By : Abdallah Sekibembe
SAMPLE QUESTION:
Discuss the origin, rationale and nature of the following equitable remedies; specific performance, injunctions, rescission, rectification and tracing
According to Martin, 1993, p.03, the term “Equity” is defined in a hypothetical sense to mean that which is fair and just, moral and ethical. Legally, the same author gives it a broader and wider meaning to mean a branch of law which, before the Judicature Act of 1873 came into force, was applied by the court of Chancery. This law laid and witnessed the foundation for the establishment of equitable remedies whose major purpose was to fill the vacuum left by the then existing common law because initially, the common law mode of relief was limited and restricted to damages for an aggrieved party to an action. Due to the inadequate and insufficient nature of these, the courts of Equity (Chancery) introduced a wide range of equitable remedies which were used to supplement the limited range of legal remedies existing at the time.
Graham Moffat in his book, Trusts Laws says that Equitable remedies are those, historically the product of the courts of equity and which are developed to supplement the perceived limitations of the then common law remedies hence one of the greatest contributions to this filed of law.
These remedies can therefore be awarded to enforce both equitable rights and those rights that are exclusively legal; they include among others; Injunctions, Specific performance, rescission, tracing. Jill E. Martin in his book, Modern Equity identifies the common features relevant to these remedies and he says that they are governed by the doctrine that Equity acts in personam, they are discretionary in nature, their presence and applicability depends on the availability of common law remedies among other features. This essay will therefore discuss their origin, rationale, and nature for this matter.
Specific performance.
According to Allastair, 2004, p.1065, Specific performance is an equitable remedy in relation to the enforcement of contracts which compels the defendant to perform his/ her contractual obligations. This essentially means that it is an order of the court compelling the defendant personally to do what he/she promised to do and courts for this matter have such jurisdiction as provided for under Section 13 of the Judicature Act Cap 13. As already noted earlier, the common law mode of compensation was limited and restricted to damages but these in the long run became inadequate in nature hence the emergence of equitable remedies like specific performance. This is established under the case of Wilson v Northampton and Banbury Junction Railway Company where court noted that as with all equitable law remedies, the grant of specific performance depends on the damages awarded in the different circumstances under common law, their insufficiency and inadequacy would for this matter enable the application of Specific performance. This is also seen under the case of Cooperative Insurance v Argyll where Lord Hoffman alluded that specific performance is traditionally regarded in English law as an exceptional remedy, as opposed to the common law remedy of damages to which a successful plaintiff is entitled as of right, specific performance was part of the discretionary jurisdiction of the Court of Chancery to do justice in cases in which the remedies available at common law were inadequate and if court was satisfied that it would be achieved in line with the maxim “equity does not act in vain”.
Equally important to note is that Specific performance will be appreciated in accordance with settled principles and the fact that it is a personal obligation on the defendant party to fulfill his/her contractual obligations, it will therefore only be available to contracts where the subject matter is of substantial significance or unique value and will for that matter be unavailable in circumstances where the contract is immoral or legal, where there is no consideration, where the contract requires supervision, where the contract is of substantial interest as noted by Allastair.
As already discussed in this essay, specific performance shall apply effectively to cases of contracts of significant effect for example contracts for the sale of properties and chattels of unique value since damages in such cases would not in any way satisfy the aggrieved party or enable him/her to attain a replacement for them or substitute. Courts might secure specific performance not because of the real nature of the land, but because damages at law, which must be calculated upon the general money value of land, may not be a complete remedy to the purchaser to whom the land may have a peculiar and special value as expressed by Sir John Leach VC in the case of Adderley v Dixon. The learned judged in this cases however noted that chattels could attain a substitute or replacement through a payment made by the defendant.
Still under Specific performance, it is pertinent to discuss the Defenses raised by the defendant to rebut to a claim of specific performance. Among these as provided under Allastair, 2009, p.1073 are an Unenforced contract which generally involves a contract executed in the absence of its essential elements that validate it that is to say; offer, acceptance, consideration, intention to create legal relations etcetera, the absence of these requirements would deny a party to a claim for specific performance for this matter. Misdescription of the subject matter which normally happens where the property that is the subject of the contract has been improperly described, ascertained or identified which extinguishes the contractual obligations of both parties. Bakibinga avers that there are two types of misdescription that is to say; trivial misdescription which can be ignored or compensated with damages when a claim of specific performance is ordered and Substantial misdescription which is strictly compelled to the defendant party that it would influence them to do something different from what intended. Conduct of the Claimant, this is where the plaintiff or claimant comes to court with malicious intention of taking advantage of the defendant for example when he comes to equity with unclean hands, his / her claim of specific performance shall for that matter be set aside. Misrepresentation, this is defined as an untrue statement of fact by one party which has induced the other to enter into the contract and in this case, specific performance in such circumstances would be denied by the court. Misrepresentation will be addressed more later on under Rescission in this essay. Other defenses include Mistake, lack of an enforceable contract, absence of some formality, undue influence or unconscionable bargain, lapse of time, Hardship, Public policy etcetera.
