§ 85 Legal and Equitable Rights
In a former chapter we considered the distinction between common law and equity. We saw that these two systems of law, administered respectively in the courts of common law and the Court of Chancery, were to a considerable extent discordant. One of the results of this discordance was the establishment of a distinction between two classes of rights, distinguishable as legal and equitable. Legal rights are those which were recognised by the courts of common law. Equitable rights (otherwise called equities) are those which were recognised solely in the Court of Chancery. Notwithstanding the fusion of law and equity by the Judicature Act, 1873, this distinction still exists, and must be reckoned with as an inherent part of our legal system. That which would have been merely an equitable right before the Judicature Act is merely an equitable right still.
Inasmuch as all rights, whether legal or equitable, now obtain legal recognition in all courts, it may be suggested that the distinction is now of no importance. This is not so however, for in two respects at least, these two classes of rights differ in their practical effects.
1. The methods of their creation and disposition are different. A legal mortgage of land must be created by deed, but an equitable mortgage may be created by a written agreement or by a mere deposit of title-deeds. A similar distinction exists between a legal and an equitable lease, a legal and an equitable servitude, a legal and an equitable charge on land, and so on.
2. Equitable rights have a more precarious existence than legal rights. Where there are two inconsistent legal rights claimed adversely by different persons over the same thing, the first in time prevails. Qui prior est tempore potior est jure. A similar rule applies to the competition of two inconsistent equitable rights. But when a legal and an equitable right conflict, the legal will prevail over and destroy the equitable, even though subsequent to it in origin, provided that the owner of the legal right acquired it for value and without notice of the prior equity. As between a prior equitable mortgage, for example, and a subsequent legal mortgage, preference will be given to the latter. The maxim is: Where there are equal equities, the law will prevail. This liability to destruction by conflict with a subsequent legal right is an essential feature and a characteristic defect of all rights which are merely equitable.202