Yerkey v Jones (1939) 63 CLR 649

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Facts

  • John Yerkey and his wife, Mary Yerkey brought an action in the Supreme Court of South Australia against Florence Jones and her husband, Estyn Jones.
  • The claim was for principal and interest secured by a memorandum of mortgage registered under the Real Property Act 1886 (SA).
  • Mrs. Jones alleged undue influence on the part of the plaintiffs and her husband acting together and also on the part of her husband separately.
  • Mrs Jones alleged various fraudulent misrepresentations and non-disclosures. She contended that the mortgage which she actually signed was of a different nature from that which it was represented to her to be and from that which she understood it to be.
  • Mrs Jones also alleged that the mortgage failed to carry out a preliminary agreement which had been made, particularly in that it created a personal liability on her part instead of merely charging her property with a liability which would become enforceable after three years and only after three years.

Issues

  • Could the memorandum of mortgage be rescinded due to undue influence?

Held

  • No, Mrs Jones could not rely on undue influence.
  • The High Court held that the relationship of husband and wife is not enough of itself to raise a presumption of undue influence.
  • The Court is not ignorant of the potential for a husband to obtain and unfairly use influence over a wife which the husband often possesses.
  • However, there is nothing unusual in a wife, due to affection or for other reasons, conferring substantial financial benefits on her husband.
  • The Court will note, as a matter of fact, the opportunities for abuse which flow from a wife’s confidence in her husband will take this into account with all the other evidence in the case.

The Rule of Yerkey v Jones

  • The wife entered without understanding the contract; and
  • The wife entered without dealing with the other party personally.
    • The rule also applies if:
      • the wife understood the transaction but her consent was obtained by the husband’s undue influence; or
      • if the wife guaranteed a company controlled by the husband, and if she does not have a significant interest in it.
    • This rule does not apply if the wife stands to benefit from the contract.
    • This rule, while somewhat outdated, has been subsequently applied in Garcia v National Australia Bank Ltd (1998) 194 CLR 395.

Full Text

The full text is available here:

http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/HCA/1939/3.html?stem=0&synonyms=0&query=title(yerkey%20and%20jones%20)


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