HEARD : 28-30 APRIL, 1, 4 & 5 MAY, 2-4, 7-10 SEPTEMBER 2009

LYNNE KOLNIK As Executor of the Will of GERALD THOMAS FOLEY

Contracts - Formation - Whether parties intended to be immediately bound - Memorandum of understanding in relation to an option providing for option agreement to be drafted

Contracts - Capacity to contract - Soundness of mind - Dementia - Whether party to contract suffering from dementia - Whether party to contract lacked contractual capacity - Whether other party ought to have known of incapacity

Unconscionable dealing - Whether party to contract suffering from special disadvantage - Whether special disadvantage sufficiently evident to other party - Whether other party took unconscientious advantage of special disadvantage

Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362

Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336

Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447

Crago v McIntyre [1976] 1 NSWLR 729

Edna May Collins by her next friend Glenys Lesley Laraine Poletti v May [2000] WASC 29

Ford by his tutor Watkinson v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 257 ALR 658

Gibbons v Wright [1954] HCA 17; (1954) 91 CLR 423

Giles v Rooney (1996) 23 MVR 510

Grainger v Williams [2009] WASCA 60

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705

Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353

McLaughlin v Daily Telegraph Newspapers Co Ltd (No 2) [1904] HCA 51; (1904) 1 CLR 243

Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60

Niesmann v Collingridge [1921] HCA 19; (1921) 29 CLR 177

Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265

Turner v Windever [2005] NSWCA 73

1 This is the trial of an action for relief by way of specific performance, damages and consequential relief. The first defendant has also made a counterclaim for declaratory and related relief.

2 The plaintiff claims as purchaser under an agreement to purchase a property by the sea at Mandurah. The agreement is said to be the result of the exercise of an option granted by an option agreement headed 'Memorandum of Understanding' (MOU). This was entered into with the registered proprietor of the property and subsequently varied by agreement deleting the provision in it for preparation of an option agreement. The first defendant is the executrix of the registered proprietor. The second defendant, the Registrar of Titles, is joined as the plaintiff seeks to have orders that will compel the second defendant to have her shown on the certificate of title to the land as its registered proprietor in place of the present registered proprietor.

3 The first defendant by her defence and counterclaim, as amended on the first day of the trial, says on its proper construction the MOU is nothing more than an agreement to agree. In any event, the first defendant says, the MOU called for an option agreement to be drafted by a stipulated date, which was not done. The first defendant also says the MOU was not varied as alleged.

4 Further, the first defendant says that at all relevant times the registered proprietor lacked the mental capacity to understand the nature and effect of the MOU and the variation alleged, and the plaintiff knew or ought to have known of that lack of capacity.

5 The first defendant also says that at all relevant times the registered proprietor was under a special disability in dealing with the plaintiff, with the consequence that there was an absence of any reasonable degree of equality between them. The first defendant says that the disability was sufficiently evident to the plaintiff to have made it prima facie unfair or unconscientious that the plaintiff procured or accepted the registered proprietor's assent to the impugned transaction. The first defendant says that the evident absence of any reasonable degree of equality between them cast a burden on the plaintiff to show the transaction was fair, just and reasonable, and that the plaintiff cannot discharge that burden.

6 The first defendant says that by reason of the matters just described the plaintiff is not entitled to the relief she claims, and a declaration should be granted that the MOU and the variation alleged 'be set aside'. Alternatively, that a declaration should be granted that the MOU and the variation alleged were voidable at the option of the first defendant by virtue of the registered proprietor's mental incapacity and that they were avoided on that basis. Furthermore, the first defendant says orders should be made for the withdrawal of the caveat the plaintiff lodged in respect of the interest she claims in the property and for damages in respect of the lodging of that caveat without reasonable cause, such damages to be assessed. The first defendant also seeks equitable damages, further or in the alternative, as well as orders for other relief.

7 I note that no argument was addressed to me with respect to the damages claims of either party.

8 There are three groups of issues in the trial in respect of which I must make findings.

9 One group of issues concerns the MOU. Here the issues are whether or not it was no more than an agreement to agree and, if not, whether it was varied so as to delete the provision calling for an option agreement.

10 The second group of issues concerns whether or not the registered proprietor lacked the mental capacity to understand the transaction when it was explained to him at the relevant times and, if he did, whether or not the plaintiff was aware, or ought to have been aware, of that lack of capacity.

11 The third group of issues concerns the first defendant's claim of unconscionable dealing by the plaintiff with the registered proprietor. Here the issues are whether or not the registered proprietor was under a special disability; and, if there was such a special disability, whether or not the special disability was sufficiently evident to the plaintiff to make it unfair that the plaintiff should benefit from the transaction with the registered proprietor. The plaintiff however, does not plead that the transaction was fair, just and reasonable.

12 I begin by setting out the background to the parties' claims, before describing the evidence they presented, and considering the issues in the trial. In doing so I will refer to the first defendant in her personal capacity as the first defendant, except as I will indicate.

Background: events leading to the signing of the memorandum of understanding on 23 February 2005

13 In February 2005 the plaintiff was a licensed real estate agent under the Real Estate and Business Agents 1978 Act (WA). She was employed as a real estate agent by Cairns Pty Ltd, trading as Realty Executives Keith Howe & Associates (Realty Executives). She had first been registered as a real estate agent in 1984.

14 In February 2005 Gerald Thomas Foley (Mr Foley) was 78 years old, having been born on 8 June 1926. He was living in a property on Curtin Avenue in Cottesloe (the Curtin Avenue home), which he had acquired from the estate of his mother.

15 In February 2005 Mr Foley was at all material times the registered proprietor of a property at 152 Ormsby Terrace in Silver Sands, being Lot 12 on Diagram 29948 and the whole of the land comprised in Certificate of Title Volume 1289 Folio 867 (the Property). The Property is located about 2 km from the central business district of Mandurah; it is rectangular in shape and level; it has an area of 809 sqm with a frontage of 20.11 m and a depth of 40.22 m; and it is separated from the beach by Ormsby Terrace and a foreshore reserve. The Property is, and at all material times was, vacant land on Ormsby Terrace and zoned residential.

16 Until 1986 Mr Foley had worked as a school teacher, and had at one time been the headmaster and a teacher at Meekatharra College.

17 In 1993 Mr Foley was made a crosswalk attendant (or traffic warden) for a crossing near Presbyterian Ladies College (PLC) and worked there mornings and afternoons on school days until 2005.

18 In the middle of 1995 the first defendant had rented a granny flat at the Curtin Avenue home. In the middle of 1996 the first defendant moved out of the granny flat to live in Mosman Park.

19 In March 2002, after having travelled overseas and having returned to Mosman Park, the first defendant moved back to the Curtin Avenue home.

20 In late June 2002 Mr Foley executed an enduring power of attorney dated 28 June 2002, appointing the first defendant and Mr Foley's sister Ms Marie Hunt his attorney.

21 On 19 July 2002 Mr Foley executed a new will replacing his previous will, executed 24 July 1998. The 2002 will named the first defendant as his executor; she was also the main beneficiary under the 2002 will.

22 On 19 February 2005 the plaintiff visited Mr Foley at the Curtin Avenue home. The plaintiff had for some time been looking to acquire property in the Mandurah area, and in particular had been interested in acquiring land in the locality of Ormsby Terrace. The plaintiff had identified Mr Foley as the owner of the property from her use of a database available to real estate agents.

23 During the visit on 19 February 2005 the plaintiff asked Mr Foley if he was interested in selling the property. He said he was not.

24 On 22 February 2005 Mr Foley telephoned the plaintiff.

25 The following day, 23 February 2005, and as a result of this telephone call, the plaintiff with her father visited Mr Foley again. At some time between 2.20 pm and 2.40 pm that day the three signed a document headed 'Memorandum of Understanding'.

Background: the Memorandum of Understanding

26 One of the issues in the trial requires me to identify the proper construction of the MOU. It is therefore appropriate to set it out at this point.

27 The MOU as it was in evidence before me (a copy is exhibit 1) was contained in a single sheet of paper and read as follows:

Pamela Denise Lampropoulos

[Post office box in Claremont]

23 February 2005

Mr Gerald Thomas Foley

[Address of Curtin Avenue home]

Dear Mr Foley

Memorandum of Understanding (MOU):

Option to purchase property situated at 152 Ormsby Terrace Silver Sands 6210 Western Australia

I confirm our discussion held on 23 February, 2005 regarding the option to purchase the property at 152 Ormsby Terrace, Silver Sands, Western Australia ('the property') and now set out the agreed terms.

1. An option to purchase the property is granted effective 23 February 2005.
2. In consideration for the granting of the option, an option fee of $300 (plus any applicable GST) will be payable on execution of the option agreement, by the relevant parties, such option agreement to be drafted by the option holder's solicitor within 21 days of execution of this 'MOU').
3. The expiry date of the option will be on or before 5pm WST 90 days from execution of this letter.
4. The exercise price of the option is to be $300,000 (inclusive of any applicable GST) less the GST inclusive amount of the option fee paid in point 2 above.
5. It is acknowledged that the Purchaser may exercise the Option in her own right or assign all or part of her interests under this document (and the Option) to another person or entity to enable the assignee to exercise the Option.
6. On the Purchaser exercising the Option, the Vendor must sell the property to the Purchaser on the terms and conditions set out.
7. The Purchaser is to pay all stamp duty payable on the Option agreement and the transfer of the Property if the Purchaser exercises the Option.
8. Each Party must bear its own costs with respect to the negotiation, preparation and execution of the Option agreement.

Under each of the 'Signed' legends and above the name appeared the respective signatures of the parties, while below the 'Witness' legend appeared the signature of the plaintiff's father, Mr Stephen Kikiros, in each case.

28 I note that the closing parenthesis at the end of the text in 2) above (that is, after 'execution of this "MOU"') is in the original document. It seems to me plainly an error, and I will disregard it.

Background: from the execution of the memorandum of understanding to the purported exercise of the option on 7 April 2005

29 On 23 February 2005, after the execution of the MOU, Mr Foley in a telephone conversation with the first defendant informed her that he had sold the Property. At this time the first defendant was living in Sydney.

30 Still later that day, the first defendant telephoned the plaintiff and left a message on her home answering machine. The first defendant also contacted Mr Bernard John West, who was Mr Foley's accountant and a friend of his.

31 The plaintiff says that the next day, 24 February 2005, she met with Mr Foley at the crosswalk where he was working outside PLC, paid him $300 in cash and handed him a letter. That letter in full text is, as printed from the plaintiff's computer, exhibit 2; a copy, signed by the plaintiff, is exhibit 3, which lacks the provision for Mr Foley's signature in the legend at the foot of exhibit 2.

P D Lampropoulos

PO Box ***

CLAREMONT WA 6910

24 February 2005

Mr Gerald Foley

*** Curtin Avenue

COTTESLOE WA 6011

Dear Mr Foley

Option To Purchase - 52 Ormsby Terrace, Silvery Sands

I enclose copy signed and stamped option agreement for your records.

When I presented it to the Office of State Revenue they told me that it was an agreement in its own right and was stampable.

Accordingly it seems that no further document is required.

I expect to have my finance in place in the near future and, in accordance with normal real estate practice, will settle within 28 days of exercising the option.

I confirm that with this letter I have paid the option fee of $300. Please sign the enclosed copy letter acknowledging receipt.

Please let me know if you have any queries.

Your sincerely

Pamela Lampropoulos

I, Gerald Thomas Foley, acknowledge receipt of the option fee of $300.

The first defendant denies or does not admit that any such meeting took place.

33 Also on 24 February 2005, the first defendant telephoned Realty Executives, as well as the plaintiff. Mr West telephoned the plaintiff and the Real Estate and Business Agents Supervisory Board (REBA). Subsequently REBA conducted an investigation into the plaintiff's conduct in the transaction with Mr Foley.

34 Also on 24 February 2005 the plaintiff lodged a caveat against the title to the Property. On the form for the caveat the plaintiff claimed an estate or interest 'in fee simple as option-holder', and did so by virtue of 'an option to purchase dated 23 February, 2005'.

35 By letter dated 15 March 2005 (exhibit 5A) to the plaintiff, the firm of solicitors acting for Mr Foley informed the plaintiff that in their view the 'purported option' was 'nothing more than an agreement to agree', and that Mr Foley would not be proceeding with the transaction, adding he

wishes to return the $300 given to him by you on 24 February 2005. Would you please kindly advise us as to which address you would like us to forward this amount to.

36 By a letter dated 24 March 2005 (exhibit 5), referring to their letter of 15 March 2005, those solicitors stated that they enclosed a cheque in the amount of $300 'to reimburse you for the money you gave Mr Foley on 24 February 2005'. It is not in contest that the plaintiff did not accept that cheque.

37 On 7 April 2005 the plaintiff gave notice purporting to exercise the option under the MOU. The notice was in the form of a letter addressed to Mr Foley at the Curtin Avenue home, in the following terms (exhibit 9):

PO Box ***

CLAREMONT WA 6910

7 April 2005

Mr Gerald Thomas Foley

*** Curtin Avenue

COTTESLOE WA 6011

Dear Mr Foley

NOTICE OF EXERCISE OF OPTION

I refer to the Option to purchase the property at 152 Ormsby Terrace, Silver Sands dated 23 February 2005.

I hereby exercise the option.

I confirm that settlement will be effected 28 days from the date hereof.

Yours sincerely,

PAMELA DENISE LAMPROPOULOS

Background: events subsequent to the purported exercise of the option on 7 April 2005

38 By letter dated 2 May 2005 (exhibit 11) to the plaintiff, the firm of solicitors acting for Mr Foley informed the plaintiff that Mr Foley was not required to proceed to settlement.

39 On 21 June 2005, on the application of the first defendant made on 9 June 2005, the State Administrative Tribunal appointed the first defendant guardian for Mr Foley.

40 On 12 July 2005 Mr Foley resigned from his position as a crosswalk attendant.

42 On 12 December 2007 probate of the 2002 will was granted to the first defendant.

43 I leave aside for the time being the substantial body of documentary evidence in the trial.

44 The plaintiff's witnesses were Dr Lloyd Thalay Singam, Dr Jonathon Keith Laurie Foster, Ms Heather Christine Sharp and Mr Kikiros, as well as the plaintiff herself.

45 Dr Singam was a consultant geriatrician employed by the State Department of Rehabilitation and Aged Care who had visited Mr Foley in the Curtin Avenue home in August 2002 and again in March 2005, acting in each case on a referral from a Dr Ryan, who was Mr Foley's general practitioner.

46 Dr Foster was a consultant neuropsychologist with between 19 and 20 years clinical experience, and he had held positions as a neuropsychologist in universities in the United Kingdom and Canada as well as Australia. On a referral dated 29 September 2008, Dr Foster prepared a report dated 19 November 2008 (exhibit 22) on Mr Foley, relying on documents provided to him.

47 Ms Sharp was a supervisor, customer centre at Landgate, who testified as to the delays in the appearance of sales of properties in the Landgate system. That appearance would make the sale prices accessible to searchers.

48 The witnesses for the first defendant were Mr George Kennington Nichols, Mr John Nielsen Cleary, Mrs Megan Deanne Pickering, Dr Warwick Claxton Black, Dr Stephen Jay Proud, Mr George Karakiozakis, Dr Louise Doreen Hayward, Mrs Susan Joy Jordan, Mrs Anne Patricia Coles, Mr John Charles Stewart Coles, Mr Rodney John Higgins, Mr Peter Robert Fryer, Mr West, Mr Warwick Victor Webb and Mr Gregory Rossen, as well as the first defendant herself.

49 Mr Nichols and Mrs Coles were former students of Mr Foley at Meekatharra Primary School, overlapping for one year in 1957, who met with him for meals in or about December 1997, January 1998, November 2000, December 2003 and April 2005. These occasions sometimes included others. Mr Coles was the husband of Mrs Coles and he was at the meals in 1998, 2000 and 2005.

50 Mr West was an accountant who had known Mr Foley since the late 1940s. He was a regular visitor at the Curtin Avenue home and had done Mr Foley's taxes for 20 years until 2005, when the first defendant took over that task.

51 Mr Cleary had lived in a home adjoining the Curtin Avenue home between September 1999 and October 2006. Over the period September 1999 to when Mr Cleary was hospitalised following a serious accident in August 2001, he and Mr Foley had many conversations. Beginning in 2004 Mr Cleary began to work from home and saw 'a lot more' of Mr Foley.

52 Mr Karakiozakis was an on-road assessor with the Traffic Warden State Management Unit attached to the Western Australian Police from early 2002 until the end of 2007. As part of his role with the Unit he visited traffic wardens employed by the Unit to assess their competency in performing their duties at their crosswalk. In the course of the performance of his role on various occasions between 2002 and 2005 he visited the crossing near PLC where Mr Foley worked and observed his behaviour. One of those visits was in June 2005.

53 Mr Fryer was a training and operations officer with the Traffic Warden State Management Unit attached to the Western Australia Police from 1996, and had first met Mr Foley in 1998 when he went to Mr Fryer's office. He had contacted Mr Foley in October 2004 following his failure to attend to crosswalk duty at the Perth Royal Show, and again in June 2005, following his failure to attend a meeting with Mr Fryer which Mr Fryer had arranged with him by telephone the previous day.

54 Dr Black was a psychiatrist who had worked in that capacity between 2002 and 2003 at the Bentley Elderly Mental Health Service and since 2003 had been in private practice. He had met with Mr Foley on a number of occasions in 2005, initially on a referral from Dr Ryan, as well as on a number of occasions in 2006.

55 Dr Hayward was a clinical psychologist who had been in private practice since 1996. She met Mr Foley on three occasions in May 2006 to prepare a cognitive assessment of him.

56 Dr Proud was a psychiatrist who between 1998 and 1999 had been the Director of North Metropolitan Psychiatric Services for Older Persons; Director of WA Training Program in Old Age Psychiatry; and Psychiatrist to the Neurosciences Unit of WA. Since 1999 Dr Proud had been in private practice. By letter dated 7 July 2006 (exhibit 71) he had provided a report to the then solicitors for Mr Foley following a clinical interview of him on 8 June 2006. He provided further reports to Mr Foley's solicitors but did not meet with Mr Foley again.

57 Mrs Jordan was a social worker at Sir Charles Gairdner Hospital, who had held that position between 1987 and 1990 and since 1993. She conducted visits to elderly persons, usually at the request of their general practitioner, to assess the elderly person's psychosocial needs, including their needs for community services and alternative care. She accompanied Dr Singam on his visit in August 2002 with Mr Foley in the Curtin Avenue home. In June 2005 she visited Mr Foley in the Curtin Avenue home again, this time with a Ms Hope Rosenberg, a senior occupational therapist from Sir Charles Gardiner Hospital, as a result of a request from the first defendant and consultation with Dr Singam. In October 2005 Mrs Jordan again visited Mr Foley in the Curtin Avenue home, this time alone, as a result of another request from the first defendant, and consultation with Dr Ryan, Dr Singam and Ms Rosenberg.

