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
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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.
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Disability
• Most attention in the caselaw has been on
what is a disability for this doctrine?
• In Blomley v Ryan Fullagar J gave a nonexhaustive list
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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)
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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.
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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.
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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.
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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.
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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.
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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
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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
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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))
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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 221
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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 577
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Mistake (cont’d)
• Rescission for Mistake
• Three forms of Mistake for rescission
• Unilateral Mistake
– Taylor v Johnson (1983) 151 CLR 422
• Mutual Mistake
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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
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Fraud in Equity
• This seems to cover a wide variety of even
smaller doctrines, eg pressure
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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
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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.”
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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
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Equitable Fraud and Statute
• None of these sections define
unconscionability but ss 21 and 22 expand the
equitable understanding of equitable fraud/
unconscionability.
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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 22.
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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.
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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.
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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.
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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;
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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
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