Equity is the body of principles which has evolved progressively to mitigate the severity sometimes occasioned by the rigid application of the rules of the common law. Its origins lay in the exercise by the Chancellor of the residual discretionary power of the King to do justice among his subjects in circumstances in which, for one reason or another, justice could not be obtained in a common law court. Several centuries earlier, Aristotle conceived equity as “a rectification of law where the law falls short by reason of its universality” (Aristotle, Nicomachean Ethics, Book V, ch 10) and, indeed, one of the perceived sources of inadequacy and injustice in the common law was the generality of the law’s rules, and the law’s inability to mould its rules to fit the circumstances of the particular case: see Patricia Loughlan, “The Historical Role of the Equitable Jurisdiction” in The Principles of Equity (Patrick Parkinson ed) (Lawbook Co, 2nd Ed, 2003) ch 1 (“Loughlan’s chapter”) at p 6. Thus, the equitable jurisdiction functioned to prevent, correct and sometimes reverse the individual failures of justice occasioned by a rule-dependent and rule-governed decision-making forum. As Lord Ellesmere aptly observed in the Earl of Oxford’s Case (1615) 1 Chan Rep 1 at 6; 21 ER 485 at 486:

The Cause why there is a Chancery is, for that Mens Actions are so divers[e] and infinite, [t]hat it is impossible to make any general Law which may aptly meet with every particular Act, and not fail in some Circumstances.

In early Chancery decisions, therefore, all the circumstances of individual cases were considered and adjudication was contextual and pragmatic. There was no abstracting methodology, no doctrine of strict binding precedent, and, accordingly, no commitment to the values of continuity, consistency, uniformity and predictability which support and justify that doctrine at common law: see Loughlan’s chapter at p 8. Over time, however, equity has gradually metamorphosised from a jurisdiction of fluid, pragmatic, conscience-based decision making to one founded primarily upon the application of authoritative rules, maxims, principles and precedents. This was a natural judicial reaction to the arbitrariness of early instances of the exercise of equitable jurisdiction which attempted to make a virtue out of inconsistency. Indeed, in more relevant times, for example, in Campbell Discount Co Ltd v Bridge [1961] 1 QB 445, Harman LJ sagely cautioned against applying equitable principles as they used to be in the early Chancery decisions. He remarked at 459:

Equitable principles are, I think, perhaps rather too often bandied about in common law courts as though the Chancellor still had only the length of his own foot to measure when coming to a conclusion. 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.

Today, paradoxically, the creativity of equity has become progressively circumscribed and, to some extent, calcified. In fact, there has even been cause for academic misgivings on how the rules that equity established for the application of its principles had become so fixed that a “rigor aequitatis” had developed and “equity itself displayed the very defect that it was designed to remedy”: see Jill E Martin, Modern Equity (Sweet & Maxwell Ltd, 17th Ed, 2005) at para 1-002. Lord Denning had even remarked extra-judicially in “The Need For a New Equity” (1952) 5 CLP 1 at 8 that:

The Courts of Chancery are no longer courts of equity .... They are as fixed and immutable as the courts of law ever were.

The increasing rigidity of application of equitable principles stems, perhaps understandably, from a reluctance to countenance judicial law-making and a concern to avoid arbitrariness and uncertainty. The English judiciary’s reluctance to undermine Parliament was manifested in Lord Lloyd of Berwick’s judgment in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (“Westdeutsche”) at 740:

To extend the equitable jurisdiction for the first time to cover a residual injustice at common law, which Parliament chose not to remedy, would, I think, be [a] great .... usurpation of the role of the legislature, and [a] clear .... example of judicial law-making ....

The concern to avoid uncertainty, on the other hand, is clearly exemplified by observations such as those of Bagnall J in Cowcher v Cowcher [1972] 1 WLR 425 (“Cowcher”). These observations were made in relation to the application of the reinvented constructive trust as a powerful proprietary remedy to be awarded on the basis of what the judge felt was “just”, without any clear guiding principles. He stated at 430:

I am convinced that in determining rights, particularly property rights, the only justice that can be attained by mortals, who are fallible and are not omniscient, is justice according to law; the justice which flows from the application of sure and settled principles to proved or admitted facts. So in the field of equity the length of the Chancellor’s foot has been measured or is capable of measurement.

Equity’s capacity to develop new rights and remedies has not, however, been entirely surrendered. Indeed, Bagnall J had prudently qualified his words in Cowcher at 430 in noting:

This does not mean that equity is past childbearing; simply that its progeny must be legitimate – by precedent out of principle. It is well that this should be so; otherwise, no lawyer could safely advise on his client’s title and every quarrel would lead to a law suit.

An apparent balance has thus been struck between uncertainty and judicial law-making by way of “palm tree” justice on the one hand, and the continuing need for equity’s creativity to mitigate the rigours of the law on the other. In our view, this balance governs the manner in which equitable principles and doctrines ought to be developed and applied in the modern context. The courts should be principled and pragmatic when resolving the tension of applying an unguided and untrammelled discretion as an antidote to the blind acceptance of inflexible hard and fast rules.