58 Mrs Pickering was employed by The Aged Persons Support Service (TAPSS) as manager from 1985 until 15 July 2005. In that capacity she worked with volunteer workers to help elderly people remain in their homes as long as possible, by arranging domestic assistance and gardening maintenance. She had known of Mr Foley and had seen him working at the crossing at PLC, but had not met him prior to him becoming a client of TAPSS in about 2000. She interviewed him then to make arrangements for him. He visited TAPSS on a regular basis to pay his account, and Mrs Pickering visited Mr Foley at the Curtin Avenue home on two occasions before the discontinuance of Mr Foley's use of TAPSS services. He discontinued his use of TAPSS services after about 18 months. Mrs Pickering went to see him in late 2002 or in 2003 after that discontinuance.

59 Mr Higgins was an inspector with the Real Estate and Business Agents Supervisory Board (REBA) between 1989 and 2007. In that capacity on 4 March 2005 he had visited the Curtin Avenue home and interviewed Mr Foley in the course of his investigation of a complaint by the first defendant against the plaintiff in respect of her transaction with Mr Foley in relation to the Property.

60 Mr Rossen was a licensed real estate agent who in 2003 had been retained by the first defendant (as Mr Foley's attorney) and by Mr Foley to sell two blocks of land of his in Ivanhoe Street in Morley. The land was successfully auctioned on 29 June 2003. He had met Mr Foley on about five occasions in that year in relation to that matter.

61 Mr Webb was a certified practising valuer who, after an inspection of the Property on 2 September 2009 and consideration of certain sales evidence, prepared a retrospective valuation report (exhibit 106) as at 23 February 2005.

The memorandum of understanding: the parties' cases

62 On the parties' pleadings and submissions, this was the question whether or not the MOU was nothing more than an agreement within the third class described in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353, 360 (Dixon CJ, McTiernan & Kitto JJ), which is to say a case where the intention of the parties was not to make a concluded option agreement at all unless and until they had executed a formal agreement.

63 The description in Masters of the three classes of case, of the implications of membership of each of the classes of case and of the approach to determining of which class a particular case is a member, is as follows (91 CLR (360 - 362), referring to among other authorities Niesmann v Collingridge [1921] HCA 19; (1921) 29 CLR 177):

Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller [(1878) 3 App Cas 1124] when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: ' ... as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed' [(1151)]: see also Sinclair, Scott & Co Ltd v Naughton [(1929) [1929] HCA 34; 43 CLR 310, at 317]. A case of the second class came before this Court in Niesmann v Collingridge [(1921) [1921] HCA 19; 29 CLR 177] where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made 'on the signing of the contract'. Rich and Starke JJ observed [(184 - 185)] that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox CJ, held that there was no difficulty in decreeing specific performance of the agreement, 'and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion' [(185)] : see also O'Brien v Dawson [(1942) [1942] HCA 8; 66 CLR 18, at 31].

Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor etc of the Poor of Kingston-upon-Hull v Petch [(1854) [1854] EngR 995; 10 Exch 610; 156 ER 583]. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker [(1950) [1950] HCA 13; 80 CLR 304] or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter ... . Lord O'Hagan said: 'Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made' [(1149)]. And Lord Blackburn said: 'parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement' [(1152)]. So, as Parker J said in Von Hatzfeldt-Wildenburg v Alexander [[1912] 1 Ch 284, at 289] in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.

The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be no contract binding upon the parties before the execution of their agreement in its ultimate shape: Farmer v Honan [(1919) [1919] HCA 13; 26 CLR 183]. Nor is any formula, such as 'subject to contract', so intractable as always and necessarily to produce that result: cf Filby v Hounsell [(1896) 2 Ch 737]. But the natural sense of such words was shown by the language of Lord Westbury when he said in Chinnock v Marchioness of Ely [(1865) [1865] EngR 335; 4 De GJ & S 638; 46 ER 1066]: 'if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipulation' [(646)]. Again, Sir George Jessel MR said in Crossley v Maycock [(1874) LR 18 Eq 180]: 'if the agreement is made subject to certain conditions then specified or to be specified by the party making it, or by his solicitor, then, until those conditions are accepted, there is no final agreement such as the Court will enforce' [(181 - 182)].

64 The plaintiff says that the MOU falls into the first class. However, in my view this cannot be squared with cl 2 of the document, and I would not accept this classification.

65 Alternatively, the plaintiff says the MOU falls into the second class, the performance of the obligation as to payment of the option fee in cl 2 being conditional on execution of the option agreement to be drafted by the plaintiff's solicitor within 21 days after execution of the MOU. However, the plaintiff also says, the MOU was varied by agreement on 24 February 2005, the day after the execution of the MOU, by the deletion of the provision in cl 2 for the parties to enter into an option agreement and by making the option fee payable forthwith. The proposal to vary the MOU was made by the letter dated 24 February 2005, hand-delivered to Mr Foley on 24 February 2005, and accepted by his conduct in accepting the option fee.

66 The first defendant says the MOU fell into the third class of case, pointing in particular to the lack of any express provision for the time of execution of the option agreement once it had been drafted by the plaintiff's solicitor, as well as the absence of any express provision for the time of settlement of any sale resulting from the exercise of an option.

67 The first defendant further says that, if the MOU fell into the second class, it was not varied as the plaintiff contends. And, as no option agreement was drafted by the plaintiff's solicitors within 21 days of execution of the MOU, or indeed at all, any contract resulting from the MOU failed.

68 The issue that arises if the MOU fell into the second class, whether it was varied to remove the limitation on payment in cl 2 and make the option fee payable forthwith, is returned to below.

69 In my view the MOU fell into the second class. My reasons for so finding are based upon the language of cl 2 of the MOU.

70 That language is of a condition of the obligation to pay the option fee, on the drafting and execution of an option agreement, in the same way the language of offer purportedly accepted in Niesmann made the obligation to pay the first instalment of the purchase price of the land conditional 'on the signing of contract', the next instalment three months 'afterwards' and the balance three years 'from the date of signing contract': Niesmann (180) (Knox CJ). It is true that the MOU spells out matters as to the drafting of the contract in greater detail, by stipulating the drafter and the time for drafting, than in the document in Niesmann. However, that point of difference appears to me, if anything, to make it less likely the parties had not reached a concluded bargain for an option unless and until they had executed the option agreement so drafted.

71 There is no language in the MOU making the option conditional on or subject to the execution of an option agreement to be drafted.

72 It is also true that the document in Niesmann began with its signatory stating he did 'hereby give' a 'firm offer', and concluded '[v]alue received for option sixpence' (180). Both matters were referred to in the judgments in terms indicating those features were significant in finding that a concluded agreement arose when the offer was accepted: Niesmann (182) (Knox CJ) and (184) (Rich and Starke JJ). There is no such language and no such payment here.

73 However, the language of the MOU, cl 1, is that '[a]n option to purchase the property is granted effective 23 February 2005', which I consider to be no less indicative of a concluded bargain than the language of 'firm offer'. The provision for payment of the option fee in the MOU, cl 2, is not the support for the conclusion that a concluded bargain had been reached, that provision for immediate payment would have provided. However, there is express provision for the duration of the option in the MOU, cl 3, and for the assignment of the interest of the 'purchaser' under the option, cl 5, unlike the position in Niesmann. Both in my view add further support for the view that the MOU was intended to be a concluded bargain for an option.

74 It is true that, as the first defendant notes, there is no express stipulation in the MOU as to the time for execution of the option agreement, nor the time for settlement of any resultant sale of the land. I accept that 'absence of agreement upon all possible subjects of negotiation may point to a difficulty as to intention to be bound, as well as to a difficulty about certainty of terms': Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60 [36] (Keane JA), [1] (McMurdo P) and [64] (Atkinson J). My attention was drawn in the cross-examination of the plaintiff to the provisions in a form of option agreement from the Real Estate Institute of Western Australia (exhibit 15) in respect of the time for settlement and other respects without any counterparts in the MOU.

75 However, there was no submission put to me that there was an issue of insufficient certainty of terms in this case. I note that both features I have described, the absence of a time for execution of the further document provided for, and the absence of a time for settlement, also characterised Niesmann.

76 I consider that the language of the MOU does not indicate, as the correspondence in Moffatt was seen not to suggest, that 'further negotiation was regarded as essential by the parties': Moffatt [30] (Keane JA). Rather, as in Moffatt (referring to Niesmann), the MOU 'contemplated the execution of a further contract as the means whereby the bargain which they had concluded would be implemented': Moffatt [30].

77 Thus, I conclude the MOU was a concluded bargain in the second class in Masters v Cameron.

The memorandum of understanding: whether or not it was varied

78 I have previously described the parties' cases in relation to this issue.

79 I have concluded that the MOU was varied by the deletion of the provision in cl 2 for the parties to enter into an option agreement and by making an option fee of $300 payable forthwith. I have so concluded on the basis of the following two matters.

80 The evidence of the first defendant is that on her visit to Perth between 8 and 17 March 2005 she found on the kitchen table of Mr Foley a letter (exhibit 16) from the plaintiff to Mr Foley dated 24 February 2005, in the form of exhibit 2, but with indications at the bottom that a portion had been torn off, underneath the signature of the plaintiff. That letter, as has been seen, said that 'with this letter I have paid the option fee of $300'.

81 I have previously referred to the letters from the solicitors for Mr Foley and his attorney (the first defendant) dated 15 March 2005 (exhibit 5A) and 24 March 2005 (exhibit 5) concerning the return of $300 said to have been given to Mr Foley on 24 February 2005. While the circumstances in which payment was made are in contest, as will shortly be seen, there does not appear to be any contest that Mr Foley did receive $300 from the plaintiff.

82 It was the plaintiff's evidence that in the afternoon of 24 February 2005, when she had gone with her father Mr Kikiros to the crossing near PLC where Mr Foley was working, she had told him that the 'State Revenue Department' had told her 'this option agreement' was 'enforceable' and so there was 'no need for a further agreement', to which Mr Foley replied, 'In that case, that's okay'. She had then counted out $300 in cash and handed the cash to Mr Foley in an envelope, which he accepted. She had also presented a copy of the letter dated 24 February 2005 to Mr Foley for signature of that portion providing for his signature, which he had said he would not sign as he had been told not to sign anything. After she had said to him 'Don't you want to sell the land?', he added, 'No, it's not that. They're laughing at me.' She had then torn off the bottom of the letter comprising the part providing for his signature and left him with the balance of the letter.

83 There is evidence to the same effect from Mr Kikiros.

84 It was put to me for the first defendant that I should not believe the evidence of the plaintiff and of Mr Kikiros as to the circumstances under which the letter was provided to Mr Foley. My attention was directed to the plaintiff's admission that she had been mistaken in her examination-in-chief when she said that the letter was prepared the evening of 24 February 2005, which of course would have been, on her testimony, after the time she had provided the letter to Mr Foley; and to her evidence in re-examination that she prepared it in the evening of 23 February 2005, when on her testimony it was on the following day that she received the advice, referred to in the letter, from the Office of State Revenue. My attention was also directed to what were said to be inconsistencies between her affidavit (exhibit 25) in support of an extension of an interlocutory injunction to restrain the removal of her caveat in respect of the Property and her evidence at the trial: in the former she had sworn that she had 'sent' the letter to Mr Foley ([3]; see also [30]). In cross-examination, her attention was drawn to this matter, which she was unable to explain. My attention was further directed to the identity of the evidence of the plaintiff and her father Mr Kikiros, as to the words ascribed to Mr Foley replying to the plaintiff's inquiry as to whether he did not want to sell the Property, as suggestive of their conforming their evidence. Both rejected any such suggestion.

85 Finally, it was put to me that it was not easy to see how the circumstances she described could have occurred at the time she testified they began, at about 2.40 pm or 2.45 pm, so as to give enough time for her, on her evidence, to then drive her father home and proceed into the city, from where she made a telephone call to her father at 2.58 pm before lodging the caveat at 3.18 pm. There would not have been enough time if Mr Foley had only just arrived at the crossing so as to permit the circumstances she described to have unfolded, given the range of the two times, 2.54 pm and 2.55 pm, put to her in cross-examination as shown in the diary notes that had been compiled by her father of his observations, sometimes with the plaintiff, of Mr Foley's arrivals at the crossing in the afternoon on other occasions.

86 Below I indicate my assessment of the credibility of the plaintiff and Mr Kikiros. For the reasons given there I have concluded I do not accept all of their evidence as reliable. In the present connection, I do not consider I need to determine whether or not their version of the circumstances under which the letter was provided to Mr Foley should be believed. That is because I find from the terms of the letter (in particular, 'with this letter I have paid the option fee of $300'; its reference to provision for signature of 'the enclosed copy letter'); its discovery at the home of Mr Foley in March 2005; and its presentation (the tearing off indications), that the letter was indeed provided to and accepted by Mr Foley on, or not long after, 24 February 2005 with payment of $300 as the option fee, if not in the circumstances described by the plaintiff and Mr Kikiros. I also note that it was not in contest that the letter, although without the signing provision, was faxed by the plaintiff to her employer, Mr Robinson, at 1.19 pm on 25 February 2005 (part of exhibit 17).

87 On that finding, in my view, a variation of the MOU is made out by the deletion of the provision in cl 2 of the MOU for the parties to enter into an option agreement and by making an option fee of $300 payable forthwith. That variation included that the option fee became an amount of $300 (that is, varying the reference in cl 2 of the MOU to 'plus any applicable GST').

88 It was not put to me that there was any failure of consideration for such a variation. In any event, it seems to me there was good consideration on both sides, in the payment of the $300, and in the release of the plaintiff from the burden on her of the condition in cl 2 (the plaintiff's solicitor to prepare the option agreement) read with cl 8 (the parties to bear their own costs of the preparation of the option agreement).

89 On the parties' pleaded cases the issue is whether or not Mr Foley lacked the capacity to contract on 23 February 2005 when the MOU was entered into, and on the date of the variation of the MOU.

90 I begin by noting that, while there is reason to distinguish between those two dates in relation to the issue of what the plaintiff knew or ought to have known, the evidence did not support any reason to distinguish between Mr Foley's capacity or lack of it on those two dates, and it was not put to me I should so distinguish.

91 The law in relation to the issues of mental capacity is not in contest.

92 The party contending that a contract is liable to be set aside for incapacity bears the burden of proving the absence of mental capacity: McLaughlin v Daily Telegraph Newspapers Co Ltd (No 2) [1904] HCA 51; (1904) 1 CLR 243, 272 (Griffith CJ). The courts accept that '[a] person may be incapable due to mental disturbance at one time but quite capable at another': Edna May Collins by her next friend Glenys Lesley Laraine Poletti v May [2000] WASC 29 [54] (Owen J), where his Honour went on to say:

In such a case, the dicta of Griffiths CJ in McLaughlin ... at 277, is apposite:

'It is not disputed, however, that when it is once established that a person is of unsound mind the burden of making out that a particular transaction took place during a lucid interval is cast upon the person alleging the fact.'

93 However, it is not enough for a party to show an absence of mental capacity. In addition, that party must show the other party knew or ought to have known of that absence: Collins [68] (Owen J); and see Gibbons v Wright [1954] HCA 17; (1954) 91 CLR 423, 441 (Dixon CJ, Kitto and Taylor JJ). I will deal with the latter issue separately, below.

94 Mental capacity for this purpose is 'such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation': Gibbons (437). This capacity is

relative to the particular transaction which is being effected by means of the instrument, and may be described as the capacity to understand the nature of that transaction when it is explained (438).

95 That implies 'different standards of sanity required for the validity of different transactions': Crago v McIntyre [1976] 1 NSWLR 729, 739 (Holland J).

96 In Gibbons the court said that the 'nature of the transaction'

means in this connection the broad operation, the 'general purport' of the instrument; but in some cases it may mean the effect of a wider transaction which the instrument is a means of carrying out (438).

97 In Gibbons the meaning 'in some cases' appears to have been illustrated by the facts of the case itself, where the instruments in question were mortgages and a transfer of land executed by three joint tenants. These had the effect of changing their interests from those of joint tenants to tenants in common. The 'nature of the transaction' was not or not simply the 'direct effect of the instruments according to their terms' but 'the resultant severance of the joint tenancy' (439).

98 In this case, it was not suggested that the meaning 'in some cases' had any application. To discharge her burden of proof as to the mental incapacity element, it was common ground that the first defendant had to show that Mr Foley was incapable of understanding the 'broad operation' or 'general purport' of the MOU.

99 It was not suggested there was any difference for this purpose made by the variation, although I note that the variation serves to emphasise the character of the MOU as an option agreement, rather than itself a contract of sale. This characterisation of the MOU, in my view, assumes some importance in the analysis required to resolve the present issue.

100 The first defendant's pleading is that at all material times, including the signing of the MOU on 23 February 2005, Mr Foley was suffering from 'dementia', and that 'as a consequence of his dementia [Mr Foley] lacked the mental capacity to understand the nature and effect of the [MOU]'.

101 The first defendant also pleads that by reason of those matters the MOU was 'void and of no legal effect or alternatively voidable'.

102 However, as Gibbons shows, the effect of contractual incapacity of which the other party knew or ought to have known is that the contract is voidable and not void. The latter is the effect of the state of affairs to which a successful plea of non est factum relates: see Gibbons (442 - 444); and Ford by his tutor Watkinson v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 257 ALR 658 [71] (Allsop P & Young JA) and [134] (Sackville AJA). It appears not to be relevant to making good a plea of non est factum whether or not the other party to the contract was aware or ought to have been aware of the state of affairs to which the plea relates.

103 While, as Ford [71] indicates, the pleas of contractual incapacity and non est factum may be made in the same case, I did not understand there to be any reliance on non est factum in this case of pleaded mental incapacity. For a plea of non est factum relying on mental incapacity, Crago (737), quoted with approval in Ford [74], states that

the mental incapacity must be such as to deprive its victim of an understanding of what he is signing so that his mind cannot go with his signature.

104 There was no pleading of such incapacity in this case, and no attempt in argument to suggest that such incapacity was made out on the evidence.

105 I also note that it is not in dispute that if the MOU was voidable, it was avoided by the letter dated 2 May 2005 (exhibit 11).

106 Finally, the first defendant pleads that by 23 February 2005, when the plaintiff visited Mr Foley at the Curtin Avenue home, she knew or ought to have known that he lacked the mental capacity to understand the nature and effect of the MOU; and that by 24 February 2005 the plaintiff knew or ought to have known that he lacked the mental capacity to understand the nature and effect of the MOU and the letter dated 24 February 2005. In each case particulars are pleaded.

107 I deal with the issue of the plaintiff's knowledge or reason to know below, where I consider those particulars.

108 The evidence as to the capacity of Mr Foley in February 2005 was of a medical and a non-medical kind.

109 There was evidence from two psychiatrists, a neuropsychologist and a psychologist as to whether or not, on the material available to them, they found that by February 2005 Mr Foley was suffering from dementia with effect on his capacity to understand the nature and effect of the MOU. The psychiatrists were Dr Black and Dr Proud, the neuropsychologist was Dr Foster and the psychologist was Dr Hayward. All of them, except Dr Foster, were able to rely on, as part of the material available to them, the results of having met with Mr Foley. Dr Black met with him relatively close to February 2005, on 4 and 19 April 2005, as well as on other later occasions including 24 June 2005; Dr Hayward saw him on 3, 10 and 17 May 2006; and Dr Proud interviewed him on 8 June 2006.

