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FUSION VS. HARMONIZATION: THE CURRENT AND FUTURE RELATIONSHIP BETWEEN THE COMMON LAW AND EQUITY

This article discusses the relationship between the common law of property and equity. It focuses on the concepts of "fusion" which suggests the two systems are mixed and "harmonization" which suggests the two run parallel to each other. In consideration of these two schools of thought, the article concludes as to which is right and what is the foreseeable future for the two systems.

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 FUSION VS. HARMONIZATION: THE CURRENT AND FUTURE RELATIONSHIP BETWEEN THE COMMON LAW AND EQUITY

 
INTRODUCTION
?...the two streams of jurisdiction though they run in the same channel, ran side by side and do not mingle their waters. The distinction between legal and equitable claims - between legal and equitable defences - and between legal and equitable remedies - has not been broken down in any respect by recent legislation.? 
- Walter Ashburner on The Judicature Acts 1873-1875
 
?For all purposes now material, equity and common law are mingled or merged?
- Cooke P in Aquaculture Corp v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299
 
For Centuries, the relationship between equity and the common law has been described as one of support. Equity simply exists to provide a ?gloss? over the common law, to pick up where common law leaves off in the law of property. It has done this in two main ways, with the creation of the Trust and the equitable remedies, particularly, the injunction and specific performance. These tools of equity, along with the underlying principle of adjudication by conscience and the maxims of equity, led to a greater sense of fairness for those who bring an action for their rights over property in contrast to the injustices created by common law. However, over the years there has been less and less need for a distinction between common law and equity and subsequently more and more demands for the two systems to become one through ?fusion?. This thesis analyses the arguments of those that advocate such a process by looking at the justifications behind areas of property law where fusion has already occurred. In contrast to this, there are those who oppose the idea of fusion and see a fundamentalism in upholding Ashburner?s notion of two streams that do not mix.  By taking into account the arguments for these two schools of thought  it should then become clearer as to what direction the future of property law in England shall take. This projection shall be part of a concluding statement with reference to the arguments from both sides of the debate.
CHAPTER ONE 
 THE RISE OF EQUITY
The history of equity
Before the 14th Century when dramatic changes to the law governing trusts and land law in Britain began to occur, there was a system many would describe as unfavourable or unjust. There were various problems with the common law system and the adjudication of its cases on property law.  The main problems included the rigidity of the law causing injustices for individuals instead of allowing the facts of the case to influence a fair decision; the courts simply followed precedent even if the decision caused an absurdity. The remedies or remedy available for these cases were also encumbered with the rigidity of the common law. The common law only provided damages as a remedy to plaintiffs (as they were called at the time but are now called claimants). 
This led to many petitions against unjust decisions being made concerning property law cases and subsequently the power to decide the cases of these matters based on another system separate to common law was delegated to the King?s Chancellor. As an extension of the Chancellor?s role as the ?Keeper of the King?s conscience? The Chancellor could decide these cases based on ?conscience? or in other words, fairness based on the reasonable logic of the Chancellor based on the facts presented before him.  The decisions that the Chancellor made on trust and land law cases provided rules and remedies available where it was absent at common law, thus creating a new body of rules known as equity. A summary of this gradual cultivation of the law of equity can be described as follows:
 
?Such petitions to the chancellor came to be settled by the chancellor in his court of conscience, new from around 1370. This court handled matters on the basis of fairness and did not formally change the law. For matters in which the chancellor wanted to change the law, he would issue a new writ (and thus begin a new common law remedy). When he only wanted to remedy the occasional problem inevitable given rigid application of rules of law in the common law courts, he took an individual case and settled it himself. These cases tended to fall into categories and even produce new rules themselves. In the sixteenth and seventeenth centuries these rules cohered into a new set of rules: equity?. 
An example of one of these petitions that sparked the introduction of conscientious law being used to decide property law cases can be seen from the case Godwyne v. Profyt (after 1393).
The Court of Chancery was not originally intended to become a court but out of its use to decide cases it later became one, independent of the normal court hierarchy. At first, the Court of Chancery was simply known as the Chancery and was the Crown's secretarial department with the Chancellor heading the administration. However, out of necessity the administration gradually became the Court of Chancery to hear its cases. By the 15th century the Court of Chancery became a recognised judicial court.
The Chancellor could change the common law by issuing formal documents called ?writs? when deciding cases. It is through this system that the Chancery is commonly being described as an aid to common law. It answered the problem of the lack of remedies provided at common law by providing the remedies such as specific performance and injunctions. The Chancery operated separately to the common law, allowing individuals to sue at common law and then again at equity if the claimant is not satisfied with the result at law. At first, the Chancellors were not men of a legal background and had to base their decisions based on morality, equality and conscience. This changed in 1529 when a lawyer named Sir Thomas Moore was appointed as Chancellor. This marked the change of a significant change in the history of equity, as all following Chancellors after this were also lawyers. However, the Chancery suffered from several problems and was in need of reform. One of the mostly noted problems was the large backlog of cases the court had, this was caused by the slow pace at which cases were dealt with. On top of this the Chancery was incredibly costly to run compared to the other courts. Because of these problems it was suggested that the independent Court of Chancery was reformed to be fused with the common law courts or more specifically become subject to what is known as administrative fusion. Subsequently, the Chancery became a branch of the High Court as a result of the 1873 and 1875 Supreme Court of Judicature Acts. This was the first step in a process known as ?fusion? which will be used to describe the process of merging equity law and common law together. The ?writ? system and the fusing of the Chancery into the Chancery Division of the High Court are examples of how the two systems of law have already fused together. However, it remains debatable as to whether this is acceptable or even advisable. It is clear that the law of equity was created out of necessity to prevent injustice, but there may be certain necessities for fusing that equity with common law. These arguments as to why they should be fused, or why they shouldn?t, are what are to be explored to satisfy the aim of finding out what direction should be taken in regards to the relationship of the two systems. Traditionally, the two systems ran separately and this process is known as ?harmonization?, indicating that the two systems worked alongside each other in harmony. This is illustrated by Lord Ashburner?s famous quote ?the two streams of jurisdiction, though they run in the same channel, run side by side and do not mingle their waters?  . This was stated during the enactment of the 1873 and 1875 Judicature Acts. This shows that even in the face of a fusing process, there is still importance in keeping the two systems separate and therefore sparking a debate as to which, out of harmonization and fusion, is the best for modern English law.
 
