Cresswell v Potter [1978] 1 WLR 255

Chancery Division

Basic Facts: C (Cresswell), a post office receptionist, agreed to transfer her interest in the matrimonial home to D (Potter) during her divorce, in exchange for being released from mortgage payments. D later sold the house for a significant profit, and C sought to set aside the agreement to claim a share of the profit.

Issue for the Court: What constitutes a weakness capable of exploitation that may allow setting aside agreements?

Held : The court established that a transaction may be set aside if it involves exploitation of a party’s weakness, especially when the transaction is at an undervalue and independent advice is lacking.

• Megarry J outlined that to set aside a transaction as unconscionable, three requirements must be met: (1) the party was poor and ignorant, (2) the sale was at a considerable undervalue, and (3) there was a lack of independent advice. Cresswell was deemed poor in the context of property transactions and lacked proper advice, making the transaction unconscionable.

💡Leveluplaw : This case set a precedent for determining unconscionable transactions, focusing on the exploitation of a party’s vulnerability and the importance of independent advice in property transactions.