Unconscionability

UNCONSCIONABILITY Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. Mason J ( Amadio)  Amadio): ‘unconscientious use of superior position to the detriment of a party who suffers from some special disability or is in some special situation of disadvantage.’ Common Law Elements: (apply to all cases of unconscionability) • Harshness not enough for rescission Rescinded if induced if induced b fraud, duress, undue influence, • influence, mistake, mistake, misre . or or harsh/onero harsh/onerous us term not Equity (Equitable Remedy for Unconscionability = rescission.)  To argue argue unconscio unconscionability nability must establish establish all elements (Deane J in Amadi in Amadio o): V is under a special disadvantage or disability; (raising the presumption of unconscionability) known, about that disadvantage; and D knew, or is likely to have known, D proceeds to use knowledge unconscientiously in order to obtain V’s consent to transaction. (Also 3rd Party Uncons.) BUT Unconscientious exploitation of another’s inability, or diminished ability, to conserve his or her interests • • •

Special disadvantage or disability = a serious disadvantage leading to a lack of true consent. consent. Blomley v Ryan: “ poverty  poverty or need need of any any kind, sickness, sickness, age, age, sex, infirmity of body body or mind, mind, drunkenness drunkenness,, illiteracy or lack of lack of education, lack of assistance or explanation where assistance or explanation is necessary” CBA v Amadio - some characteristic ‘seriously affects ability of innocent party to make judgment as to own

Knowledge requ requir irem emen entt nece necess ssar ary y because D can’t be said to have acted unconscientiously if no knowledge of the

Constitutional special disadvantage, disadvantage, deriving from age, illness, poverty, inexperience, lack of education. Situational, deriving from relationship such as emotional dependence of one on the other in the

Cases  Amadio special disadvantage knowingly used to procure signing a contract of guarantee, not limited by • time or extent of liability, to secure a loan to son who was in serious financial trouble. Louth v Diprose infatuated Diprose made a gift of $58,000 to Louth so that she could purchase a • house. Blomley v Ryan drunken Ryan sold entire landholding to Blomley at a price described by McTiernan J • Leahy also. as ‘strikingly disproportionate’ to the estimated market value. See Bridgewater v Leahy also. Third Party Unconscionability (Garcia (Garcia)) Remedy = Impropriety of a THIRD party depends on: Rescission a. Is there a vitiating factor in r’ship b/w A  The Garcia Garcia principle principle enables enables guarantee guarantee contracts contracts to be and B? set aside in some circumstances. The elements of the b. If so, ought C (Bank) be affected by principle are: vitiating factor? 1. Relationship Relationship of of trust and and confidence confidence b/w b/w debtor debtor FIRST: answer by reference to vitiating and guarantor factors: misrepresentation, duress, UDI, 2. Guarant Guarantor or is a volunte volunteer er unconscionable dealing. 3. Guarantor Guarantor did not understand understand the transact transaction ion SECOND: What are circumstances of the case, 4. Creditor knew / ought to have have known known of  such that C should be bound by B’s relationship impropriety? 5. Credito Creditorr has has failed failed to: a. If party C (Bank) knows of impropriety of  a. Ensure guarantor obtains independent advice A’s conduct with B, indicates C should be (where there is undue influence); or  bound by B’s impropriety (e.g. knowledge of  r’ship of UDI of UDI i.e. husband/wife; knew debtor coerced/misled guarantor). Rebutting a presumption of  Statutory Remedy (Bank) If C(1) relies on A getting agreement unconscionability TPA s b. 51AA prohibits corp. engaging in conduct of  theunwritten same B, then,within lender meaning should suffer unconscionable of the If a special disability is established (raising the consequences as B. B. in all law; s 51AB (1) (1) prohibits conduct presumption of unconscionability) the contract circumstances unconscionable; s 51AB (2) lists may be enforceable if the stronger party can factors relevant to court determining whether the show there was no advantage taken of the disadvantaged person. This could occur where: conduct is unconscionable; 51AC protects small business •  There is adequate adequate consider consideration ation (evidential (evidential CRA (NSW) Business to Consumer, Private to only) Private: “Unjust = “harsh or oppressive” in s 4; 4; s 7 Independent advice (though not necessary • deals with relief , vary in whole part any provision, may save a transaction but absence may be fatal void; s 8 provides ancillary relief where just; s 9 nonexhaustive list of factors court may consider to