MLL406 Lecture Notes - Lecture 2: Structural Inequality, Crown Melbourne, Constructive Notice
1 Jul 2018
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Topic 2: Undue Influence and Unconscientious Dealing
•Equitable fraud used to be the foundation for equitable intervention
•Equitable fraud referred to conduct which it was against the conscience of the court to
condone
•The law of conscience lies in the realm of ‘moral law’ as it applied to particular
individuals for the avoidance of peril to the soul through mortal sin’ (A.W.B.
Simpson)
What’s the difference?
•Undue influence (UI)
•Focusses on coercion which prevents a party exercising free judgment and
acting voluntarily
•Can be actual or presumptive
•Focuses on the weaker party
•Unconscientious dealing
•Focusses on a party who has knowingly taken advantage of another party’s
special disability
•Focuses on the stronger party
•Doesn’t matter if the weaker party consented
•Thorne v Kennedy [2017] HCA 49 at [115] per Gordon J:
‘the difference between it and undue influence was in the will of the innocent party:
unconscionable conduct requires that the will, even if independent and voluntary, is
due to the disadvantageous position that the weaker party is placed into, and of the
other party taking advantage of that position.’
Undue Influence – weaker party focus:
•Central issue: quality of consent not conduct of stronger party (latter is
unconscientious dealing).
•Undue influence much broader than unconscientious dealing
•In undue influence the will of the innocent party is not independent and voluntary
because it is overborne
•In unconscionable conduct the will of the innocent party, even if independent and
voluntary, is the result of the disadvantageous position in which he is placed and the
unconscientious taking advantage of that position.
•The doctrine of undue influence looks to the quality of the consent, or assent, of the
weaker party:
•Undue Influence in equity should be distinguished from Duress under common law.
•Duress is ‘illegitimate pressure that induces entry into the contract’. Under common
law the doctrine of duress will arise where two factors can be proven:
•(1) pressure amounting to compulsion of the will; and
•(2) the illegitimacy of the pressure exerted.
•Now interact with possibly no difference
•Effect to render a contract voidable.
•“The basis of the equitable jurisdiction to set aside an alienation of property on the
grounds of undue influence is the prevention of the unconscientious use of any
special capacity in or opportunity for the disponee to affect the disponor's will or
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freedom of judgment in reference to the transaction.” Johnson v Buttress [1936] 56
CLR 113 at 134 per Dixon J.
Categories of Undue Influence: Class 1, 2A and 2B:
•Class 1: Actual Undue Influence = actual use of coercion in the form of a threat or
proposal that is illegitimate which influences a person to enter into a decision.
•Actual undue influence requires proof that the transaction was the outcome of such
an actual influence over the mind of the disponor that it cannot be considered to be the
free act of the disponor. The source of power to practice such influence or domination
over the disponor may not arise from an antecedent relationship, but may arise in the
particular situation, or by the deliberate contrivance of the disponee: Johnson v
Buttress (1936) 56 CLR 113 at 134.
•Benefit obtained by actual pressure
•Violence or threats
•Concerned with act not relationship.
•Class 2A and 2B: relationship presumed influential; must be shown that applicant
entered freely and sufficiently informed.
•Influence is one-way.
2A: Presumed Influence
•Relationship of trust and confidence
•Power and dependency
•Presumption of influence
•Donee to show it was “the pure voluntary, well understood act of the mind of the
donor” (Johnson v Buttress per Latham CJ).
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Categories (classic categories; not fixed or inflexible):
•Doctor/patient
•Solicitor/client
•Guardian/ward
•Parent/child
•Trustee/cestui que trust (beneficiary)
•Religious advisor/disciple
•Marriage: no presumption but may be proved to be Actual UI: Yerkey v Jones
•Fiduciary relationship
–Not all actions of fiduciary attract suspicion of abuse. Must prove actual undue
influence.
•Presumed influence
–All acts raise rebuttable presumption
2B: Proven Influence
•Relationship not automatically presumed to be one of influence but this may be
proven on the facts.
•Applicant to prove relationship one of influence; onus reverts to respondent to
disprove
•Relevant factors:
–vulnerability
–dependence
–structural inequality
–Intelligence
–Understanding of business
–emotional or physical impairment
–financial status
–age and medical status
–improvidence of the gift
–lack of independent legal/financial advice
Johnson v Buttress Class 2B:
•Rocker: 67, illiterate, low intelligence, dependent, needy, wife died – transfers major
asset (his land) to wife’s friend after wife died. Wife’s friend had been kind to him.
•Son objected:
•HCA: Did ‘Rocker’ exercise free will? No – Dixon J said that this was not a presumed
relationship of influence but that the combined effect of the facts made it clear that
Rocker was influenced and the donee had failed to rebut that presumption because no
independent legal advice
•Category 2B
•Set aside on public policy grounds - Transaction was aside as he did not act voluntarily,
his will was overborn by the nature and circumstances of the relationship.
•See more recently: Calvo v Sweeney [2009] NSWSC 719.
•Union Fidelity Trustee of Australia v Gibson
–Experienced businesswoman released defendant from need to make mortgage
repayments. Proven influence.
•Janson v Janson
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Document Summary
Focusses on coercion which prevents a party exercising free judgment and acting voluntarily: can be actual or presumptive. Focuses on the weaker party: unconscientious dealing. Focusses on a party who has knowingly taken advantage of another party"s special disability. Focuses on the stronger party: doesn"t matter if the weaker party consented. Thorne v kennedy [2017] hca 49 at [115] per gordon j: Undue influence weaker party focus: central issue: quality of consent not conduct of stronger party (latter is unconscientious dealing), undue influence much broader than unconscientious dealing. In undue influence the will of the innocent party is not independent and voluntary because it is overborne. The source of power to practice such influence or domination over the disponor may not arise from an antecedent relationship, but may arise in the particular situation, or by the deliberate contrivance of the disponee: johnson v.
