LWB240 SG Sem1 10

Principles of Equity
LWB240
Study Guide
Semester 1, 2010
INSERT SEMESTER CALENDAR
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WELCOME
Welcome to your studies in the Principles of Equity, which we hope you find
stimulating, challenging and rewarding.
We have compiled this study guide to assist and direct you in your learning. However,
as the teaching and learning process involves shared responsibility between teachers
and learners, you must take responsibility for your own learning in order that you can
develop the skills necessary for lifelong learning.
We wish you continued success in your tertiary studies and future careers.
Tina Cockburn Unit Coordinator

Barbara Hamilton Unit Coordinator
and the Principles of Equity Teaching Team
Rowena Maguire
Anne Matthew
Ben McGlade
zzzzzzzzzzzzz
LWB240 Principles of Equity Study Guide - Semester 1, 2010
TABLE OF CONTENTS
INTRODUCTORY GUIDE...................................................................................................................5
PART A: UNIT MATERIAL...........................................................................................6
1. Unit Overview.............................................................................................................................6
2. Objectives of this Unit.................................................................................................................6
3. Content........................................................................................................................................6
4. Teaching and Learning Approaches...........................................................................................7
5. On-line Information for Unit.......................................................................................................8
6. Assessment...................................................................................................................................9
7. External Attendance School (16-18 April 2010).......................................................................12
8. Use of Study Guide....................................................................................................................12
9. Texts and References.................................................................................................................13
10. Study Hints and Tips...............................................................................................................14
11. Timetable.................................................................................................................................18
12. Teaching Staff..........................................................................................................................19
PART B: FACULTY POLICIES......................................................................................20
PRINCIPAL CASE LIST........................................................................................21
STUDY GUIDE.....................................................................................................................................25
PART A:
INTRODUCTION..................................................................................................................................26
CHAPTER 1: THE NATURE, HISTORY AND MAXIMS OF EQUITY....................................27
PART B:
EQUITABLE DOCTRINES AND SKILLS........................................................................................38
CHAPTER 1: TEAMWORK........................................................................................39
CHAPTER 2: LETTER WRITING................................................................................41
CHAPTER 3: FIDUCIARY DUTIES INCLUDING THE LIABILITY OF THIRD PARTIES..............46
CHAPTER 4: CONFIDENTIAL INFORMATION INCLUDING THE LIABILITY OF THIRD PARTIES. 61
CHAPTER 5: UNDUE INFLUENCE AND UNCONSCIENTIOUS DEALING INCLUDING THE
LIABILITY OF THIRD PARTIES..................................................................71
CHAPTER 6: EQUITABLE ESTOPPEL..........................................................................79
CHAPTER 7: RELIEF AGAINST FORFEITURE................................................................85
CHAPTER 8: EQUITABLE DEFENCES...........................................................................90
PART C:
EQUITABLE REMEDIES....................................................................................................................99
CHAPTER 1: INTRODUCTION: THE GENERAL NATURE OF EQUITABLE REMEDIES...........100
CHAPTER 2: CONSTRUCTIVE TRUSTS......................................................................102
CHAPTER 3: SPECIFIC PERFORMANCE......................................................................107
CHAPTER 4: INJUNCTIONS AND DECLARATIONS........................................................115
CHAPTER 5: MONETARY REMEDIES.......................................................................128
TUTORIAL QUESTIONS.................................................................................................................135
PAST EXAMINATION PAPER.......................................................................................................151
APPENDIX..........................................................................................................................................158
COVER SHEET - CLIENT LETTER...............................................................................................159
© QUT Faculty of Law 2010 4

INTRODUCTORY
GUIDE

PART A: Unit Material
1. Unit Overview
The Principles of Equity were originally developed to ameliorate the harshness of the
common law and have since become a fundamental component of our legal system. A
knowledge and understanding of the major principles of equity is necessary to an
understanding of how the Australian legal system operates and it is therefore located
early in the LLB degree.
The aim of this unit is to provide a coherent knowledge and understanding of

equitable principles within the context of the Australian legal system as well as
developing skills relevant to ongoing learning and professional practice.
2. Objectives of this Unit

On completion of this unit you should be able to:
1. identify and explain the major principles of equity and their operation in the
context of the Australian legal system;
2. apply that knowledge in analysing problems involving equitable and ethical
issues;
3. communicate the results of that analysis effectively;
4. critically analyse the manner in which the law of equity may and should
evolve; and
5. effectively communicate, work with others and identify ethical issues, building
upon basic skills acquired in first year subjects and document and reflect on
your skill development using QUT student e-portfolio so as to better prepare
you for the transition to the workplace and understand the real world relevance
of your studies.
3. Content
This unit covers:
• The nature and history of equity and its relationship with the common law
• Fiduciary relationships and the ethical and equitable obligations arising there
from
• Other equitable doctrines including the obligation of confidence, equitable
estoppel, undue influence, unconscionable transactions and relief against
forfeiture of proprietary interests
• The liability of third parties for breach of equitable obligations
• Equitable remedies including specific performance, account, injunctions,
declarations, compensation, equitable damages and the constructive trust

As you progress through the material you will be required to consider not only the
substantive law, but also the various historical, socio-economic, political and
international factors which have influenced the manner in which the law of equity has
developed and the way in which it may develop in the future.
This unit is also concerned with ensuring that students have achieved an acceptable
level of skill development building on skills acquired in earlier course units. Particular
emphasis will be on: teamwork, written communication and ethical knowledge.
4. Teaching and Learning Approaches

4.1 Lectures
There is a two-hour lecture timetabled for each week of the unit commencing in week
one. In the lectures you will be given information which develops those matters set
down in the study guide for that week and highlights the more important areas in
order that you may focus your learning. You should be familiar with the material
specified for each week’s session before you attend the lecture. Where the material
being covered permits, the lectures will incorporate Socratic discussions of principal
cases and practical problems, the aim of which is to encourage you to develop your
understanding of the course by extrapolation of the existing principles to new
situations.
In some weeks, as an alternative to a face to face lecture, materials may be posted to

the online site for you to consider and to assist you to work through the prescribed
readings and materials.
4.2 Tutorials
One-hour tutorials have been timetabled for each week commencing in week 2. In
tutorials you will be asked to consider a range of academic and practical issues
relating to the material covered in the previous week's lecture. You will be required to
prepare for the tutorials and be ready to discuss the issues raised. Preparation will
include reading the prescribed materials and principal cases and attempting the
tutorial problems set down in the study guide for that week.
In some weeks, as an alternative to a face to face tutorial, materials may be posted to

the online site for you to consider and to assist you to work through the prescribed
readings and materials.
4.3 Skills
Skills theory and practice will be incorporated at various stages in the lecture
program. In tutorials, and in an online alternative for external students, you will
participate in specific skills development exercises.
You will also be encouraged to reflect upon and document your work related skills
development by using QUT student portfolio, which is available online through the
QUT virtual network. By using this tool, we hope that you will be better prepared for
your transition into the workplace.

5. On-line Information for Unit
IMPORTANT NOTE
You will need a QUT access username and password to be able to enter the site.
5.1 Why are we using an on-line site?

The objects of offering the unit on-line are:
• to increase your access to materials such as the study guide, PowerPoint slides
from the lectures and cases and legislation
• to allow for increased communication between staff members and students in
the unit through the use of the Announcements facility
• to allow you to learn information technology skills
5.2 What will I find on the site?

The LWB240 Principles of Equity on line site will contain the following information:
1. Announcements: This will be used by the unit coordinator and members of the
teaching team to post messages to you throughout the semester. You will receive an e-
mail each time a notice is posted to alert you to look at the announcements page. This
may include information in relation to assessment items.
IMPORTANT NOTE
The Announcements will be the way in which the unit coordinator and members of the
teaching team will send messages or information to you concerning the unit. It is your
responsibility to regularly check the announcements page and to access your student e-mail.
2. Unit Details: This will have a copy of the short form unit outline approved for
LWB240. You may refer to this as a quick reference guide to unit objectives, teaching
and learning approaches, assessment and texts and reference material.
3. Learning Resources: This section contains PowerPoint slides and lecture

materials, lecture taping, tutorial questions, additional resources (for example extracts
from texts and references, online tutorials) information for external students,
including details of external school election.
4. Assessment: This section contains assessment requirements, results and assessment

feedback, past exam papers, and online Submission pages.
5. Contact Us: This will have a list of the lecturers and tutors teaching in the unit
with their contact details and consultation times.
5.3 How often should I visit the site?

You should visit the online site regularly. Announcements will be posted throughout
the semester. The PowerPoint slides for each lecture will also be up-loaded to the site
regularly.

5.4 If I cannot access the on-line site or my e-mail account, what should I do?
You will be expected to access your e-mail account to receive and send mail. You will
be notified by email of new notices placed on the on-line announcements for the unit
so it is important that you become accustomed to using and checking your email
frequently. Information concerning activating e-mail, changing e-mail passwords and
accessing e-mail from home can be found on the Faculty homepage at
<http://www.qut.edu.au/scg/>. If you are unable to activate your e-mail account by
week 3 of the semester, please contact the University Computer Helpdesk on
(07) 3864 2727 for assistance.
If you are an internal or external student and you are unable to access the on-line site
or your e-mail account either from within the Faculty Computing Laboratory or from
home, please contact the University Helpdesk on (07) 3138 2727.
First you should check:

• Do you have the right software at home to access the Internet: Netscape 4.0 or
greater?
• Do you have your QUT access username and password?
• Have you activated your e-mail account?
• Have you checked the information on the Faculty Computing homepage at
<http://www.qut.edu.au/scg/>?
6. Assessment
Assessment in this unit is both formative and summative.
6.1 Formative assessment

In tutorials, the tutor’s comments in relation to answers given by individual students,
together with group discussions, provide you with formative feedback.
Tutors and lecturers will also be available in person at specified times or via the email
to answer questions from students.
You will be given an opportunity for formative assessment of your skills development
during tutorials and lectures for internal students and for external students online.
In addition to the above formative feedback, for external students, feedback will be in
the form of comments on your tutorial exercise.
Feedback in relation to all assessment items will also be provided via the on-line site.

6.2 Summative assessment

6.2.1 Internal (only) students
ITEM DUE DATE WEIGHTING

Team Letter Writing Exercise: Beginning of Week 5 (MONDAY 22
20%
Week 4 Tutorial Question March)
Tutorial participation Every week 10%
Exam (Open book) Exam Period 70%
6.2.1.1 Tutorial participation - 10%

You will be assessed on your attendance, participation in discussions, analysis and
problem solving, and your performance in skills exercises in tutorials throughout the
whole semester.
Unit objectives (1) - (5) will be assessed by tutorial participation. The criteria sheet
for the assessment of tutorial participation will be made available on the LWB240
BLACKBOARD site.
6.2.2 External (only) students
ITEM DUE DATE WEIGHTING

Team Letter Writing Exercise Beginning of week 5 (MONDAY 22
20%
Week 4 Tutorial Question March)
External Exercise
Refer to Week 5 Tutorial End of week 7 (THURSDAY 15 April) 10%
Materials
Exam (Open book) Exam period 70%
6.2.2.1 External exercise - 10%

You are required to submit a written answer to the question which is included in the
week 5 tutorial materials. This exercise will be due on Thursday, 15 April 2010 (end
week 7). The word limit will be a maximum of 750 words.
Unit objectives (1) - (5) will be assessed by the external exercise. The criteria sheet
for the assessment of the external exercise will be made available on the LWB240
BLACKBOARD site.
6.2.3 Team letter writing exercise – Internal and External (both) students - 20%
In allocated teams, you are required to write and submit a letter of advice in relation to
the week 4 tutorial question. As far as is possible, you will work in teams of four from
your tutorial (or as allocated randomly online for external students) when writing and
submitting the letter of advice. All team members will receive the same mark for the
team letter.

The word limit will be a maximum of 1,000 words (excluding formalities such as
letterhead, address, complimentary close etc.). This is a maximum word length only –
you should note that a good letter will be concise. Further guidance will be provided
in lectures. This is NOT primarily an exercise in research, but in letter writing, and
team work.
You will be allocated to teams and complete introductory team work activities in
tutorials (or online for external students) during week 2. You will then work in your
teams to complete the team letter writing exercise and submit it at the beginning of
week 5.
In your week 6 tutorial, internal students are required to complete and submit to your
tutor an individual feedback form (to be distributed in tutorials and available online)
reflecting on the team letter writing exercise. For external students, the individual
feedback form reflecting on the teamwork is required to be submitted online by the
end of week 6.
In addition, following completion of the team letter writing exercise, you are required
to document and reflect on your skill development by making an individual entry into
QUT student e-portfolio during week 6. This is in addition to the individual feedback
form. The maximum word length for the e-portfolio entry is 250 words. Internal
students must submit a print out of their e-portfolio entry to their tutors in tutorials
during week 6. External students are required to submit their entry online by the end
of week 6.
Unit objectives (1), (2), (3) and (5) will be assessed by the letter writing exercise.
Your criteria sheet for the assessment of the letter writing exercise is available on the
BLACKBOARD site.
6.2.3.1 Submission instructions for letter writing activity - internal students

Each team must complete and submit with their letter, a criteria sheet, feedback sheet
and an assessment cover sheet which clearly sets out the names and student numbers
of the team members: internal students should also include their tutor’s name; tutorial
time and day, and all students in the team should sign the cover sheet.
The assessment cover sheet is available as an appendix to this study guide, the criteria
sheets and the feedback sheets are available on the LWB240 BLACKBOARD site.
6.2.4 End of semester exam - 70%

There will be a compulsory end of semester exam worth 70% of the total assessment.
The exam will be of 2 hours duration with 30 minutes perusal time and it will be open
book. All topics of the course may be examinable including the skills components.
Unit objectives (1) - (5) will also be assessed through the examination.
6.2.4.1 Examinations
To ensure that you have sufficient opportunity to demonstrate the widest range
possible of your knowledge, understanding and skill development, the examination
may be comprised of a mixture of problem and essay style questions. All unit

materials including the skills components are potentially examinable. You will be
required to answer three questions out of five. There will be no compulsory questions.
Furthermore, each question may include two or more parts which may examine
different areas of the unit and therefore it is risky to attempt to pass the unit by spot-
learning and hoping you will have covered enough topics to be able to attempt three
questions.
7. External Attendance School (16-18 April 2010)

It is anticipated that the timetable for the First Semester Attendance School will be as
set out below, although this is subject to finalisation and you should carefully check
the final timetable when published:
DATE TIME TOPIC
 Feedback on team letter writing exercise
(bring a copy of your team’s letter for
discussion)
 Materials and/or questions for preparation
Saturday, 17 will be advised closer to the date of the
9 am – 11am
April external school. You should consult the
Announcements page of the Blackboard site
and regularly check your student email for
further information regarding the external
school.
NOTE: Attendance at the external attendance school is NOT compulsory. However,

students will be required to make an election as to whether they will be attending the
external attendance school or so that students can be allocated to classes and sufficient
staff can be allocated.
8. Use of Study Guide

This study guide is divided into three parts. The first part contains this introductory
guide, which sets out the matters you need to be familiar with in relation to the
administration of this unit.
The second part contains the substantive study guide – information, which will assist
you in reading the materials, in gaining a knowledge and understanding of the
relevant substantive law.
You should use this information as a more detailed road map for your study of the
section. The course material is not intended to replace the prescribed textbook and
casebook, but rather is intended to be used in conjunction with the reading materials.
The reading materials for each topic are clearly indicated at the beginning of each
section and include the cases, legislation and secondary materials (articles and
chapters in the prescribed textbook and casebook). The reading materials in each
section are divided into:

• Prescribed Reading - this represents the minimum reading for

each topic and you must read this material prior to attendance
at tutorials. References are to the author(s) of the text, eg Dal
Pont and Chalmers refers to the textbook Equity and Trusts in
Australia and New Zealand. It is useful also to be familiar with
this material prior to your attendance at lectures.
• Principal Cases - you will be expected to demonstrate a thorough knowledge
and understanding of the principal cases in assignments, moots and formal
examinations. You should also be familiar with other significant cases referred
to in lectures, the prescribed texts and these notes but are not expected to
demonstrate the thorough knowledge and understanding required for the
principal cases. The details of these secondary cases as given in the textbook
or in this study guide will normally be sufficient.
• Further Reading - to assist you in gaining a deeper knowledge and
understanding of the principles of equity we have included further readings on
each topic; whilst it is not necessary, and not even recommended, to read all
the references included under this heading you may find a selection of them
useful.
The third part of this study guide contains tutorial questions, which you will need to
consider each week. The fourth part of this study guide contains an example of a past
examination paper.
9. Texts and References

9.1. Prescribed Textbook, Casebook and Statutes
9.1.1 Prescribed Textbook
The prescribed textbook prescribed for this unit is:
GE Dal Pont and DRC Chalmers, Equity and Trusts in Australia, 4th ed, LBC
Information Services, 2007
9.1.2 Recommended Casebook

The casebook recommended for the course is:
GE Dal Pont, DRC Chalmers and JK Maxton, Equity and Trusts Commentary
and Materials, 4th ed, LBC Information Services, 2007
9.1.3 Recommended Preliminary Reading

T Cockburn and M Shirley, Equity Nutshell, LBC Information Services, 3rd ed, 2007
9.1.4 Recommended References

M Cope, Equitable Obligations: Duties, Defences and Remedies, Law Book Co,
Sydney, 2007
T Cockburn, M Shirley and T. Carver, Equity and Trusts, Butterworths Question and
Answer Series, 3rd ed, 2009

GE Dal Pont and T Cockburn, Equity and Trusts in Principle, 2nd ed, Lawbook Co.,
Sydney, 2008
P Parkinson (ed), Principles of Equity, 2nd ed, LBC Information Services, 2003
9.2 Other Reference Works

Australian
M Cope, Duress, Undue Influence and Unconscientious Bargains, Lawbook Co, 1985
M Cope, Constructive Trusts, Lawbook Co, 1992
M Cope (ed), Equity - Issues and Trends, Federation Press, 1995
M Cope, Proprietary Claims and Remedies, Federation Press, 1997
PD Finn, Fiduciary Obligations, Lawbook Co, 1978
PD Finn (ed), Essays in Equity, Lawbook Co, 1985
PD Finn (ed), Equity and Commercial Relationships, Lawbook Co, 1987
J Glover, Commercial Equity - Fiduciary Relationships, Butterworths, 1995
F Gurry, Breach of Confidence, Clarendon UP, 1984
Meagher Gummow and Lehane, Equity - Doctrines and Remedies, 4th ed,
Butterworths, 2002
ICF Spry, Principles of equitable remedies, 7th ed, Lawbook Co, 2007
English
J McGhee, Snell’s Principles of Equity, 31st ed, Sweet and Maxwell, 2007
JE Martin, Hanbury and Martin: Modern equity, 17th ed, Stevens and Sons, 2005
PH Pettit, Equity and the law of trusts, 10th ed, Butterworths, 2005
North American
TG Youdan, Equity, Fiduciaries and Trusts 1993, Carswell, 1993
10. Study Hints and Tips

The end of semester exam in Principles of Equity is an open-book examination.
What can I take into an open-book exam?
An open book exam is one for which any written material (subject to library lending
rules) may be taken into the exam room.
For such an exam students need not rely wholly on memory but the techniques, which
must be used to pass an open-book exam, are essentially the same as for other exams.
Time constraints make it impossible, even in an open book exam, to use written
material other than an outline and/or summary of the course. As most students put a
great deal of effort into the preparation of outlines and summaries they will remember
it anyway.

10.1 Advantages of open-book exams

The advantage of an open book exam is that it takes some of the pressure off students.
If something is forgotten the information can be checked. It will be found that a
textbook or case need be consulted only rarely. There is no time for more than one or
two brief references to such material.
How should I organise my material?

To be useful your material should be organised, tabulated and KNOWN. It is
recommended that you have a summary of each area completed by the time the study
vacation commences and spend your study time preparing an even briefer outline of
the course. You may find it helpful to practice a past exam under exam conditions and
test the usefulness of your outline. An ideal outline is on one page per area and shows
the divisions and subdivisions of the material with case names and enough material to
integrate the outline with the summary. For example, it may provide a one-page
outline of the law of confidential information.
10.1.1 Potential pitfalls of open-book exams

The danger with open book exams is that one is even more tempted than usual to
present regurgitated and formless material, which is unrelated to the question. This is
especially prevalent in answers to essay questions where the shape of the answer is
not dictated by a sequence of facts presented in the question. Essay questions may
appear to be a "soft option" but they can be deceptive. In any exam, and particularly
in an open book exam, a student must demonstrate a real understanding of the law and
a thoughtful interpretation of the issues (based on Kenny, How to Succeed in Law
School).
How is an open-book exam different?

The main difference with an open book exam is that during the semester, instead of
concentrating on superficial learning through memorisation, you should concentrate
on understanding the material through deep learning. This is done by reading cases,
the study guide and secondary texts and preparing useful summaries and outlines.
10.2 Maximising your assessment grades - examinations

10.2.1 Problem questions
(a) To obtain a pass, students should demonstrate a mastery of the below
specified skills in the context of developing a logically coherent and structured
argument in response to the problem question.
In developing this argument, students must also demonstrate a satisfactory

understanding of the way in which the dynamic nature of the principles of
equity often prevents the giving of a definitive answer to many problem
questions. The specified skills of which students should demonstrate mastery
are:
(i) an ability to analyse a fact situation and to identify most of the
legal issues involved and the elements of most of the causes of
action raised;

(ii) an ability to recognise and isolate those facts of the problem

which are relevant to the identified legal issues and cause of
action elements;
(iii) an ability to extract and acquire a knowledge and understanding
of the principles contained in the relevant principal cases and
the prescribed statutes;
(iv) an ability to apply these principles to the relevant facts of the
problem;
(v) an ability to reach a legally justifiable conclusion consistent
with the question(s) specified in the problem; and
(vi) an ability to communicate in a legally appropriate manner.
(b) Credit level students will demonstrate a greater depth of knowledge and
understanding of the relevant cases and materials than pass students. Credit
students will also demonstrate an ability to isolate the more contentious issues
and cause of action elements and be able to discuss why such contention
exists. In so doing the credit student will also demonstrate a knowledge and
understanding of how the various social, economic and political influences on
the law dynamically interrelate and affect the current law in the problem
area(s). The demonstrated degree of command of the dynamics of an item in
the context of principles of equity will be more advanced than for the pass
students.
(c) What distinguishes distinction and high distinction students is that they have
identified all or most of the significant issues and the elements of all or most
of the significant causes of action raised; matters discussed in (b) will
similarly apply at this level. These students will also demonstrate a superior
understanding of how the principles of equity operate with particular regard to
the dynamic nature and evolutionary imperatives of the relevant area(s) of the
law and the demonstrated degree of command of the dynamics of the
principles of equity will be of a more advanced level in a relative sense.
10.2.2 Essay Questions

The grade, which a student receives for an essay answer, will depend upon a
demonstration of similar knowledge, understanding, skills and abilities to those
specified for problem questions.
Despite the absence of problem facts, students must also demonstrate an ability to
develop a concise and logical analysis of the area(s) of law targeted by the essay
question. As with problem questions, mere regurgitation of the development of the
current law will usually receive less than a pass grade.
Note: (i) Equity markers are primarily concerned with whether students have
demonstrated a knowledge and understanding of the area(s) targeted by
the question and your demonstrated skill development and command
of the dynamics in the context of the particular question. Hence, we are
more concerned with your answer as a whole than with a detailed
allocation of marks for specific points, which may, or may not, be
raised in a student’s answer. Whilst consistency in marking usually

requires that there is an allocation of a certain percentage of the total

marks to specific issues and causes of action, this allocation is
balanced by our assessment of your overall legal knowledge,
understanding, ability and skill.
(ii) Since learning involves your developing an understanding of the
dynamics of law - the dynamics of the law and not simply its rules -
and since we seek to evaluate your ability to manipulate information
for the purpose of formulating legal argument to arrive at a conclusion,
spend time preparing and organising the structure of your answer by:
• preparing (mentally or otherwise) a suitable outline to the
argument;
• thinking each argument through to a conclusion;
• keeping discussion of an issue which forms part of the
argument in one place to strengthen its impact instead of
jumping all over the place as pieces of information are recalled
in an ad hoc fashion;
• seeking to reach a conclusion which flows logically from the
development of your argument. Do not look for the definitive
answer. A conclusion which is reached, which happens to be
the correct one but which is not supported by a logical
framework of argument, will not demonstrate sufficient
command of the dynamics of the law of equity; and
• using structural aids such as headings, paragraphing, etc to
display your command of the dynamics rather than writing one
long undifferentiated and unbroken essay.
(iii) Students are not expected to discuss the facts of the cases in detail
unless they are specifically relevant to the facts of the problem. In
essay questions, facts of cases should be discussed only to the extent
necessary to illustrate the argument being developed in response to the
question asked. It is permissible to refer to case names in an
abbreviated fashion and, in examinations, citations should not be
included. Students are not expected to quote from cases.
(iv) Whilst marks are not specifically awarded or deducted for spelling and
grammar, to the extent that the practice of law is about communication,
these matters will be taken into consideration in so far as
communication forms part of your demonstration of your ability to
manipulate information for the purpose of formulating legal
arguments.
(v) Recitations of law not relevant to the problem or essay question will
receive no marks and may result in a reduction of marks in so far as
they demonstrate an inadequate command of the dynamics.
(vi) Examination markers are not expected to have knowledge of shorthand,
arcane symbolism or map reading; it is the student’s responsibility to
write in comprehensible language.

11. Timetable
The following scheme of work is intended to give you an overview of what you will
be studying in lectures in any given week of first semester:
Lecturer /
Lecture Tutorial
Week
Barbara Hamilton PART A: Introduction NO TUTORIAL
1 The Nature, History and
Maxims of Equity
Rowena Maguire PART B: Equitable Doctrines Introduction to Team Work

2 and Skills (group formation)
Teamwork
Letter Writing (first hour)
Fiduciary Duties The Nature, History and Maxims
(a) Nature (second hour) of Equity
Rowena Maguire (b) Breach Fiduciary Duties
3 - conflict of duty and interest
- conflict of duty and duty
- misuse of fiduciary position
Rowena Maguire (c) Ethical Issues Letter Writing, Team Work,
4 (d) Liability of third parties for Fiduciaries – no face to face
breach of fiduciary duty tutorials
Tina Cockburn Confidential Information Fiduciary Duties and Liability of
5 including liability of third parties third parties for breach of
fiduciary duty Letter Writing,,
Team Work Reflection
Barbara Hamilton Undue Influence and Confidential Information
6 Unconscionable Dealing
including the liability of third
parties
Tina Cockburn Equitable Estoppel, Relief Undue Influence and
7 against Forfeiture Unconscionable Bargains
Ben McGlade Equitable Defences Equitable Estoppel, Relief
8 against Forfeiture
Barbara Hamilton PART C: Equitable Remedies Equitable Defences
9 Constructive Trusts
Tina Cockburn Specific Performance Constructive Trusts

10
Tina Cockburn Injunctions and Declarations Specific Performance
11
Ben McGlade Monetary Remedies Injunctions and Declarations
12
Tina Cockburn Course Overview Monetary Remedies and Account
13

12. Teaching Staff

The teaching team consists of:
Tina Cockburn
Unit Coordinator
( (07) 3138 2003
z t.cockburn@qut.edu.au
Barbara Hamilton
Unit Coordinator
( (07) 3138 1604
z b.hamilton@qut.edu.au
Rowena Maguire
( (07) 3138 5201
z r.maguire@qut.edu.au
Anne Matthew
z a.matthew@qut.edu.au
Anne Overell
Student administration tutor
z a.overell@qut.edu.au
Ben McGlade
z ben.mcglade@qut.edu.au
You should consult the consultation times published by teaching staff at the
commencement of the semester and published on the online site. If members of the
teaching team are not available when you try to contact us, please leave a message
and we will return your call as soon as possible and arrange a convenient time to meet
if necessary. In particular, please regularly consult the Blackboard site for notices and
administrative matters relating to the unit. Your cooperation in following
administrative procedures, which have been put in place to ensure the efficient
operation of the unit, is greatly appreciated.

PART B: Faculty Policies
For all relevant faculty policies consult the law school website – see:
http://www.law.qut.edu.au/study/current/
and click on either ‘External Students’ or ‘Law School rules & forms’ for the
information you are seeking.
Please note in particular that section 7 of the LLB course rules relate to assessment:
It is your responsibility to read and understand these policies and to ensure that you
comply with them.
Academic Dishonesty
Academic dishonesty, including plagiarism, is a serious breach of QUT Student Rules
relating to assessment, and is of particular relevance to any unit which has a research
assignment or similar assessment as an assessment item.
All instances of academic dishonesty in this unit will be dealt with in accordance with
the University procedures as detailed in Chapter C of the Manual of Policies and
Procedures (MOPP) and penalties may be imposed under these procedures in
accordance with Student Rule 29. Student Rules and procedures on Academic
Dishonesty are accessible from:
http://www.mopp.qut.edu.au/C/C_09_03.jsp
Academic dishonesty includes copying any part of another student’s work, providing
copy to another student for the purposes of plagiarism, collaboration with other
students which defeats the purpose of the assessment, copying information directly
from books, articles or the internet without full and comprehensive acknowledgement
of the source, obtaining material from a plagiarism website which provides complete
papers on university topics, or similar activities.

PRINCIPAL CASE LIST

PART A: INTRODUCTION
Chapter 1: Nature, History and Maxims of Equity
Walsh v Lonsdale (1882) 2 Ch D 9
FAI Insurance Ltd v Pioneer Concrete Services (1989) 15 NSWLR 552
PART B: EQUITABLE DOCTRINES AND SKILLS

Chapter 1: Teamwork
There are no prescribed cases for this section. Students should refer to materials
posted to the BLACKBOARD site.
Chapter 2: Letter Writing

There are no prescribed cases for this section. Students should refer to materials
posted to the BLACKBOARD site.
Chapter 3: Fiduciary Duties including Liability of Third Parties

Breen v Williams (1996) 186 CLR 71
Paramasivam v Flynn [1998] 1711 FCA
Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41
M(K) v M(H) [1992] 3 SCR 6 (Canada)
Chan v Zacharia (1984) 58 ALJR 353
Phipps v Boardman [1967] 2 AC 46
United Dominions Corporation v Brian Pty Ltd (1985) 59 ALJR 676
AG for Hong Kong v Reid [1993] 3 WLR 1143
Barnes v Addy (1874) 9 Ch App 244
Consul Developments Pty Ltd v DPC Estates Ltd (1975) 132 CLR 373
Warman International Ltd v Dwyer (1995) 69 ALJR 362; (1995) 182 CLR 44
Maguire v Makaronis (1997) 71 ALJR 781
Pilmer v Duke Group Ltd (in liq) (2001) 75 ALJR 781; (2001) 207 CLR 165
ASC v AS Nominees (1995) 62 FCR 504
Chirnside v Fay [2006] NZSC 68
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22
Royal Brunei Airlines Sdn Bhd v Tan [1995] 3 WLR 64
Twinsectra v Tardley [2002] 2AC 164 [2002] UK HL 12

Chapter 4: Confidential Information including Liability of Third Parties

Coco v AN Clark (Engineers) Ltd [1969] RPC 41
Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37
Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317
Castrol Australia Pty Ltd v Em Tech Assoc. Pty Ltd [1980] 33 ALR 31
Franklin v Giddins [1978] Qd R 72
Talbot v General Television Corporation Pty Ltd [1980] VR 224
Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39
Wheatley v Bell [1982] 2 NSWLR 544
Chapter 5: Undue Influence and Unconscientious Dealing Including Liability of

Third Parties
Johnson v Buttress (1936) 56 CLR 113
Blomley v Ryan (1954) 99 CLR 362
The Commercial Bank of Australia v Amadio (1983) 151 CLR 447
Bridgewater v Leahy (1998) 72 ALJR 1525
Louth v Diprose (1992) 175 CLR 621
Bank of New South Wales v Rogers (1941) 65 CLR 43
Chapter 6: Equitable Estoppel

Dillwyn v Llewelyn (1862) 4 De.G. F&J 517 45 ER 1285
Riches v Hogben [1985] 2 Qd R 292; [1986] 1 Qd R 315 (FC)
Re Basham [1986] 1 WLR 1498
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 66 ALJR 110
Commonwealth v Verwayen (1990) 170 CLR 394; 64 ALJR 540
Giumelli v Giumelli (1999) 73 ALJR 547
Chapter 7: Relief against Forfeiture

Legione v Hateley (1983) 57 ALJR 292; (1983) 152 CLR 406
Stern v McArthur (1988) 62 ALJR 588; (1985) 165 CLR 489
Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57
Romanos v Pentagold Investments Pty Ltd [2003] HCA 58
Chapter 8: Equitable Defences

Fysh v Page (1956) 96 CLR 233
Baburin v Baburin [1990] 2 Qd R 101
Baburin v Baburin (No 2) [1991] 2 Qd R 240
Lamshed v Lamshed (1963) 109 CLR 440
Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619
Orr v Ford (1989) 167 CLR 316
Johns v Johns [2004] 3 NZLR 202

Parmasivam v Adams [1998] FCA 1711

Couthard v Disco Mix Club [2001] 1 WLR 707
Commonwealth v Verwayen (1990) 170 CLR 394
PART C: EQUITABLE REMEDIES

Chapter 1: Introduction: The General Nature of Equitable Remedies
There are no prescribed cases for this section.
Chapter 2: Constructive Trusts

Muschinski v Dodds (1985) CLR 583
Baumgartner v Baumgartner (1987) 164 CLR 137
Chapter 3: Specific Performance

Dougan v Ley (1946) 71 CLR 142
JC Williamson Ltd v Lukey and Mullholland (1931) 45 CLR 282
Dowsett v Reid (1912) 15 CLR 695
Price v Strange [1978] Ch 337
Patrick Stevedores Operations Pty Ltd v Maritime Union of Australia (1998) 153
ALR 602 (North J) confirmed on appeal by Full Federal Court at 626 High
Court at 643
Steadman v Steadman [1976] AC 536
Regent v Millett (1976) 133 CLR 679
Chapter 4: Injunctions and Declarations

Curro v Beyond Productions (1993) 30 NSWLR 337
Cooney v Kuringai Municipal Council (1963) 114 CLR 582 (Heydon, pp 1027 -
1029)
Australian Conservation Foundation Inc v The Commonwealth of Australia (1980)
146 CLR 493
Redland Bricks Ltd v Morris [1970] AC 652
Queensland Industrial Steel Pty Ltd v Jensen [1987] 2 Qd R 572
ALR 602 (North J) (confirmed on appal by Full Federal Court at 626 and High
Court at 643)
Ainsworth v Criminal Justice Commission (1992) 66 ALJR 271
Chapter 5: Monetary Remedies

Re Dawson [1966] 2 NSWR 211

Johnson v Agnew [1980] AC 367

Kennaway v Thompson [1980] 3 All ER 329
Warman v Dwyer (1995) 128 ALR 201
Dart Industries v Décor Corp Pty Ltd (1993) 179 CLR 101
Harris v Digital Pulse Pty Ltd [2003] NSWCA 10
Youyang v Minter Ellison Morris Fletcher Cross [2003] HCA 15

STUDY GUIDE

PART A:
Introduction

CHAPTER 1: The Nature, History

and Maxims of Equity
Prescribed Reading:
Dal Pont and Chalmers, Prologue
Recommended Reading;
Dal Pont, Chalmers and Maxton, Prologue
Principal Cases:
Walsh v Lonsdale (1882) 2 Ch D 9
FAI Insurance Ltd v Pioneer Concrete Services (1989) 15 NSWLR 552
1. INTRODUCTION
Equity can be described as that body of principles developed by the Court of
Chancery in England prior to 1873 and as since modified by courts administering that
jurisdiction. Equity is usually defined as the principles and rules enforced exclusively
in the Court of Chancery as distinguished from the Courts of Common Law.
Equity can also be equated with natural justice or morality and prior to the
systematisation of Equity into a body of principles and rules equity was conceived of
as a principle of natural justice or morality and as such was the subject of
philosophical and theological explanation. The ancient Greek Philosopher Aristotle in
his Nicomachean Ethics, Ch 10, Book 5 provided an analysis of equity which
postulated that the end or purpose of equity is to mitigate the strict application of legal
rules when strict application in a particular case produced an injustice. Such injustices
could be prevented by interpreting the law in accordance with its spirit or purpose, by
attempting to do what the legislator would have done had he or she envisaged the
particular case, or by taking into account the particular circumstances of the case.
Such philosophical notions of equity directed at providing a moderating and humane
application of positive legal rules were transmitted into English equity jurisprudence,
in the period prior to the systematisation of Equity into a body of principles and rules,
by the ecclesiastics - who also introduced into English equity jurisprudence
theological notions of conscience, good faith and reason. Thus, for example,
St Germain in Doctor and Student described conscience as “a righteousness which
considers all the particular circumstances of the deed tempering justice with mercy”.
Equity in its formative stages was therefore guided by moral principles and was
directed at tempering the strict application of the law through resort to reason and an
appeal to our sense of justice and mercy. This conception of equity gradually gave
way to a body of principles and rules which in many instances were formulated on the
basis of these philosophical and theological notions and which are still reflected in
many equitable doctrines to this day.
In contemporary textbooks equity is no longer referred to in terms of natural justice

and fairness and is no longer regarded as equivalent to or the same as natural justice.

