Week 2 Common Law Interaction and Fusion (Fusion fallacy debate (Key…
Common Law Interaction and Fusion
Fusion fallacy debate
there has been ongoing debate as to whether equity and the common law were fused both in administration and in their respective principles. The misrecognition and misapplication of common law and equity on the basis of this view is often referred to as a ‘fusion fallacy’
One of the enduring ways of expressing the effect of the Judicature Acts is Ashburner’s fluvial metaphor: ‘the two systems of jurisdiction, though they run in the same channel, run side by side and do not mingle their waters’
Judicature Acts focused on administrative fusion, there is a line of case law that saw the Judicature Acts as having fused principles. In the context of the law of equity, the orthodox position is that these decisions had been made under a ‘fusion fallacy’: they could not have been reached ‘under the separate systems of courts that existed before the judicature system reforms’
concept of fusion can be understood in several ways
G E Dal Pont, Equity and Trusts in Australia: Cases and Materials (LawBook Co, 6th ed, 2015) 11-2
that ‘many legal and equitable doctrines and remedies retain their unique characteristics’ and therefore there is no fusion on this level (this is subject to point 3)
where equity has recognised equivalent rights as the common law, there may be grounds for ‘doctrinal fusion’
on the basis of remedial fusion, which raises the question as to ‘whether a common law remedy ought to be available for a purely equitable right’ and vice versa.
Walsh v Lonsdale (1882) 21 Ch D 9
important case because is suggests that, in certain circumstances, ‘common law rights can be asserted even though no legal or common law right exists’.
The issue for the Court of Appeal was whether or not the common law remedy of distress was available to Lonsdale
The controversy surrounding this judgment centres on Jessel MR’s statement that the merging of equity and the common law effected by the Judicature Acts removed the difference between common law interest and equitable interests in property. This was not the effect of the judicature system. Therefore, Jessel MR’s statement is incorrect on this point
, the issue of whether specific performance applies to the facts must be resolved before the doctrine in Walsh v Lonsdale applies
Redgrave v Hurd (1881) 20 Ch D 1
concerned innocent misrepresentation
Innocent misrepresentation was recognised as a cause of action in equity, though not under the common law.
Jessel MR suggested that common law damages might be available for innocent misrepresentation.
Court of Appeal held that the defendant was entitled to have the relevant contract rescinded and his deposit on a house returned. As the defendant had not alleged fraud on the part of the plaintiff, (that is fraudulent misrepresentation which is a cause of action based in the common law) he could not recover common law damages.
To order common law damages for an exclusively equitable action would be to ‘mingle the waters’ of the common law and equity.
High court case
Chan v Cresdon Pty Ltd (1989) 168 CLR 242
considered Walsh v Lonsdale
The Court articulated two propositions
landlord’s attempt to enforce an agreement within the lease was unsuccessful
The willingness of the Court to treat the agreement as a lease in equity depends on the specific enforceability of the agreement.
Although the Court may treat an agreement for a lease as an equitable lease, the lessee does not have a lease at law in the sense of having a legal interest in the property for the term of the lease.
Developments in Australia
In Australia, it has been generally accepted that the introduction of the judicature system did not fuse two systems of principle (i.e. the common law and equity)
Much of the debate in this area has focused on the question of remedies, as opposed to the nature of rights or interests.
There are two central issues
whether equitable remedies can be ordered for common law actions
whether common law remedies, especially common law damages can be ordered for exclusively equitable causes of action
Remedial Fusion debates
. For example, with regard to damages, the award of damages may constitute an award of equitable compensation and therefore be jurisdictionally acceptable. Alternatively, damages may be awarded in addition to, or in substitution for, specific performance or injunctive relief.
Where such equitable damages are to be issued, they must satisfy the primary requirement of being in addition to, or in substitution for, specific performance or injunctive relief.
Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298
It concerned the question of common law relief for a breach of an equitable obligation. Digital Pulse operated an information technology and web design business. The company’s employees appropriated business opportunities that should have been taken up by the employer. In doing so they breached fiduciary obligations to their employer.
The New South Wales Court of Appeal reversed this decision in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298, disallowing the award of exemplary damages
. The Majority (Spigelman CJ and Heydon JA) argued that there was no precedent for awarding punitive damages in equity and to issue such an award would constitute a radical change given the fact that same was not available for breach of contract.
The court focused on the fact that the equitable jurisdiction is concerned with a balanced assessment of the conscience of the parties rather than punitive assessment and concluded that there was no example of equity providing a remedy on the sole basis of punishment, deterrence, denunciation or vindication.
Common law punitive damages could therefore be awarded in certain situations where it was clear from the circumstances that the remedial focus of both the common law and equity laid in deterrence and retribution. Equitable
Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165
the High Court of Australia concluded that an award of equitable compensation for a breach of fiduciary duty should not be reduced by taking into account the contributory negligence of the principal.
Any apportionment by contributory negligence should only apply on the facts where it arose from legislative application because the focus of contributory negligence is fundamentally different from that of the fiduciary principle.
In obiter, McHugh, Gummow, Hayne and Callinan JJ noted that, whereas ‘contributory negligence focuses on the conduct of the plaintiff, fiduciary law focuses on the defendant’s obligation to act in the plaintiff’s interests’ [at 201].