· Web viewBasically, other legal rules likely apply to a contractual relationship – make sure that they don’t override fiduciary duties. Defence of informed consent To waive...

Undue Influence

Common Law Position (both UI and UC)

Person is bound by terms of contract, cannot revoke gifts (e.g. Equuscorp; Toll v

Alphapharm).

o Equuscorp: ‘The respondents each having executed a loan agreement, each is

bound by it. Having executed the document, and not having been induced to do so

by fraud, mistake, or misrepresentation, the respondents cannot now be heard to

say that they are not bound by the agreement recorded in it.’

o Toll: ‘The representation [of a signed contract] is that the person who signs either

has read and approved the contents of the document or is willing to take the

chance of being bound by those contents.’

Can only reverse transactions in extreme cases:

o Incapacity, non est factum (not deed of alleged signatory), fraud, mistake, duress.

Undue Influence

Undue influence can cause a court to set aside the transaction.

o When a stronger party (via confidence, control, domination or influence) is used

to influence a weaker party to enter into a transfer of property.

Court’s role is to determine how WP’s intention to contract was produced, not whether

WP knew what they were doing (Huguenin v Basely; approved in Bridgewater v Leahy).

Applies to inter vivos transactions – wills are covered by different rules.

Principal case: Johnson v Buttress:

o Person with diminishing mental capacity (B) transferred property to another (J).

B’s son sued, arguing he should have received the house. Therefore J had to show

that B’s sale was a freely desired gift to her and not because of UI.

o J couldn’t prove it, so she lost the title.

Notes by All Things Law – http://law.timdavis.com.au - A Law Forum to discuss everything about Studying Law - from Law Subjects, Notes and Questions to Law Clerkships and Jobs. Credit: Christopher Angus.

http://law.timdavis.com.au/

Presumed Relationships

Certain relationships are considered to involve such trust and confidence, as well as

likelihood of SP exercising authority over WP, that they are automatically deemed to be

ones of UI.

o e.g. Solicitor-client; doctor-patient; religious advisor-disciple; parent-child;

guardian-ward.

o However, not husband-wife (Yerkey v Jones).

It is not considered natural in these relationships to expect one party to give property to

another (Yerkey v Jones).

If PR present, SP has to rebut this presumption (Johnson v Buttress).

What if not a presumed relationship?

Not to worry – the plaintiff simply has to prove that there was a relationship of influence

rather than the court automatically assuming one existed.

Once a relationship of influence is shown to exist…

The SP has to rebut this presumption in order to enforce the transaction. Can rebut by

demonstrating that:

o ‘the gift was the independent and a well understood act of a man in a position to

exercise a free judgement based on information as that of the donee’ (Johnson v

Buttress).

Why does SP have to do this?

o ‘When he takes from that man a substantial gift of property, it is incumbent upon

him to show that it cannot be ascribed to the inequality between them which must

arise from his special position’ (Johnson v Buttress).

o Not sufficient to show that WP understood/assented to deal – intention must be

free of influence by SP.

If SP can’t prove that UI wasn’t present, the court will find that there’s been an abuse of

power/authority, or at least that the close relationship makes it difficult to hold in SP’s

favour.



Third Parties

Often occurs in context of guarantors being subjected by debtor’s UI to help them with

creditors (i.e. CBA v Amadio).

If creditor (i) has actual knowledge of debtor’s UI; (ii) had knowledge of the

circumstances where UI arose, or (iii) ought to have known that UI could occur, their

transaction can be set aside.

o (CBA v Amadio – Since CBA ought to have known that dodgy son was heavily

influential on parents, it acted upon the UI and so could have its contract

reversed).



Unconscionable Dealing

Not undue influence – a parallel, but separate, jurisdiction of equity.

Occurs when one party has a ‘special disability which the other party exploits (Blomley v

Ryan):

o Kitto J: ‘whenever one party to a transaction is at a special disadvantage in dealing

with the other party because of illness, ignorance, inexperience, impaired

faculties, financial need or other circumstances affect his ability to conserve his

own interests, and the other party unconscientiously takes advantage of the

opportunity thus placed in his hands.’

o Fullagar J: age, sex and ‘lack of assistance or explanation where assistance or

explanation is necessary.’

o Lack of English (CBA v Amadio).

Includes transactions involving gifts (Louth v Diprose), contracts of sale (Bridgewater v

Leahy), and guarantees (CBA v Amadio).

Differences from Undue Influence:

o UI mainly deals with inappropriate or undue ‘control, domination, assertion or

persuasiveness’ over a party.

o UC in comparison focuses entirely on special disadvantage of one party. Also

easier to establish a claim with this doctrine.

Special Disability (Amadio UC)

1. A special disability must exist in the innocent party.

o Must be one that ‘seriously affects the ability of the innocent party to make a

judgement as to his own best interests’ (CBA v Amadio).

o Doesn’t have to be detrimental to plaintiff (CBA v Amadio).

2. D should be aware of P’s special disadvantage.

o If D has actual knowledge then no difficulty (Louth v Diprose).

3. D exploits P’s SD to get beneficial bargain.

o If two previous elements established by plaintiff, defendant must prove that ‘the

transaction was just, fair and reasonable’ (Fry v Lane; CBA v Amadio).



o Passive acceptance of a benefit when P has SD satisfies exploitation requirement

(Bridgewater v Leahy).

o Inadequacy of consideration may be relevant to make decision (Blomley v Ryan).

Though not essential to prove UD (Amadio).

HOWEVER:

o Transaction won’t necessarily be set aside if bargain itself is unfair (ACCC v

Berbatis):

Lessor had no obligation to renew and so was allowed to dictate unfair

terms to lessees.

Gleeson CJ: ‘many, perhaps even most, contracts are made between parties

of unequal bargaining power, and good conscience does not require parties

to contractual negotiations to forfeit their advantages, or neglect their own

interests.’

Applies to gifts (Wilton v Farnworth; Louth v Diprose) contracts of sale

(Blomley v Ryan) and contracts of guarantee (Amadio).

Spousal Volunteer Guarantees (Garcia UC)

If married woman enters into guarantee for husband’s benefit, and subject to undue

influence or didn’t understand nature/effect of guarantee:

o Presumption arises against lender that it knew of disability (Yerkey v Jones).

Unconscionable for D to enforce transaction where (Garcia v NAB, updating Yerkey):

o Surety didn’t understand purpose/effect of transaction;

o Transaction voluntary;

o Lender is taken to have understood that husband may not give sufficient details to

wife about guarantee; and yet

o Lender didn’t take steps to explain transaction/find out what she knew.

Despite this, a litigant does not necessarily have to meet all these requirements – not

possible or desirable for equity to do this:

o Jenys v Public Curator: ‘Such cases do not depend upon legal categories

susceptible of clear definition and giving rise to definite issues of fact readily

formulated which, when found, automatically determined the validity of the

disposition.’



Difference between Garcia and Amadio

GARCIA

Plaintiff a volunteer, victim of UI or didn’t understand transaction, lender aware

borrower/guarantor spouses or closely related, and lender didn’t take steps to ensure

guarantor understood transaction.

Confined to security-giver seeking to avoid security transaction.

No need for special disadvantage, but P must be a volunteer and lender must know of

spouse relationship.