 
 
 
 
WHY HAS THE LAW OF EQUITY AND THE COMMON LAW NOT BEEN FUSED ALREADY?
Legal commentator Edward Robeson Taylor discusses at length his support for a fully fused system between law and equity in his article ?The Fusion of Law and Equity?.  He argues that the failings in English law to fully fuse the common law and equity are critical for the effectiveness of one of the most important areas of law. Two things that are of utmost importance to the average person, is his life and his property. If there are three separate systems, law of property, common law and law of equity, which govern the laws concerning the individual?s property then this is a serious issue. The area of law which is of the most interest to the individual is highly complex when it should be simplified and easy for the average person to understand. He stresses that, the Roman law which was in a similar situation to the English law with two separate systems of law, managed to successfully fuse the two systems together. However, English law failed at successfully doing this also for particular reasons which legislators allowed to block equity and law from being fully incorporated. Roman law developed a law of equity based on a law made up of equal values shared between different nations. This was known as jus gentium  or ?law of nations? and by using these values common to various nations, laws of property could be applied to Roman civilians, non-civilians (subjects) and foreigners alike without a conflict of interest as to which nation?s laws were sovereign. In Roman law a praetor peregrines (legislator of some equivalence to the Chancellor) would set the ?declare? the laws of equity in advance, rather than by a case-by-case basis like the Chancery (which most likely allowed a faster development of the law). Then the laws declared by the praetor peregrines would be followed by, added to and edited by their successors, effectively creating a large collection of one of the world?s first codified laws of equity known as the ?Perpetual Edict of Hadrian?. Because this law of equity applied to more than just Roman civilians it became acknowledged as superior to the Roman civil law which only applied to the civilians. Eventually however, all Roman subjects were accepted as Roman civilians and subsequently the laws of equity became fully incorporated into the Roman civil law. However, when this eventual and relatively easy fusion of law and equity into one system is contrasted with the English law, it is clear to see that there are barriers to fusion at English law which did not exist at Roman law. This is said to be, why English law was not fully incorporated equity into common law. Taylor includes in his article that ?Pomeroy attributes the difference, firstly, to the strict construction of writs by the English judges; secondly, to their illiberal construction of the statute In Consimili Casu; thirdly, to the antagonism between the government and the church.?  Taylor believes that these are all barriers that could be avoided in preventing equity from fusing together with law. He has a clear support for one single system of law controlling property law.
 
 
 
 
 
 
CHAPTER TWO
 ?THE ?FUSION? SCHOOL OF THOUGHT?
In this chapter, the debate on the side of what can be referred to as the fusion school of thought shall be analysed with reference to evidence of current substantive fusion. By doing so, it can be seen what arguments and justifications there are for substantive fusion. It has already been discussed that the common law and equity have already been fused on an administrative level as a result of the Judicature Act. However, as will be discussed further on there is a certain false pretence (the ?fusion fallacy?) that this administrative fusion justifies fusion of law and equity on a substantive level. However, it is not simply due to this false pretence why substantive fusion already exists. There are those that purposely attempt to mingle the two systems by swapping over the application of remedies. There are times when equitable remedies are applied in a legal action and common law remedies such as damages are awarded in an equitable action, despite the adjudicator knowing full well that the Judicature Act do not provide substantive fusion. Attempts have been made to fuse the law in this way to make advancements in property law for various reasons. Indeed it can be said that ?it is when fusion is posited not on a misguided reading of the Judicature Act, or confusion as to the relationship between common law and equitable principles, but as the necessary development of the law that the debate becomes interesting?.  
 