Despite the reluctance of the courts to “invent” and “create” new rights and remedies, equity is, and must necessarily be, still capable of flexible development to address new circumstances. Glass JA in the Australian case of Allen v Snyder [1977] 2 NSWLR 685 recognised this, and, at the same time, delineated the parameters within which such development should take place. He opined at 689:

It is inevitable that judge made law will alter to meet the changing conditions of society. That is the way it has always evolved. But it is essential that new rules should be related to fundamental doctrine. If the foundations of accepted doctrine be submerged under new principles, without regard to the interaction between the two, there will be high uncertainty as to the state of the law, both old and new.

That “new” rights and remedies should be developed from existing principles and precedents rather than “plucked” seemingly from the air at the whim of the judge was also a concern expressed by the English Court of Appeal in In re Diplock [1948] Ch 465. It was declared at 481–482 that:

[I]f [a] claim in equity exists it must be shown to have an ancestry founded in history and in the practice and precedents of the courts administering equity jurisdiction. It is not sufficient that because we may think that the “justice” of the present case requires it, we should invent such a jurisdiction for the first time.

Indeed, this aptly corresponds to Bagnall J’s view in Cowcher that equity’s “progeny must be legitimate – by precedent out of principle” (see [28] above).

Although caution has been oft-expressed with respect to the development of new equitable principles, a number of significant developments have nevertheless emerged in the past half-century and the courts in several common law jurisdictions have gradually extended and developed existing principles so as to meet modern social needs. The proprietary estoppel doctrine is one such example. The traditional concepts of resulting and constructive trusts have also been developed and refined to deal with joint acquisition of residential property by married and cohabiting couples, by diffidently acknowledging the myriad modern partnerships that now exist between such couples; the principles of resulting and constructive trusts are now unrecognisable from the concepts known by those names at the time of the Judicature Acts (Supreme Court of Judicature Act 1873 (c 66) (UK) and Supreme Court of Judicature Act 1875 (c 77) (UK)): see Robert Pearce & John Stevens, The Law of Trusts and Equitable Obligations (Oxford University Press, 4th Ed, 2006) (“Pearce & Stevens”) at pp 29–30. As society progresses and as lifestyles, attitudes and norms change, modern development of the law and of equitable principles becomes inexorable, and, indeed, necessary. The penetrating observations of Prof Pearce and Mr Stevens at p 28 of their book are particularly pertinent:

The law is a coherent and dynamic whole, subject to constant re-evaluation and adjustment, sometimes culminating in the birth of new principles and doctrines. Equity has made a tremendous contribution to this whole and the continuous process of remoulding equitable rights and remedies should be seen as an essential part of this overall process of legal development.

Finally, the four primary perspectives which should guide the court in the development of equitable principles have been succinctly encapsulated by Gary Watt in Trusts and Equity (Oxford University Press, 2nd Ed, 2006) at pp 47–48 as:

When a judge is presented with a legal problem, the judge is bound to look first to statutory law and judicial precedent for a solution, but if it appears to the judge that there is no clear solution in precedent, the judge should in theory seek to produce a solution consistent with principles derived from precedent. Judges do not, however, reach their decisions in a logical vacuum; they are very often acutely aware of the impact that their decisions might have upon the wider community or society at large, and are therefore sensitive to policy considerations. Last, but by no means least, above all considerations of principle and policy, and sometimes even above precedent, judges are concerned to achieve a solution which works in practice and one that will not bring the whole process into disrepute; the judicial process must be pragmatic and sensitive to public interests. In fact, Lord Goff of Chieveley had candidly observed in Westdeutsche ([27] supra) at 685:

It is a truism that, in deciding a question of law in any particular case, the courts are much influenced by considerations of practical justice, and especially by the results which would flow from the recognition of a particular claim on the facts of the case before the court.

We summarise. Equity has been transformed from its early days of decision making founded on conscience to a body of discrete rules, principles and remedies. This move has been largely driven by a need for certainty and consistency. However, courts must be mindful of the equal need for a legal system which reflects contemporary societal values and caters to the modern community. Equity must be grounded by established principles, but, at the same time, these principles must be applied in a progressive and flexible manner to do justice in the current context; courts cannot, and must not, mechanically apply, in the same manner today, equitable principles which were formulated to provide for circumstances prevalent and putatively relevant centuries ago. It cannot be overstated how important it is to be aware of the genesis of equity which was motivated by the compelling need to mitigate the severity caused by, inter alia, the generality and rigidity of the common law; equity should not, in the modern context, be applied such that it displays the “very defect that it was designed to remedy” (see [26] above). Principled pragmatism should be the key to the court’s approach in the application of equitable principles. With this general approach in mind, we turn now to consider the presumption of resulting trust and the presumption of advancement in the present-day context.