What Becomes of the Broken-Hearted? Unconscionable Conduct, Emotional Dependence, and the ‘Clouded Judgment’ Cases

Dilan Thampapillai   | Bio
Senior Lecturer with the College of Law at the Australian National University
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Abstract

The High Court’s decision in Louth v Diprose that emotional dependence significantly contributed to special disadvantage was a significant development within the doctrine of unconscionable conduct. The decision in Louth established a template of sorts that found useful application in the later cases of Williams v Maalouf, Xu v Lin and Mackintosh v Johnson. Though they are few, these cases form definable subset within the broader doctrine of unconscionable conduct that might broadly be termed ‘clouded judgment’ cases. These cases quite arguably blur the lines between the doctrines of unconscionable conduct and undue influence. There is a discernible pattern to these matters. In these cases, the donor has formed an attachment to the object of his or her affection. To put matters gently, the affection is misplaced. Nonetheless, the donor makes a gift to the object of his or her affection. Subsequent developments lead the donor to realise that the gift was both improvident and bestowed upon an undeserving party. This article argues that Louth v Diprose is a troublesome precedent. First, the primacy of deception, which was a key issue in Louth, is unduly reductive. It obscures the overall context of the defendant’s conduct. Secondly, the High Court in Louth overlooked facts that might have undermined the finding that the plaintiff was at a special disadvantage. Thirdly, the case reflects a concept, known as the ‘presumption of competency’ that unhelpfully tilted the balance in favour of the plaintiff. This presumption appears to have been somewhat reversed in Mackintosh.

References

1 (1992) 175 CLR 621.
2 See Samantha Hepburn, ‘Equity and Infatuation’ (1993) 18 Alternative Law Journal 208. As Samantha Hepburn notes at 208, ‘emotional dependency can cloud the judgment of an individual when entering into transactions with the other party’.
3 Lisa Sarmas, ‘Storytelling and the Law: A Case Study of Louth v Diprose’ (1994) 19(3) Melbourne University Law Review 701. See also Regina Graycar and Jenny Morgan, The Hidden Gender of Law (2nd ed, Federation Press, 2002) 74-75.
4 Hepburn, above n 2.
5 [2005] VSC 346.
6 [2013] VSCA 10.
7 [2005] NSWSC 569.
8 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392.
9 See Warren Swain, ‘The Unconscionable Dealing Doctrine: In Retreat?’ (2014) 31 Journal of Contract Law 255. See also Rick Bigwood, ‘Kakavas v Crown Melbourne Ltd – Still Curbing Unconscionability: Kakavas in the High Court of Australia’ (2013) 37(2) Melbourne University Law Review 463.
10 See Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 where the High Court took a much harder line on special disadvantage. In Berbatis, the Court held that the weaker position of the lessees, who were under financial strain due to the illness of their child, did not amount to a special disadvantage. The Court held that it was not unconscionable for the landlord to insist that the lessees drop a claim against him before granting them another lease. See also Australian Competition and Consumer Commission v Samton Holdings (2002) 189 ALR 76.
11 The facts of these cases could also support arguments of undue influence. However, this note is confined to the issue of unconscionable conduct.
12 Though it is not remarked upon in the High Court judgments, the transcript of the trial discloses that Louis Diprose even presented Carol Louth with a contract which stipulated that they would live together as husband and wife. See Transcript of Proceeding, Diprose v Louth (unreported, SASC, 1990) , 95 cited in Sarmas above n 3, 715.
13 While this might have been evidence of calculation, it could also have easily been explained away as part of an untidy household. I am grateful to the first referee for this suggestion.
14 [2005] VSC 346.
15 Ibid, [4]-[8].
16 Ibid, [184]-[185].
17 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, [150]-[160].
18 Ibid, [161].
19 My criticisms of the Court of Appeal’s reasoning in Mackintosh v Johnson are set out in Pts III and IV of this article.
20 Mackintosh v Johnson [2013] VSCA 10, [84].
21 Blomley v Ryan (1956) 99 CLR 362.
22 Johnson v Mackintosh [2011] VCC 1400, [137].
23 Williams v Maalouf [2005] VSC 346, [80].
24 Xu v Lin [2005] NSWSC 569, [36].
25 Ibid.
26 Ibid, [40].
27 (1990) 54 SASR 438, 448. My emphasis added.
28 Louth v Diprose (1992) 175 CLR 621, 626.
29 Ibid, 638.
30 See Mackintosh v Johnson [2013] VSCA 10, [78]; Xu v Lin [2005] NSWSC 569, [37]-[40].
31 Mackintosh v Johnson [2013] VSCA 10, [79], [82]-[83]. See also Gino Dal Pont, Equity and Trusts in Australia (Thomson Reuters, 2015) 317.
32 Johnson v Mackintosh [2011] VCC 1400.
33 Ibid, [148].
34 Ibid, [164].
35 Mackintosh v Johnson [2013] VSCA 10, [84].
36 [2015] FCAFC 50.
37 Ibid, [262].
38 Mackintosh v Johnson [2013] VSCA 10, [84].
39 Johnson v Mackintosh [2011] VCC 1400, [164].
40 Ibid, [137]. Misso J noted that ‘[a]lthough there were occasions when the plaintiff and the defendant had a downward spiral in their relationship, it was revived, and it is more than coincidence that the revival occurred when the defendant was in need of money for her business’.
41 Ibid, [110].
42 Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50, [262].
43 Blomley v Ryan (1956) 99 CLR 362, 401-402 (Fullagar J).
44 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, [161].
45 Ibid, [25].
46 Sarmas, above n 3, 714.
47 Ibid.
48 See Xu v Lin [2005] NSWSC 569.
49 Sarmas, above n 3, 714.
50 Green v Sommerville (1979) 141 CLR 594, 611 (Mason J).
51 Dewhirst v Edwards [1983] 1 NSWLR 34, 51.
52 Meyers v Casey (1913) 17 CLR 90.
53 Sarmas, above n 3, 716-717.
54 Ibid.
55 In this sense, the fact that Louth rejected offers from Diprose that fell short of ownership might well need to be viewed within the context of the relationship.
56 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, [20]. See also Cranfield Pty Ltd v Commonwealth Bank of Australia [1998] VSC 140, [95] (Mandie J).
57 Hepburn, above n 4, 211.
58 Ibid.
59 Ibid.
60 Ibid.
61 Mackintosh v Johnson [2013] VSCA 10, [80].
62 Ibid, [82]. My emphasis added.
63 See Earl of Potmore v Taylor (1831) 4 Sim 182.
64 [2013] VSCA 10, [80]-[82].
65 Ibid.
66 Williams v Maalouf [2005] VSC 346, [184].
67 Ibid, [185].
68 Ibid, [184]-[187] (Hargrave J).
How to Cite
1.
Thampapillai D. What Becomes of the Broken-Hearted? Unconscionable Conduct, Emotional Dependence, and the ‘Clouded Judgment’ Cases. LiC [Internet]. 2018Dec.21 [cited 2022Sep.28];34(1). Available from: https://journals.latrobe.edu.au/index.php/law-in-context/article/view/49

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