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6 Defences

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Queensland University of Technology

VI Equitable Defences  Cause of Action  Defences o Statutory Limitation  Express—by statute  By analogy o Otherwise laches ← no laches if a statutory bar: Archbold v Scully (= laches cannot shorten the period further) o Otherwise delay giving rise to—  Acquiescence  Estoppel o Other defences  Fully informed consent  Unclean hands  Change of position  Remedies • Does not matter if action is brought in equity's exclusive or auxiliary jurisdiction ← can be common law action with equitable remedy • Applies to third party actions Andrew Trotter LWB240 Principles of Equity Fiduciary duty—Fully Informed Consent • Defence to claim for breach of fiduciary duty • Where the fiduciary/trustee obtains the fully informed consent of the principal/beneficiaries D ELAY DEFENCES Statutory Limitations • No limitation for equitable relief in Queensland State Legislation: s 10(6)(b) Limitation of Actions Act 1974 o NSW: Limitation Act 1969 , s 23 o NT: Limitation Act, s 21 o TAS: Limitation Act 1974, s 9 o VIC: Limitations of Actions Act 1958, s 5(8) o SA: Limitations of Actions Act 1936 • Except— o Non-fraudulent breaches of trust (s27) o Actions for recovery of equitable interests in land (s16(1)). • States with limitations—6yrs o ACT: Limitation Act 1985 (ACT), s 11(1) o WA: Limitation Act 1985 (WA), s 27 Analogy with Statute • = Equity applies a statutory limitation period applicable to analogous equitable action: Knox v Gye • Equity follows the law • Elements o Equitable cause of action o No statutory limitation period applies to the equitable action o Analogous common law action to the equitable action being brought o Limitation period for common law action has expired  Common law principles ← start time when action arises (cf. equity— when discovered) o Discretion—not exercised to refuse defence Analogy • If the different causes of action are simply different ways of putting the same factual complaint → statutory limitation for analogous action applies: Johns v Johns • Standard— o Where the equitable claim “parallels the statute barred claim so closely that it would be inequitable to allow the statutory bar to be outflanked” by it: Johns v Johns • The action need not be a common law action: Johns v Johns (2 equitable actions—breach of fiduciary duty & breach of trust || although defence not applied on other grounds) Andrew Trotter LWB240 Principles of Equity • Court must examine— (Johns v Johns) o Underlying facts  ← facts required to establish both actions o Relationship between the parties o Policy and purpose of two causes of action o Generally whether it is just to apply the analogy ← must be no significant difference in any material respect • Defence will not be applied if two actions target the plaintiff in different capacities: Johns v Johns (As director—devalued shares—breach of fiduciary duty | as trustee—sold property at undervalue—breach of trust (not breach of fiduciary duty)  analogy not applied ← different capacities giving rise to different duties) o Unless both actions based on same duty: Johns v Johns ( As director—devalued shares—breach of fiduciary duty | as trustee—sold property at undervalue— breach of fiduciary duty  analogy applied ← different capacities but same duties) • Defence not defeated merely because some different elements associated with each cause: Cia de Seguros Imperio v Heath (CL actions required extra element—intention ↓) • Remedies sought must materially correspond (in content, not in form): Cia de Seguros Imperio v Heath (breach of fiduciary duty (← insurance broker—dishonest use of position for personal gain) = tort / breach of contract || irrelevant that CL actions required extra element of intention) • Examples— o Breach of fiduciary duty → Fraud (6yrs): Coulthard v Disco Mix (managers & agents deliberately under-accounting—dishonest breach of fiduciary duty  analogous to fraud) o Claim for constructive trust → Breach of trust: Coulthard v Disco Mix o Breach of fiduciary duty → Breach of contract: Cia de Seguros Imperio v Heath (breach of fiduciary duty (← insurance broker—dishonest use of position for personal gain) = tort / breach of contract || irrelevant that CL actions required extra element of intention) • Running of time—CL principles apply: Re Robinson (1911); Trevelyan v Charter (1835) o Fraud—  Fraud is an element of the cause of action  Existence of cause of action has been fraudulently concealed