LAWS3018 EQUITY AND TRUSTS
LAWS3018 EQUITY AND TRUSTS
RESEARCH ESSAY PROBLEM
Problem
Aunty Mary Smith was 70 and a pensioner. She lived in a small community in the far west of New South Wales and was an Elder of the traditional Guardians of her Country.
September 2022, she travelled to Sydney to stay with her younger sister, Annie, who had been ill. Annie worked as a casual cleaner for $20 per hour. During her stay, Annie introduced Aunty to Norm Evans, a life insurance salesperson for Wegotcha Insurance Ltd. Norm was paid commissions on his sales and earned $100 for every $1,000 of the amount insured, plus a small percentage of the annual premium for as long as the policy lasted called a trail commission. Most of the policies he sold were for amounts between $10,000 and $30,000.
Norm had used his charm on Annie, who thought he was wonderful and was flattered by his compliments. She had already bought a policy for $10,000 to pay for her funeral, and her premium payments were $10 per week. She did not know that Norm received either a commission or a trail commission on the policies he sold, not had he explained the terms of the policy to her. Annie now tried to persuade Aunty Mary to take out a similar policy.
Neither Annie nor Aunty Mary had the opportunity of an education beyond the age of 12. Both were part of the Stolen Generations and had been taken from their family at a young age and raised on a Church Mission. At the age of 14, Aunty Mary was sent to work in the kitchen on a sheep station and at 15, Annie was sent to work as a helper to a childrens nanny. Both were inexperienced in financial matters. They watched TV, but did not read very much. At home, Aunty Mary mainly spoke the language of her people. In order to persuade Aunty Mary to buy a policy, Annie used all of the arguments she could think of, including emotional pressure. Norm supported Annie and used his salespersons techniques including asking questions such as - How would your children pay for your funeral if you died?
Norm, however, did not explain the terms of the policy to Aunty Mary or suggest she ask someone to help her. Nor did he explain that if Aunty Mary missed 2 weekly payments she would be charged a penalty of 2 weekly premiums and if she wanted to cancel the policy at any time, she would be required to pay $100. Aunty Mary finally gave in and signed the proposal document.
See next page for task.
Task Discuss the equitable principles/doctrines raised by the issues in this problem.
YOU DO NOT NEED TO REFER TO STATUTE -e g ACL DISCUSS ONLY EQUITY.
DONT ANSWER AS A PROBLEM QUESTION
ANSWER AS A RESEARCH ESSAY DISCUSS ONLY EQUITY AND CASES AND
A relationship of trust and confidence was established when the contract was signed between Mary and Norm also between Annie and Norm in addition, to any other insurance broker there is a fiduciary duty. That is to act in the best interests of their client and provide practical advice which is independent of any insurance companys influence. Undivided loyalty (Beach Petroleum v Kennedy) owed to both Annie and Mary, noting in confidence they trusted Norm in regard to a financial nature of there relationship. When looking at the facts of the case it can be easily be identified unconscionable conduct, undue influence and breach of fiduciary duty has been established. Thats where equity comes to the rescue and seeks fairness and justice, many may argue equity is the overriding goal of all law.
Fiduciary relationship, duty and breach
Equity closely scrutinises relationships in which one party places trust and confidence in another.The best example of a fiduciary relationship is that of trustee and beneficiary. Dawson and Toohey JJ at 92 lists the categories of fiduciary relationships however, it is important to note there are more types of relationships and anything that has to do with money is certainly one. If there are breaches of fiduciary duties, remedies will be found in various aspects of law, including breach of contract and negligence. Damages and costs may flow from this. If legal remedies cannot be found then a court may find remedies in equity, which is an enhanced system of justice.
