First Principles of Business Law

1.2. Common law and equity

The reception of English law in Australia included the case law made by the courts of England. Historically.,English courts were divided into what were known as 'common law courts' and 'courts of equity'. We need to understand this terminology.

The common law courts were those that applied the case law that was developed and applied uniformly (commonly) throughout the whole of England, displacing earlier local laws and customs.

Equity, by contrast, consists of the rules that were developed by the Court of Chancery, a special court that was established to hear and decide certain particular types of case and appeals from the common law courts. The Court of Chancery gave particular consideration to notions of fairness and justice when deciding appeals. The word 'equity', which means fairness, reflects this.

The decisions of both the common law courts and courts of equity make up case law but it is the common law that makes up the greater part of case law.

Both common law and equity were received in Australia but the various courts that exist in the Commonwealth, states and territories are not separated into common law courts and courts of equity. All Australian courts draw on the established principles and rules of both common law and equity to decide new cases.