Case note and case law

¶ … international business law, there are a number of different issues that are constantly being wrestled with. To spell out the different terms and agreements that are made during the course of business, requires the use of various contracts. This has given rise to the study of contractual law, where various legal scholars, attorneys and judges will determine how as well as when the law would apply to different cases. Once such case where this can clearly be seen is Lloyds Bank Ltd. v Bundy, as this case would provide a unique interpretation of contractual law. To fully understand the impact of this case along with how it applies to the law requires: that you examine the case itself, conduct your own research on this subject and then provide an annotated bibliography. This will provide the greatest insights as to how Lloyds Bank Ltd. v Bundy, provided a precedent for contractual law that is followed to this very day.

Lloyds Bank Ltd. v Bundy

Court / Brief Statement of Material Facts

This case took place in the Court of Appeals. What happened was: Herbert James Bundy was a farmer. His son, Michael, formed a corporation called MBJ Plant Hire Limited. During the course of Michael's business, he was beginning to face a number of different financial difficulties. To overcome these different setbacks, Michael used his father credibility with the bank (Lloyds Bank Limited) to receive overdraft protection on his accounts. Where, Michael would receive the equivalent of 1,500 pounds of overdraft protection. As the company fell deeper into a number of financial difficulties, Michael continued to receive increased amounts of overdraft protection from the bank. After doing this a few more times, the bank refused to provide any more overdraft protection to Michael. At which point, the assistant manager explained to Herbert that additional overdraft protection of 11,000 pounds is required. During the conversation, the bank placed increasing amounts of pressure on the senior Bundy to engage in such actions (in exchange for the Herbert's farm as collateral). Using his credibility at the bank along with his farm, Herbert signed the agreement and the charge form. As Michael's company fell deeper into financial difficulties, meant that he could not repay the money. The bank immediately foreclosed upon the farm (which is where Herbert lived). During the legal proceedings, Herbert had a heart attack while giving a deposition on the witness stand. This would lead to the underlying question, as to if the bank engaged inappropriate behavior, because of the undue amounts of pressure that it placed on Herbert. According to the arguments made by the defense, they felt that the undue amounts of pressure to sign the note; meant that the actions engaged in by the bank were not legal. At the heart of this argument, was the fact that Herbert Bundy relied on Lloyds to provide him with financial advice. Where, the defense claimed that they engaged in a conflict of interest by: using the senior Bundy's credibility with the bank to provide overdraft protection to his son. This would allow Lloyds would exert influence on Herbert Bundy to engage in such actions, as they were his sole trusted financial advisor for several years. According to Bundy's lawyers, this complicated relationship that the bank had with Herbert Bundy was illegal. Therefore, the court has no choice but to rule in favor of the Bundy's.

Procedural History

Lloyds Bank Ltd. v Bundy was originally heard in Her Majesty's Courts of Justice in England and Wales. During the lower court proceedings, Bundy was refusing to leave his farm because of the undue amounts of pressure that was placed on him. While, the court understood his dire financial situation, they ruled in favor of the bank. With the lower court judge saying, "There is nothing which takes this out of the vast range of commercial transactions." (Waddam, 2006) According to the lower court, Bundy's transaction with the bank was no different than any of the other transactions that they engage in everyday with customers. Therefore, Bundy is responsible for his contractual obligations, just like everyone else.

Grounds for Appeal or Issues to be Decided

There were several key points that the defense used in the appeal that they felt were overlooked by the lower court theses include: duress of goods, an unconscionable transaction, undue pressure and the salvage principal. The grounds for appealing the case were a precedent of several previous court decisions. These would include: Astley v Reynolds, Cartwright v Rowley, Steele v Williams, Maskel v. Horner and Green v Ducket, to show duress of goods. According to the Bundy's lawyers, each of these different cases showed how Lloyds exerted undue influence, because of the fact that they were his sole financial advisor. This relationship had lasted for many years and gave Lloyds undue amounts of influence, to place pressure upon the senior Bundy to do what they demand.

To show that this was an unconscionable transaction the defense cited a number of different cases that were relevant these include: Evans v Llewellin, Fry v Lane, Morrison v Coast Finance Limited, Knupp v Bell, Allcard v Skinner and Tate v Williamson. Because of the unique relationship that Lloyds had with Herbert Bundy, meant that they were obviously in position of strength. As someone who was relying on them for their advice, this caused this relationship to be brought into question. Where, Bundy's lawyers would argue that he was under the special care of Lloyds.