This approach, in part, is the result of a fear that to equate equity with natural justice
is to place the rights and property of the community under the arbitrary will of a judge
acting according to their own notions of conscience, or as Selden’s famous jibe put it:
the standard of measure was the length of the Chancellor’s foot. These fears were also
echoed in early texts on Equity as for example in Story’s Commentaries on Equity
Jurisprudence where it is said in the context of discussing “The Nature and Character
of Equity Jurisprudence” that:
“If, indeed, a court of equity in England did possess the unbounded
jurisdiction which has been thus described to it, of correcting, controlling,
moderating, and ever superseding the law, and of enforcing all rights, as well
as the charities arising from natural law justice, and of freeing itself from all
regard to former rules and precedents, it would be the most gigantic in its
sway, and the most arbitrary power that could be devised.”
2. THE HISTORY OF EQUITY

2.1 Medieval Origins
The origins of equity can be traced back to the medieval period. During the Twelfth,
Thirteenth and Fourteenth Centuries the common law lost its capacity to innovate and
maintain flexibility to meet changed circumstances. By the end of the Fourteenth
Century it had become rigid and static, bound by precedent and a mass of
technicalities and inflexible procedures associated with writs and an insistence that
matters brought before the courts had to satisfy one of the forms of action. Petitions
for justice were addressed to the King in Council and the practice developed in the
Fourteenth Century of delegating such matters to the Lord Chancellor who also
controlled the issuing of writs as the Keeper of the Great Seal. Initially the Lord
Chancellor used this power to provide appropriate relief. The power to issue writs was
restricted by the Provisions of Oxford 1258 and the Second Statute of Westminster
1285. However the Lord Chancellors continued to hear petitions for justice. Most of
the medieval Lord Chancellors were Bishops and Archbishops who had regard to
canon law when deciding such petitions. Decisions were made “according to
conscience” and with very little regard to precedent. The first Chancery Reports were
not published until 1557. Other courts on occasions administered equitable principles
including the Court of Requests during the Tudor period. The Court of Exchequer also
had some equitable jurisdiction up until 1842.
The equitable jurisdiction of the Lord Chancellor gradually evolved from the hearing
of petitions for justice. A range of measures were made available to correct defects in
the law including injunctions and specific performance. Contracts unenforceable at
law were recognised and enforced, and the enforcement of strict legal rights was
prevented in circumstances such as fraud, forgery or duress on the grounds that it was
unconscionable to insist on such rights. An exclusive jurisdiction also developed in
uses and trusts. A use was a device which enabled another person (the feoffee que
use) to hold the title to land for use of others (the cestuis que use).
The Chancellor acted on the conscience of the feoffee to uses and enforced the duty of
the feoffee to uses to hold the legal title for the benefit of the cestuis que use. Out of
this developed a jurisdiction over trusts which became the most important part of the
jurisdiction of the Court of Chancery.

The use became an important method of avoiding the payment of feudal dues to the
King. In 1535 Henry VIII by the Statute of Uses endeavoured to abolish the use but
the development of the use upon a use effectively restored the pre-1535 situation.
Upon the abolition of feudal dues in the seventeenth century, the use upon a use was
enforced and from that time was known as a trust. One of the main functions of the
early trust was to overcome the limitations of the common law rule that a woman’s
property upon marriage was transferred to the husband. Married women were able to
retain the benefits of their own property by means of a marriage settlement.
2.2 The Tudors and Stuarts

During the Tudor and Stuart period the first common lawyers were appointed as
Chancellor and they began to construct a body of precedent. The most prominent Lord
Chancellors of this period were Lord Ellesmere (1596 - 1617) and Lord Nottingham
(1672 - 1643). A coherent body of equitable principles had emerged by the end of
Lord Nottingham’s term. He is sometimes described as the father of modern equity.
The procedures of the Court of Chancery were also improved and regularised.
During the Sixteenth Century conflict between Common Law and Equity took place.
Sir Edward Coke, Chief Justice of the King’s Bench asserted supremacy of the
common law over equity. Equity by means of a common injunction had challenged
the authority of the common law courts. Such injunctions would order a plaintiff at
common law to discontinue proceedings or prevent the enforcement of a judgment at
law. Disobedience to the common injunction resulted in imprisonment. The remedy
was “in personam” in that it attached to the person of the common law plaintiff and
bound their conscience. The grant of the injunction was discretionary and depended
upon the petitioner establishing unconscionable conduct by the common law plaintiff.
The common law courts therefore sought to forbid any party resorting to any other
jurisdiction for relief, particularly if the matter was already within the jurisdiction of
the common law courts. By means of a writ of habeas corpus, persons imprisoned for
failing to obey a common law injunction were released. The conflict culminated in the
Earl of Oxford’s case (1616) 21 ER 485 which upheld the common injunction and
confirmed the right of the Chancery to set aside bad judgments at law. Equity was to
prevail where equity and common law came into conflict. Subsequently, John Selden
criticised the Chancellor’s unlimited jurisdiction for its uncertainty and arbitrary
power by describing equity as varying with the length of the Chancellor’s foot.
2.3 The Period of Consolidation to the Early Nineteenth Century

An increasing regard for precedent developed during the Seventeenth Century and a
series of Lord Chancellors began to consolidate equity into a set of principles and
rules. The most notable of the Lord Chancellors responsible for this development
were Lord Hadwick (1736 - 1756), Lord Thurlow (1778 - 1783, 1783 - 1792) and
Lord Eldon (1801 - 1806; 1807 - 1827). Equity was transformed into a system of law
almost as fixed and rigid as the rules of common law. By the early Nineteenth
Century equity had become simply that part of the law enforced in the Court of
Chancery. Other judges were also appointed and a regular system of courts developed.
In 1729 the Master of the Rolls became an independent Judge, in 1813 a Vice-
Chancellor was appointed, in 1841 two more Vice-Chancellors were appointed and

the Equity jurisdiction of the Court of Exchequer was transferred to Chancery, and in
1851 a Court of Appeal in Chancery was established.
The jurisdiction claimed by equity was described by Sir Thomas Moore as “Fraud
Accident, and Things of Confidence”. “Things of Confidence” encompasses the
enforcement of obligations dictated by conscience and includes the jurisdiction
acquired by equity in relation to uses, trusts and fiduciary or confidential
relationships. In matters of fraud, equity claimed to exercise a jurisdiction to deal with
fraud in all its infinite varieties especially in relation to unconscionable dealing which
fell short of deceit at common law. Hence the intervention of equity in matters of
undue influence and unconscientiously taking advantage of another’s weakness. In
matters of accident, equity tried to deal with problems created by the happening of
some unforeseen event, the omission or misstatement of some term or mistake. Relief
in these instances could involve rescission or rectification. There were also other
aspects of equity’s jurisdiction which developed including: a jurisdiction to give effect
to intentions where an intention was imperfectly expressed as for example by a lack of
compliance with formalities; a tutelary or protective jurisdiction exercised in relation
to people such as infants, married women, mariners, borrowers, poor, the insane; and
in matters of charity. Equity developed its own particular remedies such as specific
performance, specific restitution, the injunction and the discovery of documents. As a
Court of conscience Equity was said to act in personam, that is against the person and
not the property. Thus, for example, in the case of a trust equity would not deny that
X was the legal owner but would instead say that X was in conscience bound to look
after the property for the benefit of another.
The Jurisdiction of Equity was given a three fold division by Story, identified as
Exclusive, Concurrent and Auxiliary jurisdiction. The “exclusive jurisdiction”
referred to matters such as uses and trusts, in which the Court of Chancery alone had
jurisdiction. The “concurrent jurisdiction” referred to matters in which both the Court
of Chancery and the Common Law Courts could deal with, but in relation to which
different remedies were available depending upon which court heard the matter. The
remedies available in the Common Law Courts were more limited and usually the
remedy was in the form of damages, whereas the Court of Chancery could invoke a
much wider range of remedies including specific performance, rescission,
rectification, specific restitution and account. The “auxiliary jurisdiction” referred to
matters in which the Court of Chancery provided relief in relation to defective
procedures of the common law courts as, for example, by Bills of Discovery.
Some of the more important matters falling within the Chancery’s jurisdiction are set
out in M Evans, Equity and Trusts (2003) at 5 - 6.
3. THE RELATIONSHIP BETWEEN LAW AND EQUITY

In England, prior to 1873, common law and equity were administered in two separate
courts. A number of significant features characterised the relationship of law and
equity before 1873, the most important of which are as follows:
• The common law courts would not recognise equitable, rights, titles and
interests. No action could be brought at common law for breach of a purely
equitable obligation (See the exceptions to the rule set out in Evans at 8). Lord
Mansfield was an exception. He attempted to introduce equitable notions into

the common law but failed in the attempt. An action in a common law court to
enforce the infringement of equitable rights and interests could not be
maintained and nor could a defendant at common law plead an equitable
defence.
• Equity could not decide disputed legal rights and titles. By s 61 of the
Court of Chancery Procedure Act 1852, the Court of Chancery was given
power to determine incidental questions of law arising in suits for equitable
relief.
• Equity had no power to award damages. In 1858, the Lord Cairn’s Act
conferred power to award damages in lieu of, or in addition to, remedies of
injunction and specific performance. Equity also had a jurisdiction to award
monetary relief by way of restitution or equitable compensation.
• The common law courts had no power to award equitable relief. They
lacked the power to give interlocutory relief and had no power to award
specific performance or injunctions, or make declarations. In contrast the
Chancery was given specific power to make declarations, provided the parties
agreed to state a case. In 1852, the Chancery was given the power to make
declarations whether other relief was granted or not. NOTE: the power was
read down to apply only to cases where other relief could have been granted.
The common law courts were given the power to order discovery and
interrogatories by ss 50 and 51 of the Common Law Procedure Act 1854.
They were also given the power to award injunctions in addition to damages
by ss 48 - 51 of the Common Law Procedure Act 1854.
• There was no power to transfer cases from one jurisdiction to the other.
4. THE JUDICATURE SYSTEM

Along with the systemisation of equitable principles, there developed lengthy delays
in proceedings, which brought the Chancery into disrepute and led to calls for major
reforms of the judicial system. Major reforms were introduced by the Judicature Acts
of 1873 - 1875 which abolished the old courts and set up a new High Court with a
unified code of procedure. The new High Court was divided into five divisions; a
general Court of Appeal was set up to entertain appeals from the divisions. The
Chancery Division was concerned with equitable principles and the King’s Bench
Division was to deal with common law principles.
The administration of equity was fused in that all branches were given the power to
administer equitable remedies, equity defences could be pleaded in any action, and all
branches were required to recognised equitable interests and rights. The common
injunction was abolished.
By s 25(11) of the Judicature Act 1873 it was provided that, in any conflict or
variance between the Rules of Equity and the Rules of Common Law with reference
to the same matter, the rules of equity shall prevail. This provision, and the Judicature
Act reforms, gave rise to conflicting interpretations as to the effect of the reforms. The
orthodox interpretation holds that a separate body of legal and equitable rules
continues otherwise there would be no need to stipulate for a resolution of conflicts.

Therefore, law and equity is not codified into one set of rules and it is only in cases of
conflict on the same matter that the rules of equity will prevail. It is assumed that it
was a fusion of administration only - in that the courts should administer both legal
and equitable principles.
Under an alternative approach, often described as the “Fusion Fallacy”, it was

assumed that common law and equity were united into one set of principles and that it
was permissible to modify the rules of one jurisdiction by incorporating the rules of
the other to create a body of law containing elements of both. This has led to the
administration of a remedy not previously available at common law or equity, and the
modification of principles of one branch of the law by the introduction of principles
from another. Some examples of this approach are as follows:
(i) Damages could be obtained for innocent misrepresentation which had
previously only been recognised in equity as a ground for rescission: see
Redgrave v Hurd (1881) 20 Ch D 1
(ii) Damages could be awarded for a purely equitable obligation without regard to
the Lord Cairn’s Act: see Seager v Copydex (No 1) [1967] 2 All ER 415
(iii) Under the Doctrine of Walsh v Lonsdale (1882) 2 Ch D 9 it was held that a
landlord was entitled to distrain for arrears of rent even though there was not a
valid lease in existence at law, in circumstances where the tenant entered into
possession and paid rent in accordance with the agreement. It was agreed by
all parties that specific performance of the lease would be granted. In effect
the court adjudicated upon the legal rights of the parties without the grant of a
decree of specific performance. On one interpretation this can be done without
considering the merits of the issue of specific performance, but this is
generally thought to be incorrect as a fusion fallacy and that the courts must
make a considered decision on the issue of specific performance. However,
they do not need to administer the decree but can proceed to adjudicate on the
legal rights of the parties: see Moore v Dimond [1929] SASR 274 at 281 and
Ahern v LA Wilkinson (Northern) [1929] St R Qd 66
It was stated by Sir George Jessel MR in Walsh v Lonsdale, that there are no longer
two estates, one at common law and one in equity under an agreement to grant a lease.
This statement, if taken literally, would mean that legal and equitable estates are
abolished. This however has not happened and trusts have continued in existence. It
also assumes a conflict which does not necessarily exist. The rules of equity only
prevail where there is a conflict. Moreover in cases where equitable relief is not
available the claimant may be left with his or her legal rights.
When studying specific equitable principles and rules students should ponder the
conclusion of Meagher, Gummow and Lehane, Meacher Gummow and Lehanes’s
Equity – Doctrines and Remedies (4th ed, 2002) at 64 that “fusion fallacies” have
damaged equity. Students should also consider the extent to which equity has been
rejuvenated by a return to its original spirit of justice and fairness.
5. THE RECEPTION OF EQUITY IN AUSTRALIA - QUEENSLAND

In New South Wales, the Supreme Court was invested with the jurisdiction exercised
by the Lord Chancellor in England by s 9 of the Charter of Justice, Letters Patent

issued under authority conferred by 4 Geo IV c 96. This grant of power was continued
by the Australian Courts Act 1828, 9 Geo IV c 83, s 11. In 1840 the Administration of
Justice Act (NSW) provided for the appointment of a judge to hear equity matters
separately from the other business of the court. The equity jurisdiction of the Supreme
Court of New South Wales was administered separately from the other business of the
court until the Supreme Court Act of 1970.
In Queensland, the Supreme Court was vested with equitable jurisdiction from its
inception: see Supreme Court Act 1861. By s 22 of the Supreme Court Act 1867 the
equitable jurisdiction of the Supreme Court was declared to be “such equitable
jurisdiction as is possessed by the Lord Chancellor or the equity Judges of England”,
and included the appointment of guardians for infants and committees for lunatics.
The jurisdiction was strengthened by the passing of the Equity Act 1867. It also
introduced Lord Cairn’s Act provisions to Queensland. Other powers in relation to
cash in the control of the court, as well as permitting trustees to invest in Government
Securities, were introduced in 1876 by the Equity Procedure Act. In 1876 changes
introduced in England by the Judicature Acts were introduced into Queensland
without amendment by the Queensland Judicature Act 1876. Queensland was the first
Australian colony to adopt the Judicature System. With the exception of New South
Wales (which adopted the system in 1970), the other colonies soon followed. Various
provisions of the Equity Act 1867, the Supreme Court Act 1867 and the Judicature
Act were consolidated in the Supreme Court Act 1995 (Qld).
At first only a limited jurisdiction in equitable matters was conferred on Inferior

Courts in Queensland. See for example, ss 68 and 69 of the District Court of
Queensland Act 1967. The jurisdiction of the District Court to award specific
performance was limited to the equitable claims up to a monetary limit as debt or
“damages” and where the defendant pleads the Statute of Frauds and the plaintiff
replies by pleading part performance, an exclusively equitable doctrine. The District
Court has power to award equitable damages in lieu of an injunction: see J & F
Catelan Pty Ltd v Barbagallo [1986] 1 Qd R 245
The District Court now has a more extensive equitable jurisdiction as a result of
amendments introduced in 1989 by the District Courts Act and Other Acts
Amendment Act 1989 which substituted new ss 68 - 70.
6. THE NATURE OF EQUITY

It is apparent from the above historical outline that equity developed in an ad hoc
fashion and that the content of equity can be explained by historical factors including:
the failure of the common law to adapt to changed social conditions; the abandonment
of discretionary powers by the common law courts; the development by the Chancery
of its own principles and remedies, eg trusts and specific performance; and statutes
which gave equity courts jurisdiction in matters such as company law and adoption.
Equity was a gloss on the common law which presupposed the common law while
qualifying, moderating and reforming the rigour, hardness and edge of law by
reference to concepts of justice and moral virtue. It assisted the law where it was
defective and weak, and defended the law against contrivances to evade the law. It
often supplemented the general law where the common law was either defective or
offered no remedy. Some areas of the common law, such as real property and

contract, were substantially affected while others were little affected or unaffected at
all, as for example torts and criminal law. Essential distinctions between common law
and equitable remedies emerged including the following:
(i) Common law only awards damages and they are awarded as of right. There
are often awards of nominal damages at common law.
(ii) Equitable remedies are much more specific and often discretionary. Equity has
power to award damages conferred on it by statute, but such power is limited.
(iii) Equitable remedies are available in defence of legal and equitable rights,
although in the case of legal rights, such remedies are given usually only if
common law damages are inadequate. Common law relief is called
consequential, equitable relief is called specific. Where equity provides relief
in protection of an equitable right it involves an exercise of the exclusive
jurisdiction; where it protects a legal right the auxiliary or concurrent
jurisdiction is engaged.
It remains a matter of some controversy as to whether equity still has the capability to
adapt to changed circumstances. Some Judges have asserted that equity will not
readily uphold the invention of new equitable rights and interests: see Re Diplock’s
Estate (1948) Ch 465 at 481 - 482; Cowcher v Cowcher (1972) 1 All ER 943,
Bagnall J at 948; Allen v Snyder [1977] 2 NSWLR 685 at 689. Not all Judges agree
with this view and some, such as Lord Denning, have taken a more activist position
by extending and developing equitable doctrines and remedies - a prime example of
which is constructive trusts. Mason CJ and Deane JJ of the Australian High Court
have also done much to revive and expand equitable doctrines and remedies. It should
also be noted that there have been a number of eminent judges of equity whose
decisions and opinions are of great respect and authority. The list from the Nineteenth
Century includes Lord Eldon, Sir James Knight Bruce V-C, Sir George Turner V-C,
Sir James Wigram V-C, Sir George Jessel MR, Fry LJ, and Lords Selbourne and
MacNaughton. In the Twentieth Century the list includes Lord Parker, Viscount
Haldane, Sir Arthur Kekewich, Viscount Simonds, Lord Wilberforce, Lord Upjohn
and Lord Denning. In Australia, apart from Mason CJ and Deane J, the list includes
Sir Owen Dixon, Sir Wilfred Fullagar and Sir Frank Kitto, all Judges of the High
Court. At a state level, Sir John Harvey and Sir Frederick Jordan from New South
Wales and Sir Leo Cussen from Victoria are highly regarded.
7. THE MAXIMS OF EQUITY

The nature of equity and some of its broad concepts have been formulated as maxims
or generalisations which are sometimes used as a guide by the courts when exercising
an equitable jurisdiction. The maxims help to explain the nature of equity and some of
the broad concepts which have influenced the development of equity. The more
important equitable maxims are as follows:
7.1 Equity will not suffer a wrong without a remedy

Students should try to identify some examples of remedies developed by equity where
the common law did not provide relief (mentioned earlier in this guide), and consider
to what extent the Courts of Equity can still create new equitable rights and interests.

7.2 Equity follows the law

Equity recognised legal titles and interests and developed its own doctrines and
estates by analogy with those at law. It did not always follow the law, as it also
corrected defects in the law and prevented the unconscionable insistence on legal
rights.
7.3 When the equities are equal, the first in time prevails
This maxim is applied in the law on priorities which is studied further in the Property
Law units.
7.4 He who seeks equity must do equity

A party seeking equitable relief must do so on terms that he or she fulfils his or her
own legal and equitable obligations. Equity has the power to impose conditions when
granting relief and equitable remedies are discretionary.
7.5 He who comes to equity must come with clean hands

Equity examines the conduct of the party seeking relief in the transaction or
arrangement the subject of the suit. Equity may refuse relief if the petitioner is guilty
of some impropriety in a legal sense: see FAI Insurance Ltd v Pioneer Concrete
Services Ltd (1989) 15 NSWLR 552.
7.6 Equity assists the diligent and not the tardy

Mere delay by a plaintiff does not usually bar relief in equity. However equity did
develop concepts of laches, acquiescence and analogies to the Statute of Limitations,
as defences to claims for relief.
7.7 Equity is equality

Generally equity distributes profits and losses in proportion to the claims or liabilities
of the parties concerned. It is proportionate equality rather than literal equality. Equity
leans against finding a joint tenancy and will usually find a tenancy in common.
When called to execute a power of appointment held by a trustee, equity may order
equal division amongst the objects of the power, but in some cases there does not
need to be an equal division. This is discussed in the unit Trusts.
7.8 Equity looks to intent rather than form

A distinction is drawn between what is a matter of substance and that which is a
matter of form. A party may be prevented from insisting on the absence of form
where it defeats the substance. For example, equity may allow a contract to be
completed within a reasonable time after failure to complete a contract on the date
stipulated when time is not of the essence and without any breach entitling the
innocent party to rescind: see Stickney v Keeble [1915] AC 386. The maxim forms the
basis of the doctrine of rectification.
7.9 Equity regards that as done which ought to be done

Sometimes equity will regard an obligation as having been carried out where a person
is under a legal obligation to carry out some task. Equity may regard that as done

which ought to be done in favour of a party entitled to specifically enforce a contract.

This is the basis of the doctrine in Walsh v Lonsdale (1882) 21 Ch D 9 (discussed
earlier) where the issue was decided by assuming that a lease had actually been
granted. The maxim is also the basis of the doctrine of conversion and the rule in
Howe v Lord Dartmouth (1802) 32 ER 56 which is discussed in the unit Trusts.
7.10 Equity imputes an intention to fulfil an obligation

This maxim is of limited application and is the basis of the doctrines of satisfaction,
ademption and performance. These doctrines are not studied in this unit.
7.11 Equity will not assist a volunteer

Equity will not assist a “volunteer” or one who has not provided consideration.
However equity does assist beneficiaries of trusts who are usually volunteers. The
imposition of a constructive trust to prevent a donor’s unconscionable conduct,
together with the law of estoppel, may also assist a donee (or assignee) who is a
volunteer.
Equity will also not perfect an imperfect gift, but there are major exceptions as where
an equity arises in favour of an intended donee from the conduct of the donor after
making a voluntary promise, or where the donor has done everything that is necessary
to be done by the donor. This maxim is also discussed further in the unit Trusts.
7.12 Equity acts in personam

This maxim depends upon the theory (discussed earlier) that equity did not make
orders affecting the property of litigants but made orders effective against the
conscience of the party concerned. Disobedience of the orders was a contempt which
could result in imprisonment. Maitland maintained that equitable estates and interests
are essentially jura in personam – not rights against the world at large or as against
property (in rem), but rights against certain persons.
This maxim is no longer strictly correct as many equitable rights and interests are
proprietary in nature and not limited to a personal right of action against another
party. Consider the following illustrations:
(i) The interest of a beneficiary may be a direct proprietary interest in the assets
of the trust. The precise nature of the beneficiary’s rights will depend upon the
terms of the trust: see Baker v Archer-Shee [1927] AC 844.
(ii) A beneficiary of a trust of realty has an equitable interest in the real assets of
the trust and a contract to sell such an interest has to be evidenced in writing
under s 59 of the Property Law Act 1974 (Qld): see Horton v Jones (1935) 53
CLR 475.
However, the maxim remains important in some contexts. These are:

(i) When contrasting legal and equitable remedies. Common law remedies were
enforced by execution against the property of the defendant. Equitable
remedies were executed against the person of the defendant.
(ii) In private international law, equitable rights are treated as if they were nothing
more than rights in personam. Under the doctrine of Penn v Lord Baltimore
(1750) 1 Ves Sen 444; 27 ER 1132; Potter v Broken Hill Pty Ltd (1950) 3

CLR 479 equity could make orders which had the effect of dealing with
property outside the jurisdiction by making orders against the person of the
defendant in the jurisdiction.
(iii) For the purpose of characterising equitable rights and interests in relation to
revenue statutes, equitable rights are sometimes treated as being in personam.
Liability to some tax or duty may depend on the locality of some right or
interest in property. The determination of where a particular person’s rights
are at the relevant time may depend upon whether the rights are regarded as
rights in personam or rights in rem. When treated as in personam the rights are
located where the rights are enforceable and not where the property is situated:
see Livingston v CSD (Qld) (1960) 107 CLR 411 (High Court); [1965] AC
694 (Privy Council); New Zealand Insurance Co Ltd v Commissioner for
Probate Duties (Vic) [1973] VR 659; FCT v Whiting (1948) 68 CLR 199.
When studying the particular equitable doctrines covered by this unit, students should
note and examine the use that is made of these equitable maxims.

PART B:
Equitable Doctrines and
Skills

CHAPTER 1: Teamwork
Recommended Reading:
G Gibbs, Learning in Teams: A Student Guide, Rev ed, The Oxford Centre for Staff
Development, Oxford, 1994.
1. INTRODUCTION
Many of you will have already experienced working in teams, whether it be in a social
or professional context. Whilst some find this experience both enjoyable and
rewarding, others regard the process as disappointing – and feel that teams “just don’t
work” for them. However, the reality in the work environment (in the legal profession
or elsewhere), is that you are required to work in teams to complete projects. In many
cases you will also have no discretion over who your other team members are or how
well you “get along” with them.
This part of the unit, (in conjunction with your Tutorial Materials for weeks 2, 4 and
5, and the Teamwork Materials located on the unit’s Blackboard Site), therefore aims
to introduce you to some of the theory behind teamwork and provide you with some
strategies for working effectively and efficiently in groups. These skills will assist you
when working in teams to complete your “letter writing exercise” piece of assessment
(further outlined in the Introductory Guide to this Study Guide). However you may
find that the interpersonal skills required to work in teams such as:
• interdependence,
• accountability,
• leadership, and
• perhaps even the ability to resolve conflict,
will also aid your personal development and non-work-related relationships.
2. THEORETICAL FRAMEWORK
In the Self-directed Lecture, which forms part of your Teamwork Materials, we are
going to concentrate on the following 10 commandments of Teamwork outlined by
Gibbs in Learning in Teams: A Student Guide:
1. Be clear what the project is all about.

2. Be selective about who you work with.
3. Take the trouble to build a real team.
4. Decide how you’d like it to be.
5. Make sure someone is doing it.
6. Divide the project up and share it out.
7. Have proper meetings, not disorganised chats.
8. Discuss how it is going.
9. Give each other feedback – gently.
10. Plan your team presentation carefully.
You should consider these lecture materials for yourself as part of your own
individual study.

The Teamwork Materials are located on the unit’s Blackboard Site. Further
instructions on teamwork will also be delivered in tutorials.
3. DOCUMENTATION AND REFLECTION

Students will also be encouraged to reflect upon and document their work related
skills development honed throughout the unit. To do this, students will use, and
receive instruction in, QUT Student Portfolio, which is available through the QUT
Virtual network. Student Portfolio is an online tool that students can use to document
and present their academic, professional and personal development in the format of an
e-portfolio (Electronic Portfolio). These details may then be transferred into Resume
Builder, also provided by QUT.
The development of such a portfolio may therefore better prepare you for your
transition into the workplace by enabling you to more easily address employment
opportunities as they arise.

CHAPTER 2: Letter Writing

J De Groot & K Maxwell, Legal Letter Writing, Blackstone Press Pty Ltd, Sydney,
1994.
R Hyams, S Campbell & A Evans, Practical Legal Skills, 3rd ed, Oxford University
Press, South Melbourne, 2007, Ch 4.
1. WRITTEN COMMUNICATION – LETTER WRITING

The ability to write a good legal letter with a minimum of effort is developed only by
experience combined with a continuing desire for improvement (De Groot &
Maxwell, p 2). You will also need to practice and reflect upon your writing (Hyams,
Campbell & Evans, p 61).
Legal letter writing today is a combination of both traditional practices and modern
writing practices such as plain English language and gender neutral and non-
discriminatory language.
Apart from the relevant substantive law, the legal letter writer will need to consider:
(a) the purpose of the letter
(b) the characteristics and needs of the proposed recipient
(c) format and presentation
(d) grammar and use of language
Types of letters vary from standard letters, for example, to a client confirming
instructions, to special letters, for example, letters of advice (De Groot & Maxwell,
Chs 7 and 8).
This part of the unit, therefore aims to introduce you to some of the theory and
practice behind good legal letter writing. These skills will assist you when working in
teams to complete your “letter writing exercise” piece of assessment (further outlined
in the Introductory Guide to this Study Guide).
NOTE: The criteria for this item of assessment have been posted on the unit’s
Blackboard Site (under Assessment) – you should read and closely consider the
criteria that you will be assessed on.
2. LETTER WRITING CHECKLIST

A useful checklist for letter writing (De Groot & Maxwell, Appendix 1) follows:
Before you write:

• Is the letter necessary?
• Can the writing of the letter be delegated?

• Gather your reference materials.

• Consider your reader / reader’s needs.
Basic composition matters:

• List the issues.
• Sequence the issues in a logical order, eg most important first.
• Prepare an outline of the letter, if complex.
Language, style and tone considerations:

• Use the active voice / present tense.
• Be positive in your approach / tone.
• Use familiar and concrete words – avoid:
- legal jargon / technical language to lay clients
- foreign words and phrases
- colloquialisms
• Omit superfluous words.
• Address your reader directly, eg ‘You must pay rent’ not ‘The lessee
must pay rent’.
• Avoid:
- nominalisations
- elegant variation
- emotional language
- personal comments and opinions
- discriminatory language
Dictating the letter:

• Use the standard dictation sequence, such as:
- ‘your ref’
- ‘our ref’
- addressee’s name, address and salutation
- subject or ‘re’ line, etc
• Include necessary special instructions, eg letter to be marked ‘without
prejudice’ / ‘Attention Mr Jones’.
• Indicate:
- all punctuation required
- all formats required (ie paragraphs, insets, etc)

- if a change is required to the normal complementary close, eg ‘Yours

sincerely’ required rather than ‘Yours faithfully’
• Complete a tape instruction sheet for your assistant.
Reviewing and correcting the letter:

• Use the appropriate proofing symbols for corrections.
• Provide, as appropriate, headings and sub-headings / lists and
tabulations / numbering of points.
• Highlight important points as appropriate, eg bold, italics.
• Ensure that sentences and paragraphs:
- are not too long
- have simple structures / flow of ideas
Before signing the letter:

• Ensure that:
- your letter bears an appropriate date
- your message is clear, flowing and free from typographical
errors
- enclosures are attached in the proper order
- enclosures are properly marked for execution, if appropriate
- the envelope is attached and correctly addressed
3. SOME OBSERVATIONS ABOUT LETTER-WRITING

3.1 General observations about writing and clarity
(a) Writing letters well is no different to writing anything well.
(b) The usual purpose of writing is effective communication with the reader –
usually another person.
(c) The main requirement for effective communication is clarity.
Clarity in writing requires skill in empathy as well as skill in writing. Consider your
reader’s characteristics (intelligence, education, class). Consider what your client
needs to know – their needs for information and advice.
After writing your letter, read it. Put yourself in the shoes of your client (this is
where empathy comes in).
Then ask yourself these two questions:

1. Does the letter tell the client what they need to know?

2. Does it tell the client what they need to know in terms that they can
understand?

3.2 Ideas about the formalities of legal letters

At the beginning:
Contact details / letterhead
References
Date
Special instructions
Name and address of addressee
Salutation
Re: (general matter to which letter relates)
Reference to instructions
At the end:
Relevant conclusions, advice and requests
Complimentary close
Signature and name
Instruction / information line(s)
3.3 Ideas about the craft of letter writing

• In a client letter do not use legal jargon, ie any technical legal terms (unless
you explain them).
• In general, use the simplest word possible – not the most complex word
possible.
• Keep sentences reasonably short (helps reader to understand them).
• Use the active voice and not the passive voice.
• Block (justify) the text.
Use headings, bold type and other appropriate devices (eg spacing paragraphs) for
separate uses and possibly even for vital information / dates.

CHAPTER 3: Fiduciary Duties

Including the Liability of Third
Parties
Prescribed Reading:
Dal Pont and Chalmers, Ch 4
Recommended Reading
Dal Pont, Chalmers and Maxton, Ch 4
Cope, Equitable Obligations: Duties, Defences and Remedies, Chs 2, 3, 5, 6, 8 (esp
pp 324 - 341) and 10 (esp pp 456 – 470)
Principal Cases:
Breen v Williams (1996) 186 CLR 71
Paramasivam v Flynn [1998] 1711 FCA
Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41
M(K) v M(H) [1992] 3 SCR 6 (Canada)
Chan v Zacharia (1984) 58 ALJR 353
Phipps v Boardman [1967] 2 AC 46
United Dominions Corporation v Brian Pty Ltd (1985) 59 ALJR 676
AG for Hong Kong v Reid [1993] 3 WLR 1143
Barnes v Addy (1874) 9 Ch App 244
Consul Developments Pty Ltd v DPC Estates Ltd (1975) 132 CLR 373
Warman International Ltd v Dwyer (1995) 69 ALJR 362
Maguire v Makaronis (1997) 71 ALJR 781
Pilmer v Duke Group Ltd (in liq) 75 ALJR 781
ASC v AS Nominees (1995) 62 FCR 504
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2004] HCA 22
Royal Brunie Airlines Sdn Bhd v Tan [1995] 3 WLR 64
Twinsector Yasley [2002] 2 AC 164; [2002] UKHL 12
Barlow Clowes International Ltd v Eurotrest International Ltd [2002] UKPC 34
Further Reading:
J McPherson, ‘Fiduciaries: Who Are They?’, Australian Law Journal, Vol 72, p 288
Evans, Ch 5; Ch 17 (pp 328 - 340)
M Cope, Constructive Trusts, Lawbook Co, 1992, Chs 3 - 9
PD Finn, Fiduciary Obligations, Lawbook Co, 1977, Chs 17 - 23

1. INTRODUCTION
A liability to account for a profit, benefit or gain may arise if the relationship between
the parties is, in the eyes of equity, a fiduciary relationship or such as to impose
relevant fiduciary duties on the defendant towards the plaintiff. A fiduciary can be
required to surrender a gain or compensate a beneficiary for a loss occasioned by a
wrongful act. Usually it is a matter of deciding whether the nature of the relationship
is such as to give rise to a duty, in which case the onus shifts to the fiduciary to show
that there has not been a breach of duty.
2. THE CLASSIFICATION OF A RELATIONSHIP AS FIDUCIARY

2.1 Introduction
Fiduciary relationships take a variety of forms and give rise to a variety of obligations.
Chan v Zacharia (1984) 58 ALJR 353, Deane J stated that it is necessary:
(i) to identify the nature of the particular relationship
(ii) to define any relevant obligation which flows from it.
The accepted definition is that a fiduciary is a person who has undertaken to act for
the benefit of another person in some particular matter. The undertaking may be
general, specified or limited. It does not have to be in the form of a contract or for
value, and it may be requested or officiously assumed.
The relationship of trustee - beneficiary was the first recognised fiduciary relationship
and gradually other relationships were found to be fiduciary by analogy to that of
trustee and beneficiary. A number of well-known legal relationships are recognised to
be fiduciary:
• trustee - beneficiary
• agent (including self-appointed agent) - principal
• director - company
• promoter - company
• partner - co-partner
• solicitor - client
A person may become a fiduciary without assuming any recognised role, simply by
undertaking to act in some particular matter for the benefit of another person. The
categories are not closed and equitable intervention is based on a general principle.
The determination of whether any particular relationship is fiduciary is a question of
fact.
In recent years there has been acceptance of the proposition advanced by Finn J of the
Federal Court that a fiduciary is someone who is in a relationship with another and in
so far as that other is entitled to expect that he or she will act in the interests or (as in
the case of a partnership) in the joint interests to the exclusion of his or her own
several interests: ASC v AS Nominees (1995) 62 FCR 504. See also the summary of
the relevant circumstances provided by Gaudron and McHugh JJ in Breen v Williams
(1996) 186 CLR 71 at 107.

