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1 AN INTRODUCTION TO EQUITY

1.1 The Relevance of Equity

1.5 Rights in Equity

3 4 6

1.2 What Is Equity?

1.6 Should Equity Be Assimilated Into the Common Law?

1.3 A Brief History of Equity

1.4 The Contemporary Contribution of Equity to English Law

1.1 THE RELEVANCE OF EQUITY

Adam was married to Bryony. They had three children. Adam had been having an affair with Ciara, who fell pregnant and gave birth to Dana. Adam kept his relationship with Ciara and the birth of Dana a secret from Bryony and his children, but he paid a regular monthly allowance to Ciara for the benefit of Dana. A year ago, Adam drafted his will. He decided that he wanted to leave £50,000 to each of his children, but he did not want his wife and their children to find out about Dana. He decided that he would make a gift of £50,000 in his will to Eoin, his best friend, but he also wrote a letter to Eoin stating that he should use this money for the benefit of Dana. Adam also told Ciara what he had done. Soon afterwards, Adam died. The executors of Adam’s estate gave Eoin the £50,000 bequest according to the terms of the will. Eoin was short of money, having recently lost his job, and he did not like Ciara, so he decided to keep the £50,000 for himself. He used the money to buy a car and he invested the rest in shares, which have increased in value. Ciara was very upset that Adam’s clear intent to benefit Dana had been ignored. She asked Eoin to use the money for the benefit of her daughter. Eoin waved a copy of the will in her face and told her that it clearly stated that he was to receive a gift of £50,000; it said nothing about using this money for the benefit of Dana. Ciara reminded Eoin of the letter that Adam had sent to him, which had said that the money should be used for the benefit of Dana. Eoin responded by saying that the letter did not form part of the will and so has no legal effect. Ciara has come to you for legal advice. © Oxford University Press

At the core of this problem there is a blatant unfairness. Adam, the testator, had intended some of his property to be used after his death for the benefit of Dana but without the rest of his family finding out about her existence. He trusted his best friend to abide by his wishes, but Eoin has ignored them. But what Eoin told Ciara is correct: Adam’s letter did not form part of his will and it is a fundamental requirement of English law that a

1 An Introduction to Equity document cannot take effect as a will unless it is in writing and signed by the testator in the presence of at least two witnesses. 1 The formal will could not have been clearer: Eoin was to get £50,000 and nothing was said about what he should do with the money. On the face of the will, it appears that the money belongs to Eoin and he can do whatever he wants with it. But this does not seem fair: this is not what Adam wanted. Dana, his daugh ter, does not get anything under his will, whereas Adam wanted all four of his children to benefit equally. Should Eoin be able to rely on the clear words of the statute so that the letter written by Adam has no legal effect after Adam’s death, or should Dana’s intended benefit and Adam’s expectation be protected? Should Eoin be allowed to get away with this, when he knew exactly what Adam wanted? Equity provides the answers to these questions. This simple problem encapsulates what that body of law which is called ‘Equity’ is actually about. When someone seeks to rely on their strict rights in circumstances under which they can be considered to be acting unfairly, Equity might be available to ensure a just result. In this case, Eoin’s blatant disre gard of what Adam intended, when Eoin knew what Adam wanted, means that Equity will require Eoin to hold the car and the shares for the benefit of Dana. 2 1.2 WHAT IS EQUITY? At the beginning of their legal studies, Law students soon realize that there is a fundamen tal division in the legal system between law created by the legislature and law created by judges. This judge-made law is often called the ‘common law’. But ‘Common Law’, with capital letters, is used in another, more specific sense, to indicate that body of law which was made and developed by the judges in the Common Law courts, as opposed to that body of law which was made and developed by the judges in the Chancery courts. It is this latter body of law which is called ‘Equity’. 3 Equity has certain characteristics that distinguish it from the Common Law. These characteristics derive from the historical origins of Equity. 4 From medieval times, the Common Law was a rule-based, formalistic body of law that dealt with contracts, torts, and property rights, amongst other things. Where there was no remedy provided in the Common Law courts, or where the result reached by the application of the Common Law might be considered to be harsh, it was possible to petition the King, and later the Lord Chancellor, to provide a remedy through the exercise of his discretion. It was this discretionary jurisdiction that eventually developed to become the distinct body of law called Equity. Crucially, this historical relationship between Common Law and Equity indicates the two fundamental features of Equity as a body of law. First, it exists to modify the harshness and rigidity of the Common Law; 5 so Equity is characterized by flexibil ity. Secondly, Equity was founded on the exercise of the Lord Chancellor’s discretion, by reference to his conscience, and so it is a jurisdiction that is grounded on fairness, justice, and morality. You might think that any body of law that is characterized as being flex ible and discretionary is a recipe for disaster: where are the rules, the principles, and the © Oxford University Press

1 Wills Act 1837, s. 9. See Section 5.2.2(ii), p. 129. 2 See Section 5.2.2(ii), p. 138 for further analysis of this solution by reference to the doctrine of secret trusts. 3 Worthington, Equity (2nd edn, Oxford: Oxford University Press, 2006), 3–21. 4 This is considered in more detail in Section 1.3, pp. 6–8. 5 Vauxhall Motors Ltd v Manchester Ship Canal Co Ltd [2019] UKSC 46, [2020] AC 1161, [63] (Lady Arden).

