ON 6 AUGUST 1998, the High Court of Australia delivered Garcia v National Australia Bank Ltd [1998] HCA 48; 6 CCL 81; 194 CLR 395; 155 ALR 614; 72 ALJR 1243 (6 August 1998).

http://www.austlii.edu.au/au/cases/cth/HCA/1998/48.html

The High Court considered its earlier decisions of Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649, Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 as well as the English decision of Barclays Bank Plc v O’Brien [1994] 1 AC 180.

Yerkey v Jones provides a special rule for married women who, regardless of other characteristics, voluntarily guarantee their husband’s loans. There are two limbs: (1) a wife may have a guarantee set aside if the consent was obtained by undue influence, unless she received independent advice (at 649, per Dixon J); and (2) a wife has a prima facie right to have a guarantee set aside if she failed to understand the effect of the guarantee or its significance, unless steps were taken by the lender to inform the wife of such matters (at 683, per Dixon J).

Commercial Bank of Australia Ltd v Amadio is the leading Australian case on unconscionability. Unconscionable dealings are defined as the “unconscientious use of a superior position to the detriment of a party who suffers some special disability or is or is in some special position of disadvantage” (Mason J at 461). Such dealings occur when “one party by reason of some condition or circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientous advantage is taken” ((Mason J at 462). In other words, entry into the contract must be caused by taking advantage of a special disability, not mere inequality or impaired judgment.

In Garcia, the High Court rejected the submission that the rule in Yerkey v Jones had been overruled by or subsumed in Amadio. The court at [34] per Gaudron, McHugh, Gummow and Hayne JJ reaffirmed Yerkey v Jones as being a separate rule of unconsciounability (1) applying to married women and not dependant on any presumption of undue influence by the husband over the wife or the husband as acting as agent for the creditor and (2) dependant on “the surety being a volunteer and mistaken about the purport and effect of the transaction, and the creditor being taken to have appreciated that because of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transaction’s purport and effect”.

1300 00 2088

Employment Law, Equity, Injunctions, LAW FIRM

Patrick Stevedores v MUA [1998] HCA 30

May 4, 1998 Legal Helpdesk Lawyers

ON THIS DAY in 1998, the High Court of Australia delivered Patrick Stevedores v MUA [1998] HCA 30; 195 CLR 1; 72 ALJR 873; 79 IR 339; 153 ALR 643 (4 May 1998).

The High Court rejected Patrick’s appeal to overturn orders of the Federal Court arising from the waterfront dispute of Easter 1998.

Patrick had locked out its national workforce of about 1400 permanent and 300 part time staff and sought to terminate them on the grounds that their services were no longer required as they were employed by four labour hire companies (restructured in September 1997) that had ceased trading and had been placed under administration whilst Patrick had been involved in the organisation of a non-unionised alternative.

The MUA obtained Federal Court interim injunctions to maintain the pre-Easter status quo and stop the terminations. The effect of the injunctions was to require the specific performance of contracts of service, a remedy which the courts generally do not favour. However, the MUA satisfied the Federal Court that the balance of convenience favoured the relief sought chiefly through undertakings that the workers would refrain from industrial action and not hold the administrators personally liable for their wages and other benefits.

The High Court upheld the Federal Court orders and granted further orders to allow the administrators to properly exercise their functions.

Sydney, Australia

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Account of Profits, Damages, Equity, LAW FIRM, Patents, Unjust Enrichment

Dart Industries Inc v Decor Corporation Pty Ltd (“Lettuce Crisper case”) [1993] HCA 54

September 29, 1993 Legal Helpdesk Lawyers

The majority was of the view that purpose of an account of profits is not to punish the defendant but to prevent their unjust enrichment.

Per Mason CJ, Deane, Dawson and Toohey JJ at 111:

“Damages and an account of profits are alternative remedies ((6) See Neilson v. Betts (1871) LR 5 HL 1, at p.22; Lever v. Goodwin (1887) 36 ChD 1, at p.7; Patents Act 1990 (Cth), s.122(1).).
An account of profits was a form of relief granted by equity whereas damages were originally a purely common law remedy ((7) cf. Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 3rd ed. (1992), pp.659-660.). As Windeyer J pointed out in Colbeam Palmer Ltd. v. Stock Affiliates Pty. Ltd. ((8) [1968] HCA 50; (1968) 122 CLR 25, at p.34.), even now ((9) See Patents Act 1952 (Cth), s.118(1); Patents Act 1990 (Cth), s.122.) an account of profits retains its equitable characteristics in that a defendant is made to account for, and is then stripped of, profits which it has dishonestly made by the infringement and which it would be unconscionable for it to retain. An account of profits is confined to profits actually made, its purpose being not to punish the defendant but to prevent its unjust enrichment ((10) My Kinda Town Ltd. v. Soll (1983) RPC 15, at p.55; Potton Ltd. v. Yorkclose Ltd. (1989) 17 FSR 11, at pp.14, 15; Sheldon v. Metro-Goldwyn Pictures Corp. [1940] USSC 57; (1940) 309 US 390, at
p.399.). The ordinary requirement of the principles of unjust
enrichment that regard be paid to matters of substance rather than
technical form ((11) See Baltic Shipping Co. v. Dillon [1993] HCA 4; [1993] HCA 4; (1993) 176 CLR 344, at p.376.) is applicable.”

Per McHugh J at 123:

“The object of an account of profits is to make the infringer give up its gains in order to prevent its unjust enrichment. No element of punishment is involved.”

Sydney, Australia

1300 00 2088

Contract, Equity, Estoppel, LAW FIRM

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7

February 19, 1988 Legal Helpdesk Lawyers

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 (19 February 1988).

http://www.austlii.edu.au/au/cases/cth/HCA/1988/7.html

Maher owned a commercial property at Nowra. Waltons was a national department store. Waltons and Maher entered into negotiations regarding the lease of Maher’s property conditional upon Maher demolishing the existing building and constructing a new one in accordance with Waltons’ requriements.

