invest or deal with any of the property the ownership of the property
transfers to them under common law rulings and equity creates a beneficial interest for the beneficiaries
to ensure that when the beneficiaries reach the age of maturity as dictated by the trust document that
the full title of the property becomes vested in them. The essential element that the trustees have to be
aware of is that despite the fact that they have the power to invest or sell trust property that they are in
fact acting on behalf of the beneficiaries. Trustees who make unwise investments are breach the trust
can and often are made to compensate the beneficiaries for any losses incurred by their actions. In
these matters equity will usually favour the beneficiaries.
Although there is an apparent fusion of common law and equity there is still a difference in the way in
which common law remedies and equitable ones are administered. Common law remedies are
available as of right whilst equitable remedies are discretionary and awarded at the will of the court.
Equitable remedies can also be affected by the behavior and position of the party claiming the remedy.
As the courts are allowed to take into account the conduct of the party seeking the award they can
decide not to award an equitable remedy where it considers their conduct should deprive them of such
an award.
Problems arose in the case of Tinsley v Milligan where the question raise was whether the plaintiff
could assert a claim to an equitable interest in land by way of a resulting trust where she had acted
illegally. The maxim as set down by equity that a person seeking to assert an equitable entitlement
must come with clean hands prevented the plaintiff from asserting her right. Under common law a
plaintiff would be entitled to assert their common law right to ownership provided that they did not need
to rely on their illegal conduct to establish title. As the plaintiff in this case did not need to rely on their
illegal conduct to establish title her claim succeeded.
To assist the court in making equitable decisions certain maxis of equity have been established. These
are not binding rules and do not provide guidance in every situation. They are intended as illustrations
based on principles established in recurrent themes.
One of the maxims of equity is that it will not suffer a wrong without a remedy. This is of particular
importance in trust law, where without the influence of equity the beneficiaries may lose the benefit
assigned to them by way of the trust document. Another maxim was that equity follows the law,
although as has been previously stated statute favours equity as prevailing when the 2 are at a
variance to each other.
Further maxims exist in the following circumstances. Where the equities of the parties are equal one
with a legal right and the other an equitable right the common law rules will prevail. Where both only
possess equitable rights the first in time right to the item prevails.
It was also laid down that he who seeks equity must do equity. This means that the person seeking the
equitable relief must act fairly towards the person he is seeking the relief from. As mentioned above
anyone coming to equity must come with clean hands. Any illegality or inequitable conduct could effect
their entitlement to an equitable remedy.
Failing to act swiftly could also prevent a plaintiff from asserting his equitable rights. Where the division
of property is not clear equity would dictate that the property is divided in equal shares. When making
equitable decisions the court will look to the intent of the parties and will regard that as done that which
ought to have been done. There is an imputed intention in equity to fulfill obligations. Decisions made
on the basis of equity are in personam which enforces decisions by means of a personal order against
the defendant.
The types of equitable remedies that can be awarded by the courts include injunctions, specific
performance, rectification and rescission. With an injunction the courts can either stop the party from
doing something or require them to do something. An order of specific performance requires one of the
parties to a contractual agreement to complete their part of the contract. Usually awards of this kind
relate to specific articles such as land and will not be awarded where the court cannot supervise the
operation of the order. Rectification is concerned with the alteration of contractual documents. An order
for rescission is issued with the intent of returning the parties in a contractual agreement to the position
they were in before having entered into the agreement. This can be distinguished from the common law
award of damages. In an award for damages the intention of the court is to put the parties in the place
they would have been in had the contract been completed.
It can be seen from the above that equity was introduced to fill the void that was lacking in common
law. Under the old system of common law from the 13th century until the courts combined there was
no leeway for the courts to order specific performance or injunctions. The common law system
functioned merely on the awarding of damages and so therefore if the plaintiff wanted to order
someone to do something or to stop doing something but could not show that any specific monetary
loss would result from the action of the defendant then the common law courts did not have the power
to deal with such issues.
Although equitable remedies are awarded without reliance on legislation for their enforcement there are
many ways in which the aims of equitable remedies mirror those of the common law. Under common
law the aim is to compensate the plaintiff for any financial loss tat they have incurred as a result of a
wrong being done to them. Under equity the courts are addressing the situations where monetary
compensation may not be appropriate. An injunction may prevent a future monetary loss for the
plaintiff. An example of this would be an injunction preventing someone from building a factory on land
adjacent to that of the plaintiff. If the factory is allowed to be built the knock on effect could result in a
depreciation of the value of the property of the plaintiff. Similarly an injunction against a trustee
preventing him from dealing with the assets of the trust in a certain way might prevent the beneficiaries
from a financial loss on their inheritance.
It could be viewed in some circumstances that equitable remedies may prevent the need for a future
claim under common law. This would particularly be the case in the issuing of an injunction as
mentioned in the paragraph above. Similarly an order for specific performance could prevent a claim in
the future for breach of contract. Frequently the plaintiff would prefer that the contract was carried out
as originally agreed rather than be awarded damages for the non performance of the contract. This
could well be the case where the order of specific performance centres around building work being
undertaken on the plaintiff’s property. Although damages would compensate the plaintiff for the work
not being completed the plaintiff would still need to employ someone else to complete the contract.
Although the principles of equitable remedies can be widely different to common law remedies they are
not totally incompatible with common law remedies. One of the common aims of both is a restoration of
natural justice either by way of monetary compensation, where no other method would suffice, or by
way of equitable remedies or occasionally by the use of both. The conclusion can therefore be drawn
that equity and common law remedies are working together to establish natural justice for the plaintiff
and that although they have different remedies for achieving that aim the end result is that the plaintiff
has a greater chance of getting the award best suited to their situation.
On occasions it may seem that they are working against each other. This might particularly be the case
in trust law where the equitable interests of the beneficiaries supersede that of the trustees. This is
more the case in the instance of constructive trusts that have been created as the result of mutual wills.
In such cases as these the survivor of the deceased might only have a life interest in their own property
as they have agreed in the mutual will to hold the property on trust for the beneficiaries. However, if
equity did not intervene in this area then the surviving testator of a mutual will could alter their will upon
the death of their partner and totally disinherit the beneficiaries that the deceased testator specifically
wanted to inherit.
Despite the arguments against equity and the problems caused by the insertion into the Supreme Court Act
1981 that equity should prevail if the two areas of law are in conflict with each other, it is very rare that the
judges are placed in such a position, especially since they now have the power to decide issues under either
common law rules or equity. From the point of view of plaintiffs the inclusion of equity is a good thing as it gives
them a greater likelihood of achieving their desired outcome.