Define the term “Equity”. Discuss the nature of Equity. Explain the laws of Bangladesh where the principles of equity are secured its place
Equity is a Latin word which means fairness, justice. It is a system of law originating in the English chancery and comprising a settled and formal body of substantive and procedural rules and doctrines that supplement, aid, or override common and statutory law.
Equity is based on a judicial assessment of fairness as opposed to the strict and rigid rule of common law. For centuries, the common law was referred to as the law, in contrast with equity. As to the most common criticism of equity, these words of the English jurist, John Selden (1584-1654):
The typical Court of Equity (also known as Court of Chancery) decision would prevent a person from enforcing a common law court judgment. The kings delegated this special judicial review power over common law court rulings to a judge called chancellor, the court the Chancery. Later, this was too much work for a single judge and more judges were appointed, called chancellors. The term Chancellor is still in use in England today and now refers to the British minister of justice. Thus, a new branch of law developed known as equity, with their decisions eventually gaining precedence over those of the common law courts.
Definition of equity by various jurists
1. Mainland: ‘’Equity now is that body of rules administered by English Courts of justice which were if not for the operation of the judicature Acts, would be administered only by those courts which would be known as Courts of Equity.”
2. Henry Levery Ulman: “Equity is a body of rules, the primary source of which was neither custom nor written law but the imperative details of conscience and which had been set forth and developed in the Court of Chancery.”
3. Snell: “Equity ….. In its technical sense, may be defined as a portion of natural justice, which, though of such a nature as properly to admit of being judicially enforced, was, from circumstances hereafter to be noticed, omitted to be enforced by common law Courts – an omission which was supplied by the Court of Chancery.”
So,
Equity: ‘modification of common law: the system of jurisprudence that supplements common and statutory law, when those bodies of law are inadequate in the attainment of justice; justice tempered by ethics: justice applied in conformity with the law, but influenced at the same time by principles of ethics and fair play; [and] fair claim: a claim that is judged to be just and fair.’
An Equitable Trust: ‘position of obligation: the position of somebody who is expected by others to behave responsibly or honorably; something in which confidence is placed: somebody that people place confidence or faith in; law holding of another’s property: the legal holding and managing of money or property belonging to somebody else, for example, that of a minor; arrangement to manage another’s property; a legal arrangement by which one person (trustee) holds and manages money or property belonging to somebody else’.
Nature of Equity
The nature and scope of equity says that equity must preliminary mean right doing, or justice in the purely ethical meaning of that word. In England equity has acquired an entirely specialized meaning. It includes technically only certain rules which were developed in the court of chancery. The basis for its creation may have been the desire to do right thing between men according to the moral law of time, but it was always limited and has now become a fix body of principles of the common law.
It is no longer possible to claim redress simply upon moral grounds; it is necessary to show some principles recognized by the system of Equity before a remedy can be granted.
Firstly equity has enforced rights which the common law Courts failed to enforce; Secondly, equity has developed additional remedies to the common law for the enforcement of common law rights. Lastly, the procedure in the Common law Courts was defected, especially is not compelling or even allowing a defendant to give evidence and in limiting the enquiry to the action.
So, we can say that-
- The general rule is that equity follows the law and the equitable interests have in general the same incidents and attributes as have corresponding legal interests. They devolve and can be settled, mortgaged and disposed of precisely in the same way as legal interests.
- Equity follows the law and as such a legal estate or interest takes procedure over the equitable estate or interests. That is, in case of conflict between equity and law, the law prevails.
- An equitable right arises when a right vested in one person by the law should, in the view of equity, be, a matter of conscience, vested in another.
- Where equities are equal, that which is first in time will prevail.
General Principles of Equity
The subject matter of the equity can be grouped around some legal maxims which embody the general principles on which the court of chancery exercised its jurisdiction. Some of such important maxims are as follows:
(1) Equity is a correction of the general law in the part where it is defective – A right is a right only when it can be enforced by the court. A remediless right is of no consequence. Thus, in order to give effect to a right which is suitable for judicial enforcement but which could not be enforced at common law due to some technical defect, the Court of Chancery developed the maxim ‘equity will not suffer a wrong to be without a remedy.’
