PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS Chamila S. Talagala PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS Introduction The principle of conscience is a nebulous concept. It generally means a person’s awareness of right or wrong with regard to his or her own thoughts and actions.1 The word “conscience” has also been defined as “the part of your mind that tells you whether your actions are right or wrong”. 2 Hence, conscience always involves a moral judgement. Nevertheless, the principle of conscience, as the foundation of equity, has been instrumental in many jurisdictions towards the development of law. The purpose of this article is to briefly examine the status accorded to the principle of conscience in equity, in the jurisdictions of England, Australia and Sri Lanka. Law and Conscience Law seeks to apply general rules to particular cases. These rules are generally assumed as fair. Yet, there would always be cases, which it is not possible to cover in the form of a general rule. 3 Because of idiosyncratic case characteristics, the application of the general rule See, A. S. Hornby, Oxford Advanced Learner’s Dictionary of Current English, (5th ed.) Oxford: Oxford University Press, 1996 at p.244. 1 A. S. Hornby, Oxford Advanced Learner’s Dictionary of Current English, (7th ed.) Oxford: Oxford University Press, 2005 at p.322. 2 C. G. Weeramantry, An Invitation to the Law, (Indian Reprint) New Delhi: Lawman (India) Private Limited, 1998 at p.84. 3 Page | 2 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS may result in unfair outcomes.4 Thus, law is deficient in dealing with diverse and evolving situations. The principle of conscience could guide the law in its application to different and novel situations. Justice demands certainty in law. The law relies on rules and precedents in order to achieve certainty. The strict view of the rule of law holds that unfair results incurred due to the operation of these rules are merely the price paid for a system of law. 5 However, as Maitland has very correctly observed, “certainty of law must not become certainty of injustice”. 6 Hence, justice also demands that inconvenient rules and precedents to be discarded and conscience to be applied. Principles of equity are capable of setting aside the legally required unfair outcomes, in order to arrive at just and fair outcomes based on the individualised circumstances of each case. By acknowledging the legitimacy of equity, legal systems incorporate within themselves conflicting impulses towards rigid and formal technicalities on the one hand, and discretionary and substantive common sense on the other.7 D. R. Fox, “The Autonomy Community Balance and the Equity-Law Distinction: Anarchy’s Task for Psychological Jurisprudence” [1993] 11 Behavioural Sciences & the Law 97. 4 5 D. R. Fox, “The Autonomy Community Balance and the Equity-Law Distinction: Anarchy’s Task for Psychological Jurisprudence” [1993] 11 Behavioural Sciences & the Law 97. See, R. W. M. Dias, Jurisprudence, (2nd ed.) London: Butterworth & Co. Limited, 1964 at p.170. 6 D. R. Fox, “The Autonomy Community Balance and the Equity-Law Distinction: Anarchy’s Task for Psychological Jurisprudence” [1993] 11 Behavioural Sciences & the Law 97. 7 Page | 3 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS Conscience in the Early Courts of Equity Conscience of the judges was the driving factor of the equity courts used in correcting injustice. The early chancellors were ecclesiastical men and their conscience was highly influenced by religion and morality. Thus, they were able to inject a form of morality into the operation of the law when they were left with the task of decisionmaking.8 Moreover, conscience was the only principle that had to be adhered to in making decisions, because the chancellors were unfettered by rules and precedents. The decisions of early chancellors did not vary largely, because their reasoning was based on similar standards. Hence, some sort of certainty prevailed in relation to the decisions of equity courts. However, when legal men were appointed as the chancellors of equity, their decisions varied. Being selected from diverse segments of the society, one judge’s perception of right or wrong deferred from another. By systematisation of equity, it was intended to remedy the problem raised by subjective approach of the courts. Conscience in the Modern Courts Even with precedent and legislation, there is still room for judicial discretion in the modern courts. Hence, courts could continue with applying conscience to develop the law and provide equitable results. This would give flexibility to the courts. However, judicial discretion See, A. W. B. Simpson, A History of the Common Law of Contract: The Rise of the Action of Assumpsit, Oxford: Clarendon Press, 1975 at pp.396-398. 