Australian Law Equity - Case Study Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Course : xxxxxxxxxxx Title : Australian Law Equity Tutor : xxxxxxxxxxx @ 2011 Australian Law Equity Issue Walter Doogood was searching for property owners who were willing to sell their with his real estate agency Doogooders Property Pty Ltd. At one particular time, he came across an elderly pensioner called Joe Bloggs. He owned and lived in his house at Ipswich, Queensland. Joe had been release from hospital that day after extensive surgery to repair the damage he had suffered from a minor stroke four weeks before. When Walter knocked on his door Joe was still heavily sedated and on medication which was administered by a visiting nurse who attended to him twice a day. When leaving, the nurse notified Walter that Joe was not well and would need to rest soon because he was on heavy medication after the recent stroke operation. Regardless of the above factors, Walter went on to convince Joe to sell his house. He even mentioned that he would get a good deal with his real estate agency. Both entered into a deal. This immediately instilled a certain status in each of them. Walter, by virtue of owning the Doogooders Property Ltd, became the agent of Joe who on the other hand assumed the status of a principal. In an agency, there are certain obligations that each party ought to meet. The main issue here is to address the duties and responsibilities of each of the two, the agent and the principal in their relationship (Malcolm 2005).1 Principle For a certain contract to be made, intention or consent of both parties must be obtained through their own will. Joe’s case was another situation where Walter should have been careful when obtaining his consent. When he went to Joe’s house, he found him worked up as a result of a recent stroke that had him operated. He was also on medication given to him by a nurse who attended to him two times a day. The nurse also notified Walter that Joe was not well and would need to rest soon because he was on heavy medication after the recent stroke operation. One would tend to say that Joe was not in the best of conditions to give his consent. Therefore, Waiter obtained his consent through undue influence. A definition of undue influence was given by Hodges J in the case of Union Bank of Australia Ltd v Whitelaw (1906) VLR 711 at 720:2 “‘Influence’, as I understand the term in this connection, is the ascendancy acquired by one person over another. ‘Undue influence’ is the improper use by the ascendant person of such ascendancy for the benefit of himself or someone else, so that the acts of the person influenced are not, in the fullest sense of the word, his free, voluntary acts.” According to the definition given by Hodges J, which was undue influence since he used Joe’s sickness to benefit himself. Additionally, he capitalized on his sickness to get his consent. In an agency relationship, there is a fiduciary relationship. In the case of Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 96-7, Mason J3 said, “The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (c.f. Phipps v Boardman [[1967] 2 AC 46, at p. 127]) viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions ‘for’, ‘on behalf of’, and ‘in the interests of’ signify that the fiduciary acts in a ‘representative’ character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.” Walter is acting for the benefit of Joe. Consequently, equity has put in place certain fiduciary obligations of trust and confidence on Walter who is acting as the agent. Brennan CJ, McHugh and Gummow stated the following in the case of Maguire v Makaronis (1997) 188 CLR 449 at 465; “Equity intervenes […], not so much to recoup a loss suffered by the plaintiff as to hold the fiduciary to, and vindicate, the high duty owed the plaintiff. […] [T]hose in a fiduciary position who enter into transactions with those to whom they owe fiduciary duties labor under a heavy duty to show the righteousness of the transactions.” Application Despite knowing that Joe’s house was worth about $ 700 000, he went further and convinced him that it was worth around $ 500 000. Later, he connived with Tania so that they could buy the house at $ 450 000. Acting as Joe’s agent, Walter went on to tell Joe that due to the feedback he was getting from the property market, in his professional opinion the property was not worth $500,000 as he had previously advised but was only worth $450,000. Relying on Walter’s advice, Joe agreed to sell the property to Tania for $450,000 and signed a contract of sale. However this was after a consipiration between Tania and Walter. Again there was an involvement of a third party. The law provides that in a situation where there is a third party to a breach of fiduciary duty, liability arises upon him if the third party takes property in breach of fiduciary obligation knowingly or knowingly aided an agent to breach a fiduciary obligation. In this case the knowledge is actual knowledge as was mentioned as being the vital knowledge by Peter Gibson J in the case of Baden v Societe Generale pour Favoriser le Development du Commerce et de I’Industrie en France SA (Baden) (1992) 4 All ER 161 at 2354. Tania accepted Joes offer knowing that it was a conspiracy to strip Joe of his money. She will also be liable to account for her mischievous deeds because she acted dishonestly in pretext that she was buying a house from Joe. Liability will be attached to her because had the knowledge that a fiduciary relationship existed between Walter and Joe since she was Walter’s friend and knew he operated his real estate agency called Doogooders Property Pty Ltd. Additionally, she was aware of the dishonesty on Walter’s part, she aided him in that particular fraudulent act and had the requisite knowledge as mentioned in the case of Baden. Further, there is the issue of full disclosure. Usually, the fiduciary is expected to make full disclosure of whatever is in his knowledge not leaving out anything relevant. All the material facts should be brought to the principal’s knowledge. However, whatever is not in the knowledge of the fiduciary is exempted unless for one reason or the other he shuns the information intentionally, maybe by shunning it or keeping away from the obvious. Walter knew that based on recent sales in the area the property was worth at least $700,000 but he had told Joe that it was only worth $500,000. He further went on to convince him that it was worth only $ 450 000. Definitely, this was misleading information on Joe’s side meaning he could not make his best decision (David 2000).5 A fiduciary is in no way expected to be making profits from the transactions he carries out on behalf of the principle. He ought not to use wrongly his position by using his knowledge. However, this is exactly what Walter does. In such a case the fiduciary must explain for any profits made. This was held in the case of Regal (Hastings) Ltd v Gulliver. There is a breach of duty by Walter in this case and he should account for his profits. In this particular case there is also a conflict of duty. An agent should not let his self interests clash with his duty. Lord Cranworth LC in the case of Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461 at 471, no fiduciary “shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.” Conclusion The above transactions should be declared void so as to restore Joe to his previous position prior to entering into the transaction. This was held in the case of Cheese v Thomas (1994) 1 All ER 35.6 Similarly, there are also other statutory reliefs available to victims of unfair or fraudulent transactions. Both Tania and Walter should pay Joe what is his due. The very purpose of equity is to ensure that each and every party is reinstated to his previous position. Both Tania and Walter did not act in good faith and particularly Walter since he was Joe’s agent (David 2000).7 Bibliography Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461 at 471 Administration of Justice Act 1840 (NSW) 4 Vict No 22 Baden v Societe Generale pour Favoriser le Development du Commerce et de I’Industrie en France SA (Baden) (1992) 4 All ER 161 at 235 Cheese v Thomas (1994) 1 All ER 35 David, D., 2000, Essential Australia Law, Routledge, New York. Equity Act 1867 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 96-7 Maguire v Makaronis (1997) 188 CLR 449 at 465 Judicature Act 1873 Malcolm, C., 2005, Equity issues and trends: the importance and pervasiveness of equitable doctrines and principles in modern private, commercial, and public law, Federation Press, Sydney. Meagher et al, part one ‘The Background of Equity’ Union Bank of Australia Ltd v Whitelaw (1906) VLR 711 at 720 Read More