Defences for:

o Undue influence component

Lender must show guarantor received independent advice.

o Lack of knowledge component

Lender must show adequate steps taken to reverse this.

AMADIO

Special disability, known to enforcing party, unconscientious advantage taken.

Applies to any party avoiding transaction.

P doesn’t have to be a volunteer, but lender must have actual/constructive knowledge of

special disability.

Defences:

o Must show no unconscientious advantage taken.

Unity of Doctrine of Unconscionability?

No, not much of a proper unity at all.

Although equity (and UC by association) generally intervenes to prevent a stronger party

acting inequitably and in bad conscience by trying to enforce/retain benefit of an

agreement, this doesn’t help determine what unconscionable conduct is.

Amadio is a generally straightforward case in which to demonstrate unconscionability:

o Clearly requires the existence of SD, knowledge of SD by SP, and exploitation of

WP.



o Also extended scope of UC to include constructive knowledge of SD, and in

obiter stated that UC should not be used merely to remedy a bad bargain, but the

facts to which they were applied (i.e. dodgy bank rep) were uncontroversial and

easily fit within UC’s framework.

o However, by leaving a non-exhaustive list of circumstances in which SD could

arise problems were caused by subsequent cases.

Bridgewater appears to have been determined almost solely on the desire of the High

Court to remedy a bad bargain rather than anything particularly related to

unconscionablity.

o Although it ostensibly applied the Amadio principles, the Court seems to have

ignored evidence showing that the deceased had good reason to effect the

transaction, as well as undisputed evidence showing that the deceased was in good

health, educated and retaining his mental faculties.

All in all, there was no special disability clearly defined.

o The main factor in the decision seems to have been the rashness of the transaction,

as well as the fact that the nephew was the party to suggest it, not the deceased.

Dal Pont: ‘One wonders whether the majority would have decided any

differently had the idea for the transaction had come solely from the

deceased. If so, what the court is saying is that sowing the seed in the

mind of another person as to what he or she could do with his or her

property can of itself amount to exploitation even though the course

which the transferor chooses to adopt also serves his or her ends — a

remarkable conclusion.’

Garcia, in comparison, uses a completely different principle to establish unconscionable

conduct – namely, focuses on the trust and confidence a husband and wife have for one

another.

o Although the original principle, Yerkey v Jones, has been criticised for its sexist

and outdated perspective of the role of women in relationships, the HCA

interpretation emphasises that a husband may innocently give a poor explanation

of a guarantee to his wife.

o This isn’t attributable to an imbalance between parties or a vulnerability to

exploitation (as per Amadio) – only the relationship dynamic they hold.



o This case ultimately seems to take the same approach as Bridgewater in terms of

waiving firm principle in favour of righting the immediate wrong of the case at

hand.

Dal Pont: ‘To premise the presence or otherwise of unconscionable

conduct on a black and white distinction, such as whether or not a

transaction is voluntary or a relationship a de jure marital one, seems to go

against the multifaceted inquiry which is usually part and parcel of any

inquiry in to the blameworthiness of a person's conduct.’

Hard to fathom how external factors that a creditor cannot control

can be construed to indicate unconscionable conduct.

Based on these cases, any strongly defined concept of unconscionable conduct has been

rendered uncertain by later HCA cases. The trend towards individualised justice, whereby

each court twists overarching and vague principles to suit the facts of each case, has

hindered the foundation of a core concept of unconscionability that can be used in a

consistent and effective manner.



Fiduciary Relationships

General Definition

A relationship in which one of the parties is not free to pursue his/her own separate

interests.

o ‘The essence of a fiduciary relationship, by contrast, is that one party exercises

power on behalf of another and pledges himself or herself to act in the best

interests of the other’ (Norberg v Wynrib).

Fiduciary duties are obligations imposed by a court of equity, and are not consensually

agreed to by parties.

Duties can be breached even if unintended – strict liability:

o ‘The rule of equity which insists on those who by use of a fiduciary position make

a profit, being liable to account for that profit, in no way depends on fraud, or

absence of bona fide … the liability arises from the mere fact of a profit having …

been made’ (Regal Hastings).

Dramatically different from common law, in which the underlying principle is the free

pursuit of self-interest, regardless of good faith or fairness.

o ‘a concept of a duty to carry on negotiations in good faith is inherently repugnant

to the adversarial position of the parties involved in negotiations …each party is

entitled to pursue his own interest, so long as he avoids making

misrepresentations.’ (Walford v Miles)

o An architect can use materials for a building that allows him to receive a

commission, and so long as the products are not inferior or aren’t specified in the

contract this is not wrong at common law.

However, ‘only the third degree of legal altruism – demanded of

fiduciaries – requires self denial of that kind’ (Birks, The Content of

Fiduciary Obligation).



Categories of Fiduciary

Accepted categories: trustee-beneficiary; agent-principal; solicitor-client; employee-

employer; director-company; and partners (Hospital Products Limited).

o ‘The critical feature of these relationships is that the fiduciary undertakes or

agrees to act for or on behalf of or in the interests of another person in the exercise

of a power or discretion which will affect the interests of the other person in a

legal or practical sense’ (Mason J in Hospital Products).

However, the categories have not closed (Hospital Products).

o Example is doctor-patient, if doctor giving advice (Breen v Williams).

o ‘…the difficulty…is that the law has not, as yet, been able to formulate any

precise or comprehensive definition of the circumstances in which a person is

constituted a fiduciary in his or her relations with another’ (Breen v Williams).

o If a party is not free to pursue their separate interest, likely to be a fiduciary.

Other factors such as presence of relationship of trust/confidence, or

ability to exercise client’s powers (as per trustee) won’t necessarily mean a

fiduciary relationship exists.

May simply point to tortious duty of care or, conversely, a fiduciary

relationship could arise with no rights being held on behalf of principals

(i.e. solicitors).

o Can argue that as a result fiduciary categories remain uncertain. But this is not a

bad thing – it simply shows equity’s flexibility.

Nature of fiduciary obligations

The utmost duty to disclosure any conflicts and profits by a fiduciary forms the core of a

fiduciary relationship (see Breen v Williams).

Positive obligations of a fiduciary:

o Duty to disclose unusual terms in agreement (UDC v Brian).

o Duty to disclose material to prospective investors (Directors of Central Railway v

Kisch).



Fiduciary cannot pursue business opportunity if such conduct would put him in position

where fiduciary obligations conflict with personal interests. As such, any potential

conflict must be avoided.

o ‘A man of integrity can be a defaulting fiduciary without ceasing to be honest’

(Hughes Aircraft v Airservices).

o ‘The rule of equity which insists on those who by use of a fiduciary position make

a profit, being liable to account for that profit, in no way depends on fraud, or

absence of bona fide … the liability arises from the mere fact of a profit having …

been made’ (Regal (Hastings) Ltd v Gulliver).

In case, directors put own money into venture that their company could not

afford, all parties reaped profits. But by participating in an opportunity of

the company the directors had breached FD and so had to return their

share of money.

Should be clear that fiduciary breaches are not always fault-based, but are

ultimately relationships held to exceptionally high standards.

