EQUITY NOTES. Equity has the capacity to develop new rights and remedies for the benefit of plaintiffs
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1 EQUITY NOTES THE HISTORY AND NATURE OF EQUITY Equity has the capacity to develop new rights and remedies for the benefit of plaintiffs Pilmer v Duke Group 2001 Kirby J: The list of persons owing fiduciary duties is not closed. It could not be, given that equity is itself the embodiment of judicial intervention Burke v LFOT 2002 Kirby J: Equitable remedies should be developed to meet new and modern needs Courts should look for the underlying purpose beyond the rule, so that remedies can be fashioned to meet new and changing circumstances Comparisons between common law and equity Equity supplements common law and cannot exist without it Equity assumes concurrent existence of common law concepts Equity has concurrent, auxiliary and exclusive jurisdictions Remedies e.g. damages in common law vs. larger array in equity Relief in equity could be conditional ( he who seeks equity must do equity ) Fusion Fallacy Walsh v Lonsdale (1882) A court of equity will regard a specifically enforceable contract as being legally effective if it would be unconscionable to deny it this status EQUITY REGARDS DONE THAT WHICH OUGHT TO BE DONE Note: to be specifically enforceable the contract must be valid and not defective otherwise than from a lack of formalities. Here, a lease that was specifically enforceable (yet failed to satisfy the legal requirements to be a legal lease) was viewed by Equity as if it was legal. Chan v Cresdon Pty Ltd (1989) The Australian version of Walsh v Lonsdale A specifically enforceable contract (i.e. not one void, illegal or defective in any other way than lack of legal formalities) for a lease will be viewed by Equity as legal in some circumstances. Equity can order that the less-than-legal lease be treated as a legal lease Harris v Digital Pulse (2003) (NSWCA) Equity will NOT afford exemplary damages. Employer breached fiduciary duty very badly, employees sought exemplary damages. Principle: equity will NOT afford exemplary damages for a breach of fiduciary duty. There is no power of equity to order exemplary damages for a breach of fiduciary duties by an employer. Spigelman J: the integrity of equity must be maintained to ensure that it does not become punitive
2 ! The Maxims of Equity Cannot provide specific answers to legal problems Rhetorical function Corin v Patton (1990) Reiterated how important the maxims are. EQUITY DOES NOT ALLOW A STATUTE TO BE MADE AN INSTRUMENT OF FRAUD EQUITY WILL NOT ASSIST A VOLUNTEER EQUITY WILL NOT PERFECT AN IMPERFECT GIFT EQUITY REGARDS DONE THAT WHICH OUGHT TO BE DONE (see Walsh v Lonsdale, Chan v Cresdon) HE WHO SEEKS EQUITY MUST DO EQUITY EQUITY AIDS THE DILIGENT AND NOT THE TARDY (no undue delay) HE OR SHE WHO COMES TO EQUITY MUST COME WITH CLEAN HANDS WHERE EQUITIES ARE EQUAL, THE FIRST IN TIME PREVAILS EQUITY FOLLOWS THE LAW EQUITY WILL NOT SUFFER A WRONG TO BE WITHOUT A REMEDY! 2!
3 ! APPLICATIONS OF THE CONSCIENCE OF EQUITY A) Breach of Confidence Confidential information protected independently of contractual or statutory obligation The principle of confidential information in equity seeks to prevent actual or threatened use of information that has been imparted to someone in confidence Seager v Copydex: He who has received information in confidence shall not take unfair advantage of it Saltman Engineering Co v Campbell Engineering: if a defendant is proved to have used confidential 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 plaintiff s rights Elements of breach of confidence Four elements per Optus Networks v Telstra Corp 2010: 1. Information in question must be identified with specificity 2. It must have the necessary quality of confidence 3. It must have been received in circumstances importing an obligation of confidence 4. There must be an actual or threatened misuse of the information without consent Coco v AN Clark: Coco designed a moped, and entered into negotiations with AN to manufacture it. Negotiations broke down, there was no contract, Coco had revealed design. AN manufactured its own. Coco claimed this was part of its design, applied for injunction Three elements for the liability to be established: 1. Information itself must have necessary quality of confidence about it 2. Information must have been imparted in circumstances importing an obligation of confidence 3. There must be an unauthorised use of that information to the detriment of the party communicating it! unsettled whether need detriment or not Must be an unauthorised use of that information to the detriment of the party communicating it However, neither actual unauthorised use nor detriment is necessary what is necessary is actual or apprehended unauthorised use Wheatley v Bell: Information about a business was received in confidence. Where the recipient knows or ought to know certain information was given in confidence, equity will prevent that information from being disclosed to others without authorisation. A third party who receives confidential information is bound to keep it confidential as soon as they know it is confidential. 1. Identification with specificity Necessary to permit an order to be framed by the court Need for precision particularly important where relief sought against third party Idea must be sufficiently well-developed to be capable of realisation! 3!
