Undue Influence

Common Law Position (both UI and UC)

Person is bound by terms of contract, cannot revoke gifts (e.g. Equuscorp; Toll v Alphapharm). Equuscorp: The respondents each having executed a loan agreement, each is bound by it. Having executed the document, and not having been induced to do so by fraud, mistake, or misrepresentation, the respondents cannot now be heard to say that they are not bound by the agreement recorded in it. Toll: The representation [of a signed contract] is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents. Can only reverse transactions in extreme cases: Incapacity, non est factum (not deed of alleged signatory), fraud, mistake, duress.

Undue Influence

Undue influence can cause a court to set aside the transaction. When a stronger party (via confidence, control, domination or influence) is used to influence a weaker party to enter into a transfer of property. Courts role is to determine how WPs intention to contract was produced, not whether WP knew what they were doing (Huguenin v Basely; approved in Bridgewater v Leahy). Applies to inter vivos transactions wills are covered by different rules. Principal case: Johnson v Buttress: Person with diminishing mental capacity (B) transferred property to another (J). Bs son sued, arguing he should have received the house. Therefore J had to show that Bs sale was a freely desired gift to her and not because of UI. J couldnt prove it, so she lost the title.

Presumed Relationships

Certain relationships are considered to involve such trust and confidence, as well as likelihood of SP exercising authority over WP, that they are automatically deemed to be ones of UI. e.g. Solicitor-client; doctor-patient; religious advisor-disciple; parent-child; guardian-ward. However, not husband-wife (Yerkey v Jones). It is not considered natural in these relationships to expect one party to give property to another (Yerkey v Jones). If PR present, SP has to rebut this presumption (Johnson v Buttress).

What if not a presumed relationship?

Not to worry the plaintiff simply has to prove that there was a relationship of influence rather than the court automatically assuming one existed.

Once a relationship of influence is shown to exist

The SP has to rebut this presumption in order to enforce the transaction. Can rebut by demonstrating that: the gift was the independent and a well understood act of a man in a position to exercise a free judgement based on information as that of the donee (Johnson v Buttress). Why does SP have to do this? When he takes from that man a substantial gift of property, it is incumbent upon him to show that it cannot be ascribed to the inequality between them which must arise from his special position (Johnson v Buttress). Not sufficient to show that WP understood/assented to deal intention must be free of influence by SP. If SP cant prove that UI wasnt present, the court will find that theres been an abuse of power/authority, or at least that the close relationship makes it difficult to hold in SPs favour.

Third Parties

Often occurs in context of guarantors being subjected by debtors UI to help them with creditors (i.e. CBA v Amadio). If creditor (i) has actual knowledge of debtors UI; (ii) had knowledge of the circumstances where UI arose, or (iii) ought to have known that UI could occur, their transaction can be set aside. (CBA v Amadio Since CBA ought to have known that dodgy son was heavily influential on parents, it acted upon the UI and so could have its contract reversed).

Unconscionable Dealing

Not undue influence a parallel, but separate, jurisdiction of equity. Occurs when one party has a special disability which the other party exploits (Blomley v Ryan): Kitto J: whenever one party to a transaction is at a special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands. Fullagar J: age, sex and lack of assistance or explanation where assistance or explanation is necessary. Lack of English (CBA v Amadio). Includes transactions involving gifts (Louth v Diprose), contracts of sale (Bridgewater v Leahy), and guarantees (CBA v Amadio). Differences from Undue Influence: UI mainly deals with inappropriate or undue control, domination, assertion or persuasiveness over a party. UC in comparison focuses entirely on special disadvantage of one party. Also easier to establish a claim with this doctrine.

Special Disability (Amadio UC)

1. A special disability must exist in the innocent party. Must be one that seriously affects the ability of the innocent party to make a judgement as to his own best interests (CBA v Amadio). Doesnt have to be detrimental to plaintiff (CBA v Amadio).2. D should be aware of Ps special disadvantage. If D has actual knowledge then no difficulty (Louth v Diprose).3. D exploits Ps SD to get beneficial bargain. If two previous elements established by plaintiff, defendant must prove that the transaction was just, fair and reasonable (Fry v Lane; CBA v Amadio). Passive acceptance of a benefit when P has SD satisfies exploitation requirement (Bridgewater v Leahy). Inadequacy of consideration may be relevant to make decision (Blomley v Ryan). Though not essential to prove UD (Amadio).HOWEVER: Transaction wont necessarily be set aside if bargain itself is unfair (ACCC v Berbatis): Lessor had no obligation to renew and so was allowed to dictate unfair terms to lessees. Gleeson CJ: many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests. Applies to gifts (Wilton v Farnworth; Louth v Diprose) contracts of sale (Blomley v Ryan) and contracts of guarantee (Amadio).

Spousal Volunteer Guarantees (Garcia UC)

If married woman enters into guarantee for husbands benefit, and subject to undue influence or didnt understand nature/effect of guarantee: Presumption arises against lender that it knew of disability (Yerkey v Jones). Unconscionable for D to enforce transaction where (Garcia v NAB, updating Yerkey): Surety didnt understand purpose/effect of transaction; Transaction voluntary; Lender is taken to have understood that husband may not give sufficient details to wife about guarantee; and yet Lender didnt take steps to explain transaction/find out what she knew. Despite this, a litigant does not necessarily have to meet all these requirements not possible or desirable for equity to do this: Jenys v Public Curator: Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determined the validity of the disposition.

Difference between Garcia and Amadio

GARCIA Plaintiff a volunteer, victim of UI or didnt understand transaction, lender aware borrower/guarantor spouses or closely related, and lender didnt take steps to ensure guarantor understood transaction. Confined to security-giver seeking to avoid security transaction. No need for special disadvantage, but P must be a volunteer and lender must know of spouse relationship. Defences for: Undue influence component Lender must show guarantor received independent advice. Lack of knowledge component Lender must show adequate steps taken to reverse this.

AMADIO Special disability, known to enforcing party, unconscientious advantage taken. Applies to any party avoiding transaction. P doesnt have to be a volunteer, but lender must have actual/constructive knowledge of special disability. Defences: Must show no unconscientious advantage taken.

Unity of Doctrine of Unconscionability?