2.2 Examples of Instances in which Courts have found Fiduciary

Relationships:
2.2.1 Agents to a Trust
Boardman v Phipps [1967] 2 AC 46
2.2.2 A Purchaser purporting to act as an Agent of a Vendor without the consent

or authority of Vendor
English v Dedham Vale Properties Ltd [1978] 1 All ER 382
2.2.3 Stockbroker who undertakes to give advice on investments to client

Daly v Sydney Stock Exchange Ltd (1986) 60 ALJR 371
2.2.4 Banker to a Customer

Banks can be subject to fiduciary obligations as agents. In other contexts relevant
factors in determining whether a bank is a fiduciary include:
• whether the bank has advised on matters relating to the wisdom of the
transaction
• whether the bank has some interest in the transaction
• reliance by the customer on the advice of the bank
• trust and confidence placed by the customer in the bank
• knowledge by the bank of the reliance
• presence or absence of independent advice
2.2.5 Senior Executive Employee to an Employer

Green v Bestobell Industries Pty Ltd (1982) 1 ACLC 1
2.2.6 Director to a Company

Directors are agents of the company in conduct of affairs and are regarded as trustees
of company property when they have control over it. Duties may extend to
shareholders and creditors. Peninsular and Oriental Steam Navigation Co v Johnson
(1937) 60 CLR 189.
2.2.7 Promoter to Proposed Company and Shareholders

Tracy v Mandalay Pty Ltd (1952) 88 CLR 215
2.2.8 Liquidator of Company in Liquidation

Liquidators are agents of the company with special duties imposed by statute and
otherwise.
2.2.9 Partner to Co-Partners

Partners repose mutual confidence in each other to engage in some particular activity
for mutual advantage. They are agents for each other. Fiduciary obligations may apply
to prospective partners and between surviving partners and the estate of a deceased

partner: United Dominions Corporation v Brian Pty Ltd (1985) 59 ALJR 676, Schipp
v Cameron [1998] NSWSC 997.
2.3 Joint Venturers

Joint venturers may in some, but not all instances, be fiduciaries towards each other.
Much will depend upon the contract and whether the joint venturers are associated on
the basis of mutual trust and confidence in the skill, knowledge and integrity of each
other. See for example: United Dominions Corporation v Brian Pty Ltd (1985) 59
ALJR 676. For an example where it was held that fiduciary duties were not owed see
Gibson Motor Transport Merchandise Pty Ltd v Forbes [2006] FCAFC 44.
2.3.1 Relationship between Parties to Commercial Transactions

There are conflicting opinions as to the preparedness of courts in Australia, New
Zealand and the United Kingdom, to find fiduciary relationships in the context of
commercial transactions. The issue was considered by the High Court in United
States Surgical Corporation v Hospital Products International Pty Ltd (1984) 58
ALJR 587. The majority rejected as undesirable the extension of fiduciary duties to
commercial transactions.
Compare this approach with that of Mason J, who was prepared to examine a
transaction on its merits and to find as a fact that a fiduciary relationship has arisen
when one party has undertaken to act for or on behalf of another in some matter or
matters. Reference was made to undertaking to act in the interests of another in the
exercise of a power or discretion which will affect the interests of that other in a legal
or practical sense. Other factors mentioned included a special opportunity to exercise
a power or discretion to the detriment of the other, and that the other is vulnerable to
abuse by the fiduciary of his or her position. It is also acknowledged by Mason J, that
a contract and a fiduciary relationship can co-exist but that fiduciary duties cannot be
superimposed to alter the operation of the contract. A more limited fiduciary
relationship could be found so that one may be a fiduciary in some respects and free
to act in one’s own interest in other respects.
A majority in Hospital Products decided there was no fiduciary relationship between

a manufacturer and a distributor. Mason J found a more limited fiduciary relationship
on the part of the distributor, as custodian of the manufacturer’s product goodwill.
The issue was again considered in In Re Gold Corp Exchange Ltd [1994] 3 WLR 199
in deciding whether a fiduciary relationship existed on the part of a company
regarding purchases of gold under a sale of goods contract. Compare the approach of
the Privy Council with that of Cooke P and Gault J in the New Zealand Court of
Appeal: Liggett v Kensington [1993] 1 NZLR 257
2.3.2 Developing Categories

Courts are sometimes presented with new claims that a particular relationship has
fiduciary duties. Doctor / patient and parent / child / guardian and ward are two recent
examples (see Breen v Williams (1996) 186 CLR 71 and Paramasivam v Flynn (1998)
90 FLR 489 respectively). Such cases give the courts the opportunity to consider
whether justice is being secured by current legal positions, and provide insight into

judicial reasoning and legal and policy development. Compare this approach with the
approach adopted in some Canadian cases; McInery v MacDonald (1992) 93 DLR
(4th) 415; Norberg v Wynrib (1992) 92 DLR (4th) 447.
In Australia fiduciary obligations are regarded as proscriptive in nature rather than

prescriptive. What does this mean and what sort of interests are protected by fiduciary
obligations? Read Breen v Williams.
2.4 The Fiduciary Obligations

A fiduciary will be liable to account if it is proved that the profit, benefit of gain was
acquired:
(i) in circumstances of conflict of duty and interest
(ii) in circumstances of conflict of duty and duty
(iii) by taking advantage of the fiduciary position.
These themes are identified by Deane J, in Chan v Zacharia (1984) 58 ALJR 353 and
are applicable to fiduciaries generally.
3. CONFLICT OF DUTY AND INTEREST

It is an inflexible rule that a person in a fiduciary position is not allowed to put
himself/herself in a position where his/her interest and duty conflict, no matter how
fair the transaction, unless it is openly protected or unless the principal was fully
aware of the transaction.
The fiduciary must account if the fiduciary makes a profit without fully disclosing
his/her interest to persons towards whom he/she stands in a fiduciary position: Regal
(Hastings) v Gulliver [1967] 2 AC 134 at 137
The following matters are irrelevant:

• does not have to be any fraud or dishonesty
• does not matter whether profit could or could not have been earned by the
principal.
The obligation can be excluded by contract or other arrangement which gave rise to
the fiduciary relationship and a fiduciary is not liable if the profit was made after a
fully informed consent of the principal.
3.1 The steps involved in the analysis

The court has to determine:
(i) whether the defendant was in a fiduciary relationship - see above.
(ii) the duties imposed as a result of the fiduciary relationship - scope and ambit of
the duties. The duties may be defined by the specific terms of the undertaking.
In the case of a general undertaking it may be necessary to show that the
fiduciary has assumed a more specific duty. The fiduciary may officiously
expand the scope and ambit of the undertaking.

(iii) whether the fiduciary is in breach by placing himself/herself within the scope
and ambit of these duties such that the duty and interest may conflict.
It is necessary to demonstrate a sufficient connection between the scope and ambit of

the duties undertaken and the profit or benefit acquired on the fiduciary’s own
account. What the fiduciary did on the fiduciary’s own account must fall within the
scope of the fiduciary’s undertaking.
3.2 Liability to account and possibility of a conflict of duty and interest

In Boardman v Phipps [1967] 2 AC 46 there are statements to the effect that liability
may arise where there is an actual or potential conflict of duty and interest (Lord
Hodson, Lord Cohen). What was the possibility of conflict in Boardman v Phipps?
Lord Upjohn dissented and suggested that what was required is “a real and sensible
possibility of conflict of duty and interest”. Mason J, in Hospital Products stated that
liability does not arise if the interest of the fiduciary is “remote or insubstantial”.
3.3 Examples of benefits acquired by a fiduciary entering a transaction that

involves a conflict of duty and interest
Read and study the following reported examples: Boardman v Phipps [1967] 2 AC
46; Furs Limited v Tomkies (1936) 54 CLR 583; Birtchnell v The Equity Trustees
Executors and Agency Company Limited (1920) 42 CLR 384
4. CONFLICT OF DUTY AND DUTY

This situation arises where a lawyer represents two clients with conflicting interests or
represents a client in a situation where such representation conflicts with duties owed
to a former client.
This head of liability reflects the fact that a lawyer cannot represent two parties whose
interests conflict. A breach of duty will occur where a lawyer purports to continue
representing more than one party to a transaction after a conflict of duties arises:
Stewart v Layton (1992) 111 ALR 687
The fiduciary duties owed by a lawyer extend beyond particular transactions and
prevents him or her from representing another client against the former in a related
matter.
For a discussion of the claims which may arise in favour of a client from the
relationship of solicitor and client see Maguire v Makaronis (1997) 71 ALJR 781 at
787. See also Wan v McDonald (1992) 105 ALR 473; Rakussen v Ellis Mundey and
Clark [1912] 1 Ch 831; Moody v Cox [1917] 2 Ch 71; Prince Jefri Bolkiah v KPMG
[1999] 2 WLR 215; Carindale County Club Estate Pty Ltd v Astill [1912] 1 Ch 831.
Clark Boyce v Mouat [1994] 1 AC 428; MacDonald Estate v Martin (1991) 77 DLR
(4th) 249.

5. PROFITS MADE BY REASON OF AND IN THE COURSE OF A

FIDUCIARY RELATIONSHIP
5.1 Introduction
All fiduciaries including trustees are liable to account to their principals for profits
obtained by reason of the fiduciary relationship unless the profit was authorised in
advance by the principal after full disclosure or subsequently ratified by the principal
with full knowledge of the facts. The profit rule stems from Keech v Sandford (1726)
22 ER 629 which established that a trustee must not use the fiduciary position to make
a gain for himself or herself. This rule was formulated more broadly to cover all
fiduciaries in Regal (Hastings) v Gulliver [1967] 2 AC 134, see Lord Russell at 143.
Such statements were adopted in Boardman v Phipps to render a person in a fiduciary
position accountable for profits made by reason of a fiduciary position, opportunity or
knowledge as a fiduciary. See Lord Hodson at 60 - 61.
The following matters are immaterial to liability:
• that the fiduciary has acted honestly and in the principal’s best interests
• fraud or absence of bona fides
• whether the profit would or should otherwise have gone to the principal.
The purpose of the rule is not merely to secure for the principal the property which
should belong to the principal, but also to provide a sanction against the conduct of a
fiduciary when it falls below the standard required by the law.
The profit rule applies where a fiduciary derives a profit through the use of trust
property or the principal’s property without authorisation or fully informed consent of
the principal. Consider the following examples: Guiness Plc v Saunders [1988] 1
WLR 863; Chan v Zacharia (1984) 58 ALJR 353
A fiduciary who abuses the fiduciary position by utilising information, knowledge or

opportunities which come to the fiduciary in a fiduciary capacity is liable to account
for profits which result therefrom. The fiduciary is liable, irrespective of whether such
amounts to a conflict of duty and interest.
5.2 Examples of fiduciaries held liable to account for having utilised

information, knowledge or opportunities
Boardman v Phipps [1967] 2 AC 46
Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134
Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd
[2005] QSC 233
Victoria University of Technology v Wilson (2004) 60 IPR 392
There have been a number of Canadian cases in which it has been alleged that
managing directors and senior employees have made profits from business
opportunities acquired by virtue of the fiduciary position. In Peso Silver Mines Ltd v
Cropper (1966) 58 DLR (2) 1 the claim was dismissed on the basis that a full Board
had considered and rejected in good faith the offer of a mining claim. The fiduciary
was held entitled to take it up.

A business opportunity doctrine was enunciated by Laskin J, in Canadian Aero

Services Ltd v O’Malley (1974) 40 DLR (3d) 371. It is to the effect that a senior
employee may not obtain a business advantage without consent which (i) belongs to
the company or (ii) for which the company is negotiating. The defendants were held
liable for having captured for themselves a business opportunity which their company
was seeking.
The approach adopted in Peso Silver Mines Ltd v Cropper was approved by the High
Court in Consul Development v DPC Estates Pty Limited (1975) 132 CLR 373.
For an application of the profit from position rule, students should read Warman
International Limited v Dwyer (1995) 69 ALJR 362.
5.3 The duty of a fiduciary who undertakes to act as adviser in respect of a

transaction in which the fiduciary has an interest
The fiduciary is subject to other onerous obligations as set out in the judgement of
Brennan J in Daly v Sydney Stock Exchange Ltd (1986) 60 ALJR 371 at 346. As an
adviser, the fiduciary is required to furnish the client with all relevant knowledge he
possesses, to give the client the best advice which the fiduciary would give if the
fiduciary did not have an interest and to obtain the best terms that the fiduciary would
obtain if acting for the client in a transaction with a third party.
6. SECRET COMMISSIONS AND BRIBES

6.1 Introduction
A fiduciary may not accept a secret commission (or bribe) from the other party in a
transaction in which the fiduciary is acting for the principal without disclosure and
consent of the principal. If a fiduciary does so, the fiduciary is bound to account for it
to the principal. This may also apply to persons not normally regarded as fiduciaries:
Reading v AG [1948] 2 KB 268 (CA) [1951] AC 507 [HL]
6.2 A personal liability to account

It used to be thought that a bribee was not a constructive trustee of the sum for the
principal: The Metropolitan Bank v Herion (1880) LRJ Ex D 319; Lister v Stubbs
(1890) 45 Ch. D 1. It was described as a debt recoverable as money had and received
where there is a common law relationship as for example principal and agent or as a
personal claim in equity in the case of a purely equitable relationship such as trustee
and beneficiary.
The consequences of not regarding the fiduciary as a constructive trustee of a bribe

are as follows:
• cannot be traced into property into which it may have been converted
• not recover any property made from use of money
• principal has no preferential rights in bankruptcy
• action barred by analogy to the Statute of Limitations

However, the Privy Council has held in an appeal from the Supreme Court of New
Zealand that a fiduciary is accountable, not only for the original amount or value of
the bribe, but for the increased value of profits representing the bribe: AG for Hong
Kong v Reid [1993] 3 WLR 1143. Where property representing the bribe decreases in
value, the fiduciary must pay the difference between that value and the initial value.
Under this approach the bribe and the property representing the bribe are held on a
constructive trust for the principal.
6.3 Principal’s remedies against briber

6.3.1 Rescission of the contract between the principal and the briber
Rescission is available where the briber realises the nature of the payment. The
principal will be able to rescind where the briber has actual knowledge or is wilfully
blind to the fact that the agent intended to conceal the dealings from the principal
Logicrose Ltd v Southend United Football Club Ltd [1988] 1 WLR 1256. The
principal can recover the bribe from the agent whether the principal elects to rescind
or affirm the contract. The fact that the principal receives the bribe is not evidence of
affirmation of the contract. In rescinding the contract, the principal has to return all
benefits received under it, but not the bribe.
6.3.2 Alternative remedies against the fiduciary and the briber for the bribe or the
amount of the actual loss as a consequence of entering the transaction
The principal may sue the fiduciary and the briber for the amount of the bribe or the
actual loss sustained as a consequence of entering the transaction. It used to be
thought that the principal could recover the amount of the bribe from the agent and
damages for any loss sustained from having entered the contract. However, in
Mahesan v Malaysian Government Officers Co-operative [1978] 2 WLR 444, it was
decided that the principal cannot receive the amount of the bribe and the actual loss
sustained.
7. FULL DISCLOSURE
Liability does not arise in the above instances where the fiduciary makes full
disclosure to and obtains the consent of the principal. Trustees are required to make
disclosure to all the beneficiaries and agents are required to make the disclosure to
their principals. See ASC v AS Nominees (1995) 62 FLR 504 at 523; Breen v Williams
(1996) 186 CLR 71 at 125; Maguire v Makaronis (1997) 188 CLR 449 at 467.
Difficult problems arise as to whom directors are required to make the disclosure. The
shareholders in a general meeting may approve but there are limitations. The
shareholders may not approve where the director controls the majority of the votes;
where the transaction is ultra vires or unlawful; and where there are other interests to
be protected (eg creditors).
There are conflicting statements as to whether the board of directors can authorise or
ratify a breach of duty by a director or senior employee. In Queensland Mines Ltd v
Hudson (1977) 52 ALJR 399 liability to account was held to be excluded by the fully
informed consent of the Board. There are other more recent Australian judicial
statements that a breach of duty should be authorised or ratified by the shareholders in

a general meeting provided that the director does not control the majority of the votes:
ANZ Nominees v Wormold (1988) 13 ACLR 698
8. THE REMEDIES USED TO ACCOUNT FOR THE GAIN

8.1 Introduction
The fiduciary is personally liable to account and is also liable as a constructive trustee
and holds the benefit made in breach of duty as a constructive trustee for the principal.
Statements to that effect are to be found in the judgment of Mason J, in Hospital
Products (at 613) and in Chan v Zacharia (at 362). The principal may be able to get
the very property which the fiduciary has received and may be able to trace the
property into its product.
The fiduciary may be entitled to reimbursement of expenses and remuneration for

time and trouble where the acquisition of property called for the exercise of special
skill. Such allowances may not be available if the fiduciary is fraudulent: see for
example Victoria University of Technology v Wilson (2004) 60 IPR 393
For a detailed discussion of the principles to be applied in determining allowances for

breach of fiduciary duty see the decision of the Supreme Court of New Zealand in
Chrinside v Fay [2006] NZSC 68
8.2 Proprietary remedies: A declaration of a constructive trust

A declaration of a constructive trust may be made where the gain rests in an
identifiable form. The court has to identify what it is the fiduciary has gained. This
can be a difficult and complex issue where a business is established in breach of
fiduciary duty. See for example Timber Engineering Co Pty Ltd v Anderson [1980] 2
NSWLR 488. An apportionment may be made where the fiduciary has mixed the
fiduciary’s own property with the profit or gain.
Where the fiduciary is unable to distinguish the fiduciary’s own property, the recovery
of the gain takes precedence. The court may decline to apportion where the conduct of
the fiduciary is fraudulent. The constructive trust may be modified by liens,
indemnities and allowances in favour of the fiduciary. See, for example, Mansard
Developments Pty Ltd v Tilley Constructions Pty Ltd [1982] WAR 169.
The court may decline to grant relief by way of a constructive trust even if the gain is
in identifiable form. The court may need to protect the interests of creditors,
particularly if the fiduciary is insolvent. The remedy is not available if there is no
identifiable gain. An equitable lien or charge on property may be used instead of a
constructive trust. See the judgment of the High Court in Warman International
Limited v Dwyer.
The High Court has indicated that other remedies, particularly personal remedies
rather than proprietary remedies will be deployed if at all possible to quell the
controversy although it is still possible to obtain proprietary relief in exceptional
Cases: Bathurst City Council v PWC Pty Ltd [1998] HWCA 59; Warman v Dwyer
(1995) 182 CLR 549; Giumelli v Giumelli (1990) 196 CLR 101 and see also the
Queensland case of Wickham Developments Ltd v Parker [1995] QCA 281 and
Victoria University of Technology v Wilson (2004) 60 IPR 393 where the judge

decided that it was inequitable to declare a constructive trust because of subsequent

developments, particularly the adverse effects on third parties. Other personal relief
was awarded instead. This case is a good example of how much care has to be taken
in formulating relief for breach of fiduciary duty having regard to the particular
circumstances of the case.
The Supreme Court of New Zealand has also indicated in Chirnside v Fay [2006]
NZSC 68 that an account of profits is the primary remedy for breach of fiduciary
duty. You should read and study the judgements in this case.
8.3 Personal Remedies: An account of profits

An account of profits can be used to supplement a declaration of a constructive trust
or instead of a constructive trust where there is no identifiable property. In Warman v
Dwyer (1995) 182 CLR 544 the High Court indicated that an account of profits was
the appropriate remedy in that case and the liability of the fiduciary was considered to
be essentially personal. Read and study this case and note the approach adopted for
the purpose of calculating the account of profits for a breach of fiduciary duty. The
calculation of the profit often involves a complicated inquiry and may have to include
allowances for expenditure and remuneration. Interest earned on the profit may be
awarded. The award is usually of simple interest although compound interest may be
awarded if it can be shown that a greater profit was made from the breach of fiduciary
duty. In New Zealand, the Supreme Court has held that an account is the appropriate
remedy were a fiduciary receives an unauthorised benefit see Chirnside v Fay [2006]
NLSC 68.
8.4 Personal Remedies: Compensation for breach of fiduciary duty

A court of equity has jurisdiction to award compensation for a loss arising from
breach of fiduciary duty: Nocton v Lord Ashburton [1914] AC 932; Markwell Bros. v
CPN Diesels (1982) 7; ACLR 425 at 437; McKenzie v McDonald [1927] 134.
The measure of compensation may not be the same as damages at common law.
Compensation is restitutionary and is directed at putting the party who suffered from
breach of duty in nearly as possible the same position as if there had been no breach
of duty.
In some cases the measure of loss has been calculated as the fiduciary’s gain. The
fiduciary is compelled to restore the full value of the profit. See, for example, Fraser
Edmiston Pty Ltd v AGT [1988] 2 Qd R 1. Note the other remedies which were
awarded in this case.
In Australia the measure of compensation for breach of a fiduciary duty is determined

by equitable principles without regard to common law notions of causation,
foreseeability and remoteness although there does need to be a link between the
breach of duty and the compensation claimed. In other jurisdictions judges have been
more willing to introduce common law notions into the calculation of compensation,
as have some Australian judges, but not the High Court: Pilmer v Duke Group Ltd (in
liq) (2001) 75 ALJR 781; Maguire v Makaronis (1994) 188 CLR 449 at 468. The
introduction of notions of contributory fault has also not found favour with the High
Court: Astley v Australia Ltd (1997) 197 CLR 1 and nor has punitive relief for

wrongdoing in the form of exemplary damages found favour in breach of fiduciary

duty claims in Australia: Digital Pulse Pty Ltd v Christopher Harris [2002]
NSWSC 33.
9. LIABILITY OF THIRD PARTIES FOR BREACH OF TRUST OR

BREACH OF FIDUCIARY DUTY
9.1 Introduction
In Australia there are at least two well established forms of liability which may be
relied upon for establishing the liability of strangers (third parties) who are recipients
of trust property and for knowingly assisting a trustee or other fiduciary in a breach of
trust or breach of fiduciary duty. The focus of this study guide is on breach of
fiduciary duty but you need to be aware that breach of duty by trustees may extend
beyond the breaches of fiduciary duty discussed in this chapter to include breaches of
other specific duties incurred by trustees in their dealings with the trust property. The
phrase breach of trust is used in this context and is dealt with comprehensively in the
unit Trusts in second semester. The two forms of liability are usually referred to as
liability as constructive trustees.
These forms of liability are derived from a statement by Lord Selborne in Barnes v
Addy (1874) LR ChApp 244 and are often referred to as the two limbs of Barnes v
Addy. The first limb is primarily concerned with the receipt of trust property with
notice although much confusion arises from the fact that the first limb is often referred
to as “knowing receipt”. The second limb is said to depend upon the establishment of
knowing assistance see Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA
22 at [112]. The focus of this section will be on the requirements which have to be
established in order to establish liability under each limb in respect of breach of trust
or breach of fiduciary duty. Before doing so it should be noted that the responsibilities
of a trustee or other fiduciary may also be extended in equity to others who are not
properly trustees but who have assumed the office of trustee ( referred to as trustee de
son tort) or other fiduciary positions. Such persons will be subject to the same
liabilities to account for breach of duty as a trustee or other fiduciary who has
formally undertaken to act for another. See Mara v Browne (1896) 1 Ch 199 at 209
per Smith LJ; Nolan v Nolan [2004] VSCA 109
9.2 The First Limb of Barnes v Addy: Liability for the receipt of Trust
property
The first limb is designed to protect equitable estates and interests in property. A third
party who has receives trust property with actual or constructive notice that is trust
property transferred in breach trust will incur liability under the first limb. In the case
of a recipient who is not a bona fide purchaser for value that is a volunteer without
notice will incur liability when notice is acquired subsequent to receipt and deals with
the property in a manner inconsistent with the trust. Bona fide purchasers for value
without notice have a complete defence against such claims as do registered recipients
of land able to rely on the protection of indefeasibility provisions under the Land Title
legislation in operation in most States of Australia including the in personam
exception to indefeasibility see Farah Constructions.

The elements which a claimant must prove are as follows: that the property received
was trust property or the traceable proceeds of trust property; the circumstances
surrounding the transfer made the transfer a breach of trust; the receipt was a receipt
in the recipient’s own name or for the recipient’s own benefit (not as agent unless the
agent acts outside the scope of the agent’s authority and misappropriates the trust
property); the recipient has notice that the property was misapplied in breach of trust.
See Farah Constructions.
Notice actual or constructive will suffice although much of the case law prior to
Farah Constructions based liability on knowledge rather than notice and debate
centered around which of the following five categories of knowledge would suffice
for the purpose of establishing liability: (1) actual knowledge; (ii) willfully shutting
one’s eyes to the obvious; (iii) willfully and recklessly failing to make such inquiries
as an honest and reasonable person would make; (iv) knowledge of circumstances
which would indicate the facts to an honest and reasonable person; (v) knowledge of
circumstances which would put an honest and reasonable person on inquiry see
Baden v Societe Generale pour Favoriser le Development du Commerce et de
l’Industrie en France SA [1995] 1 WLR 509 at 575-576,582. (v) is in effect
constructive notice.
The first limb has no application where there is no relevant receipt of trust property
and no notice. This is well illustrated by Farah Constructions particularly where the
receipt involves the receipt of information including confidential information. Such
instance do not satisfy the property reqirement. Why?
It should be noted that prior to Farah Constructions other alternative approaches

emerged in the United Kingdom which received some acceptance in Australia
including liability based on unjust enrichment in which liability of the recipient was
strict subject to a defence of change of position see Twinsectra v Yardley [2002] 2
AC 164 at 194; Koorootang Nominees Pty Ltd v Australia & New Zealand Banking
Group Ltd [1998] 3 VR 16 and the decision of the New South Wales Court of Appeal
in Farah Constructions [2005] NSWCA 309 at [232]. However this approach was
categorically rejected by the High Court in Farah Constructions. Why?
There have been a number of cases decided since Farah Constructions . You should
consider the approaches adopted in these cases to recipient liability in the light of
what the High Court identified as the elements which have to be established in order
to make out a successful recipient claim see Kalls Enterprise Pty Ltd (In Liquidation)
& Ors v Baloglow & Anor [2007] NSWCA 191; McNally v Harris [2008] NSWCA
659; Benzlaw & Associates P/L v Medi – Air Centre Foundation Ltd [2007] QSC
233; Quince v McLaughlan & Anor; Varga v Quince; Quince v Varga & Anor [2008]
QSC 61; Corporate Systems Publishing Pty Ltd v Lingard [ No 4] [2008] WASC 61
9.3 The Second Limb of Barnes v Addy : Liability for Knowing Assistance
The second limb renders a defendant liable who assist a trustee or other fiduciary
with knowledge in a dishonest and fraudulent design on the part of the trustee or
fiduciary. See Farah Constructions. Thus the elements which have to be established
are assistance by the third party; a dishonest and fraudulent design on the part of the
trustee or other fiduciary and knowledge of the dishonest and fraudulent design. Read

Farah Constructions and see if you can work out what will constitute “assistance”
and

what will constitute a “dishonest and fraudulent design”. It should be noted that there
is scope for the second limb to apply to both breaches of trust and breach of fiduciary
duty see Consul Development Pty Ltd v DPC Estates Pty Ltd (1974) 132 CLR 373 at
397.
In terms of the knowledge requirement the High Court confirmed in Farah

Constructions that the conclusions in Consul Developments as to the requirement of
knowledge for the second limb represent the law in Australia namely that the first four
categories of knowledge listed in Baden (see the previous section) will be sufficient to
satisfy the requirement of knowledge under the second limb but not the fifth category.
The liability will depend upon establishing actual knowledge of a dishonest and
fraudulent design; deliberately shutting of eyes to such a design; abstaining in an
obvious way from making the inquiries that an honest and reasonable person would
make where such inquiries would lead to the discovery of a dishonest and fraudulent
design and actual knowledge of facts which would lead a reasonable person to
conclude that there is a dishonest and fraudulent design.
Prior to Farah Constructions the Courts in the United Kingdom had modified some of
the requirements which had to be satisfied under the first limb. The requirement that
the design be dishonest and fraudulent was abandoned so that it was no longer
necessary to characterize the breach of trust of breach of fiduciary duty as dishonest
and fraudulent. In addition the requirement of knowledge was replaced with a
requirement of dishonesty on the part of the third party. These modifications had also
begun to be adopted by some Australian judges. See Royal Brunei Airlines Sdn Bhd v
Tan [1995] 2 AC 378; Twinsectra v Yardley [2002] 2 AC 164; Barlow Clowes
International Ltd v Eurotrust International Limited [2005] UKPC 37; Emanuel
Management Pty Ltd v Foster’s Brewing Group Ltd [2003] QSC 205; Aequitas v
AEFC [2001] NSWSC 14. In Farah Constructions the High Court declined to
consider how far these changes should be adopted in Australia.
There have been a number of cases decided since Farah Constructions in which the
courts have had to consider whether the requirement for establishing liability have
been satisfied see Quince v Quince, Quince v Varga & Anor [2008] QSC 233;
Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21; McNally v
Harris [2008] NSWSC 659
Once you have studied this topic you should consider what has been the overall
impact of the decision of the High Court in Farah Constructions in relation to the
liabilities of third parties under the first and second limbs of Barnes v Addy.

CHAPTER 4: Confidential
Information including the Liability of
Third Parties
Prescribed Reading:
Principal Cases:
Coco v AN Clark (Engineers) Ltd [1969] RPC 41
Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37
Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317
Castrol Australia Pty Ltd v Em Tech Assoc. Pty Ltd [1980] 33 ALR 31
Franklin v Giddins [1978] Qd R 72
Talbot v General Television Corporation Pty Ltd [1980] VR 224
Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39
Wheatley v Bell [1982] 2 NSWLR 544
Further Reading:
PD Finn, Fiduciary Obligations, Lawbook Co, 1977, Ch 19
Gurry, “Breach of Confidence” in PD Finn (ed), Essays in Equity, Ch 6
Richardson and Stuckey-Clarke, “Breach of Confidence” in P Parkinson (ed), The
Principles of Equity, Ch 12
M Richardson, ‘Breach of Confidence, Surreptitiously or Accidentally Acquired
Information and Privacy’ (1994), 19 MULR 673
P Lavery, ‘Secrecy, Springboards and Public Domain’ (1998), EIPR, Issue 3
Pizer, ‘The Public Interest Exception to the Breach of Confidence Action: Are the
Lights About to Change?’ (1994) 20 Mon ULR 67
1. INTRODUCTION: THE EQUITABLE DUTY

A confidence is formed whenever one party (“the confider”) imparts to another (“the
confidant”) private or secret matters on the express or implied understanding that the
communication is for a restricted purpose. In these circumstances, equity will restrain
the confidant from making unauthorised use of the information and, if need be, will
hold him or her accountable for any profit acquired by such improper use: Dal Pont
and Chalmers at [6.05]

2. THE JURISDICTIONAL BASIS OF LIABILITY – CONTRACT, TORT

OR EQUITY?
The basis of the doctrine, particularly whether it is contractual, tortious or within the
exclusive jurisdiction of equity has been the subject of considerable debate: Morrison
v Moat (1851) 20 LJ Ch 513 per Turner VC at 522; 68 ER 492 at 498
2.1 Contractual Basis

Where there is a contractual relationship the parties may expressly provide that certain
information is to be confidential (Deta Nominees Pty Ltd v Viscount Plastic Pty Ltd
[1979] VR 167) or this obligation may be implied (Parry Jones v Law Society [1969]
1 Ch 1). Contract-based theories have been recognised as inadequate as there is no
remedy against third parties, there being no privity of contract.
2.2 Tortious Basis

The tort of inducing a breach of contract has provided a partial answer to give a
remedy against third parties: Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty
Ltd [1967] VR 37. However, this does not assist a plaintiff who has no contract with
the defendant.
It has been suggested that information should be treated as property and therefore
another tortious remedy, conversion ought to lie: Lamb v Evans [1893] 1 Ch 218;
(McPherson, “Information as Property” in Cope (ed), Equity Issues and Trends,
Federation Press, 1995; Richardson and Stuckey-Clarke in Parkinson (ed) at
para [1204]
2.3 Equitable Basis

It is now well settled that there is a general equitable jurisdiction to grant relief against
actual or threatened abuses of confidence, in cases not involving any tort or breach of
contract: Saltman Engineering v Campbell (Engineering) (1948) 65 RPC 203 at 211 -
212; Commonwealth v John Fairfax and Sons (1980) 147 CLR 39 at 50 - 52 per
Mason J
In Australia it seems that the basis of the equitable jurisdiction does not lie in a
proprietary right but in an obligation of conscience arising from the circumstances in
which the information was obtained: Moorgate Tobacco Co Ltd v Phillip Morris
(No 2) (1984) 156 CLR 414 per Deane J at 438
3. ELEMENTS OF THE ACTION FOR BREACH OF CONFIDENCE

In Coco v AN Clark (Engineers) Ltd [1969] RPC 41 at 47 Megarry J said that in order
to maintain an action for breach of confidence the plaintiff must establish that:
1. the information has the necessary quality of confidence or secrecy;
2. the information was imparted in circumstances importing an obligation of
confidence;
3. there was (or may be) an unauthorised use of the information.
See also Commonwealth v John Fairfax and Sons Ltd (1980) 147 CLR 39 at 51 per
Mason J.

3.1 The information must be confidential - it must have the necessary quality
of confidence or secrecy
3.1.1 Information not in the public domain
The general principle is that the information must not be in the public domain:
Saltman (Engineering) v Campbell (Engineering) (1948) 65 RPC 203 at 215 per Lord
Greene MR. This is a “question of degree depending on the particular case”: Interfirm
Comparison (Australia) v Law Society of NSW (1975) 5 ALR 527 at 542 - 543;
O’Brien v Komesaroff (1982) 41 ALR 255 at 266; Exchange Telegraph v Central
News [1897] 2 Ch 48; Ackroyd’s (London) v Islington Plastics [1962] RPC 97
3.1.2 Loss of the confidential nature of the information

Information which was once secret may lose that character over time, disentitling the
plaintiff to relief, even if not published to the world by the plaintiff, for example
government information: AG v Jonathon Cape [1976] QB 752; AG (UK) v Observer
Ltd [1990] 1 AC 109. See also Spycatcher Litigation: AG v Guardian Newspapers
(No 2) (1990) 1 AC 109; AG (UK) v Heinemann Publishers Aust Pty Ltd (1987) 8
NSWLR 341
3.1.3 The type of information protected

Although most cases concern commercial or technical information, such as, trade
secrets, for example, Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd
[1967] VR 37, confidential information is not so limited and includes personal
matters: Argyll v Argyll [1967] Ch 302 and government secrets: Commonwealth v
John Fairfax & Sons Ltd (1980) 147 CLR 39
3.1.4 Commercial or Technical Information

Even simple concepts and processes, where all component parts are already in the
public domain can be protected. What makes a process confidential is that the
confider has used his or her brain, thereby producing a result which can only be
produced by someone going through the same process: Saltman Engineering Co Ltd v
Campbell Engineering Co Ltd (1948) 65 RPC 203 at 213 - 215
Where the information in question can be characterised as a “trade secret” it will be

held to be confidential and the subject of equitable protection. For some guidelines as
to whether or not information is a trade secret, see Ansell Rubber v Allied Rubber
[1967] VR 37 per Gowans J at 49 - 50; Thomas Marshall Ltd v Guinle [1979] Ch 227
per Megarry VC at 248. See also Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317
per Kirby P at 334
3.1.5 The Springboard Doctrine

The fact that, given sufficient time, labour and expense, a process could be
reproduced is not a defence, otherwise the defendant would gain an unfair headstart
which would not have accrued in the absence of a breach. This is known as the
springboard doctrine and is a qualification on the public domain principle: Terrapin
Ltd v Builders Supply Co (Hayes) Ltd [1967] RPC 375 per Roxburgh J at 391;
approved in USSC v Hospital Products International Pty Ltd [1983] 2 NSWLR 157 at
228 - 233.

3.2 The equitable obligation of confidence - when will it be imposed on a

person?
The information must be imparted in circumstances importing an obligation of
confidence: Ansell Rubber Co v Allied Rubber Industries [1967] VR 37 at 40 per
Gowans J. See also Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd
[1979] VR 167 at 190 per Fullager J.
3.2.1 Imposing the Obligation of Confidence by Agreement

An obligation of confidence can be imposed expressly or by implication by contract -
Examples of contracts in which such clauses can be found include loan agreements,
industrial consultancy agreements, franchise agreements and employment contracts.
3.2.2 Implying the obligation of confidence due to the nature of the relationship
between the parties
Certain types of relationship attract the obligation of confidence. Some examples are:
3.2.3 Professional Person and Client

This includes doctors: Hunter v Mann [1974] QB 767; lawyers: Parry Jones v Law
Society [1969] Ch 1; accountants Evitt v Price (1827) 1 Sim 483; and bankers:
Tournier v National Provincial & Union Bank of England [1924] 1 KB 461
The professional person’s duty of confidence embraces virtually all information

acquired from and about his or her clients while acting in a professional capacity:
Hunter v Mann [1974] QB 767 and subsists after the professional relationship
terminates.
3.2.4 Employer and Employee

The courts will readily imply a duty of confidence into employer - employee
relationships.
Where breach of confidence is alleged against an ex employee difficult distinctions

must be made as to what is and is not confidential: Ansell Rubber Co Pty Ltd v Allied
Rubber Industries Pty Ltd [1967] VR 37 at 40. The courts must balance the rights of
the employer to have confidences respected and the rights of the employee to make
use of the skills of the profession or trade learnt during the course of employment:
Robb v Green [1895] 2 QB 1; Faccenda Chicken v Fowler (1984) ICR 589 per
Goulding J; (1986) 3 WLR 288 Court of Appeal; Cf Wright v Gasweld Pty Ltd (1991)
22 NSWLR 325 particularly Kirby P at 339 - 341
3.2.5 Relationships of Mutual Trust and Understanding

A duty of confidence may be imposed if the relationship is one of mutual trust and
understanding, eg marital relationships: Duchess of Argyll v Duke of Argyll [1967] Ch
302; close friendships Stephens v Avery [1988] 2 WLR 1280. This is particularly so
where the information sought to be protected is of a highly personal nature.

