Yerkey V Jones : The Principle Expressed by Dixon J .
Mr Jones intended to purchase a poultry farm for £3,300
With condition that Mr Jones should procure a second mortgage from his wife for £1000
The solicitor of the creditors prepared the mortgage and Mr Jones persuaded his wife to sign and made liable to pay £1,000.
Mr Jones failed in his poultry business.
Mrs Jones sought equitable remedy, claiming she did not understand the nature of the transaction and did not receive any independent legal advice.
Supreme Court of South Australia:
On grounds of undue influence, misrepresentation and unilateral mistake, Mrs Jones was entitled to equitable relief from the guarantee she signed. Yerkey appealed.
In the High Court:
Mrs Jones acted as a guarantor for her husband because he persuaded her and she did not understand the effects of the transaction. Dixon J expressed this principle:
1. It is the liability of the creditor if they rely on the husband to get the wife to be their guar-antor without dealing with her directly, knowing that the principal debtor (the husband) may misrepresent the true nature of the transaction and get the wife to be a guarantor by exerting undue influence on her.
2.
i) The one guaranteeing the loan is the wife of the main applicant (the husband) in the loan.
ii) The guarantor (the wife) decided to do so without any expectation of deriving any benefit from the transaction (voluntary basis).
iii) That the guarantor would be asked to do so by the husband who is the main ap-plicant. In the sense that the lender is to be taken to have understood that, as a wife, the guarantor pose a lot of trust and confidence in her husband in matters of business and therefore to have understood that the husband may...
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... terms. Therefore cannot cover the whole field of unconscionable conduct. Mrs Garcia’s status as a professional does not qualify her under the Amadio principle.
The only principle most appropriate for her is the principle expressed by Dixon J in Yerkey v Jones. Because it is still good law in Australia and applies to New South Wales.
For the following reason:
Mrs Garcia relied on her husband for all financial matters. By assuring her that “if the mon-ey isn't there the gold is there".
The lack of independent advice makes the enforcement of the transaction unconscionable, even if there is no actual undue influence.
Mrs Garcia had not obtained any benefit under the transaction.
The importance of the principle lies in the relationship of trust and confidence that exists be-tween the guarantor and the principal debtor, and the lender’s knowledge of such relationship.
“In my view I am required by principle and local authority to decide that the terms of this mortgage, when it was registered, established an indefeasible right in the mortgagees to bring proceedings for repayment of the debt existing from the advance of the $206,000.”
INTRODUCTION In Palgo Holdings v Gowans , the High Court considered the distinction between a security in the form of a pawn or pledge and a security in the form of a chattel mortgage. The question was whether section 6 of the Pawnbrokers and Second-hand Dealers Act 1996 (NSW) (‘the 1996 Pawnbrokers Act’) extended to a business that structured its loan agreements as chattel mortgages. In a four to one majority (Kirby J dissenting) the High Court found that chattel mortgages fell outside the ambit of section 6 of the 1996 Pawnbrokers Act. However, beyond the apparent simplicity of this decision, the reasoning of the majority raises a number of questions.
Finally, the respondent submitted that without any contradiction from the appellant that any breach of duty of care could not be sustained and any issue of liability unlike in Jones v Dunkel would have no basis.
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