Alec Lobb (Garages) v Total Oil (Great Britain) Ltd [1985] 1 All ER 303

• Defendant loaned Plaintiff some money and took mortgages on Plaintiff’s property as security. When Plaintiff got into financial trouble, Defendant (contrary to its solicitors’ advice) agreed to lease Plaintiff property for  one-off premium and a v. low rent in return for which Plaintiff would grant a lease-back at a normal rent and supply Defendant with petrol for the whole term of the lease-back.

• Plaintiff claimed that this was an unconscionable bargain because of the unequal bargaining power at the time of the agreement and should be set aside.

• CA denied this claim. 

Dillon LJ

• There was unequal bargaining power (i.e. weakness of Plaintiff) but Defendant did no take advantage of this by using its power coercively or in a usurous way etc and therefore there is no presumption of fraud as there was in Aylesford.

• The unequal bargaining power requirement is fulfilled despite Plaintiff having legal advice, since it had no other source of getting finance, Defendant did not want to accept any other terms, it was in financial difficulty etc. Mere presence of advice doesn’t change this.

• However Defendant was not oppressive in its use of power.

• For a deal to be shown to be “unconscionable”, it has to be more than merely “unreasonable”. Thus, here, it is unnecessary for Defendant to show that the transaction was “fair, just and reasonable”, since Plaintiff has not done enough to raise the presumption of fraud. 

RELATED CASES

• Aylesford v Morris