 
?We do this at common law but that at equity?  -The importance of terminology in fusing law and equity
In this article, law lecturer Andrew Burrows argues that fusion needs to be taken more seriously by eradicating the useless terminology differences between common law and equity. In his comparison of two schools of thought which he labels ?anti-fusion? and ?fusion?, he explains that the fusion school of thought support law developing in common law by referring to reasoning in equity and vice-versa. He argues that it is self-evident this is the best way to develop the law and in order to properly fuse the two laws together via substantive fusion, law practitioners need to take fusion more seriously. 
Andrew Burrows identifies three categories of co-existence of the two systems with a main focus on the third. The first is where the two categories co-exist coherently and the terminologies used by the two systems are at the best that they can be, requiring no improvements here. The second is where the systems co-exist coherently but there are several labels that create little or no benefit and should therefore be abolished. For example, in common law a contract is voidable if it was made under duress, however in equity a contract is made voidable if made under actual undue influence, which like duress is unwanted pressure but does not quite amount to duress. This difference between the two systems is not necessary as it only differentiates the varying degrees of threats or pressure. Whether it be duress or undue influence the remedy can be to make the contract voidable.
The third category is where the common law and equity do not co-exist coherently, for example in ?the law on set-off, tracing, illegal contracts, compound interest, the restitution of money that has been paid by a third party to the defendant without the owner's consent and limitation of actions.?  Burrows argues that these can resolved with small changes in the law and uses the example of monetary remedies for civil wrongs. He asserts that although this area of law is treated differently at common law and equity, essentially it is the same and with minor changes in the law, this complexity can be eliminated.
Similar to Burrows? arguments there has been other, terminology based arguments for the support of substantive fusion. In Digital Pulse Pty Ltd v Harris (2002) 20 A.C.S.R. 487 exemplary damages were awarded as an equitable remedy by a trial judge but later repealed because damages are not a remedy provided at equity. Palmer J held that: ?the availability of exemplary damages should be ?co-existent with its rationale? and that it should make no difference whether it was claimed at common law or in equity.?  Based on this case an argument was submitted in favour of fusion based on the terminology of the word ?damages?. James Edelman argues that:
?The most simple step toward eliminating inconsistency between like cases at common law and in equity should be a recognition that the word ?damages? can only mean a money award given for a wrong. It should be used both at common law and in equity ?with the appropriate epithet, to describe not only exemplary damages but also compensatory (?equitable compensation?), restitutionary (?monetary rescission?), and disgorgement (?account of profits?) damages for wrongdoing.?  Here we can see that Edelmen, like Burrows, believes that reform of terminology should be considered in order to achieve fusion and help eliminate the inconsistency problems of property law.
 ?Tracing Assets: A Case For the Fusion of Common Law and Equity in English Law?   - Tracing Assets and substantive fusion
This article by F.O.B. Babafemi, focuses on the relationship of common law and equity in relation to the law on tracing of assets. This area of law has very distinct differences between them in terms of the requirements to uphold the right of tracing assets, which Babafemi argues is a severe problem for property law in England.
?At common law property can be traced if it has remained in its original state or is represented by other property obtained in its place by its sale or exchange. This right, however, ceases once there is an admixture of the claimant?s property with that of the wrongdoer.?  This was the precedent set by Taylor v. Plumer (1815) M. & S. 562 and bars claimants from the right of tracing assets if the property has been mixed with the wrongdoer?s property. However, this is not the case at Equity.
At Equity there is a different requirement, for the claimant to exercise the right of tracing assets there must exist a fiduciary relationship between the claimant and the defendant who holds the property. Apart from this there must be a fiduciary relationship between the claimant and a person who has taken possession of the property at one point and as a result that person has some proprietary equitable interest. Therefore at some point there must be a fiduciary relationship.
 