4 ! Independent Management Resources v Brown: The more general the description of the information which a P seeks to protect, the more difficult it is for the court to satisfy itself that the information so described was imparted or received or retained by a D in circumstances giving rise to a breach of confidence O Brien v Komesaroff: K (solicitor) created a unit trust deed which was used by partner O. Partnership dissolved, K sued for infringement of copyright and breach of confidence. K could not identify the information on which the breach of confidence was based Document did not have the sufficient quality of confidence, it was pretty general. Solicitor could not describe what was confidential about the document with sufficient specificity. Mason J: the contents of the unit trust deeds and articles of association were matters of common knowledge the respondent had consistently failed to identify the particular contents of the documents he asserts constitute information the confidentiality of which he is entitled to protect Did not provide information of sufficient particularity to enable court to embody it in an order Cannot include information that is common knowledge 2. Necessary quality of confidence E.g. commercially sensitive, personal, held by governments Absolute secrecy is not required Stephens v Avery Question of degree where information disclosed to select number of people Prince of Wales v Associated Newspapers Wright v Gasweld: Factors useful in determining whether commercial information is confidential: 1. Extent to which information is known outside the business 2. Extent to which trade secret known by employees 3. Extent of measures taken to guard secrecy 4. Value of information to plaintiffs 5. Amount of effort expended in developing information 6. Easy/difficulty it could be acquired/duplicated by others 7. Whether plainly made known that was confidential 8. Industry usage supports confidentiality 9. Employee only permitted to share on basis of seniority 10. Owner believes these things to be true + reasonable belief 11. Greater extent confidential information handled by employee, greater obligation 12. Information readily identifiable Del Casale v Artedomus: Would a person of ordinary intelligence, in all the circumstances, including relationship of parties, nature of information, circumstances of communication, recognise this information to be confidential? Whether something has entered the public domain is a question of fact Transitory publication may not destroy confidentiality: Kwok v Thang; Australian Football League v Age Company! 4!
5 Absolute secrecy not necessary, may have been disclosed to a limited number of people: Prince of Walves v Associated Newspapers; Douglas v Hello! Something new and novel may be construed by material already in the public domain (by application of the skill and ingenuity of the human brain) Bolkiah v KPMG: B had retained KPMG in a personal capacity and had access to personal financial information. KPMG later audited the Brunei Investment Agency (chaired by B) and B was later removed from his position. KPMG had set up Chinese walls within the organisation to prevent movement of information Issue: was there a breach of confidentiality, or were the measures in place sufficient? HOL drew analogy with solicitor/client relationship No absolute rule that solicitor may not act in litigation against former client However solicitor maybe restrained if such a restriction is necessary to avoid the disclosure or misuse of confidential information Court imposed the injunction Rests on the reasonable possibility of real mischief Evidential burden then shifts to defendant to prove that there is clear and convincing evidence that all reasonable measures have been taken that no disclosure will occur Here that burden was not discharged! Public domain Once information gets into the public domain, it can no longer be the subject of confidence Douglas v Hello! Johns v ASC: Johns was examined by the ASC in private, regarding the collapse of the Tricontinental group of companies. Transcript given to State Royal Commissioner privately, and then later tendered. Copies given to the media, who in turn published the reports. Confidential transcripts used in public hearings. Issue: Did the ASC breach its obligation of confidence when it disclosed transcripts to the Royal Commission under conditions which allowed general publication to the media? Where information published in open proceedings, therefore in public domain Questions: 1. Whether duty of confidence arises 2. Whether duty has come to an end or 3. Whether information has lost confidential quality Employment UWA v Gray: When information has been produced only after expenditure of time/money, confidentiality indicated where could only be duplicated by going through same process Originality of process important factor that not in public domain Duty subsists after the termination of employment so as to preclude disclosure Can make full use of general knowledge/skill gained But not confidential information separate to general knowledge! 5!
