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Week 4 - Further Equitable Concepts: Unconscionability, Duress and Undue…

- - - - serious disadvantage #
      - Special disability
        
        Commercial Bank of Australia Ltd v Amadio
        “[I]f A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A's) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same.” Mr Virgo’s knowledge was imputed to the bank.
        “[T]he bank engaged in unconscionable conduct by entering into the transaction without disclosing facts that would have allowed the Amadios to judge for themselves and without ensuring the Amadios received independent advice.”
        
        See also; Louth v Diprose (1992) 175 CLR 621 and Blomley v Ryan (1956) 99 CLR 362
    - - • Party A was inhibited by their circumstances from looking properly to their own interests (special disability), and
        • Party B either:
        o knew this, or
        o was aware of the possibility, or
        o was aware of facts that would indicate to a reasonable person the possibility of such a disability, and
        • Party B took advantage of the circumstance.
        
        In Amadio, we learned that the bank knew, or at least ought to have known, that the Amadios were unable to understand the documentation which they were signing.
        
        Louth v Diprose it was very clear that Ms Louth fully understood the effect which her divine beauty had upon Mr Diprose.
        
        In Blomley v Ryan, Blomley’s agent clearly knew that Mr Ryan was a habitual abuser of alcohol, and he even went so far as to buy Mr Ryan a bottle of rum.
- - - - Impaired consent suggests that a party may enter into a contract in order to avoid a threat, rather than because they actually accept the obligations under the contract. Three sub-elements
        
        • Second, the victim of the threat must consider that the party making the threat is capable of carrying it out; and
        
        • Third, the threats must be one of the reasons for the victim’s actual behaviour.
        
        • First, there must be a threat of some nature, conditional upon the acceptance of the contract
    - - first thing to consider is whether the threat or pressure is lawful. If the threat is not lawful, then it will almost automatically be capable of giving rise to duress
        action does not need to be criminal; merely unlawful
      - Unlawful pressure is automatically illegitimate, but lawful pressure is not automatically legitimate
        For instance, if one party became aware of criminal conduct by the second party and indicated their intention to report the criminal conduct to the police, the report itself would not be unlawful conduct but the use of that intention as a negotiating tool may well be unconscionable, and therefore amount to duress.
  - - - two circumstances where this will not be available
        
        First, if the source of duress is removed and the vulnerable party continues to act as though bound by the contract, in the vulnerable party will be taken to have affirmed the contract and will be bound.
        
        Second, if something has happened which makes it effectively impossible for the court to restore the parties to their position prior to contract formation, then it may be necessary for the court to fashion some more appropriate remedy.
- - - - Khan v Khan (2004) 62 NSWLR 239
        In this case, a vendor was backing away from a house sale, but other family members sought to convince her to go through with it. Had they simply argued with her, and tried to persuade her with a force of their arguments, this would not have been problematic. However the family sought the assistance of an Imam (a spiritual advisor) who added his authority, and by implication Holy authority, to the argument. The vendor was convinced to continue with the sale, not because she actually wished to do so, but because she found herself deferring to the authority of the Imam. This is a case in which the actual operation of influence could be shown in evidence.
    - - recognised relationships
        
        The categories are not closed, but the current categories include parent and child, guardian and ward, doctor and patient, solicitor and client, religious advisor and religious believer, and trustee and beneficiary
        These categories were set out by Latham CJ in Johnson v Buttress (1936) 56 CLR 113
        “Wherever the relation between [a vulnerable party] and [a stronger party] is such that the latter is in a position to exercise dominion over the former by reason of the trust and confidence reposed in the latter, the presumption of undue influence is raised.”
        
        Hartigan v International Society for Krishna Consciousness Incorporated [2002] NSWSC 810.
        In this matter, the plaintiff was a member of the Krishna Consciousness Movement and gave her house and farm to the Society, which was an entity created to hold property for the Krishna Consciousness movement generally. The plaintiff had misunderstood the religious teaching of the Movement and wrongly thought it required her to give up all worldly possessions. At the time of the transaction, the plaintiff had three small children and no other housing.
        Bryson J held that the transaction gave rise to a presumption of undue influence by the defendant.
      - relationships that do not fall into those of recognised relationships, but the weaker party has place confidence and trust in the stronger party and relied upon them for guidance
        
        Once a relationship of influence is demonstrated by the evidence, it is treated just as though it was one of the recognized categories of relationships listed above, and if the stronger party wishes to enforce the contractual obligations they will need to rebut the presumption in the same way.