110 There was also evidence from Dr Singam of the result of a neuropsychological test he had performed on Mr Foley on 15 March 2005 during a visit at the Curtin Avenue home; and documentary evidence of analysis by Dr Cardaci of results from scans Dr Cardaci performed on Mr Foley's brain on 4 May 2005.

111 There was in addition evidence from other medical practitioners as to whether or not, on the material available to them, Mr Foley was suffering from dementia at various times in 2002.

112 The non-medical evidence included evidence from Mrs and Mr Coles and Mr Nichols, from Mr Cleary, from Mr West, and from the plaintiff and the first defendant. They testified as to what they observed as to Mr Foley's behaviour in February 2005 (Mr West, the plaintiff, Mr Kikiros and the first defendant); in April 2005 (Mr and Mrs Coles and Mr Nichols); and from 2004 onwards (Mr Cleary). They also testified as to what they had observed as to his behaviour at earlier times, except in the case of the plaintiff and Mr Kikiros, both of whom had first met Mr Foley in February 2005.

113 There was also evidence from Mr Higgins of what he observed of Mr Foley on 4 March 2005; from Mr Fryer of his dealings with Mr Foley in October 2004, and 14 and 15 June 2005; and from Mr Karakiozakis of what he observed on 14 June 2005 of Mr Foley's behaviour while he was working at the crossing near PLC.

114 There was, further, evidence from Mr Rossen as to what he observed as to Mr Foley's behaviour in mid-2003, as well as evidence from Mrs Pickering of her observations of him on a day in late 2002 or 2003.

115 And there was physical evidence of, or in relation to, actions of Mr Foley in 2002 and 2005.

116 The evidence from the plaintiff, Mr Kikiros and the first defendant as to what they observed of Mr Foley will need to be separately assessed as there are questions as to its credibility in each case, particularly as to that of the witnesses with direct interests in the matter, the plaintiff and the first defendant.

117 On the remaining evidence, I have found that Mr Foley was suffering from dementia in February 2005 when he entered into the transaction represented by the MOU and later when the MOU was varied, and that the effect of that condition was that he did not have the capacity to 'understand the nature of that transaction when it is explained': Gibbons (438). My reasons for those findings follow.

118 I first consider the medical evidence before turning to the non-medical evidence. I then turn to the evidence of the plaintiff and Mr Kikiros, and that of the first defendant, in the course of which I consider the credibility of their evidence.

119 Of the medical practitioner, neuropsychologist and psychologist witnesses, Dr Black, Dr Proud, Dr Singam, Dr Foster and Dr Hayward, all but Dr Singam gave an opinion as to whether a diagnosis of dementia could be given for Mr Foley in February 2005, and on the impact, if any, of any dementia diagnosed on the capacity to understand legal transactions.

120 It appears to have been common ground that all of those witnesses who gave such an opinion were able to proffer expert evidence in those regards, in the sense that there was a field of specialised knowledge in which such opinions fell; that they had by reason of specified study, training or experience become expert in such diagnosis and determination; that the facts observed or assumed on which their opinions as to Mr Foley were based were (with the qualifications addressed below) admissibly established; and that they had shown how the field in which they were expert applied to those facts so as produce the opinions they proffered: see Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 [85] (Heydon JA), referred to in Grainger v Williams [2009] WASCA 60 [53] - [54] (Martin CJ). I consider that such common ground was justified on the evidence before me.

121 There was, however, sharp contest as to the weight I should assign to their respective opinions, particularly in respect of the evidence of Dr Black and Dr Foster. In due course I will focus particular attention on them.

122 Dr Black did a report (exhibit 62) for the then solicitors for the first defendant dated 22 April 2005. He also saw Mr Foley on 24 June 2005 and reported on this to Mr Foley's general practitioner, Dr Ryan, in a letter dated 28 June 2005 (exhibit 52). Further, he had Dr Cardaci do a test of blood flow in the brain of Mr Foley on 4 May 2005, and Dr Cardaci's report to Dr Black (exhibit 59), as well as Dr Cardaci's further report to the solicitors for the first defendant dated 9 March 2009 (exhibit 60), were admitted by consent.

123 Dr Black's report of 22 April 2005 (exhibit 62) was the subject of examination-in-chief directed to its references to results of tests Mr Foley completed, identified with 'MMSE' and 'Camcog-R' instruments.

124 It was agreed between the parties that the MMSE is the Mini Mental State Examination, which is a standardised instrument used to measure cognitive function. It appears to have been common ground that cognitive function for this purpose is an intellectual process by which one becomes aware of, perceives or comprehends ideas. It involves all aspects of perception, thinking, reasoning and remembering.

125 However, there were some differences on the evidence of the medical experts as to whether or not the MMSE measured matters relevant to the assessment of capacity to understand a document like the MOU.

126 It was also agreed between the parties that the Camcog is the Cambridge Cognitive Function Examination, and is the cognitive and self-contained part of the Cambridge Examination for Mental Disorders of the Elderly (CAMDEX). The Camcog is a standardised instrument used to measure the extent of dementia, and to assess the level of impairment of cognitive function. The Camcog-R is the revised Cambridge Cognitive Function Examination. I note that in the examination-in-chief reproduced below, the first defendant's counsel referred to 'Camcog' results where in fact it is evident from exhibit 62 that the results are identified with the administration of the Camcog-R. At other points in the transcript it erroneously refers to 'Cancog' tests and scores.

127 In his examination-in-chief, Dr Black said this (ts 982 - 986):

Can I then take you to your own assessment, so going back to your report, still on page 622? You did a CamCog and you say that revealed an MMSE of 25 and 30 and a CamCog of 73 of 105?---Correct.

Can you just explain what you mean by saying, 'The CamCog revealed an MMSE score'?---I mean, essentially what I'm saying is that was the sum total score. So there are a series of questions obviously that one asks that entails, you know, showing someone some pictures, asking them to recall them, asking them to do various other tasks, and what I tend to do during the course of the examination is I actually enter the data into a computer program so that I can provide a summary at the end so someone doesn't have to wait for three or four weeks before they get their results because, as you might appreciate, it can be an anxiety provoking thing. So the sooner you can provide that information - well, that's the way I tend to try to do it.

All right?---So that's the sum total score and, generally speaking, a score of less than 81 is considered to be indicative of or suggestive of significant cognitive impairment.

You specifically recorded some of the difficulties that he had later down the page, but can I just ask you about the paragraph immediately below the heading Current Cognitive Assessment? So that paragraph. The last sentence says:

'It should be noted that the CamCog is a more comprehensive test than the MMSE and the apparent discrepancy with the MMSE score is a reflection of the MMSE's inadequacy in identifying executive dysfunction?'

---That's correct.

What do you mean?---Execution dysfunction is primarily - I mean, higher order thinking; sort of, you know, processing, planning. There are a range of elements that kind of, when one is doing an assessment, fall into that category. A mini mental state examination is just a simple - it's so crude, in my opinion, it's hardly worth doing; just a simple - 30 questions and the scores can vary, often by chance, in my opinion. I don't put any weight on the mini mental state examination. I mean, if a GP rang me up and said, 'Look, I've got this patient that's got a mini mental state examination of,' I wouldn't sort of hang my hat on it.

You talk about, in the next paragraph down, about six lines down, 'tests of verbal and ideational fluency were impaired'?---Mm.

What do you mean?---Essential what that's referring to is the speed of information processing. So verbal fluency, I mean, there are various tests for verbal fluency but in say a situation like this it might be, you know, sort of, 'Think of all the animals you can think of,' in a particular time frame, and so one has to kind of generate information, and typically, I suppose, if someone's cognitive processes are in tact they might be able to start thinking, 'Okay, well, kangaroos, well, they come from Australia so therefore,' and they can think of a bunch of other things. Someone who is struggling to be able to kind of process information in that way may just kind of hit a blank and just won't be able to provide the information or it just comes out very slowly, and so they tend to do rather poorly. It's part of - that test is often considered to assess executive function. And ideational fluency is, you know, sort of the ability to come up with ideas, and so the specific test in this case is, you know, you put to the patient, if, say, 'If you were given an object,' and you give them an example, say a piece of paper, 'and can you tell me how many things you could think' - 'that you could do with this piece of paper within say 90 seconds,' and so you know, you could make a square up into a ball, turn it into a paper plane, cut it up into a doyley, you know, you can do whatever, you know, the ideas can be as fanciful as you like, and then you might give the example, 'Okay, the object that I want you to tell me about is a bottle,' and surprisingly, I mean, you had to come up with about eight answers to get, you know, to get an optimal score, but he really struggled with thinking about what you could do with a bottle.

Okay?---And sometimes people tend to perseverate so they might say, you know, where you could put, you know, orange juice in it, you could put lemonade in it, and that's not - it's just that basically it's the same answer.

In the next paragraph down you talk about his word finding difficulty. How did that reveal itself?---I mean, just generally when he was trying to speak, I mean, just couldn't find the words for particular concepts or particular things he was trying to say. That's also considered to be part of the executive side of memory. It often benefits from prompts so probably all of us can be assisted in that way, but obviously there comes a point where it becomes quite problematic and in his case it was quite problematic, that he really struggled; it took a lot of effort to get information that I needed, basically.

Can I take you now to page 627, which is page 9? Now, in the second paragraph you say, 'The presence of dementia is established on the following grounds,' and you list some things that you took into account?---Mm.

What were the most important things?---I think, as much as anything, the deterioration over time, and his, you know, the presence of those multiple cognitive deficits in multiple domains, if you only had, you know, sort of difficulties in one particular area of functioning, then one would question, is this dementia or not, is it just mild cognitive impairment, but, you know, he was exhibiting significant difficulties in a number of domains and just not processing things, and I mean, as I referred to in there, he thought I was an ophthalmologist, and I mean, one would think that if you go to a psychiatrist office it's very different to an ophthalmologist office and most people would probably clue in eventually that the absence of all the ophthalmological equipment, that there's something amiss. And then you come back and it would be the same thing again. He still thought I was an ophthalmologist and was surprised that I knew so much about him when I was supposed to be interested in his eyes. So, I mean, he really had significant difficulties in kind of making sense of what was going on around him.

In terms of the deterioration that you've referred to, are you referring to the deterioration revealed by the psychiatric tests or by the reports of his functioning over time, or both?---Well, I think, I mean, certainly the tests themselves, not only the score, but the way in which he answered the questions, was very revealing. Also, I mean, if looking at past documents and so on, I mean, it would seem to me that there was a deterioration, I mean, it's possible that when I wrote this report that some assumptions were made, but he couldn't give me details about - I mean, he wouldn't have had the capacity to, you know, make an enduring power of attorney, I mean, he didn't now what bank accounts he had and so on an so forth, you know, didn't know what property he owned, you know, so - and that would have been a significant deterioration from where he was at one point in his life where he seemed like he was a very shrewd investor.

Now, you did get some information from various sources about how he had been functioning at home and much of that came perhaps first-hand or second-hand through Lynne Kolnik. If you hadn't had any of the information from Ms Kolnik would that have affected your opinion?---I still would have been concerned. I think there was enough, I mean, there was more than ample information there and the facts of the matter were that at the time that Lynne was living interstate, from memory, so he actually had very little support at home, and, you know, that was a concern to me given his level of functioning, and, you know, I can't go to his home and that was one of the reasons why, you know, I asked Dr Singam if an assessment could be arranged to see how he was actually functioning at home, because at the end of the day, in my opinion, as much as anything the occupational therapy assessment's probably the most important thing.

I mean, one can come up with a diagnosis of Alzheimer's disease or some other process but at the end of the day what I need to know as a clinician is what can the person do, what can't they do, are they going to leave the gas on, are they going to burn the house down, can they cook a meal, can't they cook a meal, can they wash themself, can't they wash themself, you know, are they going to get lost, you know, those sorts of things. It's the very practical things really that are of most importance really, you know, as a clinician. But all these other things are just important in making the preliminary diagnosis to kind of guide prognosis and possible treatment.

128 Below I consider the evidence of what Mr Foley was able to do in about February 2005.

129 Later in his examination-in-chief, Dr Black said the following, in regard to his conclusion in exhibit 62 as to Mr Foley's capacity to enter into a transaction like the MOU in February 2005 (ts 994 - 995):

You say after that question is asked, 'Does Mr Foley have the capacity,' that you hope the answer has been answered above and in the earlier parts of your report you talk about what Mr Foley's capacity was. Can you be more specific in relation to a document that purported to set out a transaction relating to the sale of property, what his capacity was as at February 2005?---I think - I noticed - I mean, one of the issues was - you know, there were mini mental state examination scores and so on, but I think it would've been more interesting if there had been a CamCog done at that time. I really just don't put a lot of stock on the mini mental state examination score. I doubt there would have been much difference in his cognitive processing in that time. There was no evidence of any acute process that would explain, you know, a precipitous decline. I mean, if he had had a stroke - and sometimes people do have, you know, small strokes, you know, in critical parts of their brain. It doesn't happen very often but it can lead to a change in cognition, but there was certainly nothing to indicate that.

So what he had in 2002 was a couple of CamCogs of, I think, 83 and 86, and then yours in April 2005 of 73. So what do you say his capacity - in your opinion obviously. You can't be definite but in your opinion what would his capacity have been in February 2005?---I mean, based on my assessments - I mean, I think the fact that he - I mean, I suspect - I mean, I notice a comment by Dr Foster and, I mean, I say this respectfully that - I can't remember the exact term but about, I guess, where kind of someone might kind of fall in the IQ scale. I suspect he was a very bright man and I think, you know, coming from, you know, the era that he did, I mean, sometimes opportunities are available to some that may not be available to others. I mean, he seemed like a very shrewd investor which I think indicates that he was of more than average intelligence and, you know, if I compared what I was seeing at that time - I mean, he couldn't tell me which bank accounts he had. He couldn't even remember, you know, how many properties he owned which interestingly he even kind of, 'That's kind of strange, isn't it, that I don't know that?' So he was at least astute enough to recognise that it was strange that he didn't know significant things; whereas he knew he had built up quite a portfolio in the past, he couldn't tell me where the money came from; you know, couldn't give me exact details about how money got into bank accounts. He couldn't tell me - I mean, he really couldn't tell me very much at all about any of that and so I suspect that, you know - I mean, I suppose when I asked him later, you know, about what he thought was going to happen in the future, I mean, for someone who I suspect - I would find it almost incomprehensible to think that he wouldn't have understood how a court worked. He really could not give me an indication of how a court would work, so that there would be lawyers on each side, that there would be a judge, what those people do, you know. He couldn't give me any information and I think, given his processing ability, I mean, really I don't think he would have had the capacity. There's no way that if someone had asked, without any of this in question, 'Does this man have the capacity to complete an enduring power of attorney?' I would have said no, and if someone had asked me, 'Would it have been the same a few months before?' I would have said no.

In other words, he didn't have the capacity, not that your answer would have been the same?---Yes; that he didn't have the capacity, yes, at either point.

130 The reference to Camcog scores in 2002 of 83 and 86 was to the scores on tests using the Camcog-R test administered by a Dr Wilson in February 2002 and September 2002 respectively, which were considered in his report to Dr Ryan of 17 September 2002 (exhibit 97). Dr Wilson was a consultant geriatrician, and there is evidence as to the significance of his scores from Dr Hayward which I reach below.

131 I do not consider Dr Black's evidence in the respects quoted was shaken or qualified in his cross-examination.

132 However, senior counsel for the plaintiff put to me there were four sets of reasons to approach his evidence with particular caution.

133 One set of reasons was from Dr Black's report to the Health Insurance Commission (exhibit 63), in a letter of the same date (22 April 2005) as exhibit 62. As he acknowledged in his evidence, at two different points in the letter, Dr Black incorrectly referred to a score by Mr Foley on the MMSE that he had administered. The score was reported as 23, whereas shown in exhibit 62 was a score of 25. Dr Black explained the incorrect reference as a 'typographical' error (ts 999), in a document a 'large portion' of which was taken from the report of 22 April 2005 (exhibit 62) (ts 1291). However, in cross-examination he appeared to qualify the characterisation of the incorrect reference as a typographical error, by indicating he could not 'recall what happened at the time' (ts 1291). He also testified as follows (ts 1291):

Can I suggest to you, it was done deliberately so that the Health Insurance Commission would permit you to give a prescription for the Reminyl drug? Do you agree or not?---I can understand why you would draw that conclusion.

Yes, and is that conclusion correct?---I can't recall what I did at that time.

Well, to say that it was inadvertent, would you agree, cannot be correct in that this letter is taken from the Williams and Hughes letter but in two respects it has been changed to show 23 instead of 25?---Certainly I would question that if I was reading the letter.

134 Further, in relation to another difference between the two letters of 22 April 2005 (exhibit 62 and 63), his testimony was as follows (ts 1293):

No, but why would you do that? Was it for the purpose of ensuring that the HIC would be prepared to authorise the scrip?----I guess that would have been the general intention but I probably didn't need to provide that much information. I mean, this is - - -

You may not have needed to provide it but you did?---I did, yes.

You did it for a purpose. It was clearly deliberate, wasn't it?---It was that I put that in there. Obviously, it was deliberate that I wrote it in there.

Yes, and it was done for a purpose and the purpose was to attempt to convince the HIC that it should authorise the scrip, wasn't it?---It was, but I doubt they would have factored that into the equation.

135 Another set of reasons to approach Dr Black's evidence with caution, advanced by senior counsel for the plaintiff, was the failure of Dr Black to keep a record of the terms of the questions to and answers by Mr Foley in the Camcog-R test, from which it would be possible to perform a check of the score Mr Foley had been given. Dr Black testified that a computer program produced the questions: a hard copy of the section on 'Executive Function' of the manual for the Camcog-R which indicated the questions in the computer program in that section was made exhibit 87. When Mr Foley answered, Dr Black entered the response directly into a computer, without recording the response, and he was able to produce only a summary of the scores on the different parts of the test, rather than the score for individual questions. Dr Black testified it was not his practice at the time to keep other records, but accepted that he could see 'the wisdom in doing that' (ts 1289).

136 Still another set of reasons to approach Dr Black's evidence with caution, put to me by senior counsel for the plaintiff, was what was said to be Dr Black's failure to reveal certain MMSE results for Mr Foley. The result of 29 out of 30 was on the MMSE administered by Dr Black on 24 June 2005, as indicated by his letter dated 28 June 2005 to Mr Foley's general practitioner, Dr Ryan (exhibit 52). In his letter dated 14 November 2005 to the Health Insurance Commission regarding Mr Foley (exhibit 68), Dr Black reported another result, of 26 out of 30, on the MMSE he administered on 14 November 2005, and did not refer to the result of 29 out of 30 on the test administered on 24 June 2005. Dr Black explained that he had not done so as it was 'irrelevant' (ts 1294), because the Health Insurance Commission was concerned only to see whether there had been a two point improvement in score.

137 A final set of reasons to approach Dr Black's evidence with caution, put to me by senior counsel for the plaintiff, was that he had shown pre-judgment of the issues as appeared from two sources. One was an email of 20 April 2005 to a solicitor in the firm acting for the first defendant who had indicated he looked forward to the report (apparently exhibit 62) in which Dr Black said 'the situation appears open and shut' (ts 1288). That was, however, after seeing Mr Foley twice, in preparation for the writing of the report of 22 April 2005 (exhibit 62). The other source was the references in that report to matter which Dr Black accepted in cross-examination was 'totally irrelevant' (ts 1290), and such references were indeed deleted from what became exhibit 62. That matter included 'geriatric or elder abuse' (ts 1290).