8 Page | 4 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS should not be unfettered. Unrestricted application of conscience may bring about detrimental results such as inconsistency and subjectivity of law. Conscience based reasoning may not be apt for every decision. Moreover, judicial decision-making purely on the ground of conscience may, in certain instances, act as a strife to the concept of rule of law which is preserved as fundamental to every jurisdiction. Thus, some sort of control is required over judicial discretion. The religion based approach in applying conscience for judicial decision-making would not be feasible in the modern context. In the modern complex and plural societies, there would hardly be any consistency of value judgements between various religions. It is very important that law needs to be flexible to achieve fairness. Society is ever changing as new circumstances arise. Attitudes and moral standards change as well. If the law lacks flexibility, it runs the risk of being eventually discarded when it is found to be irrelevant to the needs of a later stage.9 Conscience, as a flexible principle, could be used to achieve fairness. However, courts should avoid “palm tree justice” in this regard. The modern courts apply conscience through different principles which are founded upon fairness. For instance, the “doctrine of unconscionability” mandates that a party in social or commercial relationship with another should not be allowed by equity to take C. G. Weeramantry, An Invitation to the Law, (Indian Reprint) New Delhi: Lawman (India) Private Limited, 1998 at p.139. 9 Page | 5 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS unconscientious advantages. 10 The “doctrine of unjust enrichment”, though having its roots in Roman law, stipulates the equitable principle that no one should be enriched unjustly to the detriment of another.11 However, as would be seen later, the modern approach in many jurisdictions seems to be to apply the principle of conscience in a controlled manner. Conscience in the English Judiciary Modernisation of equity has resulted in rules being entrenched to assist the application of equity. Hence, the conscience of the individual judges has become less significant. Due to the merger of equity courts with the courts of law, the judges have been vested with powers of both law and equity. Thus, they have the power to follow the law as well as the power to opt for fairness instead of strictly following the law. However, many judges have found it uncomfortable to apply new equitable principles which have not been previously applied. Pettit observes that: “though there is no fiction in equity as there has been said to be at common law that the rules have been established from time immemorial, and though ‘it is perfectly well known that they have been established from time to time—altered, improved and refined from time to time. In many cases we know the names of 10 See, A. Dunn, “Equity is Dead, Long Live Equity!” [1999] 62 Mod. L. R. 141 at p.141. See, G. L. Peiris, Some Aspects of the Law of Unjust Enrichment in South Africa and Ceylon, Colombo: Lake House Investments Limited, 1972. 11 Page | 6 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS the Chancellors who invented them’, yet, it is in principle doubtful whether a new right can now be created.12 Since the fusion of equity and law, judiciary has been more concerned with pursuing certainty by strict rules and precedents. As a result, flexibility and freedom within the judiciary have been exceedingly restricted.13 Yet, in certain instances, some judges have departed from strict law and precedent in favour of fairness. Therefore, as would be seen later, the application of conscience still depends on individual attitudes of the judges and the same observation is equally applicable in the case of other jurisdictions as well. Lord Denning commenting on the state of equity in 1984 states: “Now, thirty years later in 1984, I can say that in my time the courts have discovered the new equity. It is fair and just and R. Clements and A. Abass, Equity & Trusts, Text, Cases and Materials, (2nd ed.) Oxford: Oxford University Press, 2011 at p.18. 