 
Although there has been administrative fusion as a result of the Judicature Act, the High Court are instructed, when there is a claimant making a claim of equitable right or remedy against the defendant, they must follow the decisions of the Court of Chancery before the pre-Judicature Act. This forces claimants to be subject to the constraints of having to have a fiduciary relationship in order to claim at equity.
In the past this requirement was more suitable as the fiduciary relationship requirement allowed those with equitable interest to make a claim where they would be exempt from such remedies at common law. Now that there has been administrative fusion between the two systems this requirement is less useful than it once used to be, and has actually become a detriment rather than a benefit. Because it makes it more difficult for a claim to be made for tracing, there should be substantive fusion and slight reform of this area of law in order to make the right more accessible as opposed to its current limited accessibility.
Common law remedies made available in cases of equity
There are some judicial cases where common law remedies have been made available for an action in equity. For example, in Attorney General v Observer Ltd  Lord Goff stated:
?The plaintiff's claim to restitution is usually enforced by an account of profits made by the defendant through his wrong at the plaintiff's expense. This remedy of an account is alternative to the remedy of damages, which in cases of breach of confidence is now available, despite the equitable nature of the wrong, through a beneficent interpretation of the Chancery Amendment Act 1858 (Lord Cairns' Act), and which by reason of the difficulties attending the taking of an account is often regarded as a more satisfactory remedy, at least in cases where the confidential information is of a commercial nature, and quantifiable damage may therefore have been suffered.?  Here it shows Lord Goff?s justification for the provision of the damages for breach of confidence. Despite breach of confidence being a matter of equity and damages being a common law remedy which should mostly be unavailable at equity, Lord Goff has argued that the Chancery Amendment Act 1858 (Lord Cairns' Act) justifies this provision. 
The decision in Attorney General v Observer Ltd [1990] 1 A.C. 109 was based on the earlier decision in Seager v Copydex (No 1) [1967] 2 All ER 415. In this case it was held that damages for breach of a purely equitable obligation was available based on the provisions of the Lord Cairn?s Act. In this case, Lord Denning MR acted on the basis that law and equity were successfully fused due to the introduction of the Judicature Act and he even later stated that in regards to the Judicature system that the ?fusion is complete?.  However, this can also be described as a ?fusion fallacy? as the administrative fusion of the two institutions did not provide that damages could be provided at equity through the interpretation of legislation by the courts.
Another example of common law remedies being awarded in cases of equity can be seen from the decision in Redgrave v Hurd (1881) 20 Ch D where damages were awarded for misrepresentation at equity. This was later overruled by the House of Lords decision in Smith v Chadwick (1884) 9 App Cas 187. The common law does not provide a remedy of damages for misrepresentation unless the misrepresentation was a term included in the contract. An award of damages could be claimed at tort but only for fraudulent, not innocent misrepresentation. At equity, the remedy of rescission could be awarded and the contract would be rescinded even if the misrepresentation was innocent. However, at equity the award of damages for misrepresentation is not available. In Redgrave  Jessel MR misinterpreted the Judicature Act, particularly s 25(11) where he stated:
?As regards the rescission of a contract, there was no doubt a difference between the rules of Courts of Equity and the rules of Courts of Common Law?a difference which of course has now disappeared by the operation of the Judicature Act, which makes the rules of equity prevail.? 
This statement is only true if you rely on the section 25 rule to allow equity to prevail where there are matters of conflict or variance. In this case, no such conflict or variance existed so it was wrong to rely on the Judicature Act in this way to promote a sense of fusion of the two rules to award damages at remedy. Jessel MR justified his decision in Redgrave  by arguing 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?.?  Therefore Jessel MR asserted that as there were no longer a barrier between law and equity due to the Judicature Act and equity must now prevail in matters of rescission of contracts. Because this meant, rescission is (supposedly) available at law for innocent misrepresentation, then damages should be available at equity. However, this is the result of a slippery slope argument and due to the initial misunderstanding of the Judicature Act; Jessel MR argued for a remedy to be available which could not remain an actual remedy for innocent misrepresentation.
