Crescendo Management v Westpac Casebrief PDF

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Name of Case Citation and Court Material Facts

Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 Court of Appeal of New South Wales 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 Upward Group 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 proceeds 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 Osyter 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 branch of Commerical banking Co. However, Westpac transferred the entire balance 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 money until mortgages had been executed by Hilbrink’s company, Crescendo Management Pty Ltd, to secure the debts outstanding in the name of the Upward Group. Because the money was 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.

Legal Issue The issue before the Court of Appeal was whether the 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. Relevant Law

the court said the categories are not limited, and they also include unconscionable dealing. Overall, the preferred approach to duress is to inquire: 1. Whether any applied pressure induced the victim to enter into the contract; then 2. Whether the pressure went beyond what the law is prepared to class as legitimate. Pressure is illegitimate if it: 1. Consists of unlawful threats, or 2. Amounts to unconscionable conduct. These are not closed categories. Overwhelming pressure not constituting unlawful threats or unconscionable conduct can still amount to duress ‘A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach... is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate’ - (McHugh JA) Test: Whether pressure applied by the defendant forced the plaintiff to enter into the contract and whether that pressure goes beyond that which the law would consider legitimate – – court said: ‘pressure will be illegitimate if it consists of unlawful threats or

amounts to unconscionable conduct’ (McHugh JA, 46)  The court will look at circumstances of the case – consider the victim, relationship between parties, whether or not independent advice was sought, whether party protested or took steps to avoid it. Application of Law to the Facts

The fact that there was no protest is immaterial  Crescendo Management had executed a mortgage to Westpac  was the mortgage executed based on illegitimate economic pressure on Westpac’s part? - Westpac refused to release the sum of $27 000 which it had retained from proceeds of sale of property if certain documents were not executed by Crescendo Management  however, the 27K was not owned by Crescendo Management – it belonged to Mr. H the director of Crescendo Management – He was director at two other companies too – Bank said he will not get the money back unless he signed the other documents – Court said the pressure did not induce Crescendo Management into entering into the mortgage payment; there were other factors that were responsible.  No operative duress – ‘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.’ Overall: To enable termination on the basis of economic duress the illegitimate pressure must be at least one reason for the party entering into the contract (the onus will rest on the person applying the pressure to demonstrate that it did not induce the contract). In this case there was illegitimate pressure, but it did not induce the contract.

Conclusion

The Court of Appeal unanimously 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....