3.2.6 Relationships Traditionally Regarded as Fiduciary Relationships

The courts will readily impose a duty of confidence in relationships traditionally
regarded as fiduciary relationships, eg principal and agent: Lamb v Evans [1893] 1
Ch 218; director and company: Baker v Gibbons [1972] 2 All ER 759; trustee and
beneficiary: Green v Folgham (1823) 1 S & St 398. As to the coexistence of duties of
confidence and fiduciary obligations, see Warman v Dwyer (1995) 69 ALJR 362
3.2.7 The Subject Matter and Circumstances of its Communication

In addition to the above cases, an equitable obligation of confidence will arise if a) the
information is intrinsically confidential (discussed previously) and b) it was acquired
in circumstances which import an obligation of confidence.
3.2.8 Circumstances importing an obligation of confidence
3.2.9 The reasonable person test

The test is an objective one: would a reasonable person standing in the shoes of the
recipient of the information have realised upon reasonable grounds that the
information was being given to him or her in confidence?: Coco v AN Clark
(Engineers) [1969] RPC 41 at 48 per Megarry J
3.3 The limited purpose test

Was the information disclosed on a confidential basis for a particular purpose? If so,
its use must be limited to that purpose: Saltman (Engineering) v Campbell
(Engineering) (1948) 65 RPC 203; Castrol Australia Pty Ltd v Em Tech Associates
Pty Ltd (1980) 33 ALR 31. The test is objective: Smith Kline & French Laboratories
(Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95
ALR 87 (Gummow J) at 110; upheld on appeal (1991) 99 ALR 679 (Full Court)
3.3.1 Information obtained by reprehensible means

Even if there is no pre-existing relationship, where the information is obtained
improperly or surreptitiously, the obligation of confidence may be imposed on the
basis of unconscionability: Franklin v Giddins [1978] Qd R 72
3.4 Unauthorised Use - Breach of the Obligation of Confidence

Where there is disclosure or use without consent, in the absence of a defence there
will be a breach of confidence: Saltman per Lord Greene MR at 213. Breach of
confidence will not necessarily be a conscious act. The law equally protects against
unconscious plagiarism: Seager v Copydex [1967] 1 WLR 923; and, where the parties
are in a contractual relationship, negligence: Weld Blundell v Stephens [1920] AC 956
It is clear that threatened misuse or disclosure is sufficient for proceedings to be

instituted to prevent disclosure: Corrs Pavey Whiting Byrne v Collector of Customs
(Vic) (1987) 14 FCR 434 per Gummow J at 443; Smith Kline & French Laboratories
(Aust) Ltd v Secretary Department of Community Services & Health (1990) 22 FCR
73 at 87 per Gummow J

3.4.1 The Requirement of Detriment

There is some divergence of opinion as to whether detriment must also be shown in
addition to breach of duty: Coco v AN Clark (Engineers) Ltd [1969] RPC 41 at 47
(but Cf 48) per Megarry J
In the case of government information, detriment is a necessary element of the action

for breach of confidence and a strict standard has been applied where the plaintiff is a
government or government body: Commonwealth v John Fairfax & Sons Ltd per
Mason J at 50 - 52; see also Attorney General (UK) v Heinemann Publishers Pty Ltd
(1987) 10 NSWLR 86 at 156 per Kirby J
In respect of other information, although in Commonwealth v John Fairfax & Sons

Ltd Mason J treated the requirement of detriment as absolute at 50 - 51, This
requirement has been flexibly applied and in some cases rejected: Smith Kline &
French Laboratories (Aust) Ltd v Secretary Dept of Community Services & Health
(1990) 95 ALR 87
4. DEFENCES
4.1 Plaintiff’s Lack of Locus Standi
Only the party to whom the obligation of confidence is owed may bring the action for
breach of that confidence: Fraser v Evans [1969] 1 QB 349 at 361; Finnane v
Australian Consolidated Press [1978] 2 NSWLR 435
4.2 Change of Position

Although there is little clear judicial authority in relation to the application of the
defence of change of position to actions for breach of confidence, courts in Australia
and England have recognised this as an emerging equitable defence: Lipkin Gorman v
Karpnale Ltd [1991] 2 AC 548 at 558 per Lord Bridge, 568 per Lord Ackner, 579 -
580 per Lord Goff; ANZ Ltd v Westpac Banking Corporation (1988) 78 ALR 157 at
162; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 109 ALR 57
at 80 - 81. See: Jones, Restitution of Benefits Obtained in Breach of Another’s
Confidence (1970) 86 LQR 463 at 477
4.3 Disclosure under Compulsion of Law

The duty owed by a confidant to a discloser is “subject to, and overridden by, the duty
... to comply with the law of the land.”: Parry Jones v Law Society [1969] 1 Ch 1 at 9
per Diplock LJ. This can create dilemmas for professionals: Hunter v Mann [1974]
QB 767 (doctors); Barclays Bank plc v Taylor [1989] 1 WLR 1066 (bankers)
4.4 Disclosure in Confidant’s Interests

This defence is very narrow and would seem to only apply in litigation between
parties to the confidential relationship, or where the confident has to disclose to
protect themselves in litigation against them. A bank suing a customer on an
overdrawn account is the usual example - disclosure is limited to information
reasonably necessary to protect the bank’s interests: Tournier v National Provincial &
Union Bank of England [1924] 1 KB 461

4.5 Consent, express or implied, of the Confider

The confider can consent to disclosure or use and thereby relieve the confidant in
whole or part from the duty of confidence. The consent must be real and will not be
readily implied: Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd
(1987) 10 NSWLR 86 per Kirby P at 170 - 171 (failure to contest other similar
publications meant that information did not warrant protection)
4.6 Disclosure in the Public Interest

This is the most contentious defence. The high water mark was probably reached in
Woodward v Hutchins [1977] 2 All ER 751. However the meaning of public interest
has narrowed in recent years.
In Australia it seems that the defence does not extend to the public’s interest in the
truth being told, but is limited to disclosure of actual or threatened breaches of
national security, or laws or other misdeeds of similar gravity relating to things such
as public health: Castrol Australia Pty Ltd v Emtech Associates Pty Ltd [1980] 33
ALR 31; Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 57 per
Mason J (protection of the community from “destruction, damage or harm”)
In England the courts have adopted the method of balancing the competing interests
of the public interest in maintaining the secrecy of confidential information and in the
public being informed on matters which are of real public concern: Lion Laboratories
Ltd v Evans [1984] 2 All ER 417 per Stephenson Y at 538 - 539; see also X v Y (1988)
2 All ER 648 per Rose J at 661; W. v Edgell (1990) 2 WLR 471 per Bingham J at 488.
In Commonwealth v John Fairfax & Sons Ltd Mason J at 52 accepted the possibility
of balancing interests. See also AG (UK) v Heinemann at 170, 171.
See generally Pizer, ‘The Public Interest Exception to the Breach of Confidence
Action: Are the Lights About to Change?’ (1994) 20 Mon ULR 67
4.7 A free speech defence to actions for breach of confidence?

In Attorney General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10
NSWLR 86 at 169, 170 Kirby P held that the freedom of the press to impart
information of general interest or concern is of fundamental importance to our society.
The High Court has now recognised a constitutional freedom of speech “in relation to
public affairs and political discussion”: Nationwide News Pty Ltd v Wills (1992) 177
CLR 1; Australian Capital Television Pty Ltd v Commonwealth (1992) 177 CLR 106;
which has been recognised as providing a defence in actions for defamation;
Theophanous v Herald and Weekly Times Ltd (1994) 124 ALR 1; Stephens v West
Australian Newspapers Ltd (1994) 124 ALR 80. It may be that the constitutional
freedom will be held to apply in the context of an action for breach of confidence so
that a broad defence based upon freedom of speech may subsume, at least in part, the
public interest defence. In such cases the public interest in freedom of speech would
take precedence over the private interest in maintaining confidentiality.
See Kirby J in ABC v Lenah Game Meats [2001] HCA 63.

5. REMEDIES
5.1 Injunction
The equitable remedy of injunction is an appropriate device to restrain apprehended or
continuing breaches of confidence.
As to the duration of the injunction, note the application of the “springboard doctrine”
to counter the unfair start gained by the confidant over other competitors. The
protection in time given by the springboard doctrine is limited: Potters Bellotini Ltd v
Weston Barker & Others [1977] RPV 202
As to final injunctions, factors which may influence the court include the nature of the
information, the honesty / good faith of the defendant, whether the defendant has
changed his or her position, and whether the breach is a one off: Argyll v Argyll
[1967] AC 302
5.2 Monetary Remedies

Plaintiffs seeking monetary relief must elect to either pursue an account of profits
(restitution) or damages (compensation), they cannot claim both. The object of an
account of profits is to deprive the defendant of unjust gains. The object of an order
for damages is to compensate the confider for the loss sustained by reason of the
unauthorised use of the confidential information: Talbot v General Television
Corporation Pty Ltd [1980] VR 225 at 250.
5.2.1 Account of Profits (Restitution)

An account of profits is particularly apt where the confidant has profited more greatly
from the use of confidential information than the confider would have been able to
and where the profit gained is easily identifiable.
Account of profits is rarely sought because of the computation and evidentiary

difficulties involved: Siddell v Vickers (1892) 9 RPC 152 at 163. Where the breach is
innocent an account will usually be denied: Seager v Copydex [1967] 2 All ER 415.
The profit to be accounted for is the net profit made by the defendant on items sold.
Profit = Sale price of goods - expenditure on manufacturing the goods: Peter Pan
Manufacturing Corp Ltd v Corsets Silhouette Ltd [1963] RPC 45; [1964] 1 WLR 96;
(1963) 2 All ER 402 at 412 per Pennycuick J
A recent example of an account is Warman v Dwyer (1995) 69 ALJR 362.
5.2.2 Damages (Compensation)

5.2.2.1 Theoretical Basis
There have been criticisms of the theoretical basis of the practice of awarding
damages for breach of confidence in cases involving no breach of contract or tort as in
Seager v Copydex [1967] 2 All ER 415, however the practice now seems entrenched.
It has been argued that to award a common law remedy for breach of a purely
equitable obligation is to commit the fusion fallacy, but see the interpretation of

Seager v Copydex in English v Dedham Vale Properties Ltd [1978] 1 All ER 382 per
Slade J at 399 as an award of damages in lieu of or in addition to an injunction and
specific performance under the Lord Cairns’ Act provision; adopted in Talbot v
General Television Corporation [1980] VR 225 and AG (UK) v Observer [1990] 1
AC 109.
5.2.2.2 Assessment
There is no universal principle prescribing the method of assessment of damages:
Talbot v General Television Corporation [1980] VR 224 at 244 per Marks J. The
object is to put the plaintiff in the position he or she would have been in had the
wrong not occurred: Dowson & Mason Ltd v Potter [1986] 2 All ER 418 at 421 - 422
per Sir Edward Everleigh. In Seager v Copydex Ltd (No 2) [1969] 2 All ER 718
damages were assessed as the market value of the information on a sale between a
willing buyer and a willing seller. In Interfirm Comparison (Aust) Pty Ltd v The Law
Society of NSW (1975) 5 ALR 527 assessment was on the basis of a fee for services
rendered. In Talbot v General Television Corporation [1980] VR 224 damages were
assessed on the basis of the loss of chance of gaining a contract - the diminished value
of the concept in the plaintiff’s hands after the breach of confidence.
5.3 Constructive Trust

If the defendant acquires some property by use of the confidential information, the
court may order that it be held on trust by the defendant for the plaintiff: Timber
Engineering v Anderson [1980] 2 NSWLR 488; Mansard v Tilley Consultants Pty Ltd
[1982] WAR 161; LAC Minerals Ltd v International Corona Resources Ltd (1989) 16
IPR 27 at 52, 53; see also A-G v Guardian Newspapers (No 2) [1990] 1 AC 109 at
288
5.4 Orders for Delivery-Up and for Destruction

The court may order that the defendant deliver up documents or chattels which are the
subject of the action for breach of confidence: Ansell Rubber v Allied Rubber [1967]
VR 37 and Franklin v Giddins [1978] Qd R 72
6. GOVERNMENT SECRECY
Governments and their agencies are subject to the same duties of confidence as
private individuals in dealing with confidential information supplied to them: Castrol
Australia Pty Ltd v Em Tech Associates Pty Ltd (1988) 33 ALR 31
Government information may also be protected in equity as confidential information

but the government is treated differently from individuals: Attorney-General v
Johathon Cape Ltd (1976) 1 QB 752 at 770 - 771. This is because governments
control information in a representative capacity and therefore the workings of
government should be open to scrutiny and criticism by the public: Attorney-General
v Guardian Newspapers at 660; AG (UK) v Heinemann Publishers (1987) 10 NSWLR
86 at 191 per McHugh JA (the “Spycatcher” Case)
6.1 Public Interest

Where the government is the confider, public interest takes on a different meaning.
The courts have shown a willingness to find that disclosure of past government

workings is in the public interest and unless the disclosure is likely to injure the public
interest it will not be protected: Commonwealth v John Fairfax [1980] 147 CLR 39
per Mason J at 51 - 52; see also AG (UK) v Heinememann Publishers Australia Pty
Ltd [1987] 10 NSWLR 86 at 191 per McHugh JA.
6.2 Statutory Provisions

Access to government documents is now governed by the Freedom of Information
Act (Cth) 1982 and the state counterparts, the object being to confer a legal right of
access to government documents. Privacy Legislation also now regulates the
collection and use of personal information.
7. THIRD PARTY LIABILITY FOR BREACH OF CONFIDENCE

7.1. Knowledge that the Information is Confidential
The courts have restrained third parties to whom information has been communicated
in breach of duty, from making disclosure or use of that information. Liability
depends upon knowledge that the information is confidential.
In this context knowledge is determined by reference to the tests proposed for liability
of third parties for breach of fiduciary obligation. In Australia the High Court
authority is Consul and knowledge has been construed to include both actual and
constructive knowledge (but not extending to negligent failure to enquire).
Constructive knowledge has been held to include knowledge to which the third party
has deliberately closed her or his eyes (Attorney-General v Guardian Newspapers
(No 2) [1983] 3 All ER 545 at 658 per Lord Goff) as well as information which a
person in the position of the defendant knew or ought reasonably to have known was
clothed in confidentiality (Wheatley v Bell [1982] 2 NSWLR 544 at 548.)
Of course, the original recipient remains liable for the breach of confidence.
7.2. Innocent Third Parties

Innocent third parties may also be restrained form using confidential information as
strict liability attaches from the time of knowledge (Fraser v Evans [1969] 1 QB 349
per Lord Denning at 361; Wheatley v Bell [1982] 2 NSWLR 544 at 550 per
Helsham J), even if the information was acquired innocently or for value: Butler v
Board of Trade [1971] Ch 680 at 690; Talbot v General Television Corp Pty Ltd
[1980] VR 224; Wheatley v Bell [1982] 2 NSWLR 544. Therefore, any account of
profits will be limited to profits obtained after receipt of notice: Butler v Board of
Trade [1971] Ch 680; G v Day [1982] 1 NSWLR 24
Once knowledge is acquired the defence of bona fide purchaser will be inappropriate
(Wheatley v Bell [1982] 2 NSWLR 544 at 549 - 550 per Helsham CJ); but a defence
of change of position may arise (David Securities Pty Ltd v Commonwealth Bank
(1992) 109 ALR 57).
See generally, Stuckey, .The Liability of Innocent Third Parties Implicated in

Another’s Breach of Confidence’ (1982) 4 UNSWLJ 73.

CHAPTER 5: Undue Influence and

Unconscientious Dealing including
the Liability of Third Parties
Prescribed Reading:
Dal Pont and Chalmers, Chs 7 and 9
Dal Pont, Chalmers and Maxton Casebook, Chs 7 and 9
Principal Cases:
Johnson v Buttress (1936) 56 CLR 113
Blomley v Ryan (1954) 99 CLR 362
The Commercial Bank of Australia v Amadio (1983) 151 CLR 447
Bridgewater v Leahy (1998) 72 ALJR 1525
Louth v Diprose (1992) 175 CLR 621
Further Reading:
D Otto, ‘A Barren Future? Equity’s Conscience and Women’s Inequality’ (1992) 18
MULR 808
Sir Anthony Mason, ‘The Impact of Equitable Doctrine on the Law of Contract’
(1998) 27 Anglo American Law Review 1
Hepburn, ‘Equity and Infatuation’ (1993) 18 Alternative Law Journal 208
Cope, Duress, Undue Influence, Unconscientious Bargains, Lawbook Co, Chs 4 - 7
Duggan, “Unconscientious Dealing” in P Parkinson, The Principle of Equity, Ch 5
Duggan, “Undue Influence” in Parkinson, The Principles of Equity, Ch 11
Cope, “Undue Influence”, 35.8 Laws of Australia (Lawbook Co, Sydney, 1993)
A. INTRODUCTION
In this section we will focus on two closely related equitable doctrines, namely undue
influence and a doctrine whereby equity granted relief to a party to an unconscientious
or unconscionable transaction.
B. UNDUE INFLUENCE
1. Introduction
Undue influence is an equitable doctrine, which like common law duress, was
developed to provide relief where a gift or contract was not the product of a free and
independent will.

2. Definition
Influence is the ascendancy acquired by one person over another and undue influence
is the improper use by the ascendant person of such ascendancy for the benefit of
himself or herself or someone else so that the acts of the person influenced are not in
the fullest sense his or her free and voluntary acts: Union Bank of Australia v
Whitelaw [1906] VLR 711 per Hodges J at p 720
The basis of the equitable jurisdiction is the prevention of an unconscientious use of

any special capacity or opportunity that may exist or arise affecting the alienor’s will
or freedom of judgement in reference to the transaction in question: Johnson v
Buttress (1936) 56 CLR 113 at 134 per Dixon J
3. The Classes of Undue Influence

Undue influence may be divided into two classes, an express use of influence and a
presumption of undue influence arising by reason of a special relationship of
influence between the parties: Johnson v Buttress (1936) 56 CLR 113 at 134 -135, per
Dixon CJ
4. The First Class of Undue Influence: Actual Undue Influence

4.1 Introduction
A person relying on a plea of actual undue influence must prove both the existence of
actual influence and the improper use of that influence by the other party which
resulted in entry into the transaction: Johnson v Buttress (1936) 56 CLR 113, per
Dixon J at 134 - 135
The burden of proof rests on a party seeking to avoid a transaction for actual undue
influence.
See for example: Williams v Bayley (1866) LR IHL 200; Allcard v Skinner (1887) 36
Ch D 145 at 181 per Lindley J
5. The Second Class of Undue Influence: Presumed Undue Influence

5.1 Introduction
The second class of undue influence has its basis in the existence of a special
relationship. A special relationship of influence must be established in order to raise a
presumption of undue influence. The relationship between the parties must be such
that the parties “antecedently stand in a relation that gives ... one an authority or
influence over the other from the abuse of which it is proper that he should be
protected”: Johnson v Buttress (1936) 56 CLR 113 per Dixon J at 134; Lloyds Bank
Ltd v Bundy [1974] 3 WLR 501 per Sir Eric Sachs at 512.
Once the presumption is raised the transaction will be set aside unless the dominant
party is able to prove that the transaction was not the result of an abuse of influence.
5.2 Establishing the Special Relationship of Influence

The relationship of influence may be established either by showing that it is one of the
relationships that equity, as a matter of law, presumes to be one of influence or by
proving that the relationship is in fact one of influence.

5.2.1 The Presumptive Relationships of Influence

There are certain well known relationships which are presumed to involve the
necessary degree of influence: see Johnson v Buttress (1936) 56 CLR 113 at 134 per
Dixon J. These relationships include:
• Parent and Child: Savery v King (1856) HLC 627; 10 ER 1046; Bank of New
South Wales v Rogers (1941) 65 CLR 42 at 63 - 64 per McTiernan J (uncle-
niece, loco parentis)
• Guardian and Ward: Hatch v Hatch (1804) 9 Ves 292; 32 ER 615; Taylor v
Johnston (1882) 19 Ch D 603
• Spiritual Advisor and Devotee: Huguenin v Basely (1807) 33 ER 526 at 531
per Sir Samuel Romilly MR. See also Allcard v Skinner (1886) 36 Ch D 145,
Cf Roche v Sherrington [1982] 1 WLR 599
• Solicitor and Client: Wright v Carter [1903] 1 Ch 27, 50. The burden of
proof lies on the solicitor to show that the transaction was at arm’s length:
Hatch v Hatch (1804) 9 Ves 292; 32 ER 615; Wood v Downes (1813) 18 Ves
120; 34 ER 262; Liles v Terry [1895] 2 QB 679; Barron v Wiles [1990] 2 Ch
121. The presumption does not apply to contractual dealings but the fiduciary
position of the solicitor is such that a solicitor is required to show that the
bargain is as good as any that could have been obtained by due diligence from
any other purchaser: Gibson v Jeyes (1801) 6 Ves 266, 3 ER 1044; Cane v
Allen (1814) 11 Dow 289, 3 ER 869; Wright v Carter [1903] 1 Ch 27
• Doctor and Patient
• Man and Fiancé: Lovesey v Smith (1880) 15 Ch D 655; Johnson v Buttress
(1936) 56 CLR 113 at 134. The woman was not presumed to have influence
over the man: Lloyds Bank Ltd., Re Bomze and Bomze [1931] 1 Ch 289, nor
was the husband presumed to have influence over the wife: Howes v Bishop
and Wife [1909] 2 KB 390. However, the relationship of a man to the woman
he is engaged to marry is probably no longer presumed to be one of influence
due to changed social conditions: Zamet v Hyman [1961] 3 All ER 933. See
also Louth v Diprose (1992) 175 CLR 621 per Brennan J at 630
5.2.2 Special Relationship of Influence Proven on the Facts

A special relationship of influence may also be proved as a matter of fact in the case
of relationships standing outside the established relationships of influence.
5.2.2.1 Proving a Special Relationship of Influence on the Facts

The burden of proof to show a special relationship of influence is on the party seeking
to avoid the transaction.
Evidence must be shown that one party to the relationship has acquired an
ascendancy, and reliance, a domination of another, that one party to the relationship is
governed by the other’s judgment, has given him or her his or her dependence and
entrusted him or her with his or her welfare: Johnson v Buttress (1936) 56 CLR 113 at
119 per Latham CJ; Union Fidelity Trustee Co of Australia Ltd v Gibson (1971) VR
573 per Gillard J at 576 - 577; Lloyd’s Bank Ltd v Bundy [1974] 3 WLR 501 Sachs LJ
at 511

6. Substantial Benefit or Manifestly Disadvantageous Transaction

6.1 Gifts: Substantial benefit must be shown
Apart from establishing a special relationship of influence, in order to raise the
presumption, the person allegedly subject to the influence must also show that the gift
was so substantial or otherwise of such a nature that it cannot be reasonably accounted
for on the grounds of ordinary motives, such as friendship or charity: In Re
Brocklehurst v Roberts [1978] 1 All ER 767; Goldsworthy v Brickell [1987] 2 WLR
133
6.2 Contracts: Is manifest disadvantage required?

There is dispute in relation to the question of whether manifest disadvantage must be
shown where the transaction impeached is a contract. The better view is that it is not
necessary to demonstrate that the transaction was to the manifest disadvantage of the
person influenced: Baburin v Baburin [1990] 2 Qd R 101; CBA v Amadio (1983) 151
CLR 447 at 475 per Deane J
7. Rebutting the Presumption of Undue Influence

Once the special relationship of influence and the element of substantial benefit are
made out, it is presumed that the transaction was procured by undue influence. This
presumption is one of fact and unlike a presumption of law it can be rebutted by the
presentation of contrary evidence. The main consequence of the presumption is to
shift the burden of proof to the dominant party of the special relationship of influence.
7.1 The burden of proof

The burden of proof that the dominant party must discharge in order to rebut the
presumption is one which requires the dominant party to show that the other party
entered into the transaction as a result of an independent and informed judgments,
“after full, free and informed thought”: Zamet v Hyman [1961] 1 WLR 1462, Johnson
v Buttress (1936) 56 CLR 113 per Dixon J at 134, 135
There are a number of factors frequently mentioned by Judges in deciding whether the
presumption has been rebutted. These include:
7.1.1 The righteousness of the transaction

Is the transaction a thing which a right minded person would be expected to do?:
Spong v Spong (1914) 18 CLR 544 per Isaacs J at 550
7.1.2 Improvident provisions in a deed of settlement

In the case of a deed or settlement, improvident features have included the absence of
a power of revocation or recall, the absence of any power of removal and appointment
of trustees or of any right to intervene in the activities of trustees, discretionary nature
of trustee’s powers, absence of a right to resort to the corpus and the size of the gift
compared to the disponor’s total assets: Huguenin v Baseley (1807) 14 Ves. Jun. 275,
33 ER 526; Coutts v Ackworth (1869) LR 8 Eq 558; Everitt v Everitt (1870) LR 10 Eq
Cas 405; Hall v Hall (1873) 28 LJ 383; Bester v Perpetual Trustee Co Ltd [1970] 3
NSWR 30 at 35 per Street J

7.1.3 The adequacy of the consideration

This is the factor most frequently considered in determining whether the presumption
is rebutted in cases where the transaction impeached is a contract. Johnson v Buttress
(1936) 56 CLR 113 at 136; Phillips v Hutchinson [1946] VLR 270; Berk v Permanent
Trustee Company of New South Wales (1947) 47 SR (NSW) 459. While highly
relevant evidence as to the adequacy of consideration is not decisive: Johnson v
Buttress at 135 - 136
7.1.4 Independent Advice

Independent advice is not essential although it is perhaps the surest way to rebut the
presumption. The issue that the court must decide is whether the transaction was the
product of a free and independent mind: Inche v Shaik Allie Bin Omar [1929] AC 127
per Lord Halisham at 135 - 136; Johnson v Buttress at 120 per Latham CJ
In many instances the absence of independent advice will be very material in deciding
that the presumption is not rebutted: Johnson v Buttress (1936) 56 CLR 113 at 120
per Latham CJ
8. Defences
Unreasonable delay, particularly if prejudicial, may constitute a bar to equitable relief:
Whereat v Duff (1972) 2 NSWLR 147 at 180 - 181 per Asprey JA. Delay commences
from the plaintiff’s knowledge of facts upon which the right to relief is founded:
Baburin v Baburin (No 2) (1991) 2 Qd R 940
9. Remedies
Traditionally, relief was limited to setting aside the impinged transaction or refusing
specific performance at the suit of the disponee. However, the underlying objective is
restitution - to restore to the disponer property wrongfully misappropriated by the
disponee: see generally O’Sullivan v Management Agency and Music Ltd [1984] 3
WLR 448. Remedies can also include account of profits, constructive trust.
Allowances for skill and labour may be awarded as he or she who seeks equity must
do equity.
C. UNCONSCIENTIOUS DEALING
1. Introduction
Equity has a jurisdiction to grant relief where one party unconscientiously takes
advantage of a party at a special disadvantage: *Blomley v Ryan (1954) 99 CLR 362
per Kitto J at 415; Commercial Bank of Australia Ltd v Amadio (1982 - 1983) 151
CLR 447 at 461 per Mason J
The jurisdiction to set aside unconscionable bargains may also be invoked to set aside
transactions which are completely voluntary: Wilton v Farnworth (1948) 76 CLR 646;
D v L (1990) 14 Fam LR 139; Louth v Diprose (1992) 175 CLR 621
2. Unconscientious Dealing Distinguished From Undue Influence

The equitable doctrine of undue influence is distinguishable from unconscientiously
taking advantage of a party at a special disadvantage. The doctrines are not mutually

exclusive and sometimes they will coexist and overlap within the facts of a particular
case.
The rules of undue influence depend upon establishing the existence of a special
relationship of influence. They aim to protect a party because he or she has not
entered into the transaction with a freely consenting mind - it looks at the quality of
consent and asks whether it was independent and voluntary.
In contrast the basis of relief under the doctrine of unconscientious dealing is the
presence of a weakness of bargaining position coupled with oppressive or unfair terms
- it looks at the conscionability of the conduct of the stronger party and asks whether
the decision was the result of the unequal bargaining positions and the other party
taking advantage of this: The Commercial Bank of Australia v Amadio (1983) 57
ALJR 368 per Mason J at 363 per Deane J at 369; (1983) 151 CLR 447 per Mason J
at 461 per Deane J at 474
However, it has been argued that the doctrines of unconscionable dealing and undue
influence are converging: see Brennan J in Louth v Diprose (1992) 175 CLR 621 at
627 - 628; see also Deane J at 638, but Cf Bridgewater v Leahy (1999) 72 ALJR 1525
where the court appears to accept that the doctrines remain independent.
3. The elements of the doctrine

In cases of unconscionable dealing, one party must be at a special disadvantage or
disability vis-a-vis the other and the other party must have unconscientiously taken
advantage of the party at a special disadvantage: CBA v Amadio (1983) 151 CLR 447
per Gibbs CJ at 459; per Mason J at 461 - 462 per Deane J at 474
3.1 Special Disadvantage (Disability)

The relationships in which one party is in a position of legal disadvantage vis a vis
another are various and therefore the courts have not listed such relationships but
identified factors from which a special disadvantage can be inferred: see Blomley v
Ryan (1956) 99 CLR 362 per Fullager J at 405 and Commercial Bank of Australia Ltd
v Amadio (1983) 151 CLR 447 per Mason J at 462
The underlying common requirement is that the condition must be one which
“seriously affects the ability of the innocent party to make a judgement as to his own
best interests”: CBA v Amadio per Mason J at 462
3.2 Unconscientious taking of advantage

The other party must have knowledge of the special disability and exploited the
situation for his or her conduct to be unconscientious. The requisite knowledge of the
stronger party is determined objectively: CBA v Amadio Mason J at 467 - 468
4. Negativing a claim of unconscionable dealing

The party seeking to uphold the transaction must establish that the bargain is fair, just
and reasonable.

4.1 Inadequacy of consideration

An inadequate consideration may be important firstly as supporting an inference that a
position of disadvantage existed and secondly as tending to show that an unfair use
was made of the occasion: Blomley v Ryan (1954) 99 CLR 362 per Fullager J at 405.
It is not essential that in all cases that there should be an inadequate consideration:
The Commercial Bank of Australia v Amadio (1983) 57 ALJR 358 at 369 per Deane J;
(1983) 151 CLR 447 at 475
4.2 Independent advice

Independent advice is also an important factor since there is a marked reluctance on
the part of Judges to enforce an unfair bargain entered into by a party at a serious
disadvantage without the benefit of independent advice.
5. Banks and Unconscionability

Security documents may be set aside against banks on the grounds of
unconscionability where the credit provider has acted unconscionably. Two examples
of this are:
(a) the rule in Yerkey v Jones (1939) 63 CLR 649; Garcia v National Australia
Bank Ltd (1998) 72 ALJR 1243
(b) The Commonwealth Bank of Australia v Amadio (1983) 151 CLR 447
6. Remedies
The usual remedy is setting aside the impugned transaction, however specific
performance may be refused or an injunction may be granted to prevent the
unreasonable exercise of rights under the contract. Conditions may be attached to the
order.
You should read and consider the decision of Bridgewater v Leahy (1998) 72 ALJR
1525 which provides a good example of the flexibility of equitable remedies.
7. Statutory Relief from Unconscionable Dealing

7.1 Trade Practices Act 1974 and Fair Trading Acts
The Trade Practices Act 1974 (Cth), ss 51AA, 51AB and 51AC and the Fair Trading
Acts of the States and Territories such as Fair Trading Act 1989 (Qld), s 39 give the
courts a jurisdiction to review a contract or conduct which is “unjust” “unfair” or
“unconscionable”.
7.2 Consumer Credit Code

The Consumer Credit Code governs all types of consumer credit including bank
loans, credit card facilities, housing loans and related mortgages and guarantees.
Under the code, a debtor, mortgagor or guarantor can apply to the Court to reopen an
unjust transaction: s 70(1). “Unjust” includes unconscionable, harsh or oppressive:
ss 70 and 72

7.3 Contracts Review Act

In New South Wales, relief is available under the Contracts Review Act 1980 (NSW)
from “unjust” contracts.
D. LIABILITY OF THIRD PARTIES FOR UNDUE INFLUENCE

1. Introduction
It is often the case that the person claiming that they have been subject to undue
influence will seek to be relieved of a transaction entered into with a third party. This
often arises in the context of guarantees and other security documents entered into
with banks and other financial institutions, particularly by spouses.
A transaction will be set aside as against a third party on the grounds of undue
influence or unconscionability where:
(a) the third party has notice of someone else’s wrongful conduct; and
(b) the person exerting undue influence or acting unconscionably is the agent of the
third party. In this case primary, not third party liability attaches.
2. Notice of the Wrongful Conduct of Another

If it can be shown that the third party has actual or constructive notice of undue
influence exerted by another it takes subject to the equity to set the transaction aside:
In cases where the transaction concerns a guarantee, and the guarantor is the wife of
the borrower, the principles encountered in Yerliey v Jones (1939) 63 CLR 649 as
affirmed in Garcia v National Australia Bank (1998) 194 CLR 395 apply. In these
cases it is not necessary to establish notice, the liability arises automatically. The rule
is Yerkey v Jones has attracted considerable criticism: see in particular the dissenting
judgement of Kirby J in Garcia.
3. Agency
If the person exerting undue influence or unconscionability is found to be an agent of
the third party, then the credit provider will be fixed with the undue influence of the
agent in accordance with the ordinary rule of agency: Avon Finance Co Ltd v Bridger
[1985] 2 All ER 281; Burke v State Bank of New South Wales (1994) 37 NSWR 53
In these cases primary, not third party, liability arises.

CHAPTER 6: Equitable Estoppel

Prescribed Reading:
Principal Cases:
Dillwyn v Llewelyn (1862) 4 De.G. F&J 517 45 ER 1285
Riches v Hogben [1985] 2 Qd R 292; [1986] 1 Qd R 315 (FC)
Re Basham [1986] 1 WLR 1498
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 66 ALJR 110
Commonwealth v Verwayen (1990) 170 CLR 394; 64 ALJR 540
Further Reading:
Cope, Constructive Trusts, Chs 15 - 19
Butler, Commonwealth v Verwayen (1991) QLSJ 287
Parkinson, ‘Equitable Estoppel Developments after Walton Stores’ (1991) 3(1)
Journal of Contract Law 50
A. THE CATEGORIES OF ESTOPPEL - LAW AND EQUITY

1. Common Law Estoppel
Estoppel is a term that is used by both law and equity in a number of different senses
and sometimes it is also used to convey the same meaning at both law and equity.
1.1 Estoppel in Judgment (estoppel of record)

An Estoppel in Judgment prevents one party to litigation in which a judgment was
given from questioning in any way, in any subsequent litigation between himself or
herself and another party to the litigation anything decided by the judgment.
1.2 Estoppel by Deed (estoppel in writing)

An Estoppel by Deed may arise where an action is brought upon a deed and the effect
of the estoppel is to prevent a party to the deed from disputing any allegation of fact
which he or she made in the deed.
1.3 Estoppel in Pais

An Estoppel in Pais arises as a result of words and conduct of the party rather than
from any record or written document. In Australia the various emanations of estoppel
in pais are directed to preventing unjust departures from an assumption accepted by
another as a basis of some act or omission which unless the assumption by adhered to
would operate to that other’s detriment: Thompson v Palmer (1933) 49 CLR 507 per

Dixon J at 508; Walton Stores (Interstate) Ltd v Maher (1988) 62 ALJR 111 per
Brennan J at 120 and Gaudron J at 140
1.3.1 Estoppel by Representation

Essentially an estoppel by representation prevents a person who by a representation of
fact has led another to alter his or her position from denying that the fact was other
than as represented.
Both at law and in equity, the scope of estoppel by representation is restricted by the
requirement that the representation must be shown to be a representation of fact:
Jorden v Money (1854) 5 HLC 185; Walton Stores (Interstate) Ltd v Maher (1988) 62
ALJR 111 per Mason CJ and Wilson J at 113 - 114
Estoppel by representation was regarded as a rule of evidence rather than as a cause of

action (a shield rather than a sword): Walton Stores (Interstate) Ltd v Maher (1988)
62 ALJR 111 per Gaudron J and Brennan J at 121
1.3.2 Estoppel by Convention

Estoppel by Convention is recognised exclusively by the common law and has the
effect of precluding a person from denying an assumption of fact which formed the
conventional basis of a transaction between himself or herself and another party:
Constant Industries of Australia Pty Ltd v Norwich Wintherthur Insurance (Australia)
Ltd (1986) 60 ALJR 294
B. ESTOPPEL IN EQUITY EXCLUSIVELY

1. Introduction
Estoppel in Equity does not operate by establishing an assumed state of affairs but
instead operates to compel an assumption as to rights on the basis of an actual state of
affairs and provide the basis for a cause of action or the grounds of defence. The
estoppel does not operate simply as a rule of evidence. The conscience of the party is
affected by an assumption as to rights made by the other party and this is usually
expressed in the formulae, that an equity has arisen which a court is bound to do or
abstain from doing something in order to prevent detriment to the other party which
the other party would otherwise suffer by having acted or abstained from acting in
reliance on the assumption or expectation as to rights which he or she had been
induced to accept.
Sometimes this will involve compelling the party whose conscience is bound to
recognise that the other party has an equitable entitlement to a positive right and that
the party bound by the equity is subject to equitable duties. Equitable estoppels which
take this form are usually referred to as proprietary estoppels.
Sometimes it will involve precluding the party who is bound from asserting existing
rights or from denying the existence of a right. Estoppels which take this form are
sometimes referred to as promissory estoppels.

2. Proprietary Estoppel
The category of proprietary estoppel encompassed:
1. the doctrine of acquiescence and mistaken expenditure on another’s property
2. the imperfect gift
3. the encouragement of another to believe that a right to the use of land will be
recognised
2.1.1 Acquiescence and Mistaken Expenditure on Another’s Property

A claim for equitable relief may arise where a person has by mistake acted or spent
money on improvements to another’s land believing that it is or will be his or her own
in circumstances where the other knows of the mistake. In the early cases in order to
obtain relief under what was referred to as the doctrine of acquiescence the mistaken
party had to prove that the party insisting upon his legal title to the property had
knowingly or albeit passively encouraged another to lay out money under an
erroneous opinion as to who held or would hold title to the property: Ramsden v
Dyson (1856) LR 1 HL 129 per Lord Cranworth
The relief granted in the event of a successful claim varies from case to case since the
court will examine the circumstances in each case to see in what way the equity can
be satisfied. Relevant circumstances can include the nature of the mistake, the extent
of the knowledge of the holder of the legal right and whether or not the holder of the
legal right has encouraged the other party to think that he will have a beneficial
interest.
2.1.2 The Imperfect Gift

The doctrine of acquiescence has also been used to overcome problems created by the
maxim that a court of equity will not complete or assist in the completion of a
voluntary agreement or assist in the completion of a gift where anything remains to be
done to complete the title of the donee. It is open to the donee to establish that an
equity has arisen as a result of subsequent acts or conduct of the donor so as to entitle
the donee to a right to assert a claim in equity to compel the donor to perform the
contract or perfect the donation where no right was acquired from the earlier
voluntary agreement or imperfect donation. The equity can arise where the holder of
the legal title is shown to have acquiesced with knowledge in subsequent mistaken
expenditure by the donee on the faith of the promise or gift or where the holder of the
legal title by subsequent words or conduct leads the other person to reasonably gain
the impression that he or she has an interest in the property or will gain an interest in
the property and on the faith of that representation the donee acts to his or her
detriment.
Once the equity is established in accordance with the above requirements it is then up
to the court to determine what relief is appropriate to satisfy the equity.
Very often the equity can only be satisfied by compelling the promisor to give effect
to the promise or to perfect the imperfect gift. Students should read and consider:
Dillwyn v Llewelyn (1862) 4 De GF & J 517.