Undue influence (400)
Occurs when a person who is in a position of trust, authority and confidence, exploits the influence or power derived as a result of this position to persuade the other to enter into a transaction. Unless the dominant party can demonstrate that such a transaction was the result of the other's free and independent will, it will be declared invalid. In both Mary and Annies situation they both were exploited by their disability, lack of financial knowledge and lack of education resulting in unconscionable transaction. Norm in the other hand has unconscientiously taken advantage of that position similarly in Kakavas v Crown Melbourne Ltd by not stating the terms and condition, not advising her to get legal advice and cancellation policy. When looking at undue influence it is crucial to seek the will or independence of the mind, for instance if the weaker party are overborne by the influence of the stronger party. Just like this current situation Norm is aware of both these women being elderly and are easily manipulated and taken advantage of. There are two sorts of undue influence presumed undue influence and actual undue influence. The presumed undue influence, is the complainant has to show that there was a relationship of trust and confidence between the complainant and the wrongdoer of such a nature that the will of the complainant was overborne by the wrongdoer; and it is fair to presume that the wrongdoer abused that relationship to induce the other party to enter into the impugned transaction. Also, it is necessary to show that the relationship between the parties comes within one of the presumed categories. This means establishing the relationship for there to attract presumption. Hence, this is of a finical nature it falls on the wrongdoer (i.e., the dominant party) bears the onus of rebutting the presumption. Factors which may rebut the presumption are independent legal advice (Bester v. Perpetual Trustee Co Ltd) or the fact that the transaction was fair and reasonable.
Unconscionable transaction dealings (200)
Unconscionable conduct
Equity
Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: the burthen of showing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract Blomley v Ryan (1956) 99 CLR 362, 4289.
The concept of fiduciary obligations arose out of equitys concern with moral and ethical behaviour, and the importance of ensuring that those placed in positions of power, trust and responsibility do not abuse the position for personal gain (compare to unconscionable conduct). A fiduciary relationship is therefore a relationship of utmost trust and confidence, such as the relationship between a solicitor and client.
The relevant question, therefore, is not whether the fiduciary acted wrongfully deliberately, but whether the fiduciary has acted in breach of duty regardless of his or her intention (see Boardman v Phipps below).
Therefore, the position of a fiduciary is one of strict liability.
It has been said that the fiduciary obligation must be one of undivided loyalty: Beach Petroleum v Kennedy (1999) 48 NSWLR 46-7.
It is important to remember that the categories are not closed, and the court may find a fiduciary duty in any relationship, which in the circumstances, evidences the required degree of trust and confidence being placed in one party by another.
Annie can argue she doesnt have a fiduciary relationship with Mary because
In Baden Delvaux v Societe Generale [1992] 4 All ER 161, Gibson J set out five categories of knowledge that are relevant to the decision to impose liability upon a third party:
actual knowledge
wilfully shutting of eyes to the obvious (Nelsonian knowledge)
wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make
knowledge of circumstances which would indicate the facts to an honest and reasonable person
knowledge of circumstances which would put a reasonable person on inquiry
whereas
norm was aware of the ladies lack of knowledge
essential elements of liability
when a fiduciary profits from improper use of his position or through conflict of interest, account of profits and constructive trust will be available, e.g., Boardman v Phipps: constructive trust for beneficiaries.
norm can argue
Assistance cases: something more is required. Actual knowledge of the fraudulent design is necessary so that defendant can truly be described as a participant in that fraudulent activity of the trustee.
Therefore, on the facts Clewes should not be held to be constructively on notice that Grey was in breach of his fiduciary obligation simply because further inquiries could have been made and were not made.
The jurisdiction has long been established in equity to extend the principles generally to circumstances in which:
(i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality of bargaining power between them, and
(ii) the disability was sufficiently evident to the stronger party to make it prima facie unfair or unconscientious that he or she procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which the stronger party procured or accepted it.
Conclusion
LAWS3018/7053 Equity and Trusts
Research Essay
EXEMPLAR
This exemplar is designed to assist you in writing your research essay.
