Crescendo Management Pty Ltd v Westpac Banking Corporation

Crescendo Management Pty Ltd appealed a possession order Westpac Banking Corporation had obtained on a mortgage, arguing it signed the mortgage under economic duress. The Court held that duress requires proof the illegitimate pressure actually caused the transaction, and dismissed the appeal because the mortgage was executed before Westpac applied any pressure at all.

Westpac was owed money by two Upward companies whose director, Mr Hilbrink, and his wife sold their Oyster Bay home in 1977. Westpac received the $31,268.38 net proceeds, paid roughly $3,500 into Mr Hilbrink's personal accounts, and sent the remaining $27,713.74 to its Mortdale branch to cover the Upward companies' debts, for which Mr Hilbrink but not Mrs Hilbrink was a guarantor. Westpac refused to release the $27,713.74 unless further security was given, including a mortgage over a Tahmoor property held by Crescendo Management Pty Ltd, the company through which the Hilbrinks were buying their new home. Crescendo alleged it 'had no alternative but to execute the mortgage in order to complete its Picton purchase'. Yeldham J found no economic duress and ordered Crescendo to give Westpac possession of the Tahmoor property and pay $97,056.13. Crescendo appealed, arguing that on the admitted and undisputed evidence economic duress was established.

Did Crescendo execute the mortgage over the Tahmoor property because of illegitimate economic duress applied by Westpac, so that the mortgage should not be enforced?

The appeal was dismissed with costs. McHugh JA noted that Lord Scarman, in Universe Tankships, had described duress as having two elements, 'pressure amounting to compulsion of the will of the victim and... the illegitimacy of the pressure exerted', but McHugh JA regarded the 'compulsion of the will' language as 'unfortunate' and said 'the overbearing of the will theory of duress should be rejected'. The right approach, his Honour said, is to ask whether the pressure induced the victim to enter the contract, then whether that pressure went beyond what the law will accept as legitimate. Pressure is illegitimate if it consists of unlawful threats or unconscionable conduct, though the categories are not closed. Once illegitimate pressure is shown, the party who applied it carries the onus of proving it made no contribution to the victim entering the agreement.

Westpac's insistence on retaining the whole $27,713.74, including Mrs Hilbrink's half share of the Oyster Bay proceeds, was an unlawful detention of her money and so amounted to illegitimate pressure. But McHugh JA found that the Crescendo mortgage was probably executed on 8 July 1977, before Westpac applied any pressure at all. On Mr Hilbrink's own letter of 27 July 1977, Westpac did not refuse to release the funds until 14 July, and its letter of 21 July listing the documents required for release did not even mention the Tahmoor mortgage, because it had already been signed. The pressure therefore 'played no part in the execution of the mortgage which had occurred before the pressure was applied'.

Samuels JA agreed the appeal should be dismissed 'on the ground stated by McHugh JA that any pressure exerted by Westpac played no part in the execution of the mortgage', and said he did not need to decide the conceptual basis of the duress defence. Mahoney JA agreed that the only question was whether Crescendo executed the mortgage because of illegitimate economic duress, agreed with McHugh JA that on the evidence it did not, and considered it unnecessary to express any view on the other matters argued in the appeal.