Fraud in equity Week 3

Catching Bargains This doctrine is also called unconscionable dealing This is unconscionability in the narrow sense U/I focused on the weaker party, C/B focuses on the stronger party 2LAW 2502 EQUITY 2011

Catching Bargains (cont’d) In Amadio Deane J held for this need – A disability, and – The disability evident to the other person If these 2 elements satisfied, then onus on the other party to show the transaction fair and reasonable If that party does not show this, the transaction can be set aside. 3LAW 2502 EQUITY 2011

Disability Most attention in the caselaw has been on what is a disability for this doctrine? In Blomley v Ryan Fullagar J gave a non- exhaustive list 4LAW 2502 EQUITY 2011

Disability (cont’d) The approach of the courts has been to look at what earlier cases have held to be a disability – Blomley v Ryan (1956 HC) – CBA v Amadio (1983 HC) – Louth v Diprose (1992 HC) – Bridgewater v Leahy (1998 HC) 5LAW 2502 EQUITY 2011

Bridgewater v Leahy (1998 HC) BY entered into a contract to sell grazing land to his nephew (NY) for $696,811 and at the same time executed transfers of the land and a deed of forgiveness for $546,811 of the price. NY had suggested a price of $150,000. He paid the $150,000 some months later and the transfers were completed. 6LAW 2502 EQUITY 2011

Bridgewater (Cont’d) BY had four daughters and no sons. The NY had worked on BY's land for many years. The uncle wished his land not to be broken up after his death and depended on NY to manage the land. 7LAW 2502 EQUITY 2011

Bridgewater (Cont’d) Immediately before executing the transfers and the release,BY, then aged eighty-four, was examined by a doctor and found to be of sound mind and capable of making decisions about his personal affairs. He died the following year. 8LAW 2502 EQUITY 2011

Bridgewater (Cont’d) By his will, which was dated some three years before the date of the contract of sale of the transferred land, he gave NY an option to purchase certain property, which included the transferred land, for $200,000. The residuary estate was left to his four daughters. 9LAW 2502 EQUITY 2011

Bridgewater (con’d) The nephew exercised the option, paying $200,000 for the property described in the will apart from the land already transferred. The wife and daughters made applications for family provision which were dismissed for want of prosecution. 10LAW 2502 EQUITY 2011

Bridgewater (cont’d) They also brought proceedings for a declaration that the transfers or the deed of forgiveness were of no effect having been induced by undue influence and/or unconscionable conduct. The majority of the HC found that Neil York had obtained the benefits by unconscionable conduct 11LAW 2502 EQUITY 2011

Bridgewater (cont’d) Although Bridgewater seems to be a harsh decision on the facts and the application of unconscionability seems quite wide in the case, it hasn’t signalled any revolution in the law. Basically the approach for C/B after Bridgewater remains a conservative application of Amadio 12LAW 2502 EQUITY 2011

MISREPRESENTATION At CL and in equity’s concurrent/ auxiliary jurisdiction can a party sue for both fraudulent and negligent misrepresentation Only in equity can a party sued for innocent misrepresentation (Redgrave v Hurd) But misrep now dealt with largely by other legal devices (estoppel, s 18 ACL and Misrep Act (SA)) 13LAW 2502 EQUITY 2011

MISTAKE Recovery of Money Paid Under a Mistake Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1979] 3 All ER 1025 Sinclair v Brougham [1914] AC 398 Westdeutsche Bank [1996] AC 669. Roxborough v Rothmans of Pall Mall (2001) 208 CLR LAW 2502 EQUITY 2011

Mistake (cont’d) David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 109 ALR 57 ANZ Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 Pavey & Matthews Pty Limited v Paul (1987) 69 ALR LAW 2502 EQUITY 2011

Mistake (cont’d) Rescission for Mistake Three forms of Mistake for rescission Unilateral Mistake – Taylor v Johnson (1983) 151 CLR 422 Mutual Mistake 16LAW 2502 EQUITY 2011

Mistake (cont’d) Rescission for mistake (cont’d) Common Mistake Bell v Lever Brothers Ltd [1932] AC 161 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 Leaf v International Galleries[1950] 2 KB 86 17LAW 2502 EQUITY 2011

Fraud in Equity This seems to cover a wide variety of even smaller doctrines, eg pressure 18LAW 2502 EQUITY 2011

Equitable fraud and Statute There are 2 main ways that eq fraud and statute interact The first involves the maxim “Equity will not permit a statute to be a cloak for fraud” This has its greatest application with the writing requirement for land and part performance 19LAW 2502 EQUITY 2011

Equitable fraud and Statute The second main way that eq fraud and statute interact regards statutory forms of unconscionability/ eq fraud S 18 of the ACL is very important. It reads “A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” 20LAW 2502 EQUITY 2011

Equitable fraud and statute Pt 2-2 of the ACL prohibits a person (inc a company) from engaging in unconscionable conduct Pt 2-2 has 3 main sections; s 20, s 21 and s 22 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 21LAW 2502 EQUITY 2011

Equitable Fraud and Statute None of these sections define unconscionability but ss 21 and 22 expand the equitable understanding of equitable fraud/ unconscionability. 22LAW 2502 EQUITY 2011

Statutory Unconscionability 20 Unconscionable conduct within the meaning of the unwritten law (1)A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time. Note:A pecuniary penalty may be imposed for a contravention of this subsection. (2)This section does not apply to conduct that is prohibited by section 21 or LAW 2502 EQUITY 2011

Statutory Unconscionability 21 Unconscionable conduct (1)A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services to another person, engage in conduct that is, in all the circumstances, unconscionable. 24LAW 2502 EQUITY 2011

Statutory Unconscionability (2)Without in any way limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened subsection (1) in connection with the supply or possible supply of goods or services to another person (the consumer), the court may have regard to: (a)the relative strengths of the bargaining positions of the supplier and the consumer; and (b)whether, as a result of conduct engaged in by the person, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c)whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services; and (d)whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and (e)the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the supplier. 25LAW 2502 EQUITY 2011

Statutory Unconscionability 22 Unconscionable conduct in business transactions (1)A person must not, in trade or commerce, in connection with: (a)the supply or possible supply of goods or services to another person (other than a listed public company); or (b)the acquisition or possible acquisition of goods or services from another person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. 26LAW 2502 EQUITY 2011

Statutory Unconscionability (2)Without in any way limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened subsection (1) in connection with the supply or possible supply of goods or services to another person (the business consumer), the court may have regard to: (a)the relative strengths of the bargaining positions of the supplier and the business consumer; 27LAW 2502 EQUITY 2011

Statutory Unconscionability The HC considered s 51AA (the equivalent of s20 ACL) in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 This result of this case should be compared to Bridgewater 28LAW 2502 EQUITY 2011