It is not only the various remedies that lead to substantive fusion between common law and equity but it is the consideration of the different principles when adjudicating in either system. For example, the consideration of principles of equity when deciding common law cases can also be seen as a form of substantive fusion.  This can be seen from the principles considered in deciding the tort case Hedley Byrne v Heller [1964] AC 465 where they considered the case of Nocton v Lord Ashburton [1914] AC 932 a case on fiduciary duty. In Nocton the main issue of concern was the ?obligation of a fiduciary to indemnify his principal for prejudice suffered from following advice which was fraudulent in the equitable sense of the term?.  Hedley Byrne  is the leading authority on negligent misstatement at tort, and allows the tort to be actionable where the negligent misstatement was reasonably relied upon by the claimant and the person that gave the statement was an expert in the field of the statement given. This clearly resembles the fiduciary duty obligations as fiduciaries have similar qualities to an expert relied upon. Fiduciaries have a duty to work for the benefit of the beneficiary and after Hedley Byrne experts had a duty of care at tort imposed upon them (so long as the other elements of this tort are satisfied). Therefore we can see that consideration of principles in equity has had an influence on the creation of new laws at common law. Although this can be argued to be another example of the offence of ?fusion fallacy? being committed, the outcome of considering the principles from the counterpart body of rules seems to be beneficial in nature. Where common law usually fails to adequately provide protection against claimants and their property, through consideration of fiduciary duty obligations, tort law has changed and expanded to protect unsuspecting individuals from the negligent misstatement of experts. This is particularly because the exclusionary rule at tort which disallows a remedy for pure economic loss, does not apply for negligent misstatements, as it would be rare for any other form of loss to be suffered as a result. Through this type of substantive fusion, economic loss of claimants is protected against at common law which is usually a feat for the rules of equity.
In the case United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 Lord Diplock asserted that the Judicature Act had fused the law of equity together at a substantive level and contested Lord Ashburner?s ?two streams? quote on the separation of law and equity. Lord Diplock stated after quoting Lord Ashburner?s ?two streams? quote:
?My Lords, by 1977 this metaphor has in my view become both mischievous and deceptive. The innate conservatism of English lawyers may have made them slow to recognise that by the Supreme Court of Judicature Act 1873 the two systems of substantive and adjectival law formerly administered by courts of law and Courts of Chancery?were fused?. 
Lord Diplock goes on to say that there is substantive fusion in addition to administrative fusion because of the changes stemmed from the provisions ss 25(7) and 25(11) of the Judicature Act. Section 25 subsection 7 of the Judicature Act states: 
?Stipulations in contracts, as to time or otherwise, which would not before the passing of this Act have been deemed to be or to have become of the essence of such contracts in a Court of Equity, shall receive in all courts the same construction and effect as they would have heretofore received in equity.? 
Section 25 subsections 11 states:
?Generally in all matters not hereinbefore 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.? 
Lord Diplock maintains that due to these provisions, the way in which property law is enforced and cases are dealt with has changed and because of this change, the fusion as a result of the Judicature Act goes beyond that of mere administrative fusion.
Moreover, in the Australian case Waltons Stores (Imerstate) Ltd v Maher (1988) 76 ALR 513 Deane J argued that not only is the common law and equity fused, but to restrict the systems from fusing together would be detrimental to ensuring an efficient legal system. He states:
?Knowledge of the origins and development of the common law and equity and an awareness of the ordinary and continuing distinctness of controlling equitable principles are prerequisites of a full understanding of the content of a fused system of modern law. To ignore the substantive effects of the interaction of doctrines of law and equity within that fused system in which unity, rather than conflict, of principle is now to be assumed is, however, unduly to preserve the importance of past separation and continuing distinctness as a barrier against the orderly development of a simplified and unified legal system which fusion was intended to advance.?  Deane J doesn?t see fusion as simply a by-product of the confusion of the courts but as necessary to ensure the cultivation of a modern legal system for property law which he believes is a target that should be worked towards.
 