No, not much of a proper unity at all. Although equity (and UC by association) generally intervenes to prevent a stronger party acting inequitably and in bad conscience by trying to enforce/retain benefit of an agreement, this doesnt help determine what unconscionable conduct is. Amadio is a generally straightforward case in which to demonstrate unconscionability: Clearly requires the existence of SD, knowledge of SD by SP, and exploitation of WP. Also extended scope of UC to include constructive knowledge of SD, and in obiter stated that UC should not be used merely to remedy a bad bargain, but the facts to which they were applied (i.e. dodgy bank rep) were uncontroversial and easily fit within UCs framework. However, by leaving a non-exhaustive list of circumstances in which SD could arise problems were caused by subsequent cases. Bridgewater appears to have been determined almost solely on the desire of the High Court to remedy a bad bargain rather than anything particularly related to unconscionablity. Although it ostensibly applied the Amadio principles, the Court seems to have ignored evidence showing that the deceased had good reason to effect the transaction, as well as undisputed evidence showing that the deceased was in good health, educated and retaining his mental faculties. All in all, there was no special disability clearly defined. The main factor in the decision seems to have been the rashness of the transaction, as well as the fact that the nephew was the party to suggest it, not the deceased. Dal Pont: One wonders whether the majority would have decided any differently had the idea for the transaction had come solely from the deceased. If so, what the court is saying is that sowing the seed in the mind of another person as to what he or she could do with his or her property can of itself amount to exploitation even though the course which the transferor chooses to adopt also serves his or her ends a remarkable conclusion. Garcia, in comparison, uses a completely different principle to establish unconscionable conduct namely, focuses on the trust and confidence a husband and wife have for one another. Although the original principle, Yerkey v Jones, has been criticised for its sexist and outdated perspective of the role of women in relationships, the HCA interpretation emphasises that a husband may innocently give a poor explanation of a guarantee to his wife. This isnt attributable to an imbalance between parties or a vulnerability to exploitation (as per Amadio) only the relationship dynamic they hold. This case ultimately seems to take the same approach as Bridgewater in terms of waiving firm principle in favour of righting the immediate wrong of the case at hand. Dal Pont: To premise the presence or otherwise of unconscionable conduct on a black and white distinction, such as whether or not a transaction is voluntary or a relationship a de jure marital one, seems to go against the multifaceted inquiry which is usually part and parcel of any inquiry in to the blameworthiness of a person's conduct. Hard to fathom how external factors that a creditor cannot control can be construed to indicate unconscionable conduct. Based on these cases, any strongly defined concept of unconscionable conduct has been rendered uncertain by later HCA cases. The trend towards individualised justice, whereby each court twists overarching and vague principles to suit the facts of each case, has hindered the foundation of a core concept of unconscionability that can be used in a consistent and effective manner.

Fiduciary Relationships

General Definition

A relationship in which one of the parties is not free to pursue his/her own separate interests. The essence of a fiduciary relationship, by contrast, is that one party exercises power on behalf of another and pledges himself or herself to act in the best interests of the other (Norberg v Wynrib). Fiduciary duties are obligations imposed by a court of equity, and are not consensually agreed to by parties. Duties can be breached even if unintended strict liability: The rule of equity which insists on those who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fide the liability arises from the mere fact of a profit having been made (Regal Hastings). Dramatically different from common law, in which the underlying principle is the free pursuit of self-interest, regardless of good faith or fairness. a concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties involved in negotiations each party is entitled to pursue his own interest, so long as he avoids making misrepresentations. (Walford v Miles) An architect can use materials for a building that allows him to receive a commission, and so long as the products are not inferior or arent specified in the contract this is not wrong at common law. However, only the third degree of legal altruism demanded of fiduciaries requires self denial of that kind (Birks, The Content of Fiduciary Obligation).

Categories of Fiduciary

Accepted categories: trustee-beneficiary; agent-principal; solicitor-client; employee-employer; director-company; and partners (Hospital Products Limited). The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of the other person in a legal or practical sense (Mason J in Hospital Products). However, the categories have not closed (Hospital Products). Example is doctor-patient, if doctor giving advice (Breen v Williams). the difficultyis that the law has not, as yet, been able to formulate any precise or comprehensive definition of the circumstances in which a person is constituted a fiduciary in his or her relations with another (Breen v Williams). If a party is not free to pursue their separate interest, likely to be a fiduciary. Other factors such as presence of relationship of trust/confidence, or ability to exercise clients powers (as per trustee) wont necessarily mean a fiduciary relationship exists. May simply point to tortious duty of care or, conversely, a fiduciary relationship could arise with no rights being held on behalf of principals (i.e. solicitors). Can argue that as a result fiduciary categories remain uncertain. But this is not a bad thing it simply shows equitys flexibility.

Nature of fiduciary obligations

The utmost duty to disclosure any conflicts and profits by a fiduciary forms the core of a fiduciary relationship (see Breen v Williams). Positive obligations of a fiduciary: Duty to disclose unusual terms in agreement (UDC v Brian). Duty to disclose material to prospective investors (Directors of Central Railway v Kisch). Fiduciary cannot pursue business opportunity if such conduct would put him in position where fiduciary obligations conflict with personal interests. As such, any potential conflict must be avoided. A man of integrity can be a defaulting fiduciary without ceasing to be honest (Hughes Aircraft v Airservices). The rule of equity which insists on those who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fide the liability arises from the mere fact of a profit having been made (Regal (Hastings) Ltd v Gulliver). In case, directors put own money into venture that their company could not afford, all parties reaped profits. But by participating in an opportunity of the company the directors had breached FD and so had to return their share of money. Should be clear that fiduciary breaches are not always fault-based, but are ultimately relationships held to exceptionally high standards.

Commercial relationships and fiduciaries

Quite often a purely commercial agreement conducted at arms length and on equal footing indicates no fiduciary duty (Gibbs CJ Hospital Products). However, Mason J also stated that ultimately each case must be examined on its merits to determine if a fiduciary relationship is present. Fiduciary relationships can exist, and even be forced to accommodate to the terms of, a contractual arrangement (Hospital Products). i.e. Can contract out of fiduciary duties.

