LAW 2502 Lecture Notes - Lecture 4: Westpac, Tom Hateley, Metcash
23 May 2018
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FRAUD IN EQUITY
❖ Precise and operates via discrete doctrines
‘Unconscionability’
❖ Two meanings
1. Broad meaning, big, unifying concept
2. Narrow meaning, as small, discrete doctrines
Doctrines
1. Equitable estoppel*
2. Undue influence*
3. Unconscionable bargains*
4. Misrepresentation
5. Mistake
6. Fraud in equity
EQUITABLE ESTOPPEL
STEP 1
• Choose intro depending on situation:
o Promise under failed contract- As there
is no (no condensation, terms are
uncertain), the agreement could not be
enforced under contract law. Therefore,
equitable estoppel can be employed to
protect (the relying party) from the
detriment which would flow form that
party’s change of position if the
assumption or expectation that led to the it
were to be ignored The Bell Group (in Liq)
v Westpac Banking Corporation (No 9)
per Owen J
o Promise not to enforce legal right:
equitable estoppel prevents a party from
doing something when common law
cannot: exercising a right under a contract
which the promisor promised not to
STEP 2: flag if proprietary or promissory-state
despite their historical distinction, elements are now
the same, although remedies are different.
Waltons at 420 defined the two types
1. Promissory: equity binds the holder of a legal
right who induces another to expect that the right
will not be exercised against him
a. Overcome doctrine of consideration in
contract law Denning in Central London
Porperty Trust v High Trees House Limited
b. Operates where a person promises not to
enforce that right
2. Proprietary: equity binds the owner of property
who induced another to expect than an interest in
property will be conferred on him
STEP 3: Elements, per Waltons Stores (Interstate) Ltd
v Maher (1988) 164 CLR 387, per Brennan J at 428-9
1. RESPRESENTATION: The P assumed that a
particular legal relationship than existed between
the P and the defendant or expected that a
particular legal relationship would exist between
them and, in the latter case, the D would not be
free to withdraw from the expected legal
relationship
a. Must be clear and unequivocal Legione v
Hateley
i. Language can be open to multiple
constructions
ii. can be express or implied: a clear
representation may properly be implied by
the words used or may be adduced from
either failure to speak when there was a
duty to speak, or from conduct
iii. Need not be clear in its entirety: will
suffice is so much of the rep as is
necessary to found the assumption
b. Precise and unambiguous language which
would reasonably be understood in a particular
sense by the person to whom it was addressed
Low v Bouvrie
c. BUT
i. Vague statements can be relied upon to
the extent that it is reasonable Crown
Casino; Giumelli
• Compare why this is vague statement
would/ wouldn’t be understood as
clear enough in the circumstances
• Words must be capable of
misleading a reasonable person in
the circumstances as P claims to have
been mislead Crown
ii. Silence IF there is a duty to speak Waltons
iii. Conduct Foran v Wright
2. ASSUMPTION OR EXPECTATION: The D has
induced the P to adopt that assumption or
expectation
a. P expected a legal relationship would in
future exist with D AND P expected that D
would not be free to withdraw from
relationship Franklins Pty Ltd v Metcash
i. Requirement that D cannot withdraw from
expected relationship debated: no
reference to the requirement in Cth v
Verwayen. But follow Franklins
b. Assumption must be of future conduct
c. Assumption must be reasonable in all the
circumstances
3. INDUCEMENT:
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a. Assumption is induced form representation,
rather than the promise or representation itself,
that forms the basis of the claim
b. Assumption adopted by the relying party must
have been induced by the conduct- casual link
i. Deane J in Cth v Verwayen
4. RELIANCE: The P acts or abstains from acting in
reliance on the assumption or expectations
a. Reliance must be reasonable (therefore
unlikely that commercial parties won’t use
estoppel much)
b. Represented must act or refrain from actions in
reliance of the assumption
c. Reliance must be reasonable CBA v Carotino
i. Depends on strength of rep
ii. Reasonableness = ostensibly objective but
has subjective aspects, take into account
knowledge of the parties Austotel v
Franklins
iii. No reasonable reliance where actual or
constructive knowledge of the representors
lack of ostensible authority Legione
• (law clerk giving advice case)
iv. Relative bargaining strength of the parties
can impact the reasonableness Astotel
d. P needs to rely on representation, but need not
solely rely on it Sidhu v Van Dyke
i. reliance induced by the other persons
promise/ conduct/ silence actually
caused you in somewhat to alter your
position to your own detriment
ii. alteration = FACT to be found.
CANNOT BE IMPUTED from evidence.
iii. Promise need not be the sole reason for
changing position, but must be a
significant factor- ‘material
inducement’
‘but for’ the reliance on the
assumption created by the
promisor would the person have
changed their position?
No- it is a cause. Would not
have acted if the promise
wasn’t made
Yes, would have changed
position regardless of
promise- it is not a cause
Yes, to an extent- as long as it
was a significant cause, it is a
cause
5. KNOWLEDGE OR INTENTION: D knew or
intended him to do so
a. Representor must actually know or intend that
the relying party will act or refrain from acting
in reliance of the assumption or expectation
Waltons
b. Debate as to whether its enough that the
representor ought to know the relying party
would act/ refrain from acting in reliance
i. Brennan in Waltons says NO
ii. Deane J in Cth v Verwayen says YES,
supported by Nettle JA in New Zeakebd
Pelt Export
6. DETRIMENT
a. Ps action/ inaction will occasion detriment if
the expectation or assumption is not fulfilled
i. Not enough that relying party merely acted
consistently with the representor’s promise
- must establish that he or she otherwise
changed their position in reliance
representation to their detriment
Maintendrai
• Failure to follow through with the
promise NOT the detriment
• P’s change of position from which
they cannot go back from, in reliance
on the promise
b. Foregone opportunity is enough to found
detriment Giumelli and Van Dyke
c. Must be a causal link between the
representation and the material/ substantial/
significant detriment
d. *ALWAYS contrast how different types of
detriment are sufficient using VERWAYEN
Narrow v broad view
i. argument as to whether detriment is
limited to that flowing from the reliance
on the representation (narrow); or if it
should extend to detriment that would or
will result from resiling from the
representation (broad)
ii. Narrow view (detriment only limited to
legal costs- things actually incurred in
following the promise- remedy only
damages) supported by Brennan J in
Verwayen
iii. Broad view (stress, anxiety and
inconvenience – all flow on losses
resulting from failure - was detriment,
could only be removed by enforcing the
promise, remedy = enforcement)
supported by Deane J and Gaudron J in
Verwayen
• Broad view preferred in Giumelli &
Van Dyke- ‘starting point is that you
enforce at promise’- But this is
ADJUSTED according to
circumstances/ in interest of
proportionality eg when rights of 3rd
parties are affected
7. PROMISOR’S FAILURE TO AVOID
DETRIMENT
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Two meanings: broad meaning, big, unifying concept, narrow meaning, as small, discrete doctrines. Doctrines: equitable estoppel, undue influence, unconscionable bargains, misrepresentation, mistake, fraud in equity. Step 1: choose intro depending on situation, promise under failed contract- as there is no (no condensation, terms are uncertain), the agreement could not be enforced under contract law. Step 2: flag if proprietary or promissory-state despite their historical distinction, elements are now the same, although remedies are different. Low v bouvrie: but, vague statements can be relied upon to the extent that it is reasonable crown. Yes, would have changed position regardless of promise- it is not a cause. Waltons representor ought to know the relying party would act/ refrain from acting in reliance: brennan in waltons says no, deane j in cth v verwayen says yes, supported by nettle ja in new zeakebd.
