Equitable Proprietary Interests and Creating an Express Trust - Math Problem Example

Name: Lecturer: Course and Code: Date: Equity and Trusts This essay examines various case studies in discussing the principles of equitable Estoppel, Unconscionable Dealing, Undue Influence and Wife’s Special Equity, Fiduciary Obligations and Breach, Breach of Confidence, Equitable Proprietary Interests and Creating an Express Trust. Equitable Estoppel In the case scenario, Dave wishes to retire from farming and let his son (Frasier) inherit the farm. However, Frasier promises to purchase the farm at $500,000. In his opinion, this will allow Dave to use the money to purchase a retirement unit. Since Dave trusts Frasier’s promise, he pays a non-refundable deposit of $50,000. However, Frasier changes his mind and says that he cannot afford the farm since he plans on going for a holiday overseas. Dave stands to lose his $50,000 deposit. Since there is no written agreement that evidences Fraiser’s promise, it may be assumed that there is no legally binding contract between them. However, the doctrine of equitable estoppel can be applied to provide for a number of equitable remedies that can be decreed in his favor1. Estoppel is an equitable claim that prevents a party to an agreement from denying the existence of a commitment to a promise. In essence, it can be applied to protect Dave from being harmed by Fraiser’s voluntary conduct. The voluntary conduct in this case is acquiescence, as had been demonstrated in the case Lambertini v. Lambertini2. The general principle of common law estoppels was stated in the case Grundt v Great Boulder Pty Gold Mines Ltd that the law should not allow unjust departure by a party from an assumption of fact which has made the other party to accept the purpose of their legal relations3. In particular, the promissory estoppel is that contract law doctrine most applicable in Dave and Fraiser’s case. Under promissory estoppels, when a party reasonably relies on the promises made by the other party, and because of such reliance, some form of damage, injury or loss may result. For instance, Dave relied on Fraiser’s promise to pay the $50,000 deposit. And since Fraiser has withdrawn his offer, Dave is likely to lose his $50,000. Under this present scenario, a court is likely to apply the Promissory Estoppel doctrine to demand that Fraiser fulfills his promise or pays the deposit4. Fraiser has induced Dave to believe that Fraiser will not insist on his strict legal rights under contract that exists between them. Since Fraiser relies on the assumption, he will not be exposed to liability, should Fraiser fail to undertake his obligations, the Australian law recognizes that such is unconscientious. Under such circumstances, equity would not allow Fraiser to renege on his promise to Dave. Promissory estoppel applies when a contractual obligation exists between the parties. For instance, when there is a legal relationship between the promisor or the promisee. However, this is not always the case. For instance, since Fraiser and Dave had no legally binding contractual relationship, the doctrine still applies since they were in the process of negotiating a contract. Indeed, this was demonstrated in cases where there is a pre-contractual relationship. In the case, Brinkom Investments Ltd V. Carr, the court held that promissory estoppels may apply from promises made by parties negotiating a contract5. Similar views were demonstrated in the case Durham Fancy Goods v Michael Jackson 6where the court held that “contractual relationship is inappropriate on condition that there is a pre-existing legal relationship which could give rise to liabilities and penalties”. Requirements to consider For equitable estoppels to hold, there must be a promise or unambiguous and sufficiently clear representation. In the case Australian Crime Commission v Gray, the court held that an ambiguous or clear representation will not give rise to a promissory estoppels because the doctrine is unconscionable7. In the case scenario, it can indeed be argued that Fraiser’s promise was unambiguous and sufficiently clear. Additionally, the promise may be expressed or implied, as was demonstrated in the case Legione v Hateley, where the court held that even though the promise must be clear, it does not mean it must be expressed as it may be implied by words used by the promise8. Fraiser expressed and implied to Dave that he would buy the Shamrock at $500,000. Further, since equitable estoppels arises if the promise relies on the assumption that the promisor will act in a particular way in future, Dave can get a number of equitable remedies decreed in his favor. A similar approach is applied in the case Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd, where the court held that “it is a necessary element of the principle that the promisor has created or encouraged an assumption that a particular legal relationship or interest would arise9.” Relief based on equitable estoppel Since it can be established that Dave stands to be favored by the doctrine of equitable estoppels, the doctrine gives rise to certain equities. This means that Dave is entitled to some form of equitable relief that prevents him from suffering detriment based on Fraiser’s actions. In the case ACN 074 971 109 v The National Mutual Life Association of Australasia, the court held that the doctrine of equitable estoppels permits the court to decide on a relief that will prevent the relying party (promisee) from detriments10. Thus, the relief depends on the circumstances of any particular case. Therefore, the court stands to decide the minimum equity necessary to do justice to Dave. The court may as well structure the relief in a way that the practical considerations like the need for a clean break