6 What a man of ordinary honesty and intelligence would regard as property of old employer! Former clients Basis of equitable relief depends on confidential information, not some duty of loyalty Kallinicos v Hunt (2005): K and H were partners in a commercial venture. Partnership dissolved. Solicitor (Maloney) acted for the partnership. K (plaintiff) applied to the court to prevent the solicitor acting on behalf of the defendants. No real chance the solicitor had any confidential information. Issue: Should he be restrained? Basis of courts jurisdiction to restrain a solicitor acting for another whilst retained - based on fiduciary obligation. Once retainer at an end, court s jurisdiction is based on protection of confidences of former client After termination of the retainer, there is no equitable or contractual duty of loyalty to provide a basis for the court s intervention; Test is whether a fair minded reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice. Government Secrets Commonwealth v Fairfax: Sought to restrain publication of a book with confidential state secrets Court determines government s claim to confidentiality by reference to public interest Will not be protected unless disclosure likely to injure public interest Balancing act 3. Circumstances importing an obligation of confidence Del Casale: 1. Whether the information was imparted in circumstances where a reasonable person must have realised, on reasonable grounds, that they were not free to deal with information as their own 2. Whether information has degree of intrinsic importance to warrant equitable intervention ABC v Lenah Game Meats: ABC got abattoir team members to video inside abattoir. Gleeson CJ the activities were filmed in private, so an action in breach of confidence in equity would be sufficient to protect privacy There is no separate right to privacy in Australia. Essentially, privacy interests are protected under the equitable doctrine of breach of confidence. ABC was restrained (injunction preventing broadcast of information). Third parties who receive information from a person in breach of duty, knowing if that breach, will themselves become subject to a duty of confidence If disclosed for a limited purpose, the confidence crystallises around that limited purpose - Smith Kline and French Laboratories (Aust) Ltd v Secretary, Dept of Community Services & Health! 6!
7 ! 4. Unauthorised use Remedies Usual remedy is injunction, coupled with orders for delivery up and destruction Equitable compensation or account of profits Optus v Telstra: Can sue either for damages or for account of profits Equitable Compensation Giller v Procopets Video of the defendant and plaintiff in video engaging in sexual activity. The defendant broke up with the plaintiff and tried to show it to the plaintiff s friends, family and work colleagues Breach of confidence was made out and the CA in Victoria awarded equitable compensation in the form of aggravated damages for the mental distress that the defendant s conduct had caused to the plaintiff This was somewhat controversial as equity doesn t normally have remedies for mental distress (even tort law doesn t deal with it solely) Explanation? Decision may be justified under Lord Cairns Act This may be easier to accept because the Victorian version of that Act might include that sort of thing Exemplary damages could not be awarded (Harris v Digital Pulse) as damages are always compensatory in nature (cf aggravated damages which are awarded looking at dignity/contumelious disregard of human rights) So equitable compensation in general terms is available for breach of confidence but just be careful about mental distress. This appears to be a solely Victorian position; as the view in Smith Kline is that Lord Cairns Act damages have no application to equity s exclusive jurisdiction. B) Estoppel When the law prevents someone from acting inconsistently with an earlier representation Different forms of estoppel depending upon the D s conduct or representation, or the nature of the assumption upon which P has relied. Kinds of estoppel: o Estoppel by record (applies to litigation) " Once a matter has been litigated, you cannot deny a state of affairs that arises from the litigation. o Estoppel by deed " Parties to a deed under a seal that rely on the deed facts cannot deny the facts of the deed (with some exceptions). o Estoppel by conduct " This includes estoppel which can arise through contract, in circumstances between parties close to contract, and other relationships.! 7!
8 " Estoppel by agreement (by convention): mutual assumption without any specific agreement by the parties. " Estoppel by representation: one party represents to another and other relies on it. o Proprietary estoppel " This is a special case of estoppel relating to land (e.g. where one induces another to look after them in return for inheriting the house after death). Estoppel here is most commonly raised where the interest does not pass at law for want of writing (note: exclusive jurisdiction). o Promissory estoppel " Where some representation is made to another and relied upon. Estoppel by Representation Recognised both in law and equity Prevents a person who, by a representation of fact, has led another to alter their position, from denying the fact as represented Discount & Finance v Gehring s Commonwealth v Verwayen: party who acted to their detriment was in effect given the benefit of their assumption Purpose is not to compel representing party to perform, but to avoid detriment High Trees Estoppel Where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then once the other party has taken them at their word and acted, the one who gave the assurance cannot afterwards be allowed to reneg as if no promise was made, but must accept their legal relations as subject to his word Central London Property Trust v High Trees: A tenant moved into a post-war building at reduced rent. 18 months into lease, landlord increased rent and claimed the difference for the past 18 months. Tenant argued he had been promised reduced rent and relied upon this when making the decision to move into the post-war building. Lord Denning upheld the tenant s claim and ordered the landlord to charge no more than the reduced rent (landlord estopped from resiling on promise). Lord Denning purported to set up an equitable doctrine: o Where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect legal relations, then once the other person has taken them at their word and relied on it, the promisor cannot resile from the promise, even though it is not supported by law or consideration. o Thus, Lord Denning set up 3 elements to High Trees estoppel: " 1. A promise: a representation as to intention. " 2. Reliance (with or without detriment note here we are looking at estoppel as a shield so no detriment is needed, later estoppel as a sword requires detriment) here it was shielding a person against an action for recovery of rents, later it can be used as a sword for an action against another party " 3. An attempt to resile by the promisor. High Trees estoppel operates where a party to a pre-existing legal relationship gives an assurance or makes a representation that rights will not be enforced, thereby causing the P to act in reliance on that assurance.!! 8!
