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Wife's Special Equity in the 21st Century

Wife's Special Equity in the 21st Century

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Published by Nigel Lo
Discusses the ramifications of the landmark case of Garcia v National Australia Bank. Garcia was responsible for the resurrection of the Yerkey principle that shielded women from incurring their husband's liability if there was an unconscionable transaction.
Discusses the ramifications of the landmark case of Garcia v National Australia Bank. Garcia was responsible for the resurrection of the Yerkey principle that shielded women from incurring their husband's liability if there was an unconscionable transaction.

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Categories:Types, Business/Law
Published by: Nigel Lo on Sep 22, 2013
Copyright:Attribution Non-commercial

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12/11/2013

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WIFE’S SPECIAL EQUITY IN THE 21
st
CENTURYCopyright 2013 © Nigel Lo
1
International Magis Society PublicationsIntroduction
It was February 2006 and Peter Young, Chief Justice in Equity delivered his judgement in theSupreme Court of New South Wales refusing to allow the cross claim by Mrs Sunita Narayanthe defendant in
Chandran v Narayan
2
 
who sought to avoid incurring her husband’s multimillion debt. Mrs Narayan argued that she was not liable for her husband’s debt and sought tohave the deed providing security over joint properties set aside. Mrs Narayan argued that shehad not fully understood the signing of the deed at the time it had happened. Young CJrejected the argument based on the facts that clearly and convincingly showed that not onlywas Mrs Narayan present at the meeting in Singapore where her husband Alick signed thedeed, she had taken the trouble to fly from Australia to be present at the meeting. This case is just one example of how the “wife’s special equity” as derived from
Yerkey v Jones
3
,continues to be brought into equity disputes till this very day and will continue to apply in theyears to come. This essay introduces the fundamentals of the wife’s special equity and argues
1
 Nigel Lo is the founder of the International Magis Society. He was the first Malaysian to receive the“Long Tan Australian Defence Force Leadership Award” by the Australian Department of Defence for his contributions to youth leadership development. He also served as a State District Chairman of theMalaysian Red Cross in 2008.
2
Chandran v Narayan
(2006) NSWSC 104.
3
Yerkey v Jones
(1939) 63 CLR 649.
 
that a different armour of protection afforded to a spouse must continue to exist in the 21
st
century.
The Beginning
The operation of the “wife’s special equity” can be seen where a wife does not understand thenature and effect of the guarantee she is induced to sign whereupon the transaction may be setaside. If the transaction is tainted by the actual undue influence of the husband then thetransaction will be set aside if it is proven that the creditor knew there was a marriage, unlessthe creditor can prove the wife received independent legal advice. However even if actualundue influence is absent, the second element of the special wives equity is that if the wifedid not appreciate the surety transactions effect, then the transaction will be set aside unlessthe creditor took steps to inform the wife and reasonably believed she understood thetransaction. In both the first and second elements of the ‘special wives equity’ actual or constructive notice of any undue influence or relationship of influence is irrelevant
4
, onlyknowledge of the existence of a marriage is necessary.It is important to remember that women are entangled in this web due to a personalrelationship that exists without appreciation of the legal relationship created.
5
 
4
Andrew Phang and Hans Tjio, ‘From Mythical Equities to Substantive Doctrines – Yerkey in theShadow of Notice and Unconscionability’ (1999) 14
Journal of Contract Law
72, 75.
5
Anthony Duggan, 'Till Debt Us DO Part: A Note on NAB v Garcia (1997) 19
Sydney Law Review
220.
 
In the landmark decision of 
Yerkey v Jones
, the defendant Mrs Jones sought equitable relief,claiming that she did not understand the nature of the transaction although the solicitor explained to her in some detail. Equitable relief was granted in her favour. Dixon J examineda number of cases on the position of wives as guarantors for their husband’s debt such as
Shears & Sons Ltd v Jones
,
Turnbull & Co v Duval 
 
and
Chaplin & Co Ltd v Brammall 
8
 
andallowed the appeal.The equitable principle was originally developed as a way of ameliorating the harshness of the common law, which prevented women from dealing with a property in their own names.
9
Although for the present, the law in respect to this field of special equity has been restrictedto wives
,there have been suggestions that this principle could also extend to a wider rangeof relationships of trust and confidence. Such relationships include de facto relationship and
6
Shears & Sons Ltd v Jones
(1922) 128 LT 218
7
Turnbull & Co v Duval 
(1902) AC 429
8
Chaplin & Co Ltd v Brammall 
(1908) 1 KB 233.
9
Lee Aitkin, ‘Equity, Third Party Guarantees and Wife as Guarantors: Recent English Developments’(1992) 3 Journal
of Banking and Finance
260, 264.
10
Garcia v National Australia Bank 
(1988) 155 ALR 614.

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