138 I consider that of these sets of reasons, the first and the fourth were not altogether satisfactorily explained in the evidence I have referred to. However, Dr Black's evidence, including the explanations he gave for all four sets of matters, was that of an expert witness who appreciated the need to give an opinion based on a comprehensive assessment of Mr Foley, including the need to reflect further on Dr Black's initial assessment of him (see ts 1075). At the same time, the first and fourth sets of reasons highlight the need to assess all of the evidence relating to Mr Foley's competence as at February 2005 and for me not to assign predominant weight to Dr Black's opinion in the face of conflicts in the evidence.

139 In that last respect I note the evidence of the SPECT scans and their analysis by Dr Cardaci, which Dr Black had requested after his report of 22 April 2005 (exhibit 62). There was no challenge to Dr Cardaci's expertise to do the scans and analyses described in those reports, and indeed the expert called by the plaintiff, Dr Foster, agreed that he was 'eminently qualified' in the relevant field of expertise, nuclear medicine.

140 It is common ground between the parties that 'SPECT' refers to Single Photon Emission Controlled Tomography.

141 In the report of 4 May 2005 (exhibit 59) Dr Cardaci described the performance and analysis of the SPECT scan as follows:

DESCRIPTION:

Injection of tracer was given with the patient resting quietly in a dimly lit room. The reconstructed images show moderately severe and moderately extensive reduction in perfusion in the posterolateral temporal lobes, more marked on the left side than the right, extending into the parietal lobes bilaterally. Moderately severe hypoperfusion is seen extending anteriorly into the temporal lobes. The frontal lobes show relative preservation of perfusion although focal reduction in activity is seen in the right orbitofrontal cortex. The dorsolateral prefrontal cortices show only relatively mild irregularities compared to the parieto-temporal abnormalities. On the 3D quantitative assessment there is marked hypoperfusion in the cingulate gyrus, particularly in its posterior portion.

INTERPRETATION:

The study shows sever resting abnormalities of cerebral blood flow predominantly involving the temporal and parietal lobes, and posterior cingulate gyrus, and these findings are highly suggestive of Dementia Alzheimer's Type, as being the cause for the patient's cognitive decline. Although the appearances are asymmetric, this certainly is compatible with this diagnosis. There are no features to suggest a vascular dementia, and the relative preservation of frontal lobe perfusion would be against a frontotemporal neurodegenerative process.

142 In the report of 9 March 2009 (exhibit 60) Dr Cardaci appeared to indicate the possibility of 'vascular disease' as follows:

When analysed using the statistical package, the visual impression of blood flow abnormalities in these areas is confirmed. The distribution of abnormality, in the context of a patient with declining cognitive function, is most consistent with a diagnosis of early Alzheimer's-type dementia. The appearances, however, are not specific and other pathology (eg vascular disease) could also give these appearances and the findings must be interpreted in the context of the patient's clinical history and examination findings. Alzheimer's-type dementia has been associated with characteristic patterns of alterations in cerebral blood flow which typically involve the posterolateral temporal cortices, parietal cortices, and posterior cingulate gyrus. These findings in the more advanced stages are generally symmetric and progress over time. The finding of asymmetric involvement in these regions is not unusual in the early stages of Alzheimer's-type dementia.

143 Dr Black was asked to comment on the later report's references to vascular disease, and responded, as follows (ts 992 - 993):

What is the significance of vascular involvement in a person's condition, whether if you think they might have dementia or Alzheimer's? What's the significant of vascular involvement?---Well, really I mean it's partly a prognostic one. Vascular dementia, I mean, it covers a pretty broad range of processes, so I mean some people - I mean eventually if you live long enough you will have small vessel ischaemia, which is essentially the kind of the - the tiniest vessels in the core of your brain will eventually start to sludge up, and because of the - or you know, get blocked - and because there are circuits that run between the core of your brain and the front part of your brain, so they're running on a circuit, it doesn't - I guess if you think of it like a rubber band, it doesn't matter whether you cut the core or cut it at the centre or the front, you're going to end up with similar sorts of symptoms. Often the difference is though, if you have lots of vascular damage at the core of your brain or if you have - you can have a relatively small amount of vascular damage at the core of your brain, that will equate to a fairly large amount of vascular damage in the front part of the brain because the circuits are densely packed in the core and tend to fan out in the frontal lobes. But in terms of the significance, I think what Dr Cardaci is referring to is that it would be difficult to be absolutely definitive as to whether this is, you know, absolutely definitely Alzheimer's picture or whether there's a possibility that there's a vascular component. I think it's important to note though that I think he also refers to that, you know, you need to kind of correlate it with clinical findings. I mean there were no vascular risk factors. I mean other than the cognitive impairment, Mr Foley was a remarkably healthy man, and - but as I said, you know, as we age everyone will start to have some of that. But I mean predominantly, if I had to go by my clinical judgment I'd say predominantly it's an Alzheimer's-type picture. That's my kind of clinical opinion.

144 I return below to the evidence before me as to the limitations of evidence of this kind relating to Alzheimer's disease. I should also note that the evidence does not itself relate to cognitive function, a matter to which I also return.

145 However, in my view the evidence in the reports of Dr Cardaci (exhibit 59 and exhibit 60) offers support for Dr Black's opinion that, as at 23 February 2005, Mr Foley was suffering from dementia.

147 Dr Hayward saw Mr Foley on 3, 10 and 17 May 2006, on each occasion with the first defendant, and wrote a report dated 29 September 2006 for the solicitors for the first defendant (exhibit 24).

148 Her report (exhibit 24) indicated that Dr Hayward administered a test (the Wechsler Test of Adult Reading, or WTAR) of pre-morbid (or pre-disease or injury) function as well as a test (the Wechsler Adult Intelligence Scale - 3rd edition, or WAIS-III) of current level of intellectual function, and tested his visuospatial perception. She also attempted to use a test (the Wechsler Memory Scale - 3rd edition, or WMS-III) to assess his memory and to use a test (the Delis-Kaplan Executive Function System, or D-KEFS) to assess his executive function. In her examination-in-chief, she testified as to the results of that testing as set out in her report as follows (ts 1141):

And then you have got a summary in which you say his test profile is grossly abnormal and reveals severe cognitive impairment?---That's correct.

And then you refer to, 'Some few other learned skills such as single word reading and word knowledge remain relatively intact although they are still not at the level they would have been premorbidly'?---That's right.

And then over to the top of page 10 in the first paragraph you detail the areas of significant problems?---Yes.

And that included executive function?---Yes.

When you use the expression 'executive function,' Dr Hayward, what do you mean?---Those functions which are often attributed to the frontal lobes but can - problems in those areas can be caused by problems in other parts of the brain, if you like, that talk to the frontal lobes and communicate with them. By 'executive functions,' they range from basic functions such as the ability to sustain and divide attention through to obtaining problem-solving, reasoning type skills.

What sort of daily activities, if any, would require executive functioning?---Certainly anything novel, anything new, and also multistep activities where you have got to do a number of things, but mostly in the earlier stages problems with executive function will show when people really can't come up with something to do in the face of a new problem or a new situation.

149 Dr Hayward also testified as to the significance of the Camcog-R results of 83 and 86, reported by Dr Wilson in 2002 (see exhibit 94 and exhibit 97), as follows (ts 1156 - 1157: her references to the CamCog results are to CamCog-R results, I have concluded):

Would you agree that comparing what appears to have been his condition in 2002, mid-2002, with his condition as you saw him, there has been quite a marked decline?---Yes. I mean the CamCog had problems, but, yes, there has been certainly a marked decline in that three-year period.

Whether he was suffering from any degree of cognitive impairment then is not clear, is it?---If he got 86 - I know there's some dispute; one is 86 and one is 83 - that's actually not a significant difference on the CamCog, to people at the time many would suggest there was mild cognitive impairment. They particularly found that in areas of new learning and some impairment in executive function.

150 There were a number of criticisms of Dr Hayward's report made by Dr Foster which it is convenient to review briefly here. When I consider those criticisms with Dr Hayward's responses to them, responses which I find reasonable ones, the criticisms do not individually or in combination cause me to conclude I should reject her opinions, nor do they cause me to give them significantly less weight.

151 Dr Foster testified that Dr Hayward had relied on second and third hand opinion in her report. However, her answer, that it was necessary to rely on information from as many suitable sources as possible, particularly 'somebody who has known him for a reasonably long time to see whether or not you have got a sudden onset, for instance, and whether it's slow and progressive' (ts 1144), appears to me to meet this concern. This is subject to evaluation of that person, the first defendant, on whom she particularly relied, which I provide below.

152 Dr Foster testified that he had noted there was a third party (the first defendant) present during the interviews with Mr Foley, who might influence or bias results. However, Dr Foster also acknowledged that 'if that person was suitably instructed to stay out of the line of sight and to make no verbal utterances, then that's reasonably acceptable' (ts 334). Dr Hayward responded to this criticism as follows (ts 1144):

It can be a problem if this person interferes or interrupts in any way or if they become - if they are a distraction for the person in the room. On the other hand, it can be advantageous if the person is a bit unsettled at all or you think they might be. So very often with the much older adult and with young children, we will have someone in the room who they know. It's just stabilising.

153 Further, her report (exhibit 24) states that '[d]uring assessment, whilst she sat in the room, Mr Foley was sitting with his back to her, and she did not contribute in any way'.

154 Dr Foster testified that there were 'some apparent non sequiturs and incomplete statements' in Dr Hayward's report (ts 335). It was not clear to what Dr Foster was referring, however, and to me there were no non-sequiturs or incomplete statements apparent in the report.

155 Dr Foster testified that it was not clear what the source of some of the information on which Dr Hayward relied was, and reference was made to the point in her report (exhibit 24) where she said that her opinion as to Mr Foley having 'significant cognitive problems' in February 2005 was 'substantiated by Ms Kolnik's observations of him in the years 2002, 2003 and 2004'. Dr Foster was of the view that it was not clear from the report that the immediately following two portions of indented text in smaller font than the rest of the report was a record by Dr Hayward of those observations (ts 336). While the nature of those portions of text might have been made clearer, in my view there can be no doubt that they were such a record.

156 Dr Hayward responded to the proposition put to her, from Dr Foster's evidence, that it would be difficult for her to give an opinion, based on her exposure to Mr Foley in May 2006, of his capacity in February 2005 (ts 1145):

Sorry, that is another criticism and I will get to that in a moment but his first criticism was that you were expressing an opinion about Mr Foley in February 2005 and you didn't see him until May 2006?---That's right.

So his criticism was really how can you express an opinion about what Mr Foley was like in 2005 when you didn't see him until May 2006. What's your response?---I think that that's a potentially fair criticism and certainly had Mr Foley been less impaired, I may well not have offered a firm opinion at all on how he might have been but by the time I saw him, he was so severely cognitively impaired it seemed to me highly unlikely that he was okay 12 - 14 months earlier.

157 She also testified as to patterns in pre-diagnosis decline of well-educated persons such as Mr Foley including the possibility of lucid intervals (ts 1146 - 1148):

All right. Dr Foster also talked about lucid intervals and just so that you understand and you would have seen from the transcript. He was talking about a person who had dementia or Alzheimer's disease who from to time would have a lucid interval and would be better than they had been the day before, for example, and he accepted that they wouldn't go back to perfectly normal, the way they were before, but he said you could have a lucid interval. You could actually be - I assume he meant significantly better than you would normally be. What's your response to that?---I guess one overriding concern that I have with the use of language like that is, what does lucid mean? Does it mean just a little better than they were and is it always relative? Early on in dementia people often - they are a bit confused one day and a bit less confused the next day. Is that a lucid interval? Fine. In the very late stages of dementia they may not recognise someone one day and the next day they might show some recognition. Is that lucidity? Both things could potentially be described as lucid, but what does it mean? That's really all I have to say. It's not a well defined term.

No. If by that Dr Foster meant that despite how bad Mr Foley was when you saw him he had improved so much just for a moment in February 2005 that he was able to understand the option agreement, if that's what he meant, what would your response be to that?---I think that it's probably unlikely that that would happen and I will tell you why. There has been a study put out a little while ago that followed a cohort of older people for quite a long time and they have looked at the interaction between age and education and education especially on how well cognition holds up in a dementing process, so they got these people before they even started to dement and they followed them through and what they found is that in the well educated people who demented eventually, in the last three years there is a huge decline, a very sudden decline that you don't see in the less well educated people where you see the slow decline. With the more educated people it seems to stay relatively steady and then there's a sharp fall and the hypothesis, the theory, behind that is that the extra resource, if you like, in the brain of a well educated person can cover the problems for a very long time, but then it stops covering them when the underlying damage has become too big, so if that's true, then it's highly unlikely - I would not have seen anything like that in my experience.

The other thing Dr Foster said, although this is changed, but initially he said he thought Mr Foley had mild cognitive impairment in February 2005. Nothing worse than that. What is your response to that?---Okay. I mean, neither of us saw him in 2005 but he was actually given a formal diagnosis of dementia in 2005 and one of the problems when talking about this stuff is that the way I might talk about it, mild, moderate, severe cognitive impairment, is different to how the clinicians classify it, so there's a mild, moderate, severe dementia. Basically people are not given a diagnosis until they have moderate to severe cognitive impairment so, you know, unless he had a sudden huge deterioration between February when he was formally given the diagnosis in March of that year I think it was, or May of that year, then I think that it's unlikely that it was mild.

158 In particular, she testified that in her clinical experience she had not encountered persons with Alzheimer's who had 'shown mild cognitive impairment and then within 12 months [had] exhibited a quite steep decline' (ts 1155). In her report she had concluded it was 'probable' Mr Foley had 'an Alzheimer type dementia' (exhibit 24).

159 Dr Foster testified that Dr Hayward had not submitted her report until four months after her examinations of Mr Foley. She responded to that criticism (ts 1146):

Well, I had asked for some written history because Mr Foley would get agitated if you tried taking a history with him there and the legal firm took their time sending it to me. By the time they sent it to me, I was due to leave for six weeks' study leave and did not have time to finish the report and so it was finished when I returned.

160 Dr Foster testified that Dr Hayward's report was 'a good cross-sectional snap shot', but it did not provide an 'indication of what the change has been like over time' (ts 342). However, in my view, as I have indicated and will further indicate, Dr Hayward's report does provide an account of Mr Foley over the time period to which her sources of information relate.

161 A substantial criticism of Dr Hayward's report by Dr Foster was that she had not administered a test of effort. Dr Foster testified that such a test was 'fundamental to obtaining a valid result on neuropsychological testing' (ts 540). He further testified that such a test was for (ts 541)

unconscious or conscious lack of effort. He could have been acting in a sick role, for instance, so the term that's used in favour in the literature is 'showing poor effort, lack of motivational response, bias.'

162 Dr Hayward responded to this criticism as follows (ts 1146):

I know the test that he's referring to. It's the tested memory malingering or the TOMM, and the problem with giving someone like Mr Foley that test - I mean (a) the TOMM doesn't do that well with people with severe cognitive impairment. I can't remember exactly, but something like 20 per cent of the demented clients in their sample actually fail the test, but what it required - what it basically does is show people a lot of pictures - I prefer not to say how many because I don't want to divulge too much - of everyday objects and they are seen for three seconds each and then they go through and they have to choose between two pictures. The problem was that Mr Foley was having trouble recognising items, not just word finding. There was that as well - and recognising items and so he was obviously not going to do well on that test. It seemed pointless. The test could take quite a while, so there was no point giving him something that he quite clearly didn't have the basic skills to do.

163 It appears Dr Foley did indeed have in mind the TOMM test (see his cross-examination, ts 543).

164 It seems to me that on the evidence before me the lack of a test of effort was not a major reason not to rely on or not to weigh significantly Dr Hayward's report (exhibit 24) and her testimony.

165 Dr Hayward in fact testified as to her opinion as to Mr Foley's capacity based exclusively on Dr Wilson's indications of cognitive impairment in 2002, her own observations of Mr Foley and Dr Black's assessment in April 2005 (ts 1171 - 1172):

Dr Hayward, if all you had was your assessment of Mr Foley on those three occasions, and the information from Dr Wilson about some signs being shown in 2002, but would you have been able to reach a conclusion - not a hundred per cent, but a conclusion as to what he was like in February 2005?---I would have been less certain than I was in the report, and even in the report I'm not a hundred per cent certain, but I still would have thought that he would not have been doing very well in 2005, to be so bad when I saw him.

When you say he would not have been doing very well, what do you mean by that?---In the - you know, when I saw him, you start losing the oral, over-learnt material and procedural information and historical information, really at quite an advanced stage, and he was doing that. And so that suggests to me that there had been some time before that where he was having quite significant cognitive problems. Now, it is possible that there was a sudden decline but when Dr Black saw him he gave - and if we just look at more objective data, the CamCog is 73 out of 105, that's way below the cut-off. Now, to have a score like that on CamCog you really are having problems; quite significant ones so - but it's never, you know, I can't be hundred per cent certain about any of this.

167 Dr Proud saw Mr Foley with the first defendant present on 7 July 2006 and produced a report for the then solicitors of the first defendant by a letter of that date (exhibit 71). Dr Proud asked Mr Foley 'specific cognitive questions and specific questions regarding his family and assets', and administered an MMSE, on which Mr Foley scored 18 out of 30 (exhibit 71). Dr Proud concluded as to Mr Foley's condition on 7 July 2006, on the basis of those data, as follows (exhibit 71):

The evidence today clearly shows that Mr Foley has Dementia and in my opinion it is most likely Alzheimer's dementia or a mixed vascular - Alzheimer's Dementia. Today on the mini mental status examination he scored 18 out of 30. The mini mental status examination strongly suggests significant cognitive problems below a level of 24. Irrespective of the mini mental status examination however, my clinical interview today revealed significant cognitive difficulties with Mr Foley and I am satisfied that on the basis of clinical grounds alone he has at present a dementia, most likely Alzheimer's but possibly mixed vascular and Alzheimer's.

168 As to Mr Foley's capacity, Dr Proud said this (exhibit 71):

Currently Mr Gerald Foley has moderate Dementia, probably Alzheimer's type and is incapable of managing his personal and financial affairs at present.

169 Dr Proud testified that in his 'cognitive testing' he did not use the CamCog (which I understood to be a reference to the CamCog-R), but rather, apart from the MMSE results, 'standard structural questions but the content was of my own creation' (ts 1109). He had not, in accordance with his usual practice, recorded the questions and answers he used.

170 Of relevance to my assessment of Mr Foley's capacity as at February 2005, Dr Proud in his report said this (exhibit 71):

According to Ms Kolnik there is evidence of cognitive decline in Mr Foley starting at the end of 2001. Examinations by geriatricians could find no hard evidence of functional impairment or of cognitive impairment to the extent that a diagnosis of Dementia could be sustained prior to 2005. The first factual evidence that Mr Foley could be diagnosed clinically with Dementia was when Dr Black made his diagnosis in April 2005.