1.2 What is Equity? 5 predictability? The reality is that, over the years, Equity became much more rule-based and principled, with identifiable doctrines being recognized. This was largely because the Equity jurisdiction was transferred from the Lord Chancellor to judges, whose decisions had value as precedent for future decisions so that, increasingly, like cases could be treated in the same way. Even today, Equity is characterized by many judges and commentators as being flexible and seeking to secure the just and fair result. 6 Modern Equity is, however, founded on a framework of principles which purport to provide structure and predict ability, but their application and the award of remedies can be tempered by the exercise of judicial discretion to secure a just and fair result. 7 The operation of modern Equity is particularly well illustrated by the Supreme Court’s analysis in Vauxhall Motors Ltd v Manchester Ship Canal Co Ltd 8 of the equitable remedy of relief from forfeiture of a right. This remedy is available to prevent the defendant from forfeiting the claimant’s right in respect of an asset where the claimant has failed to comply with an obligation owed to the defendant, such as payment for the right, in circumstances where the forfeiture of the right is regarded as unconscionable, because there are other less extreme remedies for non-payment available. In that case the claim ant had inadvertently failed to pay £50 for a licence to use the defendant’s neighbouring land, as a result of which the defendant sought to terminate the licence so that the claim ant would lose the use of the land, which use was valued at over £300,000 a year. Lord Briggs, speaking for the majority of the Supreme Court, stated that the remedy of relief from forfeiture ‘plays a valuable role in preventing the unconscionable abuse of strict legal rights for purposes other than those for which they were conferred’. 9 He went on to emphasize, however, that the remedy ‘needs to be constrained with principled boundar ies, so that the admirable certainty of English law in the fields of business and property is not undermined by an uncontrolled intervention of equity in any situation regarded by a judge as unconscionable’. 10 The Supreme Court in that case was willing to expand the ambit of the equitable remedy of relief from forfeiture to include the forfeiture of pos sessory rights over land, so covering forfeiture of a licence to use the defendant’s land, whereas previously the remedy had only been available in respect of proprietary interests in land, although it was available in respect of possessory rights to chattels. This expan sion of the ambit of the remedy was defended specifically on the ground that this was a principled extension of the law which operated within clear boundaries and so was sufficiently certain. 11 But the Supreme Court was not willing to expand the jurisdiction further (to encompass any right to use property) with the control of the remedy being left simply to the exercise of the judge’s discretion, since this would undermine the cer tainty of the law. 12 Lady Arden, whilst agreeing with the result of the case, was willing to contemplate greater uncertainty in the operation of Equity as an inevitable consequence of it being founded on principles, the application of which depends on the exercise of the judge’s discretion by careful assessment of the facts and context of the case, rather than rules which are automatically applied. 13 It is this conflict between a rule-based and a discretionary-based approach to the operation of Equity which characterizes much of the contemporary discussion about the nature of the subject and which will be examined throughout this book. © Oxford University Press

6 Ibid . 7 Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21, [2018] 1 WLR 2052, [57] (Lord Briggs). 8 [2019] UKSC 46, [2020] AC 1161. 9 Ibid., [2]. 10 Ibid. 11 Ibid., [47]. 12 Ibid., [50]. 13 Ibid., [64].

1 An Introduction to Equity 1.3 A BRIEF HISTORY OF EQUITY

To understand why we have two different streams of judge-made law at Common Law and in Equity we need to go back to the Middle Ages. 14 This was the period during which judge-made law started to develop rapidly. Before this period, the law was local, being administered in local courts. Various Kings developed a legal system that was common to all of England, known as ‘common law’. It was during this period that legal principles, some of which are still relevant today, started to emerge. But the general attitude of the judges was strict and inflexible. Although there was room for judicial creativity, the judges tended to interpret the law rigidly and developed it through the elaboration of ever more complicated rules. In particular, claims brought by individual litigants had to fall within clearly established forms of action; if they did not, they would fail. Claims were initiated by writs, and cases were heard in front of a judge and jury. Claimants were bound by very strict rules of pleading and proof. This common law system was restrictive. But if no remedy was awarded, or was even available, it was possible to petition the King to seek justice in a particular case. Eventually, this function was delegated by the King to his chief minister, the Lord Chancellor. Originally, the Lord Chancellor was an ecclesiastical figure who presumably had regard to Biblical no tions of fairness and justice to determine whether a remedy should be awarded in an indi vidual case, but he would have been influenced by Greek and Roman authors too, notably the works of Aristotle and Homer. Ultimately, however, the Lord Chancellor’s decision was influenced by the exercise of his own conscience. It was through the exercise of conscience that the characteristic of Equity as a discretionary system emerged. This was famously de scribed by John Selden, a legal author writing in the seventeenth century, as follows: Equity is a roguish thing: for law we have a measure, know what to trust to; equity is ac cording to the conscience of him that is chancellor, and as that is larger or narrower, so is equity. [It is] as if they should make the standard for the measure we call a foot a chancel lor’s foot; what an uncertain measure would this be! One chancellor has a long foot, an other a short foot, a third an indifferent foot. Tis the same in the chancellor’s conscience. 15 Eventually, so many petitions came to the Chancellor that it was necessary to establish a separate court, known as the Court of Chancery, to deal with them, and it was the law that was developed and applied in this court that became known as Equity. This law was very different from that administered by the Common Law courts. It was much more discretionary, but, crucially, the judges in the court benefited from distinct powers and remedies that had been developed by the Lord Chancellors. Two of these were especially significant. First, the court could make an order against litigants, known as a subpoena, to require them to be interrogated in the court. That made it easier to determine what the fair result should be as between the parties. Second, whereas the remedy typically awarded in the Common Law courts was pecuniary to compensate for loss suffered, in Equity the Lord Chancellors had fashioned the injunction, which enabled the court to compel a party to act or to desist from acting in a particular way. 16 Failure to comply with the terms of the injunction would constitute contempt of court, for which the sanction could be imprisonment. Over the years, the distinction between the Common Law and Equity approaches to decision-making became so marked that there developed a struggle between the Common © Oxford University Press

14 Baker, Introduction to Legal History (5th edn, Oxford: Oxford University Press, 2019), 114–24. 15 Table Talk of John Selden , ed. Pollock (London: Selden Society, 1927), 43. 16 See further Section 1.4.6, p. 15.

