Topic two fraud in equity
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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. INTRODUCTION. Fraud in Equity ≠ Unfairness

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TOPIC TWO FRAUD IN EQUITY

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Topic two fraud in equity

TOPIC TWOFRAUD IN EQUITY

UNCONSCIONABLE TRANSACTIONS


Topics

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 2011


Introduction

INTRODUCTION

  • Fraud in Equity ≠ Unfairness

  • Fraud in Equity is more precise and only operates via discrete doctrines

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Unconscionability

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

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Discrete doctrines

DISCRETE DOCTRINES

  • Undue Influence

  • Unconscionable (catching) Bargains

  • Misrepresentation

  • Estoppel

  • Mistake

  • Fraud In Equity

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Estoppel

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

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Estoppel cont d

Estoppel (cont’d)

  • There are many different forms of estoppel

  • There is Common Law and equitable estoppel

  • We are only looking at equitable estoppel

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Estoppel cont d1

Estoppel (cont’d)

  • Traditionally, there were two sorts of equitable estoppel :

    • Promissory estoppel, and

    • Proprietary estoppel.

  • However, the division no longer seems very important

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Estoppel cont d2

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

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Estoppel cont d3

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

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Estoppel cont d4

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

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Estoppel cont d5

Estoppel (cont’d)

  • Waltons (cont’d)

  • HC held that Waltons were estopped but different reasoning used

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Estoppel cont d6

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

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Estoppel cont d7

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

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Estoppel cont d8

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.

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Estoppel cont d9

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

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Estoppel cont d10

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

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Estoppel cont d11

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

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Undue influence

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)

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Certain relationships

Certain Relationships

  • Parent/Child,

  • Spiritual advisor/ follower,

  • Client/ solicitor,

  • Doctor/ patient,

  • fiancé/ fiancée (but not husband/ wife)

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Husband wife and u i

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

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Husband wife and u i con t

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

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Husband wife and u i garcia

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

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Husband wife and u i garcia cont d

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

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Class 2b undue influence

Class 2B Undue Influence

  • Where not one of the certain relationships have to show it on the facts

  • Johnson v Buttress (1936 HC)

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Independent legal advice

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)

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Basis of u i

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

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