To prove that the bank used undue amounts of pressure, the defense would cite a number of different rulings as precedent these include: Williams v Bayley, Ormes v Beadel and D&C Builders Ltd. v Reese. These different cases were relevant because they showed how a transaction that is placed under undue amount of pressure is invalid. As the party under pressure, has no option but to submit to the demands of the other party. In this case, Herbert Bundy had no choice other than to do exactly what the bank demanded of him.

To show salvage conditions; the defense would compare Bundy' situation to that of sinking ship. Where, there is an unfair relationship between the party on the sinking ship that needs help and the one that provides rescue assistance. According the defense counsel, they said that Bundy was in a similar situation, as Lloyds was the only way that he could save himself. Because such conditions existed, meant that the actions undertaken by Lloyds were wrong. The precedent that was cited was The Port of Caledonia v The Anna. Under this case, the rescuer refused to throw a rope to a sinking ship unless he was paid 1,000 pounds. The courts ruled that such contracts are not enforceable, when such an obvious disadvantage existed between the two parties. Bundy's lawyers argued that a similar situation existed in the relationship between Lloyds and Bundy.

Summary of Court's Analysis of the Law

The court felt that all of the different case sand issues cited all pointed to one single principal that interconnected everything, the inequality of bargaining power. Under English common law, a debtor can have relief from their obligations that they agree to: if they enter into the agreement or transfer property without the having independent advice. In several instances, the bank exerted the principal of inequality of buying power upon Bundy. To include: the fact that moving to another bank was not possible; the relationship between the bank with that of Bundy was one of trust; Bundy was naturally influenced by his relationship with his son and there was a conflict of interest between the bank with that of the senior Bundy. Together, these different factors allowed the bank to use the inequality of bargaining power on Bundy.

Principals of the Law to be Applied

The principal of law that is being applied in this case is the undue amounts of influence that Lloyds exerted over Herbert Bundy. This is because, he did not receive independent advice regarding the note and that the bank used unusual amounts of pressure to influence Bundy. To illustrate this point, the court cited three different principals of law that were relevant in this case to include: duress of goods, unconscionable transactions and undue pressure. The duress of goods would apply to this case, because one party has an obvious advantage over the other. In this case, Lloyds has an advantage over Bundy by having the goods that he needs (money). This would qualify as an unconscionable transaction, where someone in special care could easily be manipulated to obtain their property. Because Bundy was much older and not in good health, meant that the bank would force him to engage in such a transaction to obtain his farm. Undue pressure is: when the stronger party will force the weaker party to comply with their demands or face the consequences. Since the banks placed pressure on Bundy to sign the note in his weakened mental state, meant that they would use undue pressure to force him to comply. In this particular case all three apply, because the Lloyds would take advantage of the age of the elder Bundy to exert pressure on him to sign the note.

Description of How the Law Applied to the Facts

The court applied four factors of the law to this case these include: that terms of the agreement were unfair, there were undue amount of pressure exerted, Bundy's bargaining power was severely limited and there was a lack of having independent financial advice. Together, these different principals of the law would lead the court to determine that an inequality of bargaining power existed. Under these different areas, Bundy was not of sound mind to make an accurate determination as to what was the right decision. Under the principals of English law, one is not obligated to agreements that were made without independent financial advice and there was property that was transferred. In the case of Bundy, because the bank did not provide independent financial advice when this involved his sole asset, meant that he is not liable. Then when you look at the undue amounts of influence outside this law, there is one case that highlights this Allcard v Skinner. This is relevant because, the court felt that the bank was simply doing anything to lower its risks to a bad loan. They should have taken into account the fact, that this was Bundy's only property and the fact that he was reliant on the bank for financial advice.

Decision

The court decided in favor of Bundy, this is because Lloyds was the sole financial advisor for Herbert Bundy. When they wanted him to sign the note they breached their responsibilities by not giving him impartial advice. This could have been resolved by the bank, by providing an independent second party to advise Bundy. Then, when you combine this with the fact that they exerted pressure upon Bundy to engage in the business transaction, meant that the bank had abused it fiduciary responsibilities.

Order Made by the Court

The court ordered that Bundy is allowed to keep his farm. This is because the transaction that he engaged in was not valid. As a result, the bank can only seek remedy for the loan from Bundy's son Michael.