However it is significant that the SPECT examination in February 2002 was abnormal and suggested Alzheimer's disease and was again abnormal in May of last year suggesting Alzheimer's disease. The clinical picture clearly indicates that Alzheimer's disease was emerging as early as February 2002. That is, the SPECT scan was abnormal then and predicted the clinical picture which I see before me today, that is of an elderly man with moderate Dementia with significant cognitive problems suffering from Alzheimer's disease.

The question comes down to as to what Mr Foley's cognitive state was at the time of February 2005. This is a difficult question to answer, but I would make the following remarks. First, in February 2005 Mr Foley would have had some level of cognitive impairment. This cognitive impairment would have comprised his ability to make a rational judgment regarding the selling of the block of land to Mrs Lampropoulous. What exactly was the level of cognitive impairment? This is difficult to answer. The mini mental status examination done by Dr Singam on 24 March 2003 was 29 out of 30 but one month later repeated by Dr Black it was 25 out of 30.

The point is, as I mentioned earlier, Mr Foley may have had significant impairments in frontal lobe executive functioning but still have a normal mini mental status examination. That is, the mini mental status examination done by Dr Singam of 29 on 30 does not exclude the hypothesis that at that point in time Mr Foley was suffering significant cognitive impairments affecting his judgment to the extent that would comprise his ability to sell the block to Mrs Lampropoulous. Frontal Lope [sic] Executive Cognitive Impairment does not show up in the mini mental status examination. This part of the brain however is absolutely crucial with respect to making judgments and in particular more complex abstract judgments. This part of the brain is also responsible for making complex interpersonal judgments regarding people. This may be relevant in the context of Mrs Lampropoulous and her father presenting to Mr Foley with a proposal to sell the land in Mandurah. There is no documented evidence as to what exactly took place during those discussions.

Therefore, considering all of the evidence, it is highly likely that Mr Foley had a significant impairment of cognitive functioning (including executive functioning which is critical in making appropriate judgements) in February of last year. This may have significantly impaired his capacity to make a reasonable judgment regarding the sale of the land to Mrs Lampropoulos.'

171 The 'SPECT examination in February 2002' appears to have been a reference to an examination of Mr Foley on 11 February 2002 by a Dr Turner (exhibit 55). It was common ground that it demonstrated 'mild-moderate reduction in posterior parietal cortical activity' and 'prominent hypoperfusion of the temporal lobes consistent with Alzheimer's disease' (exhibit 55).

172 The 'mini mental status examination done by Dr Singam on 24 March 2005' appears to have been a reference to the MMSE he had done on 15 March 2005. I return to it in considering his evidence below.

173 Dr Proud was asked in particular to consider the question of Mr Foley's capacity to understand the MOU (exhibit 1), where he drew an analogy as follows (ts 1093 - 1094):

Without requiring you to analyse this in any great detail this is in fact - purports to be an agreement to allow the plaintiff to exercise an option if she chooses in the future to buy the land, so it's not actually a contract for sale, it's a document purporting to record an option agreement. If a person within the space of 10 minutes appeared to read this and then had someone read it to them - or not a person - Mr Foley in February 2005, what is your opinion as to whether or not he would have been able to understand the general nature of this document?

---Understanding would not have been raised by reading it and then hearing it. You would eliminate errors of reading by the repetition through the auditory nature but that would not lead to a higher level increase in understanding. It would just lead to perhaps a lower level reduction in - and in inaccuracy.

In terms of Mr Foley's specifically and not worrying now about how much time he had or anything else, just with your opinion of what his impairments were in February 2005 would he have been able to understand the general nature of this document?---At a basic lower level but not a higher level with those more abstract judgments I was talking about.

I understand. To give us an illustration of what you are talking about there, the distinction between a basic level and a more judgment-orientated level, can you draw an analogy with for example a school child, a primary school child or is that helpful?---Yes.

McCUSKER, MR: Your Honour, I object to this kind of questioning. The witness can certainly be asked by my learned friend, 'Can you just elaborate that, explain what you mean,' but not to suggest analogies.

SIMMONDS J: Yes. Ms Archer? Would you wish to excuse the witness at this point?

ARCHER, MS: No. My response to that is I'm not sure why I can't ask the witness if an analogy with a child would be helpful or not.

SIMMONDS J: Yes. I'm inclined to think the same, Mr McCusker. The matter of the weight I give to what the witness has to say and such it seems to me is a matter for submissions and ultimately for weighing.

McCUSKER, MR: If it please your Honour.

ARCHER, MS: Thank you, your Honour?---Interestingly, when you learn about dementia - I mean, the phrase is commonly bandied about, that it's a chronological reversal and you go back in time in development. I mean, a child's cognitive development unfolds as they age and the acquisition of these higher judgments I've been talking about, they kick in typically in late adolescence. Probably with children being more advanced and more learned in social discourse now, they probably kick in earlier, but the analogy is helpful to understand, that a child in primary school could read the document and know the meaning of the words but would not have that higher ability that comes later in high school to understand the implications of the judgment, the motives involved, and the law recognises this by only allowing legal responsibility to occur at a certain age.

174 I have taken Dr Proud's answer as his explanation of what he meant by his conclusion that Mr Foley would have been able to understand the 'general nature' of a document like the memorandum of understanding 'at a basic lower level but not at a higher level'.

175 I note in relation to the testimony of Drs Black, Proud and Hayward that all were asked for their opinions as to Mr Foley's capacity, on certain propositions put to them, as to his knowledge of the transaction on 23 February 2005, and as to his motivation for entering into it. I return below to the evidence on which those propositions rested, and their opinions, below.

177 As I have indicated, Dr Foster did not interview Mr Foley. In preparing his report by letter dated 19 November 2008 to the solicitors for the plaintiff (exhibit 22), he drew on a wide range of documents, including all of those previously referred to in this section of my reasons, except for the report of Dr Hayward (exhibit 24), which he had not previously seen. He testified he was also oriented towards the matters by conversations he had with the plaintiff.

178 In Dr Foster's report (exhibit 22) he appears to indicate that, notwithstanding the diagnosis of dementia in April 2005 by Dr Black, and the results of the SPECT scanning in May 2005, it was not possible to conclude on the documents before him that Mr Foley lacked 'decision-making capacity' in February 2005.

179 Those indications are clearest in the following passages from his report (exhibit 22, original emphasis):

5.2 It is challenging to determine decision-making capacity as a complex nexus of factors must be taken into consideration. This point has been made clearly in Continuing Professional Development presentations which I have given and which I have attended over the past two years at the International Conference on Alzheimer's Disease (Madrid, Spain; July 2006), Pfizer Masterclass in Alzheimer's Disease (Surfer's Paradise, QLD; March 2007), the annual meeting of the College of Clinical Neuropsychologists of the Australian Psychological Society (Manly, NSW; November 2006) and the Australian Society for the Study of Brain Impairment (Melbourne, VIC; May 2007). I have made presentations at all of these meetings.

5.3 It is my understanding that Mr Foley was diagnosed with dementia in April 2005. Periods of stabilization and lucid intervals occur in dementia. It is not clear to me from the documents that I have reviewed whether such periods were observed or, indeed, whether they were systematically investigated by the relevant clinicians in the case of Mr Foley.

5.4 The diagnosis of dementia (and subtypes of dementia) cannot typically be made definitively until after the time of death, when a post mortem examination is undertaken. I have not seen a neuropathological report from the Coroner's office for Mr Foley. There is also reference in the file to Mr Foley suffering from some delirium in the past. This condition needs to be excluded before a diagnosis of dementia can be made. Delirium and depression can present with symptoms similar to dementia. Recognition and differentia diagnosis of these 3 conditions is therefore important. There is additional reference to Mr Foley having sustained a cerebral aneurysm underlying 'memory difficulties of several years duration' (Dr Black's report dated 22 April 2005). It is of especial interest, in this context, that Mr Foley's revised Will was apparently executed in July 2002, approximately 5 weeks after Mr Foley underwent surgery for an abdominal aortic aneurysm, after which he was described as 'very confused' for 4 - 5 weeks.

5.5 Brain imaging findings are useful when evaluating neurodegenerative processes. However, they do not assess cognitive functioning or decision-making capacity per se. Moreover, the concept of cognitive reserve is acknowledged internationally as being of central relevance when considering the impact of neural changes on behavioural and cognitive capacity (see for example: Stern, Y; Zarahn, E; Hilton, HJ, et al. (2003) Exploring the neural basis of cognitive reserve. Journal of Clinical and Experimental Neuropsychology, 25, 691-701). Specifically, people who are higher functioning premorbidly can typically withstand a greater degree of neural insult before changes in cognitive and functional status are manifested. Given:

(a) Mr Foley's achievements across his lifespan;

(b) his apparent financial acumen; and

(c) his ongoing involvement in community activities as a traffic warden

it may be considered plausible that he possessed considerable cognitive reserve and would therefore manifest some resilience with respect to the cognitive and functional sequelae of any diagnosed neurodegenerative brain disorder.

5.6 It is not clear to me whether any formal, objective assessment of Mr Foley's capacity was undertaken using detailed, standardized, age and gender-normed neuropsychological instruments, ie was a full neuropsychometric work-up undertaken according to international standards of best practice? Screening instruments such as the Mini Mental State Examination (MMSE) and CAMCOG can provide useful 'first pass' information in this respect, however, they are relatively crude instruments that are lacking in depth and do not offer or age and gender-related norms. This point notwithstanding, it was reported that Mr Foley scored 29/30 on the MMSE on 14 March 2005 (report of Dr Warwick Black) which would place Mr Foley within the 'healthy control' category for the internationally renowned AIBL study which is currently being conducted between Perth and Melbourne. (The CSIRO Australian Imaging Biomarker and Lifestyle Flagship in Ageing, on which I am co-investigator in the Clinical stream, is the largest contemporary international study of its kind; see http://www.aibl.nnf.com.au/page/home). I also note that, in September 2002, Mr Foley performed above the cut-off on the CAMCOG, leading Dr Mark Wilson to suggest that a diagnosis of dementia was not clear. As noted elsewhere, the diagnosis of dementia is probabilistic prior to the time of death.

...

5.8 There is evidence that Mr Foley's score on the MMSE (29/30) was the same in March 2005 (when he saw Dr Lloyd Singam), shortly after he signed the contract of sale, as it had been in 2002, close to the time when Mr Foley revised his Will. As noted above, this score would place Mr Foley within the 'healthy control' category for the AIBL study which is currently being conducted between Perth and Melbourne. There is further evidence that Mr Foley continued to drive, was functionally active in the community and that he maintained his living quarters to a reasonable standard at March 2005 (report of Dr Lloyd Singam).

5.9 Further to the above, it is not clear to me why no home support was set in place for Mr Foley as at May 2005, when Dr Black reports that Mr Foley was experiencing difficulties in managing his home environment

5.10 Related to 5.6 above, I have not seen any concrete, objective evidence at the time of signature (Will, contract of sale) of any significant cognitive impairment and/or loss of functional status which was impacting adversely upon Mr Foley's decision-making capacity. I have not seen any evidence that an objective, quantitative neuropsychological assessment of Mr Foley undertaken to determine any clinical significant memory loss, executive dysfunction, communication problems, lack of mental flexibility, calculation problems or disorientation. The opinions I have read seem predicated only on subjective, non-quantitative evaluation by clinicians and those opinions appear to be conflicting across different specialists. A quantitative neuropsychological assessment is crucial when seeking to determine mental capacity in internationally standardized, objective terms. Specifically, there is discussion in the file pertaining to Mr Foley's executive capacity with respect his performance on CAMCOG and other forms of assessment which are not specifically designed to evaluate executive functioning. In the absence of such direct neuropsychological evidence there was no objective information available regarding Mr Foley's cognitive functioning and decision-making capacity at the time of signature of the contract of sale, or indeed, of his Will

180 I will return below to the matters of Mr Foley's 2002 will, his driving, his activity in the community, the state of his living quarters and his home support under the non-medical evidence.

181 Dr Foster appeared to provide a revised opinion in his testimony. He testified that as at February 2005 he would have put Mr Foley 'at the severe end of mild cognitive impairment and let's monitor to see if he enters the category of frank dementia' (ts 531). He had not long before testified as follows, after further matters had been put to him (ts 530):

So with all of that information, a lot of which you didn't have before, does all of that information and the other information that you had suggest to you that Mr Foley was probably suffering from dementia in February 2005?---If you want a one-word answer, no.

182 However, as he made plain later in his testimony, this retrospective opinion was subject to 'appropriate caveats', as follows (ts 540):

I guess my first question is are you able sitting here now to give an opinion about somebody's state of impairment or whether or not they were suffering from dementia in February 2005, not having seen him yourself?---To the best of my knowledge and in my considered professional opinion I would place him at the severe end of the mild cognitive impairment range.

So, sorry, is your answer yes, that you can give an opinion?---Yes, it is.

So you can give an opinion that is retrospective four years. Is that right?---With appropriate caveats which have already been explored.

What are the caveats?---In the context of the same criteria that we use to place people on a spectrum in the CSIRO flagship Abel study of 1000 people across the spectrum of - - -

But let's just focus - - -?---If I may please finish?

No, Dr Foster. You need to answer my question and let's just focus on that. Are you saying that never having seen Dr Foley you can offer an opinion as to his state four years ago?---To the best of my knowledge with appropriate caveats, yes.

The appropriate caveats include that you have never seen him?---Retrospective and a retrospective attempt to place someone is challenging.

Yes, and you have never seen him?---I haven't seen him.

You have never administered a CanCog or an MMSE on him?---That's correct, but they are given according to standard criteria.

You have never done neuropsychological tests on him?---No, but a colleague of mine has, yes.

But are they of any use to you? I thought that you were at pains to tell us that they were to be criticised?---The results are fine but with a huge 'if.'

What's the huge if?---The huge if is that having revisited Dr Hayward's report, she didn't undertake something which is fundamental to obtaining a valid result on neuropsychological testing which is to administer a test with effort.

183 The information put to him included two documents he acknowledged he did not have when he prepared his report (exhibit 22). One was the assessments of Mr Foley's capacity to discharge his crosswalk responsibilities. I will return to those assessments under the non-medical evidence below. The other was Dr Hayward's report (exhibit 24). Dr Foster acknowledged that this provided 'concrete, objective evidence' which was lacking when he prepared his report ([5.10] of exhibit 22 above) subject to the concerns about her report to which I have previously referred when I considered her evidence above.

184 There were further matters which Dr Foster testified he was unaware of at the time of preparing his report (exhibit 22), and to which I will return under the non-medical evidence below. Those matters included one to which Dr Foster attached some significance, being the instructions on the use of an ATM prepared for Mr Foley by Mr West the day after Mr Foley executed the MOU. In relation to those instructions, when Dr Foster was first presented with them there was the following exchange with senior counsel for the first defendant (ts 406):

So somebody who needs that level of instruction - would somebody who needs that be capable of understanding that document I showed you before?---It depends on this issue of potential lucid interval which is, you know - - -

But we have already - - -?---On the balance of probabilities, no, but we never know. You know, people present only one particular snapshot in time. I would like to know precisely when that was relative to the time of the MOU signature.

What if I was to tell you it was the day after?---Well, it raises concerns.

It does more than that, doesn't it, Dr Foster? You would have liked to have been given this information, wouldn't you?---I would have liked to have known that information. It raises a bunch of concerns in addition to the concerns before the court.

185 Later in his cross-examination there was the following exchange (ts 543 - 544):

Does the information that you now have that you didn't have before, and in particular those ATM instructions, suggest to you that on the day before those ATM instructions Mr Foley would probably not have had the capacity to understand the general nature of that document that I showed you?---I don't have any evidence before me of the validity of this document.

Could you stop worrying about the validity of this document and challenging it. I've asked you to accept that it has been written in good faith?---Assuming that, then, yes, I would have concerns that a person with this capacity would be left - the capacity indicated by this series of instructions would be let out to use an ATM on - - -

Okay, so again, Dr Foster, you are answering by criticising people for not having looked after him properly?---Okay.

We've all heard that criticism. My question is not directed to what you think about whether people were looking after him well enough. It is simply that if you accept that that document was written in good faith the day afterwards, do you agree that - and you can't be definite, I don't expect you to be definite, but you agree that it is probable that Mr Foley could not understand the general nature of the document that I showed you?---The options document.

Yes?---Yes, I believe that that would be entirely consistent, that lack of convention of one would be consistent with this series of instructions.

So your answer is yes?---Yes.

186 In his re-examination, Dr Foster qualified this evidence, by reference to the fact that Mr Foley had until 2003 been in the practice of withdrawing amounts in cash across the counter, not by using ATMs. There was evidence from Mr West who compiled the ATM instructions which would indicate that had been his practice and from the first defendant that she had first tried to teach Mr Foley to use ATM machines in late 2003. Dr Foster's evidence was (ts 569):

In the sense that somebody who had been familiar with using ATMs and suddenly or over a period of time needed this level of detailed instruction, that would indicate evidence of a degree of cognitive impairment, much greater than somebody who'd never used an ATM and was being taken through step-wise for maybe even the first time.

187 Dr Foster also testified he had not previously seen the MOU and, after having had an opportunity to examine it, there was the following exchange with respect to Mr Foley's capacity to understand it, having regard to a number of matters (ts 397):

ARCHER, MS: Putting aside contracts of sale and just dealing with this document, do you consider that a person who - bearing in mind this is February 2005 - that a person who was assessed as having - I'm going to give you a whole list of things - assessed of having a CamCog of 73 out of 105 in April; who had the SPECT scan that you've seen that Dr Cardaci did with his results, would that information on its own be enough to raise your concerns on your part as to whether this person had the capacity to understand that document?---It would raise some concerns, notwithstanding the issue of the apparent anomaly of the MMSE, you know, why that person was still - we've been through that as to how that MMSE was administered but I would take the - it would raise concerns on the basis of the CamCog findings as to someone's capacity to undertake such a transaction.

Sure, and as we've said on a number of occasions, a positive score on the MMSE doesn't give you any indication of a person's level of executive function, does it?---That is a fair point.

So just based on the CamCog score of 73 and the SPECT scans of Dr Cardaci, you would have concerns about a person's capacity to understand this document?---More the CamCog than the SPECT scans because even, you know, healthy controls can show hypoperfusion in the brain for a whole bunch of different reasons.

Sure. Just looking at the 73 score then, would that be enough to cause you to think the person didn't have the capacity?---It would raise concerns in my mind as to whether it was appropriate to proceed with this kind of detailed transaction.

188 It was submitted to me, as I understood the submissions, that I should heavily discount Dr Foster's evidence for a number of reasons. Those reasons indicated he was endeavouring to act as an advocate for the plaintiff, rather than as a provider of impartial evidence to assist the court.

189 The reasons put forward were what was submitted to be his resistance to answering certain questions in cross-examination; his volunteering information in order to assist the plaintiff's case when that was not responsive to the question; his volunteering information to demonstrate his expertise when that information was also not responsive to the cross-examiner's questions; his criticisms generally; and his volunteering assessments when he had said he would not do this. Examples of each were provided.

190 However, in my view of his evidence, including the examples provided, Dr Foster should be seen as endeavouring to highlight what he perceived to be the difficulties in providing opinions as to Mr Foley's capacity as at February 2005. Those difficulties were his conclusions after having performed what he described as 'my role as being identifying whether there were any potential anomalies in the findings' (ts 389). He was prepared to express an opinion as to Mr Foley's capacity as at February 2005, but only if those difficulties were properly recognised. This in my view is not to be seen as a form of partisanship.

