Foundations of Law summary

3a) Explain the way(s) in which the historical development of the equitable jurisdiction informs our contemporary understandings of the relationship between law and equity.
Historical development of equity
Until 14th Century, if justice was not achieved, a litigant could appeal to the king in King’s council (Curia Regis). The council possessed royal power and could thereby make order to delegate the hearing of injustice function to the Chancellor. Starting from 15th Century all petitions went directly to him. The Chancellor’s court was a court of conscience, where when the common law was not achieving justice, the Chancellor could intervene with the flexibility of royal power and ensure that justice was done.
The chancellor’s intervention was not to contradict the common law, which would have undermined royal power, but to leave the common law judgment undamaged and work behind it to the conscience of the wrongdoer. This form of equitable correction began to evolve into a separate collection of legal principles.
In early days, rules of equity were applied with considerable flexibility. In 17th and 18th centuries however, Chancery judges became more determined to follow their own decisions and those of their predecessors. Thus they completed the conversion of Equity into a system of complex rules of law, which became nearly as rigid as the Common Law itself. By 19th and 20th centuries, Equity had become a rigid and complex set of rules which had to be enforced by a completely separate set of courts from the common law courts. The Judicature Act 1873 has recognized the importance of equity and permits common law courts to administer equity, which make it no longer necessary to go to separate courts in one matter.
Implications on modern relationship between equity and common
By reference to the historical development, it is known that Equity had become complex rules of law which is as rigid as common law. This rigidity of laws extends to the modern judicature, and courts are very cautious about cases involving these two branches of law (equity and common law) and tend not to fuse them together when making the judgment (as per Heydon and Spigelman JJ in Harris digital). This justifies that equity and common law fits more to the notion of ‘strict separation of laws’ rather than the idea of merging equity and common law, despite the fact that equity should mean to be flexible when it is first invented.
The reluctance on the part of judges to merge both common law and equity together would be understandable. Equity is borne with the notion of ‘conscience’ and general perception of civil rights after a series of development during the Chancellor’s period. This gave rise to the concepts where common law provide exemplary punishment and equity only provide relief, or in some extreme situation, to the idea that equity cannot be used as a cause of action but only a defense (as in several cases in the field of contracts law regarding equity estoppels). Due to the different natures and outcome of both branches of laws, judges’ judgment may result in a precedent which would bind the future courts and create floodgate and misuse of equity.
Decades ago, litigants would file another lawsuit to the Chancellor when common law failed to do justice. Such historical fact has proven that equity and common law should be two separate sets of law. These two streams of law do not interfere each other, but work side by side to achieve justice. Common law has its flaws which in some circumstances would fail to achieve justice. And so equity acts as though it was a band-aid and remedies the deficiency. For example, trust disputes would be a type of cases whereby common law would fail to identify the problem area and thus, cannot do justice to the victim. With the presence of Equity, which is a completely different set of legal principles, would be helpful in this situation to provide fairness.
Yet, it should be noted that the enactment of Judicature Act 1873 which allowed the same courts to judge both equity and common law cases, may imply that equity and common law could be fused in the future. The idea of mixing equity in common law case in some circumstances was proposed by Mason J in Harris digital. Although this is a minority judgment, this might open a new possibility for ‘fusion fallacy’ in the future.
In conclusion, both equity and common law are about achieving the ultimate goal of the common law system – which is to achieve justice and fairness to people.

3 b) Critically evaluate the different positions on the ‘fusion fallacy’ that are discussed in Harris v Digital Pulse.
Overview of Spigelman and Heydon JJ judgment
In Harris Digital, both Spigelman and Heydon JJ had overturned the decision made by the Palmer J at trial, which is that exemplary damage (common law remedy) cannot be awarded to a breach of fiduciary duty (equity).
Both Spigelman and Heydon JJ stated that equity does not punish, as opposed to common law. Rather, equity is a remedial law which balanced the detriment suffered by the plaintiff. In addition, equity focused more on the ‘conscience’ of both parties. Heydon J held a strong view in opposition to putting common law damages in equity cases. He believes that equity and common law should be strictly separated and therefore if common law damages is permitted to be imposed upon equity cases, it would violate the principles of equity where it has only the power to relieve the victim, but not the power to prevent the commission of a crime. On the other hand, Spigelman J adopted a narrow approach by saying that it is incompatible for this case to impose exemplary damages on breach of fiduciary duty, as well as pointed out that equity and common should be separated under the Australian jurisprudence. Nonetheless, Spigelman opened the possibility of exemplary damages in other situations in equity for the reason that ‘remedial flexibility’ is a characteristic of equity jurisprudence.
Over view of Mason J judgment (dissent)
Mason J did not explicitly say that fusion fallacy is now in force in the legal system, but he did not agree with the other judges’ view in relation to the argument that common law remedy cannot be imposed on breach of fiduciary duty and stated that equity is meant to be flexible. Moreover, he also believed that equity reveals itself as a stringent remedy if the fiduciary’s default deserves a harsh punishment.
Fusion fallacy? Can equity fused with common law?
Fusion fallacy can be defined as the view that it is erroneous to conclude that the rules of common law and equity have been amalgamated. In Harris Digital, it involved both common law and equity which give rise to a perception that these two branches of law could be merged. Such notion was rejected by majority judgment.
Equity is a separated body of law as opposed to common law, which supplements, corrects and controls the rules and deficiency of the common law. Since 15th century, the concept of equity was developed and was aimed to do justice and reduce unfairness in ‘grey area’ where the common law failed to do justice. Equity was used to be exercised by the chancellor and its flexibility had undeniably brought fairness to people who could not obtain justice under the sphere of common law. Equity was then gradually developed to be a separate set of law and became as rigid as common law. These two different branches of law worked differently and deal with cases of different nature.
In the judgment of Spigelmen and Heydon JJ, they ruled that common law remedy cannot be placed on an equity case. This is not an unsound judgment, because their view was in fact more connected to the nature of equity during the later development stage of equity. That is, equity becomes a separate law, which is rigid and cannot be mixed with common law. By 19th century, equity and common law cases are heard separately in different courts, which manifest the fact that these two types of law are completely different, both in terms of principle and outcome. Heydon relied on the NSW legislation that it does not recognize award of exemplary damages for equitable wrongs, and gave a number of indications that he would not be in favour of such approach for awarding damages even if he were on the High Court. On the contrary, despite having rejected the trial judgment same as Heydon J, Spigelman was more open-minded and had opened the possibility that exemplary damages could be granted in other situations of equity cases. There is no doubt that the original purpose to have equity is to provide fairness when common law failed to do so. It is built-in with a balancing ’and ‘remedial flexibility characteristic. Flexibility of equity is vital, if it is not flexible, it may hinder equity from solving problem, which destroys the original intention of having equity. Flexibility does not necessarily mean that equity must be fused with common law, but to the very least, exemplary damages should be imposed on the appellant in this case. Mason, in dissent, had mentioned that the previous punishment is inadequate to punish the appellant and make him from not committing the crime again. His reason is clear to show the weakness of common law which occasionally cannot to do ‘adequate’ justice. The aforementioned traits and function of equity was mentioned by Mason.
Fusion of equity and common law does not equate to fallacy. Although they are two separate branches of laws, one cannot deny that to allow equity work efficiently and effectively, it is necessary to be flexible, which may involve fusing equity with common law.