12 See, R. Clements and A. Abass, Equity & Trusts, Text, Cases and Materials, (2nd ed.) Oxford: Oxford University Press, 2011 at p.18, where it is stated that “In 1952 ((1952) 5 CLP 8), Lord Denning wrote that ‘the Courts of Chancery are no longer courts of equity . . . they are as fixed and immutable as the courts of law ever were’. In 1953 ((1953) 6 CLP 11 at 12), Lord Evershed stated that the Judicature Acts halted or, at least, severely restricted the inventive faculties of future chancery judges. In Re Diplock [1948] 2 All ER 204 at 218, the English Court of Appeal held that if a claim in equity exists: 13 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. In their work, Equity, Doctrines and Remedies (2nd edn, Sydney: Butterworths, 1984 at 68–9) Meagher, Gummow, and Lehane write that equity’s naked power of improvisation had long been spent. In Western Fish Products Ltd v Penwith District Council [1981] 2 All ER 204 (CA) at 218, Megaw LJ stated that ‘the creation of new rights and remedies is a matter for Parliament, not judges’.” [Emphasis added] Page | 7 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS flexible, but not as variable as the ‘Chancellor’s foot.’ It is a great achievement. If I were setting an examination paper for students, I would ask them to give examples of the truth of that statement. They would find them in the doctrines of promissory estoppels, proprietary estoppels, constructive trusts, licences of land, granting of injunctions, and so forth.”14 English courts find place to the principle of conscience within the initiated maxims of equity. For instance, under the maxim “equity acts in personam”, the court has the power to restrain a defendant from taking unfair advantage from the plaintiff.15 Apart from traditional equitable principles, the English judiciary has created several doctrines such as, “doctrine of implied term” and “doctrine of presumed intent” in order to reach fair and reasonable solutions. These doctrines are mainly used when courts decide on issues relating to law of contract. Under the “doctrine of implied term”, the court implies a term, even though there is no express term in the contract between the parties in order to give effect to just and fair results.16 Despite the cautionary Lord Denning, Landmarks in the Law, [Indian Reprint] New Delhi: Aditya Books, 1993 at p.86. 14 15 S. J. Bailey, “The Future of Equity” [1977] 93 L.Q.R. 529 at 532. 16 See, Gardiner v. Grey [1815] 4 Camp. 144. Page | 8 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS approach towards the application of this doctrine by courts, 17 Lord Denning had been a strong advocate of the doctrine in many instances.18 The “doctrine of presumed intent” is utilised by courts to presume that parties to a contract have agreed upon a fair and reasonable solution instead of searching whether parties have actually agreed on such terms. In the application of this doctrine too, the individual attitudes of the judges have been the determinant factor.19 The “doctrine of unjust enrichment” is founded on the similar principles of equity in English law.20 Nevertheless, the English Courts have considered this doctrine as alien to their legal system. Hence, See, Reigate v. Union Manufacturing [1918] 1 K.B. 592, where it was stated that court cannot imply a term simply because it is reasonable to do so, but could only when it is necessary. Also see, The Moorcock [1889] 14 P.D. 14. 17 Lord Denning, The Discipline of Law, (Indian Reprint) New Delhi: Aditya Books, 1993 at p.41. 18 19 See, Wholesale Distributors Ltd v. Gibbons Holdings Ltd [2007] NZSC 37 at para.96, where is was stated that “The notion of presumed intent has been popular ever since Viscount Simon, referring to the fact parties to a contract are often faced with a turn of events which they did not anticipate, expressly enunciated the doctrine in British Movietonews v. London and District Cinemas [1952] AC 166 at pp 185 – 186. The doctrine has necessarily had an impact on the way judges and lawyers approach contractual interpretation in general. Aware that in many, if not most, cases the parties did not, because of unforeseen events, have an actual intention in respect of the particular clause in issue, the doctrine permits judges and lawyers to arrive at an interpretation without compromising the basic premise that the contract must not be interpreted subjectively. The presumed intent is imputed to the parties. Inevitably, and understandably, judges and lawyers come to impute an intention to the parties without questioning the process. The imputation becomes a habit of thought or attitude of mind.” [Emphasis added] See, Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32 at 61. 