9 Je Maintenendrie v Quaglia: Written lease for three year term, commenced March 1973 at $197 per month. New three year lease executed July 1976; rent increased to $278 per month, and provision made for quarterly increases. October 1976 tenant asked for the rent to be reduced to $240 pm, and this was accepted for 18 months. When tenant gave notice to vacate, landlord demanded payment. Issue: was the doctrine of promissory estoppel part of the law in Australia? How was the defence to be made out? Was part of the law of Australia The doctrine of promissory estoppel is a salutary corrective to an otherwise undesirable rigidity in the law of contract, but I do not think it should be applied as liberally as that. SAFC held that a representee must show detriment in a case of promissory estoppel, meaning injustice would result if promisor were allowed to resile Estoppel as a shield Walton Store v Maher: Y all know the facts Estoppel could be set up as a cause of action with regards to pre-contractual representations Created an expectation in the respondents that contracts would be exchanged, and this was sufficient Promissory estoppel extends to representations as to future facts: Legione v Hately Equity will come to the relief of a plaintiff who has acted to his detriment on the basis of an assumption in relation to which the other party to the transaction has played such a part in the adoption of the assumption that it would be unfair if they could ignore it Two key elements: situation or urgency, and inaction constituting clear encouragement Commonwealth v Verwayen: Commonwealth said it would not raise certain defences, then did. Verwayen argued the commonwealth had raised such defences, or was estopped from raising them. Commonwealth was estopped from resiling from a promise not to plead those defences Equitable estoppel concerns everything necessary to prevent detriment But will do no more There must be proportionality between the remedy and detriment Must ascertain the minimum relief necessary to do justice Ausotel v Franklins: For equitable estoppel to operate in pre-contractual negotiations, there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or promise be performed or an interest granted to the plaintiff by a defendant and reliance by that plaintiff in circumstances where unconscionable to resile Proprietary Estoppel May give the repressentee a permanent proprietary interest in the subject property which they can protect by right of action Need not be subsisting legal relationship between the parties Based on equitable fraud by the representor and must be with respect to property!! 9!
10 Relief may be to either have defendant make good representation, or strip them of unconscionable profits Divided into two categories: estoppels by encouragement and estoppel by acquiescence! Pascoe v Turner: X had property in Mayfair for mistress Y. X had legal title. Y did some improvements on the property. At some stage, X stopped giving Y gifts or payment for services. Evidence suggested that Y maintained the relationship on the assumption that the property would be given to her. When X ceased the relationship, Y claimed an interest in the land. Issue: was X estopped from denying Y had an interest in the land? Y s assumption and reliance was reasonable in this case. Determined that granting a life estate via license to Y would be a minimum equity, but would leave room for the interest to be challenged by the children. So the court made an order that the legal estate be transferred to Y (a very strong result). The proprietary estoppel arose by virtue of her improvements to the house, made with the encouragement and acquiescence of him, and in reliance on his declaration that he had given the house to her Only granting a licence may allow him to still evict her later on So here mere equity to do justice was whole conveyance, which is unusual but makes sense on the facts Note: This does not change the general principle that the court will look to providing the minimum equity (Crabb v Arun District Council [1976]), but that this particular factual scenario gave rise to particular problems with granting a life estate via license EQUITY WILL LOOK TO ALL THE CIRCUMSTANCES OF THE CASE (relief in specie). a) Estoppel by encouragement Dilwyn v Llewelyn: Father encouraged son to take possession and build on father s land. Father signed an instrument intended to operate as a voluntary conveyance, but not execute under seal: therefore was ineffective as Deed to convey land. Son spent money to build the house and occupied the land. Father, assuming that land belonged to son, left all his estate to other people House of Lords held the son was entitled to the land Equity to perfect the imperfect gift because of son s detrimental reliance on the assumption If father had changed his mind during his lifetime, he would have been estopped from claiming house as fixture on the land Equity able to perfect imperfect gift because of son s detrimental reliance on the assumption Plimmer v Mayor of Wellington applied Dilwyn v Llewelyn Plimmer built jetty on public land with agreement of government. Expenditure of money, encouragement by other party. Land then resumed for public purposes by statute Plaintiff only entitled to compensation if he could establish he has an estate or interest in the land Active encouragement! 10!
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