2.1.3 The encouragement of another to believe that a right to the use of the land
will be conferred
A court of equity may also intervene to prevent the holder of the legal title to land
from insisting upon his legal rights in relation to the land where the holder of the legal
title has encouraged the other party to believe or expect a right to the use of the land
will be conferred on the other party. The principle was stated to apply where one
person took possession of land under an expectation of acquiring a certain interest in
the land of the holder of the legal title or took possession of the land under a verbal
agreement with the holder of the legal title for a certain interest in the land which for
this purpose amounted to an expectation of acquiring a certain interest in the land, and
on the faith of that expectation laid out money upon the land with the knowledge of
and without objection from the legal title holder. Under this principle a court of equity
can intervene where there has been a representation or statement by the holder of the
legal title that the other party has an interest in the land and on the faith of the
expectation created by the statement the other party has acted or expended money: Re
Bashman [1986] 1 WLR 1498; Riches v Hogben [1985] 2 Qd R 292.
The relief may take the form of an order for the transfer of property or it may take the
form of money compensation. Prima facie the court will grant the party entitled to
relief the right which he or she expected or believed would be his or hers and usually
this will result in the court extinguishing or qualifying the legal right of the party
holding and asserting these rights. This is justifiable because the holder of the legal
right has by his or her encouragement indicated that he or she is prepared to
extinguish or qualify his or her rights to that extent.
In recent years the constructive trust has been the most frequently used remedial
device used for the purpose of bringing about a total or partial extinguishment of the
legal rights for the benefits of the party entitled in relation to the disputed property.
2.2 Promissory Estoppel

The so called doctrine of promissory derived from the judgment of Denning J in
Central Property Trust Limited v High Trees House Limited [1947] 1 KB 136 can be
interpreted as a further manifestation of estoppel in equity directed to preventing an
unconscionable insistence upon a legal right. It can also be interpreted as a
manifestation of a wider principle directed to preventing the falsification of promises
unsupported by consideration.
2.2.1 Promissory Estoppel as a Method of Preventing an Unconscionable

Insistence upon a Legal Right
Promissory estoppel as a method of preventing an unconscionable insistence upon a
legal right can be invoked so as to raise an equity to prevent a contractor from
insisting upon his or her strict contractual rights where one contracting party has led
the other party to act in the belief that there would not be an insistence on these
contractual rights.
The High Court of Australia in Legione v Hateley (1983) 57 ALJR 292 adopted a
limited doctrine of promissory estoppel in the form just outlined for defensive
purposes.

The relief ordered in the case of an unconscionable insistence upon a contractual right
will be directed to estopping or preventing the representor from resuming at his or her
will the previous position whereby the representor would be able to insist on his or
her strict contractual rights. To prevent this, the court will either give relief which
permanently prevents the resumption of the contractual right or will allow the
representor to revive the contractual right but only after certain conditions have been
complied with before resumption of the former position, is resumed.
2.2.2 Promissory Estoppel has also been Invoked as a Method of Enforcing Non-
Contractual Promises
Promissory estoppel has also been invoked as a method of enforcing non-contractual
promises. The possibility of transforming the unconscionable insistence upon a legal
right approach into a principle directed to preventing the falsification of promises was
first suggested by Denning J in Central London Property Trust Limited v High Trees
House Limited [1974] 1 KB 136. Denning J enunciated a wider principle whereby a
promise intended to be binding, intended to be acted and in fact acted on would be
binding in so far as its terms properly apply. The main consequence of this approach
is that it is possible to allege and rely upon a representation in order to create an
obligation binding upon the representor in circumstances where the underlying
transaction does not constitute a binding contract at the date of the representation or
where no binding contract is subsequently entered into following the representation.
In Australia the High Court of Australia has also accepted that the doctrine of
promissory estoppel can be alleged and relied upon in the absence of any pre-existing
contractual relationship between the parties so as to bring about the enforcement of
purely voluntary promises notwithstanding the objection that such intervention
outflanks the principles of the law of contract and the doctrine of consideration:
Walton Stores (Interstate) Ltd v Maher (1988) 62 ALJR 110
In Walton Stores (Interstate) Ltd v Maher (1988) 66 ALJR 110 the High Court
decided that the appellant was estopped from denying the existence of a binding
contract in circumstances where the parties were negotiating for an agreement for a
lease to be completed by way of customary exchange.
There is very little discussion by Justices of the High Court in Walton Stores
(Interstate) Ltd v Maher (1988) 66 ALJR 110 of the relief available where an equity is
raised as a result of unconscionable conduct and of the factors that will be taken into
account when framing a remedy. The remedy will vary according to the circumstances
of the case and the court will go no further than is necessary to prevent the
unconscionable conduct. In Walton Stores (Interstate) Ltd v Maher (1988) 66 ALJR
110 the equity was satisfied by treating Waltons as though it had done what it induced
Mr Maher to expect that it would do, namely by treating Waltons as though it had
executed and delivered the original deed. In effect by treating the parties as
contractually bound.
3. A General Principle for Equitable Estoppel

The above separate categories of equitable estoppel have now been overtaken by the
formulation of a general principle for equitable estoppel based on unconscionable
conduct capable of application in diverse circumstances.

The High Court of Australia has recently refused to divide estoppel in equity into
particular categories and Brennan J in Walton Stores (Interstate) Ltd v Maher (1988)
62 ALJR 111 has accepted that it is unconscionable conduct which gives rise to the
equity and shapes the remedy. See Brennan J at 420 - 421 and Mason CJ at 404.
Brennan J agreed that it is unconscionable conduct which gives rise to the equity and
shapes the remedy to be given.
The minimum elements to establish unconscionable conduct to found an action in

estoppel would be: an assumption as to rights or future conduct, induced by
representations or conduct by the defendant, upon which there has been detrimental
reliance by the plaintiff: Giumelli v Giumelli (1999) 73 ALJR 547
The remedy for equitable estoppel is the minimum equity to do justice and avoid the
detriment, although sometimes that will require making good the assumption or
enforcing the promise: Commonwealth v Verwayen (1990) 64 ALJR 540. A monetary
remedy rather than a proprietary interest may be awarded where making good the
assumption would cause injustice to a third party or go beyond ‘what was required for
conscientious conduct by the defendant’: Giumelli v Guimelli (1999) 73 ALJR 547
4. A General Principle for Common Law Estoppel (Estoppel in Pais) and

Equitable Estoppel
As a result of Jorden v Money (1854) 5 HLC 185; 10 ER 868 common law estoppel -
estoppel in pais (by conduct) could not be founded upon a representation of future
conduct. It is always necessary to establish a representation of fact relied upon by the
representee to his or her detriment before the representor can be estopped from
asserting the contrary of his or her representation in subsequent litigation. Promissory
estoppel has been extended to representations (or promises) as the future conduct and
assumptions as to future rights. As a result of this the relationship between estoppel
and pais (by conduct) and promissory estoppel is not very clear.
Conflicting statements are to be found in the judgments in Walton Stores (Interstate)
Ltd v Maher (1988) 62 ALJR 110 as to whether the extension of promissory estoppel
to future representations as to future conduct as well as assumptions as to future
rights, is in substance an extension of estoppel in pais or the basis of an independent
doctrine. Brennan J seems to regard estoppel as an independent doctrine whereas
Deane J outlines an approach for a unified and common set of principles
encompassing estoppel in pais and promissory estoppel founded on unconscionable
conduct.
The case for the adoption of a general doctrine of estoppel by conduct was developed
further by Deane J in Commonwealth v Verwayen (1990) 64 ALJR 540 under this
approach promissory estoppel is but one aspect of a general doctrine of estoppel by
conduct which operates “indifferently in both law and equity” (p 555). See also
Mason CJ at 546.
It is accepted by Deane J, that prima facie the operation of estoppel by conduct is to
preclude a departure from the assumed state of affairs. Lesser relief is available when
relief framed on the basis of the assumed state of affairs would be harsh and
inequitable. Contrast the approach of the other judges, especially Mason CJ.
In Giumelli, the High Court did not take the opportunity to comment on a unified
doctrine.

CHAPTER 7: Relief against

Forfeiture
Prescribed Reading:
Cope, Constructive Trusts, Ch 20
Principal Cases:
Legione v Hateley (1983) 57 ALJR 292; (1983) 152 CLR 406
Stern v McArthur (1988) 62 ALJR 588; (1985) 165 CLR 489
Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57
Romanos v Pentagold Investments Pty Ltd [2003] HCA 58
Further Reading:
Tilbury, “Relief Against Forfeiture” in Parkinson (ed), The Principles of Equity, Ch 9
WMC Gummow, Forfeiture and Certainty: The High Court and the House of Lords
in Finn (ed) Essays in Equity, Ch 2
KG Nicholson, ‘Breach of an Essential Time Stipulation and Relief Against
Forfeiture’ (1983) 57 ALJ 632
KG Nicholson, Stern v McArthur - the Jurisdiction to Relieve Against Forfeiture and
Instalment Contracts (1989) 2 JCL 148
1. THE BASIS OF THE EQUITABLE JURISDICTION

The basis of the jurisdiction is the relief against inequitable or unconscionable
conduct “...especially when unconscionable conduct is associated with fraud, mistake,
accident or surprise...”: Legione v Hateley (1983) 57 ALJR 292 per Mason and
Deane JJ at 307
Equity looks to the substance rather than the form. Whereas the common law looks at
the letter of the agreement, equity looks to its spirit and will not allow a person to take
advantage of strict legal rights if it would be unconscionable to do so.
The jurisdiction is discretionary. The difficulty for the court is finding a balance
between preventing unconscionable conduct and the desirability that a contractual
promise be observed: Shiloh Spinners Ltd v Harding [1973] AC 691; AMEV-VDC
Finance Ltd v Austin (1986) 162 CLR 170 at 193 - 194 per Mason and Wilson JJ
2. DISTINGUISHING FORFEITURE FROM A PENALTY

In Legione v Hateley (1983) 57 ALJR 292 at 307; (1983) 152 CLR 406 at 445 Mason
and Deane JJ explained the distinction between penalties and forfeiture:

“A penalty ... is in the nature of a punishment for non-observance of a contractual

stipulation; it consists of the imposition of an additional or different liability upon
breach of the contractual stipulation ... On the other hand, forfeiture involves the
loss or determination of an estate or interest in property or a proprietary right, eg a
lease, in consequence of a failure to perform a covenant ...”
See also PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615 per Clarke J at
642 - 644; Cf Johnson v Johnson (1989) 1 All ER 621 per Dillon LJ at 628; per
Nicholls J at 633 - 634.
3. WHEN WILL EQUITY GRANT RELIEF

In Shiloh Spinners v Harding [1973] AC 691; Evans [713], the two separate bases of
jurisdiction for relief against forfeiture were identified by Lord Wilberforce as
follows: a) where the object of the transaction and of the right to forfeit is essentially
to secure the payment of money; and b) the general heads of fraud, accident, mistake
or surprise, which are not limited to providing relief against forfeiture.
Equity will relieve against forfeiture of an interest in property in two situations:

(a) if the forfeiture provision amounts to a penalty; and
(b) where the provision is not in the nature of a penalty, equity requires
exceptional circumstances before it will grant relief, such as unconscionable
conduct (Legione v Hateley) or a contract of sale in the nature of a mortgage
(Stern v McArthur).
What distinguishes these two situations above is the nature of the breach. A clause
which allows forfeiture of an interest in property even in the case of minor breaches
will almost certainly be held to be a penalty and thus capable of being relieved
against. However, exceptional circumstances must be shown in the case of breach of
essential terms: Legione Hateley; see also Stern v McArthur (1988) 165 CLR 489 per
Mason CJ at 501; per Brennan J at 511; per Deane and Dawson JJ at 526
In determining whether a clause is a penalty or a genuine pre-estimate of loss the

courts use the considerations identified by Lord Dunedin in Dunlop Pneumatic Tyre
Co v New Garage & Motor Co [1915] AC 79 at 86 - 88 as a starting point. ‘Penalties’
was dealt with in detail in the first year unit, Contracts.
The court considers amongst other things:

1. the construction of the contract as a whole;
2. whether the amount payable is a genuine pre-estimate of damages; and
3. whether the sum is extravagant and unconscionable in amount in comparison
with the greatest loss that could conceivably be proved to have followed from
the breach.
4. RELIEF AGAINST FORFEITURE OF LEASES

Relief against forfeiture of a lease, where the lessor purports to terminate the lease for
non-payment of rent or breach of other covenants, is one of the most common
applications of the jurisdiction. Statute, reflecting the general equitable right, has now
intervened.

The general equitable jurisdiction

Equity has jurisdiction to relieve against the consequences of forfeiture in appropriate
circumstances. Factors to be considered in determining whether the circumstances are
appropriate to grant relief were identified in Shiloh Spinners v Harding [1973] AC
691 at 725 by Lord Wilberforce. They include:
(a) the conduct of the applicant for relief, in particular whether the default was
wilful;
(b) the nature and gravity of the breaches;
(c) the disparity between the value of the property of which forfeiture is claimed
as compared with the damage caused by the breach; and
(d) whether the breach can be compensated in money.
The statutory right to relief

In Queensland, Division Three of Part VIII of the Property Law Act 1974, ss 123 -
128 particularly s 124 contains the equitable right of relief against forfeiture arising
by reason of breaches of the covenant to pay rent as well as covenants other than
those relating to the payment of rent.
5. RELIEF AGAINST FORFEITURE OF OTHER INTERESTS IN LAND

If a court of equity considers that it would be unconscionable to allow the vendor to
rely upon its strict contractual rights to terminate a contract, relief against forfeiture of
the purchaser’s equitable interest in the land will be granted. This has been held to be
so even if the right arises as a consequence of breach of an essential term (usually
where time is of the essence and the breach is failure to pay on time) though
exceptional circumstances (unconscionability) would then be required: Legione v
Hateley. By relieving against forfeiture of the purchaser’s equitable interest, the
jurisdiction removes the vendor’s defence (viz termination of the contract for the
purchaser’s breach of a term where time was of the essence) to an action for specific
performance.
Considerations relevant to the grant of relief against forfeiture of the purchaser’s

equitable interest
In Legione v Hateley the exceptional circumstances that will entitle a purchaser in
breach of an essential condition to seek relief are identified by Mason and Deane JJ as
fraud, mistake, accident, surprise or some other element which makes it
unconscionable or inequitable for the vendor to insist on the right to forfeit the
purchaser’s interest in the property because it has not been performed strictly in
accordance with its terms. Under this approach the vendor’s insistence on strict
contractual rights would be unconscionable. You should read and consider the
judgement of Mason and Deane JJ and note the factor referred to at p 309.
In the absence of exceptional circumstances, equitable relief is not available against a

vendor’s election to treat a contract as determined where the vendor neither waives
the essentiality of time nor encourages the purchaser to believe that he or she will not
exercise his or her rights upon default.

In such cases the court is still entitled to give effect to a provision in a contract for the
sale of land that the time fixed for completion shall be of the essence in the usual sort
of case where the purchase price is payable on completion and possession is given
upon completion: Ciavaralla v Balmer (1983) 153 CLR 438; Lexane v Highfern Pty
Ltd [1985] 1 Qd R 446
In Stern v McArthur (1988) 62 ALJR 588; (1988) 165 CLR 489 the High Court
confirmed that equity would grant relief against an unconscionable exercise of legal
rights. Deane and Dawson JJ point to the underlying general notion at 604 ALJR; 526
- 527 CLR as “that a person should not be permitted to use or insist upon his legal
rights to take advantage of another’s special vulnerability or misadventure for the
unjust enrichment of himself.” Deane and Dawson JJ considered that the purchaser’s
equitable interest under an instalment contract was akin to an equity of redemption
under a mortgage. Note the dissent of Mason CJ in Stern v McArthur particularly at
593, which has now been accepted in Tanwar Enterprises Pty Ltd v Cauchi and
Romanos v Pentagold Investments Pty Ltd
Instalment Contracts for the Sale of Land

In the case of instalment contracts a distinction must be made between an action for
reimbursement of instalments or the deposit (discussed under the penalty cases) and
an action for relief against forfeiture of the purchaser’s interest in the land. The
deposit will rarely be ordered to be returned. An order requiring reimbursement of the
instalments will usually be ordered, subject to a claim for damages for breach of
contract. However, relief against forfeiture of the purchaser’s interest in the land will
only be awarded in exceptional circumstances: Legione v Hateley; Stern v McArthur
Instalment contracts for the sale of land are expressly provided for in Queensland in
Division 4 of Part VI of the Property Law Act 1974. For a discussion of the effect of
ss 71 - 76 of the Property Law Act on the application in Queensland of the instalment
contract cases such as Legione v Hateley and Stern v McArthur see Hill v Terry
(1993) 2 Qd R 640 per McPherson J at 651 - 653. In Lexane Pty Ltd v Highfern Pty
Ltd (1985) 1 Qd R 446 the Supreme Court of Queensland held that the provisions of
the Property Law Act do not remove the right of a purchaser to seek relief against
forfeiture of instalments under an instalment contract.
6. RELIEF AGAINST FORFEITURE OF INTERESTS OTHER THAN

LAND
Is the equitable relief confined to instances where the subject matter of the contract is
property or an interest therein, or does it extend to embrace contracts at large?
Generally see Cope at 751 - 752 and Pawlowski, ‘The Scope of Equity’s Jurisdiction
to Relieve against Forfeiture of Interests in Property other than Land’ [1994] JBL 372.
In England relief against forfeiture is only available where what is forfeited is a

proprietary or possessory right: Scandinavian Trading Tanker Co AB v Flota
Petrolera Equatoriana; Scraptrade [1983] 2 AC 694 (time charter) affirmed Sport
International Bessum BLV v Inter-Footwear Ltd [1984] 1 All ER 376 (contractual
licence to use trademarks). In Australia Legione v Hateley implicitly supports the
proposition that a proprietary or possessory interest is necessary by emphasising the
need to find an interest in land.

However, the jurisdiction is not limited to estates or interests in real property. In

England it has been extended to include estates or interests in personal property:
Barton Thompson & Co Ltd v Stapling Machines Co [1966] 1 Ch 499 (lease of
chattels); B.I.C.C. PLC v Burndy Corporation [1985] 1 Ch 233 (contract for the
acquisition of an interest in patents). In Australia there is nothing in Legione v
Hateley which would require that the jurisdiction be restricted to interests in land and
Brennan J (obiter) in Esanda Finance v Plessnig at 151 - 152 specifically
contemplates that relief against forfeiture of an interest in a chattel (lease of prime
mover) would be available in appropriate circumstances.
Lehane has argued that the principles should extend to the relief against the forfeiture
of contractual rights generally, without being limited to where the contract involves an
interest in property, as most contractual rights are property for the purpose of the law
relating to assignments and that the principle of unconscionable conduct should be
applicable in such cases: discussed in Cope at 752.

CHAPTER 8: Equitable Defences

Prescribed Reading:
Dal Pont and Chalmers , Ch 30
Recommended reading:
Cope, EQUITABLE OBLIGATIONS Duties, Defences and Remedies, Ch 7
Principal Cases:
Fysh v Page (1956) 96 CLR 233
Baburin v Baburin[1990] 2 Qd R 101
Baburin v Baburin (No 2) [1991] 2 Qd R 240
Hourigan v Trustees Executors and Agency Co. Ltd (1934) 51 CLR 619
Orr v Ford (1989) 167 CLR 316
Johns v Johns [2004] 3 NZLR 202
Parmasivam v Adams [1998] FCA 1711
Coulthard v Disco Mix Club [2001] 1 WLR 707
Commonwealth v Verwayen (1990) 170 CLR 394
INTRODUCTION
In this chapter the focus is on a number of traditional defences recognised by Courts

of Equity. Some equitable defences which will be considered includes:
• Fully Informed Consent;
• Laches;
• Acquiescence;
• Estoppel;
• Release;
• Analogy with Statute;
• Change of Position;
• Set off; and
• Unclean hands
Some defences to equitable relief also exist under statutes - such as statutory
limitation periods and the statutory provisions relating to excusing breaches of duty.

1. FULLY INFORMED CONSENT
Fully informed consent provides a defence to a breach of fiduciary duty. This defence
is taught in detail in earlier weeks of semester.
2. DELAY BASED DEFENCES
Where a plaintiff delays in the commencement of suit in a claim for equitable relief
there are several defences which may apply to bar the claim:
• Application of a Limitation Statute;
• Application of a Limitation Statute by Analogy;
• Laches;
• Acquiescence; and
• Estoppel.
2.1. Limitation Act Defence
While, at common law, delay in the commencement of suit is been dealt with by the
application of limitations statutes, until 1833 there was no limitation statute which
barred claims for equitable relief in the United Kingdom or any of the States of
Territories of Australia.
Generally, even in modern times, claims for equitable relief are still not subject to
statutory limitation periods - see, for example:
• QLD: Limitation of Actions Act 1974, s 10(6)(b)
• Exceptions: Non-fraudulent breaches of trust (s 27) and actions for the
recovery of equitable interests in land (s 16(1))
• NSW: Limitation Act 1969, s 23
• NT: Limitation Act, s 21
• TAS: Limitation Act 1974, s 9
• VIC: Limitations of Actions Act 1958, s 5(8)
• SA: Limitations of Actions Act 1936
[Note: Exceptions in other states and territories other than Queensland are not
considered].
In the ACT, a strict six year period applies (Limitation Act 1985 (ACT), s 11(1)). The
WA position is that, prima facie, a six year period applies - though note the exception
in s 27(b) of the Limitation Act 2005 (WA).
2.2. Application of a Limitation Act by Analogy
Equity will apply a statutory limitation period applicable to an analogous cause of

action to the equitable action/relief.

• Maxim:- "Equity follows the Law"
Westbury LC in Knox v Gye (1872) LR 5 HL 656 explained the operation of the

defence:
For where the remedy in Equity is correspondent to the remedy at Law, and
the latter is subject to a limit in point of time by the Statute of Limitations, a
Court of Equity acts by analogy to the statute, and imposes on the remedy it
affords the same limitation. Where a Court of Equity frames its remedy upon
the basis of the Common Law, and supplements the Common Law by
extending the remedy to parties who cannot have an action at Common Law,
there the Court of Equity acts in analogy to the statute; that is, it adopts the
statute as the rule of procedure regulating the remedy it affords (at 674-5).
History and Rationale of the Defence
Some statements which are useful in understanding the history and rationale behind
the defence are stated below:
 La Forrest LJ in M(K) v M(H) (1992) 96 DLR (4th) 289 (at [90]).

The concept of limitation by analogy is as old as limitation statutes
themselves, and some appreciation of its history is helpful in
understanding the true scope of the doctrine… the first English statutes of
limitations applied only to actions at common law, and it was only
centuries later in 1833 that some equitable actions were so limited... In
the interim, Chancery Courts were often called upon to decide purely
legal claims within an equitable proceeding, and a practice evolved
whereby the statutes could be applied even though the proceeding was
technically in equity.
 Smith v Clay (1767) 3 Bro CC 639 at 640:

... But as the court has no legislative authority, it could not properly
define the time of bar by a positive rule of an hour, minute, or a year. It
was governed by circumstances. But as often as Parliament had limited
the time of actions and remedies to a certain period in legal proceedings,
the Court of Chancery adopted that rule, and applied it to similar cases
in equity. For when the legislature had fixed the time at law, it would
have been preposterous for equity (which by its own proper authority
always maintained a limitation) to countenance laches beyond the period
that law had been confined by Parliament. And therefore in all cases
where the legal right has been barred by Parliament the equitable right
as the same thing has been concluded by the same bar.
 Hovenden v Lord Annesley (1806) 9 ER 119 at 120 per Lord Resesdale:

But it is said that courts of equity are not within the statutes of
limitations. This is true in one respect; they are not within the words of
the statutes, because the words apply to particular legal remedies, but
they are within the spirit and meaning of the statutes, and have always

been so considered. I think it is a mistake in point of language to say that

courts

of equity act merely by analogy with to the statute; they act in obedience
to it. The statute of limitations, applying itself to certain legal remedies,
for recovering the possession of lands, for recovering of debts... Equity,
which in all cases follows the law, acts upon legal titles, and legal
demands, according to matters of conscience which arise, and which do
not admit of the ordinary legal remedies: nevertheless, in this
administering justice, according to the means afforded by a court of
equity, it follows the law.
Elements of the Defence
(1) Equitable relief sought (Primary Claim);

(2) No statutory time limitation period applies to the Primary Claim;
(3) There is another cause of action/relief which is analogous to the
Primary Claim (Analogous Claim) which has a statutory time period;
(4) If the statutory time period applying to the Analogous Claim applied to
the Primary Claim then the Primary Claim would be statute barred; and
(5) The court does not exercise its discretion to refuse to allow the defence
to be raised.
The Analogous Claim can be equitable (Johns v Johns [2004] 3 NZLR 202).
The main issue is determining whether the court will determine that a necessary nexus
exists such that it will determine that the Analogous Claim is, in fact, analogous to the
Primary Claim (Requisite Nexus). In Johns v Johns [2004] 3 NZLR 202, Tipping J
(at [80]-[81]) outlined when the Requisite Nexus will exist:
There will be a bar by analogy only when the [equitable] claim parallels
the statute barred claim so closely that it would be inequitable to allow the
statutory bar to be outflanked by the [equitable] claim. In order to
determine how close the parallel is the court must examine not only the
underlying facts but also the nature of the relationship between the parties
and the policy and purpose of the different causes of action. If there is a
sufficient difference in any material respect, the suggested parallel is
unlikely to be close enough to make it appropriate in equity to apply an
analogous bar... If, however, there is factual concurrence in the sense that
the different causes of action are simply different ways of putting the same
factual complaint, and there are no policy or other reasons militating
against it, the case for an analogous bar is likely to have been made out.
Good examples of the court applying the analogy with statute defence can be seen in
the cases of:
• Johns v Johns [2004] 3 NZLR 202;
• Coulthard v Disco Mix Club [2001] 1 WLR 707; and
• Cia de Seguros Imperio (a body corporate) v Heath (REBX) Ltd (formerly CE
Heath & Co (North America) Ltd [2001] 1 WLR 112.

2.3. Laches
A plaintiff who comes to equity with undue delay (“laches”) may be refused relief.
Laches is a recognised defence to equitable claims as opposed to legal claims. Laches
will bar a claim for equitable relief where a plaintiff's delay in the commencement of
his or her action for equitable relief makes it unjust to grant equitable relief.
• Also applies to delay after commencement of suit: Lamshed v
Lamshed (1963) 109 CLR 440 at 455.
Delay, by itself, is not a defence: Lamshed v Lamshed (1963) 109 CLR 440 at 453 per
Kitto J. Laches does not apply when there is a statutory bar (or a bar by analogy with
a limitation statute): Archbold v Scully (1861) 9 HL Cas 360 at 383 per Lord
Wensleydale.
Elements:
(1) Length and reasons for the delay; and
(2) Prejudice of the defendant and third parties.
(1) Length and reasons for the delay
The first issue to consider when determining the application of laches is how long the
plaintiff has delayed in the commencement or prosecution of his/her suit. In terms of
calculating the length of time, time starts running from when the claimant either
discovered or, with the exercise of reasonable diligence should have discovered, that
he or she had an enforceable right (Erlanger v New Sombrero Phosphate Co (1878) 3
App Cas 1218 at 1279 per Lord Blackburn; Lindsay Petroleum Co v Hird (1874) LR
5 PC 221 at 239-240). It is not necessary, however, that the claimant should have
known the exact relief to which he was entitled; it is enough that he knew the facts
constituting his title to relief (Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 at
241).
The second issue to consider is whether there are justifiable reasons for the plaintiff's
delay. Some delays (provided the length is reasonable) may be excusable such as a
delay to obtain legal advice or instituting inquiries before the commencement of suit
(Boyns v Lackey (1958) SR (NSW) 395 at 402; 75 WN (NSW) 451 per Hardie J) or a
delay to resolve matter out-of-court (Erlanger v The New Sombrero Phosphate Co
(1878) 3 App Cas 1218).
The third issue is to consider whether equity will require greater promptitude on the
plaintiff's part because of the nature of the matter or relief sought. For example, there
are some situations which equity requires utmost promptitude:
• Where the property is of fluctuating value or wasting in nature
(Baburin v Baburin (No 2) [1991] Qd R 240 at 259-260);
• Where a party awaits the outcome of a transaction which may or may
not be profitable (Boyns v Lackey (1958) SR (NSW) 395; Foley v Farrell
(1933) 36 WALR 46);

• Gifts made under undue influence (Turner v Collins (1871) 7 Ch App

329); and
• Claims for specific performance, constructive trusts and rescission of
contracts (Lazard Bros & Co Ltd v Fairfield Properties Co (Mayfair) Ltd
(1977) 121 Sol Jo 793 at 793 per Megarry V-C).
(2) Prejudice of the defendant and third parties
The most important consideration for a court in determining whether laches applies to
bar a claim for equitable relief is the prejudice suffered by the defendant or any third
parties by reason of the delay. The prejudice will be viewed more harshly/strictly by
a court where the plaintiff knows of the prejudice and fails to act (Erlanger v The
New Sombrero Phosphate Co (1878) 3 App Cas 1218).
A significant form of prejudice occurs where the defendant, by reason of the delay,
loses the ability, or the evidence necessary, to defend the claim (see, for example, Orr
v Ford (1989) 167 CLR 316).
2.4. Acquiescence
Acquiescence may be relied upon as an alternative defence to laches and requires

inaction in the face of an assertion of adverse rights in contrast to inaction in
prosecuting rights (LACHES). However much confusion arises from the use of the
term acquiescence because it is also used as a catch all phrase covering many of the
defences referred to in this study guide. It can also refer to conduct by a person with
knowledge of the acts of another person which encourages that other person to believe
that his acts are accepted. There is a useful discussion of the divergent uses of the
term by Deane J in Orr v Ford (1989) 167 CLR 316.
2.5 Estoppel
In the context of delay, similar to acquiescence, where a person's standing by and/or

other conduct creates a representation that that person does not challenge another's
legal rights (or waives his/her own rights), an estoppel may exist if detrimental
reliance is also present.
Note that estoppel may also exist as a defence to a claim for equitable relief outside
the context of delay (see, for example, Commonwealth v Verwayen (1990) 170 CLR
394).
3. RELEASE
Release operates as an equitable defence where one party (the plaintiff), by oral or
written agreement or by conduct, releases another party from liability. A release of
legal rights to sue must be for consideration or under seal: Commissioner of Stamp
Duties for the State of NSW v Bone (1976) 135 CLR 223 at 229.

Release cannot be relied on where would be unconscionable to do so:

Where (i) the releasee, say A, knows of facts which give rise to a claim...,
(ii) A deliberately conceals those facts from the releasor, say B, in
circumstances where A knows or believes that B cannot discover them for
himself, and (iii) B does not know of those facts, then A cannot rely on a
general release from B as a defence to a claim based on those facts,
notwithstanding that, as a matter of construction the words of the release
would include all unidentified claims. A cannot rely on the general
release because, in the circumstances described, it would be
unconscionable for him to do so.
 Bank of Credit and Commerce International SA (in liq) v Ali
[2000] 3 All ER 51 at 76.
4. UNCLEAN HANDS DEFENCE IN EQUITY
Nature of Defence
This defence involves the application of the equitable maxim that “a person who
comes to equity must come with clean hands”. It is based on the assumption that a
person must not derive an advantage from his or her own wrong. The focus is on the
conduct of the claimant seeking assistance from equity rather than the defendant. The
circumstances in which the defence may be pleaded are limited. There are many
limitations on the defence including the following:
• only a defence to an equitable claim – may still assert rights at law
• the alleged impropriety must be a depravity in a legal as well as a moral sense
• the impropriety must display an immediate and necessary connection to the
equity sued for
• relief will not be denied simply because conduct relates to taking advantage of
a bad business decision or judgment or failure to take proper precautions
• not deny relief if the consequences of doing so conflicts with other policies of
equity or statute
• defence is discretionary and the court will take into account the circumstances
of the individual case
• not be relied upon if the conduct has ceased or never carried out
Consider the following examples :
Kettles and Gas Appliances Ltd v Anthony Horden and Sons Ltd (1934) 35 SR (NSW)
108
Hewson v Sydney Stock Exchange Ltd [1968] 2 NSWLR 224
Note that specific performance may be denied in cases where the plaintiff has induced
the defendant to enter into the contract by misrepresentation or other fraudulent
conduct.

5. CHANGE OF POSITION
Although there is little clear judicial authority in relation to the application of the
defence of change of position to actions for breach of confidence, courts in Australia
and England have recognised this as an emerging equitable defence: Lipkin Gorman v
Karpnale Ltd [1991] 2 AC 548 at 558 per Lord Bridge, 568 per Lord Ackner, 579 -
580 per Lord Goff; ANZ Ltd v Westpac Banking Corporation (1988) 78 ALR 157 at
162; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 109 ALR 57
at 80 - 81. See: Jones, Restitution of Benefits Obtained in Breach of Another’s
Confidence (1970) 86 LQR 463 at 477
Elements of Change of Position Defence:

(1) Receipt of Property in Good Faith; and
(2) The defendant has acted to his or her detriment on the faith of the receipt.
- David Securities Pty Ltd v Commonwealth Bank of Australia
(1992) 175 CLR 353 at 385.
In relation to its operation as an equitable defence, it operates predominantly in two

contexts:
• Receipt by an innocent third party of confidential information (where
defence of bona fide purchaser is defeated by notice: Wheatley v Bell [1992] 2
NSWLR 544); and
• Where an innocent volunteer receives property in breach of an
equitable obligation.
6. EXCUSING BREACHES OF DUTY
The court has the power in many jurisdictions to excuse a trustee from personal
liability for breach of trust - for example Trusts Act 1973 (Qld), s 76 and
Corporations Act 2001 (Cth), s 1318.
These provisions generally requires trustee to have acted honestly and reasonably and
in such a manner that he or she "ought fairly to be excused".
These defences can extend to excusing breaches of fiduciary duty where the breach is
by a fiduciary in the capacity of a trustee (Jolmoon Pty Ltd (in liq) v Bow [1997] 2 Qd
R 62 at 72-3).
7. SET-OFF
Where a plaintiff's claim and a defendant's cross-claim/counterclaim are closely

connected, the defendant's liability to pay the plaintiff's claim can be diminished or
extinguished by virtue of the defendant's counterclaim.
For more detail refer to Dal Pont & Chalmers at 802-809.

PART C:
Equitable Remedies

CHAPTER 1: Introduction: The

General Nature of Equitable
Remedies
A. DISTINCTION BETWEEN EQUITABLE AND COMMON LAW
REMEDIES
(1) Equitable remedies are a lot more flexible and offer more scope than common
law remedies which are primarily limited to damages.
(2) Common Law remedies are generally awarded as of right, whereas equitable
remedies are discretionary, that is, the court will take into account all
circumstances including the plaintiff’s conduct, eg unclean hands, laches.
(3) Equity acts in personam:
- order is directed to defendant personally to perform or abstain from the
performance of particular acts;
- jurisdiction of the court of equity is based on the defendant being
within the power of the court, not on the location of property or the
place where an act is to be performed. Thus equitable remedies may be
given in respect of foreign property provided the defendant is within
the jurisdiction. See Penn v Lord Baltimore 27 ER 1132.
B. THE JUDICATURE ACT

Prior to the Judicature Act 1873 (Imp), only the Courts of Chancery were able to
administer equitable remedies. The Courts of Chancery also provided equitable relief
in relation to legal rights for which there was no adequate remedy at common law, eg
an injunction to restrain a tort.
Section 24(1) of the Judicature Act (Imp) (see s 244 Supreme Court Act (Qld) 1995)
enabled all branches of the new court to administer equitable remedies. As discussed
in earlier Chapters of the Study Guide, the Act was not intended to change substantive
rights and obligations but was merely intended to be procedural. Consequently, no
equitable remedy is available for a legal wrong which would not have been available
before the Judicature Act. Although note some examples of the “fusion fallacy” where
this has occurred.
C. EXCLUSIVE AND AUXILIARY JURISDICTION

Where equitable relief is provided for protection of an equitable right, such as breach
of fiduciary duty, equity is exercising its exclusive jurisdiction.
Where equitable relief is provided for protection of a legal right, such as breach of
contract, equity is exercising its auxiliary jurisdiction.
Where a plaintiff is seeking equitable relief in the auxiliary jurisdiction, there is a

basic requirement that the common law remedy of damages is inadequate, that is, does
not provide complete justice to the parties.

