Moral depravity – or at least morally depraved conduct – will be a decisive factor in determining the outcome of a claim for relief in a court of equity. Not the moral depravity of the defendant, mind you, but that of the person seeking the remedy.

This is pursuant to the long-established principle that a discretionary remedy in equity will not be available to an applicant who has engaged in serious misconduct. “A person must come into a Court of Equity with clean hands,” runs the famous maxim – hence the defence of “unclean hands” is available to a defendant. “The unclean hands maxim requires the Court to look at the conduct of the litigant who seeks the assistance of equity, rather than the conduct of the defendant,” as Campbell J stated in Black Uhlans Inc v Crime Commn (NSW) [2002] NSWSC 1060.

The defence arises in situations where a court of equity is exercising its discretionary capacity. The considerations a court must take into account when considering the defence include whether the alleged conduct of the applicant had an immediate and necessary relation to the equity sought and whether it was directed at, or done to, the defendant. A court must also take into account all the circumstances of the case.

In deciding whether to deny an equitable remedy in circumstances where the applicant has themselves engaged in conduct contrary to good conscience or fair dealing – “the dirt in question on the hand” (Moody v Cox [1917] 2 Ch 71) – a court of equity engages in an evaluative exercise. Allsop P made this clear in the NSW Court of Appeal case Kation Pty Ltd v Lamru Pty Ltd [2009] NSWCA 145:

Just as the underlying concepts are evaluative and, to a degree, reflective of contemporary social morality, the degree of proximity of the iniquity to the equity is equally necessarily evaluative.

But lest one be concerned that this may suggest the fate of an “unclean hands” defence rests on the subjective assessment of what is morally right or wrong by equity judges with disparate sensibilities, it should be noted that the conduct in question must be “depravity in a legal as well as in a moral sense” (emphasis added).

In British American Tobacco Australia Ltd v Gordon [No 3] [2009] VSC 619, Kaye J underlined this requirement for “legal depravity” in endorsing the statement of Eyre LCB in the old case of Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184, that:

It is not laying down any principle to say that his (the plaintiff’s) ill conduct disables him from having any relief in this Court. If this can be founded on any principle, it must be, that a man must come into a Court of Equity with clean hands; but when this is said, it does not mean a general depravity; it must have an immediate and necessary relation to the equity sued for; it must be a depravity in a legal as well in a moral sense.

That said, updated The Laws of Australia Subtitle 15.4 “Equitable Defences” does argue that a more precise definition of “legal impropriety would minimise the danger that ‘unclean hands’ might simply act as a net to catch situations which fail to attract redress on bases such as misrepresentation, fraud or estoppel, but which nevertheless arouse the judges' sympathy”.

For more information about The Laws of Australia, click here.