The Court of Chancery applied the maxim in those cases where there was a failure of justice due to the deficiencies in law, and to help the litigants in obtaining legal reliefs for the violation of legal rights by offering facilities in evidence and procedure which the common law courts did not secure. The maxim is to give an adequate relief where the one available in common law court was inadequate.
(2) Equity follows the law – Equity does not claim to override the law. Equity generally operates by recognizing the legal rule and adding some further rule, remedy or the other machinery of its own.
The Court of Chancery, which developed equitable law never wanted to give the equity an overriding effect to the common law. The jurisdiction of equity is debarred from overreaching the boundaries established by the prior course of adjudication.
(3) He who seeks equity must do equity – This maxim put a mandate on the seeker of equity that he must, in his turn, be equitable in recognizing and submitting to the right of his adversary as no one can be justified in requiring another to be conscientious without himself being so. A litigant, claiming something by way of equity, must, himself be ready and willing to grant to his opponent, that which the opponent is entitled.
A litigant cannot seek equitable remedies as a matter of right as such remedies are at the discretion of the court. The court before granting it, must enquire whether the plaintiff himself would be prepared to act as a man of conscience towards the defendants.
Incorporation of the maxim in Indian Laws
Section 38 of the Specific Relief Act provides that on adjudging recession of a contract, the Court may require the party to whom such relief in granted, to make any compensation to the other which justice may require. Section 30 and 38 also provide that on adjudging the cancellation of an instrument, the Court may require the party to whom such relief is granted, to make compensation to the other which justice may require.
An equitable condition is imposed on the beneficiary to repay the trustee, the purchase with interest and other legitimate expenses when he seeks a declaration on trust or retransfer of trust property wrongfully bought by the trustee, by section 62 of the Indian Trust Act, section 86 imposes the equitable condition of repaying the consideration paid in transfer of property pursuant to a rescindable contract.
According to section 35 of the Transfer of Property Act, that he who takes a benefit under an instrument must accept or reject the instrument as a whole. This section incorporates the ‘Doctrine of Election’ dealt under a separate head.
Section 51 of the Transfer of Property Act, provides that he who makes improvement on any immovable property believing in good faith that he is absolutely entitled thereto and in subsequently evicted there from by a person having better title, is entitled to compensation for the improvement made by him.
The Indian Contract Act says that “when consent to an agreement is caused by undue influence, the argument is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it, has received any benefit there under, upon such terms and conditions as the court may deem first.”
Further section 64 and 65 of the Indian Contract Act are also based on the doctrine ‘he who seeks equity must do equity’.
The maxim, however, does not apply when relief sought by the plaintiff and equitable right or relief secured to or sought by the defendant belongs to or originates from two entirely separate and distinct matters. Further, it is not applicable where the plaintiff seeks to enforce purely legal rights.
(4)The law helps the vigilant and the dormant – While a legal claim is not barred by any lapse of time less than the prescribed statutory period of limitation, an equitable claim, on the other hand, may be barred by delay on the part of the plaintiff seeking relief.
Delay, however, means unreasonable delay in claiming relief and an ordinary or reasonable delay. A court of equity has always refused its aid to demands where a party has slept upon his rights and acquiesced for a great length of time.
An unreasonable delay defeats equity. But such legal or equitable claims to which the statutes of limitation apply expressly or by analogy the maxim ‘delay defeats equity’ does not apply. In such cases, delay so far as it is within the statutory period will not defeat a claim.
(5)Equity delights in equality – The English Court of Chancery, incorporated into the Equity jurisprudence of English Law, the concept of acquits i.e. the notion of equality and impartiality as conceived by the Roman jurists. The equity, thus, so far as possible, puts the parties to a transaction on an equal footing, although the strict rules of law may give one party an advantage over the other. Equality have does not mean literal equality, but it means ‘proportional equality’.
Place of the maxim in Bangladesh context
The Code of Civil Procedure, section 48, provides that where assets are held by a court and more persons than one have (before the receipt of such assets) made application to the Court for the execution of decrees for the payment of money passed against the same judgment- debtor and have not obtained satisfaction thereof, the assets after deducting the costs of realization will be reliably distributed among all such persons.
Other provisions giving effect to the maxim are section 42 of the Indian Contract Act that applies the principle of tenancy-in-common, section 43, 63-70,146-147 of the Indian Contract Act and section 82 of the Transfer of Property Act, laying provisions relating to ‘contribution’.