Social or Contextual Context

This case was decided in 1975. The social context of the time was a push for increased amount of consumer protections. The four principals that the court laid out during the case would provide a basic standard, for providing protections to consumers against aggressive lending practices. The approach that was used was one that is difficult to apply, to a number of different cases. This is because Denning is attempting to write law from the bench, by saying that four principals could be applied to determine if an unfair relationship exists. The problem with engaging in such actions is: you are taking a one size fits all approach when it comes to the law. Anyone, who has any kind trial experience will tell you that flexibility is one of the most important aspects to the law. As a result, many judges have never endorsed these different principals. Also many elements of the Consumer Reporting Act of 1974 address many of the areas that Denning was referring to. This is a law that regulates what assets banks can take as collateral, it gave the courts increased powers to intervene in unfair agreements and it allowed consumers to cancel such agreements under certain conditions. In many ways, this law would allow for adequate consumer protection to remain in place. As a result, the different principals that were outlined during the case were never fully embraced by the legal community or the general public.

Part B: Case Law Research

Case Citations

Explain what each element of the case citation for your assigned case denotes.

Each element of the case citation denotes a number of different pieces of information. These would include: case precedents, future court cases that were influenced, information on the case itself and common terms used throughout the case.

List any parallel (alternate) citations for your assigned case. How did you locate this information?

Several alternate citations were found in various books. This was located by conducting an internet search using Google to find relevant pieces of information. Once this search was complete a total of two books were found. These different sources provided additional background and information that was relevant to the case.

Locating the Full Judgment of Cases

Briefly describe the steps that you would take to locate the full judgment of your assigned case electronically using the Library's databases.

This would be utilized by typing in the appropriate case name and then hitting enter. Once this takes place, you will see a variety of relevant information surrounding the case. In Lloyds Bank Ltd. v Bundy, the name of the case was entered into the database. Then, all relevant information surrounding the case and the terminology were found.

Outline which authorised reports series' can be accessed via the LexisNexis AU and Legal Online databases.

The various reports that can be found on the database would include: all relevant case files, reports from Go Duck about previous / future cases and terminology from Go Duck.

Finding Judicial Consideration of Cases / Noting Up

Have any subsequent Australian cases followed or applied your case.

There is one case that influenced by the principals of inequality between the different parties this would include: Commercial Bank of Australia v Amadio. In this particular case, the standard of unfair dealings in various agreements between individuals and corporations can be adjusted or nullified by the courts. The below table illustrates how Lloyds Bank Ltd. v Bundy has been applied to issues in Australian case law.

Citation of your assigned case

(in correct AGLC style)

Source/s used to update your case e.g. Case Base Cases

Citation of the subsequent case

(in correct AGLC style)

Treatment (followed/applied)

Lloyds Bank Ltd. v Bundy

Concise Contract Law

Commercial Bank of Australia v Amadio

Courts can determine inequality in agreements.

If you were researching how an Australian case has been judicially considered by Australian courts, which other online case law research product could you use?

There are a number of other resources which can be used to identify different issues relevant to Australian case law these would include: the National Law Library of Australia, World LII Databases, BNet and CCH Australia.

Locating Cases on a Legal Topic

Locate one authoritative Queensland case and one authoritative Commonwealth / Federal case relating to the topic for your assigned case, as listed below.

Case citation

(in correct AGLC format)

Brief outline of your search strategy (including the case law research product consulted)

Commercial Bank of Australia v Amadio

AustLII Databases. The name of the case was typed in search box. This provides all relevant information on the subject.

Commercial Bank of Australia v Amadio

CommonLII Databases were used. The name of the case was type into the search box. This provided information about the case.

Are either of the cases located in Question 7 available via the AustLII website?

Yes. The way that this was located was by typing in the name the relevant case into the search box and hitting enter. This would provide all case law information about Commercial Bank of Australia v Amadio.

What are the advantages of relying on a decision reported in an authorised law reports series as opposed to the same decision reported on a free Internet website?

The information provide by the various law reports allows you to see: how the case was developed, what was the relevant legal precedent that was used and what elements of the law were relevant to this case. These advantages allow you to see how the actual law applies to this case, according to the legal experts. When you are using a free internet resource, it will provide you with good background information. However, many of the facts could be based on opinions or an ad hock interpretation of the law (making any kind of information not as factually accurate).