General Bars to Relief

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This article is a topic within the subject Equity and Trusts.

Contents

Required Reading

M.W. Bryan & V.J. Vann, Equity and Trusts in Australia (Cambridge University Press, 2012), pp. Textbook Chapter 6.

Orr v Ford (1989) 167 CLR 316 [329-331] (laches)

ANZ Executors and Trustees Ltd v Humes Ltd [1990] VR 615 (hardship, clean hands)

Giumelli v Giumelli(1999) 196 CLR 101 (third parties)

See also material in class 11-1 relating to discretion in award of specific performance.


Introduction

[1]Equitable remedies are discretionary, not automatic like the common law. The court weighs factors from both the plaintiff’s and defendant’s perspectives before granting the remedy. These grounds are sometimes referred to as ‘equitable defences’ because they may reduce or deny the plaintiff’s remedy. Equity will consider factors other than those below, for example, equity will not grant an order that is futile, impossible to supervise or will unjustly effect third parties.

Laches

[2]Broadly speaking, laches involves delay. The classic statement of law comes from Lindsay Petroleum Co v Hurd,[3] which declared that it would be unjust to give a remedy where:

a) The plaintiff has effectively waived their rights
b) By their conduct and neglect, the plaintiff has put the defendant in what would be a difficult position if the remedy were now to be granted

Two circumstances important in such case are the length of the delay and the nature of acts done during the interval which might affect either party and cause injustice.

  • The focus is on the effect of the delay which must have resulted in prejudice to the defendant, for example, preventing the defendant from gathering witnesses or documents to help their defence or altering their position, or prejudice to third parties who have dealt with the defendant in the intervening period as if there was no claim against them.
  • (The defendant must specify evidence lost and show how it would have supported the case.)
  • Delay is assessed from the time at which the plaintiff had knowledge of the facts that gave rise to their claim.
  • Laches can be applied when the plaintiff is too slow to prosecute a commenced action, as well as too slow to bring the action.
  • Laches is a personal bar only and does not usually bind the plaintiff’s successors in title.

Bahurin v Bahurin (No 2)[4]

Facts: A mother transferred shares in a family company to her sons. 19 years later she sought to have the transaction set aside for unconscientious dealing. During that time one of the sons had died, documents had been lost or destroyed and some of the shares had been transferred to third parties.
Held: Rescission was refused despite uncontentious dealing being made out.


Orr v Ford[5]

Facts: Two men agreed that one would purchase land and hold one half on constructive trust for the other, the other contributing to the purchase price. The second man did nothing to assert his rights for 20 years.
Held: The majority of the High Court held that the purchaser could not show laches, as during the period no crucial evidence had been lost and no prejudice to other parties had occurred.

Acquiescence

[6]There is some overlap between acquiescence, where a plaintiff with knowledge of a breach acquiesces to it, and laches, however, this doctrine does not depend on delay.

  • Acquiescence requires the plaintiff to indicate some level of acceptance of the defendant’s wrongful behaviour (either expressly or impliedly) and does not require positive prejudice to the defendant.
  • Delay in commencing proceedings is one indicator, as is standing by without any positive act or words.
  • In Gafford v Gafford,[7] a landowner held a restrictive covenant over adjoining land. Its owner erected an indoor equestrian school on the adjoining land in breach of the covenant. The landowner stood by and took no steps to enforce his rights for three years after the structure was completed. He was denied an injunction that would have involved the removal of the building.
  • In Nocton v Ashburton,[8] the client acquiesced because he knew of the solicitor’s conflict of interest and had been warned in writing by one of the solicitor’s partners of the risk he was taking.

Unclean hands

[9]Unclean hands does not address the general unattractiveness of a plaintiff’s conduct, only the specific issues between the plaintiff and the defendant.

  • The bar can only be established if there is “an immediate and necessary relation to the equity sued for” (Black Uhlans Inc v NSW Crime Commission). [10]
  • General immorality, dishonesty or even criminality is insufficient to engage the doctrine.
  • The plaintiff’s “unclean” conduct must constitute “a depravity in a legal as well as moral sense” (Dering v Earl of Winchelsea).[11]
  • This may not add much to the doctrine. False and misleading statements are examples of being wrong in a legal sense.
  • There have been case where the plaintiff’s breach of contract with the defendant has engaged the bar but this is a question of degree in each case.
  • Courts sometimes deny the unclean hands on the basis of proportionality. In Duchess of Argyll v Duke of Argyll,[12] the Duchess was granted an injunction against the Duke’s intended publication of her sexual exploits because her breach of his confidentiality was not as damaging.

Hardship

[13]This bar is extremely rare, apart from in applications for interlocutory injunctions. In cases where this remedy is applied, the plaintiff will often be entitled to some amount of equitable compensation.

Patel v Ali[14]

Facts: A couple contracted to sell a house they owned. For various reasons completion was delayed for several years. During this time one of the vendors gave birth to two more children and lost a leg to cancer. As a result, she was dependent on family members and friends who lived close by and would lose that support if required to vacate the premises.
Issue: If the remedy is denied, equitable compensation will usually be given.
Held: So long as damages for breach of contract were paid, the order for specific performance of contract would be discharged on the grounds of hardship.

Effect of the order on third parties

[15] Giumelli v Giumelli,[16] where a constructive trust was denied in favour of equitable compensation, provides an example of third parties interests (the claimant’s brother) being taken in account.

  • Specific performance has been refused where it would require a breach of contract with another party.
  • The third party can include creditors of the defendant and third party investors.


End

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References

Textbook refers to M.W. Bryan & V.J. Vann, Equity and Trusts in Australia (Cambridge University Press, 2012).

  1. Textbook, p 85.
  2. Textbook, pp 85-7.
  3. (1874) LR 5 PC 221.
  4. [1991] 2 Qd R 240.
  5. (1989) 167 CLR 316.
  6. Textbook, pp 87-8.
  7. [1988] TLR 272.
  8. [1914] AC 932.
  9. Textbook, pp 88-91.
  10. (2002) 12 BPR 22.
  11. (1787) 1 Cox 318.
  12. [1967] Ch 302.
  13. Textbook, p 91.
  14. [1984] Ch 283.
  15. Textbook, pp 92-3.
  16. (1999) 196 CLR 101.
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