D. TYPES OF EQUITABLE REMEDIES

Equitable remedies may be personal or proprietary.
Proprietary remedies take effect as against identifiable property and usually take the
form of a constructive trust or an equitable lien and it may be necessary to invoke the
process of tracing in order to identify the property which is sought to be made the
subject of an equitable proprietary remedy. A claimant may also be able to gain
proprietary relief by means of subrogation to the rights of another when that other has
rights in respect of identifiable property.
Personal remedies which are available in equity include:

(i) Specific performance
(ii) Injunctions and Declarations
(iii) Monetary Remedies such as Equitable Compensation and Damages, Account
of Profits
Other remedies include, Restitution, Rescission, Rectification, Appointment of

Receivers and Managers and Delivery Up

CHAPTER 2: Constructive Trusts

Prescribed Reading:
Dal Pont and Chalmers, Ch 38 (esp. pp1004 – 1020)
Cope, Equitable Obligations, Duties, Defences and Remedies, Ch 9
Principal Cases:
Muschinski v Dodds (1985) CLR 583
Baumgartner v Baumgartner (1987) 164 CLR 137
Further Reading:
Cope, Constructive Trusts
1. THE NATURE OF A CONSTRUCTIVE TRUST

A constructive trust is the means employed for procuring an account of property in
equity where the justice of the cases requires this. A constructive trust requires no
formalities for its creation, and arises by operation of law rather than from the
intention of the parties. The basis for the imposition of a constructive trust is the
unconscionable conduct of the legal owner of the property.
Two forms of liability are designated by the term constructive trust:

(a) a declaration that property is subject to a trust in favour of some person.
(b) a declaration of personal liability to the effect that someone is liable for losses
and gains as if he or she were a trustee without requiring the defendant to hold
specific property on trust for the plaintiff.
There is no clear view as to the nature of the constructive trust and various
explanations are used to explain why a constructive trust is imposed. For a recent
consideration see Giumelli v Giumelli (1999) 73 ALJR 547 at [2] - [5].
2. CONSTRUCTIVE TRUSTS DISTINGUISHED FROM OTHER

TRUSTS
Constructive trusts are distinguishable from express and implied (resulting) trusts.
Express trusts arise as a consequence of the express intentions of the parties.
Implied (resulting trusts) arise as a consequence of the presumed intentions of the
settlor and are imposed by presumption of law.

3. INSTITUTION OR REMEDY?
It is often stated that the constructive trust is a substantive institution, a type of trust,
analogous to an express trust with many of the characteristics of an express trust such
as trustee, beneficiary and legal title to property.
It is also acknowledged that in certain situations the constructive trust is a remedy

used to compel people to acknowledge that the entitlement to the enjoyment of
property is in others or that the property should be conveyed to others. This is
achieved by imposing a duty upon the constructive trustee to hand over or surrender
or return the disputed property to the constructive beneficiary. It has been used in this
way to render fiduciaries liable to account for property and where the defendant is
acting unconscionably in refusing to hand over property.
The remedial origins and the remedial nature of the constructive trust are
acknowledged by Deane J in Muschinski v Dodds (1985) 60 ALJR 52. Read and study
the judgment. For a useful summary see Gummow J in Stephenson Nominees Pty Ltd
v Official Receiver in Bankruptcy (1987) 76 ALR 485.
4. THE BASIS OF IMPOSITION OF CONSTRUCTIVE TRUSTS

According to Deane J in Muschinski v Dodds (1986) 60 ALJR 52 a constructive trust
can be imposed so as to subject a legal owner to an obligation to hold or apply
property for the benefit of another in order to prevent a person from asserting or
exercising a legal right in circumstances where the particular assertion or exercise of it
would constitute unconscionable conduct. Importantly, the Constructive Trust is not
based on “idiosyncratic notions of fairness and justice” but on “established equitable
principles or by proper analogy of such principles”.
5. AT WHAT TIME DOES THE CONSTRUCTIVE TRUST ARISE?

There is no need for a court order before the recognition of the trust; however, the
remedy is moulded according to the justice of the case and so as not to prejudice the
rights of third parties: Muschinski v Dodds per Deane J at 614 – 615. See also Re
Osborne (1989) 91 ALR 135. This approach may not be applicable where the
constructive trust is not used purely as a remedial device and is independent e.g. or
used to enforced a pre-existing trust or related to property other than for the purpose
of declaring a new equitable interest in property for the purpose of preventing an
unconscionable assertion or retention of the relevant property. See Parsons and
Parsons v McBain [2001] FCA 376.
6. CIRCUMSTANCES IN WHICH CONSTRUCTIVE TRUSTS MAY

ARISE
There are a number of categories of case in which constructive trusts may arise. The
list is not closed and it is not always easy to define and isolate exactly the
circumstances in which a constructive trust will arise. The list includes the following:
1. Persons who act as trustees without appointment (trustees de son tort)
2. Breach of fiduciary obligation:
(a) liability of fiduciaries
(b) strangers or third parties associated with fiduciaries

3. Disputes over beneficial ownership of property:

(a) Property acquired on death:
(i) Mutual wills
(ii) Secret trusts
(iii) Murderer acquiring property by right of survivorship
(b) Advantages obtained by acting fraudulently, unconscionably or
inequitably, eg mistake, misrepresentation and undue influence
(c) Unconscionable reliance on absence of statutory formalities – oral
agreements to transfer and create trusts
(d) Unconscionable conduct generally such as estoppel part performance
or unconscionable denial of beneficial interest, particularly in the
context of de facto property disputes
(e) Miscellaneous cases:
(i) Vendor under a contract for sale of land
(ii) Mortgagees exercise of power
(iii) Assignments of property
The constructive trust as it operates in the context of persons who act as trustees
without appointment and in the context of breach of trust and breach of fiduciary duty
has already been considered in “Third Party Liability in Equity”. In this chapter the
focus is on the constructive trust in cases of disputes over beneficial ownership of
property in the context of unconscionable conduct generally such as estoppel, part
performance and unconscionable denial of beneficial interest, particularly in de facto
property disputes.
7. DISPUTES OVER BENEFICIAL OWNERSHIP OF PROPERTY: A

CONSTRUCTIVE TRUST BASED ON UNCONSCIONABLE
CONDUCT
7.1 Introduction
Where money or property is applied on the basis of some specific relationship or
endeavour, equity can prevent a party from asserting or retaining the benefit of the
relevant property to the extent that it would be unconscionable to do so. It is necessary
to establish an unconscionable retention of a benefit.
7.2 De Facto Property Disputes

The law in this area has developed in the context of property disputes between
unmarried partners. In Muschinski v Dodds (1986) 60 ALJR 52 Deane J invoked the
principle from failed joint endeavours. Because of the disproportionate contributions
of each party, each party could insist on realisation of the asset and the repayment of
contributions to purchase and improvement of the property out of the proceeds of sale.
In Baumgartner v Baumgartner (1987) 62 ALJR 29 a majority of the High Court

adopted the approach of Deane J in Muschinski v Dodds and imposed a constructive
trust in favour of the respondent as the majority were satisfied that the appellant’s

assertion, after the failure of the de facto relationship, of his legal title to the property
in order to deny his partner a beneficial interest amounted to unconscionable conduct.
It is clear from Muschinski v Dodds and Baumgartner v Baumgartner that

nonfinancial contributions are to be taken into account in determining beneficial
entitlement to property, however contributions by women as homemakers and parents
have caused difficulty in application: see Kirby P in Bryson v Bryant (1992) 29
NSWLR 188 at 203; Eekelar A Woman’s Place - a conflict between law and social
policies (1987) Con V 93 and Riley The Property Rights of Homemakers Under
General Law: Bryson v Bryant (1994) 16 Sydney Law Review 412.
Despite this, it is now clear that such contributions should and will now be taken into
account: Dunne v Turner (unreported, Court of Appeal, Queensland, 20 August 1996)
see generally Willmott, Defacto Relationships Law, LBC Information Services, 1996
at 75 - 77.
7.2.1 Statutory Reform

In most jurisdictions the courts are now able to adjust property rights of former de
facto partners under statutory provisions.
In Queensland the Property Law Act 1974 now includes Part 19 – Property (de facto
Relationships) which allows the Court to adjust the property rights of parties to a
defacto relationship (either same or opposite sex) on the basis of what is just and
equitable.
The Act applies to all de facto relationships which ended after its commencement
(21 December 1999). The Court is required to consider both financial and non-
financial contributions to the property and to the welfare of the family. Other matters
which the Court may consider include: the age and health of the parties, other
financial resources and family support commitments.
The Legislation also allows for property adjustments in favour of a child of the de
facto couple; however the Court will only consider contributions of the child where
those contributions are substantial.
Equitable principles are still relevant in those jurisdictions where there is no

legislation and where the relationship is outside the scope of the legislation.
7.3 Constructive Trusts and Other Property Disputes

The reasoning in Muschinski v Dodds, Baumgartner v Baumgartner has been applied
in the context of other domestic property disputes. See for example: Luke v
Chamberlain [2000] NSWSC 6.26; BC 200003878, Musgrave v Musgrave [2001]
NSWSC 134; BC 200101002. It has also been applied in a commercial context:
Carson v Wood (1994) 34 NSWLR 9

7.4 Other Approaches for Determining Beneficial Interests in Property

7.4.1 Common Intention Constructive Trusts
The approach adopted prior to the one outlined above was to ascertain whether the
parties had a common intention of common agreement that the beneficial interests in
the property should be shared: Allen v Snyder [1977] 2 NSWLR 685. In the United
Kingdom the House of Lords has that this approach is still applicable in that county
see Stock v Downden [2007] 2 WLR 83.
This approach is derived from the following English cases: Pettit v Pettit [1969] 2
WLR 966; Gissing v Gissing [1971] AC 866 and Grant v Edwards [1986] 3 WLR 114
7.4.2 Constructive Trust to Prevent Unjust Enrichment

In Canada a constructive trust imposed to prevent unjust enrichment is now used for
the purpose of determining the equitable ownership of property: Pettkus v Becker
(1980) 117 DLR (3d) 257; Sorochan v Sorochan (1986) 29 DLR (4d) 1
What are the differences between an approach based on unjust enrichment and one
based on an unconscionable denial of a beneficial interest? See the observations of
Kirby P and Sheller JA in Bryson v Bryant (1992) 29 NSWLR 188 on the application
of the principle of unjust enrichment.
8. ALTERNATIVE REMEDIES
The fundamental principles which govern the manner in which a court of equity
exercises its discretion to award equitable remedies are:
(a) He or she who seeks equity must do equity and therefore conditions may be
imposed on an award; and
(b) Relief will be awarded to the extent of the minimum equity necessary to do
justice and therefore a full constructive trust may not be awarded in all cases,
even where an equity has been established.
The decision of Giumelli v Giumelli (1999) 73 ALJR 547 illustrates these principles.
It may be that it is not always appropriate to award a proprietary constructive trust

remedy, but rather a personal remedy. Examples of other remedies include:
(a) The imposition of an equitable charge or lien representing contributions made
by the plaintiff. See for example: Giumelli v Giumelli (1999) 73 ALJR 547,
Musgrave v Musgrave [2001] NSWSC 134, Luke v Chamberlain (2000)
NSWSC 626
(b) Allowing a person to retain his or her interest in the property subject to the
payment of allowances to another who made contributions to the property.
(c) Account of Profits: Warmen v Dwyer

CHAPTER 3: Specific Performance

Prescribed Readings:
Dal Pont, Chalmers and Maxton, Chs 12 and 33
Principle Cases:
Dougan v Ley (1946) 71 CLR 142
JC Williamson Ltd v Lukey and Mullholland (1931) 45 CLR 282
Dowsett v Reid (1912) 15 CLR 695
Price v Strange [1978] Ch 337
Steadman v Steadman [1976] AC 536
Regent v Millett (1976) 133 CLR 679
1. INTRODUCTION
Specific performance is an order of the court directing a party to a contract to perform
his or her obligations under that contract.
The term “specific performance” is used in two senses, the proper / strict or narrow
sense and the wide sense.
The equitable remedy of specific performance shares the features of other equitable
remedies in that it is:
(i) discretionary; and
(ii) in personam.
2. REQUIREMENTS FOR SPECIFIC PERFORMANCE

The requirements for specific performance are:
1. Valid binding contract
2. Valuable consideration
3. Common law damages inadequate
2.1 Valid Binding Contract

If it relates to land, the contract must comply with PLA s 59 subject to the following
exceptions:
(a) fraud in equity: Wakeham v MacKenzie (1968) 2 All ER 783
(b) part performance

(c) unconscionability
2.2 Valuable consideration

Valuable consideration does not include deeds under seal: Jefferys v Jefferys (1841)
41 ER 443
Valuable consideration does include marriage consideration: In Re Cook’s Settlement

Trusts [1965] Ch 902
2.3 Common law damages must not be an adequate remedy

Because contract law is within the common law jurisdiction, equity is exercising its
auxiliary jurisdiction and therefore specific performance is generally only available
where legal remedies and particularly damages are inadequate.
2.3.1 Contracts for the disposition of interests in land

Damages are generally regarded as inadequate even where the purchaser is acquiring
the land merely to resell at a profit: Pianta v National Finance (1964) 38 ALJR 232 at
233; Adderley v Dixon (1824) 57 ER 239
2.3.2 Contracts for the sale of chattels and other personalty

Contracts relating to personal property will not as a general rule, be specifically
enforceable since in most cases damages will be an adequate remedy because the
goods can be replaced in the market place: Re Schwabacher (1907) 98 LT 127 at 128
(Shares)
Damages may not be adequate where the item of personalty has special qualities:
Falcke v Gray (1859) 4 Drew 651, Dougan v Ley (1946) 71 CLR 147, ANZ Executors
and Trustees Ltd v Humes Ltd [1990] VR 615
2.3.3 Contracts to pay or receive money

Generally a contract to lend or pay money will not be specifically enforceable because
it is a case where damages would almost always be an adequate remedy: The South
African Territories Ltd v Wallington [1898] AC 309.
Exceptions:
(i) agreement to provide money on security and money already advanced.
(ii) agreement to pay annuity, as separate yearly actions for each default would
make damages not adequate remedy.
(iii) contract for the material benefit of a third party where damages to the
contracting party would be nominal: Beswick v Beswick [1968] AC 58, Coulls
v Bagot’s Executor & Trustee Co Ltd (1967) 119 CLR 460
(iv) Where the contract is of such a kind that the purchaser can sue for specific
performance the vendor can also sue notwithstanding that his or her claim is
merely to recover money: Turner v Bladin (1951) 82 CLR 463 at 473

3. DEFENCES AND DISCRETIONARY CONSIDERATIONS

There are some matters which have traditionally been regarded as conclusive
defences, that is, where those circumstances exist, the court will not order specific
performance, eg lack of mutuality. In addition, there are discretionary considerations
which the court will weigh up in determining whether to grant specific performance
such as the conduct of the plaintiff and the circumstances of the defendant.
Spry suggests that there is really no distinction between the two. They are all matters
of a discretionary nature however some are ordinarily given more weight than others
(pp 88 - 89). This will be the approach adopted in the following discussion.
3.1 Continued Supervision

Generally, equity will not enforce a contract which will require continued supervision
by the court: JC Williamson v Lukey and Mulholland (1931) 45 CLR 282 at 297 -298
per Dixon J; Cooperative Insurance Society v Argyll Stores (Holdings) Ltd [1997] 3
All ER 297 (1998) AC 1
What is the rationale of this principle? This is a general principle only and in
appropriate cases an order may still be made: Argyll Stores at 15 - 16; 305 All ER for
example where the possibility of excessive applications to the court arising out of the
order is unlikely (Patrick Stevedores (supra at 617 - 620 per North J; 637 (Full
Federal Court); 670 (High Court).
Building contracts are a major exception to this general rule. Although building
contracts involve complex terms which may require constant supervision, they may be
enforced by specific performance where certain conditions are satisfied:
• work defined by contract
• plaintiff has a substantial interest in having the contract performed
• defendant has obtained possession of the land: Wolverhampton Corp v
Eimmons [1901] 1 KB 515
3.2 Personal Services

Equity will generally not decree specific performance of an agreement involving
personal services or which compel the parties to maintain a personal relationship such
as that of master - servant, or partners in partnership: JC Williamson v Lukey &
Mulholland (1931) 45 CLR 283 at 297 and 298 per Dixon J
Where the contract is an executory one (that is an agreement to enter into a formal
contract such as a service agreement) the court may order specific performance in its
narrow sense even though it is one for personal services: Giles & Co Ltd v Morris
[1967] 1 All ER 960
3.3 Lack of Mutuality

The general rule is that specific performance will not be decreed unless the remedy is
mutual in the sense that the defendant could also obtain specific performance in
respect of the plaintiff’s outstanding obligations. Equity is ensuring that justice is
done to both parties.

Lack of mutuality may occur where:

• the plaintiff is a minor: Flight v Bollard (1828) 38 ER 817
• the plaintiff’s obligations involve personal services
• the plaintiff’s obligations would require continued supervision
Mutuality must exist at least at the time of the hearing whether or not it existed at the
date of contract: Price v Strange [1978] Ch 337.
There are three exceptions to the doctrine of mutuality:

(i) Where writing is required under s 59 of the Property Law Act 1974, a plaintiff
may obtain specific performance even though, not having signed any
document it would be impossible for the defendant to obtain specific
performance against him. (The section requires that the writing be signed by
the “party to be charged”.) (However, even here once action is brought the
remedy will become mutual because the plaintiff’s pleadings must contain
particulars of the contract and must be signed by the plaintiff or an authorised
agent.)
(ii) Option to purchase. Specific performance may be obtained even though the
defendant has no claim against the plaintiff. Of course once the option is
exercised it becomes mutual.
(iii) The grant of specific performance with compensation in the case of
misdescription in a contract for the sale of land.
3.4 Misrepresentation and Mistake

Where the defendant is entitled to rescind the contract for misrepresentation or
mistake, specific performance will not be ordered against the defendant.
Where the mistake is not sufficient to allow the defendant to rescind the court may
still take it into account in deciding whether it will grant specific performance:
Tamplin v James (1879) 15 Ch D 215 at 221
3.5 Unfair Conduct

Proof of unfairness such as unconscionable conduct by a plaintiff may be sufficient
for the court to refuse specific performance: Blomley v Ryan (1956) 99 CLR 362
3.6 Hardship
Equity will not order specific performance where it would enforce a bargain which
would work great hardship upon either party: Dowsett v Reid (1912) 15 CLR 695
The court usually determines hardship by having regard to the parties’ positions at the
time of contract. However in exceptional circumstances, the court may take into
account events occurring after the date of entry into the contract: Patel v Ali [1984] 1
All ER 978, 982 per Goulding J; Ready Constructions Pty Ltd v Jenno [1984] 2 Qd R
7

The court may not decree specific performance if this would involve hardship to third
persons, particularly if the defendant is a fiduciary or trustee and specific performance
would involve him or her in breach of trust or fiduciary duty: Thomas v Dering (1837)
48 ER 488
3.7 Clean hands, not in substantial breach and ready, willing and able to
perform
The court may refuse specific performance on the grounds that the plaintiff has
breached the contract or is not ready and willing to perform his or her own obligations
under the contract.
The court’s discretion is based on the maxims “he who seeks equity must do equity”
and “he who comes to equity must come with clean hands”.
Not every breach by the plaintiff will be grounds for refusing specific performance:
• inessential terms: (Mehmet v Benson (1965) 113 CLR 295)
• where the defendant’s conduct contributed to the plaintiff’s breach: (Legione v
Hately (1983) 57 ALJR 292)
3.8 Part only of agreement to be performed

The general rule is that specific performance will not be granted of part only of an
agreement: Ryan v Mutual Tontine Westminster Chambers Association [1892] 1 Ch
116
This rule has most application to executory contracts as it is not uncommon for the
court to order specific performance of a particular obligation in an executed contract.
The plaintiff can waive performance of the balance of the agreement or obtain
damages for breach in relation to other obligations. See Spry, at pp 106 - 110.
3.9 Where performance is impossible

The courts will not require that to be done which cannot be done. Thus, where
performance is impossible the court will not order specific performance. For example
the court will not order A to specifically perform a contract to transfer land to B if A
has already transferred it to C.
3.10 Where performance would be futile

Equity will not make any order in vain. Specific performance will not be awarded if it
would be futile, that is if it would achieve no purpose. It will be of some purpose if
the plaintiff is in a more favourable position with specific performance than if left to
the remedy of damages.
For example a court would not order specific performance in relation to a lease where
the term of the lease had already expired unless there would be some tangible benefit
to the plaintiff arising from the execution of the lease: Mundy v Joliffe (1839) 9 LJ Ch
95

3.11 Laches and acquiescence

Laches and acquiescence are commonly dealt with together because of the
considerable overlap between the two. Both laches and acquiescence are used in so
many senses that it is difficult to give precise definition. For a good discussion of the
various senses and the overlap between the two, see the judgment of Deane J in Orr v
Ford (1989) 167 CLR 316 at 335 - 339
3.11.1 Laches
Laches refers to the delay of the plaintiff in pursuing relief. However mere delay of
itself is not enough to found a defence in laches. There must be something more that
makes it unconscionable for the plaintiff to be seeking the specific relief. The relevant
maxim is “equity assists the diligent and not the tardy”.
Laches is established when two conditions are satisfied:

(1) there must be unreasonable delay in the commencement or prosecution of
proceedings; and
(2) the consequences of the delay must render the grant of relief unreasonable or
unjust because it would prejudice the rights of others.
3.11.1.1 Unreasonable Delay

Delay relates not only to the period prior to the commencement of proceedings but
also to the delay in prosecuting proceedings after they have been duly commenced:
Lamshed v Lamshed 1963 109 CLR 440
3.11.1.2 Prejudice
Examples of prejudice are:
• undue doubt or uncertainty or the defendant unfairly held in suspense:
Lamshed v Lamshed 1963 109 CLR 440 at 453 per Kitto J
• the loss of evidence which will prevent the defendant from properly defending
the claim, eg if witnesses have died or documents have been lost
• expenditure of money or effort
• third parties have acquired an interest during the delay
3.11.2 Acquiescence
Acquiescence with respect to the remedy of specific performance arises where:
(i) there is an express or implied representation by the plaintiff that he or she does
not intend to compel the performance of an obligation in specie;
(ii) the plaintiff knows that the defendant believes that the plaintiff does not intend
to so enforce the obligation; and
(iii) in reliance on the representation the defendant or third party have altered their
position in such a way that enforcement in specie of the obligation would
involve an additional prejudice or inconvenience (Spry pp 236 - 241).

Where acquiescence is established in an action for specific performance, the plaintiff

will be confined to such other remedies as are appropriate.
Acquiescence in its wide sense is now incorporated in the doctrine of equitable

estoppel: See Waltons Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387; Study
Guide on Estoppel.
4. THE DOCTRINE OF PART PERFORMANCE

Specific performance will not be granted of a contract which is unenforceable at law
for lack of writing under s 59 of the Property Law Act 1974 (Qld) (originally s 4
Statute of Frauds 1677 (UK)). However, equity will order specific performance
despite the fact that the contract is not in writing where there have been sufficient acts
of part performance.
The doctrine of part performance focuses on the acts done by the plaintiff on the faith
of the contract which would make it a fraud or unconscionable for the defendant to
rely on the lack of writing.
The leading case expounding the doctrine of part performance is Maddison v

Alderson (1883) 8 App Cas 467. Lord Selbourne stated the test as follows at pp 479 -
481:
“... the acts relied upon as part performance must be unequivocally and in their own
nature, referable to some such agreement as that alleged.”
4.1 Application of Test in Maddison v Alderson

The application of the test is open to a number of interpretations:
(i) An extreme view is that the acts must point to the exact contract alleged and
no other title: Chaproniere v Lambert [1917] 2 Ch 356
(ii) The middle view and the one that has been accepted by the Australian
courts is that referable to some such contract as that alleged means “some
contract of the general nature as that alleged”: McBride v Sandiland (1918) 25
CLR 69; Regent v Millett (1976) 133 CLR 679
(iii) The wide view and the one which has been adopted by a majority of
the House of Lords is that “the acts must refer to the existence of some
contract and are not inconsistent with the one alleged”: see Steadman v
Steadman [1976] AC 536
Can the mere payment of money by a sufficient act of part performance?
The High Court in Regent v Millett left open the question of the correctness of
Steadman on its facts. State courts and the Federal Court have also declined to depart
from Australian precedent: Riches v Hogben [1986] 2 Qd R 292; Thwaites v Ryan
[1984] VR 65 (at 78); Ogilvie v Ryan 1976 2 NSWLR 504; ANZ v Widin (1990) 26
FCR 21

4.2 Nature of Acts Required

What acts can be looked at to see if they satisfy the test? Must the acts be acts done in
execution of the contract or is the test satisfied by acts authorised or allowed by the
contract or acts done in reliance on the contract?
A narrow view is that only those acts which are expressly required to be done under
the contract will be acts of part performance: Cooney v Burns (1922) 30 CLR 216
It would seem that the better view is that acts of part performance include not only
acts which are required to be done but also those authorised or permitted by the
contract and those done in reliance on a contract although not expressly authorised or
required: Millet v Regent [1975] NSWLR 62 at 66 per Hutley J; Regent v Millett
(1976) 133 CLR 679 per Gibbs J
4.3 Future of Part Performance in Australia

In many cases, a plaintiff’s acts may not be sufficient for the doctrine of part
performance but may still give rise to unconscionability on the part of the defendant
which would found an action in estoppel or constructive trust. In many cases the
plaintiff may claim these as alternatives, eg Riches v Hogben (supra) (estoppel and
part performance) and Ogilvie v Ryan (supra) (part performance and constructive
trust).
Should the application of the doctrine of part performance be liberalised? Should the
section requiring writing be abolished? See: Harris, W, ‘The Doctrine of Part
Performance and the Constructive Trust’, (1993) 11 Australian Bar Review 27;
Ridge, P, ‘The Equitable doctrines of Part Performance and Proprietary Estoppel’,
(1988) Melbourne University Law Review 725.
5. Enforcement of Specific Performance Order

As with all court orders, if the party fails to comply he or she may be committed for
contempt of court in the court’s discretion.
If an order for specific performance is sought and made, the contract remains on foot
and is not merged in the judgment for specific performance. If a breach or repudiation
occurs after a decree of specific performance, the plaintiff may have the contract
rescinded with the leave of the court and seek damages without starting a new action:
Johnson v Agnew [1980] AC 367; Sunbird Plaza Pty Ltd v Moloney (1988) 62 ALJR
195
Prior to the court ordering specific performance, it seems that the contract can be
rescinded without the leave of the court: Ogle v Comboyuro Investments Pty Ltd
(1976) 136 CLR 444

CHAPTER 4: Injunctions and

Declarations
Prescribed Reading:
Dal Pont, Chalmers and Maxton, Chs 31 and 37
Principal Cases:
Curro v Beyond Productions (1993) 30 NSWLR 337
Cooney v Kuringai Municipal Council (1963) 114 CLR 582
Australian Conservation Foundation Inc v The Commonwealth of Australia (1980)
146 CLR 493
Redland Bricks Ltd v Morris [1970] AC 652
Queensland Industrial Steel Pty Ltd v Jensen [1987] 2 Qd R 572
ALR 602 (North J) (confirmed on appeal by Full Federal Court at 626 and
High Court at 643)
Ainsworth v Criminal Justice Commission (1992) 66 ALJR 271
A. INJUNCTIONS
1. Introduction
An injunction is an order of the court restraining the person to whom it is directed
from performing a specified act or requiring that person to perform a positive act
(Spry, p 317).
Injunctions may be classified in a number of ways:

(a) whether the injunction orders the doing of an act or prohibits an act -
mandatory or prohibitory
(b) the time at which the injunction is sought:
- before the full trial to protect the rights of the parties pending the final
outcome of litigation - interlocutory or interim
- at trial for final relief - perpetual or final
(c) whether the breach of rights has not yet occurred but is anticipated or
threatened - quia timet
(d) Mareva Injunctions
(e) Anton Piller Orders
2. History and Jurisdiction

Historically, injunctions were the exclusive remedy of the Chancery Court, and could
be awarded either in its exclusive jurisdiction to protect or enforce equitable rights or

in its auxiliary jurisdiction to protect legal rights where common law remedies were
inadequate.
By legislative enactments during the 1850s the common law courts obtained a wide
power to award injunctions to stop a party from continuing a legal wrong.
Consequent upon the Judicature Act, the fused court has power to award an injunction
in the same circumstances as the separate courts of common law and equity did prior
to 1873. Section 5(8) of the Judicature Act 1876 (Qld) also conferred power to grant
injunctions “in all cases in which it shall appear to the Court to be just or convenient”.
(This section now s 246 Supreme Court Act (Qld) 1995)
Therefore, jurisdiction to grant an injunction may derive from the following sources:
• Equitable Jurisdiction
- exclusive
- auxiliary
• Common Law Jurisdiction
• Statutory Jurisdiction
3. Equity’s Exclusive Jurisdiction

An injunction granted in aid of an equitable right is awarded in equity’s exclusive
jurisdiction.
Examples of purely equitable rights protected by an injunction in equity’s exclusive

jurisdiction include:
(i) injunctions to prevent an unreasonable restraint of trade: Buckley v Tutty
(1971) 125 CLR 353
(ii) injunctions preventing a trustee committing a breach of trust: Park v Dawson
[1965] NSWR 298
(iii) injunctions restraining an untrustworthy executor from dealing with estate
assets: Bowen v Phillips [1897] 1 Ch 174
(iv) injunctions to prevent breach of confidential information: Duchess of Argyll v
Duke of Argyll [1967] Ch 302
4. Equity’s Auxiliary Jurisdiction

An injunction granted in aid of a common law or statutory right is awarded in equity’s
auxiliary jurisdiction.
(a) Requirements:
(i) infringement of a legal right of an established kind: see Australian
Broadcasting Corporation v Lenah Game Meats (2001) HCA 63 per
Gleeson CJ, Gaudron J and Gummow and Hayne JJ, but Cf Kirby J
and Callinan J

(ii) damages or common law remedies are an inadequate remedy: see

discussion of this requirement in “Specific Performance” and see
Aristoc Industries Pty Ltd v RA Wenham (Builders) Pty Ltd [1965]
NSWR 581 Graham v K.D. Morris & Sons Pty Ltd [1974] Qd R 1
(iii) that the legal right to be protected is proprietary in nature.
Traditionally, the injunction was dependent on the plaintiff showing some proprietary
right that had to be protected, however, that principle has been substantially eroded by
the courts.
(b) Examples of common law rights protected by an injunction in equity’s

auxiliary jurisdiction include:
(i) To prevent multiplicity of common law actions: (Commissioners of
Sewers of London v Gellatly (1876) 13 Ch D 610 at 615 - 616)
(ii) To restrain infringement of a common law right, contractual, tortious,
or statutory: (Wolverhampton and Walsall Railway Co v London and
North West Railway Co (1873) LR 16 Eq 433)
(iii) To restrain a private nuisance as in Vincent v Peacock [1973] 1 NSW
LR 466 or a trespass to land as in Graham v KD Morris & Sons Pty
Ltd [1974] Qd R 1
5. Common Law Injunctions

The Common Law Courts had no inherent jurisdiction to grant injunctions but had
limited jurisdiction conferred by statute both before and after the Judicature Act and
there may now be concurrent jurisdiction - at common law and in equity’s auxiliary
jurisdiction. However, one disadvantage at common law was the inability to obtain an
injunction quia timet.
6. Statutory Injunctions
Particular statutes may also give jurisdiction to grant injunctions in prescribed
circumstances: See s 114, Family Law Act 1975; Section 80, Trade Practices Act
1974.
Under the Queensland derivative of Lord Cairns’ Act, equitable damages can be
awarded in lieu of or in addition to an injunction.
7. Prohibitory Injunctions
The scope of prohibitory injunctions is wide. They have been used, amongst other
things, to restrain waste, public or private nuisance, trespass to land, injurious
falsehood, passing off, inducing breach of contract, interference with the goodwill of a
business by its assignor, and abuse of rights by a mortgagor. The following is a
discussion of other uses of the prohibitory injunction.
7.1 Injunctions to Enforce Negative Covenants

The Courts of Equity have jurisdiction to restrain breaches of negative covenants and
contractual terms, notwithstanding that no proprietary right is threatened. There is also

the concurrent common law jurisdiction to restrain repetitions or continuations of

breaches of contract: Doherty v Allman (1878) 3 A C 709 at 719 - 721; Ampol
Petroleum Ltd v Mutton (1952) 53 SR(NSW) 1
This rule applies to both express and implied terms provided that the stipulation is
negative in substance. The court looks to the substance not the form of words: ACOA
v The Commonwealth (1979) 53 ALJR 588
In some cases, the effect of the injunction may be akin to ordering specific
performance. The traditional view is that equity will not grant an injunction where the
effect would be to compel performance of an agreement to which equity would not
decree specific performance. Consequently, the court will usually not grant
injunctions in three particular cases:
(i) contracts for the sale of chattels where damages would be an adequate remedy
(ii) contracts in which the granting of an injunction would put the court in the
position of supervising the contract, eg building contracts and sharefarming
agreements
(iii) contracts of personal service
Here the court must distinguish between a negative stipulation which has the indirect
effect of positively enforcing the contract in specie and where it has a purely negative
effect. It will have an indirect effect of enforcement where the defendant would have
no choice but to perform the services or remain in destitute idleness: Page One
Records v Britton [1968] 1 WLR 157; Curro v Beyond Productions (1993) 30
NSWLR 337
7.2 Injunctions to Restrain Statutory Breaches or Enforce Statutory Rights

Where there has been a breach of statute or a breach threatened, there are a number of
possibilities as far as obtaining an injunction is concerned:
(a) A statute may expressly or impliedly exclude any remedy other than those
which it expressly provides.
(b) A statute may confer private rights upon an individual which can be protected
by injunction: Bradley v The Commonwealth (1973) 128 CLR 357; King v
Goussetis (1986) 5 NSWLR 89.
(c) Where a public right is infringed or threatened the Attorney-General is the
proper plaintiff. An individual cannot sue, unless he or she gets the fiat of the
Attorney-General. This is called a relator action. Note that if the Attorney-
General refuses to give the fiat there is no avenue for appeal. Such an
injunction does not require proof of an infringement of a proprietary interest:
Gouriet v Union of Post Office Workers [1978] AC 435; Cooney v Kuringai
Municipal Council (1963) 114 CLR 582
(d) Where a public right is threatened or infringed, a private individual can bring
an action in his or her own name without the fiat of the Attorney-General if he
or she comes within the principles in Boyce v Paddington Borough Council
[1903] 1 Ch 109:

(i) where the interference with the public right is such that some private
right is also infringed: California Theatres Pty Ltd v Hoyts Country
Theatres Ltd (1959) 59 SR NSW 188; Helicopter Utilities Pty Ltd v
Australian National Airlines Commission [1962] NSWR 747; or
(ii) where no private right is infringed, but in respect of the infringement
of the public right the individual has suffered special damage: Onus v
Alcoa of Australia Ltd (1981) 149 CLR 27; Australian Conservation
Foundation Inc. v The Commonwealth of Australia (1980) 146 CLR
493. As to what is required for special damage has been the subject of
various different views:
(a) The Narrow View:- In Alphapharm Pty Ltd v Smithkline
Beecham (Australia) Pty Ltd (1994) 121 ALR 373, the court said
the to have a special interest the applicant’s interest must
correlate with the interests of the legislation in question
(“correlation of objects”). What the court will consider in this
regard is the subject matter, scope and purpose of the legislation.
Despite being impliedly overruled by Bateman’s Bay Local
Aboriginal Land Council v Aboriginal Community Benefits Fund
Pty Ltd (1998) 155 ALR 684, Support for this approach can still
be gleaned from Allan v Transurban City Link Pty Ltd (2001) 208
CLR 167 and Chilcott v Queensland Health [2002] QSC 118;
[2002] ACL Rep 10 QLD 11.
(b) The Middle Ground View:- in Bateman’s Bay Local Aboriginal
Land Council v Aboriginal Community Benefits Fund Pty ltd
(1998) 155 ALR 684, the court confirmed it was inappropriate to
adopt a precise formula as to what would amount to a special
interest. In the context of non lobby groups, what needs to be
shown is an interest that is special – i.e. something more than a
mere emotional or intellectual concern: ACFI per Gibbs J. A
plaintiff must show that he is specially affected, that is, in
comparison with the public at large he has been affected to a
substantially greater degree or in a significantly different manner:
Onus v Alcoa of Australia Ltd (1981) 149 CLR 27 per Gibbs J at
74. A small difference will not be enough: Central Qld
Speleological Society v Central Qld Cement Pty Ltd. However, in
the context of lobby groups, it appears that the traditional view as
to the rewuirements of “ special damage” adopted in ACFI is no
longer applicable – as the community now expects such bodies to
concern themselves with conservation (Australian Conservation
Foundation v Minister for Resources (1989) 19 ALD 70
(“ACF2”) per Davies J). What needs to be shown in this context
is a proximity to the subject matter and importance of its concern:
North Coast Environment Council v Minister for Resources
(1994) 36 ALD 30 (“NCEC”) In ACF2, NCEC and Tasmanian
Conservation Trust v Minister for Resouces (1995) 127 ALR
580, the court alluded to factors that were indicative of such
proximity, including:
a. Whether the issue is of national or loval concern;
b. The conservation body’s size (though size is not critical)
and membership, government recognition (whether through

grants, funding, invitations to make submissions or act on

advisory committees), public recognition and activities in
the conservation area which the injunction is sought.
(c) The Broad View:- The brpad view, as put forward by
Chesterman J in NQCC (and approved in Save Bell Park Group v
Kennedy [2002] QSC 174; [2002] ACL Rep 10 QLD 16 per
Outney J) is that standing should be as of right, as long as there is
no abuse of process.
(e) A statute may give an individual or a body the right to bring action in its own
name even though no private right is infringed.
There are a number of statutes which confer open standing, enabling any
person to commence action in their own name. Legislation may also confer
this right on local authorities: Trade Practices Act 1974 (Cth), s 80; Cooney v
Kuringai Municipal Council (1963) 114 CLR 582 and s 587, Local
Government Act (NSW)
7.3 Where Breach is a Criminal Offence

Where the breach of statute is a criminal offence, equity will not intervene to restrain
the breach or prevent the criminal activity unless there are exceptional circumstances.
This is because equity has no criminal jurisdiction: Elliot v Seymour (1993) 68 ALJR
173.
Exceptional circumstances include:

• where the act complained of is both an infringement of a public right and a
crime: A-G (on the relation of Daniels) v Huber (1971) 2 SASR 142
• an offence frequently repeated in disregard of a usually inadequate penalty:
Attorney-General ex. rel. Meat & Allied Trades Federation of Australia v
Beck [1980] 2 NSWLR 77
• emergency situations: A-G v Chaundry [1971] 1 WLR 1614
• the statute’s object is the health, safety and welfare of the public: Cooney
(supra)
8. Mandatory Injunctions
A mandatory injunction is an injunction which compels the party to whom it is
directed to perform some positive act.
There are two types of mandatory injunctions:

(i) the enforcing injunction; and
(ii) the restorative injunction.
The enforcing injunction compels a person to whom it is addressed to do some

positive act which he has promised for valuable consideration to do. This injunction is
similar to specific performance and the same discretionary defences and
considerations will apply.