o ← Fraud includes—  Deceit  Active steps to conceal evidence  Any conscionable failure to reveal such evidence: Tito v Waddell (1977) Andrew Trotter LWB240 Principles of Equity o → time will run from when fraught ought to have been discovered Andrew Trotter LWB240 Principles of Equity Laches (Consider Statutory Defence | analogy with statute first) = Plaintiff's delay in the commencement of his action → unjust to grant equitable relief o Can operate to bar some equitable relief but not other (eg account of profits but not equitable compensation) o Equity assists the diligent, but not the tardy—delay in bringing action may make it unequitable to grant relief • Does not apply when there is a statutory bar (or by analogy): Archbold v Scully (1861) | Matai Industries Ltd v Jensen; No 68 Ltd v Eastern Services Ltd • Discretionary • Based on maxim: Vigilantibus non dormientibus aequitas subvenit (equity aids the vigilant, not the tardy) • Basis o Person claiming equitable remedy must do so in ‘conscience, good faith and reasonable diligence’: Smith v Clay (1767) per Lord Camden • Objective o To allow people to organise their affairs without having the threat of litigation hanging over them: No 68 Ltd v Eastern Services Ltd [2006] 2 NZLR 43 • Also applies to delay after commencement of suit: Lamshed v Lamshed (1963) (Seeking specific performace of a contract—commenced action promptly but did not move to set matter for trial for 4yrs 8mths—defendant had on-sold property  laches upheld → action barred ← prejudice = uncertainty in defendant as to whether or not required to complete the contract) • Delay by a predecessor will not bind successors in title Nwakobi v Nzekwu [1964] • Factors— (1) Length and reasons for the delay; and (2) Prejudice suffered by the defendant or third party (1) Length of delay • Time starts running where claimant discovered or should have with reasonable diligence discovered the cause of action: Erlanger v New Sombrero Phosphate (misrepresentation of purchase price of land by directors to shareholders (fiduciary duty)—[1871] rumours at shareholder meeting—[1872] [June] stronger suspicions—[August] report confirms suspicions | [Dec 1872] commenced proceedings  notice when report handed down—[Aug 1872] (not 1871 rumours) → no laches) o Cf. Common law—when action accrues • Knowledge of exact legal relief not necessary—merely that knew the facts that gave rise to the title to relief: Lindsay Petroleum Co v Hurd; • Undue influence—time starts running when the plaintiff escapes the influence and is sufficiently free to make an independent judgment about whether to seek rescission: Allcard v Skinner (1871 Nun convinced to bequeath property & give cash to S | 1879 left church | 1880 changed will & discussed with solicitor | 1884 heard that another nun had money returned | 1885 filed suit  time started running 1879—when left Sisterhood— not 1884 → barred by laches || prejudice = sisterhood conducting affairs on assumption that they could use the money) Andrew Trotter LWB240 Principles of Equity o Not the date of the transaction: Baburin v Baburin [1991] • Greater speed required where— o Property of fluctuating value or perishable in nature: Baburin v Baburin o Transaction may or may not be profitable—cannot wait to see the outcome: Boyns v Lackley (share prices—21 years  laches barred); Foley v Farrell o Gifts made under undue influence: Turner v Collins o Claims for specific performance, constructive trusts, rescission of contracts: Lazard Bros v Fairfield o Seeking interlocutory injunction for restraint of trade clause: Ice TV v Ross (← otherwise prejudices third parties) o Seeking an account after the death of defendant where defendant lived long enough to account within their lifetime: Hourigan v Trustees Executors • Less speed require where good reasons— (not closed categories) o Delay to obtain legal advice: Boyns v Lackley  And making relevant inquiries o Delay to resolve matter out of court: Erlanger v New Sombrero Phosphate (Aware of facts giving rise to action in August—tried to settle matter out of court —Dec commenced proceedings  delay less significant → no laches)  But must take actual steps—must not be excessive—if merely laying dormant and hoping it will settle, laches may apply: Lamshed v Lamshed (1963) (Seeking specific performance of a contract—commenced action promptly but did not move to set matter for trial for 4yrs 8mths  laches upheld → action barred || was hoping that matter would settle out of
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