TOPIC TWO FRAUD IN EQUITY UNCONSCIONABLE TRANSACTIONS

Topics: Estoppel, Ch 10 Undue influence, Ch 7 Fraud and Mistake, Ch 8 Unconscionable Dealing, Ch 9 These topics will be covered in lectures weeks 2 and 3. LAW 2502 EQUITY 20112

INTRODUCTION Fraud in Equity ≠ Unfairness Fraud in Equity is more precise and only operates via discrete doctrines 3LAW 2502 EQUITY 2011

UNCONSCIONABILITY Unconscionability has become a buzz word but it is confusing It is confusing because unconscionability has two meanings – 1. broad meaning, as a big, unifying concept, and – 2. narrow meaning, as a small, discrete doctrine 4LAW 2502 EQUITY 2011

DISCRETE DOCTRINES Undue Influence Unconscionable (catching) Bargains Misrepresentation Estoppel Mistake Fraud In Equity 5LAW 2502 EQUITY 2011

ESTOPPEL You have seen this doctrine mostly in contracts but it isn’t limited to contracts Estoppel protects a party from the detriment which would flow from that party’s change of position if the assumption or expectation that led to it were to be ignored 6LAW 2502 EQUITY 2011

Estoppel (cont’d) There are many different forms of estoppel There is Common Law and equitable estoppel We are only looking at equitable estoppel 7LAW 2502 EQUITY 2011

Estoppel (cont’d) Traditionally, there were two sorts of equitable estoppel : – Promissory estoppel, and – Proprietary estoppel. However, the division no longer seems very important 8LAW 2502 EQUITY 2011

Estoppel (cont’d) Elements of Equitable Estoppel – Representation, – Reliance, must be reasonable so it is a likely that commercial parties won’t be using estoppel very much, and – detriment, there must be a causal link between the representation and the detriment Remedy-After satisfying the elements then the question of the remedy 9LAW 2502 EQUITY 2011

Estoppel (cont’d) Cases on Estoppel Legione v Hateley (1983 HC) – Secretary said “I think that’ll be all right, but I’ll have to get instructions” – HC held this did not amount to estoppel 10LAW 2502 EQUITY 2011

Estoppel (cont’d) Waltons Stores v Maher (1988 HC) – Waltons intended to lease premises – Advanced negotiations with the Mahers, who had land with a building on it – Walton’s solicitor made a representation – Mahers demolished existing building and started building the store for Waltons – Waltons said there was no contract and refused to go into possession 11LAW 2502 EQUITY 2011

Estoppel (cont’d) Waltons (cont’d) HC held that Waltons were estopped but different reasoning used 12LAW 2502 EQUITY 2011

Estoppel (cont’d) Verwayen (1990 HC) – V was a sailor on a ship in RAN that was involved in bad accident – V sued the Commonwealth – The C said it would not argue Statute of Limitations and combat defence – V went ahead with suing the Commonwealth – Cth then changed its policy re liability – V argued that it couldn’t 13LAW 2502 EQUITY 2011

Estoppel (cont’d) Verwayen (cont’d) By 4 to 3 the HC held that the C couldn’t change its mind However, even the four in the majority were split – Two judges on waiver, – Two on estoppel 14LAW 2502 EQUITY 2011

Estoppel (cont’d) Giumelli v Giumelli (1999 HC) Parents made oral promises relating to their land to Robert Later his parents gave R a choice, the land or his new wife R argued this was an invalid choice, as the land was already his. 15LAW 2502 EQUITY 2011

Estoppel (cont’d) Giumelli cont’d The full court of the WASC agreed with R, the promises created an estoppel and that was remedied in this case by a CT The HC agreed that there was an estoppel but differed with the court below over the remedy 16LAW 2502 EQUITY 2011

Estoppel (cont’d) Giumelli (cont’d) The appeal to the HC was about the remedy for the estoppel the HC held that the Court could award a CT but first decide whether there is an appropriate equitable remedy that falls short of the imposition of a trust 17LAW 2502 EQUITY 2011

Estoppel (cont’d) Giumelli cont’d The HC held that CT was not the appropriate remedy, which was (in this case) an equitable lien Crt stressed the importance of detriment Remedy may not involve making good teh assumption 18LAW 2502 EQUITY 2011

UNDUE INFLUENCE U/I → transaction being set aside Barclays Bank divided U/I into – Actual U/I (class 1), – Presumed U/I (class 2) from either Certain Relationships (class 2 A) Proved on the facts (class 2 B) 19LAW 2502 EQUITY 2011

Certain Relationships Parent/Child, Spiritual advisor/ follower, Client/ solicitor, Doctor/ patient, fiancé/ fiancée (but not husband/ wife) 20LAW 2502 EQUITY 2011

Husband/wife and U/I No presumption of U/I but... Dixon J in Yerkey v Jones “The special equity theory” So it protecting married women In England, Yerkey has been rejected In England, after Barclays protection revolves around notice 21LAW 2502 EQUITY 2011

Husband/wife and U/I (con’t) But in Australia, the English position has not been accepted, so it is not based on notice What is the Australian approach today? For a while it was believed that Yerkey was subsumed into broad unconscionability principle coming from Amadio But the HC in Garcia rejected this 22LAW 2502 EQUITY 2011

Husband/wife and U/I (Garcia) Trial judge applied Yerkey NSW CA applied a broad principle of unconscionability and applied Amadio The HC applied Yerkey and it held that Amadio did not apply and that it did not make actionable some form of broad unconscionability 23LAW 2502 EQUITY 2011

Husband/wife and U/I (Garcia cont’d) The HC also held in Garcia that the protection in Yerkey is based upon trust and confidence Further the HC also held that notice by the third party (usually a bank) is not needed under Yerkey for the transaction to be set aside but is needed under Amadio and Barclay 24LAW 2502 EQUITY 2011

Class 2B Undue Influence Where not one of the certain relationships have to show it on the facts Johnson v Buttress (1936 HC) 25LAW 2502 EQUITY 2011

Independent Legal Advice Independent Legal Advice is very important to show that person not acting under undue influence But it can be very hard to satisfy Bester v Perpetual Trustee (1970 NSWSC) 26LAW 2502 EQUITY 2011

Basis of U/I The basis is not settled According to Dixon in Johnson v Buttress the doctrine based on ascendancy But according to Mason in Amadio the doctrine is activated when the will of the innocent party is not independent and free But according to Deane in Amadio the doctrine looks to the quality of the consent 27LAW 2502 EQUITY 2011