Chapter 12 - Equity and the common law: section 99

Should section 99 be retained?

There are three options:

(a)The rule should be retained because there may still be matters where common law and equitable rules conflict, and equity should continue to prevail in those circumstances.

(b)The rule should be repealed because conflicts are unlikely to occur in the future, or if they do this will happen infrequently and that equity should prevail is sufficiently well established.

(c)The rule should be repealed because, if future conflicts occur, the court should have the discretion to give primacy to either the equitable or common law rule, depending on which is the more appropriate in the circumstances of the case.

For the reasons set out below, we favour the retention of section 99.

It is difficult to offer a definitive view on whether any further conflicts will arise. On one view it seems unlikely, given that so much time has passed since the original enactment. A survey of New Zealand commentaries and cases on the matters dealt with in the English cases listed above shows that, in general, the rules established in those cases tend to be considered settled law here or have been legislated for.336

However, the case law also reveals a diverse range of areas where conflicting rules of equity and the common law have been contemplated and shows that conflicts have sometimes related to narrow, technical rules that may not frequently come before the courts. So, while unlikely, future conflicts cannot be ruled out.

A second factor in favour of keeping the provision is that it does not pose any significant problems. There may be a view that its retention might hinder the fusion of law and equity because it limits the courts’ ability to further “intermingle” common law and equitable rules in a way that results in “practical justice”337 or in “a just and equitable result”.338 This is particularly the case if it is given a broad interpretation.339

However, if the narrow view of section 99 set out above is valid, then it does not prevent the gradual development of common law or equitable doctrine that inevitably takes place over time. If fusion is taken to mean the application of equitable remedies and defences to common law actions and vice versa, section 99 is of little or no relevance.

The provision cannot be said to have caused such a hindrance thus far. It has not been a factor in the New Zealand judgments that have favoured fusion. The extension of the notion of contributory negligence to equitable compensation in Day v Mead,340 and the acknowledgement in Aquaculture Corp v New Zealand Green Mussel Co Ltd341 that exemplary damages are available for breaches of equitable duties, shows that New Zealand courts have felt able to develop the law of civil remedies without legislative hindrance.

Third, we are not aware of any dispute with the proposition that, in a case of conflict between substantive rules, equity should prevail. We have not found any suggestion in equity texts, cases or other commentary that the rule should be repealed.342 In contrast, other jurisdictions have retained the rule in recent rewrites of their equivalent judicature or courts legislation.

While the provision has received little attention from law reform bodies, those that have considered it have favoured its preservation. The Law Reform Commission of Ireland has recently recommended that it be retained in its review of Ireland’s Courts Acts.343 Both the New South Wales344 and Queensland345 Law Reform Commissions have considered the rule, but only in relation to the question of whether their Supreme Court Acts were the appropriate places for it given that the rule was intended to be applied by all courts.346

For the sake of completeness, in the New Zealand Law Commission’s 1991 review of the Property Law Act 1952, the existence of section 99 was given as justification for the repeal of section 30 of that Act. Section 30 had started life as one of the enumerated conflicts in section 25 SCJA and as section 5 of our Law Amendment Act 1882.347 The Law Commission’s preliminary paper states:348

Section 30 … may now be superfluous. It is intended to make clear that the equitable rule on merger must prevail over the common law rule (In re Waugh, Sutherland v Waugh [1955] NZLR 1129). But this is sufficiently achieved in general terms by section 99 of the Judicature Act 1908. It therefore does not seem necessary to repeat section 30.349

Finally, there is a question as to what signal would be given by the repeal of section 99 and what the outcome should be if a conflict were to arise in the future. The position would not be straightforward. Notwithstanding section 17(2) of the Interpretation Act 1999 (non-revival of previous position), there would be a question as to whether the pre-existing rule (that equity prevails) continues to apply or whether the repeal should be taken to have changed the law.350 Might, therefore, its repeal suggest that the conflicts addressed in the case law set out above are open to judicial reconsideration?

For these reasons, we incline towards the retention of the provision. However, we are interested in hearing submitters’ views.

Q33

Should section 99 of the Judicature Act be retained?

For instance, rescission of a contract for innocent or fraudulent misrepresentation is dealt with in the Contractual Remedies Act 1979.

As desired in Halpern v Halpern (Nos 1 and 2) [2007] EWCA Civ 291, [2008] QB 195, relying on Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218.

As desired in X v Attorney-General [1997] 2 NZLR 623 (HC).

See the views expressed in A Burrows “We do this at common law but that in equity” (2002) OJLS 1. See also Sir Anthony Mason “The Place of Equity and Equitable Doctrines in the Contemporary Common Law World: An Australian Perspective” in D Waters (ed) Equity, Fiduciaries and Trusts (Carswell, Ontario, 1993) at 9: “the traditional principles of equity are not so invincibly superior to the concepts of the common law that equity cannot occasionally profit from common law ideas. And, though the courts should look at policy arguments with due circumspection, it would be absurd to suggest that the courts cannot adjust or modify equitable principle on policy grounds where to do so is appropriate.”

Day v Mead [1987] 2 NZLR 443 (CA).

Aquaculture Corp v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299 (CA).

Only the authors of Meagher, Gummow and Lehane go into any detailed discussion of the provision, linking what they consider to be misunderstandings of the breadth of the provision to the growth of the “fusion fallacy”. R Meagher, D Heydon, M Leeming Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (4th ed, Butterworths LexisNexis, Sydney, 2002) at chapter 2.

Law Reform Commission of Ireland Report on Consolidation and Reform of the Courts Acts (LRC 97-2010) at 460 and cl 97 of the Draft Courts (Consolidation and Reform) Bill. See also Law Reform Commission of Ireland Consultation Paper on the Consolidation and Reform of the Courts Acts (LRC CP 46-2007) at 47–49 and 107.

New South Wales Law Reform Commission Law and Equity (Report 13, 1971).

Queensland Law Reform Commission A Bill to consolidate, amend and reform the Supreme Court Acts and ancillary Acts regulating civil proceedings in the Supreme Court (Report 32, 1988).

Consequently, in New South Wales, the Law and Equity Act 1972 makes clear that the rule was part of the general law of New South Wales. The Queensland Law Reform Commission determined that the provision should be retained in the new Supreme Court Act.

It provided: “No merger by operation of law. There shall not be any merger by operation of law only of any estate the beneficial interest in which would not be deemed to be merged or extinguished in equity.” In 1908, the provision was shifted to the Property Law Act 1908, s 11, later being enacted as s 30 of the 1952 Act.

New Zealand Law Commission The Property Law Act 1952 (NZLC PP16 1991) at para [147].

Accordingly, the merger provision does not appear in the Property Law Act 2007. The provision remains in force in the UK: Law of Property Act 1925 (UK), s 189.

JF Burrows and RI Carter Statute Law in New Zealand (4th ed, LexisNexis, Wellington, 2009) at 614–615.