It provides you with examples of-
a similar type of question
how to discuss the equitable principles raised by the question
how to reference the sources you used for your research.
It also provides a commentary discussing what you must do and what not to do.
Instructions
1. Read the problem carefully and identify the equitable principle or principles involved.
2. Research the principles in your required texts and through Library resources.
3.This essay is not a case study or an answer to a problem question, so do not restate the facts in your essay. You should concentrate solely upon the equitable principles raised by the hypothetical situation.
4. You need to discuss and analyse the principles - it is not sufficient to merely describe them. Evaluate whether they are fair and reasonable, discuss whether they have any unusual consequences and whether there are any alternative judicial views.
5. YOU MUST USE FOOTNOTES ACCORDING TO AGLC4 FOR ALL MATERIAL/SOURCES.
PROBLEM
Sunita went to her local medical practitioner, Jane Shipman, for a health check. At the beginning of the consultation Dr Shipman asked Sunita whether she was working and a number of other questions about her financial situation. Sunita was puzzled as to why the doctor was interested in her personal finances, but answered the questions anyway. The doctor diagnosed high blood pressure and asked Sunita to return in two weeks for a follow-up consultation.
Two weeks later, Sunita returned for the follow-up. As she was fastening the blood-pressure cuff to Sunitas arm, Dr Shipman asked Sunita what companies she had in her share portfolio. Sunita answered that she had a substantial holding in XWZ Ltd, but was not happy with its performance since the value had been dropping over the last couple of months and the dividends were 50% lower that the previous year. Dr Shipman then advised Sunita to sell those shares and use the proceeds to buy shares in OPU Ltd. She then told Sunita that her blood-pressure was still high, but did not want to put her on medication. Sunita made an appointment to see Dr Shipman in two weeks.
During the third consultation, Dr Shipman asked Sunita if she had followed her advice in relation to the shares. Sunita replied that she had not. The doctors then told Sunita that she thought the high blood pressure was caused by Sunita worrying about her share portfolio. Then said
Why dont you engage a stock broker? I know a very good one who has made some excellent purchases for me. Hes very trustworthy. I can give you his number. Your blood pressure is still high come back in two weeks.
Sunita contacted Roy Rogers, the stock broker and engaged him to deal with her shares. What Sunita did not know was that Roy Rogers, although a stock broker, was also Dr Shipmans cousin.
Sunita made four more visits to see Dr Shipman to have her blood-pressure checked before she was told that her blood pressure had returned to normal. On each occasion, Dr Shipman made recommendations as to what shares Sunita should buy.
Six months later, Sunita received an email from her accountant asking her why she had sold all of her shares and what had happened to the proceeds. After careful enquiries, the accountant discovered that Roy had sold all of Sunitas shares and divided the money between himself and Dr Shipman.
RESPONSE
The primary issue is whether Sunita has any standing in equity pursuant to a claim for breach of fiduciary duty against Dr Shipman and/or Roy Rogers.
A fiduciary relationship is one of trust and confidence as well as undivided loyalty. Justice Mason went on to state that because a fiduciary is in a position to affect the interests of the other person in a legal or practical sense, the fiduciary has a special opportunity to abuse that position for his or her own benefit. Furthermore, because the fiduciarys exercise of power can adversely affect the interests of the object of the duty, he or she has a duty to exercise that power or discretion in the interests of the person to whom it is owed.
Despite the fact that in Hospital Products Mason J suggested that the object of the duty is rendered vulnerable by the very nature of the relationship, or s not necessary that the object be vulnerable in the sense of powerless. In C-Shirt Pty Ltd v Barnett Lehane J noted that he did not think that in Australia vulnerability was the touchstone of a fiduciary relationship.
As noted in Meagher, Gummow and Lehane, the distinguishing characteristic of a fiduciary relationship . . . is that its essence or purpose is to serve exclusively the interests of a person or group of persons.