Waltons provided Maher with a draft lease contract. Maher suggested amendments and indicated they needed to complete the agreement in the next day or so in order to arrange building supplies before Christmas. Maher indicated that he did not want to demolish the building until he knew there was no problem with the lease. The solicitor for Waltons said to Maher that Waltons had informed him that the amendments were acceptable but would obtain formal instructions and inform him by the next day if they did not agree with any of the amendments. The solicitor for Waltons then sent Maher’s solicitor a redrafted lease with the suggested amendments and did not object to the amendments the next day, or at all. Maher then sent Waltons an executed lease by way of exchange and then proceeded with the demolition. A week later, Waltons had concerns about the transaction and, not having exchanged their counterpart of the lease, instructed their solicitor to go slow. Waltons then became aware that the building had been demolished and when the new building was 40% completed advised Maher that they did not wish to proceed with the transaction.

Maher sued Waltons in the Supreme Court of NSW, obtaining an order for specific performance or damages in lieu. An appeal to the NSW Court of Appeal was dismissed, as was an appeal to the High Court of Australia.

Per Mason CJ, Wilson, Brennan and Deane JJJ, Waltons was bound to enter into a lease agreement and estopped from denying an implied promise to complete the contract as it would be unconscionable for Waltons to take a course of inaction that exposed Maher to detriment by acting on a false assumption.

The High Court brought together proprietary and promissory estoppel under the broader principle of equitable estoppel. When a person makes a non-contractual or voluntary promise and knowingly induces the other party to act to his or her detriment in reliance on that promise, that person is precluded from resiling from the promise without avoiding the detriment. The person who makes the promise is liable to either honour the promise or avoid detriment to the other party.

Per Brennan J at 428-9:

“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.”

Sydney, Australia

1300 00 2088

Equity, Family Law, LAW FIRM, Property disputes, Property Law, Trusts

Baumgartner v Baumgartner [1987] HCA 59

December 10, 1987 Legal Helpdesk Lawyers

ON 10 DECEMBER 1987, the High Court of Australia delivered Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 (10 December 1987).

http://www.austlii.edu.au/au/cases/cth/HCA/1987/59.html

The parties had lived together in a de facto relationship. They pooled their earnings to meet all outgoings of the joint relationship, including mortgage payments over the family home purchased with the husband as the only registered proprietor.

After about four years the relationship came to an end. The wife sought a declaration that she held an interest in the property in trust. The husband asserted that only he held the legal title to the property.

The court held that the wife held a beneficial interest in the property by way of constructive trust.

Per Mason CJ, Wilson and Deane JJ at 149:

“The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child. Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant’s assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent.”

The High Court declared that the parties hold beneficial interests in the property of 55% to the husband and 45% to the wife, subject to adjustments.

Sydney, Australia

1300 00 2088

Commercial Law, Contract, Equity, LAW FIRM

Commercial Bank of Australia Ltd v Amadio [1983] HCA 14

May 12, 1983 Legal Helpdesk Lawyers

ON 12 MAY 1983, the High Court of Australia delivered Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 (12 May 1983).

http://www.austlii.edu.au/au/cases/cth/HCA/1983/14.html

“Equity – Mortgage and guarantee – Right to set aside – Unusual transactions between bank and customer – Bank’s failure to disclose to mortgagor guarantor – Misrepresentation.

Guarantee – Guarantor under disability – Dealing with bank – Bank knowing of disability – Unconscionable bargain – Onus of proof – Whether transaction should be set aside unconditionally.”

An elderly Italian migrant couple had mortgaged land they owned as a guarantee for a loan from the bank to their son’s business. The business then went into liquidation and the bank demanded payment of the guarantee and then attempted to exercise a power of sale over the land.

The Amadios argued that the guarantee and mortgage should set aside as:

they spoke limited English;
they did not receive independent advice and were not advised to do so;
they were not aware of their son’s financial situation, although the bank was; and
they mistakenly believed that the liability was limited to $50,000.

The court held that the mortgage and guarantee must be set aside as it was unconscionable for the bank to enter into those transactions in circumstances where the bank through it’s superior bargaining power had gained an unconscientious advantage to the detriment of the Amadios who suffered a special disability.

Sydney, Australia

1300 00 2088

Contract, Equity, LAW FIRM, Property Law

Neeta (Epping) Pty Ltd v Phillips [1974] HCA 18

May 14, 1974 Legal Helpdesk Lawyers

ON 14 MAY 1974, the High Court of Australia delivered Neeta (Epping) Pty Ltd v Phillips [1974] HCA 18; (1974) 131 CLR 286 (14 May 1974).

In a contract for the sale of land in which time is not of the essence, a party seeking to rely on a notice to complete must itself be free of default by way of breach or delay. When such a notice is ineffective, the purchaser’s continued failure to complete does not amount to a repudiation allowing the vendor to rescind.

http://www.austlii.edu.au/au/cases/cth/HCA/1974/18.html

1300 00 2088

Equity, Family Law, LAW FIRM, Property Law

Pettit v Pettit [1970] AC 777

April 23, 1969 Legal Helpdesk Lawyers

ON THIS DAY in 1969, the House of Lords delivered Pettit v Pettit [1970] AC 777.

A husband claimed a beneficial interest in a property solely owned by his wife. The basis of the claim was that he had made improvements to the property during the course of the marriage.

The husbands claim was unsuccessful on the facts. However, modern principles of implied trust can be traced back to this case and the subsequent Gissing v Gissing [1971] AC 886.

Sydney, Australia

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