A Proposal in Equity: The Marriage of Undue Influence with Unconscionable Dealing?
26 Pages Posted: 13 Jan 2014 Last revised: 21 Apr 2014
Date Written: December 30, 2013
The equitable doctrines of undue influence and unconscionable dealing have hitherto been recognized as two independent doctrines in Australian law. Both serve to safeguard the interests of persons afflicted with legal disabilities and relieve them of legal transactions that are repugnant in the eyes of Equity, particularly where such transactions may be recognized and upheld at common law.
Undue influence is a plaintiff-oriented doctrine that operates to avoid legal transactions procured in circumstances where the plaintiff’s consent is defective, while unconscionable dealing grants relief upon the basis of a defendant’s exploitation of a plaintiff’s special disability contrary to the good conscience of Equity.
However, it is argued that undue influence and unconscionable dealing may operate to a significant extent as a single doctrine. This is because they are both underpinned by the existence of particular disabilities inherent in plaintiffs (such as old age and unfamiliarity with the English language) or those emanating from the relationship between plaintiff and defendant (such as trust and confidence reposed in the defendant by a plaintiff) that render a plaintiff’s interests especially vulnerable to be adversely affected by a defendant’s conscious and wrongful acts.
Thus, a significant merger of undue influence and unconscionable dealing is proposed upon the expansion of special disabilities enlivening the operation of unconscionable dealing to include relationships giving rise to undue influence. The basis for including such relationships as a form of special disability is that although they do not automatically place plaintiffs at a disadvantage in dealing with defendants, the interests of plaintiffs may nevertheless be adversely affected by defendants exerting influence upon them in the course of acquiring benefits or property from plaintiffs. Accordingly, a distinction is made between special disabilities that automatically place plaintiffs in an unequal position in dealing with defendants (‘internal disabilities’) and those that only result in plaintiffs being put in an unequal position through the exertion of influence by defendants (‘external disabilities').
This thesis presents the proposed merger in five parts. First, the operation and principles underpinning undue influence and unconscionable dealing in their present forms are examined to provide the context for the proposed merger. Secondly, it is argued that the exertion of influence by defendants upon plaintiffs within relationships giving rise to undue influence is a wrongful act that justifies the inclusion of such relationships as special disabilities that enliven the operation of unconscionable dealing, a defendant-oriented doctrine. Thirdly, the framework for the proposed merger is outlined and its associated implications analyzed. Fourthly, the proposed merger’s practical applications, effects and advantages are examined with respect to third-party guarantees, gifts and the inequality of bargaining power. Finally, it is submitted that the proposed merger may serve as a better framework for facilitating the operation of undue influence and unconscionable dealing.
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