Joint ventures

Fiduciary relationships can exist between parties attempting to form a joint venture (United Dominions v Brian). A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached, and who may never reach, agreement upon the consensual terms which are to govern the arrangement between them This case meant that equitable duties, such as making full and frank disclosures or avoiding any conflict of interest, would apply during negotiations to enter into joint ventures. Less likely to be present in commercial transactions where parties are acting at arms length (Gibson Motorsports). Although such transactions are ripe with fiduciary potential, if this is not realised then there is no such duty. All the above parties embarking on separate interests whilst negotiating a joint venture was evidence that all were acting in distinctively non-fiduciary manner. In England, equitable jurisdiction enlivened because one party removed itself from the market so the other could purchase assets, the capital being shared as part of an intended JV (Banner Homes). The equity is invoked where the defendant has acquired property in circumstances where it would be inequitable to allow him to treat it as his own, and where because it would be inequitable to allow him to treat the property as his own, it is necessary to impose on him the obligations of a trustee in relation to it. It is invoked because there is no bargain which is capable of being enforced. If there were an enforceable bargain there would have been no need for equity to intervene in the way that it has done in the cases to which I have referred.

Extent of fiduciary duties within a relationship

Can be fiduciary as to none, all or some of its aspects. It is important to appreciate that the existence of a fiduciary relationship does not determine the content of the duties owed by one fiduciary to another. It has long been recognised that the nature and extent of the duties depend on the circumstances surrounding the particular relationship and the context in which relief is sought (News Ltd). In contractual relationships, the nature of fiduciary obligations may be determined by the terms, if any exist. Noranda v Lachlan: Selling an interest in JV falls outside the scope of fiduciary duties and so exiting partner does not need to act in the interests of other partners. Also in Noranda, fiduciary obligations do not supply rules of positive obligations owed e.g. if director makes decision to make appalling invest, but doesnt act in self-interest, only breaches contractual duties as fiduciary principles would not state whether or not hes breaching FD. Simply stating that a relationship is fiduciary does not provide a complete description of the legal nature of the relationship. the extent and nature of the fiduciary duties owed in any particular case ought to be determined by reference to any underlying contractual relationship between the parties. Thus, in the case of an agent employed under a contract, the scope of his fiduciary duties is determined by the terms of the underlying contract (Henderson v Merrett Syndicates). Basically, other legal rules likely apply to a contractual relationship make sure that they dont override fiduciary duties.

Defence of informed consent

To waive fiduciary duties, must make full disclosure to party who is owed duty, and that party must consent. Strict application if substantial documentation to be given to beneficiaries then this must be disclosed (Boardman v Phipps). In above case solicitor did not get permission from a trustee who was not sui juris. As a result he was liable even though all other trustees had approved the measure.

Accessorial Liability in Equity

Property Rights To be one, it: Must be both capable of assignment to third parties and capable of binding third parties without their consent. Cannot be destroyed just because the property comes into the possession of a third party. Generally, if one party (X) holds anothers (Y) item of property, Y has an equitable title and can enforce the return of the property. However, if X is a bona fide purchaser for value without notice, the equitable title is extinguished Y cannot get the property back.

Types of claims against trustees Proprietary: Plaintiff asserts that item of property is held by defendant on trust. Claim is not for the loss incurred by P, but for the property itself (therefore if property value increases, the plaintiff benefits from this). Personal: Plaintiff asserts claim against trustee for loss and illegal breach of trust assets. Effectively claims security interest over asset illegally acquired in order to get back what was originally lost from the trust (if property value increased in Ds hands, P doesnt benefit from this).

Barnes v Addy Claims

Case principle Principle (Lord Selborne): Those who create a trust clothe the trustee with legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others if they are found either making themselves trustees de son tort [by assuming duties wrongly primary liability], or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust [beneficiary fraudulent conduct according to common law principles]. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps a court of equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees. Application in Barnes v Addy: Not necessary to affect the outcome the third parties (solicitors) didnt receive ant trust property, nor was it argued that they had knowledge of Barnes intended misappropriation. Furthermore, the express trustees (Addy) default was not dishonest or fraudulent. Additional note: Although Lord Selborne formulated the third party liability principle, there were other cases in the 1840s that held that a stranger might be liable for knowingly inducing or assisting the commission of a breach of trust, even if the trustee had not been dishonest or fraudulent. Relates to second limb claims, which require bad trustee conduct. The High Court in Farah noted these cases, and accordingly has left open the possibility that third parties may in future be liable under innocent breaches of fiduciary duty.

First limb Knowing Receipt Lord Selbornes actual expression receive and become chargeable. Plaintiff must prove elements of this cause of action (Farah). Must demonstrate three things:1. Defendant received trust property beneficially (not merely as an agent for another); Information is not trust property for this limb (Farah).2. Defendant knew property was part of the trust; and3. D knew of circumstances that made payment a misapplication of trust funds. Knowledge requirement first four parts of the Baden 5-part classification (Consult Development). Doesnt have to be aware at time trust property acquired, but if later realises and continues to use property as own then liable. Most stringent requirement knowledge of circumstances that would indicate the facts to a reasonable and honest person (Baden v Societe-General). Historically in England, liability required knowledge amounting to a want of probity by recipient more stringent requirement than in Australia.

Second limb Knowing Assistance Three elements (as above, burden of proof on plaintiff):1. A fraudulent breach of trust by the fiduciary must have occurred (Farah [180]); Not all breaches dishonest/fraudulent, but Australian cases (Consul; Farah) rely on common law principles and not equitable. Also see Farah High Court regarding 1840 cases in future Australian courts may find scope to make third party liable even when fiduciary is not at fault, and can do so whilst following orthodox manner. NOTE: Fiduciaries no longer need to fraudulent breach trust in England (Royal Brunei; Twinsectra).2. Defendant must have assisted in that breach; Can be omission by D failing to stop trustees breach. However, assistance must be of some significance.3. D must have had knowledge of the breach. Same actual/constructive requirement as the first limb. In England, dishonesty has replaced knowledge (Royal Brunei; Twinsectra). Reflects modern societal views about third party liability especially when professionals are assisting trustees and become embroiled in liability (i.e. Enron, HIH). cf Lord Selborne trust performance would benefit from solicitors and so reluctant to extend liability to them.