 
THE ?BOWMAKERS RULE ? ILLEGALITY AND SUBSTANTIVE FUSION
In Tinsley v Milligan  the appellant tried to rely on an illegality to enforce her equitable rights over the respondent. This led to the discussion of the principle which dictates the outcome in such circumstances. Lord Browne-Wilkinson discusses that at equity Lord Eldon developed a principle that broadly covers the rules for claiming an equitable right or interest.  In Curtis v. Perry 6 Ves. 739 Lord Eldon stated:
?The moment the purpose to defeat the policy of the law by fraudulently concealing, that this was his property, is admitted, it is very clear, he ought not to be heard in this court to say, that it is his property.?
This is what is known as Lord Eldon?s principle and its purpose is that when it becomes revealed in court that the appellant has obtained the title of the property through illegal means or for fraudulent purposes then he will be treated as not possessing the title of the property, thus barring him from several equitable proprietary interests. However the law also considered the doctrine of locus poentitentiae for matters concerning enforcing rights that contained an issue of illegality. Under this rule if the claimant repented for his illegal purpose before the purpose was carried through then he could recover his property.  This rule was followed in equity as well as at law and it meant that in situations where there were was an issue with illegality in acquiring proprietary rights that were not repented under the doctrine of locus poentitentiae, ?the effect is to render the equitable interest unenforceable in certain circumstances?  .This meant that the illegality did not completely bar the claimant from enforcing their equitable rights but it became an aggravating factor to be taken into account.
In Bowmakers Limited v Barnet Instruments Limited  the common law created a narrower version of the Lord Eldon?s principle now called the ?Bowmakers? rule. Under this rule: 
?[The Bowmakers rule]? is in essence a narrower principle of non-recovery, which allows a party to an illegality to recover by virtue of a legal or equitable property interest if he can establish his claim without relying on his own illegality?From this it follows, so the argument runs, that the court will assist the transferee in the protection of her interest provided that she does not have to rely on the illegal agreement for any purpose other than to show her title or interest in the property.? 
This rule was subsequently applied in Tinsley v Milligan   and has also been applied in Privy Council cases Singh v. Ali [1960] A.C. 167 and Palaniappa Chettiar v. Arunasalam Chettiar [1962] A.C. 294. This was a move away from Lord Eldon?s principle but with the same underlying principle that the courts do not favour equitable rights and interests being enforced where the claimant is involved in illegality. This is a single rule followed by the law and equity and Lord Browne-Wilkinson believes that a fusion of the law and equity is what lead the courts to using the Bowmakers rule instead of Lord Eldon?s ?absolute rule?. In his dictum he states:
?In my judgment to draw such distinctions between property rights enforceable at law and those which require the intervention of equity would be surprising. More than 100 years has elapsed since the administration of law and equity became fused...If the law is that a party is entitled to enforce a property right acquired under an illegal transaction, in my judgment the same rule ought to apply to any property right so acquired, whether such right is legal or equitable.? It is clear that Lord Browne-Wilkinson is an advocator of the fusion between law and equity or at least as far as property law on illegality is concerned.
  This further exemplifies the common law and equity being fused together and clearly this shows that clarity of the law and fairness is a motive. Lord Eldon?s principle was too broad of an approach and the doctrine of locus poentitentiae was too narrow. Despite the law being claimed to have been fused in this area, using the word ?fusion? to describe the resulting Bowmakers rule may be too simple of an explanation. Instead it can be said that equity developed alongside the law and the two simply met at the same place. With the same underlying principle that a claimant should not have the court enforce their proprietary rights if they have acquired that property for illegal purposes.
CHAPTER THREE
?THE ?FUSION FALLACY? AND THE ?ANTI-FUSION? SCHOOL OF THOUGHT?
Those that support the notion that law and equity should have their rules kept separate in two different systems usually quote the words of Lord Ashburner who stated in regards to law and equity that:
?the two streams of jurisdiction, though they run in the same channel, run side by side and do not mingle their waters? 
However it is sometimes forgotten that this quote is not generalised but is a response to the Judicature Act 1873-5 that fused the common law and equity courts into the Chancery Division of the High Court. Thus abolishing the costly Court of Chancery and enabling common law rules and equity rules enforced in one single court. The ?channel? referred to by Ashburner is the single court that was formed, but he adds weight to the importance that despite equity and common law decisions being adjudicated in one court the two set of rules should be kept separate. Despite Ashburner?s efforts and the efforts of several other judges as will be shown further on, there have been some confusion about the relationship of the two systems.
Although there are some commentators who support fusion, they may also be against fusion where there is fusion created through unjustifiable means. Through confusion in the law of equity and the common law, there has been substantive fusion where it is not necessarily permitted or even encouraged. To elaborate on this, it necessary to look at the explanation of the term ?fusion fallacy?, a term coined by Meagher, Gummow and Lehane in Equity, Doctrines and Remedies where they explained the fusion fallacy as: 
?[T]he administration of a remedy?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?. 
They further explained that:
?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.?  
In other words, the creation of the Judicature Act and the administrative fusion of the courts have created a false sense of confidence that this administrative fusion allows the rules of equity to influence the decisions in common law through remedies and vice versa that common law remedies and reasoning can be used to decide cases at equity. For example, a common law remedy of damages being awarded in equity for the breach of a fiduciary duty or testing the existence of a duty of care in tort by investigating if a fiduciary relationship exists between the parties. 
The Judicature Act do not create substantive fusion, therefore this substantive fusion that stems from the belief that it is caused by the Judicature Act is nothing more than a false belief. 
The Judicature Act 1873 deals with matters which conflict between common law and equity. Section 25(11) of the Judicature Act rules 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?. 
This should eliminate the temptation for common law or equity to dabble in the principles of its counterpart when making decisions. Additionally, Meagher et al have indicated as such that the s 25(11) provision exists to give the effect of keeping the two systems separate where they state: ?It will be seen immediately that s 25(11) of the Judicature Act?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.? It is because there is a provision to deal with conflicts why, it is clear that the two systems are intended to be kept separate. The s 25(11) provision is rigid, it does not allow for mixing of remedies and clearly states that in matters of conflict or variance the law of equity must, not may, be followed. The extent of discretion allowed in this area is on what actually constitutes as a ?conflict or variance? which can be dealt with through statutory interpretation and definitions formed by judges.
Anti ? Fusion Arguments
In Salt v Cooper (1880) 16 Ch D 544 at 549 Sir George Jessel MR stated:
?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 the tribunal. That was the meaning of the Act?.
 
