Crescendo Management Pty Ltd v Westpac Banking Corporation PDF

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Summary

economic duress, important aspect of contract law...

Description

Crescendo Management Pty Ltd v Westpac Banking Corporation Economic Duress Name of Case

Crescendo Management Pty Ltd v Westpac Banking Corporation

Citation and Court

Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) Court of Appeal in NSW

Material Facts

Hilbrink was a director of the Upward Group of Companies, which comprised two companies that were in a state of indebtedness to Westpac. The directors of the UG decided to relocate the company premises from Mortdale in Sydney to Picton. As a result, Hilbrink and his wife decided to sell their residence in Oyster Bay and move to Picton. They sold their home in July 1977, with the net proceed of $31 268.38 being received by Westpac head office as mortgages. Hilbrink claimed Westpac was authorized to deduct an amount to discharge a long-term loan secured by the Oyster Bay property and overdrafts on his own personal accounts. One half of the balance of the proceeds of sale was to be credited to Hilbrink’s account with Westpac, while the other half was to be transferred to an account held in his wife’s name at the Picton of $27 713.74 to its ‘Mortdale Branch A (Upward Publishing Co Pty Ltd and Upward Productions Pty Ltd)’. The bank refused to release the moneys until mortgages has been executed by the Hilbrinks’ company, Crescendo Management Pty Ltd, to secure the debts outstanding in the name of the Upward Group. Because the moneys were required to complete the Picton purchase, the Hilbrinks signed the documents. However, and despite their apparent lack of protest, they then claimed that the documents were executed under duress. Whether withholding of the balance of proceeds of sale until documents had been executed to secure the indebtedness of the Upward Group amounted to economic duress. McHugh J: Rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised upon one party by another party when the law regards that pressure as illegitimate. Lord Scarman: (a) pressure amounting to compulsion of the will of the victim and (b) the illegitimacy of the pressure exerted. The true basis of duress is that the will is overborne, a contract entered into under duress should be void. Yet the accepted doctrine is that the contract is merely voidable. Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress. It is unnecessary, however, for the victim to prove that the illegitimate pressure was the sole reason for him entering into the contract. It is sufficient that the illegitimate pressure was one of the reasons for the person entering into the contract.

Legal Issue

Relevant Law

Application

The assertion by Westpac that it would detain the whole of the sum of $27

of Law to the Facts

Conclusion

000 until various documents were executed was improper and constituted an unlawful detention of Mrs. Hilbrink’s half interest in the proceeds of the sale of the Oyster Bay property. The pressure applied by Westpac was unlawful but played no part in the execution of the mortgage which had occurred before the pressure was applied It was assumed in favour of Crescendo that the pressure applied to Mr. and Mrs. Hilbrink was applied to them in their capacity as directors of Crescendo as well as in their personal capacity. The execution of the mortgage was not associated with any threat by Westpac The mortgage by Crescendo was executed on the assumption that the moneys would be released. It is possible that Westpac made some express or implied representation to that effect. However, at no stage of the proceedings has Crescendo made an allegation that it executed the mortgage because of a false or fraudulent representation of that effect. Held that although a prima facie case of economic duress could be made out against Westpac, the pressure caused by the bank’s conduct played no part in Crescendo Management’s decision to execute the documents...