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Rescission of Guarantees for Misrepresentation and Actionable Non-Disclosure
Published online by Cambridge University Press: 15 August 2002
Abstract
It has been a traditional requirement of rescission (ab initio), even as a response to fraudulent misrepresentation, that it must be possible to restore both parties to the relevant contract to some equivalence of their pre-contract positions. A line of cases involving rescission of guarantees has, however, permitted a surety to be entirely released from the guarantee even though the creditor has relied on it by supplying credit to the principal debtor. The suggested rationalisation is that the traditional requirement is confined to cases where rescission in specie is being sought and the innocent party can be adequately protected by a claim for damages. The article also addresses the relevance to rescission of the restitutionary concepts of change or position and counter-restitution.
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References
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16 [1994] 1 A.C. 180, and [2001] UKHL 44, [2001] 3 W.L.R. 1021, respectively.
17 (1887) 36 Ch.D. 145, 164. See too M. Chen-Wishart, “In defence of Unjust Factors: A Study of Rescission for Duress, Fraud and Exploitation” (2000) Oxford University Comparative Law Forum, http://ouclf.iuscomp.org, text to note 46.
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19 At para. [45].
20 (1841) 9 M. & W. 54; 152 E.R. 24.
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23 Ibid.
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25 [1969] N.Z.L.R. 151 (C.A.).
26 [1999] 2 N.Z.L.R. 21 (C.A.).
27 See P. Watts, “A Property Principle and a Services Principle” [1995] R.L.R. 49, 52-54. Cf. the position of persons who buy misapplied trust funds: see Westpac Banking Corp. v. Savin [1985] 2 N.Z.L.R. 41 (C.A.), and Bank of Credit and Commerce (Overseas) Ltd. v. Akindele [2001] Ch. 437.
28 [2001] 1 N.Z.L.R. 513, para. [39]
29 [1900] A.C. 6.
30 (199 5) 184 C.L.R. 102.
31 [1995] 1 W.L.R. 430; see too De Molestina v. Ponton [2002] 1 Lloyd's Rep. 271.
32 [1999] 3 N.Z.L.R. 26, 40-41.
33 See D. O’Sullivan, “Partial Rescission for Misrepresentation in Australia” (1997) 113 L.Q.R. 16, 16; N. Nahan, (1997) 27 U.W.A.L.R. 66, 81; and A. Robertson, “Partial Rescission, Causation and Benefit” (2001) 17 J.C.L. 163.
34 See D. O’Sullivan, (1997) 113 L.Q.R. 16; N. Nahan, (1997) 27 U.W.A.L.R. 66; and L. Proksch, “Rescission on Terms” [1996] R.L.R. 71, 75.
35 See too M. Chen-Wishart, (2000) Oxford University Comparative Law Forum, http://ouclf.iuscomp.org, text to note 112.
36 Though for a case where part only of a transaction was set aside, see Bridgewater v. Leahy (1999) 194 C.L.R. 457; cf. De Molestina v. Ponton [2002] 1 Lloyd's Rep. 271.
37 Cf. Cook v. Evatt (No. 2) [1992] 1 N.Z.L.R. 676.
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