191 I consider the appropriateness of this view is most clearly indicated in his references to the MMSE and Camcog-R scores for Mr Foley and the way in which he expressed his opinion on Mr Foley's capacity as at February 2005.

192 In his initial cross-examination on what could be extracted from MMSE scores, there was the following exchange (ts 330):

You just said 'based on my clinical experience' you would categorise Mr Foley as mild based on the MMSE score of 29 out of 30?---Yes.

That was your answer just a moment ago, but you would agree with me that the MMSE score really isn't very useful in determining a person's level of cognitive functioning, is it?---It is used in the NI and CDS criteria which is the American body which, together with the DSM-IV is used to categorise degrees of severity of dementia.

Sure?---So Mr Foley would fall into the possible mild end of the spectrum based on his MMSE score, but I take your point that ideally one would want to do a full clinical work-up using a range of other tests in addition to the MMSE.

More than ideally. If all you had was an MMSE score, that wouldn't allow you to form any valuable opinion as to what the person's level of cognitive impairment was, would it?---In terms of clinical best practice, a full work-up would be recommended and ideally the person who is suffering from possible or probable dementia should be referred on to a specialist clinic which includes a multi-disciplinary team of health professors which didn't seem to occur in this case.

Sure, but just going back to my question, if all you had was a score of 29 out of 30 you would not be able to give a valuable opinion as to whether or not that person was suffering from cognitive impairment?---In my opinion, that's somewhat limited information. However, on the basis of the reports, several of the other professionals - - -

No. Sorry, Dr Foster. I was just asking about the MMSE?---It is too limited in my opinion to draw a definitive conclusion.

193 As to the Camcog-R, there was the following exchange (ts 353):

We have just dealt with the MMSE. The CanCog is not a perfect instrument either, is it?---No.

But at least the revised CanCog does have some bits in it that are specifically aimed at executive function?---It's not an executive function test but there are elements of it that one could use to gain a handle on executive functioning.

In fact we had the CanCog and now we have got the revised version which is the CanCog-R. I say that for the transcript, not for you, Dr Foster. The revised version had some items specifically added to assess executive functioning, didn't it?---I believe so, yes. It's not one of my instruments of choice.

194 Dr Foster in his testimony appeared to be concerned to go back to the lack of signs of decline in MMSE scores over the period 2002 - 2005. He was referring to the scores of 29 out of 30 on the MMSE administered with Mr Foley by Dr Wilson on 18 February 2002 (exhibit 94), and on the MMSE administered with Mr Foley by Dr Singam on 15 March 2005 (exhibit 13).

195 This concern is indicated in the following exchanges, which begin with a question concerning the delirium Mr Foley suffered after undergoing an operation for an aortic aneurism on 7 June 2002 (ts 342):

In fact people who are suffering from some form of cognitive impairment are more susceptible to experiencing delirium after an operation, aren't they?---There is mixed literature on that. There are some findings that indicate that is the case and some that indicate that isn't the case. I don't think there's a definitive conclusion on that particular issue at the moment, but excluding metabolic deficiencies, dietary insufficiently, delirium and depression and particularly a progressive change - and I got back to the NI and CDS, the American body which is the dominant body in the world for setting the criteria for the diagnosis of dementia. Again returning briefly to the MMSE, in our study of a thousand people with Alzheimer's disease, mild cognitive impairment and healthy ageing, we found in our Alzheimer's patients that over an 18-month period they declined by four to five points on the mini mental state examination, whereas I noted that Mr Foley didn't seem to decline at all from 2002 to 2005 on the mini mental state examination. It is this issue of progressive change. From Dr Hayward we get a good cross-sectional snapshot but we don't get an indication of what the change has been like over time unfortunately, so that would be my major qualification to Dr Hayward's report - - -

196 There was later an exchange concerning the progression in Alzheimer's disease and its association with continuing cognitive decline (ts 361 - 362):

But do you agree with me that Alzheimer's is a slow, progressive, deteriorating condition?---That's correct.

It is characterised by gradual onset?---Yes.

And a continuing cognitive decline?---Yes. That's right.

Progression is usually slow?---It can be quite rapid in the early onset cases of the illness, but we are not dealing with that here.

In the usual case, as this case appears to be, if that is what it is because we didn't cut the brain open, it would be slow?---Relatively slow, yes.

It's very unlikely in Alzheimer's that there would be a rapid decline in a person's scores and cognitive functioning over, say, a three-month period?---Going back to the CSIRO analysis that I did, we had the MMSE score changing by approximately four points over 18 months in our probable Alzheimer cases.

But we have already gone through the limits of the MMSE. I don't want to do that again?---It will be reported in all the publications that go to peer review that we submit from the study.

Look, I am not criticising that the study has value in a particular context but you have already agreed with me I think that simply administering an MMSE is not going to give you enough information about a person's executive functioning?---Yes. It is an unusual feature of this case that there wasn't a decline over an apparent three-year period.

You keep saying that, but you're basing that on information you have been given?---On the numbers I have been given, yes.

Can we just leave it there and ask you to stop keep throwing that in because I am going to give you some more information?---It's just an unusual feature that niggles with me because it just seems odd.

So you said but can we just stick with the questions? Putting aside the limited worth of an MMSE for another day, do you agree that it is very unlikely that there would be a rapid decline in a person suffering from dementia in their scores and cognitive functioning over a period of three months?---Well, you wouldn't expect a 10 point drop on the MMSE, for instance, in three months unless somebody had a very aggressive - say, early onset - type of Alzheimer's.

Similarly you wouldn't expect a rapid decline in a person's cognitive functioning over a three-month period?---It would depend. Say they had a caregiver who was supporting them. Not necessarily in a cognitive context - that's correct, but in - - -

Just sticking with the cognitive functioning, you agree?---Formally assessed cognitive functioning, yes.

197 There was a still later exchange in which Dr Foster raised the matter of the pattern in the MMSE scores, as follows (ts 530 - 531):

Is it fair to say that you don't feel able to offer an opinion, sitting here now, of what he was like in February 2005?---No, that's not correct.

Okay, well you tell us?---Okay. The question is very timely because on Friday afternoon I was involved in another CSIRO Flagship meeting between Perth and Melbourne where I am the clinical leader for Perth and Prof David Ainsley, who is one of the most distinguished people in the field based in Melbourne is the director of the National Institute of Aging. Of course I didn't discuss this very issue before us today but we reviewed approximately 30 cases across the spectrum from healthy controlled through MCI to Alzheimer's disease and I was particularly struck by David's comment, which was - - -

Sorry, no. I'm sorry, Dr Foster. I really don't want you to tell us what another doctor said. Is that what you were about to do? I thought you were going to tell us about some research that you had done?---I was then - if I am allowed to finish, I was going to tell you what I thought was some relevant information particularly relevant to this case.

That another doctor had told you?---Well, just to illustrate, because you have cited specific individuals. This is one of the most eminent people in the field in this country who stated that it's always a worry regarding a diagnosis of Alzheimer's disease. Mini mental state does not fall over an 18-month period and here we have a three year period where this person's mini mental state did not seem to fall, notwithstanding some of the issues we discussed on Thursday, and if I may be allowed to finish, we have some essentially conflicting information that he may or may not have been living alone with variable degrees of care, so I was put him at the severe end of mild cognitive impairment and let's monitor to see if he enters the category of frank dementia in the context of that particular study.

All right?---That's where I would place him.

198 I return below under the non-medical evidence to the matter of the 'degrees of care'.

199 Of course, Dr Black had reported an MMSE score of 25 out of 30 on a test he had administered on 4 April 2005, which compared with the score of 29 out of 30 on the test Dr Singam had administered not long beforehand, on 15 March 2005. Dr Foster was cross-examined on what might explain that variance. The conclusion to that exchange was that Dr Foster testified the explanation lay in 'any combination' of four of the matters put to him, being error in the administration of the test; contamination of the result by having another person present; a lucid period on 15 March 2005; or a significant deterioration in Mr Foley from 15 March 2005 - 4 April 2005 (ts 532 - 535).

200 In re-examination Dr Foster testified it was 'possible' to explain the drop in the MMSE scores on the basis that Mr Foley had consciously or unconsciously diminished his effort. However, Dr Foster also qualified that answer (ts 577 - 578):

What I want to do is put this to you - let us just put this hypothesis: suppose Mr Foley, although suffering some degree of mental impairment, some slight (indistinct) cognitive impairment, was still capable of understanding that he had, as he saw it, sold his block, and was under some degree of pressure or persuasion to endeavour to undo what he had done, either from Ms Kolnik or Marie - all right?---Mm.

And with that background and with the knowledge that if he were incapable of understanding the document, that might be a basis for legal action to terminate the contract, he undergoes this test. Do you follow?---The SPECT scan?

Yes?---It is referred to in the proceeding.

And I hark back to what you said about conscious or unconscious diminution of effort. I'm not sure what - is that a possibility in those circumstances, to explain the drop in the MMSE result so soon after the result in March 2005?---It's possible. Without an effort test having been administered, it can't be stated conclusively what his effort was at that time.

No?---But as I said before, ideally an effort test should be given in all circumstances, and the interpretation of the data should be predicated on the person having passed the effort test. Once they have overcome that hurdle then the ability tests can stand on their own merits, the other tests, whether they be something more sophisticated like a neuropsychological full assessment or something fairly simply like an MMSE. With regard to the SPECT scan, it's unlikely that arresting - in my opinion it's unlikely that a resting state SPECT scan could be modified by somebody lying in the scanner manifesting, consciously or unconsciously, inappropriate or reduced effort, because that's a baseline metabolic measure, but if someone were being asked to perform a cognitive test in the SPECT scan, and which I believe Dr Cardaci does routinely, it's possible that their effort could have been somewhat reduced in performing that task, but I think it was the case the Dr Cardaci produced a resting state SPECT scan rather than a SPECT scan in which cognitive testing was being undertaken at the time.

201 In my view it is difficult on Dr Foster's own evidence to conclude that any large significance should be given to any assumed stability in MMSE scores over a three year interval, at least where there was other material on which it was possible for him to draw. One such kind of material was the CamCog-R scores.

202 Dr Foster testified as to the interpretation of CamCog-R scores including those for Mr Foley from a test performed in February 2002 (a reference to the test administered by Dr Wilson on 18 February) and from a test performed in April 2005 (a reference to the test administered by Dr Black on 4 April) in the following exchange (ts 536: the transcript erroneously refers to 'Cancog' scores):

You have told us that the MMSE scores do not indicate anything about executive dysfunction. They don't test for that. We have a CanCog of 83 in February 2002 and a CanCog of 73 in April 2005. Do you not accept that there was a significant deterioration of Mr Foley's executive functioning in that three-year period?---Such that it would put him in the category of mild cognitive impairment, monitor further to determine whether unequivocal dementia follows - yes, I agree, but only to the extent that it would put him into that category at the medium to severe end of MCI.

I will deal with the category in a moment, but your answer to my question is, yes, it would show a significant decline in executive functioning over that two-year period?---I can't answer that question because I don't carry the confidence intervals for the reliable change index for the CanCog in my head. That could be calculated if one knows the standard deviation test reliability of the instrument, but I don't have that at my fingertips.

You told us before that 79 to did you say 83 was what people say the cut-off is?---The range cited in the literature, yes.

Right, so he was at 83, which according to you would mean some would say he was on the cut-off point and some would say he hadn't met it?---Yes.

Yes?---That's correct, yes

Two years later he is well below the cut-off point?---If one takes a binary approach, yes, but in more sophisticated studies using the CanCog it would be treated as a continuous variable because a statistician will tell you that once you start reducing the range in your data, you're losing valuable information, so you don't want to make it a black and white binary decision.

203 The reference to 'confidence intervals' and 'more sophisticated studies' are difficult to evaluate, as they were not addressed in Dr Foster's report (exhibit 22) and were not the subject of further evidence. However, in my view, they illustrate his endeavour to highlight difficulties in providing opinions as to Mr Foley's capacity as at February 2005. However, notwithstanding those difficulties, he was able to provide the opinion he did, qualified as he indicated, regarding that capacity.

204 I should add that, in his re-examination, Dr Foster further illustrated his concern to highlight difficulties in providing an opinion as to Mr Foley, by reference to the difficulties in giving an opinion as to whether or not he would have presented to a lay person as apparently suffering from some form of dementia or mental impairment. That is evidence I return to below. However, in my view that evidence goes to show that Dr Foster's evidence is not to be discounted for partisanship.

205 I further note in relation to the testimony of Dr Foster that, like Drs Black, Proud and Hayward, he was asked for his opinion on Mr Foley's capacity on certain propositions put to him as to Mr Foley's knowledge of the transaction on 23 February 2005, although not as to Mr Foley's motivation for entering into it. I return below to the evidence on which those propositions rested, and his opinion, below.

207 As I have previously indicated, Dr Singam had visited Mr Foley in the Curtin house on or about 27 August 2002 and again on 15 March 2005. On both visits it appears he had acted on a request by Mr Foley's general practitioner, Dr Ryan of Fremantle. Dr Singam's letters to Dr Ryan reporting on the visits were put into evidence: exhibit 12 was a letter dated 27 August 2002; and exhibit 13 was a letter dated 24 March 2005, with a further document.

208 Dr Singam's evidence was that on the second visit he administered the MMSE to Mr Foley. A copy of the test as completed by Mr Foley is the further document forming part of exhibit 13. Mr Foley's result on that test was 29 out of 30.

209 However, Dr Singam agreed that the MMSE tested 'very poorly for frontal lobe problems and therefore someone can have significant frontal lobe cognitive difficulties and be suffering from dementia, frontal lobe type, yet score perfectly well on the mini status examination' (ts 223). He also agreed that the CamCog-R was a better test. Dr Singam had not administered a CamCog-R test to Mr Foley, and indeed had no experience of his own with that test.

210 Dr Singam also testified that on the first visit with Mr Foley on or about 27 August 2002, he '[seemed] to show some evidence of frontal lobe dementia at an early stage' while he 'certainly does not seem to present as the usual common Alzheimer's-type presentation' (ts 203). Dr Singam testified as to the basis for those conclusions as follows (ts 204):

Can you recall what it was that caused you to form an impression that 'he seems to show some evidence' of that at an early stage?---Yes. I deal with a lot more Alzheimer's disease where memory is a major problem and yet his behaviour was to my recollection - or a feeling it was a bit odd. The house was quite untidy and unkept beyond a normal sort of acceptance and yet he seemed not bothered by that so the impression I had was that it could possibly be something not quite right with him and that while his memory seemed quite good Alzheimer's seemed unlikely so front lobe dementia is a possibility. I did not particularly test it or check which is more specialised.

Right. Have you experienced in your practice, have you come across situations where older people living alone have been untidy in their keeping of the house?---Yes, they do.

Just one other matter relating to this report, did you know that he had had an operation a couple of months earlier in June?---Yes, he had an operation.

And that he was recovering from that?---He would have been because it was an aneurism that was operated on.

Yes. All right. To clarify just one more point, I'm sorry, did you reach any conclusion as to whether or not he was suffering from Alzheimer's?---No, I did not think he had Alzheimer's disease.

211 Dr Singam further testified it was not apparent to him on the second visit to Mr Foley on 15 March 2005 that Mr Foley was suffering from dementia at that time. Dr Singam particularly noted that the condition of the interior of the Curtin Avenue home had improved significantly over that which he had observed on the earlier visit on 27 August 2002. However, as I will note again below, there is uncontested evidence from the first defendant that at about this time she had done some tidying up and cleaning in Mr Foley's home, although not any 'major cleaning', in March 2005 on the occasion of the first defendant's visit to Perth.

212 I also note that Dr Singam's evidence was also that 'an opinion regarding Mr Foley's capacity to make decisions, and act upon them' was 'a specialised area, in particular in assessing someone like Mr Foley who scored quite well on the MMSE' (ts 205). He acknowledged that that area was not his area of expertise. Also, he testified that it was possible that by reason of his experience of visiting the homes of elderly patients he was more tolerant of untidiness in the home of an elderly person, like Mr Foley.

213 Further, Dr Singam testified that a diagnosis that a patient was suffering from Alzheimer's disease, made at the highest level of confidence attainable before a biopsy of brain tissue was obtained, would require at the least a physical examination, which Dr Singam had not done on either visit, as well as the taking of a more extensive history, such as from family members, than Dr Singam had taken on either visit. That history would be directed to such matters as identifying any functional deterioration in the patient, such as in their washing and shaving.

214 Overall, I consider Dr Singam was a truthful witness whose recollection of events was good, but whose evidence as to Mr Foley's capacity at the times of Dr Singam's visit with him was of assistance to me as to how Mr Foley presented, and not as expert evidence.

216 I begin with the evidence of those witnesses other than the plaintiff, Mr Kikiros and the first defendant. I set their evidence aside for the time being as there are challenges to their credibility which need to be separately dealt with.

217 In the case of the former students of Mr Foley, Mr Nichols and Mrs Coles, both of them had met with him for meals in or about December 1997, January 1998, November 2000, December 2003 and April 2005. Both testified that there was a noticeable change in Mr Foley's behaviour at the December 2003 and April 2005 meals.

218 The December 2003 meal was at the La Tropicana restaurant. Both Mr Nichols and Mrs Coles testified that Mr Foley had shown no inability to converse until that meal. At that time, Mrs Coles' evidence, he could not remember a number of those present including Mr Nichols, or that he had offered to pay the bill. Mr Nichols gave evidence of both of those matters, and that at times Mr Foley had his mouth wide open, had a vacant expression and had 'deteriorated' (ts 924).

219 The meal in April 2005 was, on Mrs Coles' testimony, held at her home rather than at a restaurant, as she and Mr Nichols had decided lunch at a private home would be 'easier' on Mr Foley (ts 1220). Both Mrs Coles and Mr Nichols testified that Mr Foley had to be driven by Mr Nichols, as Mr Foley had indicated to them difficulty in driving to his sister Marie's home on a previous occasion. On their testimony, Mr Foley showed forgetfulness as to a number of those present at the meal and had difficulty conversing. Mr Nichols also testified as to Mr Foley having a 'vacant facial expression', and his mouth was 'often wide open' (ts 902).

220 Mr Coles was present only at the meals in 1998, 2000 and 2005. He also testified that at the April 2005 meal Mr Foley appeared to have changed, seeming to be 'socially uncomfortable', at times looking 'dazed' with his mouth 'wide open' (ts 1234).

221 Dr Foster testified that information of the following kind would be 'useful corollary information' for the purposes of a determination as to dementia (ts 341):

What if, for example, you had a group of people who over a period of, say, eight years got together on five occasions over a period of eight years? The first few occasions they would get together for a meal at a restaurant and the person of interest seemed fine. Then they thought he wasn't really coping particularly well with restaurants. 'We should try somebody's home' so they did that a couple of times. By the last occasion, they thought, 'He actually can't cope at all because he doesn't remember who anyone is. He can't drive himself there. He can't converse. He is just sitting there with a vacant expression on his face and looking very uncomfortable.' If you accepted that that information was true, would that be useful information?---It could be useful corollary information, yes, definitely.