Farah and the NSW Court of Appeal

Case Facts Joint venture between Farah and Say-Dee to purchase and redevelop land (No. 11). However, the council refused development applications as land too narrow without amalgamation with adjacent lots. After refusal Mr Elias (F), his wife and 2 daughters bought surrounding lots. Farah then tried to buy out Say-Dees share in No. 11 SD refused, F brought proceedings seeking trustee to be appointed and property sold. SD counterclaimed, arguing F held its interests in surrounding property on constructive trust. F won at trial, but overturned by Court of Appeal on the basis of unjust enrichment, despite neither claimant raising this issue. High Court strongly rejected COAs decision and reasoning.Scope of Fiduciary Obligation and informed consent: COA held Elias did not properly obtain informed consent in order to avoid breaching fiduciary duty. High Court held otherwise - the sufficiency of disclosure can depend on the sophistication and intelligence of the persons to whom disclosure must be made and so Elias had adequately discharged his fiduciary obligations in that respect.Knowing Receipt/Unjust Enrichment: The proposal by the COA to allow unjust enrichment to run alongside knowing receipt (and Say-Dees proposal replacing the first limb claim with unjust enrichment) was thoroughly rejected by the High Court. It was an unjust solution purely because neither claimant had raised the issue it was an independent creation of the COA. A restitution-based response, whether complementing or replacing knowing receipt, would cause serious confusion in the lower courts. This is because they would not know whether to enforce a flawed restitution cause of action (COA) or High Court obiter (Consul). There was no valid justification to modify the existing causes of action. In fact, the COA reasoning was so unsupported that the High Court felt that there was a belief that restitution had an inalienable right to exist. Interestingly, although the Court of Appeal attempted to refer to Birks as a general authority for its decision, the High Court found that Birks had actually retreated from his initial support for restitution in this field. Ultimately, the Farah High Court held that unjust enrichment exists only if there is a relevant qualifying or vitiating factor falling into a pre-existing category. Referred cases such as David Security indicate that courts do not determine whether a matter is unjust by reference to subjective evaluation of fairness or unconscionable conduct. UE is not a definitive legal principle on its own terms because (quoting Gummow) its existence could restrict dynamism and substance in the legal field, result in new fictions being created to support its thesis, distort existing legal principles and ultimately create serious uncertainty in Australias legal system.Knowing Assistance The High Court reiterated that there was no need to look to English cases in regards to dishonesty or the jury question Consul remains the authority for assessing which parties are liable under the second limb claim.Purple Patch or Isolation? The decision in Farah could be regarded as stubbornness except for the fact that the High Court was undoing what should be wholly regarded as bad law. Quoting Gummow J, the Court held that general principle is derived from judicial decisions upon particular instances, not the other way around In contrast, the Court of Appeal had favoured academic notions of an ideal taxonomy, and by doing this had created a principle that, first, was unsupported by and heavily clashed with existing Australian law and, second, unnecessary for fair and just outcomes. In regards to the latter point, the High Court emphasised that failure of a party to obtain a favourable outcome was in itself not unjust the principle itself would have to be flawed to justify change. Based upon these facts, Farah represents a clarion call to orthodoxy and a return to existing precedent, which have been shown to create good and certain law.

Misrepresentation and Mistake

Misrepresentation Common Law

CL Position If misrepresentation fraudulent (i.e. was done dishonestly) a contract can be rescinded: First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false (Derry v Peek). However, if a duty of care is present certain innocent misrepresentations are liable for damages at law (Hedley Byrne v Heller). Rules as to causation: Fraudulent statement must be a cause, not the absolute cause inducing entry into the contract. Influence of statement on plaintiff assessed objectively. Remoteness fraudulent defendant must make amends for all damages directly attributable to fraudulent inducement. Damages place plaintiff in position would have been in if fraud not committed (Hedley Byrne v Heller).

Rescission can be done at Common Law? Yes, this proprietary remedy can be granted transfer of title was induced by fraudulent misrepresentation. Permits rescission of contract and re-vesting of title in plaintiff. Although a proprietary remedy, rescission has both personal and proprietary consqeuences: Personal Permit victim to avoid contract at his/her discretion. Proprietary Title vested in transferee is conditional, and if power holder/plaintiff successfully exercises rescission power the title: (i) re-vests in plaintiff; and (ii) power holders proprietal rights become vested in defendant (contractual counterparty). Sounds confusing, but basically proprietal rights are transferred simultaneously so that there is no multiplication of rights. Ensures restitutio integrum (restoration to original position) occurs.

Steps required when rescinding contract The power holder: Must elect to rescind while power survives; Mustnt have affirmed contract while being aware of fraud; and Must be in position to make restitution of any benefits received under the contract. i.e. If plaintiff got money from fraudulent sale, must be able to return in to get the property back. In Specie restitution: After rescission, if property is being returned it must be returned in present form under common law cannot sell it and distribute the profits. e.g. A induced to enter fraudulent contract to transfer title of painting to B in exchange for title in Bs car. If B found to have induced A, conditional common law title passes to B subject to power to re-vest title in A. If A decides to re-vest title in painting, must make in specie restitution of Bs car. However, this power to rescind can be destroyed: Nemo dat quod non habet noone gives what he does not have. Cardinal property law rule: If X gain possession of property from Y, who does not have ownership rights, X will also be denied such rights. [T]he assets come to the liquidator with their history and inherent characteristics. Although the liquidator takes the assets on behalf of the creditors, third parties retain any rights which ensure to them as a result of that history or those characteristics (Vagrand v Fielding). But because the power is absolutely proprietary in nature, it is destroyed by good faith purchaser of title for value without notice.

Common Law Cases

Car & Universal Finance Co Ltd v Caldwell Caldwell sold car to dodgy dealer, when cheque bounced C rescinded successfully. In meantime car sold a number of different people, eventually ending up with C&U who purchased in good faith/for value. However, rescinding contract first meant that title already re-vested in C: The contract of sale to these rogues was avoided and Caldwell then became the owner of the car again. It was only after he avoided it (so that it was once again his property), that these rogues purported to sell it to Motobella and Motobella purported to sell it to C & G Finance. Those sales were ineffective to pass the property because it had already re-vested in Caldwell.

Re Eastgate; Ex parte Ward [1905] 1 KB 465 Fraudulent purchaser bought furniture from vendor on credit. Purchaser engaged in bankruptcy, vendor entered the house and repossessed furniture. Purchaser formally went bankrupt, his property vested in trustee. Trustee sued vendor for possession of taken furniture. Court right to rescind required against both purchaser and trustee. Vendor had not engaged in conversion by taking back furniture: the trustee acquired the interest of the bankrupt in the property subject to the rights of third parties. One of those rights in this case was the right of the vendors of the goods to disaffirm the contract and to retake possession of the goods.