Commercial relationships and fiduciaries

Quite often a purely commercial agreement conducted at arms length and on equal

footing indicates no fiduciary duty (Gibbs CJ Hospital Products).

o However, Mason J also stated that ultimately each case must be examined on its

merits to determine if a fiduciary relationship is present.

Fiduciary relationships can exist, and even be forced to accommodate to the terms of, a

contractual arrangement (Hospital Products).

o i.e. Can contract out of fiduciary duties.

Joint ventures

Fiduciary relationships can exist between parties attempting to form a joint venture

(United Dominions v Brian).

o ‘A fiduciary relationship can arise and fiduciary duties can exist between

parties who have not reached, and who may never reach, agreement upon the

consensual terms which are to govern the arrangement between them’



This case meant that equitable duties, such as making full and frank

disclosures or avoiding any conflict of interest, would apply during

negotiations to enter into joint ventures.

Less likely to be present in commercial transactions where parties are acting at arm’s

length (Gibson Motorsports).

o Although such transactions are ‘ripe with fiduciary potential’, if this is not

realised then there is no such duty.

o All the above parties embarking on separate interests whilst negotiating a joint

venture was evidence that all were acting in distinctively non-fiduciary manner.

In England, equitable jurisdiction enlivened because one party removed itself from the

market so the other could purchase assets, the capital being shared as part of an intended

JV (Banner Homes).

o ‘The equity is invoked where the defendant has acquired property in

circumstances where it would be inequitable to allow him to treat it as his own,

and where because it would be inequitable to allow him to treat the property as his

own, it is necessary to impose on him the obligations of a trustee in relation to

it. It is invoked because there is no bargain which is capable of being enforced. If

there were an enforceable bargain there would have been no need for equity to

intervene in the way that it has done in the cases to which I have referred.’

Extent of fiduciary duties within a relationship

Can be fiduciary as to none, all or some of its aspects.

o ‘It is important to appreciate that the existence of a fiduciary relationship does not

determine the content of the duties owed by one fiduciary to another. It has long

been recognised that the nature and extent of the duties depend on the

circumstances surrounding the particular relationship and the context in which

relief is sought’ (News Ltd).

In contractual relationships, the nature of fiduciary obligations may be determined by the

terms, if any exist.

o Noranda v Lachlan: Selling an interest in JV falls outside the scope of fiduciary

duties and so exiting partner does not need to act in the interests of other partners.



o Also in Noranda, fiduciary obligations do not supply rules of positive obligations

owed – e.g. if director makes decision to make appalling invest, but doesn’t act in

self-interest, only breaches contractual duties as fiduciary principles would not

state whether or not he’s breaching FD.

Simply stating that a relationship is fiduciary does not provide a complete description of

the legal nature of the relationship.

o ‘…the extent and nature of the fiduciary duties owed in any particular case ought

to be determined by reference to any underlying contractual relationship between

the parties. Thus, in the case of an agent employed under a contract, the scope of

his fiduciary duties is determined by the terms of the underlying contract’

(Henderson v Merrett Syndicates).

Basically, other legal rules likely apply to a contractual relationship –

make sure that they don’t override fiduciary duties.

Defence of informed consent

To waive fiduciary duties, must make full disclosure to party who is owed duty, and that

party must consent.

o Strict application – if substantial documentation to be given to beneficiaries then

this must be disclosed (Boardman v Phipps).

In above case solicitor did not get permission from a trustee who was not

sui juris. As a result he was liable even though all other trustees had

approved the measure.



Accessorial Liability in Equity

Property Rights

To be one, it:

o Must be both capable of assignment to third parties and capable of binding

third parties without their consent.

o Cannot be destroyed just because the property comes into the possession of a third

party.

Generally, if one party (X) holds another’s (Y) item of property, Y has an equitable title

and can enforce the return of the property.

o However, if X is a bona fide purchaser for value without notice, the equitable

title is extinguished – Y cannot get the property back.

Types of claims against trustees

Proprietary:

o Plaintiff asserts that item of property is held by defendant on trust.

o Claim is not for the loss incurred by P, but for the property itself (therefore if

property value increases, the plaintiff benefits from this).

Personal:

o Plaintiff asserts claim against trustee for loss and illegal breach of trust assets.

o Effectively claims security interest over asset illegally acquired in order to get

back what was originally lost from the trust (if property value increased in D’s

hands, P doesn’t benefit from this).

Barnes v Addy Claims

Case principle

Principle (Lord Selborne):

o ‘Those who create a trust clothe the trustee with legal power and control over the

trust property, imposing on him a corresponding responsibility. That responsibility

may no doubt be extended in equity to others if they are found either making

themselves trustees de son tort [by assuming duties wrongly – primary liability],

or actually participating in any fraudulent conduct of the trustee to the injury of



the cestui que trust [beneficiary – fraudulent conduct according to common law

principles].’

o ‘But, on the other hand, strangers are not to be made constructive trustees merely

because they act as the agents of trustees in transactions within their legal powers,

transactions, perhaps a court of equity may disapprove, unless those agents

receive and become chargeable with some part of the trust property, or unless

they assist with knowledge in a dishonest and fraudulent design on the part of

the trustees.’

Application in Barnes v Addy:

o Not necessary to affect the outcome – the third parties (solicitors) didn’t receive

ant trust property, nor was it argued that they had knowledge of Barnes’ intended

misappropriation. Furthermore, the express trustee’s (Addy) default was not

dishonest or fraudulent.

Additional note:

o Although Lord Selborne formulated the third party liability principle, there were

other cases in the 1840’s that held that a stranger might be liable for knowingly

inducing or assisting the commission of a breach of trust, even if the trustee had

not been dishonest or fraudulent.

Relates to second limb claims, which require bad trustee conduct.

o The High Court in Farah noted these cases, and accordingly has left open the

possibility that third parties may in future be liable under innocent breaches of

fiduciary duty.

First limb – Knowing Receipt

Lord Selborne’s actual expression ‘receive and become chargeable’.

Plaintiff must prove elements of this cause of action (Farah). Must demonstrate three

things:

1. Defendant received trust property beneficially (not merely as an agent for

another);

Information is not trust property for this limb (Farah).

2. Defendant knew property was part of the trust; and

3. D knew of circumstances that made payment a misapplication of trust funds.



Knowledge requirement – first four parts of the Baden 5-part classification

(Consult Development). Doesn’t have to be aware at time trust property

acquired, but if later realises and continues to use property as own then liable.

o Most stringent requirement – knowledge of circumstances that would

indicate the facts to a reasonable and honest person (Baden v Societe-

General).

Historically in England, liability required knowledge amounting to ‘a want of

probity’ by recipient – more stringent requirement than in Australia.

Second limb – Knowing Assistance

Three elements (as above, burden of proof on plaintiff):

1. A fraudulent breach of trust by the fiduciary must have occurred (Farah [180]);

Not all breaches dishonest/fraudulent, but Australian cases (Consul; Farah)

rely on common law principles and not equitable.

o Also see Farah High Court regarding 1840 cases – in future Australian

courts may find scope to make third party liable even when fiduciary is

not at fault, and can do so whilst following orthodox manner.

NOTE: Fiduciaries no longer need to fraudulent breach trust in England

(Royal Brunei; Twinsectra).