222 It will be noted that the description provided to him was not altogether in terms of the evidence I have described. However, I consider that this non-medical evidence, in light of Dr Foster's evidence, is of assistance in relation to the issue of dementia and thereby of capacity.

223 Mr Cleary testified he had lived next door to Mr Foley from 1999 and had had many conversations with him, until August 2001, when Mr Cleary was injured in an accident. Following that accident, Mr Cleary did not speak with Mr Foley for about 12 months. Mr Cleary further testified as follows, reading from his witness statement (exhibit 54) (ts 937):

I recall that the front yard was never in particularly good shape but the backyard was well kept. I observed that Gerry did the gardening himself; (9) by about 2004 the back garden was unkempt and Gerry had stopped attending to his vegetable garden. I also noticed at this time there were more weeds growing in the front garden.

(10) in 2004 I started to work from home and as a result I saw a lot more of Gerry. However, conversations between Gerry and myself became brief and we no longer had meaningful discussions. I noticed that Gerry repeated himself and was often forgetful; (11) Gerry used to know me by name and knew my dog was called Lucy; (12) however, by 2004 Gerry often didn't recognise me and on one occasion he asked who Lucy was. This was very unusual because the dogs often played together.

224 In cross-examination, Mr Cleary elaborated on this evidence as follows (ts 939 - 941):

In 2004 you say - by 2004 Gerry often didn't recognise you, often?---Yes. I had - as I said, I had time away, I guess, recuperating and when I came back I still didn't have a lot of contact with Gerry but when I started working from home, there was a lot more opportunity to have contact with Gerry but by that time, yes, he seemed to be quite a different chap.

You say he often didn't recognise you. It doesn't mean he always failed to recognise you, just sometimes it happened?---He never called me by name after that but he was always the gentleman, so it was very hard to work out whether he recognised you or he was just being very polite, yes.

That's the problem. On one occasion he was asking you who Lucy was. Is that right?---Yes.

That was your dog?---Yes; yes.

But he saw your dog on quite a few occasions, didn't he?---That's right.

And on other occasions he would call Lucy or say, 'How is Lucy going?' and so on?---In the early days, yes, but - - -

And in 2004?---No, no. By 2004 he didn't seem to know my name. He didn't know Lucy's name. He didn't know how long he'd even lived in the house. He couldn't remember Mrs Dukes who lived in the house I was in for years and years and years, a number of - - -

...

And you would on occasion, as neighbours, talk to each other. This is after, in 2004 and onwards, you would still talk to each other, didn't you?---Yeah, not, look - - -

Not as freely as you used to?---There wasn't much in it, really, it was polite, whereas before we talked about all sorts of things, you know, gardens, dogs, you know, the weather, what was going on in Cottesloe. After that I guess, you know, I may sound a bit cruel but there was nothing meaningful in it - - -

Nothing meaningful in the sense of anything that you thought was of any interest?---Well, Gerry obviously wasn't following the conversation so - - -

225 I consider this evidence strongly confirms the evidence of Mr and Mrs Coles and Mr Nichols as to a deterioration in Mr Foley's cognitive capacity by 2004.

226 I turn now to evidence of Mr West, who had dealings with Mr Foley over a period of some years before and including 2005.

227 Mr West had known Mr Foley since the early 1940s. His testimony included the following as to changes he noted in Mr Foley over the years leading up to 2005 (ts 1335, 1336 - 1337, reading from his witness statement, exhibit 105):

Gerald has always been quiet and reluctant to mix.

...

Gerald was averse to purchasing new clothes and hardly spent any money on the house. Gerald did minimal housework and the furniture in his house was very old and shabby. From visiting Gerald's house I know that at about 23 February 2005 and in the years prior the house was not in a neat or well kept state. It was getting progressively worse over time but at around 23 February 2005 I would describe the house as follows. The front garden of the property was all overgrown.

The house was untidy and there were various objects lying around. The kitchen sink looked old and grotty and often had dirty dishes soaking in it. All through the house there were newspaper cuttings and photos stuck on the walls. Gerald made up large sheets of paper with song words on them for his musical evenings and thereafter stuck them up on the walls around the house, mainly in the back living area. Gerald rarely did any dusting or general cleaning, and it was obvious.

When visiting Gerald's house his dog would bark when I arrived, which alerted Gerald that I was there and he would come to the front door to let me in. In later years the dog would still bark but Gerald would no longer come to the door, therefore I would have to go around the side of the property to the back door.

Also, Gerald seemed to become forgetful about two to three years prior to the transaction with Mrs Lampropoulos. I would often call him to let him know that I would be coming over to visit him in about 20 minutes. By the time I arrived at Gerald's house 20 minutes or so later he would be surprised to see me and would have forgotten our earlier telephone conversation.

As I am an accountant I attended to Gerald's tax for about 20 years until 2005 when Ms Kolnik took over. In the last few years in which I did Gerald's tax, 2000 to 2004, it would take far longer than it should have to complete Gerald's tax because I would go over to Gerald's to obtain the tax documents and I would have to wait for him to find each document.

228 I return below to other evidence as to the state of the interior of the Curtin Avenue home.

229 Mr West also met with Mr Foley on 24 February 2005, following a phone conversation Mr West had with the first defendant the previous evening concerning what she said had been a conversation she had with Mr Foley regarding him having sold the Property. Mr West arrived at the Curtin Avenue home at about 9.30 am and the first defendant rang there at about 10.00 am, speaking first to Mr Foley and then to Mr West. Mr West testified as follows (ts 1340, reading from his witness statement, exhibit 105):

Once I got off the phone I asked Gerald about the sale of the block and said Ms Kolnik told me he had sold the block for $300,000. Gerald then told me that he had sold the block for $330,000 not $300,000. He was adamant about the price. I then reminded Gerald that it had only been a few months since I obtained the valuation which indicated that the property was worth about $430,000 and I also reminded him that I told him at that time that I thought the valuation was very low and that I thought the block was worth $500,000 to $600,000.

Gerald then said to me, 'Now you tell me' in a tone of surprise.

230 The reference to a 'valuation' was to a 'verbal appraisal valuation' which it was his evidence Mr West had obtained and had described to Mr Foley as follows (ts 1337 - 1338, reading from exhibit 105):

'When I completed Gerald's 2004 tax return in October 2004 I mentioned to him that a new house in Ormsby Terrace, Mandurah, had recently sold for over $2 million and he might like to know the value of the vacant block he owned in the same street. I obtained a verbal appraisal valuation of the property for him through a real estate agent friend of mine, Peter Ehlers, who had real estate connections in Mandurah. Peter Ehlers verbally told me that the property was worth $430,000. Peter Ehlers did not charge me for the appraisal valuation and I did not receive the appraisal valuation in writing at that time.

I told Gerald at that time, approximately October 2004, the property had been appraised at 430,000 but I considered the appraisal was a gross undervaluation of the property as I thought the block was worth $500,000 to $600,000.'

Can I just clarify that with you, Mr West? Do you mean that you said all of those things to Gerald?---Yes.

Thank you?

---'Additionally, there was a tremendous tax advantage in keeping the block.'

I'm sorry. Because I interrupted you you have skipped out paragraph 27?---I'm sorry.

No, no, that's my fault?

---'I also said to Gerald it did not matter and he confirmed what he had told me in the early 1990s, that he would never sell the block. Additionally, there was a tremendous tax advantage in keeping the block as Gerald would never incur a capital gains tax liability or an income tax liability on the sale of the block no matter how high the value of the block went.'

231 Subsequently Mr West obtained a written appraisal from Mr Ehlers dated 1 March 2005 (an annexure to the witness statement of Mr West, exhibit 105, and included as part of that exhibit). The appraisal stated that the 'selling range' for the Property was '$400,000 to $430,000' based on 'most recent sales evidence and current activity', and appears to be an appraisal of the selling range as at the date of the appraisal. For reasons I will give below, I consider this is likely to be an underestimate of the fair market value of the Property as at that date.

232 Mr West testified that not long after the exchange concerning what Mr West thought the Property was worth, there was an exchange over the state of Mr Foley's bank account (ts 1341, reading from exhibit 105):

---Gerald told me he was worried because he believed that he had only $10 in his everyday bank account. This was not the first time Gerald had mentioned this. He had mentioned this to me earlier. I tried to persuade Gerald that the balance was over $10,000.

233 After Mr West's meeting with Mr Foley, Mr West had taken him to an ATM with the results described in the following testimony (ts 1343, reading from his witness statement, exhibit 105):

Taking Gerald to the ATM on 24 February 2005. I then took Gerald to the Commonwealth Bank automatic teller machine, the ATM, in Cottesloe so he could withdraw cash from his Police and Nurses' account. This took around half an hour because Gerald could not get the knack of pushing the buttons in the correct order and generally found it difficult to operate the ATM. Gerald would not let me operate the ATM for him, nor would he go inside to see a bank teller, even though I pleaded with him to go inside. Gerald was adamant that he would learn how to use the ATM.

After four or five unsuccessful attempts, which took about 30 minutes as Gerald was also very slow, Gerald managed to withdraw $180 from the ATM. We then returned to Gerald's house. I wrote out a page of instructions for him on how to operate the ATM. Gerald kept this on his refrigerator for months. I know this because I would see it on the fridge when I went over to Gerald's house. A copy of the instructions is attached and marked BJW1.

234 'BJW1' formed part of exhibit 105, and contained detailed step-by-step handwritten instructions over one A4 page.

235 I particularly note from this evidence signs of deterioration in Mr Foley's ability to manage his own affairs, in the indications of forgetfulness over periods of 2 - 3 years before the transactions with the plaintiff on 23 and 24 February 2005; and over the same period, the increasing time it took for Mr Foley to assemble his papers for taxation purposes; his account of the price at which he had 'sold' the Property; his reaction to Mr West's reminder to him of the appraisal information Mr West had given him the previous October; Mr Foley's description of his bank account; and the circumstances in which the instructions for the ATM were compiled and their detailed content.

236 Dr Proud was taken to the divergence between the option price from the MOU (exhibit 1) signed the previous day (ts 1127):

If the day after the transaction he told Mr West, his accountant, that the price was $330,000 what is your comment?---The travelling 30,000. I mean, it's a bit of a mess with the figure changing so quickly. I mean, that raises concerns about this person's memory at the least.

237 Dr Proud was also asked about the ATM instructions (part of exhibit 105) in the following exchange (ts 1095):

That is a set of instructions that were written by a chap called Bernie, Bernie West, for Mr Foley on how to use an ATM machine. Have you seen that before?---Yes.

If Mr West wrote that the day after he signed the memorandum of understanding, would that have any significance to you in trying to decide whether or not he had a lucid interval on the day he signed the MOU?---It's difficult to answer about the lucid interval but the instructions on how to use the ATM are very detailed and talk about, in sequence, how to use the ATM. It's not just a simple question of forgetting your PIN. He even goes down to 'near the right side of the machine'. So the way it's structured indicates that Mr Foley had, in Mr West's view, extreme difficulties in using an ATM that went beyond the simple issue of recalling the PIN number. So that would give me - it's a strong piece of evidence that for someone to write these instructions means that, in their view, Mr Foley was having cognitive difficulties.

238 I have previously referred to Dr Foster's evidence as to those instructions.

239 It is convenient I note at this point the evidence from Dr Black of how Mr Foley understood the MOU not long after it was executed. Dr Black in his report of 22 April 2005 described the following exchange with Mr Foley at their second meeting, on 19 April 2005 (exhibit 62):

1. When I asked him about what was happening with the block of land, he was initially unaware of what I was talking about. Once again, as I began to orientate him, he was surprised that I knew anything about it, despite our previous meeting. Once he was aware that I was talking about the block of land in Mandurah he was able to provide the following details.

6.1 He suggested that in approximately three weeks it would be decided whether 'she' will have the block or whether 'I' will. When I asked who would make this decision he indicated that he did not know who would make the decision. He was unable to explain how the court process would work, whether he would be represented by someone, or how the court would come to the conclusion about who would take ownership of the property.

6.2 He suggested that 'the lady' came and said she wanted to buy the block of land, and that she wanted it for her sick father. When asked, he indicated that she did not say what sickness he had, but that 'she gave me the strong impression that it was serious'. In fact, Mr Foley reported that he had been told that 'the lady's' father was dying.

6.3 When asked about what he thought of this situation, in hindsight, he suggested that he believed 'she made this story up' and he suggested that he was not keen to sell, but she was keen to buy. He informed me that he eventually agreed to sign the papers when she offered him $300,000 for the property. He suggested that 'she seemed to be so excited, and I'm a bit of a soft touch'. He suggested that he thought it might be good for 'the lady's' father to have his final memories near the beach. He informed me that the property overlooked the water.

6.4 He indicated that other people had told him that the property was probably worth about $500,000, prior to this time, but was unable to give me the details of who had given him this information. [Correspondence from yourself, suggests that the Valuer General has placed a value on the property in the region of $600,000. My personal experience with such matters has suggested that the Valuer General's listed price is often significantly under market value.] Ultimately, he suggested that he agreed to sign the papers, essentially as an act of kindness, which he would not have done in hindsight, because he believed that 'the lady' had lied to him.

Although generosity appears to be a part of Mr Foley's nature, this has typically been directed towards family members.

240 I will return to this evidence below. For now, I note the reference to the plaintiff wanting the Property for her 'sick' father. The evidence of the plaintiff is that she told Mr Foley no such thing, as follows (ts 250):

Was it because he wanted to help you with your sick father?---My father, touch wood, is not sick.

But had you told him that?---Never. He may have told Ms Kolnik that to justify the sale of the block because he was leaving it to her.

241 Dr Hayward was asked about Mr Foley's account of that reason for the transaction with the plaintiff (ts 1176):

Just going back, I'll refresh your memory. Mr McCusker was asking you about his statement as to why he had done it, and you said people frequently try to cover up for their errors. You said whether he really is a soft touch and then he believed he'd been lied to, or whether he didn't want to admit he had done something silly, and then you said knowing what you're doing - actually I can't read that writing, but anyway, you can decide to sell but you may not think you know what it means without an idea of the consequences. So going back to his express reason, which was to do with the plaintiff's father being sick; soft touch. If in fact the plaintiff is telling the truth when she says she didn't tell Mr Foley her father was sick, would that have any relevance for you?---It would. If she was telling the truth and this had become part of Mr Foley's recognition or belief of what had happened, that would be very consistent with the way he performed when I assessed him, which is that during the course of a dementia, as memory deteriorates, a process called confabulation will occur where the person fills in missing information with whatever might be plausible to them at the time. And interestingly, that information often becomes more stable than other information. You see it over and over again in testing. So if she's telling the truth and it's what he believed, then what that suggests to me was that he was confabulating, which is quite a severe - by then he's got quite a severe memory impairment if he's doing that.

242 On the evidence I have of Mr Foley's character, and assuming he was not suffering from any significant cognitive impairment, there does not seem to be any reason to consider that he would dissemble in the way the plaintiff suggested. Nor is such dissembling at that point easy to reconcile with his account of how he had come to enter into the transaction with the plaintiff concerning the Property.

243 It will be noted that by contrast with Mr West's evidence as to his conversation with Mr Foley on 24 February 2005, on Dr Black's evidence, Mr Foley's account of the price was of the correct option price; his understanding of what the Property was 'probably worth' was of a higher amount, 'about $500,000'; and he also gave a different account of how he had come to enter into the transaction with the plaintiff concerning the Property.

244 The only remaining evidence of those who had seen Mr Foley, both in 2005 and some years earlier, and could testify as to those times, was from Mrs Jordan and Dr Singam, as well as two officers of the Traffic Warden State Management Unit, Mr Fryer and Mr Karakiozakis. I deal with those two officers later, as their recollection of Mr Foley prior to October 2004 (Mr Fryer) or June 2005 (Mr Karadiozakis) is not specific.

245 Both Dr Singam and Mrs Jordan particularly commented on the state of Mr Foley's house in 2002 and 2005, based on a joint visit in 2002 and on separate visits in 2005. Only Mrs Jordan provided an assessment of conversations with Mr Foley in 2005, while I have considered above Dr Singam's impressions of Mr Foley's personal presentation on his visits in 2002 and 2005.

246 As to the state of the interior of Mr Foley's house on 23 August 2002, both Dr Singam and Mrs Jordan testified that it was cluttered or untidy and neglected or unkempt in parts. I have previously referred to Dr Singam's testimony as to the state of the interior when he re-visited on 15 March 2005. As to the extent of the untidiness and unkempt character at the time of the joint 2002 visit, Dr Singam testified as follows (ts 204):

The house was quite untidy and unkept beyond a normal sort of acceptance and yet he seemed not bothered by that so the impression I had was that it could possibly be something not quite right with him and that while his memory seemed quite good Alzheimer's seemed unlikely so front lobe dementia is a possibility. I did not particularly test it or check which is more specialised.

Right. Have you experienced in your practice, have you come across situations where older people living alone have been untidy in their keeping of the house?---Yes, they do.

247 Mrs Jordan's second visit was on 7 June 2005, this time without Dr Singam. She testified that the house had not 'really changed since my first visit in August 2002' (ts 1191, reading from her witness statement, exhibit 77).

248 Mrs Jordan testified as to the extent of the clutter and neglect on 7 June 2005 (ts 1196):

So generally it was - from your experience would you describe it as a somewhat typical bachelor's house, a bit disorganised here and there or worse than that? By bachelor I mean older bachelor perhaps?---Yes. The house looked quite unusual and it was unusual in that the furniture in the lounge room, certainly the dining room, the general furniture was very old. Nothing looked like it had been updated for years.

Yes?---So it was possibly - I believe his mother lived in the house so it was possibly all as his mother had had it.

As his mother had lived before him, yes?---Yes, and the place had not been updated in any way, painted, plus there were these cracks in the walls and then there were these unusual, you know, gallery of photographs of prime ministers and I recollect there being written quotes that were hanging on the wall as well.

Yes?---So the house. Then there was the clutter. Then this back area was very bare. So, no, I wouldn't say it's what you would expect of an elderly gentleman. I think he was about 76 at that stage so he wasn't that old. No, it was a bit out of the ordinary.

249 The evidence of Dr Singam and Mrs Jordan may be compared with that of Mr Higgins, who visited the Curtin Avenue home on 4 March 2005, before the first defendant had arrived from interstate, which in turn preceded Dr Singam's visit of 15 March 2005. Mr Higgins' testimony included the following (ts 1239 - 1240, reading from his witness statement, exhibit 81):

There was a covered entrance at the front of the house as you came up to the verandah near the front door of the house. There were a number of items sitting on the verandah. I do not recall exactly what items were sitting on the verandah. We knocked on the front door and after quite a while Mr Foley answered the door.

We introduced ourselves to Mr Foley. We walked into the foyer area and I recall that the wall directly opposite to the foyer area had a number of newspaper articles stuck on it. I do not remember what all the articles were but I do remember there was one in respect of Cardinal Foley on the wall that faced into the foyer.

Mr Foley showed us through the foyer, through the kitchen and into a sun room at the back of the house. On the way through I saw the kitchen and it seemed fairly bare and it had a laminated table in it from the 1950s.

