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 (contd)

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
non-exhaustive list

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Disability (contd)
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 (Contd)
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 (Contd)
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 (Contd)
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 (cond)
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 (contd)
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 (contd)
Although Bridgewater seems to be a
harsh decision on the facts and the
application of unconscionability
seems quite wide in the case, it
hasnt 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 equitys 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 IsraelBritish 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 (contd)
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 (contd)
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 (contd)
Rescission for mistake (contd)
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 section21 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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