JD STUDENTS WILL BE EXPECTED TO PROVIDE MORE DISCUSSION AND HAVE CONDUCTED WIDER RESEARCH THAN THE LLB STUDENTS.
..
There are certain classes of relationship in which fiduciary duties arise
However, the relationship of doctor and patient is not one of the traditional categories.
Here you provide more discussion as per comment.
You then need to go through elements of Dr Shipmans behaviour towards Sunita and discuss whether it conforms to indicia provided in the authorities. When you have decided whether or not Dr Shipman became a fiduciary, you can move on to discuss Roy Rogers, who undoubtedly owed fiduciary obligations to Sunita and why.
You can then go on to mention possible remedies JD STUDENTS WILL BE EXPECTED TO DO THIS.
IF SOME STUDENTS MAY TAKE THE VIEW THAT DR SHIPMAN WAS A THIRD PARTY IF SHE WAS NOT A FIDUCIARY AND THEREFORE DISCUSS THE SECOND LIMB -KNOWING ASSISTANCE IN BARNES v ADDY.
END THE ESSAY WITH A CONCLUSION, WHICH SUMMARISES YOUR DISCUSSION/ARGUMENTS FOR OR AGAINST WHETHER OR NOT DR SHIPMAN BECAME A FIDUCIARY. THE CONCLUSION SHOULD BE SUBSTANTIAL AND NOT JUST ONE OR TWO SENTENCES. IT SHOULD SUMMARISE THE POINTS MADE IN THE ESSAY AND PRESENT YOUR ARGUMENT AS TO WHETHER DR SHIPMAN AND ROY WERE FIDUCIARIES.
LAWS3018/7053 EQUITY AND TRUSTS
RESEARCH ESSAY PROBLEM
Problem
Aunty Mary Smith was 70 and a pensioner. She lived in a small community in the far west of New South Wales and was an Elder of the traditional Guardians of her Country.
September 2022, she travelled to Sydney to stay with her younger sister, Annie, who had been ill. Annie worked as a casual cleaner for $20 per hour. During her stay, Annie introduced Aunty to Norm Evans, a life insurance salesperson for Wegotcha Insurance Ltd. Norm was paid commissions on his sales and earned $100 for every $1,000 of the amount insured, plus a small percentage of the annual premium for as long as the policy lasted called a trail commission. Most of the policies he sold were for amounts between $10,000 and $30,000.
Norm had used his charm on Annie, who thought he was wonderful and was flattered by his compliments. She had already bought a policy for $10,000 to pay for her funeral, and her premium payments were $10 per week. She did not know that Norm received either a commission or a trail commission on the policies he sold, not had he explained the terms of the policy to her. Annie now tried to persuade Aunty Mary to take out a similar policy.
Neither Annie nor Aunty Mary had the opportunity of an education beyond the age of 12. Both were part of the Stolen Generations and had been taken from their family at a young age and raised on a Church Mission. At the age of 14, Aunty Mary was sent to work in the kitchen on a sheep station and at 15, Annie was sent to work as a helper to a childrens nanny. Both were inexperienced in financial matters. They watched TV, but did not read very much. At home, Aunty Mary mainly spoke the language of her people. In order to persuade Aunty Mary to buy a policy, Annie used all of the arguments she could think of, including emotional pressure. Norm supported Annie and used his salespersons techniques including asking questions such as - How would your children pay for your funeral if you died?
Norm, however, did not explain the terms of the policy to Aunty Mary or suggest she ask someone to help her. Nor did he explain that if Aunty Mary missed 2 weekly payments she would be charged a penalty of 2 weekly premiums and if she wanted to cancel the policy at any time, she would be required to pay $100. Aunty Mary finally gave in and signed the proposal document.
See next page for task.
Task Discuss the equitable principles/doctrines raised by the issues in this problem.
YOU DO NOT NEED TO REFER TO STATUTE -e g ACL DISCUSS ONLY EQUITY.
