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Common Law doesn’t recognise Equity

Equity doesn’t exist in Common Law which gave rise to the validity and fairness in which rooted in the Common Law

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The common law rigor doesn’t recognise the equitable interests of beneficiaries so after a ruling in a  common law court was made, people would present a petition to the king (OR BILL) for ‘fairness’, and relied on the Kings conscience to make fair his decision on the case. Because of the popularity of such action the King passed his decisions onto The Chancellor which gave birth to the Courts of Chancery or courts of equity (fairness).

So while, at common law, the owner of the estate in question is the legal title holder, we have an equitable claim in the Chancery to the estate in equity being that of a private claim to it not recognised by the common law of the land.

“For most of the history of the common law, there were two sets of courts, the courts of common law and of equity. Equity had a vigorous separate existence for nearly 500 years, though some attempt was made to assimilate the remedies granted by the Court of Chancery into the common law courts. Thus under the Common Law Procedure Act 1854 the common law courts were given some power to award equitable remedies and the Chancery Amendment Act 1858 gave the Chancellor the power to grant damages in addition to, or in substitution for, an injunction or a decree of specific performance. Consequently, a certain rivalry developed between the two courts and this came to a head in the Earl of Oxford’s Case (1616) 1 Rep Ch 1 in which the common law court gave a verdict in favour of one party and the Court of Equity then issued an injunction to prevent that party enforcing that judgement. The dispute was referred to the King who asked the Attorney-General to make a ruling. It was decided that in cases of conflict between common law and equity, equity was to prevail. From that time on the common law and equity worked together, side by side. The Judicature Acts 1873-75 rationalised the position. They created one system of courts by amalgamating the common law courts and the court of equity to form the Supreme Court of Judicature which would administer common law and equity. It was foreseen that a court which applied the rules both of common law and of equity would face a conflict where the common law rules would produce one result, and equity another. Section 25 of the Judicature Act 1873 provided that if there was any conflict between these principles, then equity was to prevail. However, this did not fuse the principles of common law and equity, which still remain as separate bodies of rules. “The two streams have met and still run in the same channel, but their waters do not mix” (Maitland).” Read more: Equity came not to destroy law | Law Teacher http://www.lawteacher.net/finance-law/essays/equity-came-not-to-destroy-law.php#ixzz2TYU1DSAb

Common Law and its unfairness

Due to common law not recognising its equitable interest holders. the common law ruling would easily make an individual pay a debt twice over in which we will explain:

Under the common law legal system, the legal title to property is recognized and protected by the courts. However, the common law does not recognize equitable interests in property, which are interests that are based on principles of fairness rather than strict legal rights.

A trust is a legal arrangement in which one party, the grantor, holds legal title to property for the benefit of another party, the beneficiary. The trustee is responsible for managing and administering the trust property on behalf of the beneficiary. In a trust, the grantor holds legal title to the trust property, while the beneficiary holds an equitable interest in the property.

If a trust is established, and the grantor and beneficiary enter into a contract regarding the terms of the trust, the grantor holds legal title to the trust property and the beneficiary holds an equitable interest in the property. The legal title holder has the right to control and dispose of the trust property according to the terms of the trust, while the equitable interest holder has the right to receive the benefits of the trust property.

If a dispute arises between the grantor and the beneficiary, and the grantor claims that the beneficiary has not fulfilled their obligations under the trust, the common law courts will generally only recognize the grantor’s legal title to the trust property. If the grantor takes the beneficiary to court and the court finds in favor of the grantor, the beneficiary may be required to pay the grantor twice for the same debt, once under the terms of the trust and again as a result of the court’s ruling.

This is because the common law courts do not recognize the equitable interests of beneficiaries and will only enforce the legal rights of the parties involved in a case. In order to seek relief in such a situation, the beneficiary would have to petition the courts of chancery (also known as courts of equity) for relief based on their equitable interest in the trust property.

The courts of chancery were established to provide a forum for individuals to seek relief when the common law courts were unable or unwilling to provide it. They were based on principles of fairness and justice, and were able to consider the equitable interests of parties in addition to their legal rights. As a result, the courts of chancery were able to provide a degree of fairness and balance in situations where the common law courts were unable to do so.

To put it simply

When someone borrows money to an individual, without both parties knowing, a title is split creating what is know as a trust (See post on Trust Law for an understanding of titles). All trusts have 3 elements to it, or 3 parties – they are:

  1. Grantor: the one who creates the trust and determines its terms
  2. Trustee: The one who controls the trust property and abides by the terms
  3. Beneficiary: The one who receives a benefit from the trust

After the trust has been created between the parties, titles are than split between the two or more parties into two categories:

  1. Legal Title: Whomever holds Legal title has the controlling position and can determine the way in which the trust is to be treated according to its constitution (Original promise)
  2. Equatable Title: Whoever holds Equitable title has only the right to benefit from such a trust

Now going back to the Common law, due to the common law not recognising its equitable holders (those that benefit from the trust or an agreement), those that are equitable title holders would not be recognised and therefore may lose out on ana agreemant.

Lets say you (Part A) borrowed money from party B (Mathew) and you both agree to pay Mathew back in 2 weeks. if 2 weeks came and you paid Mathew back settling your debt but for some reason Mathew decides to say you haven’t paid him his money

Under the Common law Mathew could go to a Common Law court with his claim and unfortunately the common law courts would uphold his claim due to Common Law itself not having the ability to recognise Equitable holders. (You, Party A, the one who benefited from the agreement).

In this case the Courts would agree with Mathew (Part B) and will (in short terms) make You (Party A), pay back what was owed to Mathew(Party B).

And therefore, the rise of Equity courts to be able to bring in a sense of fairness to individuals. Common Law was too rigid and in many cases had caused more harm to its defendants than good.

Questions to consider

Do you think Common Law was fair?

Would you be happy under a Common law Arrangement?

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