Injunctions
According to Bakibinga, 2006, p.48, An injunction is defined as an order by the court directed to a party to the effect that he/she do or refrain from doing a particular act. It is granted at the discretion of the court to make an order to either party to litigation, or by way of a final judgment, to take some action or to refrain from some action. The remedy of injunction is expressly provided for under Section 38(1) of the Judicature Act which is to the effect that the high court shall have power to grant an injunction to restrain any person from doing any act as may be specified by the High Court. Allastair, 2009, p.1078 avers that for an injunction to be awarded or to succeed in this court, the relevant common law remedy should be insufficient in the circumstances at hand, the claimant must come with clean hands and there must not have been delay on his part, some right of the claimant must be affected and the defendant must not suffer undue harm as a result of the injunction.
The remedy of injunction derives its origin from the Courts of chancery in the UK and was meant to uphold and support equitable rights through offering flexible forms of relief to the aggrieved party when those of the common law proved to be ineffective and inadequate and this was witnessed under section 25(8) the Judicature Act 1873 (UK) which noted that an injunction could be granted or a receiver appointed by an interlocutory order of the court in all cases in which it shall appear to the court to be just or convenient that such order should be made; and any such order may be made either unconditionally or upon such terms and conditions as the court thinks just.
In awarding injunctions as a discretionary remedy, Courts shall be required to take into account specified factors before addressing the precise circumstances of the parties and the most suitable means for resolving the issues between them. Courts by way of judgment then will secure performance of some act by the defendant (Mandatory Injunction); or will ensure that the defendant refrains from some action (Prohibitory Injunction); Courts may also seek to prevent the happening of some action or event in the future. These and other forms of injunctions are discussed below:
Mandatory Injunction: A Mandatory injunction is one that ensures that the defendant takes some action. It orders the defendant to take positive steps to undo what he has already done, in other words it is restorative and not merely preventive thus the defendant may be compelled to demolish or modify a building he has already built as seen in the case of Lord Manners v. Johnson. The defendant can as well be compelled to remove a road he has already constructed. A hypothetical example is where a defendant’s negligence has caused water to leak onto another person’s property; the court may seek to order that defendant to take some action which will stop the water leakage. One means of doing this would be by way of mandatory injunction to require the defendant to take action to mend the leak, as well as other actions in respect of damages. Allastair notes that there is a degree of overlap between the mandatory injunction and specific performance in that both obligations may seek to force the defendant to perform an action. Specific performance refers specifically to contractual obligations, whereas a mandatory injunction has broader application outside specific performance and gives the court greater leeway to impose conditions on its performance.
Injunctions Quia Timet: Bakibinga defines this type of injunction is one that is given where the injury to the plaintiff’s rights has not yet occurred or happened but is feared or threatened. This type of injunction is expressly provided for under section 38(3) of the Judicature Act which is to the effect that where before, at or after the hearing of any cause or matter, an application is made for an injunction to prevent a threatened or apprehended waste or trespass, an injunction may be granted, if the High Court thinks fit; whether or not the person against whom the injunction is sought is in possession under any claim of title or claims a right to do the act sought to be restrained under any color of title; and whether the estates claimed by the parties or any of the parties are legal or equitable. The term “qui timet” literally means “since he fears and its sole essential purpose is to prevent a wrong from being committed. Initially, the remedy was only restricted to equitable rights; it is now available to all matters that fall under Section 38 (3) of the Judicature Act. In the case of Redland Bricks v Morris, Lord Upjohn observed that a Quia timet injunction arises in the following two types of case; where no harm to the defendant has occurred but it is threatened or intended, and where harm has been done by the earlier actions of the defendant, and the plaintiff has been compensated, but the plaintiff fears that future wrongs may be committed by the defendant
Interlocutory or Interim Injunction: In relation to this type of injunction, Bakibinga justifies the position that they are given until the commencement of the trial and their award is based on a balance of convenience between the potential harm suffered by the applicant if no injunction were awarded, and the potential inconvenience caused to the respondent if the injunction were to be awarded. This type of injunction is normally given during the litigation process and this would be binding on both parties only up to the date of the final judgment. A case illustrating this is one of Commonwealth of Australia v John Fairfax & Sons Ltd where the plaintiff obtained an ex parte interim injunction on 9 November 1980 that remained in force until 11 November 1980. On that date the defendant entered an appearance and the court granted an interlocutory injunction pending a final hearing of the matter.