is ensure. In setting the relief, the court will as well consider the impact of the relief on the relevant third parties any injustice of hardship they are likely to suffer. Unconscionable Dealing In the second case scenario, Betty has inherited a 1960’s Jaguar from her father. Coincidentally, her childhood friend Paris had often admired the Jaguar. Betty however found the car expensive to run and a little unreliable. She opts to buy a car (Toyota Corolla). Since Paris vehemently implies that the Jaguar, Betty gives her the car as a gift. However, Betty is contacted by the police that the Toyota was stolen and is returned to the rightful owner. She approaches Paris to ask back for her car who implacably refuses to return the Jaguar. Based on the illustrated case scenario, the equitable doctrine of unconscionable bargain and undue influence may work in her favor. However, the chances of solving Betty’s dilemma are very slim. In Australian law, unconscionable dealing is a doctrine in contract law that specifies that terms that are exceptionally unjust or extremely one-sided in favor of the party, have a better bargaining power and hence, contrary to good conscious. The unconscionable contract is viewed to be enforceable since no reasonable or informed person can agree to it. The person viewed as the perpetrator is usually not allowed to benefit since the consideration offered is wanting or inadequate. Hence, enforcing the contract would be unfair to the party that seeks to cancel the contract11. Based on Betty’s case, it would be critical to first establish the circumstances under which their contract was made such as their mental capacity, age and most importantly, their bargaining power. Considering the bargaining power, the issues to be considered in Betty’s case scenario include superior knowledge, lack of choice and other circumstances and obligations that surrounding her negotiation with Paris. Base on the factors, since Paris is said to have had superior knowledge on Jaguar, it can be argued that she took unconscionable advantage of Betty. For the defense of unconscionability to be relevant to this case, the contract between Betty and Paris must have been unconscionable she gave the car and all its documentation to Paris. Since there no standardized criteria that can be used to determine unconscionability, it remains upon the subjective judgment of the judges. Based on this case, since Paris used undue influence or coercion by vehemently praising the car with the view of influencing Betty to let her own the car, Betty was not in a position to make an independent decision. In any case, Paris used undue influence to bear upon her. In this case, since Paris is seen as the more knowledgeable and hence the stronger party, it can be viewed that she is taking advantage of the fact that Betty has no enough understanding or knowledge of the car, and hence is in capable of making an independent decision. Such was demonstrated in the case Commercial Bank of Australia Ltd v Amadio12. However, since Paris did not enter into the agreement by her own will and on her own terms, Betty would have slim chances of winning the case. Further, the contract is not a valid contract, and hence not legally binding. Undue Influence and Wife’s Special Equity In the case scenario, Fred omitted to inform Evan that the bank required a mortgage over the farm. Further, Evan used blackmail (by refusing to talk to Evan) to have Evan agree to help Fred in his new business venture. Additional blackmails are witnessed at the bank when Evan refuses to sign the mortgage and Fred shouts, “After 20 years together, how could you betray me like this?” When Evan’s business fails after one year, Evan defaults on loan repayment and the bank notifies Evan of its intention to exercise the power of sale under the mortgage over the farm. From the above illustration, it is clear that Evan has been induced to enter into the transaction by undue influence of Fred. Evan is hence at liberty to set that transactions side against Fred (the wrongdoer). In order for Evan to successfully create a right to rescind for undue influence, he will have to establish the existence of abuse of dominant position by Evan, whether he was overborne by Evan and causation – or whether he entered into the transaction by Evan’s overborne will. Given that all the three elements exist, Evan has high chances of winning the case13. There are some equitable doctrines that can assist Evan. He has high chances of success. The equitable doctrine applicable for this particular case is undue influence. Under this doctrine, the law will have to determine whether Evan exerted dominion over Fred resulting to Evan signing the mortgage. Since the contractual relationship between Fred, Evan and the bank is as a result of undue influence. Basing on the fact that Charlie the bank manager was aware of the omission, the contract can be rendered as void by the court. Indeed, the case falls under actual undue influence. Hence, Evan will have to prove that the act that Fred induced relates to the principles of undue influence; it should be argued that he did not act freely in choosing to contract with Fred or the bank. However, since the doctrine is purely defensive, no damages are available. However, the influence party may be excused from performance or fulfilling obligations as specified by the contract. This means the court could protect Evan’s property from being auctioned by the bank14. Fiduciary Obligations and Breach Mort Pty td has entered into negotiations with Reynard Pty Ltd (‘Reynard’). As a result of these negotiations, a contract was drawn up that has however not been signed yet. The contract gives Reynard the exclusive right to sell the Exterminator range in rural and regional Australia for 5 years. It also