 
Similarly to this, Sir John Coleridge who was the Attorney General at the time of the enactment of the Judicature Act stated:
?To talk of the fusion of law and equity was to talk ignorantly. Law and Equity were two things inherently distinct?all that 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?.  
 Similar conclusions have been drawn by Glass JA in O?Rourke v Hoeven [1974] 1 NSWLR 622 and by Lord Brandon in Bank of Boston Connecticut v European Grain and Shipping Ltd [1989] 1 All ER 545. Evidently, judges who understand the meaning of the Judicature Act and their purposes try to express that there is administrative fusion only but no further than this. Despite this there still continues to be decisions being made which create a cross-over of the two systems in the administration of remedies. 
However, it is not only to avoid severing the distinct differences in common law and equity which encourages anti-fusion based arguments. Lord Selborne LC, in Parliamentary discussions of the Judicature Act during its readings, also submitted his arguments for opposing fusion. He stated:
 ?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? It trusts are to continue, there must be a distinction between what we call a legal and an equitable estate??.  
 
Lord Cairns in his judgement in Pugh v Heath (1882) 7 App Cas discussed the importance of this difference in allowing the court to direct them as to which rules and remedies (common law or equity) is applicable to the case presented before them, based on whether the appellants had a legal or equitable mortgage. 
Clearly, it is not just about avoiding committing the ?offence? of fusion fallacy which gives reasons to maintain a distinct separation of the two systems. Trusts, is an important invention of Equity and has securely embedded itself into English property law. As described earlier, a man?s property is of relatively similar importance to his life. The existence of a trust or lack thereof guides the court on what action to take depending if the parties have legal interests or equitable interests. The differences in remedies depending on such facts can make a strong difference in outcome. For example, specific performance is only available at equity; if equitable interests are barred then this remedy can become subsequently barred also.  Ultimately, due to this difference in remedies which has become central to the importance of the very existence of equity law, a continuation of this difference is necessary to differentiate between rights under equity and rights under common law. The purpose of equity was to supplement the common law where it fell short in property law and caused injustices. This was done by the provision of the property law remedies unique to equity law. Fusion of the two systems through substantive fusion and subsequently fusing their remedies will shift the law back towards a time where these injustices where created by the common law shortfalls. 
It can be argued that the purpose of equity, to supplement the law were it falls short, is not a reciprocal relationship. This creates a sense of freedom for equity in the creation of its rules and application to equitable cases. If the purpose of equity is to supplement the law then the law should not try to do the same for equity. Equity is free to award equitable remedies based on a difference of principles compared to common law, usually to protect the plaintiff from loss to his property (typically monetary).   ?[Equity] ?steps in when remedies under the law is judged to be inadequate ? therefore, a court looks to Equity to award remedies as it sees just. The relationship is not reciprocal. If a dispute requires Equitable doctrines to resolve, it means that the common law was inadequate in some way; if that is the case, why is there a need to bring in common law remedies?? 
 
Furthermore, it is important to maintain a separation between the two systems mainly due to the difference in the types of remedies available. For example, innocent misrepresentation can lead to a rescission of the contract to protect the plaintiff?s property even in the event of a misrepresentation without the intent to do so. At common law, misrepresentation can only lead to the award of damages if it is included in the terms of the contract or if at tort, the misrepresentation was fraudulent. This meant that the remedies available to the plaintiff were limited at common law if the contract in question did not fall into either of these two categories. Similarly, when considering the tort of passing-off, where a trader passes off his goods or services as those of another, the common law was limited in protecting the interests of the plaintiff before the introduction of Spalding Bros v A W Gamage Ltd (1915) 32 RPC 273. Previously, the law required that the plaintiff expose fraud by the defendant but at equity, injunctions were granted even in the cases containing innocent defendants to protect the plaintiff?s property. This allowed the defendant to have a defence at law but not one at equity. This importance of protecting the property and interests of the plaintiff is a fundamental reason to oppose the amalgamation of the common law and equity. If common law remedies were more readily applied in equitable cases, then this protection given to plaintiffs will be gradually eroded away and the defendants of property law will triumph. In addition, ?if common law remedies were available for all breaches of equitable duties, we could see the state of law decline into a mish-mash of confusion. For example, exemplary damages may be awarded in cases of breach of contract, simply because the judge feels that it is appropriate to do so? 
In his article, ?The Decadence of Equity? , Roscoe Pound reviewed the fused systems of law and equity in the United States and identified four issues of concern as a result of this substantive fusion. These issues include: (1) legal rules superseding equitable rules in certain cases: (2) equitable rules, or portions of them, disappearing; (3) equitable principles becoming hard and fast and legal in their application; (4) equitable rules becoming adopted in such way as to confuse instead of supplement the legal rule.  Meagher et al used these findings to strengthen their arguments against fusion, as it is clear that substantive fusion can create several problems for property law. However, despite this, Pound still saw the advantages of fusion and saw it as part of the ?needs of the future?. 
 
 
 
 
 
 
 
 
 