20 Page | 9 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS there is much uncertainty attending the topic of unjust enrichment in England.21 Conscience in the Australian Judiciary The Australian Courts, in contrast to the English Courts, are commonly guided by the “doctrine of unconscionability” in equity jurisdiction. In recent years, they have emphasised more on the principle of conscience and prevention of unconscionable conduct while returning to the moral basis of equity. It has been observed that: “The emphasis upon unconscionability in Baumgartner 22 is characteristic of recent cases in the High Court which have identified unconscionability as the underlying principle in several discrete equitable doctrines. The novelty of the analysis lies in the urge to synthesis apparent in those cases. It might also be said that to identify unconscionability as the basic principle underlying a particular doctrine is necessarily to modify its potential scope”.23 [Emphasis added] See, Reading v. Attorney General [1951] 1 All. E.R. 617; [1951] A.C. 507 at 513514, where Lord Porter stated, “It was suggested in argument that the learned judge founded his decision solely upon the doctrine of unjust enrichment and that that doctrine was not recognized by the law of England. My Lords, the exact status of the law of unjust enrichment is not yet assumed. It holds the place in law of Scotland, and I think, of the United States, but I am content for the purpose of this case to assume that it forms no part of the law of England”. See also, Orakpo v. Manson Investments Limited [1978] A.C. 95, where Lord Diplock said that there is no general doctrine of unjust enrichment recognized in English law. 21 22 Baumgartner v. Baumgartner [1987] 164 C.L.R. 137. A. Black, “Baumgartner v Baumgartner, The Constructive Trust and the Expanding Scope of Unconscionability” (1988) 11 (1) University of New South Wales Law Journal 117 at p.122. 23 Page | 10 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS The “doctrine of unconscionability” is considered as the pivot to many areas of equitable jurisdiction in Australia. It has been submitted that this doctrine could be more successfully utilised as one key principle upon which equity operates.24 According to Ashley Black, the approach emerging from the Australian High Court identifies the concept of unconscionability as underlying a number of equitable doctrines. Finn characterises that approach as seeking to prevent an insistence upon strict legal rights where unconscionable conduct has attended their acquisition or would inhere in their proposed exercise. 25 The Australian High Court in Commercial Bank of Australia v. Amadio, 26 held that a remedy in unconscionability [unconscionable bargain] would be available where one party unconscionably took advantage of the other’s position of weakness.27 Though the origin of the doctrine of unconscionable bargain is in the English Courts of Equity, it is found as a much more evolved and wider doctrine in Australia, compared with its application in See, A. Dunn “Equity is Dead, Long Live Equity!” [1999] 62 Mod. L. R. 141 at p.141. 24 25 P. D. Finn, “Equitable Estoppel” in Finn, (Ed.) Essays in Equity, cited in A. Black, “Baumgartner v Baumgartner, The Constructive Trust and the Expanding Scope of Unconscionability” (1988) 11 (1) University of New South Wales Law Journal 117 at p.122. 26 (1983) 151 C.L.R. 447. A. Black, “Baumgartner v Baumgartner, The Constructive Trust and the Expanding Scope of Unconscionability” (1988) 11 (1) University of New South Wales Law Journal 117 at pp.122-123. 