(6)Where equities are equal , the first in time shall prevail – In the absence of a legal estate in the matter and the contest is among the equitable estate only, the rule is that the person whose equity attached to the property first will be entitled to priority over other or others e.g., if A enters into a contract for the sale of his house with B and then with C, the interest of B and C both being equitable, B will have priority over C because his attached to the property first.
This rule ‘where equities are equal, the first in time shall prevail’ is applicable in cases only when equities are equal. Therefore, if equities are unequal in the sense that equity on the side of the person otherwise entitled to priority is worse, that is, he is guilty of anything unconscionable or unfair, he would lose his priority.
Application of the maxim in Bangladesh – Section 48, 78 and 79 of the Transfer of Property Act, provides the example of this maxim.
Section 78 provides that where through the fraud, misrepresentation, gross neglect of a prior mortgagee, another person has been induced to advance money on the security of the mortgaged property the prior mortgagee shall be postponed to the subsequent mortgagee.
(7) Legal estate prevails over the equitable estate – Where there is a question of selection between equity on one hand over text of law on the other, the Court shall choose the latter. To say it differently, the person in possession of legal estate is entitled to priority over any person having merely an equitable estate in that property.
Applicability of the maxim in Bangladesh – The ‘Doctrine of Election’, Marshalling and ‘set off’, of Indian law are based on this maxim. The principle of the maxim has been incorporated in section 40 and 78 of the Transfer of Property Act, 1882. According to section 40, where a third person is entitled to the benefit of an obligation arising out of contract and annexed to the ownership of immovable property, but not amounting to an interest therein or an easement thereon, such right or obligation may be enforced against a transferee with notice thereof gratuitous transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right or obligation, nor against such property in his hands.
Further, section 78 provides that where through the fraud, misrepresentation or gross neglect of a prior mortgagee, another person has been induced to advance money on the security of the mortgaged property, to the prior mortgagee is to be postponed to the subsequent mortgagee.
Doctrine of Election
In equity the doctrine of election is founded on the rule that a person who takes under an instrument must give effect to every part of it. Thus, if a testator devises his own estate to A, and A’s estate to B, A must elect whether he will take ‘under’ or ‘against’ the will. If he elects to take under and consequently to conform to all the provisions of the will, there is no difficulty he takes the testator’s estate and gives up his own to B. If on the other hand, he elects to take against the will, i.e., retains his own estate and at the same time claims that devised to him by the testator, he is bound to make compensation out of it to B, whom he has disappointed by thus electing; Streatfield v. Streatfield.
Story’s Jurisprudence describes the doctrine as “…. the obligation imposed upon a party to choose between two inconsistent or alternative rights or claims in cases where there is a clear intention of the person from whom he devises one, that he should not enjoy both.”
The purpose of the doctrine of election is merely to carry out the intention expressed by the grantor in the instrument of grant. If one agrees to receive benefit, one must accept the reciprocal obligation also. It is choosing between rights when there is a clear intention that both shall be enjoyed. Maitland considers the doctrine of election to be based on the principles of compensation.
Remedies in Equity
Remedies at law are generally paid in some amount of money whereas equitable remedies result in a court ordering one party to do some action, e.g., an injunction.
Equitable remedies, unlike remedies at law, are granted at the sole discretion of a judge. A jury is not involved. Equitable awards also require that the person seeking equitable relief must have acted in good faith in the matter at hand (i.e., he who asks for equitable relief must come before the court “with clean hands”).
Equitable remedies are sought in those cases when money damages will not make a party “whole” in the eyes of the law, or where the other party has been unjustly enriched. Accordingly, it is not uncommon for courts to require the seller’s performance of a contract to sell land to the petitioner if the seller has tried, unlawfully or unfairly, to back out of the deal. That is because, in the eyes of the law, land is unique: no amount of money will compensate for a seller’s failure to sell a particular parcel of land he lawfully contracted to sell.
Sometimes equitable remedies are sought in cases where the strict imposition of the law would result in a great injustice to the person seeking equitable relief. The maxim that applies to this case is “Equity abhors forfeiture.”
The existence of equitable remedies is an acknowledgement by the legal system that even when a legal remedy exists; there are a few cases in which the legal remedy would produce an unjust result. These situations are relatively rare, but they do occur.