2. Defendant must have assisted in that breach;

Can be omission by D – failing to stop trustees’ breach. However, assistance

must be of some significance.

3. D must have had knowledge of the breach.

Same actual/constructive requirement as the first limb.

In England, dishonesty has replaced knowledge (Royal Brunei; Twinsectra).

o Reflects modern societal views about third party liability – especially

when professionals are assisting trustees and become embroiled in

liability (i.e. Enron, HIH).

o cf Lord Selborne – trust performance would benefit from solicitors and

so reluctant to extend liability to them.



Farah and the NSW Court of Appeal

Case Facts

Joint venture between Farah and Say-Dee to purchase and redevelop land (No. 11).

However, the council refused development applications as land too narrow without

amalgamation with adjacent lots.

After refusal Mr Elias (F), his wife and 2 daughters bought surrounding lots. Farah then

tried to buy out Say-Dee’s share in No. 11 – SD refused, F brought proceedings seeking

trustee to be appointed and property sold.

SD counterclaimed, arguing F held its interests in surrounding property on constructive

trust. F won at trial, but overturned by Court of Appeal on the basis of unjust enrichment,

despite neither claimant raising this issue.

High Court strongly rejected COA’s decision and reasoning.

Scope of Fiduciary Obligation and ‘informed consent’:

COA held Elias did not properly obtain informed consent in order to avoid breaching

fiduciary duty.

High Court held otherwise - the ‘sufficiency of disclosure can depend on the

sophistication and intelligence of the persons to whom disclosure must be made’ –

and so Elias had adequately discharged his fiduciary obligations in that respect.

Knowing Receipt/Unjust Enrichment:

The proposal by the COA to allow unjust enrichment to run alongside knowing

receipt (and Say-Dee’s proposal replacing the first limb claim with unjust enrichment)

was thoroughly rejected by the High Court.

o It was an unjust solution purely because neither claimant had raised the issue –

it was an independent creation of the COA.

o A restitution-based response, whether complementing or replacing knowing

receipt, would cause serious confusion in the lower courts. This is because

they would not know whether to enforce a flawed restitution cause of action

(COA) or High Court obiter (Consul).

o There was no valid justification to modify the existing causes of action. In

fact, the COA reasoning was so unsupported that the High Court felt that there

was a belief that restitution had an inalienable right to exist.



Interestingly, although the Court of Appeal attempted to refer to ‘Birks’ as

a general authority for its decision, the High Court found that Birks had

actually retreated from his initial support for restitution in this field.

o Ultimately, the Farah High Court held that unjust enrichment exists only if there

is a relevant qualifying or vitiating factor falling into a pre-existing category.

Referred cases such as David Security indicate that courts do not

determine whether a matter is unjust by reference to subjective evaluation

of fairness or unconscionable conduct.

UE is not a definitive legal principle on its own terms because (quoting

Gummow) its existence could restrict dynamism and substance in the legal

field, result in new fictions being created to support its thesis, distort

existing legal principles and ultimately create serious uncertainty in

Australia’s legal system.

Knowing Assistance

The High Court reiterated that there was no need to look to English cases in regards to

dishonesty or ‘the jury question’ – Consul remains the authority for assessing which

parties are liable under the second limb claim.

‘Purple Patch’ or Isolation?

The decision in Farah could be regarded as stubbornness except for the fact that the

High Court was undoing what should be wholly regarded as bad law.

Quoting Gummow J, the Court held that ‘general principle is derived from judicial

decisions upon particular instances, not the other way around’

o In contrast, the Court of Appeal had favoured academic notions of an ‘ideal

taxonomy’, and by doing this had created a principle that, first, was unsupported

by and heavily clashed with existing Australian law and, second, unnecessary for

fair and just outcomes.

o In regards to the latter point, the High Court emphasised that failure of a party to

obtain a favourable outcome was in itself not unjust – the principle itself would

have to be flawed to justify change.

Based upon these facts, Farah represents a clarion call to orthodoxy and a return to

existing precedent, which have been shown to create good and certain law.



Misrepresentation and Mistake

Misrepresentation – Common Law

CL Position

If misrepresentation fraudulent (i.e. was done dishonestly) a contract can be rescinded:

o ‘First, in order to sustain an action of deceit, there must be proof of fraud, and

nothing short of that will suffice. Secondly, fraud is proved when it is shown that

a false representation has been made (1) knowingly, or (2) without belief in

its truth, or (3) recklessly, careless whether it be true or false…’ (Derry v Peek).

o However, if a duty of care is present certain innocent misrepresentations are liable

for damages at law (Hedley Byrne v Heller).

Rules as to causation:

o Fraudulent statement must be a cause, not the absolute cause inducing entry into

the contract.

o Influence of statement on plaintiff assessed objectively.

o Remoteness – fraudulent defendant must make amends for all damages directly

attributable to fraudulent inducement.

Damages place plaintiff in position would have been in if fraud not

committed (Hedley Byrne v Heller).

Rescission can be done at Common Law?

Yes, this proprietary remedy can be granted transfer of title was induced by fraudulent

misrepresentation. Permits rescission of contract and re-vesting of title in plaintiff.

Although a proprietary remedy, rescission has both personal and proprietary

consqeuences:

o Personal – Permit victim to avoid contract at his/her discretion.

o Proprietary – Title vested in transferee is conditional, and if power

holder/plaintiff successfully exercises rescission power the title:

(i) re-vests in plaintiff; and

(ii) power holder’s proprietal rights become vested in defendant

(contractual counterparty).



o Sounds confusing, but basically proprietal rights are transferred simultaneously so

that there is no multiplication of rights.

Ensures restitutio integrum (restoration to original position) occurs.

Steps required when rescinding contract

The power holder:

o Must elect to rescind while power survives;

o Mustn’t have affirmed contract while being aware of fraud; and

o Must be in position to make restitution of any benefits received under the contract.

i.e. If plaintiff got money from fraudulent sale, must be able to return in to

get the property back.

In Specie restitution:

o After rescission, if property is being returned it must be returned in present form

under common law – cannot sell it and distribute the profits.

e.g. A induced to enter fraudulent contract to transfer title of painting to B

in exchange for title in B’s car. If B found to have induced A, conditional

common law title passes to B subject to power to re-vest title in A. If A

decides to re-vest title in painting, must make in specie restitution of B’s

car.

However, this power to rescind can be destroyed:

o ‘Nemo dat quod non habet’ – noone gives what he does not have.

Cardinal property law rule: If X gain possession of property from Y, who

does not have ownership rights, X will also be denied such rights.

‘[T]he assets come to the liquidator with their history and inherent

characteristics. Although the liquidator takes the assets on behalf of the

creditors, third parties retain any rights which ensure to them as a result of

that history or those characteristics’ (Vagrand v Fielding).

o But because the power is absolutely proprietary in nature, it is destroyed by

good faith purchaser of title for value without notice.



Common Law Cases

Car & Universal Finance Co Ltd v Caldwell

Caldwell sold car to dodgy dealer, when cheque bounced C rescinded successfully.

In meantime car sold a number of different people, eventually ending up with C&U who

purchased in good faith/for value.

