Special Disadvantage: Mackintosh v Johnson [2013] VSCA 10

In Mackintosh v Johnson  [2013] VSCA 10 (8 February 2013) a matter dealing with equity and constructive trusts, the full court of the Victorian Supreme Court has considered issues relating to unconscionable conduct and the type of special disadvantage required to support a claim based on it.

What is unconscionable conduct

In general terms unconscionable conduct occurs where two requirements are satisfied:

• one party to a contract or transaction is under a special disability; and

• the other party takes unfair advantage of that disability, either with knowledge of that disability or where the other party has "closed their eyes" to the disability.

Background

In this case during an intimate relationship, the respondent gave money to the appellant for the purposes of assisting the appellant with her business and to enable her to purchase a home. Upon the relationship breaking down the respondent claimed that he was entitled to equitable relief on two main grounds.

First Ground

The respondent claimed the appellant has engaged in unconscionable conduct, as the respondent was under a "special disadvantage" when he made the dispositions of money to the appellant.

Second Ground

The respondent further claimed that the house should be transferred to him on the grounds of constructive trust and equitable estoppel, as the payment for the property was made on the basis that he and the appellant would live in the house together, and continue their relationship.

The Result

On the first ground the question at issue was - whether the emotional dependence asserted amounted to a special disadvantage? In concluding that it did not the full court of the Supreme Court of Victoria considered the cases of Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, Louth v Diprose (1992) 175 CLR 621, and Bridgewater v Leahy (1998) 194 CLR 457.  The full court concluded that this was a case of "mere folly". It found that infatuation with the appellant and "clouded judgment" were not sufficient to constitute "special disadvantage" something more than "mere infatuation" was required to show a special disadvantage.

On the second ground the full court held that the dispositions made by the respondent were gifts and as such the arguments based on constructive trust and estoppel failed.

The appeal was allowed and the orders made in the initial decision were set aside.

Sources: read the full case, for a wider discussion of unconscionable conduct see The Law Handbook.
 

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