Extent of equity’s application in Bangladesh-
Besides statutory laws, courts in Bangladesh have been applying equity laws also. But their nature and extent are different from of England’s. The principal of equity in England are applied in Bangladesh subject to amendment as necessary. At present courts of Bangladesh continue applying principles of Equity law besides similar of provision. But in spite of the nature and extent being similar of England, there are some different characteristics between these two.
So, equitable principles of English court are applied in Bangladesh courts subject to necessary amendments. Conventions as prevailing laws in Bangladesh are-
Injunction
Appointment of care taker government
Specific performance of the contract
Part performance
Trust Act.
Redemption of mortgage
It is especially noticeable that the above mentioned laws are clearly inserted into provisions of-
- Specific Relief Act, 1877
- Trust Act, 1882
- Contract Act, 1872 and
- Transfer of property Act, 1882, prevailing in Bangladesh.
But all equitable principles of England are not equally and fully applicable to Bangladesh Courts. For example- Doctrine of satisfaction and Amemption of equitable principles are not recognized in Bangladesh courts. But it is true that these principles have made a great contribution in the realm— of legal development by removing inadequacy of common law, harshness and complexity.
Practices of Equity law in Bangladesh
The provision of specific relief act Regarding injunction, cancellation, rectification and recession etc. recognize the principles of equity in large scale. The guidance afforded by the foreign courts in interpreting and applying the provisions of the Indian acts is therefore of peculiarity valuable character.
The rules contained in the Indian trust Act, 1882 are substantially the same which were administered at the time English Courts of Equity under the name of justice. There are certain equitable doctrines which have been imported in the India Contract Act, and some of them relating generally to the law of contract are the doctrine of penalties and forfeitures as to time in a contract. Section 64 and 65of the Indian Contract Act in nothing but the coded form of the Maxim “he who seeks equity must do equity.” The transfer of property Act has also included many doctrines of Equity originated in the Court of Chancery in England. Apart from such doctrines section 48 and 51 of the present Transfer of Property Act are based on Equity .The English equitable doctrine of part performance has also been drawn in section 53-A of the Transfer Property Act.
Differences between Bangladesh Equity with English Equity
Although a major part of Equity law of England have made room in the all rules or provisions of Bangladesh, but it does not mean that any provision is not omitted. There are few provisions that has been omitted, such as Ademption and Satisfaction of the Equity law of England , the provisions in this regard, is not accepted by the parliament of Bangladesh. But on the other hand here there is no difference between legal and equitable rights and interests.
Rights of redemption is not equitable title in Bangladesh here it is legal title. In case of the sale of property, the purchaser under England equity is entitled to equitable title but it dost not apple in Bangladesh. The nature of Banami transaction followed in Bangladesh is totally different from that of England. To ensure proper justice, inherent power have been vested with the courts of Bangladesh under section151 on the Code of Civil Procedure.
Influence of Equity law in the constitution of Bangladesh
Article no 19(1) of the constitution of the People’s Republic of Bangladesh has been included “maxim of equity” specially. The maxim of equity is applied at the time of Administration of justice like England. Where there was no sufficient common law, Equity law acts as an auxiliary law of the common law. The maxim of equity in the court of England is applied in the court of Bangladesh subject to necessary amendment.
Conclusion
Equity and the common law represented opposing values in the English legal system. The common law was the creation of a judiciary independent from the Crown. Common-law courts believed in the strict interpretation of statutes and precedential cases. Whereas the common law provided results based on years of judicial wisdom, equity produced results based on the whim of the king’s chancellor. Common-law judges considered equity Arbitrary and a royal encroachment on the power of an independent judiciary. Renowned seventeenth-century judge John Selden called equity “a roguish thing” and noted that results in equity cases might well depend on the size of a chancellor’s foot.
Thus we have seen that enacting many statutes, the Bangladeshi legislature has substantially adopted the English rules of equity but it must also be noted that all the rules of English Equity are not applicable in Bangladesh. For example, while the English rule is that a court of equity will not compel specific performance of a continuous duty extending over many years, section 21 of the Specific Relief Act puts a definite time limit in this respect, that contract requiring performance of a continuous duty extending over more than 3 years will not be specifically enforced. Actually Bangladeshi legal system follows those rules of the English equity system which consistent with the behavior of our people, usage of our people and humanity of our people.