1.3 A Brief History of Equity 7 Law and Chancery courts, with each considering that its approach should prevail over the other. This struggle came to a head in the Earl of Oxford’s case , 17 in which Equity prevailed. Lord Chancellor Ellesmere in that case recognized that Equity’s function was ‘to soften and mollify the extremity of the law’. Later, Lord Chancellor Cowper summarized the relationship between Common Law and Equity well when he said: ‘Equity is no part of the law, but a moral virtue which qualifies, moderates and reforms the rigour, hardness and edge of the law.’ 18 From the seventeenth century onwards, Equity as a body of law became more system atic. Various Lord Chancellors made their mark in the Court of Chancery in rationalizing the law. For example, in the eighteenth century Lord Nottingham developed the law of perpetuities, which still applies today, 19 and early in the nineteenth century Lord Eldon consolidated many equitable rules to make Equity much more principled. 20 Even though Equity’s function in moderating the rigours of the Common Law remained clear, the legal system that emerged in the nineteenth century was far from ideal. The dual court structure, resulting from having distinct Common Law and Chancery courts in which different bodies of law were applied, caused great inconvenience and injustice: it meant that the claimant had to choose the right court in which to pursue the claim. If the wrong court was chosen, the claimant would then have to start all over again in the other court. This resulted in lengthy delays and very high costs in pursuing litigation. This was reflected by Charles Dickens in the mid-nineteenth century, in his novel Bleak House , which starts with the following description of Equity, as practised in the courts of the time: On such an afternoon, some score of members of the High Court of Chancery bar ought to be—as here they are—mistily engaged in one of the ten thousand stages of an endless cause, tripping one another up on slippery precedents, groping knee-deep in technicalities, running their goat-hair and horse-hair warded heads against walls of words, and making a pretence of equity with serious faces, as players might. Everyone is yawning ‘for no crumb of amusement ever falls from JARNDYCE AND JARNDYCE (the cause in hand), which was squeezed dry years upon years ago’. That case involved a disputed inheritance and, as Dickens writes, ‘this scarecrow of a suit has, in course of time, become so complicated, that no man alive knows what it means’. 21 By the end of the novel, judgment is given, but the legal costs that have been incurred are so great that they consume most of the estate that was disputed in the first place. The complexity of litigation in the nineteenth century was to some extent resolved by the enactment of the Judicature Acts of 1873 and 1875. The effect of these statutes was to abolish the Common Law and Chancery courts and replace them with a single High Court, which was divided into what is now known as the Chancery Division, the Queen’s Bench Division, and the Family Division. Each Division is responsible for its own area of the law, with the Chancery Division tending to deal with the Equity business, the Queen’s Bench Division dealing with contract and tort, and the Family Division dealing with mat rimonial and other family disputes. But, because the Divisions together form a unified High Court, it should not matter to the resolution of the dispute in which Division the claimant chooses to sue. The Divisions are a matter of administrative convenience and do not have any jurisdictional significance. This was made absolutely clear by the Judicature © Oxford University Press

17 (1615) 1 Ch Rep 1. See Ibbetson, ‘The Earl of Oxford’s Case’ in Landmark Cases in Equity , ed. Mitchell and Mitchell (Oxford: Hart, 2012), ch. 1. 18 Lord Dudley v Lady Dudley (1705) Prec Ch 241, 244. 19 See Section 4.6, p. 120. 20 Gee v Pritchard (1818) 2 Swans 402, 414. 21 Dickens, Bleak House (Oxford Illustrated Dickens) (Oxford: Oxford University Press, 1988), 2, 3, 4.

1 An Introduction to Equity Act 1873, which stated that Equity, as a body of law, could be applied in any Division of the High Court. The effect of this was that remedies that derived from Common Law or Equity could be awarded, regardless of the court in which the claim was heard. 22 The Judicature Acts are highly significant in English legal history, but their significance must not be exaggerated. The effect of this legislation was to fuse the administration of Common Law and Equity, but the statutes did not fuse the two bodies of law. 23 Equity was not abolished by the Judicature Acts. Indeed, the Judicature Act 1873 recognized that Equity prevailed where there was a conflict or variance between the rules of Common Law and Equity. 24 One of the most important applications of this principle occurred almost a decade later in Walsh v Lonsdale. 25 In this case, a lease was purported to be made, but it was unenforceable at Common Law because the formalities for its creation were never completed. Since, however, the parties had agreed to enter into a lease, Equity was able to enforce the agreement and treat the lease as having been validly made. In other words, the flexibility of Equity was able to make the agreement work despite the failure to comply with the requirements of the Common Law. Equity is still sometimes described as operating to modify the rigidity of the Common Law. As Lord Briggs recently recognized in Guest v Guest : 26 One of the principal functions of equity is to put right injustice to which the law is other wise blind, by restraining the rigid application of legal rules where their implementation would be unconscionable. But, to the extent that this indicates that Equity is vague and unprincipled, it is untrue: much of Equity today is rule-based and certain; precedent is followed and there are iden tifiable principles. Lord Leggatt has summarized this well in Guest v Guest : 27 Although equity jurisdiction was originally administered according to the conscience of the Chancellor, that long ago ceased to be the case and modern equity is governed by prin ciple just as much as the law in general. As Harman LJ said in Campbell Discount Co Ltd v Bridge [ 28 ]: ‘Since the time of Lord Eldon the system of equity for good or evil has been a very precise one, and equitable jurisdiction is exercised only on well-known principles.’ Further, the characterization of the Common Law as being rigid and unyielding in the face of injustice is unconvincing, since the rapid advances of the Common Law during the twentieth century and continuing into the twenty-first century in, for example, the laws of negligence and unjust enrichment, show that it is creative and nuanced. Today, rather than seeing the Common Law and Equity as being in conflict, the better characterization is that they are complementary, working together, although sometimes (and unfortunately) contradicting each other. © Oxford University Press