However, rescinding contract first meant that title already re-vested in C:

o ‘The contract of sale to these rogues was avoided and Caldwell then became the

owner of the car again. It was only after he avoided it (so that it was once again

his property), that these rogues purported to sell it to Motobella and Motobella

purported to sell it to C & G Finance. Those sales were ineffective to pass the

property because it had already re-vested in Caldwell.’

Re Eastgate; Ex parte Ward [1905] 1 KB 465

Fraudulent purchaser bought furniture from vendor on credit. Purchaser engaged in

bankruptcy, vendor entered the house and repossessed furniture.

Purchaser formally went bankrupt, his property vested in trustee. Trustee sued vendor for

possession of taken furniture.

Court – right to rescind required against both purchaser and trustee. Vendor had not

engaged in conversion by taking back furniture:

o ‘the trustee acquired the interest of the bankrupt in the property subject to

the rights of third parties. One of those rights in this case was the right of the

vendors of the goods to disaffirm the contract and to retake possession of the

goods.’

Equity’s concurrent jurisdiction with common law

Equitable remedies available if contract void at common law.

o Notably, if power holder’s right to rescind ineffective because in specie restitution

not possible, equity intervenes to treat the exercise as valid and therefore re-vest

rights in equity at that time.

Full proprietary and personal restitution can be decreed at the time of the subsequent

equity suit.



o Equity takes less substantial view of the requirements of restitution in integrum;

o CL lacks means of adjustment to provide a remedy where one or other party

benefits from the possession of property.

e.g. Shareholder receives dividends from shares before exercises right to

rescind. Common law won’t allow rescission because s’holder has gained

profit from the deal, but in equity this will be ignored and restitution

granted.

Rescission differences – Alati v Kruger leading case:

o Essentially, equity can re-vest equitable title to property in a much wider variety

of cases than CL.

‘Of course, a rescission which the common law courts would not accept

as valid cannot of its own force revesting legal title to property which

had passed, but if a court of equity would treat it as effectual the equitable

title to such property revests upon the rescission.’

If CL can’t find rescission valid equity doesn’t apply, but if CL

does approve of rescission equitable remedies are relevant.

o Proprietary consequences of rescission in equity is to make the parties to the

contract (and those who take through them) trustees of the re-vested titles for

their contractual counter-party.

Effectively a resulting trust (El Ajou v Dollar Land Holdings).

Innocent Misrepresentation

In a nutshell – common law provides no remedy, Equity does.

o Rescission is the remedy equity provides (Redgrave v Hurd)

‘Where rescission [on the ground of misrepresentation of a material fact] is

claimed it is only necessary to prove that there was misrepresentation;

then, however, honestly it may have been made, however free from

blaming the person who made it, the contract, having been obtained by

misrepresentation, cannot stand’ (Derry v Peek).

o Bars to rescession: As per fraudulent misrepresentation, i.e. bona fide purchase,

affirmation, lapse of time.



Rescission & Restitution vs Common Law Damages

Rescission/restitution dissolves contract ab initio (from the start) so no claim of

contractual damages can occur.

However, at CL rescission doesn’t prevent a victim bringing other claims against D.

o So can rescind contract, re-vest title and get resitution (if profits made) and then,

providing no element of double recovery, initiate a claimm for damages in deceit

(i.e. for fraudulent conduct).

Equitable Fraud

Definition

Different meaning in equity than common law:

o Common law – dishonesty, intention to cheat.

o Equity – much broader, acts as preventative measure rather than dealing with

issues after problems occur.

Jurisidiction of equity a prophylactic.

‘By disarming the parties of all legal sanction and protection for their acts,

they suppress the temptations and encouragements which might otherwise

be found too strong for their virtue’(Story).

Even innocent wrongs will be held liable – an extremely high standard of

openness and fairness by parties (Maguire v Makaronis).

Other Heads of Equitable Fraud

Inducement:

o Needs to be more than inequality and capacities of parties, i.e. EF (MGL).

‘…the touchstone is whether the pressure (unlawful or lawful) amounts to

conduct which is unconscionable; but that, as stated in [12-090] below, is

no more than saying that it is fraudulent in the equitable sense.’

Part Performance:

o Equity can decree specific performance even if contract rendered unenforceable

by Statute of Frauds (modern counterpart – s 53(1) Property Law Act).



Only possible if D reasonably aware of P’s acts and then relies on statute

to render the contract unenforceable

Basically indicates that D is being sneaky by not remedying the situation.

However, no more new heads of EF according to MGL:

o ‘The door may now appear shut to fresh appeals but the terms in which fraud is

seen to appear in various cases will provide sufficient lee-ways for further

development.’

o Such a principle upholds the notion that Courts should adhere to precedent –

and should not seek to stray from it.

Mistake

General Rule

Equity can rescind a concluded contract that parties have entered under mutual, common

or otherwise unilateral mistake, leaving ‘defective data’in P’s head.

Generally, all such contracts have either an:

1. Induced Mistake (error brought on by D’s misrepresentation). Equity is more

likely to be intervene in this type of mistake.

2. Self-Directed Mistake (D innocent of any wrongdoing).

Equity won’t intervene if contracting parties of one mind (ad idem).

o Only intervenes when plaintiff is subjectively mistaken to the bargain and, if

objectively construed, there is conduct suggestive of contractual formation and

the defendant is not at fault.

If it does intervene, equity does so in concurrent jurisdiction (both CL and equity) or

auxiliary jurisdiction (equity supplements CL).

Heads of Mistake

Unilateral:

o Mistake made because guilty party knew about error and induced contract

anyway.

o If acknowledged that understanding of one party correct, will fit into this

subcategory (Goldborough Mort v Quinn).

Mutual:



o Both parties make mistakes, but different from one another.

o Offer and acceptance are in their true meanings different, so no contract created

(Sharp v Thomson).

Common:

o Both parties make the exact same mistake.

o Transfers made under this mistake can be subject to restitution in integrum.

However, only if misapprehension fundamental and party seeking equity

not at faul (Solle v Butcher).

o Contract void?

Possibly at law, but not ab initio (Bell v Lever Bros).

Contract void in futuro from time common mistake discovered (McRae v

Cth).

Recovery of Mistaken Payments

Equity allows return of mistaken payment or other transfers outside contractual

formation.

o Strict liability in cases of mistaken beneficiary to deceased’s estate – must pay

back money regardless of fault (Re Diplocks Estate).

Only requirement – P must have exhausted remedy against those making

the mistake (i.e. the trustees).



Estoppel

Equitable Estoppel

Two types: Promissory and Proprietary.

However, Waltons Stores signalled a potential merger of these doctrines

o NOTE: It is uncertain as to whether this has occurred or not.

Promissory Estoppel

Occurs when (Legione v Hately):

1. Parties are in pre-existing contractual relationships;

2. One party make an express/implied representation;

3. The representation is clear and unambiguous; and

4. The other party has acted in reliance on the representation and is in a position where

material disadvantage will be suffered if estoppel is denied.

Legione – failed on the facts

Did not satisfy point 3 – secretary gave uncertain and unqualified response about delay.

Promissory estoppel acts as a defensive ‘shield’ only:

This was because concern that to enforce voluntary promises of future conduct without

consideration would undermine the law of contract.

o ‘It would cut up the doctrine of consideration by the roots, if a promisee could

make a gratuitous promise binding by subsequently acting in reliance of it’ (Cth v

Scituate Savings).