27 Page | 11 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS England.28 Initially, the doctrine was concerned with expectant heirs who have made improvident bargains with respect to the inheritance yet to be received by them. 29 However, today, the doctrine has developed into a general ground on which any contract could be challenged and set aside if the requisites of the doctrine are satisfied.30 The approach of the Australian Courts in applying “doctrine of unconscionability” does not seem to be subjective. Apart from the moral considerations, they have paid attention to many other factors in favour of an objective approach. The main focus of the doctrine of unconscionability in the area of contract law is on the procedure in which the transaction was brought into force.31 Thus, the mere fact that the transaction turns out to be harsh in its operation, does not impeach the transaction on the See, C. S. Talagala, “The Doctrine of Unconscionability in Banking Law: New Vista For Customer Protection in Sri Lanka”, A Dissertation submitted for the Degree of Master of Laws, Faculty of Law, University of Colombo, 2008. 28 29 Fry v. Lane (1889) 40 Ch.D. 312 at 321. Also see, V. Hailsham (Ed.), Halsbury’s Laws of England, Vol. 13, (2nd ed.) London: Butterworths, 1934 at p. 25. See, M. Furmston, Cheshire, Fifoot & Furmston’s Law of Contract (15th ed.) New Delhi: Oxford University Press, 2007 at p.385 and P. S. Atiyah & S. A. Smith, Atiyah’s Introduction to the Law of Contract (6th ed.) New Delhi: Oxford University Press, 2007 at p.308. 30 Commercial Bank of Australia v. Amadio (1983) 151 C.L.R. 447 at 459, 466 & 474. Under the principle laid down in his case, the court can set aside a contract on the ground of unconscionability provided that the following core elements are present. 31 1. A party to the contract (weaker party) was under a special disability in dealing with the other party (stronger party), with the consequence that there was an absence of any reasonable degree of equality between them; and 2. That disability was sufficiently evident to the stronger party to make it prima facie unfair or "unconscientious" that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Page | 12 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS ground of unconscionability. However, when the substance of the transaction incorporates unduly harsh terms, such terms may form a part of the factual matrix that could be used to infer unconscionable conduct.32 When determining the nature of unconscionable conduct in the area of family law, courts would examine the financial contributions made by claimants of beneficial interest. On this ground, it has been held that a defendant’s assertion of the sole legal title was not unconscionable where the plaintiff had made no monetary contribution to the acquisition of property.33 The “doctrine of unjust enrichment” finds a place in Australia. The courts have applied the doctrine, even in instances where an agreement has been rendered unenforceable by operation of statutes.34 Also, Australian Courts have proceeded to the extent that See, L. Brown, “The Impact of Section 51AC of the Trade Practices Act 1974 (CTH) on Commercial Certainty” [2004] 28 Melbourne University Law Review 589 at p.595, D. Clough, “Trends in the Law of Unconscionability” (1999) 18 Australian Bar Review 34 at pp.37–38 & M. Sindone, “The Doctrine of Economic Duress — Part 1” (1996) 14 Australian Bar Review 34. 32 33 Arthur v. Public Trustee [1988] 90 F.L.R. 203, where Asche C.J. stated, at 213, “Darwin may be truly blessed with a colourful array of palm trees. But they are not here for the judges of this court to sit under.” The court was not even prepared to accede to arguments based on generalized notions of fairness and justice, which were unrelated to contributions. See also, Hibberson v. George [1988] 12 F.L.R. 735, where the court applied the unconscionability rule in Baumgartner’s Case in consideration of the financial contributions made. 34 Pavey & Mathews Private Limited v. Paul [1987] 162 C.L.R. 221. The issue, which the court had to decide in this case, was whether a licensed builder who had renovated a cottage under an unenforceable oral contract could sue for quantum meruit. By section 45 of the New South Wales Building Licensing Act 1971, a contract to carry out building work by the holder of the license was not enforceable against the other party to the contract, unless the contract was in writing, sufficiently describing the building work and signed by the parties. The High Court of Australia held that the right to recover on a quantum meruit depends on the establishment of a claim based on unjust enrichment. See, A. O’Brien, “The Page | 13 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS when there is a conflict between a statute and an equitable right, the equitable right prevails unless