Equitys concurrent jurisdiction with common law Equitable remedies available if contract void at common law. Notably, if power holders right to rescind ineffective because in specie restitution not possible, equity intervenes to treat the exercise as valid and therefore re-vest rights in equity at that time. Full proprietary and personal restitution can be decreed at the time of the subsequent equity suit. Equity takes less substantial view of the requirements of restitution in integrum; CL lacks means of adjustment to provide a remedy where one or other party benefits from the possession of property. e.g. Shareholder receives dividends from shares before exercises right to rescind. Common law wont allow rescission because sholder has gained profit from the deal, but in equity this will be ignored and restitution granted. Rescission differences Alati v Kruger leading case: Essentially, equity can re-vest equitable title to property in a much wider variety of cases than CL. Of course, a rescission which the common law courts would not accept as valid cannot of its own force revesting legal title to property which had passed, but if a court of equity would treat it as effectual the equitable title to such property revests upon the rescission. If CL cant find rescission valid equity doesnt apply, but if CL does approve of rescission equitable remedies are relevant. Proprietary consequences of rescission in equity is to make the parties to the contract (and those who take through them) trustees of the re-vested titles for their contractual counter-party. Effectively a resulting trust (El Ajou v Dollar Land Holdings).

Innocent Misrepresentation In a nutshell common law provides no remedy, Equity does. Rescission is the remedy equity provides (Redgrave v Hurd) Where rescission [on the ground of misrepresentation of a material fact] is claimed it is only necessary to prove that there was misrepresentation; then, however, honestly it may have been made, however free from blaming the person who made it, the contract, having been obtained by misrepresentation, cannot stand (Derry v Peek). Bars to rescession: As per fraudulent misrepresentation, i.e. bona fide purchase, affirmation, lapse of time.

Rescission & Restitution vs Common Law Damages Rescission/restitution dissolves contract ab initio (from the start) so no claim of contractual damages can occur. However, at CL rescission doesnt prevent a victim bringing other claims against D. So can rescind contract, re-vest title and get resitution (if profits made) and then, providing no element of double recovery, initiate a claimm for damages in deceit (i.e. for fraudulent conduct).

Equitable Fraud

Definition Different meaning in equity than common law: Common law dishonesty, intention to cheat. Equity much broader, acts as preventative measure rather than dealing with issues after problems occur. Jurisidiction of equity a prophylactic. By disarming the parties of all legal sanction and protection for their acts, they suppress the temptations and encouragements which might otherwise be found too strong for their virtue(Story). Even innocent wrongs will be held liable an extremely high standard of openness and fairness by parties (Maguire v Makaronis).

Other Heads of Equitable Fraud Inducement: Needs to be more than inequality and capacities of parties, i.e. EF (MGL). the touchstone is whether the pressure (unlawful or lawful) amounts to conduct which is unconscionable; but that, as stated in [12-090] below, is no more than saying that it is fraudulent in the equitable sense. Part Performance: Equity can decree specific performance even if contract rendered unenforceable by Statute of Frauds (modern counterpart s 53(1) Property Law Act). Only possible if D reasonably aware of Ps acts and then relies on statute to render the contract unenforceable Basically indicates that D is being sneaky by not remedying the situation. However, no more new heads of EF according to MGL: The door may now appear shut to fresh appeals but the terms in which fraud is seen to appear in various cases will provide sufficient lee-ways for further development. Such a principle upholds the notion that Courts should adhere to precedent and should not seek to stray from it.

Mistake

General Rule Equity can rescind a concluded contract that parties have entered under mutual, common or otherwise unilateral mistake, leaving defective datain Ps head. Generally, all such contracts have either an:1. Induced Mistake (error brought on by Ds misrepresentation). Equity is more likely to be intervene in this type of mistake.2. Self-Directed Mistake (D innocent of any wrongdoing). Equity wont intervene if contracting parties of one mind (ad idem). Only intervenes when plaintiff is subjectively mistaken to the bargain and, if objectively construed, there is conduct suggestive of contractual formation and the defendant is not at fault. If it does intervene, equity does so in concurrent jurisdiction (both CL and equity) or auxiliary jurisdiction (equity supplements CL).

Heads of Mistake Unilateral: Mistake made because guilty party knew about error and induced contract anyway. If acknowledged that understanding of one party correct, will fit into this subcategory (Goldborough Mort v Quinn). Mutual: Both parties make mistakes, but different from one another. Offer and acceptance are in their true meanings different, so no contract created (Sharp v Thomson). Common: Both parties make the exact same mistake. Transfers made under this mistake can be subject to restitution in integrum. However, only if misapprehension fundamental and party seeking equity not at faul (Solle v Butcher). Contract void? Possibly at law, but not ab initio (Bell v Lever Bros). Contract void in futuro from time common mistake discovered (McRae v Cth).

Recovery of Mistaken Payments Equity allows return of mistaken payment or other transfers outside contractual formation. Strict liability in cases of mistaken beneficiary to deceaseds estate must pay back money regardless of fault (Re Diplocks Estate). Only requirement P must have exhausted remedy against those making the mistake (i.e. the trustees).

Estoppel

Equitable Estoppel Two types: Promissory and Proprietary. However, Waltons Stores signalled a potential merger of these doctrines NOTE: It is uncertain as to whether this has occurred or not.

Promissory EstoppelOccurs when (Legione v Hately):1. Parties are in pre-existing contractual relationships;2. One party make an express/implied representation;3. The representation is clear and unambiguous; and4. The other party has acted in reliance on the representation and is in a position where material disadvantage will be suffered if estoppel is denied.

Legione failed on the facts Did not satisfy point 3 secretary gave uncertain and unqualified response about delay.

Promissory estoppel acts as a defensive shield only: This was because concern that to enforce voluntary promises of future conduct without consideration would undermine the law of contract. It would cut up the doctrine of consideration by the roots, if a promisee could make a gratuitous promise binding by subsequently acting in reliance of it (Cth v Scituate Savings).

Proprietary EstoppelOccurs when (Dillwyn v Llewellyn):1. An expectation has been created/encouraged by landowner;2. Second party had expended money on land in accordance with this expectation;3. Owner know of expenditure, does not object; and4. Second party will suffer detriment if the expectation not fulfilled.

Dillwyn Relevant facts Father promised to transfer son land. Transfer not completed, but son built house on land with his fathers knowledge and approval. Son successfully argued proprietary estoppel because of his fathers conduct.

Functions as a cause of action (sword) as well as defence (shield).

