Feedback on 2011 Equity Exam

FEEDBACK ON 2011 EQUITY EXAM

It would seem either can argue 1) (most likely to be successful) the doctrine of unconscionability or 2) (unlikely) resulting trusts. Taking these in turn. 1. The doctrine of unconscionability per Amadio, The doctrine of unconscionability looks at the behaviour of the stronger party (cf the doctrine of undue influence).

Important High Court cases in the doctrine of unconscionability are CBA v Amadio,

Louth v Diprose and Bridgewater v Leahy.

According to Deane in Amadio this doctrine has three elements i) special disadvantage by M, ii) knowledge of this special disadvantage by D (this can be either actual or constructive knowledge), and iii) unconscionable exploitation of this special disadvantage by D.

Really, the issue here is the third element, iii) unconscionable exploitation of this special disadvantage by D. What has she done to take advantage of the special disadvantage? It isn’t clear that D has done anything wrong. Can passive acceptance of a gift invoke the doctrine of unconscionability? The relevant High Court authority on this point is

Bridgewater v Leahy(1998) 158 ALR 66.

De Jersey J, at first instance, and a majority of the Court of Appeal, found that Bill York was under no special disadvantage when dealing with his nephew, Neil. There was also evidence that Bill York had defended the transaction in November 1988. The transaction with Neil was also consistent with Bill York's testamentary intention. While he was elderly, the evidence did not suggest any lack of capacity on Bill York's part. His widow, one of the appellants, did not give evidence in the proceedings.

However the majority of HC did find a catching bargain (or an unconscionable bargain).

Glesson CJ and Callinan, dissenting, accepted the findings of fact by the trial judge that

Bill York was "not under any" special disability, and that Neil York was not 'guilty of any unconscientious conduct. They held that the appeal should be dismissed.

Gaudron, Gummow and Kirby JJ found that Nei1 York, had obtained the benefit of the

1988 deal with Bill York by unconscionable conduct. Neil had taken the initiative to obtain the deal thus to implement Bill's testamentary wishes during his lifetime. Their

Honours did not consider it an answer that there was no finding that Neil had used the initiative to its implementation in July and November 1988 with the motive or purpose of forestalling any change in Bill's testamentary intentions. The equity to set aside the deed, they said, may be enlivened not only by the active pursuit of the benefit of it but by the passive acceptance of that benefit. Accordingly, they concluded that they were unequal.

Neil took advantage of this position. Accordingly, the majority held that the deed forgiving the debt of $546,811 should be set aside.

Had the 1988 deal not gone ahead, Neil York would have been entitled under Bill York's will to purchase all properties for $200,000. The decision of the majority; in Bridgewater v Leahy seems, to be a very harsh application of the unconscionability principles stated in CBA v Amadio. There was no change in the law proposed or mooted by the majority.

Many authors see the decision of Gaudron, Gummow and Kirby as being wrong and take the minority approach of Gleeson and Callinan. This minority approach is consistent with the later HC decision in Berbatis. Dal Pont pp 281- 282 worries that the majority approach in Bridgewater moves the doctrine away from procedural unconscionability towards substantive (or outcome) unconscionability.

If the doctrine is satisfied here, it may produce as a remedy a constructive trust-ie M would argue that D is holding her half interest on constructive trust for her (ie M) (but have to consider Giumelli and John Alexander and the role of third parties and the use of constructive trusts when they impact upon third parties)

2. Resulting trusts, which may mean that escape John Alexander but may have to use the maxim “he who seeks equity must do equity” meaning that may not been able to get the property but more likely just have to pay money over to W (repay the loan to W), which would achieved most likely by using the equitable lien like in Giumelli

Resulting trusts are created either

1. Failure to completely dispose of title, including the surplus cases (these

are called automatic resulting trusts) or 2. Where title does not reflect contributions to purchase price (presumed

resulting trusts)

So here there is a presumed resulting trust. The presumption of a resulting trust can be rebutted by

a. Evidence of contrary intention, or

b. Presumption of Advancement

Regarding the presumption of advancement, f the relationship between the parties to a transaction which would ordinarily give rise to the presumption of resulting trust is such that the transferor has a natural obligation to provide for the transferee, equity presumes that, subject to contrary intention, the transferor intended the transfer to operate by way of advancement or gift (the ‘presumption of advancement’). The presumption of advancement applies with respect to transfers from parent to child

Historically the presumption of advancement was limited to transfers from father to child: for example, Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ. However, it now also applies with respect to transfers from mother to child: Brown v Brown (1993) 31 NSWLR 582 at598-599 per Kirby P; Nelson v Nelson (1995) 184 CLR 538 (noting that the (CTH) Family Law Act imposes upon both parents the ‘primary duty to maintain the child’.

That the child is of age, has independent means or is otherwise self-supporting will not prevent the presumption of advancement from arising (Callaghan v Callaghan (1995) 64 SASR 396 at 405 per Perry J.

M might attempt to rebut this presumption. The presumption of advancement may be rebutted by admissible evidence that no gift was intended by the transferor. Here there most likely no evidence of contrary intention (perhaps there is a contract, she agreed to look after her mother in exchange for a price, in this case, half the house). But there may be evidence that D got the property by a breach of an equitable obligation (here it would be by breach of the unconscionability doctrine) which must logically invalid the transfer and the presumption of advancement. There is no caselaw to indicate this argument is right or wrong. The onus of rebutting the presumption of advancement lies upon the person alleging the existence of a resulting trust.

If, in a given case, the presumption of advancement is rebutted, then the basic presumption of resulting trust applies.