Summary - Summary of landmark equity decision Garcia v NAB PDF

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Summary of landmark equity decision Garcia v NAB...

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Garcia v National Australia Bank Ltd 1998 HCA:

Date of Judgement: 6th August 1998 Presided over by Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ The Facts: The appellant executed a mortgage over her home and guaranteed multiple personal loans at the request of her husband so that he could pursue a career in business. The husband took 4 loans with a total of 270 000 dollars from the commercial banking company of Sydney. The appellants marriage deteriorated with her husband as the business slowly failed and went into debt. The appellant dissolved her marriage believing this would also dissolve her guarantees. However when the business collapsed the bank came to collect the guarantees. The appellant has been pursuing legal action through the supreme, court of appeals and the high court claiming equitable relief from a contract she should not have to honour. The court of first instance found that the appellant signed the guarantees under her husband’s urging and promises it would be impossible for the business to collapse. Furthermore the documents were signed at a different bank with little to no explanation of the impact. The original trial judge ruled that the husband practiced undue influence over the appellant forcing her to sign the document and thereby voiding it under equitable principle. Court of Appeal: Justices of the court of appeal disagreed with the ratio extracted from Yerkley v Jones by the court of first instance overturning both their decision and removes Yerkley from the law of equity in Australia. Combined Judgement of the High Court: The court rejects the decision to overall the precedence set within Yerkley v Jones and holds that it is still binding on the law of equity in Australia. Although it is true that many of the aspects relating to women in Australian society have changed since Yerkley however the equitable principles have changed little. The court feels that there is still a disproportionate amount of relationships where there is a power imbalance and abuse of trust. The abuse of trust like this will always offend against equitable principles and it for this reason that the High Court upholds the decision of Yerkley. Furthermore the principles of Yerkley apply directly to that of undue influence not unconscionable conduct and therefore are related to different areas of equity and cannot subsume each other. The high court therefore rules that the judge in court of first instance was correct in his interpretation of the principles of Yerkley relating to undue influence. The court of appeal was incorrect to set aside the decision and their ruling that the principles of Yerkley were no longer apart of the law of NSW was incorrect. The High Court grants the appeal with all costs paid....