Post-Waltons Equitable EstoppelOccurs when (Brennan J in Waltons):1. Assumed Legal Relationship: Plaintiff assumed a particular legal relationship existed/would exist with defendant;2. Defendant Induced: Defendant induced plaintiff to adopt that assumption/expectation;3. Plaintiff Acted: Plaintiff acts in reliance of this promise;4. Defendant knew of Action: Defendant knew plaintiff was acting in reliance of the promise;5. Plaintiff Suffered: Plaintiffs actions would cause detriment if assumption/expectation not fulfilled; and6. Defendant didnt attempt to avoid: Defendant fails to act to avoid the detriment, whether by keeping the promise or otherwise. NOTE: EE speaks in terms of assumption/expectations, not representations. However, must be unambiguous, clear and unequivocal or equity will not intervene if not reasonable to rely upon representation cant invoke EE.

Waltons Stores Relevant facts Mahers in negotiations with Waltons Stores about granting a lease. Building on site had to be demolished so that new department store to Waltons specifications could be constructed. 7 November Mahers solicitors requested prompt finalisation of contract, Waltons solicitors sent redrafted lease same day. 11 November Mahers solicitors sent executed lease to Waltons, began to demolish building. 21 November Waltons had second thoughts about lease, told solicitors to go slow. Mid-December Waltons becomes aware of demolition works, decides not to proceed with lease. Does not inform Mahers of this decision. 19 January Waltons makes first communication with Mahers since 21 November, informs that Waltons will not go ahead with lease. Demolition works 40 per cent complete at this stage.

Waltons Stores Decision and reasoning Mahers could not claim common law estoppel by representation, or promissory estoppel: CLE: Was not a representation of existing fact (i.e. lease not in existence); PE: Parties not in pre-existing relationship, and Mahers were plaintiffs and so not relying on estoppel defence. However, the High Court made a remarkable departure from existing principle: Extended the Legione principle so as to preclude departure by a person from a non-contractual representation (Mason CJ, Wilson J [399]). Now a sword as well as a shield. The need for clear and unequivocal representation was satisfied the terms of the lease were settled and there was an assumption that the contract would be completed as a matter of course (Mason CJ, Wilson J). Accordingly, a new head of equitable jurisdiction had to be established to circumvent the constraints of Jorden v Money. Waltons silence from 21 November to 19 January was, in the circumstances, enough to found an equitable estoppel. Silence only supports estoppel if it is inequitable to assert a legal relationship different from the one which, to the silent partys knowledge, the other party assumed/expected (Brennan J). Elements of urgency in obtaining a response, and because the last communication between parties was the sending of lease documents, the assumption that the contract would be completed remained unchallenged. Therefore appellant under obligation to communicate with Mahers within reasonable time (Mason CJ, Wilson J 407).

Minimum EquityA court of equity must make an order that simply addresses the detriment suffered by relying on the representation. i.e. Mahers would be compensated for demolished building, not loss of contract. Cth v Verwayen: Minority found that stress and additional legal costs would allow estoppel, but majority held that only measurable detriment was the delays and that could be resolved by an order for costs.

Common Law Estoppel

Estoppel by judgement Res judicata Issue estoppel Any matter of fact or law decided by earlier judgement estopped from use in later proceeding. e.g. If court rejects that you were beaten into confessing, you cant argue it later - double jeopardy-esque.

Anshun Estoppel Cannot raise an issue in a proceeding that could/should have been raised in an earlier one. Not strictly estoppel, but derived from need for public interest considerations.

Estoppel by Writing Precludes parties from disputing any matter recited in a deed between them.

Estoppel in pais (by conduct) Estoppel by Convention Made when two parties reach mutual agreement or mutual assumption of a state of fact - estopped from denying this fact. Must prove that: P has adopted assumption as to terms of legal relationship with D; D has adopted the same assumption; Both parties have conducted affairs on basis of assumption; Each party knew/intended that the other act on that basis; and Departure would detriment P. Conventional estoppel can act alongside contractual variation: If parties to contract put particular interpretation on its terms and hold faith that other party has acted the same, bound by interpretation (Amalgamated Investment v Texas Commerce). Irrelevant whether interpretation mistaken or not - both parties have reached consensual interpretation and bound by it. Estoppel by Representation Can be representation of either fact and law, or law alone (Foran v Wright). Must be an existing representation, not future (Jordan v Money). Future representations dealt with by contract under CL - otherwise it would destroy the doctrine of consideration (Cth v Scituate). Basically, if there were no contract between parties CL estoppel could not apply to render a promise binding.

Differences between common law and equitable estoppelWhen representations occurred: CL existing fact (Jorden v Money). Laws of contract at the common law cover future representations. It would cut up the doctrine of consideration by the roots, if a promisee could make a gratuitous promise binding by subsequently acting in reliance of it (Cth v Scituate Savings). Equity future conduct (Waltons Stores).

Defence or cause of action: CL Defence (or shield) only. Equity Both shield and sword. Can be used as an independent cause of action by a plaintiff if they satisfy the 6-step test as per Brennan J (Waltons Stores).

One unified doctrine of estoppel? Mason CJ (Cth v Verwayen): the consistent trend in the modern decisions points inexorably towards the emergence of one overarching doctrine of estoppel rather than a series of independent rules. However, no unified doctrine of estoppel yet.

Issues surrounding a unified doctrine In favour: Deane J has claimed in a number of cases (Waltons; Foran v Wright; Cth v Verwayen) that there has always been one doctrine of estoppel even before the Judicature Acts, and with the exception of Jorden v Money this extended to representations of future conduct that are the concern of proprietary estoppel. The unification of estoppel by conduct avoids the restrictive nature of the common law, and allows wider scope for relief based upon the assumed state of affairs (Cth v Verwayen). For example, in Giumelli the landowner was estopped from retreating from the promise to give his son land in exchange for his work on it. However, as another family member had already occupied the land it would have been unjust to force this third party (who was not part of the proceedings) to hold the property on constructive trust. Accordingly, the equitable solution was to give a pecuniary remedy instead. Against unification: Relatively few estoppel cases to further modify this area of equity, and of the cases to reach the High Court the question of unification has been left open (Giumelli v Giumelli). The main issue when unifying common law and equitable estoppel by conduct is that both doctrines are fundamentally different. Equity requires that plaintiffs be willing to do equity, whilst at the common law this is not needed. At common law the truth and justice of individual cases is shut out, with strict application of estoppel principles. In complete contrast, equity promotes these concepts in an attempt to subdue fraud (both actual and equitable) and promote honest and fair dealing (Perley CJ in Horn v Cole). CL: Estoppel by conduct is evidentiary in character, not a source of rights. Eq: Must show sufficient detriment to be granted estoppel, not just prove reliance on a representation. From these references it seems that, although a unified doctrine of estoppel would have many benefits, the fundamental differences between common law and equity must be considered before any further changes are made (perhaps these difficulties are a reason why the courts have not expanded upon this question in recent years).