Perpetual Injunction: This type of Injunction is awarded with intention of resolving the existing disputes between the two parties to an action but this doesn’t extinguish the action in court. It is normally is granted after a full hearing of the claim on its merits and once these are argued, it is then awarded with intention to finally settle relations between the parties.
Prohibitory Injunction: Bakibinga, 2007, p.48 notes that this is the most common and natural form of injunction and it normally requires the defendant to refrain from an action.
Tracing:
Hudson Allastair in his book, Equity and Trusts alludes that the principle of tracing could be defined as a situation where a claimant seeks to identify a specific item of property (or its clean substitute) in the hands of the defendant and once this is done, the claimant would pursue a common law “following” claim to require the return of that specific item or property.
The rationale behind Tracing was to enable the claimant to recover that specific property that was earlier taken from him/her involuntarily and the application of the term “involuntarily” in this sense could mean that the claimant never gave consent to the taking of the property in question in the first place. The property could have been stolen, or taken in breach of trust, or taken by mistake. Similar to this, Phillip H. Pettit in his book, Equity and the law of Trusts alludes that Tracing assists a beneficial owner to seek to recover his/ her property in the possession of another. The remedy of Tracing derives its applicability from a breach of trust action brought by a beneficiary party. Bakibinga, 2007, p.216, defines a breach of Trust to consist of an improper act, neglect, default or omission of the trustee with regard to trust property or of a beneficiary’s interest in it. Bakibinga furthermore says that it may include; direct intermeddling with trust proper for improper purposes; failure to exercise proper care in discharging a duty; malafide exercise of a discretion.
According to Allastair, 2009, p.807, the principle of Trespass operates on three levels namely; the first level where the owner is seeking to recover her original property from the defendant, the second level where the owner might be seeking to recover both her original property and any profits which have been realized from the defendant’s use of the property and the third level where the owner may not be able to recover her original property because that property has been mixed with other property, or it cannot be found, or some other person has acquired good title to it through the principle of ‘Bonafide purchase by notice’. Allastair says that in such situations, the claimant would establish property rights against the substitute property that the defendant acquired using the original property and the substitute property is normally referred to as “traceable proceeds because the claimant’s rights are traced into the substitute property. Tracing is not meant to punish the trustee but to compensate the beneficiary for the loss created from the fund, it therefore not a remedy or claim but a process. A claimant would therefore claim a proprietary remedy from the Trustee of the original property whether in its original or changed form..
Pettit gives an illustration which seeks to identify the merits and demerits of Tracing as a proprietary remedy. He avers that if X, a trustee of a trust fund becomes bankrupt and had initially used the trust fund money in clear breach of the trust to buy Y a ring, the beneficiary can bring action against breach of trust and if Y still has the ring, the beneficiary can trace the trust funds into X’s hands in their altered form, assert his proprietary right and make sure that the ring can be transferred to the trust fund. In case of bankruptcy, the trust property does not become available for the trustee’s creditor. On the hand, the proprietary remedy of Tracing may enable the beneficiary to take advantage of any increase there may be in the value of the property and entitle him to any income or profits that the property has generated while in the custody of the defendant. Tracing can be properly understood in two ways that is to say; Common law Tracing and Equitable Tracing and these are discussed below;
Common law Tracing: Under this, a claimant would normally secure the return of a specific property after identifying it in the possession of the defendant; a claimant would normally seek a common law tracing claim for that matter. The onus would therefore be on the claimant to prove that the said property is infact his and would therefore demonstrate it has not been mixed with any other property. Bakibinga says that the plaintiff’s ownership is relevant in that his entitlement is to the property or its property and such property can be followed so long as its nature is ascertainable. Bakibinga furthermore says that this right ceases when the means of ascertainment fail, an example is where the property is converted into money, mixed and confounded in a general mass of the same description. This essentially means that the right to trace one’s property at common law is extinguished when money becomes part of the mixed account because it is no longer identifiable and a case in point that establishes this principle is one of Cf Westdeutsche Landesbank Girozentrale v Islington LBC. Furthermore in the case of Banque Belge pour L’Etranger v Hambrouck , it was averred that common law tracing was only effective where money is held unmixed with other sums in bank accounts for this matter. The common law tracing will be frustrated where property in question is unidentified and unascertained for this matter. Claimant would therefore settle for equitable Tracing as discussed below.
Equitable tracing: According to Allastair, 2009, p.818, equitable tracing is where a claimant can successfully trace into mixtures of property with a view of attaining what he’s entitled to, it is therefore more liberal and extensive as opposed to common law tracing, the claimant will however must have had some equitable interest in the property. Allastair says that that it is pertinent to note that equitable tracing operates under a two-stage process, the first stage requires detective work for the tracing process to be carried out so that the claimant is able to identify the property which stands as a substitute for his/her original property and against which she therefore wishes to bring an action. Under the second stage, having traced the property, the claimant is required to identify which equitable remedy should be imposed over that property.