Proprietary Estoppel

Occurs when (Dillwyn v Llewellyn):

1. An expectation has been created/encouraged by landowner;

2. Second party had expended money on land in accordance with this expectation;

3. Owner know of expenditure, does not object; and

4. Second party will suffer detriment if the expectation not fulfilled.



Dillwyn – Relevant facts

Father promised to transfer son land. Transfer not completed, but son built house on land

with his father’s knowledge and approval. Son successfully argued proprietary estoppel

because of his father’s conduct.

Functions as a cause of action (‘sword’) as well as defence (‘shield’).

Post-Waltons Equitable Estoppel

Occurs when (Brennan J in Waltons):

1. Assumed Legal Relationship: Plaintiff assumed a particular legal relationship

existed/would exist with defendant;

2. Defendant Induced: Defendant induced plaintiff to adopt that assumption/expectation;

3. Plaintiff Acted: Plaintiff acts in reliance of this promise;

4. Defendant knew of Action: Defendant knew plaintiff was acting in reliance of the

promise;

5. Plaintiff Suffered: Plaintiff’s actions would cause detriment if assumption/expectation not

fulfilled; and

6. Defendant didn’t attempt to avoid: Defendant fails to act to avoid the detriment, whether

by keeping the promise or otherwise.

NOTE: EE speaks in terms of assumption/expectations, not representations. However,

must be unambiguous, clear and unequivocal or equity will not intervene – if not

reasonable to rely upon representation can’t invoke EE.

Waltons Stores – Relevant facts

Mahers in negotiations with Waltons Stores about granting a lease. Building on site had

to be demolished so that new department store to Waltons’ specifications could be

constructed.

7 November – Mahers solicitors requested prompt finalisation of contract, Waltons

solicitors sent redrafted lease same day.

11 November – Mahers solicitors sent executed lease to Waltons, began to demolish

building.

21 November – Waltons had second thoughts about lease, told solicitors to ‘go slow’.

Mid-December – Waltons becomes aware of demolition works, decides not to proceed

with lease. Does not inform Mahers of this decision.



19 January – Waltons makes first communication with Mahers since 21 November,

informs that Waltons will not go ahead with lease. Demolition works 40 per cent

complete at this stage.

Waltons Stores – Decision and reasoning

Mahers could not claim common law estoppel by representation, or promissory estoppel:

o CLE: Was not a representation of existing fact (i.e. lease not in existence);

o PE: Parties not in pre-existing relationship, and Mahers were plaintiffs and so not

relying on estoppel defence.

However, the High Court made a remarkable departure from existing principle:

o Extended the Legione principle so as to preclude departure by a person from a

non-contractual representation (Mason CJ, Wilson J [399]).

Now a ‘sword’ as well as a ‘shield’.

o The need for clear and unequivocal representation was satisfied – the terms of the

lease were settled and there was an assumption that the contract would be

completed ‘as a matter of course’ (Mason CJ, Wilson J).

Accordingly, a new head of equitable jurisdiction had to be established to

circumvent the constraints of Jorden v Money.

o Waltons’ silence from 21 November to 19 January was, in the circumstances,

enough to found an equitable estoppel.

Silence only supports estoppel if it is inequitable to assert a legal

relationship different from the one which, to the silent party’s knowledge,

the other party assumed/expected (Brennan J).

Elements of urgency in obtaining a response, and because the last

communication between parties was the sending of lease documents, the

assumption that the contract would be completed remained unchallenged.

Therefore appellant under obligation to communicate with Mahers within

reasonable time (Mason CJ, Wilson J 407).

Minimum Equity



A court of equity must make an order that simply addresses the detriment suffered by relying

on the representation.

i.e. Mahers would be compensated for demolished building, not loss of contract.

Cth v Verwayen: Minority found that stress and additional legal costs would allow

estoppel, but majority held that only measurable detriment was the delays and that could

be resolved by an order for costs.

Common Law Estoppel

Estoppel by judgement

Res judicata

Issue estoppel

o Any matter of fact or law decided by earlier judgement estopped from use in later

proceeding.

o e.g. If court rejects that you were beaten into confessing, you can’t argue it later -

double jeopardy-esque.

Anshun Estoppel

Cannot raise an issue in a proceeding that could/should have been raised in an earlier one.

o Not strictly estoppel, but derived from need for public interest considerations.

Estoppel by Writing

Precludes parties from disputing any matter recited in a deed between them.

Estoppel in pais (by conduct)

Estoppel by Convention

o Made when two parties reach mutual agreement or mutual assumption of a state of

fact - estopped from denying this fact.

o Must prove that:

P has adopted assumption as to terms of legal relationship with D;

D has adopted the same assumption;

Both parties have conducted affairs on basis of assumption;

Each party knew/intended that the other act on that basis; and



Departure would detriment P.

o Conventional estoppel can act alongside contractual variation:

If parties to contract put particular interpretation on its terms and hold faith

that other party has acted the same, bound by interpretation (Amalgamated

Investment v Texas Commerce).

Irrelevant whether interpretation mistaken or not - both parties have

reached consensual interpretation and bound by it.

Estoppel by Representation

o Can be representation of either fact and law, or law alone (Foran v Wright).

o Must be an existing representation, not future (Jordan v Money).

Future representations dealt with by contract under CL - otherwise it

would destroy the doctrine of consideration (Cth v Scituate).

Basically, if there were no contract between parties CL estoppel could not

apply to render a promise binding.

Differences between common law and equitable estoppel

When representations occurred:

CL – existing fact (Jorden v Money).

o Laws of contract at the common law cover future representations.

o ‘It would cut up the doctrine of consideration by the roots, if a promisee could

make a gratuitous promise binding by subsequently acting in reliance of it’ (Cth v

Scituate Savings).

Equity – future conduct (Waltons Stores).

Defence or cause of action:

CL – Defence (or ‘shield’) only.

Equity – Both ‘shield’ and ‘sword’.

o Can be used as an independent cause of action by a plaintiff if they satisfy the 6-

step test as per Brennan J (Waltons Stores).

One unified doctrine of estoppel?



Mason CJ (Cth v Verwayen): ‘the consistent trend in the modern decisions points

inexorably towards the emergence of one overarching doctrine of estoppel rather than a

series of independent rules.’

o However, no unified doctrine of estoppel yet.

Issues surrounding a unified doctrine

In favour:

o Deane J has claimed in a number of cases (Waltons; Foran v Wright; Cth v

Verwayen) that there has always been one doctrine of estoppel even before the

Judicature Acts, and with the exception of Jorden v Money this extended to

representations of future conduct that are the concern of proprietary estoppel.

o The unification of estoppel by conduct avoids the restrictive nature of the common

law, and allows wider scope for relief based upon the assumed state of affairs (Cth

v Verwayen).

For example, in Giumelli the landowner was estopped from retreating from

the promise to give his son land in exchange for his work on it.

However, as another family member had already occupied the land it

would have been unjust to force this third party (who was not part of the

proceedings) to hold the property on constructive trust.

Accordingly, the equitable solution was to give a pecuniary remedy

instead.