Confidential Information

Starting Point Exclusive jurisdiction: Equity can restrain and compensate breaches of confidence. Typically, possessors of confidential info subject to fiduciary duties which prevent misuse of information/knowledge for their own advantage. However, equitys jurisdiction over confidences and confidential information not confined to FRs two distinct doctrines, the former not requiring FR or special relationship. Auxiliary jurisdiction: Equity may be relevant in aid of granting contractual rights following a breach of confidence (e.g. granting injunctions). However, contractual primacy equity moulds itself to suit contract at hand, purely acts a possible supplementaryn remedy.

Elements of modern cause of action Three elements (Megarry J in Coco v AN Clark):1. Information itself must have necessary quality of cconfidence about it.2. Information must have been imparted in circumstances importing an obligation of confidence.3. Must be an unauthorised use of that information to detriment of party communicating it. However, although formulation will suffice as a working statement, two caveats:1. Inclusion of eavedroppers and similar parties.2. Inessentiality of detriment in any specific sense of economic loss (i.e. can be humiliation or distress instead). Basically, a court of equity will restrain publication of confidential info improperly/surreptitiously obtained, or of info imparted in confidence which should not be divulged (Smith Kline). Two species of same genus: confidential info (i) improperly obtained, and (ii) imparted in confidence. Possible third caveat: D may have obligation of confidence if he ought to have known that confidential info being imparted to him (see Gummow J in Smith Kline; Gibbs J in Consul Development).

Confidential Information

Definition Confidential information different from information: The former suggests communication of secrets or private matters. It will not exist in something which is public knowledge. However, no bright line between public and private (Gleeson CJ in Lenah). Examples of CI (Parkinson): Commercial/trade secrets; confidential ideas not yet in public domain (TV show Talbot); Information about business operations; Personal biographical or commercially sensitive information. Last example establishes and enforces a personal zone of privacy free from public scrutiny.

Confidential Info Commercial Context Information not property, so breach of confidence does not bestow proprietary rights: Equity acts on conscience of the defendant, not in aid of proprietary right. Sometimes confidential information has proprietary characteristics (e.g. capacity to assign), but not the reason for equitable intervention.

Lenah Game Meats case Main question was it appropriate to grant an interlocutory injunction on the basis of unconscionability and not an established cause of action? Gleeson CJ: [17] The language of unconscionability cannot conjure up the right to interlocutory relief if there is no right available. [25] Operations filmed were not secret or confidential, since had to be licensed by a public authority and would have had inspections from officials. [29] the circumstances in which the film was made, the nature of the activities recorded, a persons concern that they not be seen by the general public, and an inference thattrespassers and broadcasters or publishers knew of that concern, could make the image and the sounds confidential. Has left scope for future development of equity to protect from illegal filming of private activities. [34], [39] The slaughtering method was not private, meaning that an injunction could (and should) not be granted. [41] Expansion of breach of confidence better than creating a new tort of privacy. Lack of precision of the concept of privacy means caution when developing new torts. Also issues regarding free speech constrained by privacy. [43] Even if privacy protected, concept enshrined in human dignity and so unlikely a corporation would receive this protection. Therefore Lenah would lose because a company. Gummow and Hayne JJ: [73] Absence of publicity does not mean something is invested with necessary qualities of confidence to allow an injunction. Refers to Saltman. The information, to be confidential must not be something which is public property and public knowledge. [79] Difference between a corporation, who seeks to protect its pocket book from bad publicity, and a person, who seeks the seclusion of personal life. One monetary, the other actual privacy. [125]-[126] Four categories of wrongs: (i) Appropriation of Ps name and likeness (i.e. complaint about deprivation of opportunity of commercial exploitation of name/likeness for his/her benefit); (ii) Putting P in false light damages reputation or causes financial detriment or both (can be protected by defamation); (iii) Disclosure of private facts and (iv) unreasonable intrustion upon seclusion. These come closest to reflection a concern for privacy as a legal principle drawn from the fundamental value of personal autonomy.

Equitable Defences

Laches and Acquiescence

Arises when plaintiff has allowed an unreasonable delay to occur before commencing legal proceedings, or was negligent in issuing proceedings. Court can refuse to grant P relief as a result. However, mere delay alone wont defeat equitable claim. Not bound by any Statutory Limitations (these generally relate to common law claims, NOT equitable).

Two considerations: Length of delay, or laches (in modern era parties expected to act expeditiously, so not specific quantifier for appropriate length of delay); and Nature of the acts done during interval the following may be considered as a waiver by plaintiff and thus defeat equitable claim: P acquiesced to Ds conduct (i.e. knew of equitable breach, yet did not commence proceedings until much later). P caused D to alter position in reasonable reliance of Ps acceptance of the status quo (e.g. D went ahead and built a house on land after believing that P would not take legal action). Ps actions have permitted a situation to arise that would be unjust to disturb (e.g. D sold property to third party and unfair to latter to force return of property). Scott: Treat two as separate L being inexcusable delay, A confined to situations where P knows of rights yet willingly allows them to be violated. whether the plaintiffs conduct amounts in point of law to acquiescence or laches, or whether it amounts to an election not to avoid a voidable transaction, or whether it amounts to a ratification or a confirmation of her gifts, are questions of mere words which it is needless to discuss (Allcard v Skinner).

Unclean Hands

Equitable maxim: he who comes into equity must come with clean hands. Pretty straightforward if P also guilty of improper conduct during transaction, then relief will be refused. e.g. Cannot claim specific performance if agreement procured by misrepresentation. For this defence to operate, complainant must have an immediate and necessary relation to the equity sued for. i.e. Ps unclean hands must be related to the matter at hand, not just any old unethical conduct by P since any D would simply unearth the skeletons of their adversary to claim the defence.

Equitable Set-off

Defendant has a separate and distinct legal claim against a plaintiff. Must go to the root of Ps title to sue, so if not closely related no defence. e.g. P claims money under building contract, D seeks damages for breach of the same contract for faulty workmanship.