Rescission:
According to Allastair, 2009, p.1095, Rescission can be defined as an equitable remedy used to set aside contracts and to restore the parties to the positions which they had originally occupied. One party would in this instance express him/herself by word of mouth that he or she is no longer willing or that he/she is willing to be bound by the contract and this arises in circumstances where the contract is voidable but not void since the contract would remain valid until avoided through rescission.
The rationale behind the establishment of Rescission was to return the aggrieved party to their original position (Restitutio Integrum) by setting the contract aside and this action was readily available in cases where there was a mistake made by both parties to a contract or where one party was mistaken, misrepresented which was either fraudulent or innocent, induced through constructive fraud and non-disclosure of material facts by the other party. These instances/grounds are expressly identified by Bakibinga in his book, Equity and Trusts in Uganda and still herein, it is clearly averred that under rescission, the aggrieved party has a right to extinguish a contract since as it is an act between two parties and not a judicial remedy, court may however chip in to provide guidance and direction with intention to restore the parties to their original position had the contract not been made in the first place. In this regard, court will normally decide whether the right to rescind was justified and whether the rescission relied upon is effective. The right to rescind will however be frustrated where it is impossible to return the parties to the positions they previously occupied, this happens in circumstances where the contract had already been executed or affirmed or where there has been delay in enforcing the right to rescind (delay defeats equity).
Rescission as a discretionary equitable remedy is only applicable to contracts that are voidable (valid until avoided) and is available on an application to court. The following therefore are the grounds for could establish a right to rescission of a contract;
Misrepresentation: According to Elliot, 2009, p.186, misrepresentation is defined as an untrue statement of fact by one party which has induced the other to enter into the contract, it is voidable and it may give rise to a right to rescinding of a contract or damages depending on the type of misrepresentation. Elliot furthermore avers that for a misrepresentation to be actionable, it will have to satisfy three requirements: an untrue statement; a statement of fact and not mere opinion and must have induced the innocent party to enter the contract. If a misrepresentation arises, the claimant will be entitled to rescind the contract to avoid the other party from benefiting from their wrongdoing. Misrepresentation comes in two forms that is to say; innocent misrepresentation and fraudulent misrepresentation. The former is majorly concerned with a false statement made innocently with an honest belief in its truth and without any as a false statement that is made while the latter, fraudulent misrepresentation is false statement that is made knowingly, or without belief in its truth, or recklessly as to whether it is true or false.
Mistake: This can be defined can be defined in two ways; Unilateral mistake and Bilateral mistake. Elliot defines unilateral mistake as where only one party is mistaken and the other either knows of the mistake or ought to know of it and in this case, a contract may be void if one makes a contract with some person, thinking it to be another person and also if one party knows the other is under that misapprehension. This is established in cases like Cundy v. Lindsay, Ingram & others v. Little, Lewis v. Avery. On the other hand, Bilateral mistake is defined as where both parties to a contract are mistaken and it may be common / identical or mutual /non identical.
Constructive fraud: This basically arises where one party tends or attempts to influence another to enter into a contract and this normally happens without their consent. A leading example in this regard is one of undue influence which normally applies where one party uses their influence over the other to persuade them to make a contract and the onus of proof lies of proof of undue influence lies on the person alleging it
Non-disclosure of Material Facts: Bakibinga, 2007, p.88 is to the effect that there is no duty for any party to a contract to disclose any information relating to the contract, however as an exception there are circumstances which impose a duty to disclose for example contracts of uberimae fidei (Fiduciary relationships) and these secure full disclosure of facts to the person. A contract would therefore be avoided if one party to a contract fails to disclose the material facts or relevant information to a contract.
In conclusion as already noted above, the application of the above equitable remedies will depend on the availability of the damages in an action, they shall therefore be adopted when the these common law damages are inadequate and insufficient in nature and the high court shall for this matter award where it thinks just as provided for under section 33 of the Judicature Act Cap. 13
Bibliography:
Jill E. Martin, Modern Equity, London: Sweet & Maxwell Ltd, 1993
Graham Mof5fat, Trusts Laws, Cambridge: Cambridge University Press, 2009
Phillip H Phillip, Equity and the Law of Trusts, London: Mackays of Chatham plc, 1997
Alastair Hudson, Equity and Trusts, London: Routledge Cavendish, 2009
David J. Bakibinga, Equity and Trusts in Uganda, Kampala: Professional Books Publishers, 2007
Catherine Elliot, Frances Quinn, Contract Law, Edinburgh gate: Pearson Longman, 2009
The writer is a student of Law at Uganda Christian University School of Law.
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