Against unification:

o Relatively few estoppel cases to further modify this area of equity, and of the

cases to reach the High Court the question of unification has been left open

(Giumelli v Giumelli).

o The main issue when unifying common law and equitable estoppel by conduct is

that both doctrines are fundamentally different.

Equity requires that plaintiffs be willing to do equity, whilst at the

common law this is not needed.

At common law the ‘truth and justice of individual cases’ is shut out, with

strict application of estoppel principles. In complete contrast, equity

promotes these concepts in an attempt to subdue fraud (both actual and

equitable) and promote honest and fair dealing (Perley CJ in Horn v Cole).



CL: Estoppel by conduct is evidentiary in character, not a source of rights.

Eq: Must show sufficient detriment to be granted estoppel, not just prove

reliance on a representation.

From these references it seems that, although a unified doctrine of estoppel would have

many benefits, the fundamental differences between common law and equity must be

considered before any further changes are made (perhaps these difficulties are a reason

why the courts have not expanded upon this question in recent years).



Confidential Information

Starting Point

Exclusive jurisdiction:

o Equity can restrain and compensate breaches of confidence.

o Typically, possessors of confidential info subject to fiduciary duties which prevent

misuse of information/knowledge for their own advantage.

However, equity’s jurisdiction over confidences and confidential

information not confined to FRs – two distinct doctrines, the former not

requiring FR or special relationship.

Auxiliary jurisdiction:

o Equity may be relevant in aid of granting contractual rights following a breach of

confidence (e.g. granting injunctions).

o However, contractual primacy – equity moulds itself to suit contract at hand,

purely acts a possible supplementaryn remedy.

Elements of ‘modern’ cause of action

Three elements (Megarry J in Coco v AN Clark):

1. Information itself must have ‘necessary quality of cconfidence about it’.

2. Information must have been imparted in circumstances importing an obligation

of confidence.

3. Must be an unauthorised use of that information to detriment of party

communicating it.

However, although formulation will ‘suffice as a working statement’, two caveats:

1. Inclusion of eavedroppers and similar parties.

2. Inessentiality of detriment in any specific sense of economic loss (i.e. can be

humiliation or distress instead).

o Basically, a court of equity will restrain publication of confidential info

improperly/surreptitiously obtained, or of info imparted in confidence which

should not be divulged (Smith Kline).

Two species of same genus: confidential info (i) improperly obtained, and

(ii) imparted in confidence.

o Possible third caveat:



D may have obligation of confidence if he ought to have known that

confidential info being imparted to him (see Gummow J in Smith Kline;

Gibbs J in Consul Development).

Confidential Information

Definition

Confidential information different from information:

o The former suggests communication of secrets or private matters. It will not exist

in something which is public knowledge.

o However, no bright line between public and private (Gleeson CJ in Lenah).

Examples of CI (Parkinson):

o Commercial/trade secrets; confidential ideas not yet in public domain (TV show –

Talbot); Information about business operations; Personal biographical or

commercially sensitive information.

Last example establishes and enforces a ‘personal zone of privacy free

from public scrutiny’.

Confidential Info – Commercial Context

Information not property, so breach of confidence does not bestow proprietary rights:

o Equity acts on conscience of the defendant, not in aid of proprietary right.

o Sometimes confidential information has proprietary characteristics (e.g. capacity

to assign), but not the reason for equitable intervention.

Lenah Game Meats case

Main question – was it appropriate to grant an interlocutory injunction on the basis of

‘unconscionability’ and not an established cause of action?

Gleeson CJ:

o [17] The language of unconscionability cannot conjure up the right to

interlocutory relief if there is no right available.

o [25] Operations filmed were not secret or confidential, since had to be licensed by

a public authority and would have had inspections from officials.



o [29] ‘the circumstances in which the film was made, the nature of the activities

recorded, a person’s concern that they not be seen by the general public, and an

inference thattrespassers and broadcasters or publishers knew of that concern,

could make the image and the sounds confidential.’

Has left scope for future development of equity to protect from illegal

filming of private activities.

o [34], [39] The slaughtering method was not private, meaning that an injunction

could (and should) not be granted.

o [41] Expansion of breach of confidence better than creating a new tort of privacy.

Lack of precision of the concept of privacy means caution when developing new

torts. Also issues regarding free speech constrained by privacy.

o [43] Even if privacy protected, concept enshrined in human dignity and so

unlikely a corporation would receive this protection. Therefore Lenah would lose

because a company.

Gummow and Hayne JJ:

o [73] Absence of publicity does not mean something is invested with necessary

qualities of confidence to allow an injunction.

Refers to Saltman.

‘The information, to be confidential … must not be something which is

public property and public knowledge.’

o [79] Difference between a corporation, who seeks to protect its ‘pocket book’

from bad publicity, and a person, who seeks the seclusion of personal life.

One monetary, the other actual privacy.

o [125]-[126] Four categories of wrongs:

(i) Appropriation of P’s name and likeness (i.e. complaint about

deprivation of opportunity of commercial exploitation of name/likeness for

his/her benefit);

(ii) Putting P in false light damages reputation or causes financial

detriment or both (can be protected by defamation);

(iii) Disclosure of private facts and (iv) unreasonable intrustion upon

seclusion.

These come closest to reflection a concern for privacy as a legal

principle drawn from the fundamental value of personal autonomy.



Equitable Defences

Laches and Acquiescence

Arises when plaintiff has allowed an unreasonable delay to occur before commencing legal

proceedings, or was negligent in issuing proceedings.

Court can refuse to grant P relief as a result.

However, mere delay alone won’t defeat equitable claim.

Not bound by any Statutory Limitations (these generally relate to common law claims,

NOT equitable).

Two considerations:

o Length of delay, or laches (in modern era parties expected to act expeditiously, so

not specific quantifier for appropriate length of delay); and

o Nature of the acts done during interval – the following may be considered as a

waiver by plaintiff and thus defeat equitable claim:

P acquiesced to D’s conduct (i.e. knew of equitable breach, yet did not

commence proceedings until much later).

P caused D to alter position in reasonable reliance of P’s acceptance of the

status quo (e.g. D went ahead and built a house on land after believing that

P would not take legal action).

P’s actions have permitted a situation to arise that would be unjust to

disturb (e.g. D sold property to third party and unfair to latter to force

return of property).

o Scott: Treat two as separate – L being inexcusable delay, A confined to situations

where P knows of rights yet willingly allows them to be violated.

‘… whether the plaintiff’s conduct amounts in point of law to

acquiescence or laches, or whether it amounts to an election not to avoid a

voidable transaction, or whether it amounts to a ratification or a

confirmation of her gifts, are questions of mere words which it is needless

to discuss’ (Allcard v Skinner).



Unclean Hands

Equitable maxim: ‘he who comes into equity must come with clean hands.’

Pretty straightforward – if P also guilty of improper conduct during transaction, then

relief will be refused.

o e.g. Cannot claim specific performance if agreement procured by

misrepresentation.

For this defence to operate, complainant ‘must have an immediate and necessary relation

to the equity sued for.’

o i.e. P’s ‘unclean hands’ must be related to the matter at hand, not just any old

unethical conduct by P since any D would simply unearth the skeletons of their

adversary to claim the defence.

