Cockerill v Westpac Banking Corporation (1996) 142 ALR 227
Contract; vitiating circumstances; duress; threats of economic harm.
Facts: Acting on advice from Westpac Banking Corporation, Cockerill & Dingle borrowed foreign currency from Westpac. A sharp decline in the value of the Australian dollar then made the loan increasingly expensive for Cockerill. Cockerill claimed Westpac should not have recommended a foreign currency loan. Westpac denied any legal liability for its advice but offered to re-finance Cockerill's debt if Cockerill agreed to give up any legal claims against Westpac. Westpac also threatened to wind up Cockerill's business if Cockerill did not agree to this arrangement. Cockerill agreed to give up his legal rights against Westpac, but later decided to sue Westpac for losses arising from Westpac's original advice.
Issue: Was Cockerill bound by his agreement to give up his legal rights against Westpac?
Decision: Cockerill could avoid the agreement not to sue Westpac because Westpac's threats to wind up Cockerill's business amounted to economic duress.
Reason: The bank's threat to wind up Cockerill's business was not in itself unlawful, being something the bank was entitled to do. In the circumstances, however, the bank was taking unfair advantage of Cockerill's position of weakness to extract agreement, and this conduct was contrary to 'good conscience'. Such conduct is not allowed by law and this made Westpac's threats illegitimate.