1.4 THE CONTEMPORARY CONTRIBUTION OF EQUITY TO ENGLISH LAW

It is all very well to identify a body of judge-made law, give it a name, identify certain vague characteristics, and then seek to justify this by reference to constitutional, politi cal, and legal developments many hundreds of years ago. The crucial question is whether

22 See now the Senior Courts Act 1981, s. 49(2). 23 Evershed, ‘Reflections on the Fusion of Law and Equity after Seventy-Five Years’ (1954) 70 LQR 326, 341. 24 Supreme Court of Judicature Act 1873, s. 25(11). See now the Senior Courts Act 1981, s. 49(1). 25 (1882) 21 Ch D 9. 26 [2022] UKSC 27, [2022] 3 WLR 911 [4]. 27 Ibid., [161]. 28 [1961] 1 QB 455, 459. © Oxford University Press

1.4 The Contemporary Contribution of Equity to English Law 9 Equity remains relevant today. As will be illustrated throughout this book, it clearly is, both in terms of explaining long-established doctrines of private law and also as a mecha nism for providing new solutions to contemporary problems: Equity is not, as it is some times quaintly put, ‘past the age of child-bearing’. Equity can still be used to create new doctrines and to develop existing ones to provide solutions to contemporary problems that are ignored by the Common Law. The best way of illustrating the continued relevance of Equity to English law is by refer ence to particular legal subjects. As you will see, the modern contribution of Equity relates both to the identification of significant rights, duties, powers, and liabilities, but also to important remedies. 1.4.1 The law of contract Many aspects of the law of contract have been influenced by Equity. This influence has First, there are situations in which Equity operates to determine whether a party’s promise is more apparent than real. There is a variety of situations in which a party to a contract has appeared to have made a real promise, but in circumstances under which it should not be considered to be valid. The Common Law has various doctrines to identify whether a party’s consent is real, but Equity’s approach is more nuanced and flexible. So, for ex ample, the Common Law recognizes that, where a party’s promise has been induced by fraudulent misrepresentation, this will be sufficient to enable the contract to be set aside. But Equity will recognize this even where the misrepresentation was negligent or inno cent. Equity recognized a wider concept of mistake than at Common Law to vitiate a contract, although this has since been rejected. 29 (ii) Fairness of the transaction Equity is sometimes willing to examine the procedural fairness of a transaction, as regards the process by which the contract was made. If one party can be shown to have abused their relationship with the other party, or if this abuse can be presumed from the nature of the relationship, the contract may be set aside by virtue of the doctrine of undue influ ence. 30 Equity is even willing to assess the fairness of the contract. If this is considered to have involved one party unconscientiously exploiting their superior bargaining position to the detriment of the claimant who is in a much weaker position, 31 the contract may be set aside by virtue of the equitable doctrine of unconscionable conduct. 32 (iii) Supplementing the law of contract Sometimes no contract will have been formed but one party has made a promise on which the other party has relied. In such a case, the Common Law is unable to assist because the strict requirements for a contract have not been satisfied, usually through the absence of any consideration being provided by the relying party. But it is unconscionable for a party © Oxford University Press taken four main forms. (i) Validity of consent

29 Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407, [2003] QB 679. 30 Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773. 31 Lloyd’s Bank Ltd v Bundy [1975] QB 326, 337 (Lord Denning MR). 32 Hart v O’Connor [1985] AC 1000. © Oxford University Press

