Legally Ranting

Unconscionable Dealing, or Undue Influence?

Posted in Equity, Law School by legalrants on April 14, 2011

The equitable doctrines of Undue Influence and Unconscionable Dealing have often been confused and inappropriately administered. Even within the doctrine of Undue Influence itself, it is not entirely clear as to which is the correct approach.

Let me cite an example. When addressing an action in Undue Influence, does it matter whether the defendant acted with some impropriety (exploitation) towards the plaintiff? According to some UK cases (see National Westminster Bank v Morgan; RBS v Etridge), the answer is yes. In Australia, the approach focuses on the quality of the plaintiff’s consent. This was clearly stated in the case of CBA v Amadio, albeit in an obiter.

Now the problem with the ‘exploitation’ approach is that it gets easily confused with the doctrine of Unconscionable Dealing. This latter doctrine focuses entirely on the defendant acting unconscionably in taking advantage of the plaintiff’s special disability.  Certainly, there are strong overlaps between the notion of ‘exploitation’ and ‘unconscionability’. The blurring of the two doctrines is further compounded if the scope of the ‘special disability’ in Unconscionable Dealing is not set out correctly.

In the High Court of Australia case of Bridgewater v Leahy, the special disability was an affection and fondness of the defendant. Now, when you consider that in cases of Undue Influence, a presumption that there was undue influence can be made out if there is a relationship of trust and confidence between the plaintiff and the defendant, you can see the problems arising — another case of strong overlap, this time between ‘trust and confidence’ and ‘affection and fondness’.

Taken to the extreme, it can be said that there is no discernable difference between the doctrines of Unconscionable Dealing and Undue Influence. In retrospect, this may be to the advantage of the plaintiff, for he may be able to argue two different causes of action on the same set of facts. Nevertheless, the blurring of the two doctrines does no favours to the jurisprudence of Equity.

The Fusion Fallacy — Is it really necessary to separate Equity from the Common Law?

Posted in Contract, Equity, Law School by legalrants on March 5, 2011

A hilarious incident occurred during the Equity lecture two days ago. The lecturer was attempting to explain what forms of equitable relief  are available. It went like this:

Lecturer: A lady signed over her property to her son, in the understanding that she would be able to live in that property for life. She went away for holiday and her rascal son sold the property, and she came back finding that the property was scheduled to be demolished. What form of equitable remedy would she be seeking?

A loud SYMPHONIC TUNE went off, presumable from a mobile.

Lecturer: Not THAT kind of relief, I hope!

In short, the answer to this question would likely to be an injunction. Before I started the Equity unit, I didn’t give two hoots about the available remedies to a civil breach — say a breach of contract. I mean, to me, it was pretty clear cut — injunction? specific performance? damages? rescission? These mixture of equitable and common law remedies were all mish-mashed and bundled in my head, ready to be spewed out according to the context of the case.

Lo and behold — the puritanical law academic would have frowned upon my insolence and ignorance. It’s a FUSION FALLACY, they would say. In my defence, I didn’t even know they were SEPARATE, let alone try to “fuse” them.

Why is it really important to make a clear distinction between equitable remedies and common law remedies anyway? I mean, one would simply dish out the most appropriate remedy right? Who cares if it’s equitable or common law-based? However, in a much celebrated dictum, Professor Ashburner had compared equity and the law to two streams of jurisdiction, though running side by side in the same channel, they do not mingle their waters.

In my opinion, it is still important at the moment to ensure that equitable doctrines are not mixed up with common law principles. For example, exemplary damages (a common law remedy) should not be awarded in a case of a breach of fiduciary duty (an equitable duty) — see the case of Harris v Digital Pulse.

The doctrine of Equity was derived as a supplement, or a “gloss”, to the common law. It steps in when remedies under the law is judged to be inadequate — therefore, a court looks to Equity to award remedies as it sees just. The relationship is not reciprocal. If a dispute requires Equitable doctrines to resolve, it means that the common law was inadequate in some way; if that is the case, why is there a need to bring in common law remedies?

A more appropriate approach, though possibly entailing no change in substance, is to develop the common law incorporating duties that were previously under equitable doctrines. For example, in the case of Harris, a court can hold that a fiduciary duty has a legal component to it, that would attract common law remedies if that duty was breached.

It is still important to keep the “waters” from “mingling” — if common law remedies were available for all breaches of equitable duties, we could see the state of law  decline into a mish-mash of confusion. For example, exemplary damages may be awarded in cases of breach of contract, simply because the judge feels that it is appropriate to do so (when previously, contract law would not administer such a relief).

Boy, isn’t that confusing?

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