it is extinguished by express and clear statutory language.35 Conscience in the Sri Lankan Judiciary The law of Sri Lanka has been greatly influenced by Roman and English jurisprudence. Equity finds a place in both English law and Roman law systems.36 According to Sir Ivor Jennings and Dr. H. W. Tambiah, Sri Lanka has been heir to two sorts of equity. One is the Roman-Dutch equity, and the other is English equity. English equity was a system of law formerly administered by the Court of Chancery in England, and imported into Sri Lankan law through the Charter of Justice, 1801. Jennings and Tambiah express the view that equitable jurisdiction given by the Charter of Justice, 1801 meant administration of RomanDutch equity in an English manner.37 Nevertheless, English equitable principles have been introduced into Sri Lanka through legislation 38 and judge made law. 39 English Relationship between the Laws of Unjust Enrichment and Contract: Unpacking Lumbers V Cook” (2011) 32 Adelaide Law Review 83 at p.101. 35 See, Minister for Lands and Forests v. McPherson [1991] 22 N.S.W.L.R. 687. L. J. M. Cooray, An Introduction to the Legal System of Sri Lanka, (2nd ed.) Colombo: Lake House Investments Limited, 1992, at p.197 36 A. R. B. Amerasinghe, The Legal Heritage of Sri Lanka, Colombo: The Royal Asiatic Society, Law and Society Trust & Sarvodaya Vishva Lekha, 1999 at p.241. 37 See, for instance, Trusts Ordinance [Chapter 96, Legislative Enactments 1980, Revised Edition – Unofficial], Industrial Disputes Act [Chapter 152, Legislative Enactments 1980, Revised Edition – Unofficial] and Civil Procedure Code [Chapter 105, Legislative Enactments 1980, Revised Edition – Unofficial]. 38 Page | 14 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS principles relating to rectification of documents drawn up under a mistake, equitable relief against forfeiture in a lease, the tort of passing-off, undue influence in contracts and specific performance of contracts form part of the Sri Lankan law.40 In applying conscience through the “doctrine of unjust enrichment” Sri Lankan Courts have acceded to the Roman law perception, “it is inequitable that any person should be enriched to the detriment and injury of another”.41 This doctrine is mainly applied by our courts in areas such as, property, restitution, compensation for improvements, and contracts. The “doctrine of unjust enrichment” envisages a very broad spectrum. Professor Weeramantry observes that in jurisdictions governed by Roman-Dutch law, this doctrine is unfettered by technicalities, and there is no need to insist on proof that the general rule has been previously applied in a precisely similar situation. 42 He further submits that the Sri Lankan courts would appear to proceed rather on the general basis that relief will be granted against a person who has been unjustly enriched at the expense of another, than upon a for instance, Gavin v. Hadden [1871] 17 E.R. 247 (P.C.), Dodwell & Co. v. John [1918] 20 N.L.R. 206 (P.C.) and Kapadiya v. Mohamed [1918] 20 N.L.R. 314. 39See L. J. M. Cooray, An Introduction to the Legal System of Sri Lanka, (2nd ed.) Colombo: Lake House Investments Limited, 1992, at p.200. 40 See, C. G. Weeramantry, The Law of Contracts, 2 Vols. (Indian Reprint) New Delhi: Lawman (India) Pvt. Ltd., 1999 at p.1028. See also, Marie Cangany v. Karuppasamy Cangany [1906] 10 N.L.R. 79 & Mohamadu Marikar v. Ibrahim Naina [1910] 13 N.L.R. 187. 41 C. G. Weeramantry, The Law of Contracts, 2 Vols. (Indian Reprint) New Delhi: Lawman (India) Pvt. Ltd., 1999 at p.1030. 42 Page | 15 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS consideration of the actual form of the action, and no search is required as is sometimes thought to be necessary in English law, for an imputed contract on which to rest the claim.43 Professor Lee observes suggests that the doctrine of unjust enrichment should be confined to cases where there is an antecedent relation between the persons concerned, if the doctrine is to be kept within reasonable limits. 