1 An Introduction to Equity to say something and then deny it in cases in which the other party has relied upon the rep resentation, and so Equity will prevent the representor from doing so by means of the doc trine of promissory estoppel. 33 So, for example, if the defendant owes the claimant £1,000 and offers to pay £800, which the claimant accepts, at Common Law the defendant remains liable to pay the outstanding £200. 34 However, the claimant’s promise to accept £800 in sat isfaction of the debt will mean that the claimant is estopped from relying on the strict terms of the contract and is bound by the promise in Equity, even though it is not supported by any consideration. Where a promise is not enforceable at Common Law, typically because it was informal, Equity may be willing to hold the promisor to their promise. For example, where the defendant has promised that the claimant will obtain property and the claimant relies on this promise to their detriment, Equity is able to ensure that the defendant does not renege on the promise, by means of the doctrine of proprietary estoppel. 35 (iv) Equitable remedies Various remedies have been created and developed in Equity which are particularly signif icant within the law of contract. As Lord Briggs recognized in Guest v Guest : 36 ‘Equitable remedies are generally more flexible than those afforded by the common law and they are always discretionary.’ Key examples of these remedies include: 1. Specific performance This remedy requires a party to perform a particular contractual obligation, but it is an exceptional remedy which is only available to do justice where Common Law compen satory remedies are inadequate. 37 It follows that, where the defendant has threatened to breach their contract, the usual remedy will be for the defendant to compensate the claimant for any loss suffered, rather than the defendant being required to perform their contractual obligation. 38 Even where damages for breach of contract are available, they might still be considered to be an inadequate remedy, because, for example, the loss aris ing from the breach of contract might be difficult to quantify or the claimant bargained for unique property, such as land 39 or unusual chattels, 40 which cannot be readily acquired on the open market, so that receipt of a pecuniary award would not adequately compensate the claimant for not obtaining the property. This was recognized by the House of Lords in Beswick v Beswick , 41 in which it was held that, where a defendant was bound by contract to pay a regular annuity to the claimant and the defendant failed to do so, the claimant would be able to sue the defendant for breach of contract at Common Law. But the claim ant would only be able to bring a claim for each payment once that payment was due and had not been made. In other words, the claimant could bring a claim only following each breach of the promise to make a payment and it would not be possible to obtain damages in respect of a future breach of contract. This is a significant limitation of the Common Law, but Equity can come to the claimant’s assistance by specifically enforcing the contract now and for the future, and so avoid the trouble and expense of a multiplicity of actions. 33 See Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130. 34 Foakes v Beer (1884) 9 App Cas 605. 35 Guest v Guest [2022] UKSC 27 [2022] 3 WLR 911. See Section 10.4, p. 343. 36 [2022] UKSC 27, [2022] 3 WLR 911 [5]. 37 Jones and Goodhart, Specific Performance (2nd edn, London: Butterworths, 1996); Snell’s Equity , ed. McGhee (34th edn, London: Sweet & Maxwell, 2012), ch. 17. 38 Co-operative Insurance Society v Argyll Stores (Holdings) Ltd [1998] AC 1. 39 Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444, 478. 40 Falcke v Gray (1859) 4 Dr 651. 41 [1968] AC 58. © Oxford University Press

1.4 The Contemporary Contribution of Equity to English Law 11 Even where damages are considered to be an inadequate remedy, the court will not necessarily order specific performance of the defendant’s obligations. This remains a dis cretionary remedy that is not ordered as a matter of course, but with reference to careful consideration of the facts. Specific factors may prevent an order for specific performance from being made. These factors include the poor conduct of the party seeking specific performance, so that a claimant who is not ready and willing to perform their own con tractual obligations will not be able to obtain an order for specific performance 42 —such a claimant does not have clean hands; 43 similarly if the claimant delays unreasonably in seeking the order; 44 or if the grant of specific performance would cause unnecessary hardship to either party, or to a third party. 45 The court’s only sanction for breach of an order for specific performance is punishment for contempt of court, but this is a powerful weapon which might be considered to be heavy-handed. Where the threat of punishment influences the defendant to carry on with performance of their contractual obligation, even though it might not have been in their economic interests to do so, this would be another reason why specific performance should not be awarded. 2. Rescission This is a remedy 46 that enables a voidable contract 47 to be treated as though it had never come into existence. 48 A contract will be voidable where there was a flaw in its making that impaired the consent of one of the parties to it, such as where they were induced to enter into it as a result of a misrepresentation or undue influence. Once a contract is rescinded, it is nullified and everything that has been done under it is liable to be undone, so that the parties are restored to their original pre-contractual position; there is a giving and a taking back on both sides. 49 Rescission can be effected at Common Law or in Equity depending on the type of flaw, known as a vitiating factor, which affected the making of the contract. The Common Law recognizes far fewer vitiating factors than Equity, but all the factors that are recognized at Common Law are also recognized in Equity by virtue of Equity’s concurrent jurisdiction, so that the party who wishes a contract to be rescinded may have a choice as to whether to seek rescission at Common Law or in Equity. Usually equitable rescission will be prefer able, because of the more extensive vitiating factors that are recognized, the less restrictive approach to the bars on rescission, and the remedial consequences which are more likely to be beneficial to the party who seeks rescission. Rescission at Common Law is a self-help remedy that takes effect by the act of the party seeking rescission, 50 which is usually effected by communication to the other party to the contract and without requiring a court order. 51 In Equity, rescission is a form of equitable © Oxford University Press 45 Patel v Ali [1984] Ch 283. 46 See generally McBride, ‘Rescission’ in Commercial Remedies: Resolving Controversies , ed. Virgo and Worthington (Cambridge: Cambridge University Press, 2017), ch. 7. 47 Rescission can also be used to set aside other transactions such as wills, deeds of gift and other voluntary settlements such as a disposition to trusts: Pitt v Holt [2013] UKSC 26, [2013] 2 AC 108. See Section 9.3.3, p. 296. 48 Johnson v Agnew [1980] AC 367, 393 (Lord Wilberforce). 49 Shalson v Russo [2003] EWHC 1637 (Ch), [2005] Ch 281, [122] (Rimer J). 50 Halpern v Halpern (No 2) [2006] EWHC 1728 (Comm), [2007] QB 88, [26] (Nigel Teare QC); O’Sullivan, ‘Rescission as a Self-Help Remedy: A Critical Analysis’ (2000) 59 CLJ 509. 51 Brotherton v Aseguradora Cobeguros (No 2) [2003] EWCA Civ 705, [2003] 3 All ER (Comm) 298, [27] (Mance LJ) and [45] (Buxton LJ). 42 Cornish v Brook Green Laundry [1959] 1 KB 394. 43 See Section 2.5, p. 37. 44 MEPC Ltd v Christian-Edwards [1981] AC 205.