The restorative injunction compels a person to repair the consequences of some

wrongful act done by himself, eg in breach of contract or a statute. The plaintiff must
prove:
(i) a very strong probability on the facts that grave damage would occur in the
future;
(ii) damages are inadequate; and
(iii) the court’s discretion favours the order having regard to the conduct of the
defendant and the cost of the restorative work: Redland Bricks Ltd v Morris
[1970] AC 652.
Justice between the parties having regard to all the relevant circumstances is a guiding
factor in the Court’s discretion.
9. Interlocutory Injunctions
A perpetual or final injunction is a final judgment which settles the dispute between
the parties and is usually only granted after a full trial on the merits. Interim
injunction is often used interchangeably with interlocutory injunction. However,
technically there is a difference in that an interim injunction is more temporary than
an interlocutory injunction, remaining in force until a specified date, which is prior to
the eventual hearing date. See Commonwealth of Australia v John Fairfax and Sons
Ltd (1980) 32 ALR 485.
An interlocutory injunction is a temporary order to maintain the status quo until the
main hearing when the court has an opportunity to hear and weigh fully the evidence
on both sides. It does not involve a full presentation of both parties’ evidence and is
often sought as a matter of urgency to prevent allegedly irreversible damage to the
plaintiff’s rights.
9.1 Requirements for interlocutory injunction

9.1.1 Serious question to be tried or triable issue
In recent years, there has been much debate about whether the plaintiff has to prove a
prima facie case, that is, prove that at the trial they would probably have success
(Beecham Group Limited v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622 -
623), or prove that there was a serious question to be tried. (American Cynamid v
Ethicon Ltd (1975) AC 396
Ultimately, the Full Court of the High Court in the case of Murphy v Lush (1986) 60
ALJR 523, without comment, adopted the test that there be a “triable issue”.
Is a “triable issue” the same test as “a serious question to be tried”?: Qld Industrial
Steel Pty Ltd v Jensen [1987] 2 Qd R 572
9.1.2 Balance of convenience favours the granting of the interlocutory injunction

In Beecham the High Court stated (at 662,3) that the second requirement for the
granting of an injunction is “whether the inconvenience or injury which the plaintiff
would be likely to suffer if an injunction were refused out-weighs or is outweighed by
the injury which the defendant would suffer if an injunction were granted”.

What matters will the court take into account?
To satisfy the balance of convenience, a plaintiff may have to show a stronger case in
relation to mandatory injunctions, interlocutory injunctions having final effect and
injunctions where the granting of the injunction is against the public interest, such as
to prevent alleged defamation: See Castlemaine Tooheys Ltd v State of South
Australia (1986) 161 CLR 148 at 154 per Mason ACJ.
As a matter of practice, an interlocutory injunction will be refused unless the plaintiff

gives an undertaking as to damages.
The Court may take into account that any undertaking may be worthless because the
plaintiff cannot afford to pay damages: See Cambridge Credit Corporation Ltd v
Surfers’ Paradise Forests Ltd [1977] Qd R 261.
For a good application of the requirements for an interlocutory injunction, see Qld
Industrial Steel Pty Ltd v Jensen [1987] 2 Qd R 572 and Patrick Stevedores
Operations Pty Ltd v Maritime Union of Australia (1998) 153 ALR 602 (North J).
10. Quia Timet Injunctions

Quia Timet injunctions are granted for the purpose of preventing a threatened
unlawful interference with the exercise of the plaintiff’s rights prior to any actual
interference. The plaintiff must show a strong probability that what the defendant
proposes to do will cause imminent and substantial damage to the plaintiff’s property
or business: see Redland Bricks Ltd v Morris [1970] AC 652.
11. Mareva Orders

11.1 Nature of the Mareva Order
The Mareva order is a special type of prohibitory injunction usually interlocutory,
which restrains a defendant or a third party from removing any assets from within the
jurisdiction or otherwise dealing with assets either within or outside the jurisdiction.
The Mareva order derives its name from the second English decision granting such an
injunction: Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2
Lloyd’s Rep 509; [1980] 1 All ER 213
The order is in personam and not in rem. Therefore it attaches to the person not the
property. Its purpose is not to create a security for the plaintiff, give the plaintiff
proprietary rights or give priority over other creditors. The purpose of the order is to
prevent the defendant disposing of his or her assets so as to abuse the process of the
court by depriving the plaintiff of successfully executing any judgment the plaintiff
may obtain against the defendant: Jackson v Sterling Industries Ltd (1987) 162 CLR
612
11.2 Jurisdiction
Since 1975 the validity of the Mareva injunction has been virtually accepted by all
commonwealth countries.

The jurisdictional basis for the order is statutory (eg Judicature Act 1876 (Qld), s 5(8)
(now s 246 Supreme Court Act 1995 (Qld)), Federal Court of Australia Act 1976
(Cth), s 23) and/or within the inherent jurisdiction of the court to prevent abuse of its
process: Cardile v Led Builders Pty Ltd (1999) 73 ALJR 657
Rule 260 of the Uniform Civil Procedure Rules authorises Supreme and District
Courts to grant Mareva Orders.
(iii) Requirements
At general law, the plaintiff was required to prove:
• a prima facie cause of action against the defendant; and
• a real risk that the defendant will abscond, remove or dispose of assets so that
any judgment obtained by the plaintiff could not be satisfied: Patterson v BTR
Engineering (Aust) Ltd (1989)18 NSWLR 319.
Rule 260 does not set out any requirements for the granting of a Mareva Order;
however, the information which the application must contain indicates that the general
law will apply. Note that an interlocutory Mareva Order will not usually be granted
unless the applicant gives an undertaking as to damages: r 264.
12. Anton Piller Orders

12.1 Nature of the Anton Piller Order
An Anton Piller order is an interlocutory mandatory injunction, usually ex parte,
which compels the defendant to permit the plaintiff to enter and inspect its premises
for the purpose of obtaining articles the subject of litigation and relevant
documentation. The Order derives its name from the first case in which the English
Court of Appeal approved the grant: Anton Piller K.G. v Manufacturing Processes
Ltd [1976] 1 Ch 55
The purpose of the order is to preserve evidence which supports a plaintiff’s case
which an unscrupulous or dishonest defendant may destroy before trial if the
defendant had forewarning. The order may also enable the plaintiff to obtain
documentation in relation to the defendant’s customers or suppliers which the
defendant may otherwise have destroyed: Rank Film Distributors Ltd v Video
Information Centre [1982] AC 380
12.2 Jurisdictional Basis

The courts in Australia have accepted that they have power to award the order in its
wide and narrow form. The Courts have relied upon an inherent jurisdiction to grant
both forms of order. Rule 261 of the Uniform Civil Procedure Rules authorises the
Supreme and District courts to grant Anton Piller orders.
12.3 Requirements and Safeguards

In addition to the usual requirements for an interlocutory injunction, the plaintiff must
show:

• a strong prima facie case

• clear evidence that the defendant has incriminating articles or evidence in his
or her possession
• that there is a real possibility that the defendant may destroy the article or
evidence before an application or notice can be made
Because of the exceptional nature of the remedy and its potential for abuse, a number
of protective safeguards have been developed concerning the exact terms of the order
and its implementation: Columbia Pictures Industries Inc v Robinson [1986] 3 WLR
542
Rule 261 does not set out any requirements for the granting of an Anton Piller Order
however, the information which the application must contain indicates that the general
law will apply. Note that an interlocutory Anton Piller Order will not usually be
granted unless the application gives an undertaking as to damages: r 264
13. Defences
The usual equitable defences such as laches, acquiescence, unclean hands, etc are
available. Spry suggests that the same equitable discretionary considerations would
apply to the grant of both equitable and legal injunctions. However, special
considerations may be applied by a court exercising statutory jurisdiction.
See discretionary defences and considerations in “Specific Performance”.
14. Damages in Lieu of an Injunction

Under the Queensland derivative of Lord Cairns’ Act, equitable damages can be
awarded in lieu of or in addition to an injunction.
B. DECLARATIONS
1. Introduction
A declaration is a statement by the court of the law or the rights of parties in some
particular matter.
2. Jurisdiction
Originally no court had power to grant merely declaratory relief. Equity’s jurisdiction
to award declarations was limited to cases where some other equitable relief was also
granted. Legislative amendments culminating in the Judicature Act 1873, invested the
courts with power to hear matters for declaratory relief whether or not any other relief
was or could be claimed.
These provisions were also adopted in most Australian States. In Queensland the
jurisdiction derives from Rule 658 of the Uniform Civil Procedure Rules (Qld).
The jurisdiction of the High Court stems from O 26 r 19 of the Rules of the High
Court.

3. Scope of Declaratory Relief

The court’s jurisdiction to award declaratory relief is very broad and almost
unlimited: Ainsworth v Criminal Justice Commission (1992) 66 ALJR 271 at 278
Declaratory relief has been granted in a large range of matters, including:

• determination of statutory rights
• determination of property rights
• contract matters
• constitutional matters
• challenging legislation
• administrative review
• criminal law (exceptionally)
The jurisdiction of the courts to award declaratory relief may be excluded by statute
(expressly or by implication). The mere existence of another tribunal to hear a matter
is not enough to take away the courts jurisdiction: Forster v Jododex Pty Ltd (1972)
127 CLR 421
4. Standing / Locus standi

The test of locus standi for declarations is the same as for injunctions: ACF v
Commonwealth
5. Court’s Discretion to Grant Declaratory Relief

As the jurisdiction to award declarations is both statutory and within the court’s
inherent jurisdiction, it is not subject to the traditional equitable defences: Mayfair
Trading Co Pty Ltd (1958) 101 CLR 428 at 450 - 456. However, declaratory relief is
discretionary and there are some cases where the courts will generally exercise a
discretion against awarding the relief:
(i) Criminal Proceedings
Generally the court will not grant a declaration so as to interrupt or forestall
criminal proceedings if the basis of the application is really to ask the court to
declare that an offence has or has not been committed: Elliot v Seymour
(1993) 68 ALJR 173
Exceptional circumstances justifying a declaration in criminal matters may
arise where some private right of the plaintiff is infringed: Crouch v The
Commonwealth (1948) 77 CLR 339
(ii) Theoretical or Hypothetical issues
The court may refuse a declaration if the issue is purely theoretical or
hypothetical: Ainsworth

(iii) No practical use

The court may refuse to grant an injunction where the granting of the
declaration will be of no practical use or have no foreseeable consequences:
Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 307; Ainsworth
(iv) Availability of another remedy
It used to be thought that if another remedy was available, the court would not
grant a declaration. However this view has been rejected by the courts: Pyx
Granite case [1960] AC 260; Ainsworth

CHAPTER 5: Monetary Remedies

Prescribed Reading:
Cope, Equitable Obligation, Duties, Remedies and Defences, Ch 8.
Principal Cases:
Re Dawson [1966] 2 NSWR 211
Johnson v Agnew [1980] AC 367
Kennaway v Thompson [1980] 3 All ER 329
Warman v Dwyer (1995) 128 ALR 201; (1995) 182 CLR 544
Dart Industries v Décor Corp Pty Ltd (1993) 179 CLR 101
Youyang v Minter Ellison Morris Fletcher [2003] 212 CLR 484; [2003] HCA 15
Harris v Digital Pulse Pty Ltd [2003] NSWCA 10
Further Reading:
JA Jolowicz, ‘Damages in Equity - A Study of Lord Cairns’ Act’, (1975) 34
Cambridge Law Journal 224
Aitken L, ‘Developments in Equitable Compensation: Opportunity or Damper’ (1993)
67 ALJ 596
A. MONETARY REMEDIES: INTRODUCTION

Traditionally equity had no power to award damages as known in the common law. In
its inherent jurisdiction it could award monetary remedies such as an account of
profits, equitable compensation or restitution for breaches of equitable obligations. In
1858 the Chancery Courts were given statutory power to award damages in addition
to or in lieu of other equitable remedies in certain cases. After the Judicature Act
1873, the fused court had power to award common law damages, limited however to
those matters where common law damages could previously have been awarded.
A plaintiff must elect between the remedies of account of profits or equitable

compensation (Warman International Ltd v Dwyer (1995) 182 CLR 544) and like all
other equitable remedies, the award of monetary remedies in equity is discretionary.
B. EQUITABLE COMPENSATION
1. Nature
A court of equity has inherent and exclusive jurisdiction to award equitable
compensation against a fiduciary in favour of a beneficiary who has suffered loss as a

consequence of the fiduciary’s breach of obligation. This remedy has been extended to
breaches of other equitable obligation such as breach of confidence.
2. Purpose
The purpose of an award of equitable compensation is to place the plaintiff who has
suffered as a consequence of breach of an equitable obligation as nearly as possible in
the position that he or she would have been in had there not been any breach of such
obligation: Nocton v Lord Ashburton [1914] AC 932.
Equitable compensation is often described as restitutionary (in the sense of

restoration) in nature (Re Dawson [1966] 2 NSWR 211; Target Holdings Ltd v
Redferns [1995] 3 WLR 352), as opposed to common law damages which are
generally compensatory in nature: Houghton v Immer (No 155) Pty Ltd; (1997) 44
NSWLR 46. It has been suggested that this is a distinction without a difference.
2.1 Availability of Exemplary (punitive) Damages

There is some debate as to whether the remedy should be used to punish the guilty
party by awarding exemplary damages: Aquaculture Corporation v NZ Green Mussel
Co Ltd [1990] 3 NZLR 299 (exemplary damages awarded); Cf Houghton v Immer
(No 155) Pty Ltd (1997) 44 NSWLR 46 and Harris v Digital Pulse Pty Ltd [2003]
NSWCA 10
3. Recoverable Heads of Damage

A variety of heads of damage are recoverable, for example both economic and non
economic loss are recoverable, though aggravated damages are questionable.
4. Principles Governing Equitable Compensation and its Measure

4.1 General Principles
There is some controversy regarding the general principles governing the award of
equitable compensation.
As with all equitable remedies, compensation is discretionary: Day v Mead [1987] 2

NZLR 443 per Somers J at 462. Therefore there are no hard and fast rules to apply – the
approach is broad and flexible.
For a recent consideration, see Pilmer v The Duke Group (in liquidation) [2001] HCA 31
per McHugh, Gummow, Hayne and Callinan JJ at [85] and if Kirby J at [149] - [154].
4.2 Factors limiting Equitable Compensation

The orthodox view is that in contrast to common law damages, the factors which limit
common law damages such as contributory negligence, mitigation, causation, novus
actus interveniens and remoteness of damage do not arise. However as with all equitable
remedies the award of equitable compensation is discretionary and the conduct of the
parties may be relevant in determining the availability of the remedy.
This traditional view is being eroded in New Zealand and Canada, where the courts
are incorporating some of the principles of common law into equitable compensation:

Canson Enterprises Ltd v Boughton (1991) 85 DLR (4th) 129 (novus actus
interveniens); Day v Mead [1987] 2 NZLR 443 (contributory negligence); Davies JD
Equitable Compensation: Causation Foreseeability and Remoteness in Waters DWM,
Equity Fiduciaries and Trusts, Carswell ,Toronto, 1993, p 297 at 305 - 312. See also:
Norberg v Wynrib [1992] 2 SCR 226 (Can); Hodgkinson v Simms (1994)117 DLR
(4th) 161
Australian courts have been reluctant to embrace this approach: Maguire v Makaronis
(1997) 188 CLR 449; Astley v Australia Ltd (1997) 197 CLR 1; Pilmer v The Duke
Group (in liquidation) [2001] HCA at (86) per majority: see also Kirby J [171] - [173].
See also Youyang v Minter Ellison Morris Fletcher [2003] HCA 15
4.3 Assessment
As the remedy is discretionary there is flexibility as to the date of assessment and the
method of assessment. The remedy is moulded to meet the justice of the case.
4.3.1 Quantum
Compensation may be assessed by reference either to the plaintiff’s loss or the
defendant’s gain, whichever meets the justice of the case in the circumstances:
McKenzie v McDonald [1927] VLR 134. The purpose of an award of equitable
compensation is to place the plaintiff who has suffered as a consequence of breach of
an equitable obligation as nearly as possible in the position that he or she would have
been in had there not been any breach of such obligation: Nocton v Lord Ashburton
[1914] AC 932; Hill v Rose [1990] VR 129
Compensation is also often awarded where an account of profits would be too difficult
to assess: Fraser Edminston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1
The incidence of taxation is irrelevant in the assessment of equitable compensation:

Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515 at 545 per Brightman LJ
Interest is available on awards of equitable compensation according to the justice of the

case.
4.3.2 Date of Assessment

The date at which the assessment is made is the date which the justice of the case
requires in all the circumstances: Re Dawson; Youyang v Minter Ellison Morris
Fletcher [2003] HCA 15
C. LORD CARINS’ ACT - DAMAGES

1. History
In 1858 the Chancery Amendment Act 1858 (21 and 22 Vict C27) known as Lord
Cairns’ Act (Imp) sought to extend the power of an equity court to award damages.
The main purpose of the act was to enable the Court of Chancery to do “complete
justice” between the parties by awarding damages in those cases in which it had
formerly refused equitable relief in respect of a legal right and left the plaintiff to sue

for damages at common law: Wentworth v Woollahra Municipal Council (1982) 149
CLR 672 at 676.
In Queensland, the provisions of Lord Cairns’ Act were enacted in s 62 of the Equity
Act 1867. This section was abrogated by the Repealing Rules of 1900 and the Act
repealed by the Statute Law Revision Act 1908. Both the Rules and the 1908 Act had
saving provisions similar to parallel English legislation where Lord Cairns’ Act was
similarly repealed. In Queensland, as in England (Sayers v Collyer (1884) 28 Ch D
103 at 107 - 108 per Baggallay LJ) it has been held that the relevant provisions of
Lord Cairns’ Act survived the repealing statute and that the court had the power to
award damages: Barbagallo v J & F Catelan Pty Ltd [1986] 1 Qd R 245 at 250 - 251
2. Prerequisites
The jurisdiction to award damages under Lord Cairns’ Act arises whenever “the court
of chancery has jurisdiction to entertain an application ...”.
Does this mean that damages may only be awarded where the court would have
exercised its discretion to grant the equitable relief of injunction or specific
performance? See: Edward Street Properties Pty Ltd v Collins [1977] Qd R 399;
Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 at 677 - 678
The court must have such jurisdiction either at the time of commencement of
proceedings or at the hearing: Ferguson v Wilson (1866) 2 Ch App 77
The statutory power to award damages may be exercised although the plaintiff has not
specifically pleaded damages in lieu of an injunction or specific performance:
Barbagello v Catelan Pty Ltd (supra)
The court has jurisdiction to award damages where it has previously awarded specific
performance and such order has not been enforced. This is because the contract
remains on foot and is not merged in the judgment. Johnson v Agnew [1980] AC 367
3. Extent of Jurisdiction
3.1 Common Law Rights
Although it may have been intended that Lord Cairns’ Act would be purely procedural
(in the same way as the Judicature Act), the effect has been the widening of the
court’s power in that damages have been awarded in cases where damages at common
law would not have been available:
(a) contracts which are only enforceable through the equitable doctrine of part
performance
(b) actions to restrain threatened wrongs
(c) continuing wrongs

3.2 Equitable Rights

Lord Cairns’ Act enables a court to award damages in lieu of an injunction or specific
performance in the event of the breach of a purely equitable right: Wentworth v
Woolahra Municipal Council (Supra) at 676
Examples of such cases include:

a) breach of the equitable obligation of confidence: Seager v Copydex Ltd
[1967] 1 WLR 809; Talbot v General Television Corp Pty Ltd [1980] VR 224
b) restrictive Covenants: Johnson v Agnew [1980] AC 367
c) breach of fiduciary duty: Re Leeds and Hanley Theatre of Varieties [1902]
2 Ch 809
3.3 Public Rights

The statute does not extend to awarding damages in lieu of an injunction to protect
public rights such as breach of a prohibition contained in a statute which creates only
public rights and does not confer any private rights: Wentworth v Woollahra
Municipal Council (1982) 149 CLR 672
4. Discretionary Considerations
As with all equitable remedies the court has a discretion whether to award damages in
lieu or, in fact, give any equitable relief. The general rule is that a substitution of
damages for specific relief “ordinarily occurs only when the hardship caused to the
defendant through specific enforcement would so far outweigh the inconvenience
caused to the plaintiff if specific performance was denied that it would be highly
unreasonable in all the circumstances to do more than to award damages” (Spry).
In Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287 (Heydon, p 1062),

AL Smith LJ, set out a “good working rule” as to the circumstances in which damages
could be awarded in lieu of an injunction where (at 322 - 323).
This “good working rule” is only meant as a broad guide and is not intended to be
applied strictly. See: Kennaway v Thompson [1980] 3 All ER 329 for the application
of these principles (damages refused).
What role does the public interest have in the court’s determination? Kennaway v
Thompson [1980] 3 All ER 329; Cf (Miller v Jackson [1977] QB 966)
5. Assessment
The remedy of damages under Lord Cairns’ Act is discretionary and the court may
take into account equitable considerations in determining the quantum of damages.
No exhaustive rules can be laid down as in each case the measure of damages is to be
assessed by reference to what is most just and appropriate in all the circumstances.
5.1 Legal Rights

However, in cases where there is a right to damages at law, it has been held that
damages under the Act are to be assessed in accordance with common law principles.
Thus, in cases of breach of contract, damages will usually be assessed as of the date of

the breach. However, that is not an absolute rule and if the usual rule would give rise
to an injustice the Court can fix such other date as may be just and appropriate in the
circumstances, such as the date of judgment: Johnson v Agnew [1980] AC 367;
Madden v Kevereski [1983] 1 NSWLR 305
In relation to the award of damages in cases where a remedy which would not have
otherwise been available at common law, for example, damages in lieu of a quia timet
injunction, there is a suggestion that the method of assessment would be different
from that in relation to common law rights and analogous to equitable compensation:
Johnson v Agnew [1980] AC 367 at 400
5.2 Equitable Rights

On what basis should damages for breach of a purely equitable obligation or damages
in lieu of a quia timet injunction be assessed? It has been suggested that the principles
applicable to equitable compensation should apply by analogy. There is a great degree
of flexibility. See for example Talbot (Supra) at pp 244 - 245 for example, where
three different methods were proposed as the basis of assessment for breach of
confidential information; see also Barbagello v Catelan Pty Ltd (supra) in relation to
quia timet injunctions.
D. ACCOUNT OF PROFITS
1. The Nature of an Account of Profits
The aim of an account of profit is to determine the net gains or profits acquired by the
defendant in breach of equitable obligation and recover those profits to the plaintiff.
The purpose is to prevent the unjust enrichment of the defendant, not to punish him or
her: Dart Industries Inc v Decor Corporation Pty Ltd (1993) 179 CLR 101. The court
has discretion to refuse an award of an account or to mould the remedy to meet the
justice of the particular case.
Where both an account of profits and damages (or equitable compensation) would be
available on the facts, the plaintiff must elect between the remedies to prevent double
recovery: Warman International ltd v Dwyer (1995) 128 ALR 201: Colbeam Palmer
Ltd v Stock Affiliates Pty Ltd (1970) 122 CLR 25
2. Assessment of Profit
2.1 General Principles
Precise calculation of profit will often be difficult, so the court may make a reasonable
approximation: Warman v Dwyer (1995) 128 ALR; Chirnside v Fay [2006] NZSC 68.
Both revenue and capital profit may be accounted for: Apand Pty Ltd v Kettle Chip
Company Pty Ltd (1999) 43 IPR 225
The profit to be accounted for is net profit; that is receipts less expenses. The courts
are guided by normal accounting practice: Dart Industries
Allowances may be made for the skill and effort of the defendant who is in breach of
the equitable obligation: Warman v Dwyer (1995) 128 ALR 201.

2.2 Apportionment
The plaintiff is only entitled to an order for profits attributable to the breach of the
equitable obligation: Colbean Palmer Ltd v Stock Affiliates Pty Ltd (1970) 122 CLR
25 per Windeyer J at 43
If other sources are identified the courts have the difficult task of apportionment:
Siddell v Vickers (1892) 9 RPC 152 at 162 - 163 per Lindley LJ. However, the result
may be different where the plaintiff’s rights relate to the essential feature of the
product in question: Dart Industries Inc v Décor Corporation Pty Ltd (1993) 179
CLR 101

TUTORIAL
QUESTIONS

Tutorials will commence in Week 2 of first semester. The topics and problems for
each week of the tutorial program are set out below. Every effort shall be made to
progress to the particular tutorial topics and problems designated for a particular week
of the semester. Classes may be re-scheduled in order to maintain progression
throughout the semester where, for example, classes are interrupted by public
holidays.
The topics listed against each week are intended as a guide to assist students to
identify principal areas of the study involved in the problems to be discussed during
particular tutorials (or in exercises by external students). Students are advised,
however, that the tutorials do not cover all material studied. You should therefore also
ensure that you read and consider all prescribed cases and materials with particular
focus on cases and readings emphasised in lectures and consult past examination
questions to assist you to develop a full understanding of this unit. DO NOT rely on
materials posted by past students on the internet or available elsewhere as these
materials may be inaccurate and/or misleading, especially as the law is constantly
developing and the focus may change over time.
A number of tutorial problems may involve issues from different topics in addition to
the principal topic or topics listed and students will be expected to recognise and
discuss all issues involved in a particular problem.
WEEK 1 - NO TUTORIAL
Students should familiarise themselves with the course content and assessment
information contained in the Introductory Guide.
WEEK 2 - TEAMWORK AND THE NATURE, HISTORY AND

MAXIMS OF EQUITY
Part (a)
In this tutorial you will form a team of four (4) students to undertake the team letter
writing exercise (which is to be submitted at the beginning of week 5) and participate
in introductory teamwork exercises which will be allocated at the tutorial.
You will then be allocated some of the questions below to complete in your team and
report back the outcome of your team discussions to the class.
External students will be allocated into teams online.
Part (b)
1. What were the circumstances giving rise to the growth and development of the
Court of Chancery?
2. What was the importance to the growth of equity of the ecclesiastic
background of the early Chancellors?
3. Discuss the importance of the system of uses in the development of equity.

4. What is the historical importance of the Earl of Oxford’s case (1616) 21 ER

485?
5. What is meant by the “fusion fallacy”? Illustrate with examples.
6. What are some distinctions between common law and equitable remedies?
7. What is the significance of the maxims of equity?
8. What is the historical significance of the maxim “equity acts in personam”?
WEEK 3 - FIDUCIARY DUTIES
READ THE FOLLOWING CASES
Birtchnell v Equity Trustees & Agency Co Ltd (1929) 42 CLR 384
Warman International Ltd v Dwyer (1995) 182 CLR 544
Stewart v Layton [1992] FCA 618; (1992) 111 ALR 687
In your reading focus on ascertaining what principles the courts have enunciated for
the purpose of determining the existence of fiduciary duties and breach of those
duties. At this stage it is not necessary to consider what defences may be relied upon
by a fiduciary for the purpose of avoiding liability for breach of fiduciary duty and
nor is it necessary to consider what relief is available in the event that a party is found
to be in breach of fiduciary duty.
Apply those principles to each of the scenarios set out below and determine whether
or not:
(a) any fiduciary duties have arisen and if so the specific nature of the those fiduciary
duties; and
(b) if any specific fiduciary duties have arisen whether there has been a breach of
those specific fiduciary duties.
SCENARIO 1
John Slow and Polly Fast established a partnership for the purpose of providing a
service to clients wishing to acquire land for subdivision. In return for commission the
partners would subdivide the land for clients and sell the allotments. Both partners
were constantly on the outlook for new opportunities. Under the terms of the
partnership the profits would be shared equally between the partners. James
Bidewhile had been a client of the partnership for some ten years having bought land
and sold it in subdivision through the firm. In 2008 Bidewhile became aware that
some land was available for subdivision which he bought with the usual assistance of
the partnership. The land once subdivided was subsequently sold for a profit of
$500.000. The firm received the usual commission for the services it provided in
relation to the purchase, subdivision and sale of the land. At the time the land was

acquired Fast and Bidewhile had entered into a secret arrangement to share equally
the profits arising from the sale of the subdivided land.
SCENARIO 2
Willing Winston International Pty Ltd (“Willing”) is a company wholly owned by

William Winston and his wife. It carried on business in Queensland and a major part
of its business involved the conduct of an agency for the distribution of cars
manufactured in Korea by Kim Motors. Nigel Everready was the general manager of
Willing and controlled the running of the agency. In August 2005 Kim Motors
informed Willing that it wished to enter into a joint venture with Willing for the
distribution of spare parts for the cars sold in Quensland.. Willing said it was not
interested and was only interested in distributing the cars long term. Everready then
told Kim Motors that he was considering leaving Willing to set up his own business
for the distribution of imported cars and spare parts. In September Everrady
incorporated Everready Pty Ltd in which he and his son held the majority of the
shares. He then negotiated and entered into a joint venture agreement with Kim
Motors for the distribution of spare parts for Kim Motors in Queensland. Everready
then resigned from Willing and began to establish a very successful business
distributing spare parts for Kim Motors. Subsequently Kim Motors terminated the
agency entered into with Willing for the distribution of cars in Queensland as it
decided that it would prefer the cars and spare parts to be distributed by the same
distributor. At the invitation of Kim Motors Everready took over the distribution of
the cars some two years after Everready resigned from Willing. Everready is now
running a very successful business distributing both cars and spare parts for Kim
Motors.
SCENARIO 3
Karl Mann is a solicitor who has acted for Mandy Joyce since 1972. Mann has been
entrusted with the management of a lot of her affairs. Loral Cribb is a property
developer who also became a client of Mann and Mann performed the conveyancing
work associated with the Cribb’s development business. Joyce has decided that given
her age she would like to sell her large house in Clayfied and move to a small unit.
Mann put Joyce in touch with Cribb and Cribb entered into a contract to purchase
Joyce’s house in Clayfied. Joyce then found a unit in New Farm and signed a contract
to purchase the unit. Mann then accepted instructions from Joyce and Cribb to act for
each of them in relation to both contracts. Subsequently Mann became aware that
Cribb was almost bankrupt and would be unable to obtain finance to complete the
purchase of the house in Clayfield. Mann then advised Joyce to make an unsecured
loan to Cribb to enable him to complete the purchase. This left Joyce short of funds
for payment of the purchase price of the Unit in New Farm as a result of which she
had to borrow a substantial sum at a high interest rate in order to complete the
purchase of the unit. Soon after competing the sale of the house to Cribb, Cribb was
declared bankrupt and there is little prospect of Joyce recovering the money lent to
Cribb to enable him to complete the purchase of the house as there are lots of
unsecured creditors also seeking to recover debts owed to them by Cribb.

WEEKS 4 and 5 - FIDUCIARIES, TEAM WORK AND LETTER

WRITING EXERCISE
In weeks 4 and 5 you will engage in further skill development – teamwork and letter
writing. This will be undertaken in the context of a problem which deals with the law
relating to fiduciaries. The outcome of this – the letter – will be assessed. You will be
encouraged to reflect on your skill development and document this in QUT eportfolio.
You will also be required to provide feedback to academic staff.
In relation to the team letter writing exercise, you should be aware that detailed
assessment criteria for the purposes of criterion referenced assessment and a feedback
sheet have been posted to the LWB240 online site.
As you will see from the assessment criteria, there are two primary goals of the team
letter writing activity, namely to ascertain the correct legal answer to the problem
(substantive legal content) and to present this in a letter format (form).
You should be aware that this activity is NOT primarily intended to be a research
assignment. If you read and consider the lecture material and prescribed readings you
should be in a position to complete this task. You may need to read some materials in
advance of your lectures. Of course any additional reading may assist you in
developing a better understanding.
We hope that you find this activity challenging and rewarding. Some comments from
past students in relation to the team letter writing exercise include:
“What I liked most was learning a lot from other people’s ideas and comments. The
exchange of ideas was very good and stimulated me to think about issues etc. that you
may not have thought of working alone.”
“My team members were very dedicated to completing the exercise. Their
enthusiasm to towards completing the letter was appreciated.”
“It was good to see our knowledge grow in completing the task. We learnt a lot from
each other.”
“Getting to know the other members – find out whether you’re on the right/wrong
track with your thinking, not normally an option as an external unless you have some
regular contact with others – possibly for future collaboration/help – good people,
keen to work together and meet requirements.” (External Student)
WEEK 4 - LETTER WRITING, TEAM WORK, FIDUCIARIES:

TEAM LETTER WRITING EXERCISE
There are no face to face tutorials in week 4 and no tutorial tape will be available for
external students.
You should work in your teams from week two to complete a letter of advice in
relation to the issues raised by the following problem:

TEAM LETTER WRITING EXERCISE
Rudi met Liz at the Gold Coast in March 2005 and they fell in love. At the time Rudi
was living in Sydney designing and building yachting equipment. Liz owned and
operated a business which sold swimming pool chemicals and equipment wholesale at
Loganholme, assisted by her adult son, Brett. Brett was formerly an aircraft technician
in the Royal Australian Air Force, but in 2003 left to assist his mother in her business
as he had experience working with chemicals.
In November 2006 Rudi relocated to Queensland to live with Liz and moved his
business to her rented factory premises. When their romantic relationship broke down
in mid 2007, Rudi moved out of Liz’ home and factory, although they continued their
turbulent, on again - off again relationship until mid 2008.
For many years Liz had dreamt of building a purpose built factory for her business,
but was concerned about her own capacity to finance such a project as she had
experienced serious cash flow problems in the past. Rudi encouraged her to follow her
dream, and wanted to be involved. Rudi was able to do this as he had skills in
property investment, project management and financial modelling as well as
experience in building the type of building which would be suitable for Liz’ purpose.
Following these discussions, a company, Dreams Pty Ltd (Dreams), was incorporated
in November 2007 to progress the project. The directors and equal shareholders of
Dreams were Rudi, Liz and Brett. The plan was for Rudi to find a suitable block of
land, prepare a business plan, design a suitable building, develop a budget and
manage the construction. Liz was to arrange finance through her bank, with which she
had a good working relationship, and she would also provide her business as a tenant
of the warehouse when constructed. Brett was to organise all council approvals,
especially in relation to the storage of chemicals, and assist Rudi with submissions
and other work.
Rudi prepared a draft business plan and drew some sketches for a new factory on land
at Grist Street Loganholme which he had identified as suitable. On 29 November
2007, Dreams entered into a contract, subject to finance and development approval, to
purchase the land at Grist Street for $160,000 and Liz lodged the finance application.
On 13 February 2008 Rudi understood from Liz that the bank would not lend any
money to finance the Grist Street project and the November contract was therefore
terminated. Rudi’s understanding at that time was that the Grist Street project was
over.
Brett then proposed seeking finance to purchase the land for himself, with a view to
holding it until their financial circumstances improved. To that end Liz proposed to
Rudi that they both (Liz and Rudi) resign as directors of Dreams and give Brett their
shares. The relationship between Rudi, Liz and to a lesser extent, Brett was very
volatile between December 2007 and mid February 2008. Rudi initially agreed to
resign as a director of Dreams on 13 February 2008 but withdrew those instructions,
although he subsequently resigned when requested by Dreams’ accountant in March
2008. Although Liz instructed her accountant to attend to her resignation from 13

February 2008, she did not cease to be a director until Dreams was deregistered on 1
August 2009.
On 18 February 2008, within days of the project’s end so far as Dreams purchasing
the land was concerned, Liz had incorporated another company, New Start Pty Ltd
(New Start), as its sole director and shareholder. She obtained a loan from her bank
for New Start to purchase the land at Grist Street, and, subsequently, to build the
warehouse. In May 2008 New Start entered into a contract to purchase Grist Street for
$160,000, which was completed in April 2008.
In May 2009 Rudi drove past the land at Grist Street and saw a building in the process
of construction and recognised the design from his sketches. The Grist Street
warehouse was subsequently completed by New Start in September 2009 at a cost of
$550,000. The Grist Street property (including land and buildings) is now worth
$1,100,000 and produces a rental income of $85,225 per annum under a ten year lease
to Liz’ business (which was entered into in September 2009).
Advise Rudi.
DUE DATE: Monday 22 March 2010
WEEK 5: FIDUCIARY DUTIES AND LIABILITY OF THIRD

