Bridgewater V Leahy [1998] Hca 66

Legal Issues

Question One- (319 words)

The contract at the centre of Bridgewater v Leahy [1998] HCA 66 is a deed of forgiveness of debt, in relation to the transfer of land. The parties to this contract were Neil York, who bought the interest in the land, and Bill York who sold the interest, and forgave the debt.

The contract was entered into on 19th July 1988, with the terms being that Bill would transfer his interests in the Wonga Park fee simple, the Wonga Park perpetual lease selection, and the Risby land to Neil York. It was agreed that this would be for the consideration of $150 000 and the remaining $546 811 would be set aside in a deed of forgiveness. The Wonga Park fee simple was partly owned by Sam York, who agreed to transfer his interest to Neil as a gift, and this part of the transaction is not in question. On 28th November 1988, $150 000 was transferred into Bill York’s account in relation to the total cash owed under this contract.

In addition to this deed, the case looks at the last will and testament made several years earlier in 1985. This includes an option for Neil York to purchase interests in Bill York’s land, that being the properties of Wonga Park fee simple, Tooks land, Mt Leigh land, Risby land, and Wonga Park perpetual lease selection, and also Bill’s interest in the partnership Mt Leigh Pastoral Company. This option was created under clause four of the will and was in exchange for $200 000 consideration, to be split between Bill’s four daughters. Since the Wonga Park lands and Risby land were acquired under the 1988 transaction they were removed from this option.

Neil York did exercise his right to the option and paid $200 000 on 1st April 1990. Along with the $150 000 paid in 1988 the total amount paid, by Neil York, in this case is $350 000.

Question Two- (171 Words)

In this case there are five appellants who are trying to set aside the deed of forgiveness; they are Bill York’s widow, Mrs Stella York, and his four daughters, Desley Bridgewater, Joan O’Neill, June Ashton, and Shirley Leahy.

In their original court case the appellants were seeking to challenge the validity of the option in Bill’s will, that is the option to purchase the land and business interests for $200 000. The grounds for this challenge were undue influence and unconscionable conduct; this was dismissed and not pursued on their appeal.

The appellants then sought to have the 1988 transaction set aside on the grounds of undue influence and unconscionable conduct. The Court of Appeal and de Jersey J found that there was no evidence of undue influence, and this ground was not sought in the High Court.

In their appeal to the High Court of Australia, the appellants are trying to set aside the deed of forgiveness on the grounds of unconscionable conduct by Neil York when forming the contract.

Question Three-

A)(715 words) The Majority Judges granted that Neil had acted unconscionably in his dealing with Bill York over the 1988 transaction. These are the steps they used in their reasoning:

They first established that the principles of unconscionable conduct have been developed and applied in several other High Court decisions, and this allows them the authority to decide using these precedents. It is also established that the setting aside of this transaction will be made in equity, and they have the jurisdiction to do so.

After going through the facts and history of the case the Justices find that there is little disagreement in the primary facts but that de Jersey J, and the majority in the Court of Appeal incorrectly applied the principle of unconscionable conduct to the case, and therefore came to conclusions that were �either irrelevant or incorrectly focused.’

When analysing the previous judgements, which had included arguments of undue influence, the majority concluded that when applying the principle of unconscionable dealing de Jersey J had treated it similarly to the principle of undue influence. They concluded that when de Jersey J dismissed the grounds of undue influence that resulted in the dismissal unconscionable dealing. The majority set forth their interpretation of unconscionable conduct to include the concept of the stronger party exploiting another parties special disadvantage vis-Ð" -vis another, and that this principle should be distinguished from undue influence.

Through evidence it was concluded that Bill had a strong attachment to Neil, treated him favourably and considered him the son he never had. The majority concluded that this amounted to a special disadvantage of emotional dependence, as established in the case Louth v Diprose. The majority dismissed previous judgements in the case that had ruled Bill was physically and mentally able to enter into a contract, which was a concern due to his age and frailty. The majority considered that their focus on age as a disability over looked the more pressing issue of emotional dependence.

With Bill’s special disadvantage established the majority judges then examined Neil’s knowledge and exploitation of the disadvantage. Through cross examination listed in paragraph it was acknowledged that Neil was aware of Bill’s affection for him. It was also established that Neil was aware that the properties acquired in 1988 and those available under the option in the will were being received at good value for him.

Bill York’s wish was that his properties would be kept under single experienced management, and this was found to be a major concern for Bill This can be seen as the catalyst for the option under the will and also the 1988 transaction. However it was also found that there were no legal guarantees, initiated by Bill that his wish would be upheld through the will or the 1988 transaction. The initiative to form the 1988 transaction had come from Neil, in light of his favourable relationship with Bill. The majority ruled that even though Neil had no ulterior motive of suggesting a change to Bill’s will, the pursuit of the 1988 transaction, and acceptance of the benefit it provided did constitute exploitation of Bill’s emotional dependence on Neil. This ruling is summarised in paragraph 123

The motivation behind the appellants’ case was to ensure equity in regards to Bill York’s will, which was to be enacted after he passed away in 1989. If the deed of forgiveness

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