1 An Introduction to Equity relief that is determined and effected by the court. 52 The judges have a discretion both as to whether to order rescission and, if so, as to the nature and extent of that relief, which might be subject to conditions. 53 The discretion is exercised with reference to recognized principles, so it is still correct to describe the claimant as having a right to rescission if an equitable vitiating factor is identified and none of the bars to rescission apply. 54 Before the contract is rescinded by the court, the claimant will have only an equity to rescind if one of the equitable vitiating factors applies. This gives the claimant an entitlement to apply to the court for an order to rescind the contract. 55 In addition to Equity’s concurrent jurisdiction to rescind by virtue of the grounds recognized at Common Law, there is an exclusive equitable jurisdiction of rescission in Equity where a contract has been induced by non-fraudulent misrepresentation, or undue influence, or where the defendant has procured the contract in breach of fiduciary duty, 56 or where the contract can be considered to be an unconscionable bargain. Various bars to rescission have been recognized that generally apply regardless of the ground for rescission and regardless of whether rescission occurs at Common Law or in Equity, although the bars are interpreted more restrictively in Equity than at Common Law. These include that it would not be possible to restore the defendant substantially to the position in which they were before the contract was made; 57 the claimant has waived the right to rescind and has affirmed the contract; where a substantial time has elapsed before the claimant sought to rescind the contract; 58 or where the effect of rescission would be to harm the rights of third parties. 59 3. Rectification This is an equitable remedy that enables the court to amend the terms of a legal docu ment which, by virtue of mistake, fails to reflect accurately the intention of the parties to it, 60 either the common intention of the parties or the intention of one party of which the other party knew. Rectification is a drastic equitable remedy because it enables the court to rewrite a written document. Although, being equitable, the remedy is discretionary, the equitable jurisdiction is founded on clear principles. 61 Rectification is justified on the ground that Equity will not countenance a party enforcing the terms of a written con tract when this would be against conscience because that document is inconsistent with what the parties had both intended or mutually understood each other to intend when the document was executed. 62 Being an equitable remedy, rectification is subject to the usual bars, such as delay or ac quiescence, 63 or where a bona fide purchaser for value has acquired an interest as a result of the transaction. 64 In most cases, rectification will simply ensure that the contractual © Oxford University Press 52 Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218, 1278 (Lord Blackburn); Spence v Crawford [1939] 3 All ER 271, 288 (Lord Wright). 53 Hurstanger Ltd v Wilson [2007] EWCA Civ 299, [2007] 4 All ER 1118, [48] (Tuckey LJ).

54 Spence v Crawford [1939] 3 All ER 271, 281 (Lord Thankerton). 55 Phillips v Phillips (1861) 4 De GF & J 208, 218 (Lord Westbury). 57 Spence v Crawford [1939] 3 All ER 271, 288–9 (Lord Wright). 58 Leaf v International Galleries [1950] 2 KB 86.

56 See Section 15.7.1, p. 501.

59 Tennent v The City of Glasgow Bank and Liquidators (1879) 4 App Cas 615, 621 (Earl Cairns LC). 60 FHSC Group Holdings Ltd v GLAS Trust Corporation Ltd [2019] EWCA Civ 1361, [2020] Ch 365, [6] (Leggatt LJ). 61 Daventry District Council v Daventry and District Housing Ltd [2011] EWCA Civ 1153, [2012] 1 WLR 1333, [194] (Lord Neuberger MR). 62 FHSC Group Holdings Ltd v GLAS Trust Corporation Ltd [2019] EWCA Civ 1361, [2020] Ch 365, [146] (Leggatt LJ). 63 Beale v Kyte [1907] 1 Ch 564. 64 Smith v Jones [1954] 1 WLR 1089.

1.4 The Contemporary Contribution of Equity to English Law 13 documentation reflects the intentions of the parties. But there will be some cases where rectification may have other consequences, such as extinguishing rights which would oth erwise be enjoyed by the defendant according to the face of the document or enabling the claimant to recover property which had been transferred to the defendant. This is illus trated by Day v Day , 65 where a written conveyance was rectified as a consequence of there being a mistake relating to its legal effect. Property had been settled on trust. The settlor had intended the property to be used simply as security to enable the defendant to raise funds, whereas the effect of the settlement was to give the defendant an interest in the property. The effect of rectification was to enable the settlor’s estate to recover the property which had been mistakenly transferred to the defendant. 1.4.2 Tort Equity recognizes a variety of civil wrongs, especially claims for breach of trust 66 or breach of fiduciary duty. 67 Although it is rare to describe them as torts, which are typically con sidered to be the creation of the Common Law, 68 many of these wrongs have much in common with the torts that are recognized at Common Law. For example, whereas the Common Law recognizes a tort of inducing a breach of contract, Equity recognizes the equivalent wrong of inducing a breach of trust or breach of fiduciary duty, commonly called the ‘action for dishonest assistance’. 69 Although there is an analogy with the Common Law tort, they are not identical, since the Common Law tort is one of strict li ability, whereas the equitable wrong requires proof of fault. Similarly, Equity recognizes an action for breach of confidence where the defendant is in a relationship with the claimant by virtue of which there is a duty to maintain confi dences and the defendant breaches that duty, for example by disclosing confidential infor mation to another. 70 This action has sometimes been characterized as a tort, 71 although its equitable foundations in conscience remain significant in determining the nature of the claim and the remedies which are awarded. 72 The essence of the action was correctly identified by Deane J in Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) : 73 ‘its rational basis . . . lies in the notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained.’ A duty of confi dence may relate to trade secrets, 74 national security, 75 and even personal confidences. 76 A distinct tort of misuse of private information has developed from the action of breach of confidence which operates to protect privacy rather than secret or confidential informa tion and which does not require proof of a relationship of confidence. 77

66 See Chapter 17.

67 See Chapter 15.

65 [2013] EWCA Civ 280, [2014] Ch 114.