Informed Consent

As per Fiduciary Duties, must make full disclosure to party who is owed duty, and that party must consent (Boardman v Phipps). Strict application full facts provided to relevant parties, who must all be capable of approving.

Bona Fide Purchase

Only related to cases where plaintiff asserts entitlement to a remedy that involves the vindication of their equitable proprietary interests. If party is a bona fide purchaser of the legal title for value without notice, the earlier equitable interest is extinguished.

Equitable Remedies

Starting Point

Equity, if it provides a remedy (its completely discretionary), seeks to achieve practical justice between the parties. Must emphasise that remedy may be something neither party expects. Gummow J: the requirement that a person seeking equity must be prepared to do equity and the operation of the various equitable defences always have the potential to produce relief in a form which could not have been wholly anticipated [by the litigants].

Remedies can come from equitys exclusive jurisdiction: Remarkably flexible when fashioning a remedy for parties. Giumelli constructive trust for P held to be unjust to third party, so equivalent monetary compensation given in lieu of land. Bridgewater Setting aside entire deed unfair, but the price paid for it was too low as well. Therefore sent back to lower courts to determine what a fair price would be!Remedies also come from the concurrent/auxiliary jurisdiction: Must show to court that CL remedies are inadequate. CL generally gives damages, so must show that its not enough to get paid out. Examples: Injunction to prevent showing film that will destroy a persons credibility; Specific performance forcing land sale because P already living on property; D sells off property and gets profit, not enough for P to just get the original purchase price and not reap benefit of sale.

Specific Performance

Concurrent jurisdiction. Applies to the enforcement of executory contracts: An agreement that requires the execution of an instrument, or the doing of an act in law, which would put the parties in the position relative to each other which the contract contemplates. Generally, an agreement to transfer interest in property! OR executed contracts: Doesnt require execution of an instrument contract itself already does this. See JC Williamson Ps right to sell sweets in theatre was right by virtue of the contract itself, and no further instrument or act in law was necessary to allow this right. Pre-requisites to grant remedy: Binding contract; P ready, willing and able to perform obligations; and Inadequate remedy available at CL. Defences that prevent SP being used: Cannot be used to compel performance of personal work (employer-employee relationship). Akin to slavery as no right to leave the contract until over (if it actually ends). Wont be upheld if undue hardship imposed on D.

Injunction

Types of Injunctions

Defied by the purpose of the injunction: Prohibitory court order restraining party from performing a specific act. Mandatory court order requiring party to perform a specific, positive act. Categorised by point of trial granted: Interim/interlocutory If P can prove cause of action, can get a temporary injunction awarded prior to commencement of proceedings (i.e. protects P from injury that could occur if D could continue activities before decision handed down). P must prove that they have a cause of action to rely upon or this injunction cannot be granted. If injunction wrongly given, P may have to pay D damages. An injunction can only issue to protect a legal/equitable right, or to prevent equitable/legal wrong (Lenah Game Meats). Final Court holds that P has cause of action, upholds injunction. Other types of injunction Mareva Restrains D from disposing of its assets in an effort to render future judgement ineffective (i.e. go spend-crazy and wipe out assets owed to another). Anton Piller order D compelled to permit P to inspect Ds premises in order to discover and remove any material relevant to Ps case (i.e. cant destroy confidential records that demonstrate liability). Anti-suit Protects courts processes from frustration due to commencement of proceedings in another, inappropriate forum. Norwich v Commissioners Bailee forced to hold duty to third party where bailee has innocently become caught up in wrongdoing of another.

Distinction between equitable and legal injunctions

Equitable injunction part of equitys exclusive jurisdiction. No need to ask whether damages are sufficient this remedy can be applied whenever a court believes discretion is warranted. Legal injunction part of equitys auxiliary jurisdiction. Must always ask whether damages can suffice if they can, then this remedy cannot be used!

Equitable Compensation

Exclusive jurisdiction, equitable breaches only (otherwise just go to CL). Equity traditionally cannot award damages instead can give compensation in form of account of profits, money equivalent to property value, etc. Supreme Court Act s 38 allows equity to give damages in lieu of equitable remedies. Not limited by CL concepts like remoteness, foreseeability, etc.

Rescission

If concurrent jurisdiction: Applies when contract voidable at law for fraudulent misrepresentation/duress/etc. If exclusive jurisdiction: Is a means of setting aside contract induced by some wrong that equity recognises. Examples: innocent misrepresentation, undue influence, unconscionable conduct, mistake or breach of fiduciary duty.

Account of Profits

Both auxiliary and exclusive jurisdictions. Works out profits made by D in order to return them to P.

Constructive Trust

Difference between C Trust and C Trustee Millett LJ in Paragon Finance plc v DB Thakerar. Constructive Trust (proprietary right): D, though not expressly appointed, has assumed duties of trustee by lawful transaction that arose prior to the breach of trust. Note: The transaction itself is not being disputed by P, only the breach. In these cases the plaintiff does not impugn the transaction by which the defendant obtained control of the property. He alleges that the circumstances in which the defendant obtained control make it unconscionable for him thereafter to assert a beneficial interest in the property. D is a trustee Constructive Trustee (personal right): A trust obligation arises as a direct consequence of the unlawful transaction that is impugned by P. It arises when the defendant is implicated in a fraud. Equity has always given relief against fraud by making any person sufficiently implicated in the fraud accountable in equity. D is not a trustee Accordingly expressions C Trust/Trustee are misleading for there is no trust and usually no possibility of a proprietary remedy; they are 'nothing more than a formula for equitable relief.

Extra If CT not available (i.e. makes an unjust result to other party/third party) damages can be given in lieu of this remedy (Giumelli v Giumelli).

Constructive trust nothing more than a formula for equitable relief

Lord Millett has outlined two definitions under constructive trust: Trust refers to an actual trust with a trustee who, although lawfully assuming this role has committed a breach of trust. Trustee refers to situations where D has committed fraud. The party is not a trustee at all, but has somehow acquired property (e.g. taken from trust, made a profit at Ps expense) that a court will deem is held on trust to return to P. Regarding the latter, this is the definition described as a formula for equitable relief. By this it means that, rather than a discrete remedy, it simply outlines a situation whereby a plaintiff can argue for whatever equitable remedy a court find appropriate at the time.Notes byAll Things Law http://law.timdavis.com.au - A Law Forum to discuss everything about Studying Law - from Law Subjects, Notes and Questions to Law Clerkships and Jobs. Credit: Christopher Angus.