Equitable Set-off

Defendant has a separate and distinct legal claim against a plaintiff.

Must go to the root of P’s title to sue, so if not closely related no defence.

o e.g. P claims money under building contract, D seeks damages for breach of

the same contract for faulty workmanship.

Informed Consent

As per Fiduciary Duties, must make full disclosure to party who is owed duty, and that party

must consent (Boardman v Phipps).

o Strict application – full facts provided to relevant parties, who must all be capable

of approving.

Bona Fide Purchase

Only related to cases where plaintiff asserts entitlement to a remedy that involves the

vindication of their equitable proprietary interests.

If party is a bona fide purchaser of the legal title for value without notice, the earlier

equitable interest is extinguished.



Equitable Remedies

Starting Point

Equity, if it provides a remedy (it’s completely discretionary), seeks to achieve practical

justice between the parties.

Must emphasise that remedy may be something neither party expects.

o Gummow J: ‘the requirement that a person seeking equity must be prepared to do

equity and the operation of the various equitable defences always have the

potential to produce relief in a form which could not have been wholly anticipated

[by the litigants].’

Remedies can come from equity’s exclusive jurisdiction:

Remarkably flexible when fashioning a remedy for parties.

o Giumelli – constructive trust for P held to be unjust to third party, so equivalent

monetary compensation given in lieu of land.

o Bridgewater – Setting aside entire deed unfair, but the price paid for it was too

low as well. Therefore sent back to lower courts to determine what a fair price

would be!

Remedies also come from the concurrent/auxiliary jurisdiction:

Must show to court that CL remedies are inadequate.

o CL generally gives damages, so must show that it’s not enough to get paid out.

Examples:

Injunction to prevent showing film that will destroy a person’s credibility;

Specific performance forcing land sale because P already living on

property;

D sells off property and gets profit, not enough for P to just get the original

purchase price and not reap benefit of sale.

Specific Performance

Concurrent jurisdiction.

Applies to the enforcement of executory contracts:



o An agreement that requires the execution of an instrument, or the doing of an act

in law, which would put the parties in the position relative to each other which the

contract contemplates.

Generally, an agreement to transfer interest in property!

OR executed contracts:

o Doesn’t require execution of an instrument – contract itself already does this.

See JC Williamson – P’s right to sell sweets in theatre was right by virtue

of the contract itself, and no further instrument or act in law was necessary

to allow this right.

Pre-requisites to grant remedy:

o Binding contract;

o P ready, willing and able to perform obligations; and

o Inadequate remedy available at CL.

Defences that prevent SP being used:

o Cannot be used to compel performance of personal work (employer-employee

relationship).

Akin to slavery as no right to leave the contract until over (if it actually

ends).

o Won’t be upheld if undue hardship imposed on D.

Injunction

Types of Injunctions

Defied by the purpose of the injunction:

o Prohibitory – court order restraining party from performing a specific act.

o Mandatory – court order requiring party to perform a specific, positive act.

Categorised by point of trial granted:

o Interim/interlocutory – If P can prove cause of action, can get a temporary

injunction awarded prior to commencement of proceedings (i.e. protects P from

injury that could occur if D could continue activities before decision handed

down).



P must prove that they have a cause of action to rely upon or this

injunction cannot be granted. If injunction wrongly given, P may have to

pay D damages.

An injunction can only issue to protect a legal/equitable right, or to prevent

equitable/legal wrong (Lenah Game Meats).

o Final – Court holds that P has cause of action, upholds injunction.

Other types of injunction

o Mareva – Restrains D from disposing of its assets in an effort to render future

judgement ineffective (i.e. go spend-crazy and wipe out assets owed to another).

o Anton Piller order – D compelled to permit P to inspect D’s premises in order to

discover and remove any material relevant to P’s case (i.e. can’t destroy

confidential records that demonstrate liability).

o Anti-suit – Protects court’s processes from frustration due to commencement of

proceedings in another, inappropriate forum.

o Norwich v Commissioners – Bailee forced to hold duty to third party where bailee

has innocently become caught up in wrongdoing of another.

Distinction between equitable and legal injunctions

Equitable injunction – part of equity’s exclusive jurisdiction.

o No need to ask whether damages are sufficient – this remedy can be applied

whenever a court believes discretion is warranted.

Legal injunction – part of equity’s auxiliary jurisdiction.

o Must always ask whether damages can suffice – if they can, then this remedy

cannot be used!

Equitable Compensation

Exclusive jurisdiction, equitable breaches only (otherwise just go to CL).

Equity traditionally cannot award damages – instead can give ‘compensation’ in form of

account of profits, money equivalent to property value, etc.

o Supreme Court Act s 38 allows equity to give damages in lieu of equitable

remedies.



Not limited by CL concepts like remoteness, foreseeability, etc.

Rescission

If concurrent jurisdiction:

o Applies when contract voidable at law for fraudulent misrepresentation/duress/etc.

If exclusive jurisdiction:

o Is a means of setting aside contract induced by some wrong that equity recognises.

o Examples: innocent misrepresentation, undue influence, unconscionable conduct,

mistake or breach of fiduciary duty.

Account of Profits

Both auxiliary and exclusive jurisdictions.

Works out profits made by D in order to return them to P.

Constructive Trust

Difference between ‘C Trust’ and ‘C Trustee’

Millett LJ in Paragon Finance plc v DB Thakerar.

Constructive Trust (proprietary right):

o D, though not expressly appointed, has assumed duties of trustee by lawful

transaction that arose prior to the breach of trust. Note: The transaction itself is

not being disputed by P, only the breach.

o ‘In these cases the plaintiff does not impugn the transaction by which the

defendant obtained control of the property. He alleges that the circumstances in

which the defendant obtained control make it unconscionable for him

thereafter to assert a beneficial interest in the property.’

o D is a trustee

Constructive Trustee (personal right):

o A trust obligation arises as a direct consequence of the unlawful transaction that is

impugned by P.



o ‘It arises when the defendant is implicated in a fraud. Equity has always given

relief against fraud by making any person sufficiently implicated in the fraud

accountable in equity.’

o D is not a trustee

Accordingly expressions ‘C Trust/Trustee’ are misleading – ‘for there is

no trust and usually no possibility of a proprietary remedy; they are

'nothing more than a formula for equitable relief.’

Extra

If CT not available (i.e. makes an unjust result to other party/third party) damages can be

given in lieu of this remedy (Giumelli v Giumelli).

Constructive trust ‘nothing more than a formula for equitable relief’

Lord Millett has outlined two definitions under ‘constructive trust’:

o ‘Trust’ refers to an actual trust with a trustee who, although lawfully assuming this

role has committed a breach of trust.

o ‘Trustee’ refers to situations where D has committed fraud. The party is not a

trustee at all, but has somehow acquired property (e.g. taken from trust, made a

profit at P’s expense) that a court will deem is held on trust to return to P.

Regarding the latter, this is the definition described as a ‘formula for equitable relief.’ By

this it means that, rather than a discrete remedy, it simply outlines a situation whereby a

plaintiff can argue for whatever equitable remedy a court find appropriate at the time.



· Web viewBasically, other legal rules likely apply to a contractual relationship – make sure that they don’t override fiduciary duties. Defence of informed consent To waive...

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