Cresswell v Potter [1978] 1 WLR 255
Facts
A wife and husband owned property jointly after earlier dealings with their home. When the marriage broke down, the husband arranged for her to sign a release transferring her interest to him in return for protection against mortgage liability. She had no independent solicitor and did not understand that she would receive no share of the property’s value. The document was prepared on the husband’s instructions. He later sold the property at a profit. She challenged the release, relying on her position, the undervalue and the absence of independent advice rather than simply asking the court to reconsider a disappointing bargain.
Legal Issue
C brought an action claiming that the property’s release was ineffective against the sale and that she ought to have received half of the profits; D argued the contrary - that the sale was valid
Held
Megarry J set the transaction aside because the husband had not established that it was fair, just and reasonable in the relevant circumstances. The wife’s relative poverty and lack of sophistication, the substantial undervalue and absence of independent advice brought the transaction within the equitable principle illustrated by Fry v Lane. The judge did not treat poverty as confined to destitution. His discussion of a clear explanatory letter and an opportunity to obtain advice indicated that the enquiry was practical, not a rigid ritual requiring a solicitor’s attendance in every case. Here there had been no adequate attempt to ensure an informed independent decision.
⭐ Legal Principle
Equity may set aside an unconscionable transaction involving a disadvantaged and insufficiently advised person at a substantial undervalue. The beneficiary of the transaction may need to show that it was fair, just and reasonable; independent advice is assessed in its practical context.
Significance
Cresswell applies the older unconscionable-bargain authorities to a modern family property transaction. It is not principally authority about notice letters or the formalities of severance. Compare Fry v Lane for the underlying protection and Allcard for undue influence, while keeping the doctrines distinct. A bad price alone is not a general equitable ground for undoing a contract; the vulnerability and circumstances of procurement matter.
Common exam questions about this case
Was undervalue alone enough to set the release aside?
No. The court considered the wife’s position, the substantial undervalue and lack of independent advice together. Equity does not ordinarily rewrite every bargain producing an unequal financial result. The combination required the husband to establish that the particular transaction was fair, just and reasonable.
Did the judge require a solicitor in every transaction?
He did not treat advice as a mechanical formality. A clear explanation and genuine opportunity to obtain independent advice could be relevant to an informed choice. Here, however, the wife received no adequate protection of that kind before giving up her valuable interest.
How does Cresswell differ from proving an express threat?
Its reasoning addressed unconscionable dealing with a disadvantaged party, substantial undervalue and inadequate advice. The claimant did not need to identify a physical threat in order to invoke that equitable principle. A student should nevertheless establish its specific conditions rather than label any unhappy family agreement unconscionable.