44 However, Professor Weeramantry very correctly submits that such restriction would unduly hamper the evolution of the doctrine towards fuller maturity so necessary in this vital and developing area of law.45 Professor Peiris in his valuable work on the Law of Unjust Enrichment in South Africa and Ceylon observes that: “The remedies against unjust enrichment evolved by the RomanDutch law are viable in a modern context, in that they contain elements of liability which are capable of being adopted and applied readily to changed circumstances. Liability predicated on the ground of unjust enrichment requires consideration of a complex of factors, involving social and economic values. The scope of the judicial function in the interpretation and application of remedies against unjust enrichment, is necessarily wide. The 43 C. G. Weeramantry, The Law of Contracts, 2 Vols. (Indian Reprint) New Delhi: Lawman (India) Pvt. Ltd., 1999 at pp.1029-1030. R. W. Lee, An Introduction to Roman-Dutch Law, (5th ed.) Oxford: Clarendon Press, 1953 at p.348. 44 C. G. Weeramantry, The Law of Contracts, 2 Vols. (Indian Reprint) New Delhi: Lawman (India) Pvt. Ltd., 1999 at p.1031. 45 Page | 16 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS extension or curtailment of the scope of a remedy or its application to circumstances analogous to those provided for by the classical law, may be necessitated by the requirements of a particular society at a given period....... The legal rules governing enrichment apply to circumstances which have an immediate bearing on many aspects of public policy. In this respect, adequate flexibility and the potential for development, essential if the remedies are to be capable of useful application at the present day, are found to characterize the existing remedies”.46 [Emphasis added] How far Sri Lankan Courts have made use of the wide scope of the doctrine of unjust enrichment and exercised flexibility in the interpretation and application of remedies against unjust enrichment is worthy of examination. In De Costa v. Bank of Ceylon, 47 Justice Weeramantry, as he then was, after making an exhaustive examination of all relevant authorities, concludes his judgement as follows: “For all these reasons I strongly incline then to the view that there is available in our law a general principle of liability based on enrichment, I do believe moreover that any other view runs G. L. Peiris, Some Aspects of the Law of Unjust Enrichment in South Africa and Ceylon, Colombo: Lake House Investments Limited, 1972 at pp.416-417. 46 47 72 N.L.R. 457. Page | 17 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS counter to the spirit and the essence of the Roman-Dutch law and that a compartmentalised method of approaching the question cuts across the gram and tradition of that eminently liberal system. There is, beneath the particular actions, a broader principle at once necessitous of and amenable to development; and of this principle the specific actions are no more than particular illustrations. Where possible, progress towards that general principle rather than regress towards the particular actions, is the obligation of the courts If the view in Nortje's case be correct we have, with much respect, reached the end of the development of the principle of unjust enrichment. A principle vibrant with life and struggling for growth, would then be locked forever in tight compartments, a prisoner of the past. Such a view bodes ill for the future, for it cramps development in what truly is and surely ought to be an area of significant advance. We cannot thus cry halt at one of the vital frontiers of the law. I hold therefore, that the plaintiff would be entitled to recover the sum claimed from the defendant on the basis, of the general principle of enrichment which is recognised by the Roman-Dutch law.”48 [Emphasis added] 48 72 N.L.R. 457 at 544-545. Page | 18 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS In People’s Bank v. Yashodha Holdings Pvt. Ltd., 49 Justice Marsoof citing the judgement of Justice Weeramantry with approval observes that: “This Court cannot show a Nelsonian eye to the fact that the Respondent will be unjustly enriched if the Appellant cannot recover the money advanced by it to the Respondent on a straightforward short term loan. If the transaction on the basis of which money was advanced to the Respondent is a nullity, then at least the money so advanced should be capable of being recovered. It is true that in Sinclair v Brougham [1914] AC 398, due to insistence of an imputed or fictional contract, the English House of Lords missed an opportunity of developing a general restitutionary remedy to redress unjust enrichment, but we cannot forget the ancient authority of Moses v Macferlan [1760] 2 Burr. 1055 in which Lord Mansfield observed at page 1012 that ‘if the defendant be under an obligation, from the ties of natural justice, to refund, the law implies a debt, and gives this action (sc. indebitatus assumpsit) founded in the equity of the plaintiff’s case, as it were, upon a contract (“quasi ex contractu”) as the Roman law expresses it).’ This reasoning has been followed in England (Re Coltman; Coltman v. Coltman [1881], 19 Ch.D. 64), Australia (In re K.L. Tractors Ltd., [1961], 106 C.L.R. 318) and Canada (Breckenridge Speedway Ltd. et al. v. R., [1970] S.C.R. 49 S.C. C.H.C. (Appeal) 21/2006 decided on 25.06.2009. Page | 19 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS 175) to found an action for money had and received, and perhaps prompted Vicount Haldane to observe in Dodwell & Co v John 20 NLR 206 at page 211, that ‘under principles which have always obtained in Ceylon, law and equity have been administered by the same Courts as aspects of a single system, and it could never have been difficult to treat an action analogous to that for money had and received as maintainable in all cases where the defendant has received money which ex aequo et bono he ought to refund’.”50 [Emphasis added] Thus, it appears that the Sri Lankan Courts have been able to make use of the doctrine of unjust enrichment as a flexible tool in preventing inequitable enrichment of a person to the detriment or injury of another and to develop the doctrine as a general principle moving beyond the traditional precincts. The doctrine of unconscionable bargain is found in Sri Lankan law as part of the English law of equity. However, it has been rarely applied by the courts in Sri Lanka.51 Such application too, appears to be in an abstract sense. In any event, the doctrine of unconscionable bargain does not find a fertile ground in Sri Lanka as in Australia. Hence, it could be observed that the aptitude of Sri Lankan Courts to broadly 50 S.C. C.H.C. (Appeal) 21/2006 decided on 25.06.2009 at p.8. Nakamuthu v. Kanthan (1908) 1 S.C.D. 48; Hinnihamy v. Gunawardena 3 C.L.R. 163; Parupathipillai v. Kandiah Arumugam (1944) 46 N.L.R. 35; Simon Appu v. Somawathie 56 N.L.R. 275 & Raleeha v. Bee Bee (2004) 1 S.L.R. 195. 51 Page | 20 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS exercise conscience is found within the equitable principle of unjust enrichment. Conclusion The principle of conscience vests equity with great amount of flexibility to guide the law in its application to evolving needs of the society. Therefore, it could be stated that conscience has been the driving factor in the equity jurisdiction, which has enabled equity to promote justice and fairness. However, in the modern context, equity has become a rigid system. Judicial discretion is essential to remove rigidities and technicalities of the law. Principle of conscience is capable of granting wide discretion to judges. However, unfettered discretion may erode objectivity and certainty of the law, which are the fundamentals in any legal system. The jurisdictions which were considered in this article have employed the principle of conscience to a greater or lesser degree, in order to make a balance between flexibility on one hand and, objectivity and certainty of the law on the other. Hence, the application of the principle has fostered a divergence of judicial approaches in these jurisdictions. The law, after all, must respond to human needs and aspirations, even if it seeks only to confine them. Legal systems must contain remnants of earlier forms of social life that render control more Page | 21 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS palatable to the public.52 Hence, twinges of conscience are unfeasible to be eliminated from justice, 53 and until such time, law and conscience will cohabit. D. R. Fox, “The Autonomy Community Balance and the Equity-Law Distinction: Anarchy’s Task for Psychological Jurisprudence” [1993] 11 Behavioural Sciences & the Law 97. 52 J. Ellul, The Technological Society, New York: Random House, 1964 at p.295, cited in D. R. Fox, “The Autonomy Community Balance and the Equity-Law Distinction: Anarchy’s Task for Psychological Jurisprudence” [1993] 11 Behavioural Sciences & the Law 97. 53 Page | 22 PRINCIPLE OF CONSCIENCE IN THE EQUITY COURTS BIBLIOGRAPHY Amerasinghe, A. R. B., The Legal Heritage of Sri Lanka, Colombo: The Royal Asiatic Society, Law and Society Trust & Sarvodaya Vishva Lekha, 1999. Atiyah, P. S. & Smith, S. 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