68 Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391, 474 (Slade LJ), quoting Salmond & Heuston on Torts (19th edn, 1987), 14. 69 See Section 20.3.2, p. 677. 70 Coco v AN Clark (Engineers) Ltd [1969] RPC 41. 71 Walsh v Shanahan [2013] EWCA Civ 411, [55] (Rimer LJ). 72 Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414, 438 (Deane J); Stephens v Avery [1988] Ch 449, 455 (Sir Nicolas Browne-Wilkinson V-C). 73 (1984) 156 CLR 414, 438. See also Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] UKSC 31, [2013] 1 WLR 1556, [22] and I-Admin (Singapore) Pte Ltd v Hong Ying Ting [2020] SGCA 32; [2020] 1 SLR 1130, [51] (Singapore Court of Appeal). 74 Saltman Engineering Co Ltd v Campbell Engineering Co Ltd [1948] 65 RPC 203. 75 Attorney-General v Guardian Newspapers Ltd (No 2) [1990] AC 109. 76 Argyll v Argyll [1967] 1 Ch 302. 77 Vidal-Hall v Google Inc [2015] EWCA Civ 311, [2016] QB 1003.

1 An Introduction to Equity 1.4.3 Unjust enrichment

The law of unjust enrichment was recognized by the House of Lords in 1991, 78 but this was simply the formal recognition of a doctrine the elements of which had been developing for many hundreds of years, and this historic development remains relevant to the contem porary understanding of unjust enrichment. 79 Much of this development had occurred in the Common Law, but Equity had a significant influence on that development too. The es sence of the law of unjust enrichment is that, where the defendant has been enriched at the expense of the claimant in circumstances which fall within one of the recognized grounds of restitution, a restitutionary remedy will be awarded which is assessed by reference to the value of the enrichment received by the defendant. 80 The function of restitutionary reme dies is to correct what has been described as ‘normatively defective transfers of value’ from one party to another by restoring the parties to their pre-transfer position. 81 A transfer of value will be ‘normatively defective’ if one of the recognized grounds of restitution can be identified, such as mistake, duress, or a total failure of the basis for the transfer. These grounds were all developed by the Common Law. But Equity has influenced the interpreta tion and recognition of the grounds of restitution too. So, for example, the defendant will be liable to make restitution to the claimant of the value of any benefit received if the defen dant unduly influenced the claimant to transfer the benefit or the defendant induced the claimant to transfer the enrichment as the result of a non-fraudulent misrepresentation. This equitable jurisdiction within the law of unjust enrichment will be especially sig nificant if the defendant has unconscionably induced the claimant to make a gift to the defendant. So, for example, in Allcard v Skinner , 82 the claimant was a nun who was per suaded by the defendant, her Mother Superior, to make gifts to her. Eventually, the claim ant left the convent and, some years later, sought to recover the gifts. It was held that she would have been able to do so but for the delay in bringing the claim, on the ground that she had been unduly influenced by the defendant to make the gifts. Similarly, where the claimant has mistakenly made a gift to the defendant by deed, the defendant will be re quired to make restitution to the claimant if it would otherwise be unconscionable for the defendant to retain the gift. 83 1.4.4 Land law Equity has had a profound influence on the development of land law, both as regards the recognition of different interests in land, 84 and by protecting particular property interests. This is illustrated by three examples. The first concerns the law of mortgages. At Common Law, a mortgagee would be able to retain the mortgaged property if there was the slight est delay in the mortgagor discharging the mortgage. This was considered to be unfair in Equity and so the equity of redemption was developed as a mechanism for avoiding the © Oxford University Press 78 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548. 79 The Commissioners for Her Majesty’s Revenue and Customs v The Investment Trust Companies [2017] UKSC 29, [2018] AC 275, [40] (Lord Reed). 80 Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221, 227 (Lord Steyn). The different ques tions which need to be considered to establish unjust enrichment have been described as ‘signposts towards areas of inquiry’ rather than being ‘legal tests’: The Commissioners for Her Majesty’s Revenue and Customs v The Investment Trust Companies [2017] UKSC 29, [2018] AC 275, [41] (Lord Reed). 81 The Commissioners for Her Majesty’s Revenue and Customs v The Investment Trust Companies [2017] UKSC 29, [2018] AC 275, [42] (Lord Reed). 82 (1887) 36 Ch D 145. 83 Pitt v Holt [2013] UKSC 26, [2013] 2 AC 108. See Section 9.3.3, p. 296. 84 See Section 1.5.1, p. 19.