 
CHAPTER FOUR
PROJECTIONS OF THE FUTURE RELATIONSHIP BETWEEN COMMON LAW AND EQUITY AND CONCLUSIVE STATEMENT
As it stands today in English law, there has already been administrative fusion of the Courts and because of this the effect of substantive fusion has stemmed from the Judicature System. Cases such as United Scientific Holdings Ltd v Burnley Borough Council and Redgrave v Hurd which use the Judicature Act to justify a crossover of applicable remedies are only the tip of the iceberg and there are many more cases and many more to come which will also use the Judicature Act to justify further substantive fusion.
There are those that already say the two systems are already fused  then there are others who say that the systems need to be fused together for the benefit of property law. These types of thinkers greatly outnumber those in the camp of Meagher et al, with the anti-fusion school of thought having ?fusion fallacy? as its main argument against fusion. It is argued that the concept of a ?fusion fallacy? is a fallacy within itself and doesn?t really exist. Furthermore, there are several various arguments for why fusion is beneficial over maintaining separate systems including: clarity of terminology, expansion of remedies available, development of the law with the use of counterpart systems as guidance. Whereas, ?fusion fallacy? being viewed as an offence, the maintenance of consistency and predictability, and the protection of the rights and interests of claimants are the main arguments against fusion and upholding ?harmonization?.
However, despite these arguments against fusion, substantive fusion still continues to occur. For this reason and the reasons stated above, it can be comfortably assumed that substantive fusion will remain to do so, particularly through the crossover of the different remedies provided. Although a ?complete? fusion is still far from complete, the process is slow on a case-by-case basis. To achieve complete substantive fusion there needs to be a new system of rules governing property law which is not merely law alone or equity, but a completely different system altogether. Meagher et al express that, ?if there was ?fusion? of substantive law, how does one in any given case discern the composition of the amalgam which by their definition is neither fish nor fowl but some new form of life?. 
There are various admittances of ways in which the two systems should be fused to be able to fuse the systems effectively. One of these methods is to ?develop the common law incorporating duties that were previously under equitable doctrines. For example, in the case of Harris [Digital Pulse Pty Ltd v Harris (2002) 20 A.C.S.R. 487]  , a court can hold that a fiduciary duty has a legal component to it, that would attract common law remedies if that duty was breached.? 
The concept of ?direct fusion? and ?indirect fusion? are also other methods discussed when considering fusion. Direct fusion, has already been discussed as it is the application of common law remedies in equity. Indirect fusion is the adaptation of equity principles to punish wrongdoers at equity but with equity?s own rules.  Direct fusion is seen as more of a hostile takeover of the law over equity through making common law remedies available in equitable cases, whereas indirect fusion is seen as a more moderate and quiet integration of law and equity. Equity, generally does not seek to punish and has not created rules based on such a principle for its many years in existence. On the other hand there has already been direct fusion as noted by the various types of common law remedies being made available at equity (for example exemplary damages for breach of confidence) . Commentators such as Andrew Burrows and James Edelman call for direct fusion by actively changing the law to make it clearer and strike down the barriers between common law and equity.
Conclusion
Ultimately, when discussing the ?fusion? debate and asking the question, where are the two systems governing English property law heading, the appropriate response would be towards a modernised, fused system of property law. After the administrative fusion of the judicature, the common law has hightailed past the ?Do Not Cross? signs and has already headed towards a destination where the common law and equity are more fused. Despite the cries of ?fusion fallacy?, the warnings of laws being made ultra vires, the courts across several jurisdictions have adopted the method of ?direct fusion? and began chipping away at the wall that separates law and equity at a case-by-case basis. The justifications for amalgamation far exceed the justifications to retain separation and so the ?fusion? process which began after the introduction of the Judicature Act is showing no signs of slowing down but speeding up. The common law constantly seeks to offer the protection to plaintiffs which it previously did not but in order to do so, the common law has to step on a few toes first in order to get there. Through the provision of statute law, the substantive fusion can be sped up even further however; this is dangerous as it could eliminate the benefits of having two systems. Therefore, for this reason a gradual case-by-case basis of substantive fusion is probably the most beneficial; fusing the laws only where it is needed to form a harmonized mesh of two rules rather than one complete system. Maitland has already submitted a statement which he seems to have prophesised correctly:
?The day will come when lawyers will cease to inquire whether a given rule be a rule of equity or a rule of common law: suffice it that it is a well-established rule administered by the High Court of Justice?. 
 
 
 
 
 
 
 
 
 
 
 
 
Cases
Aquaculture Corp v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299 1
Attorney General v Observer Ltd [1990] 1 A.C. 109 12, 13
Bank of Boston Connecticut v European Grain and Shipping Ltd [1989] 1 All ER 545 23
Bowmakers Limited v Barnet Instruments Limited 19
Curtis v. Perry 6 Ves. 739 18
Digital Pulse Pty Ltd v Harris (2002) 20 A.C.S.R. 487 10, 23, 30
Godwyne v. Profyt (after 1393) 3
Hedley Byrne v Heller [1964] AC 465 15
Nocton v Lord Ashburton [1914] AC 932 15
O?Rourke v Hoeven [1974] 1 NSWLR 622 23
Palaniappa Chettiar v. Arunasalam Chettiar [1962] A.C. 294 19
Pugh v Heath (1882) 7 App Cas 24
Redgrave v Hurd (1881) 20 Ch D 13, 14, 28
Salt v Cooper (1880) 16 Ch D 544 23
Seager v Copydex (No 1) [1967] 2 All ER 415 13
Singh v Ali [1960] A.C. 167 19
Smith v Chadwick (1884) 9 App Cas 187 13
Spalding Bros v A W Gamage Ltd (1915) 32 RPC 273 26
Taylor v. Plumer (1815) M. & S. 562 11
Tinsley v Milligan [1994] 1 A.C. 340 18, 19
United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 16, 28
Waltons Stores (Imerstate) Ltd v Maher (1988) 76 ALR 513 17
 
Table of Statutes
Chancery Amendment Act 1858 (Lord Cairns' Act)
The Supreme Court Act 1981 (UK) s 49
Supreme Court of Judicature Act 1873
 
 
 

© Shakir Hall, 2013

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