provided that Reynard was to be permitted to compete with us by retailing our range in the city. However, Reynard has access to Mort’s secret formula and it has been discovered that are now manufacturing its own range of pesticides and has just introduced them onto the market15. From the illustration, Mort can use equitable doctrine of fiduciary obligations against Reynard. Since Mort trusted Reynard with its formula during negotiation of a contract, it should be argued that Reynard (fiduciary) abused its position to obtain undue advantage or benefit at the expense of Mort (the confiding party16). Under this circumstance, Mort is at liberty to seek relief from the court of equity to prevent Reynard from benefitting from the manufacture of the fertilizers17. However, Mort will have to establish breach of trust or fiduciary duty, with the view that a statement of claim maybe regarded as deficient if it lacks evidence of breach18. The advantage of successful claim of breach of fiduciary duty should however be really rather than purely illusionary. Since Reynard’s formula differs from that of Mort, it does not infringe on the latter’s patent19. Hence, claims that Reynard did not know about manufacturing pesticides until they surveyed Mort’s set up during a visit may be viewed as illusionary20. In any case, Mort can still seek compensation for loss by common law rules of remoteness of damage as they have lost $100,000 thus far, causation and contributory negligence. Breach of Confidence Based on analysis of the case scenario, Mort can use the equitable doctrine of breach of confidence against Reynard. Indeed, from Felicity’s perspective, Reynard breached their confidence, the equitable doctrine can allow her company to claim remedy provided there is evidence that their confidence was breached. The Australian courts will recognize a breach of confidence if the information has some degree of confidence, the information was provided under conditions suggesting an obligation of confidence and lastly, if there was unauthorized use of the information and risk of damage. Hence, the duty of confidence arose when Reynard can to the knowledge of Mort’s secret formula, and hence it would be unfair to use the information for their benefit at the expense of Mort. In this scenario, the reach of confidence gives rise to civil claim. Given that all the three conditions can be established (as explained), Mort can be successful in obtaining some remedies. Equitable remedies Felicity’s company can seek include damages for the loss incurred as a result of Reynard’s actions. The company can also seek injunction to stop Reynard from manufacturing the fertilizers. Equitable Proprietary Interests In the case scenario, Charlie enters into an oral contract to purchase land from Allan for $800,000 and pays $20,000 deposit. However, Allan sells the property to Rod. Charlie also discovers that the land in question had been used as collateral for a loan. Charlie and Allan’s agreement were not in writing. As a general however the agreement in land purchase must be in writing otherwise the dealing will fail and the interest will be conferred. In Australia, under Section 52 of the Property Law Act 1958 of Victoria, conveyance of property must be in deed. Further, conveyances must be signed and sealed, as stipulated in Instruments Act1958 section 126 of the state of Victoria. In any case, equity can sort the problems of interest. An equitable interest over land that has been improperly conveyed may still be effective as was ruled in the case Walsh v Lonsdale21. In this case, Charlie has the right to seek legal action at the court of equity to protest on conveyance that does not meet the requirement of a deed22. By seeking equitable intervention, Charlie may be granted equitable remedies such as damages or injunction23. Creating an Express Trust In the case scenario, Paolo creates a trust -- with his friend Calypso as the trustee of his property – with the intention of stopping his wife from divorce. With respect to the property, this is not a valid inter vivos. In the Australian law, the creation of express trusts must comprise four elements for it to be valid. First; is the capacity or the settler’s (Paolo’s) ability to create a trust. Second is certainty or the ability of the trust instrument to show certainty of intention to create trust, what the subject matter of the trust is and who the beneficiaries are. Third is the constitution, or the quality of the trust to be valid. Third is formality, where the oral or written instruments must show intention to create a trust. From the above discussion, it is clear that Paolo’s plan is likely to fail since requirement for certainty has not been sufficiently. Additionally, the settler must be legally competent to create the trust. A trust can however not be create for purposes of defrauding creditors or depriving a spouse of her or his rightful share. Hence, the purpose of the trust will be termed as illegal under the law. In conclusion therefore, Paolo’s trust cannot be enforced. Works Cited Books and Articles Dorsett, Shaunnagh. "Comparing Apples and Oranges: The Fiduciary Principle in Australia and Canada after Breen v Williams.” Bond Law Review, 8.2 (1996) pp.157-174 Gray, Kevin. “Equitable Property.” Current Legal Problems, 47.2 (1994) 157 – 214 Jaani. Equitable Proprietary Interests. 5 August 2013 Jaani. Undue Influence. 5 August 2013 McCamus, John. Remedies for breach of fiduciary duty. 5 August 2013 McGhee, John. The Role of Fiduciary Obligations in Commercial Disputes. 5 AUgust 2013 Sydney University. Equitable estoppel. 5 August 2013 (pp252-259) Yee, Tina. The Etridge Influence on Undue Influence: Attempts At Fusion with Duress And Unconscionability. Canterbury: University of Canterbury . 2008. 5 August 2013 Read More