1.4 The Contemporary Contribution of Equity to English Law 15 harshness of the Common Law, to enable the mortgagor to redeem the mortgaged prop erty having repaid the loan to the mortgagee. Secondly, where the defendant represented to the claimant that the latter would obtain an interest in land and, in reliance on that representation, the claimant acted to their detriment, Equity would fashion a remedy to satisfy the expectations of the claimant by means of the doctrine of proprietary estoppel. Here, Equity could create an interest in property because of the defendant’s unconscio nable conduct in reneging on their representation. 85 Third, where a couple have cohabited and the property is registered in the name of one of them, if the relationship ends, Equity will provide the party who does not have registered title with an interest in the family home by means of a common intention constructive trust. 86 1.4.5 Commercial law Equity has been especially influential in the development of modern commercial law, 87 and has a growing role in the commercial sphere. 88 For example, Equity recognizes that there are certain relationships that are characterized as relationships of trust and confi dence, in which one party, known as the ‘principal’, is dependent on another, known as the ‘fiduciary’. 89 The fiduciary is expected to be loyal to the principal and to maintain the highest standards of behaviour in looking after the principal’s interests. Failure to main tain these standards will mean that the fiduciary is liable to the principal for breach of duty. A wide variety of relationships have been characterized as fiduciary, and many of them are relevant in the commercial world. So, for example, an agent owes fiduciary duties to their principal, a director owes fiduciary duties to their company, and solicitors are in a fiduciary relationship with their clients. Equity has also proved to be significant in the recognition of a variety of security interests, such as the floating charge 90 and the lien 91 to secure a debt owed to the claimant. There is, however, significant concern amongst some judges and commentators that Equity has overreached itself as regards its impact in commercial transactions and also that the need for certainty in the commercial world is being undermined by the uncer tainty of Equity. 92 This can be avoided if equitable principles are formulated with clarity and specificity. 93 1.4.6 Equitable remedies and orders Equity has had a profound influence on the development of English law by virtue of its remedial jurisdiction. One of the most significant contributions of Equity to the remedial arsenal is through the creation of the injunction to make the defendant act or refrain from acting in a particular way. 94 Today, the authority to grant injunctions is statutory, 95 whereby the court may grant an injunction where it appears to the court to be just 96 and © Oxford University Press 85 Thorner v Major [2009] UKHL 18, [2009] 1 WLR 776. See Section 10.4.3, p. 347. 86 Curran v Collins [2015] EWCA Civ 404, [2015] Fam Law 780. See Section 10.2.4(i), p. 330. 87 See Yip, ‘The Commercial Context in Trust Law’ [2016] Conv 347 and Yip and Lee, ‘The Commercialisation of Equity’ (2017) 37 LS 647 for analysis of the relevance of the commercial context to the development of trust law and Equity. 88 Briggs, ‘Equity in Business’ (2019) 135 LQR 567. 89 See further Section 15.2, p. 468. 90 Snell’s Equity (n 37), ch. 40. 91 See further Section 19.5.2, p. 642. 92 Briggs (n 88). 93 Ibid., 584. 94 See generally Snell’s Equity (n. 37), ch. 18. 95 Senior Courts Act 1981, s. 37(1). 96 AB v CD [2014] EWCA Civ 229, [2015] 1 WLR 771, [33] (Ryder LJ).

1 An Introduction to Equity convenient to do so—but the equitable origin of the order continues to explain some of its significant features. For example, this equitable jurisdiction can be engaged only where there is an inadequacy in the remedies available at Common Law; Equity here is subor dinate to the Common Law. Compensatory damages will be inadequate if no damages are available at Common Law for the infringement of the particular wrong; if the dam ages would be nominal or small; if the loss would be difficult to quantify; or if the damages would compensate only for past loss and not for loss that might arise in the future. Damages would also be an inadequate remedy if the defendant was unable to afford to pay them. The principle that damages must be inadequate before an equitable remedy will be granted was considered by the Court of Appeal in AB v CD . 97 In that case, the claimant sought an equitable order to require the defendant to honour an agreement between them. The agreement contained a clause which limited the damages which would be available for breach of contract to below what might have been available under the gen eral law. It was held that, because of the agreed clause, damages would be an inadequate remedy for breach of contract and so the order was made. At first sight this conclusion seems odd, since it appears to undermine the bargain agreed by the parties. But the court emphasized the importance of distinguishing between primary and secondary obliga tions. The agreed damages clause provided for damages as a secondary obligation follow ing breach, whereas the equitable injunction operated to enforce the primary obligation to perform the contract and sought to avoid the claimant needing to have recourse to the agreed damages clause. It followed that, if the agreed damages clause provided for less damages than would otherwise have been available for breach, damages could be consid ered to be an inadequate remedy for breach, enabling the injunction to be awarded. The creative function of Equity is especially well illustrated by the freezing order, which was created in the 1970s to deal with the problem of a defendant who seeks to hide their assets or to take them out of the jurisdiction to prevent the claimant from enforcing a judgment for damages against the defendant. To avoid this problem, Equity created a new form of injunction to freeze some or all of the defendant’s assets to prevent them from being removed from the jurisdiction or dissipated and so ensure that any judgment could be enforced against the defendant. 98 For example, this freezing injunction might be used to prevent the defendant from gaining access to money that had been credited to their bank account. The jurisdiction to grant such an injunction is now recognized by statute. 99 The injunction has proved to be of real significance to international commercial litigation in the English courts. It was described by Lord Denning extra-judicially as ‘the greatest piece of judicial law reform in my time’. 100 Another significant application of the equitable jurisdiction which has been used to support domestic and international litigation is the search order, formerly known as the Anton Piller order after one of the first cases to recognize the jurisdiction to grant an order to permit the claimant to search premises and to seize property so as to assist the claimant in establishing a claim against the defendant. 101 That case illustrates the potential signifi cance of this exercise of the equitable jurisdiction. In Anton Pillar KG v Manufacturing Process Ltd , 102 the claimant claimed that the defendant had given confidential informa tion to manufacturers that was damaging to the claimant’s business. The Court of Appeal 97 [2014] EWCA Civ 229, [2015] 1 WLR 771. 98 The first case to recognize this injunction was Nippon Yusen Kaisha v Karageogis [1975] 1 WLR 1093. 99 The Senior Courts Act 1981, s. 37(3). See also the Civil Procedure Rules 1998, r. 25.1(f). 100 Denning, The Due Process of Law (London: Butterworths, 1980), 134. 101 The very first reported case to make such an order was EMI Ltd v Pandit [1975] 1 WLR 302 (Templeman J). 102 [1976] Ch 55. © Oxford University Press

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