Common law, equity, statute law and delegated legislation

Common law is that part of the law which is contained in the decisions of the courts, rather than being made by Parliament. Of course, an important part of the status of any system of law is that it must be binding.

Historically, the common law originated in the King’s courts. More particularly, it emerged from the practice of the King’s judges, who travelled round the country when administering the law, adopting what they considered to be the best legal rules from each area and enforcing them in other areas as well. Thus, at a time when communications were such that there could be wide variations between laws in different localities, the King’s judges used their powers to minimise those variations and enforce a single set of laws that were common to the whole country. In other words, they created the common law.

Although, as we shall see in Chapter 7, the modern version of the doctrine of binding precedent is surprisingly flexible, in earlier times the common law valued uniformity above flexibility. Consequently, there were many situations in which the common law lacked the flexibility to produce fair results in individual cases. It was to counter this tendency of the common law that the doctrines of equity emerged.

Equity originated in the office of chancery, whose head was the Lord Chancellor and whose function it was to issue the writs that were the documents used to begin actions at common law. What happened was that the office of chancery began to introduce a more flexible system of rules, which operated alongside the rules of common law but were much more geared to producing results that were consistent with what was thought to be good conscience. This parallel system came to be called equity, and in due course its operation and development came into the hands of the Lord Chancellor’s court, namely the court of chancery.

To take a straightforward example of how the relationship between the common law and equity worked (and, indeed still does work), suppose that you agree to sell me an ‘old master’ painting, but you then decide not to go through with the deal and refuse to deliver the goods even though I am ready, willing and able to pay the price we have agreed. The only remedy the common law can offer me is damages. However, in cases like this, the subject matter of the contract is unique and therefore no amount of money will enable me to go out and buy an equivalent painting. Equity, on the other hand, has developed a remedy (called specific performance) for cases like this. If I obtain an order for specific performance against you, you will be obliged to perform our contract and deliver the goods I have agreed to buy. If you fail to comply with the order, you will be in contempt of court and may be sent to prison.

A moment’s thought will show you that, since the whole purpose of having the two systems of common law and equity was to get different answers to the same question, it was inevitable that the courts of common law and chancery would find themselves at loggerheads. Returning to the example we have already considered, if you are ordered to pay me damages at common law, and you comply with the order, that will be an end of the matter. However, if equity also orders you to perform the contract, and you fail to do so, you could be imprisoned for contempt of court.

The rule that emerged to deal with conflicts of this kind was that where the two systems conflicted, equity was to prevail over the common law. Since the Judicature Acts of 1873–75, both common law and equity have been administered by the same courts; but, as this jurisdictional change did nothing to avoid conflict between the two systems, there is still a maxim to the effect that where equity and the [common] law conflict, equity prevails.

Perhaps an even more important aspect of equity’s creativity than the invention of additional remedies may be found in its invention of the law of trusts.

If trustees use trust property for their own benefit, equity will hold them to account. Indeed, one equitable remedy is known as account because it compels defendants to account for – or, in other words, pay back – their wrongful profits.

Strictly speaking, this explanation of the nature of a trust is defective, because trusts need not benefit people, but may exist for the benefit of animals and other things, such as the maintenance of buildings. However, the outer limits of the nature of trusts cannot be pursued here. All that need be said is that, historically, wealthy families found that trusts provided a very important way of managing their property. In the modern world, however, the main importance of trusts is that they provide the legal frameworks for the operation of pension funds and unit trusts.

Having seen how judge-made law as a whole contains the contrasting systems of common law and equity, we can now move on to the distinction between judge-made law as a whole, and law made either by Parliament or by someone else acting under authority conferred by Parliament.