PARTIES FOR BREACH OF FIDUCIARY DUTY, LETTER
WRITING, TEAM WORK, REFLECTION cont.
AND EXTERNAL EXERCISE QUESTION
WEEK 5 TUTORIAL QUESTION:
Private Research Corporation (PRC), a bio-technology research company, decided to

investigate its potential to develop products which it could commercialise in order to
provide a revenue stream with a view to supplementing declining government
research funding.
PRC retained an external financial consultant, Evelyn Scoop (Scoop), to assist in the
development of a business plan and advise it in relation to attracting research funding
and commercialising research outcomes.
As Scoop had been regularly retained by PRC to advise in relation to other projects
during the preceding four years, he had developed a close professional relationship
with key research and managerial personnel, including Rina Kobbe (Kobbe), a senior
research manager who was formerly leader of the bio-technology research project.
Scoop and Kobbe were regular golfing partners and sometimes discussed the bio-
technology project while golfing.
Kobbe maintained close contact with her successor Karl Capital (Capital). Capital had
great confidence in Kobbe and regularly briefed her about current bio-technology
research projects and commercialisation opportunities. Kobbe and Capital began to

work together to identify which bio-technology research opportunities PRC ought to

pursue and which it should not pursue. They provided Scoop with a list (compiled
from information publicly available on the internet) of names of senior bio-
technology researchers employed by various rival corporations and an outline of their
specialist research interests. Scoop was asked to interview the researchers on the list
and provide advice as to which bio-technology research areas were most suitable for
inclusion in the business plan. At no stage was Scoop provided with any information
which PRC regarded as confidential; nor did he receive any confidential information
from any other source during the interviews.
While conducting the interviews, Scoop discovered that one interviewee was about to
launch a new cancer treatment drug, Cantie. As he immediately recognised the drug’s
potential, Scoop entered into an exclusive distributorship of Cantie (the distribution
fee paid to him was $5,000 for every five hundred tablets sold).
Although Scoop subsequently recommended cancer treatment as a key bio-technology

research area for inclusion by PRC in its business plan, he did not mention the
existence of Cantie in his advice to PRC.
Scoop did not see PRC’s final business plan, but it generally reflected his advice in
relation to which areas should be included and which should not. Scoop continued to
advise PRC until Capital resigned and implementation of the business plan became no
longer viable.
Soon after it abandoned the business plan, PRC became aware of the existence of the
drug, Cantie, its huge commercial success and Scoop’s interest in it. It also discovered
that Scoop has also pursued other profitable business opportunities, some of which
were within the scope of PRC’s business plan and others which were not.
Advise PRC as to its prospects of success in any claim(s) in equity against any parties,
including advice as to equitable relief available in the event of success. Your advice
should also include a discussion of any defence(s) which might be raised and the
extent to which any such defence(s) is likely to succeed.
(EXTERNAL STUDENTS PLEASE NOTE: Please see below for the external
exercise question.)
INTERNAL STUDENTS ONLY:
Internal students will be given the opportunity to reflect upon the team letter writing
exercise and the development of their team work and letter writing skills. You should
bring a copy of your team’s submitted letter with you to the tutorial.
In addition to considering the above question for discussion in tutorials you may also
wish to attempt the following external exercise question as a practice problem for
revision.
********************

EXTERNAL STUDENTS ONLY: EXTERNAL EXERCISE DUE

END WEEK 7 (15 April 2010):
External students are required to submit a written answer to the following question for
assessment as the external exercise (this assessment is in addition to the letter writing
exercise).
Please note: you may need to read in advance of lectures to answer this question fully.
EXTERNAL EXERCISE QUESTION:

Lisbeth was a baby when her parents met an untimely death. After that Lisbeth lived
with her Uncle Kalle until she turned 18. Kalle had looked after all the money and
property she inherited from her parents. Although all this property was absolutely
transferred to Lisbeth when she turned 18, Lisbeth has no business experience and
always defers to Uncle Kalle’s advice on financial and business matters. Lisbeth trusts
his advice implicitly.
Lisbeth, now 21 years of age, writes music and lyrics. Last year Lisbeth entered a
recording of one of her songs in a competition with a local radio station and won. She
is now being courted by several record companies who all want to sign her up to a
management and recording agreement. Lisbeth has two serious offers:
1. Offer from Rock You Pty Ltd: 1 year term, payment $100,000 US Dollars;
and
2. Offer from Pop Pty Ltd: 1 year term, payment $100,000 Australian
Dollars.
Both contracts look the same to Lisbeth, but she does not realise that US dollars are
worth more than Australian dollars.
As is her practice, Lisbeth seeks the advice of Uncle Kalle. Kalle immediately spots
that Rock You Pty Ltd would pay Lisbeth in US dollars, but recommends that she
sign up with Pop Pty Ltd because his girlfriend of one year, Astrid, is the manager and
a director of Pop Pty Ltd.
Lisbeth asks Kalle to come with her to a meeting of the directors of Pop Pty Ltd to
sign the contract at 7pm.
At 7.30pm Astrid, the other directors and Kalle are still waiting for Lisbeth to arrive.
Kalle offers to call Lisbeth to see where she is. Kalle calls Lisbeth on his mobile. All
the directors can overhear Kalle’s part of the telephone conversation. Lisbeth tells
Kalle she has had second thoughts, and that maybe she should wait and get some
advice from an accountant or lawyer.
Kalle tells her he thinks that lawyers are a waste of time and money and that she
should get to the meeting as fast as she can to sign the contract before the directors
change their mind about her. Kalle tells the directors:

“Please wait a little longer. Lisbeth is on her way. She is a bit of a scatterbrain.
I am always having to make her mind up for her”.
Lisbeth finally arrives at the meeting and signs the contract.
Lisbeth has now changed her mind about the contract and has told Pop Pty Ltd she
does not want to proceed. Pop Pty Ltd has brought an action for specific performance
of the management contract.
Advise Lisbeth
(DO NOT DISCUSS ANY CLAIMS WHICH MAY POSSIBLY ARISE OUT OF
BREACH OF FIDUCIARY OBLIGATIONS.)
*********************
WEEK 6 - CONFIDENTIAL INFORMATION
Kane Farmer had for some years been considering possible means of using sugar cane
as stock feed. One day he noticed an advertisement for an organic dehydrator placed
by Technology Ltd, a company which designed, manufactured and sold machines
which dehydrated organic matter of all kinds.
Kane contacted Technology Ltd and after being told about the attributes of the
dehydrator, he said that he was interested in a distributorship.
After being told that such an arrangement was not yet possible, he informed the
managing director that he was interested in the use of sugar cane as stock feed. Kane
requested a demonstration of the machine on sugar cane. Technology Ltd agreed to
this and Kane took samples of the product for analysis by Dr Sue Green, a Professor
of Nutritional Biochemistry at the University of Queensland. Technology Ltd
requested Kane to communicate the results of these tests to it, which he did. The
report of Dr Green showed that dehydrated sugar cane had a valuable commercial
application as stock feed in substitution for grain.
Negotiations with respect to a distributorship were recommenced and Technology Ltd

began modifying its dehydrator so as to make it specialised for sugar cane. Kane
Farmer and Technology Ltd have just had a falling out over the name of the
dehydrator and are unable to resolve their differences. Advise Kane Farmer (on the
basis that Technology Ltd are about to start production of a new machine).
How would your advice differ if there had been no discussions between Kane Farmer
and Technology Ltd but the managing director of Technology Ltd heard that Kane
Farmer was making investigations about applications of its dehydrator and stole the
file from Kane Farmer’s office?

What if the managing director found out about the theory by overhearing a
conversation in the lift at the University between Dr Green and Kane Farmer? What if
Australia was in its fourth year of a severe drought and there was no available
stockfeed?
WEEK 7 - UNDUE INFLUENCE AND UNCONSCIENTIOUS

DEALING
Jack Johnson died in May 2005 aged 88. His estate had few assets, as the year before
he died he had sold his principal asset, his farming property, to his nephew. Jack’s
wife predeceased him 5 years previously. They lived in a home on the farming
property. The couple had four daughters, all of whom were married and in
comfortable circumstances. When Jack’s wife died, the daughters arranged a live-in
housekeeper for Jack, but visited him and had him to stay with their families.
Jack’s nephew, Jason, ran the property, for which he was paid a reasonable salary.
The year before Jack died, Jason suggested to Jack that he purchase the farming
property. He offered $100 000 for a property that was worth $1 200 000. It was
agreed that Jack would continue to live on the farming property until his death. Jack
agreed, as Jack was especially fond of Jason, and had come to the conclusion that
Jason should take over his property and continue to run it after his death. Jack had run
the property successfully after inheriting it from his parents, but since his wife’s
death, had come to rely on Jason. He made Jason a signatory to the joint farming
accounts. He also believed that running a farming property was simply not ‘women’s
work’. Jason was concerned to arrange this transaction before Jack’s death, as he felt
Jack might leave the property in his will to his daughters or even the housekeeper,
even though Jack had always told him he wanted the property to be his.
Jason arranged for their (his and Jack’s) local solicitor to draw up the transfer papers,
which Jack signed in the presence of Jason. Jack attended his local doctor the week
prior to the signing, who noted on his file that he was ‘as sharp as a tack’ mentally,
though frail physically.
After Jack’s death his daughters come to you for advice as there are few assets left to
them as a result of the transaction the previous year (of which they had no
knowledge). They are upset that they have ended up with little inheritance, after
treating their father lovingly over many years, albeit they were not involved in
running the farming business .They have also been distrustful of Jason for some years
and have evidence that Jason has not been fully accounting to Jack in respect of
property accounts in past years.
Advise the daughters as to their likelihood of success in any possible action(s)

(including available remedies) in equity. (Do not discuss any potential remedies under
succession law)
If the daughters find out about the transaction after it is signed, but before the balance
of the purchase price is paid, is their position any different?

Re-consider the above problem on the basis that instead of personally purchasing the
land from Jack at an under value, the purchaser named in the contract was Easy Land
Development Pty Ltd, a company wholly controlled by Jason’s wife, Shirley, an
accountant and Jason’s daughter, Rose, a law student.
WEEK 8 - FORFEITURE AND ESTOPPEL

Jane Grey entered into two contracts for the purchase of two adjoining rural blocks of
land. Her long term plan, as she made clear to the vendor, was to build a house on one
block and plant a pine tree plantation for harvesting on the other. The contract price
for each block was $100 000 and the agreement was that Jane would make an initial
payment of $10 000 per block and she would pay the balance off over the next ten
years by monthly instalments. The instalments included an interest component of 8%
per year.
The contract provided:

• that Jane would have no interest in the land until payment was made in full
• that no improvements were to be made to the property until full payment
• that time was of the essence in relation to the monthly instalments, and
• that if Jane defaults in making any payments or otherwise breaches the
contract, the vendor may terminate the contract and repossess the land upon
returning all instalments other than the deposit to Jane.
After three years, Jane thought she should make the land earn some money for her and
proceeded to plant pine trees on one block. The trees could be harvested within
3 years of planting and then a new lot could be planted. Jane sought the vendor’s
permission to bring heavy machinery onto the land for the planting. She told him that
she’d have an income from harvesting the trees in three years. He wished her good
luck and congratulated her on her foresight. A few years later, Jane ran into financial
problems paying in advance for work associated with the upcoming harvest and was
unable to meet two of her monthly repayments on the vacant proposed house block.
She has received a letter from the vendor’s solicitors stating that the contract in
relation to the vacant block was terminated for failure to make instalments and that
the vendor wanted possession and would return her instalments to her. The land is
now valued at $200 000. The letter further stated in relation to the plantation property
that the vendor would refuse permission for any trees to be removed from the property
and would terminate the contract and repossess if she attempted to do so. Jane has
spent $50 000 in planting, the harvest is worth about $100 000 after costs and the
unimproved land is worth $200 000.
Advise Jane as to her legal rights and entitlements.

WEEK 9 – EQUITABLE DEFENCES
Part (a)
Callum is a young and gifted guitarist. He has all the talent in the world, but is
struggling to get the recognition and riches he deserves. In June 2000, Callum decided
to appoint a well-known, hip manager, Dayne, to promote his name around the globe.
Dayne and Callum entered into a management agreement, the terms of which include
the following:
(1) Dayne is entitled to a 25% commission of any profits generated by Callum
(which is to be paid monthly); and
(2) Dayne will receive, as trustee of the Callum Success Trust, all profits
generated by Callum which should be accounted to Callum as beneficiary
(after Dayne has taken his 25% cut).
Because of Dayne’s remarkable skills and connections in the industry, Callum is

virtually an overnight success. In fact, by December 2000 Callum had earned over
$400,000 from events arranged by Dayne. Dayne received his commission of
$100,000.
In January 2001, Dayne decided that he deserved more recognition than he was
currently getting. He decided to start increasing his commission to 50%. In the
calendar years 2001, 2002 and 2003, Callum generated profits of $2m each year –
which Dayne took half of as his commission.
In January 2003, Callum discovered that Dayne had been taking the additional 25%
commission. He was furious and instantly fired him. However, because Callum’s
wealth was so high, he was not overly concerned by the $1.5m which Dayne had
taken, as he considered that, down the track, it will only be a minuscule of his career
profits. Dayne believed that Callum’s failure to make a fuss about the $1.5m was
merely Callum’s recognition that Dayne deserves that cut of the money.
Without Dayne’s management, Callum’s career slowly slips. In fact, by March 2009
Callum has no money or assets left. He now wants to sue Dayne to recover the
$1.5m.
Advise Callum.
Part (b)
How would your answer differ if:

(i) After discovering that Dayne was misappropriating the money, Callum
allowed Dayne to continue to manage him without making a fuss until
March 2009.
(ii) There was a genuine dispute as to the amount of commission available
under the contract and Dayne threw away the only existing copy of the
contract in 2008 thinking that issues between Callum and himself had
settled.

WEEK 10 - CONSTRUCTIVE TRUSTS
Prior to class please read Luke v Chamberlain [2000] NSWSC 626.
In 1979 Sophia Luke and her family including her two children, moved next door to
Maria and Alex Chamberlain at Dolphin Head. The families became very friendly.
In 1988 Sophia’s marriage broke down. As a result of the divorce and subsequent
property settlement the matrimonial home at Dolphin Head was sold. Sophia’s
husband moved away and did not contact or support the children after this time.
Following discussions between the Sophia and the Chamberlains, it was decided that
Sophia and her children aged 11 and 9 years would move in with the Chamberlains.
At the time the Chamberlain’s home was one storey. Sophia and her two children
occupied one bedroom. Sophia paid her family’s share of food, household supplies,
electricity and phone. She did not pay rent and this subject was not discussed.
Alex Chamberlain is a paraplegic who is normally confined to a wheelchair, though

he is able to drive his car. Maria is in full-time employment as a physiotherapist.
Sophia works part-time as a shop assistant. As she was home for a substantial period
of time, Sophia used to provide assistance to Alex on a daily basis, such as running
errands.
As Sophia and her two children were all living in one room, in 1992 it was suggested
in conversation between her and the Chamberlains that she put an extension on to the
Chamberlain house. The Chamberlain’s engaged a builder to make the alterations
which involved making a second storey comprised of two bedrooms and a stairway.
The alterations, including the fees, cost $37,000, which was paid for by Sophia.
After Sophia paid for the renovations there was some suggestion that the
Chamberlain’s would borrow money to pay her back. Sophia responded that this was
not necessary but that they could pay her back if they sold the house when she left.
In 1997 Sophia and the Chamberlains went on a two week holiday to Jindabyne.
During the holiday Sophia and the Chamberlains had an argument and on her return to
Dolphin Head Sophia and her family moved out of the Chamberlain’s home and have
not returned.
In May 1998 Sophia sent a letter to the Chamberlains claiming repayment for her
expenditure on the extension. She has received no response to this letter. She now
wishes to commence proceedings in respect of the expenditure by her on the
improvements to the Chamberlains property.
The Chamberlains still own the property at Dolphin Head. The value of the increase in
the value of the property brought about by the improvements paid for by Sophia
amount to $42 500.

Advise Sophia. Would your answer be different is the value of the property had
increased due to the improvements by $80 000?
WEEK 11 - SPECIFIC PERFORMANCE

Brides-R-Us Limited wishes to establish a bridal boutique which specialises in the
manufacture, design and retail of wedding dresses for the budget conscious bride.
Owen Vendor therefore approaches Brides-R-Us and promises that if they make a
wedding dress for his daughter Antonia, he will sell them his block of vacant land at
Ascot on which to build their studio and sales outlet. After receiving legal advice
from their solicitor, Brides-R-Us make the dress and on 1 March 2000 enter into an
oral contract with Vendor to purchase his land for $2 million. The agreement
provides for an initial payment of $150,000, with the balance of the purchase price
(which includes an interest component of 10 percent per annum) spread evenly over
the next eight years and payable monthly on the first day of the month.
Time is agreed to be of the essence. As the land is currently zoned for residential use
only, the parties also agree that the contract is to be subject to Brides-R-Us obtaining
from the Brisbane City Council, within six months, a rezoning of the land as suitable
for commercial/retail use. Furthermore, should the contract not be completed for any
reason other than the Vendor’s default, the Vendor is to have the use and benefit of all
consents and approvals given by the local Council in connection with any application
made.
Brides-R-Us obtain the required rezoning and commence construction on the land.
However, on 1 March 2004, they are unable to meet their monthly payment as they
are unable to secure funds from their financier. When they attempt to tend payment
two days later Brides-R-Us are informed that the contract has been terminated for
failure to make the payment. The land is now worth $3.5 million and Brides-R-Us
wish to proceed with the contract. However Vendor has been diagnosed with cancer
and being unable to work, and forced to pay medical bills for his associated treatment,
is in severe financially difficulty. He would therefore prefer to take advantage of the
land’s increase in value and sell it to another.
Assuming that relief against forfeiture is available, fully advise Brides-R-Us whether
specific performance is available against Owen Vendor.
WEEK 12 – INJUNCTIONS AND DECLARATIONS

Section 21 of the Queensland Wetlands Protection Act (the QWPA) provides that it is
an offence to damage or destroy designated wetland areas. In the event of
infringement of this section, the QWPA provides that the court may order payment of
a fine of up to $50,000 and/or a maximum of 2 years imprisonment.
Coastal Developments Company (CDC) recently acquired a large parcel of waterfront

land along Coolum Creek and the Maroochy River, which are designated wetland
areas. CDC intends to develop exclusive waterfront residences on the land. To
facilitate the development CDC has engaged contractors to clear the land of all

vegetation, including mangroves which impede water views, to start work next
weekend.
George Green, the president of the local branch of the Save the Environment
Association (SEA) has heard that the land is about to be cleared and has come to you
for urgent advice. George also mentions that Marg Bloom, the SEA marketing and
grants officer has just given one week’s notice that she will commence work next
week with the local branch of the Green Australia Association (GAA), despite a valid
restraint of trade clause in her employment contract which prevents her from
commencing employment with other environment protection agencies for a period of
one year after ceasing employment with SEA. GAA is SEA’s major competitor for
grant funding and the annual grant submission deadlines are next month.
Advise George whether any equitable remedies are available to SEA in these
circumstances and its prospects of success.
Would your advice differ if you were instead consulted by the leader of the local
indigenous community, Jonas Smith, who wants to ensure that the wetlands on the
adjoining property are never cleared as this land contains a midden and bora ring
which would be destroyed in this event?
WEEK 13 – MONETARY REMEDIES AND ACCOUNT

Ally is a Senior Associate with the legal practice of Hollywood & Associates. She
heads the firm’s deceased estates section. As an Associate she is permitted to attend
the firm’s partners meetings but has been advised by the equity partners that she
would have to double her billings in order to be eligible for partnership.
Ally meets an old university friend, Lola at a disco one night and Lola tells her of her
proposed new business ‘Estates R Us’. Lola tells Ally that consumers of legal
products are looking for more value and that lawyers who just do the legal work in the
administration of deceased estates will soon go broke. She tells Ally that ‘Estates R
Us’ will cover: estate planning, drafting wills and living wills, a funeral planning
division including car-hire and catering, the establishment of a trustee service for
ongoing supervision of large estates and a separate service company to handle all
press advertising associated with the service. Lola then invites Ally to join her as her
partner in the new business.
Ally gives four weeks notice to Hollywood & Associates and spends all her spare
time working with Lola in devising the appropriate structure for the new business. She
secretly talks with her existing clients and advises them of all the extra services
offered by her new firm that her old firm couldn’t offer. She also takes out a loan with
Fast Bank to inject some capital into the new business and establish her share as
partner.
Two months after opening the new business Ally receives a letter from Hollywood &
Associates demanding that ‘Estates R Us’ cease trading immediately and that she
account to them for all profits made since opening or they will take her to court.
Advise Ally and Lola.

PAST
EXAMINATION
PAPER
Semester 1, 2009

LWB 240 PRINCIPLES OF EQUITY EXAM, SEMESTER 1, 2009
QUESTION 1
You MUST answer BOTH (a) and (b)
(a) In Saltman Engineering Co v Campbell Engineering Co (1948) 65 RPC 203

at 213 Lord Greene said:
“If a defendant is proved to have used information, directly or indirectly

obtained from a plaintiff, without the consent, express or implied, of the
plaintiff, he will be guilty of an infringement of the plaintiffs’ right.”
In Coco v A.N. Clark (Engineers) [1969] RPC 41 at 50 Megarry J said:
“If the duty is a duty not to use the information without consent, then it may
be the proper subject of an injunction restraining its use….If on the other
hand, the duty is merely a duty not to use the information without paying a
reasonable sum for it, then no such injunction should be granted.”
Evaluate the above statements from the perspective of the circumstances in which
equity will impose duty of confidence on a recipient of information, the nature of
that duty and the circumstances in which such a duty may be breached.
(15 arks)
(b) In American Cyanamid Co v Ethicon Ltd [1975] AC 397 at 407 Lord Diplock
said:
“Your Lordships should in my view take this opportunity of declaring that

there is no such rule. The use of such expressions as “a probability”, “a prima
facie case” or “a very strong prima facie case” in the context of the exercise of
a discretionary power to grant an interlocutory injunction leads to confusion as
to the object sought to be achieved by this temporary relief. The court no
doubt must be satisfied that the claim is not frivolous or vexatious; in other
words, that there is a serious question to be tried.”
What principles do the courts in Australia apply in the exercise of a discretionary

power to grant or refuse an interlocutory injunction?
(5 Marks)
[TOTAL: 20 MARKS]

QUESTION 2
Peter Griffin owned a piece of land and a house situated at Quahog, Queensland,
which he resided in with his wife (Lois). The unimproved value of the land is
$85,000, though the house and land package is valued at $140,000 (despite the house
being quite dilapidated).
On 30 June 1999 Peter's son, Chris, together with Chris' family (his wife, Kate, and
four children) moved into the Quahog residence following an invitation from Peter.
Chris, as a gesture of thanks, spent $20,000 on the repair and maintenance of the
dilapidated house between 30 June 1999 and 29 June 2001. However on 30 June
2001, following the death of Lois (and Peter's increasingly declining physical health),
Chris suggested to Peter that if Peter gave Chris the Quahog land that Chris would
demolish the existing house and build a mansion which both Peter and Chris' family
could reside in. Chris said that the house would include a large bedroom and ensuite
for Peter and that Chris would assist his father with personal domestic care to aid his
declining health.
Chris spent $240,000 on the construction of the new house, which was built by 31
December 2001. While the new house was being built, Peter lived in a cabana (i.e. a
small thatched hut on the back of the property) and, even after the house was built
(with Peter's large bedroom and ensuite) Peter remained in the cabana to Chris'
dissatisfaction. Peter's friend Quagmire moved into the cabana on 30 June 2001.
Peter also refused to pay rates and electricity, which Chris paid for in its entirety
which was $300 per month. Notwithstanding, Chris continued to care for his father,
albeit minimally, spending about 10 hours per month in the cabana assisting him with
various domestic tasks.
In 30 June 2003, the relationship broke down. Chris says the cause was not just
Peter's attitude - it was far more serious. Chris says that Quagmire's constant
unwarranted sexual advances on, and sexual harassment of Kate (with Peter's
encouragement), made the situation unbearable. Peter denies this. Chris told Peter to
leave the house, however Peter did not take this seriously (as it had occurred before
and nothing had come of it). Peter decided to embark on a year-long holiday around
the world and expected, upon his return, that he would continue to reside in Quahog.
However, the day after Peter left on his overseas adventure, Chris changed the locks
on the house and set up a barb wire fence around the property to ensure Peter could
never return. Quagmire left the property on 30 August 2003 and, following
contracting a serious disease, died on 29 June 2004.
Peter returned on 30 June 2004 to discover that Chris had actually meant what he said
and that he was excluded from the Quahog property. Peter felt hopeless and believed
he could not do anything because the property was in Chris' name. However, on 1
January 2005, Peter's solicitor friend, Cleveland, told him that he may have a viable
cause of action. Cleveland, on Peter's instructions, immediately entered into
settlement negotiations with Chris, however these settlement negotiations broke down
on 30 June 2005 when Chris told Cleveland that "Peter would not get a cent... and that
he is going to improve it and use it as a security for a loan to purchase an even bigger

house". Around this time, Peter learnt that Kate was in declining mental health
(though she was in reasonable mental health at that stage).
On 30 June 2006, Peter learnt that Kate's mind had diminished to such a state that she
had been placed into a mental asylum. He also found out that Chris, as he had
previously suggested, had spent $100,000 building a pool on the property and had
granted a mortgage over it to the National Australia Bank. Peter immediately
commenced legal proceedings. Peter is now denying that Chris gave him any
assistance with domestic tasks.
Advise Peter.
[20 MARKS]
QUESTION 3
You MUST answer BOTH (a) and (b)
Leslie Rat is the site manager and letting agent of a large commercial retail shopping
complex on the Gold Coast owned by Retailers Investors Ltd. The contract between
Leslie and Retailers Investors Ltd provides for an extensive set of duties to be
discharged by Leslie in relation to the maintenance of the complex. The contract
provides for Leslie to be paid an annual fee of $200,000 for discharge of the
maintenance duties. All expenses incurred in the discharge of those duties are to be
paid for by Retailers Investors Ltd. Under the contract it is also provided that Leslie
will act as the Letting Agent for Retailers Investors Ltd in relation to the leasing of all
shops within the complex available for lease and that Leslie will be entitled to be paid
a commission in respect of all leasing contracts entered into on behalf of the owner.
The contract provides that the manager shall in the discharge of his contractual duties
act in the best interests of the owner. The contract was entered into for a period of ten
years.
For the last five years Leslie has arranged for vacated leased premises to be cleaned
by a firm which operated as a partnership in which Leslie is one of the partners
together with Sally Ajax and Oscar Brush. The cleaning expenses have been regularly
paid for by Retailer Investors Ltd. Under the terms of the partnership the annual
profits of the firm are shared in thirds between the partners. To date Leslie has
received $150,000 as his share of the profits. On the first occasion when Leslie
decided to use the firm to carry out the cleaning work Leslie told the Chairperson of
the Board of Directors of Retailers Investors Ltd about the existence of the partnership
and of his interest in the partnership. The Chairperson indicated that he had no
objection to the firm carrying out such work provided that Leslie was satisfied they
did a good job.
The number of potential tenants seeking premises for lease in the complex for the last
few years has far exceeded the premises available for lease. In an attempt to
discriminate between applicants Leslie will only process applications from those who
are prepared to pay Leslie a one off deduction of five per cent from their business
profits earned during the first year of the lease Retailers Investors Ltd was totally

unaware of this arrangement. Leslie has so far received $700,000 as a result of this
arrangement $500,000 of which he has invested in a luxury pleasure cruiser now
valued at $1.5 million and he has also invested $200,000 in some shares which are
now worth $25,000. A new potential tenant who was not happy with this arrangement
has recently told the Chairperson of Retail Investors Ltd about the existence of these
arrangements.
Leslie also formed a close and confidential relationship with Doctor Ricki Bandage
who conducted a general medical practice on premises in the shopping complex. He
also developed a very close working relationship with Ricki’s personal assistant Cleo
Cleft. Leslie undertook to invest the Doctor’s surplus profits in suitable investments
and usually his recommendations for investment were conveyed to Ricki by Cleo and
approved by Ricki without any further discussion with Leslie. However Ricki decided
in 2007 that he did not wish to invest any of his excess profits for that year as he was
taking leave of absence to go on a world cruise. For that reason and prior to departing
for the cruise Ricki rejected a proposal from Cleo to purchase some land in an area
which was under consideration by a private developer for the establishment of a new
residential suburb. This information was discovered by Leslie in the course of looking
for a new investment for Ricki. Cleo was aware of this information at the time she
made the recommendation to Ricki but she consciously decided not to pass the
information on to Ricki. Cleo then incorporated a company Cleft Pty Ltd in which she
and Leslie held all of the shares. The company was used as a vehicle for the
acquisition of the land rejected by Ricki. The land has since been sold to the
developer for $8.4 million which is held on term deposit with the National Australia
Bank.
(a) Have any of the parties mentioned in the above situations committed a breach
of fiduciary duty and what relief would a court award for the purpose of redressing a
breach of fiduciary duty committed by any of the parties in the above situations?
(15 marks)
(b) Would any other parties in the above situations who are not subject to
fiduciary duties be liable for breach of fiduciary duty committed by any of the parties
in the above situations?
(5 marks)
[TOTAL: 20 MARKS]
QUESTION 4
Jane Jenkins is a woman in her forties who has lived with her uncle Bruce (her
father’s brother) and his family since her parents died in a car crash in her teens.
Although intelligent and well-read, she was inexperienced in business and relied on
her uncle, a former bank manager, to manage the substantial estate she inherited when
her parents died in a car crash. As she had sufficient income from this estate, she had
only ever worked part-time in the local library.

Two years ago uncle Bruce persuaded Jane to sell an investment farming property she
owned (representing 60% of her estate) to him and invest the proceeds in a fund
which lost 90% of its value in 2008. He assured her it was a good decision because
she would have ready access to cash if she needed to make a withdrawal. He told her
he particularly wanted the property because it was property her father had inherited
from Bruce and his father (her grandfather), to which he was attached having grown
up there. Uncle Bruce took her to his local solicitor who made no enquiries as to the
price, but drew up a contract of sale which Jane signed later that day. The sale price
was well below market value.
Jane comes to you for advice in 2009 when she realises her current financial situation.
Would your advice differ if the property was sold to JJ Holdings, a company wholly
controlled by Jill and John, Bruce’s son and daughter, who are both in their twenties
studying Business/Law at university? What problems might her solicitor face?
[20 MARKS]
QUESTION 5
You MUST answer ALL of Part (a) and Part (b)
Part (a)
(i) On 1 May 2006, Bob the Builder, a property developer, entered into a contract
to purchase a block of land in Queensland (Land) from Sally for $500,000. The
contract relevantly provided that:
• A deposit of $50,000 was payable on execution, with the balance of $450,000

payable on settlement;
• Time was of the essence in relation to all payments under the contract; and
• Settlement was to occur by 5 pm on 1 May 2009, at which stage Bob would
receive title to the Land.
Prior to entry into the contract, Bob informs Sally at the time of selling that he
intended to build a block of units on the land. Upon execution of the contract, Bob
paid the deposit and commenced spending money in successfully obtaining the
necessary development approval and stockpiling building materials for the proposed
unit block.
On 1 April 2009, Bob becomes aware that his overseas financier is going to be one
day late with the remainder of the purchase funds for settlement and sends a facsimile
to Sally explaining the situation and requests an extension of time to 2 May 2009.
As Bob does not hear from Sally, he assumes that Sally is happy with the proposed
extension. On 30 April 2009, Sally sends a facsimile to Bob advising that the
extension was refused and that time remained of the essence.

The day for settlement (1 May 2009) arrives and Bob does not have the remainder of
the purchaser funds. After 5 pm, Sally informs Bob that the contract is terminated
and that she will be keeping his deposit. Bob’s funds arrive the next day. At the time
of termination, the Land is worth $1M and Bob has incurred $50,000 in obtaining the
development approval and stockpiling building materials.
Advise Bob.
(7 marks)
(ii) Assume now that the contract provides for a deposit of $50,000 and for the
balance of the purchase price to be payable over equal monthly instalments on the
first day of each month until the final payment is made on 1 May 2009, at which stage
Bob would receive title to the Land.
Bob executed the contract, paid the deposit and commenced making all monthly
payments missing a payment that was due on 1 March 2009. As the land has
increased in value, Sally wishes to terminate the contract and seeks your advice.
Advise Sally in relation to her statutory rights only.

(3 marks)
Part (b)
Yillia owned 2 parcels of land adjacent to one another. The properties can be
identified as lot 54 and lot 55. In 1984 Yillia sold lot 54 to Tinariwen for $200,000.
The sale of land contract contained the following clauses
1. The owner of lot 54 has three years to construct a right of way over lot 55;
2. The right of way is to be constructed for the purpose of providing vehicle access
for the owner of lot 54.
3. The owner of lot 55 is to retain $10, 000 of the purchase price until council
approval is given for construction of right of way.
4. Upon council approval and construction of the right of way, the owner of lot 54 is
able to register the right of way as an easement interest on the land titles register.
Upon receiving council approval in 1985 Tinariwen constructed the right of way and
transferred the remaining $10,000 to Yillia. Tinariwen commenced using the right of
way following construction but failed to register this interest in land at the land titles
office. The right of way has been used sporadically over the past 25 years. In 2008
Tinariwen’s solicitors recommended that the right of way agreement be registered at
the land title registry. Tinariwen solicitors drew up the necessary documentation and
sent to Yillia’s solicitors for execution. Yillia’s solicitors are refusing to sign the
documents stating that there has been unreasonable delay in executing the contract.
Advice Tinariwen as to what action they should pursue in Equity? Your advice
should include a discussion of applicable relevant defences.
(10 marks)
[TOTAL: 20 MARKS]
END OF PAPER

APPENDIX

Cover Sheet - Client Letter
COVER SHEET TO BE USED FOR SUBMITTING CLIENT

LETTER

COVER SHEET - CLIENT LETTER
(Students must copy and use this sheet)
Unit Code and Name: LWB240 Principles of Equity

Assessment Item: Team Client Letter
Student Name, Number and Status (F/T, P/T, Ext):
1. __________________________________________________________________
2. __________________________________________________________________
3. __________________________________________________________________
4. __________________________________________________________________
Tutor: ______________________________________________________________
Tutorial Group (day and time): _________________________________________
Word Count: _______________
Non-plagiarism Statement: We, _______________________________
_______________________________ _______________________________
______________________________ _______________________________
declare that we: (1) have not copied the work of another student and (2) have not
copied any part of another person’s work without appropriate citation.
Signed:
1. _______________________________
2. _______________________________
3. _______________________________
4. _______________________________
Dated: ___________________________
Key Administrative Dates (Insert)
Key dates for students include the dates of supplementary and deferred examinations,
QTAC offers, and closing dates for lodging various enrolment and admissions forms.
Due dates and deadlines are listed for each month of the year in Key Administrative
Dates.
http://www.studentservices.qut.edu.au/info/calendar/
Legal Citation Guide
The Legal Referencing Style Guidelines below are to be used by students for all
formal legal writing in the Law School’s undergraduate program, eg for the citation of
cases, articles, books and legislation.
http://www.law.qut.edu.au/files/Legal_Reference_Style_Guide.pdf

LWB240 SG Sem1 10

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Principles of Equity

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Tina Cockburn Unit Coordinator

PAST EXAMINATION PAPER.......................................................................................................151

COVER SHEET - CLIENT LETTER...............................................................................................159

© QUT Faculty of Law 2010 4

© QUT Faculty of Law 2010 5

PART A: Unit Material

The aim of this unit is to provide a coherent knowledge and understanding of

2. Objectives of this Unit

© QUT Faculty of Law 2010 6

4. Teaching and Learning Approaches

In some weeks, as an alternative to a face to face lecture, materials may be posted to

In some weeks, as an alternative to a face to face tutorial, materials may be posted to

© QUT Faculty of Law 2010 7

5. On-line Information for Unit

5.1 Why are we using an on-line site?

5.2 What will I find on the site?

3. Learning Resources: This section contains PowerPoint slides and lecture

4. Assessment: This section contains assessment requirements, results and assessment

5.3 How often should I visit the site?

© QUT Faculty of Law 2010 8

First you should check:

6.1 Formative assessment

© QUT Faculty of Law 2010 9

6.2 Summative assessment

ITEM DUE DATE WEIGHTING

6.2.1.1 Tutorial participation - 10%

6.2.2 External (only) students

ITEM DUE DATE WEIGHTING

6.2.2.1 External exercise - 10%

© QUT Faculty of Law 2010 10

6.2.3.1 Submission instructions for letter writing activity - internal students

6.2.4 End of semester exam - 70%

© QUT Faculty of Law 2010 11

7. External Attendance School (16-18 April 2010)

NOTE: Attendance at the external attendance school is NOT compulsory. However,

8. Use of Study Guide

© QUT Faculty of Law 2010 12

• Prescribed Reading - this represents the minimum reading for

9. Texts and References

9.1.2 Recommended Casebook

9.1.3 Recommended Preliminary Reading

9.1.4 Recommended References

© QUT Faculty of Law 2010 13

9.2 Other Reference Works

10. Study Hints and Tips

What can I take into an open-book exam?

© QUT Faculty of Law 2010 14

10.1 Advantages of open-book exams

How should I organise my material?

10.1.1 Potential pitfalls of open-book exams

How is an open-book exam different?

10.2 Maximising your assessment grades - examinations

In developing this argument, students must also demonstrate a satisfactory

© QUT Faculty of Law 2010 15

(ii) an ability to recognise and isolate those facts of the problem

10.2.2 Essay Questions

© QUT Faculty of Law 2010 16

requires that there is an allocation of a certain percentage of the total

© QUT Faculty of Law 2010 17

Rowena Maguire PART B: Equitable Doctrines Introduction to Team Work