250 Evidence of this kind from Dr Singam, Mrs Jordan and Mr Higgins is of use in determining Mr Foley's capacity, on the evidence of Dr Proud (ts 1123) and of Dr Foster (ts 339). However, in my view it must be weighed having regard to the evidence of Mr West, on how Mr Foley had previously kept his house. At the same time the evidence of the lack of change between her visits in 2002 and in 2005 of Mrs Jordan must be compared with that of Mr West, who noticed a deterioration, and might be expected to have a closer acquaintance with the house than Mrs Jordan.

251 I will return to the evidence of the state of the interior of the Curtin Avenue home in 2005 when I come to consider evidence of the plaintiff and her father, Mr Kikiros.

252 Mrs Jordan also testified as to the conversations she had with Mr Foley on the occasion of her visit with him in June 2005. She testified that what he said 'sounded coherent' and he presented as 'socially appropriate'; however, what he said 'in relation some of these very basic and concrete things wasn't actually correct' (ts 1210, 1212). She gave the example of him saying he did the cleaning but when asked by the person accompanying Mrs Jordan on the visit to indicate where the vacuum cleaner and broom were, he could not find the vacuum or point to anything used to clean the house (ts 1210).

253 There was further evidence of Mr Foley's mental condition in 2005 and in late 2004 from Mr Higgins, Mr Fryer and Mr Karakiozakis, and from a DVD recording (exhibit 6) of Mr Foley arriving at his crosswalk, working there and driving to the Curtin Avenue home from there on 2 June 2005.

254 Mr Higgins testified as to his conversation with Mr Foley in the Curtin Avenue home as follows (ts 1240 - 1241, reading his witness statement, exhibit 81):

I asked Mr Foley a series of questions to see what Mr Foley could recall about his dealings with Pamela Lampropoulos. Prior to going out to Mr Foley's I had drawn up a series of headings to guide my questions while I was at the interview. During the interview I generally observed that Mr Foley was very slow in providing his responses. He seemed to be processing my questions and then after some time he provided a response.

There was one exception to this and this is where I asked him a question about whether or not he had informed his sister about the sale of the property to which he responded quickly 'No' in a manner that indicated he would not discuss it with her.

Although it took Mr Foley a long time to respond to each question he seemed to understand the question and was able to provide a response which indicated he understood the question. Although Mr Foley seemed to understand my questions and was able to answer the questions, albeit in a very slow manner, many of the responses provided by Mr Foley were contradictory.

Some examples of the contradictory information follow: I asked Mr Foley on two occasions when he had last visited the block in Mandurah and Mr Foley indicated he went there approximately two years ago and then later in the interview he said he went there about four or five years ago.

When I asked Mr Foley about the value of the block he was initially reluctant to respond but said he thought the block might be worth a few thousand dollars. He then said he was aware that a block in the area had been sold for around 600,000. When I asked Mr Foley about Ms Lampropoulos' father Mr Foley stated he did not recall meeting the father and stated he would have spoken to him if he had.

He seemed clear on this. However, at a later point in the interview when I asked Mr Foley why he sold the block for 300,000 when he knew another in the area had sold for 600,000 Mr Foley said he did it, 'Because the old guy' - I assume he meant Ms Lampropoulos' father - 'was there and he was sick.' I never raised these inconsistencies with M Foley as I did not want to confuse him further.

Additionally when I asked Mr Foley some questions about what had transpired between himself and Ms Lampropoulos Mr Foley was not able to provide answers. He seemed genuinely confused about some aspects of the transaction and in other aspects was unaware of the details of the transaction. He did not recall many specific details of the interaction he had with Ms Lampropoulos or her father.

He seemed to be unsure about events concerning the Mandurah property.

255 In cross-examination Mr Higgins acknowledged he had taken Mr Foley's reference to the Property being worth 'a few thousand dollars' as that he knew it was 'worth a bit' (ts 1253); and that Mr Foley's statement as to when he bought the Property was 'certainly close' to the date on which Land Titles Office records (see exhibit 83) showed he had acquired it (ts 1254). However, he rejected suggestions he was inclined or biased against the plaintiff, and the documents put to him (see ts 1248 - 1249) do not, in my view, offer any such suggestions strong support.

256 I draw from Mr Higgins' evidence strong support for the other non-medical evidence I have referred to of cognitive difficulties Mr Foley was suffering from in about March 2005.

257 There was evidence from the two officers of the Traffic Warden State Management Unit, Mr Fryer and Mr Karakiozakis, which also points to cognitive difficulties Mr Foley was having in 2005.

258 Mr Fryer's earliest recollection of dealing with Mr Foley was in 1998, when he came to his office. Mr Fryer verified that his note, forming part of a bundle of documents concerning Mr Foley from the Unit, was a correct record of the discussion with Mr Foley (exhibit 84, page 4). Mr Fryer testified he considered that 'our contact with him was fairly normal for the average traffic warden', prior to his failure to turn up for duty at the Perth Royal Show in October 2004 (ts 1263). Mr Fryer also testified that on 14 June 2005 he telephoned Mr Foley and arranged an appointment with him the following morning. This arrangement was the result of a conversation Mr Fryer had with Mr Karakiozakis. However, Mr Foley missed the appointment, and when Mr Fryer rang him that afternoon, Mr Foley asked him who he was and, when reminded, Mr Foley said he had gone to the Education Department (ts 1259 - 1260, reading from Mr Fryer's witness statement, exhibit 85).

259 Mr Fryer testified that at a new appointment the following day, 'by the end of the conversation which lasted about 5 minutes Mr Foley became hesitate [sic] and asked who I was' (ts 1260).

260 Mr Karakiozakis testified that he had carried out 'a two and three assessment [sic] on Mr Foley in relation to his crosswalk attendant duties at the crossing between 2002 and 2005' (ts 1129, reading from his witness statement exhibit 75), although Mr Karakiozakis was unable to locate any of the assessments except for one conducted on 14 June 2005. Mr Karakiozakis also testified he had met Mr Foley on one occasion earlier than 2005, when Mr Foley had come into the offices of the Unit, saying he thought they were St Johns Ambulance offices, to which Mr Karakiozakis directed him (ts 1132 - 1133).

261 Mr Karakiozakis testified that until 14 June 2005 he 'didn't really note ... personally' Mr Foley as having been a 'bit of a problem' on his crosswalk (ts 1133). However, as to his assessment of Mr Foley's conduct on 14 June 2005, Mr Karakiozakis, when asked to compare him with other crosswalk attendants, testified as follows (ts 1133):

Did you find that Mr Foley was not the only one that you had trouble with on these crosswalks?---To that extent as him, no.

Pardon?---To the extent of how Mr Foley was at the time when I assessed him, I have not really seen any as bad as that - actually quite dangerous.

You have seen problems with other crosswalk attendants, though, haven't you?---Yes, but they can be rectified on the crossing generally.

262 There were a number of documents relating to assessment of Mr Foley as a crosswalk attendant in the bundle of documents from the Unit (exhibit 84). These included several 'Phase 3 (Generic) Assessment Form' documents. The two most recent were dated respectively 16 September 2003 and 14 September 2004. Neither was signed by either Mr Fryer or Mr Karkiozakis. Both assessed Mr Foley as 'Competent', although with a number of items indicated as done incorrectly, and an indication that re-training was required. Dr Foster was asked a number of questions about the earlier form (ts 377 - 378):

This is an assessment on 16 September 2003. Do you see that?---Yes.

Again Mr Foley has apparently blotted his copybook in a number of respects. Over the page, he is assessed as competent. Do you see that?---Yes, I see that.

What is the assessor's comment?---'Confused at first but finally got it.'

That is September 2003?---Yes.

So in September 2003 this bloke from the traffic wardens office has gone out to assess him. He has done a number of things incorrectly and he has observed, 'He was confused at first but finally got it'?---Yes.

Again would that have been useful information for you to have been provided with?---Useful corollary information, yes.

Useful corollary information to support the proposition that for a period of some years Mr Foley was showing signs of a cognitive impairment?---It certainly indicates that his activities of daily living may have been somewhat compromised in the context - in an occupational context - but it doesn't point to cognitive deficits per se.

Sure, but that is one of the things that can tell you about a person's cognitive deficit if they're starting to have problems doing activities that they have been doing for a long time?---The DSM-IV criteria for dementia, for instance, as distinct from the NI and CDS criteria - social and occupational functions are considered relevant to making a diagnosis.

But whichever criteria you use, you would agree that one of the things that will assist you to reach a good conclusion or a weighty opinion is to have that sort of information that potentially indicates support - not 'potentially'; that supports the proposition that there was some problem with his executive functioning back over those years?---Yes. It certainly provides additional relevant information.

As an expert, you would have liked to have been given that, wouldn't you?---It would have been useful in formulating an overall opinion.

And you weren't given it, were you?---As far as I am aware, I didn't see that.

263 I take from this exchange that it was the expert opinion of Dr Foster that assessments of the kind Mr Karakiozakis arrived at were relevant to a determination as to Mr Foley's capacity in June 2005.

264 However, there is no corresponding note as to any confusion in the later form, dated 14 September 2004.

265 The DVD (exhibit 6) made on 2 June 2005 is edited vision, between an indicated 2.32 pm and 4.07 pm, and running 13 minutes. It shows Mr Foley parking his car at 2.46 pm; at the crosswalk at various times; and driving away from where his car was parked at 4.02 pm, the car last being seen in motion near Curtin Avenue.

266 Two witnesses testified as to the DVD images, Dr Proud and Mr Fryer.

267 Dr Proud had viewed the DVD and prepared a report contained in a letter dated 1 April 2009 for the solicitors for the first defendant (exhibit 74).

268 Dr Proud in his report refers to the DVD as approximately 30 minutes long. However, this appears to be an error, as it was not in contest his report was as to the DVD (exhibit 6).

That DVD shows Mr Foley driving his car, getting out of his car after parking it and putting on his hat and jackets and getting his flags and other equipment to operate the crossing. There are school children seen going across the crossing. He then puts his gear back into the car and drives off.

At the end of the video, he is seen making two right-hand turns, both of them at a set of lights, the first with a green arrow indicating right, the second without an arrow. All of these tasks he completes adequately.

My only comment here is that these are very basic tasks and no meaningful comments can be made about his cognitive abilities and in particular, no meaningful comments can be made about his frontal lobe executive functioning from these tasks, as these tasks are routine and require very little in the way of judgment, planning or organization.

270 In his evidence Dr Proud testified as to his observation in that report (ts 1099):

Just going over to page 2, what are you able to say about the cognitive capacity required to do the things that you were watching Mr Foley do?---They were relatively basic tasks and I think it's difficult to adduce anything meaningful from his cognitive capacity from what I observed on the DVD one way or the other.

271 Mr Fryer also viewed the DVD and testified as to what he observed (ts 1262, reading from his witness statement, exhibit 85):

Downings Legal has recently provided me with a DVD, which they inform me is exhibit 6 in the trial, showing Mr Foley at the crosswalk at PLC at the intersection of McNeil Street and Stirling Highway on 2 June 2005. I make the following observations with respect to Mr Foley's actions shown in the DVD.

He puts his traffic warden safety vest on back to front. Instead of standing by the road waiting for pedestrians Mr Foley can be observed at least once standing near his car looking up the road. On one occasion he is doing this while someone is waiting at the crosswalk to cross.

Mr Foley does not use the correct flag procedure on the crosswalk. He can be observed walking off the crosswalk with one pedestrian which is strictly prohibited. He takes off his vest and coat when collecting his flags which is contrary to the proper procedure. If I was assessing Mr Foley on 2 June 2005 I would have assessed him as not competent and I would have required that he attend retraining and be found competent prior to returning to duty.

272 Senior counsel for the first defendant directed my attention to a number of features of the images on the DVD, including ones showing Mr Foley's mouth moving while not evidently speaking to or with any one, and, towards the end of the DVD, driving in the cycle/emergency lane on the road. However, I have difficulty extracting from my viewing of those images what senior counsel for the first defendant contended were indications of cognitive deficits. At the same time, in view of Dr Proud's evidence and my own viewing, I consider I cannot draw from viewing anything which is strong evidence of the absence of any cognitive deficit.

273 Finally, I consider that Mr Fryer provides evidence of the kind that Dr Foster's evidence indicates is relevant to a determination as to Mr Foley's capacity at 2 June 2005, when the images on the DVD were captured.

274 There is also evidence of difficulties Mr Foley may have been having with understanding land sale transactions from earlier than 2004. This is evidence from Mr Rossen, who dealt with Mr Foley in the sale by auction of some blocks of land of his in Morley. That evidence included the following (ts 1371, reading from his witness statement, exhibit 107):

It was apparent to me from meeting Mr Foley that he had difficulty following all the steps involved in the auction process. He deferred to Lynne to organise the necessary arrangements when discussing what was involved. His manner was pleasant but he seemed vague on details and I could not hold a sustained conversation with him.

275 It was put to me that I should wholly discount Mr Rossen's evidence because after Mr Foley's death he had been retained by the first defendant to sell the Curtin Avenue home, and she had discussed with him the dispute as to the transaction with respect to the Property. In addition, there was no supporting evidence that Mr Foley was suffering from any cognitive impairment at this time.

276 However, I note Mr Rossen's uncontested evidence that he had taken 'extra precautions' in respect of the sale of the Morley blocks. He testified these were in view of the impression he had formed as Mr Foley's capacity (ts 1373, reading from exhibit 107). They were a survey of the blocks and a sworn valuation of them, as opposed to an appraisal, although he admitted that in the latter case he had so proceeded also for the reason he was not 'an expert in the area' (ts 1373). In addition, I note the evidence of Mrs Cole and Mr Nichols as to how they found Mr Foley at the meal in 2003. I consider the extra precautions of Mr Rossen and the evidence of Mrs Cole and Mr Nichols provide support for the testimony of Mr Rossen I have described.

277 Accordingly I would not wholly discount that evidence.

278 There is evidence for the period prior to 2003 which would tend to indicate that Mr Foley was not suffering from cognitive impairment, at least not to the extent to which the medical and non-medical evidence I have reviewed points to in 2005, and the non-medical evidence points to in 2004 and 2003.

279 Mrs Pickering testified that in 'approximately 2000' she had arranged cleaning services to be provided through subcontractors to Mr Foley after interviewing him and visiting the Curtin Avenue home. Mrs Pickering later visited the Curtin Avenue home, to see that the services were being provided. Mr Foley discontinued the services after about 18 months as he believed he could 'manage on his own' (ts 968, reading from her witness statement, exhibit 57). Subsequently, Mrs Pickering went to see him 'in about 2003, maybe late 2002' to tell him she was 'a bit concerned' (ts 969, reading from her witness statement, exhibit 57). This concern arose out of encountering him earlier that day expressing apparent uncertainty as to where he should be going (ts 976). On her visits before the services were discontinued she testified that the house was 'in disarray' (ts 968, reading from her witness statement, exhibit 57), on the later visit, apparently because he would not allow the cleaners to tidy things up (ts 972). She also testified that on her last visit, after the services were discontinued, he had 'deteriorated', while his 'conversation had become repetitive and his house was still in disarray' (ts 969, reading from her witness statement, exhibit 57). However, she also testified that on the visits before the services were discontinued he was 'still articulate' (ts 968, reading from her witness statement, exhibit 57), and on the visit after the services were discontinued he 'just seemed okay' (ts 976).

280 I have previously referred to Dr Singam's evidence as to Mr Foley, at Dr Singam's visit to the Curtin Avenue home on or about 27 August 2002, seeming not to be 'bothered' by the house being 'quite untidy and unkempt beyond a normal sort of acceptance', although his memory 'seemed quite good' (ts 204).

281 I also note that it is common ground that not long before Mr Foley underwent the operation for an aortic aneurism on 7 June 2002, he had written a letter, undated, to his sister Marie (exhibit 38). In it he indicated his views as to benefits that should be conferred on the individuals listed there, including the first defendant, and the reasons for those views. It is also not in contest that those views are largely reflected in the will dated 19 July 2002, which he subsequently executed (exhibit 50). Mr West in his cross-examination was shown the letter (exhibit 38), which he testified he had not known existed. After being taken to much of its detail, he testified as follows (ts 1353):

But it certainly shows Mr Foley had a considerable understanding both of his family situation and his business affairs, doesn't it, at that time?---Yes, I would agree.

Yes. Does it surprise you that he was capable of writing in those terms, so clearly and in detail?---It does surprise me.

Yes, because you thought that he was in a bit of a decline before then, did you?---Yes. He has always been very strange and very shy.

He has always been very strange and very shy?---Yes.

And so socially he doesn't - I'm talking about, as long as you have known him he was very shy and somewhat strange?---Yes.

282 I turn now to the evidence of the plaintiff, her father Mr Kikiros and that of the first defendant.

The evidence of the plaintiff and of Mr Kikiros

283 The plaintiff gave evidence as to how Mr Foley presented at the two meetings she had with him at his Curtin Avenue home, on 19 February 2005 and 23 February 2005, as well as how he presented at their meeting at his crosswalk on 24 February 2005.

284 The plaintiff's evidence was that at the meeting on 19 February 2005 at the Curtin Avenue home, which began in the morning, the 'interior of the house seemed neat and tidy and the kitchen sink was clear and clean' (ts 132, reading from her statement of evidence, exhibit 30). In her cross-examination she described the state of the interior as follows (ts 244):

You say when you went to the house the first time on 19 February it was tidy?---Extremely.

Extremely tidy?---Absolutely - tidier than I have ever had my house.

Right. The exterior of the house was nicely painted?---It was an old house, as my parents' house is. I'm talking about the inside. You're asking if it was tidy, Ms Archer.

285 The plaintiff testified that when she asked Mr Foley if he would be prepared to sell the Property to her, he said he did not think he would be selling it because he was thinking of leaving it and the Curtin Avenue home to the first defendant. His will dated 19 July 2002 (exhibit 50) in fact so provided. He also furnished personal details about himself, his sister, and the first defendant, as well as about his original acquisition of the Property, all of which are consistent with other evidence in the case which I accept, and some of which I consider she could not have obtained except from Mr Foley.

286 On her evidence, Mr Foley telephoned her on 22 February 2005, at about 8.00 pm. Her testimony in her examination-in-chief was that after he confirmed she was the Pamela who had visited him a couple of days earlier, the following exchange occurred (ts 134, reading from her statement of evidence, exhibit 30):

Mr Foley then asked if I still wished to purchase his property in Ormsby Terrace as he had decided to sell the block to me for $300,000. He said that he thought he could probably get about $400,000 if he offered it for sale publicly but that he would sell it to me for $300,000. I asked him if he was sure he wanted to do that. He then asked if I could afford the price he was asking. I said I would go to my bank and hopefully organise the finance.

He asked me if we could meet the next afternoon. I said, 'Yes' and we agreed to meet at his home at 2 pm.

287 As to the meeting at the Curtin Avenue home on 23 February 2005, the plaintiff's evidence was that she went there with Mr Kikiros arriving about 2.15 pm. As I have indicated, this was as a result of Mr Foley's telephone call to the plaintiff the previous evening. The house 'appeared to be in the same clean condition as on my last visit' (ts 134, reading from exhibit 30). After a 'brief discussion' between Mr Foley and her father about the 'present state of the education system and the differences between the teaching profession in the present day and when Mr Foley was teaching' (ts 134 - 135, reading from exhibit 30), as well as about their respective experiences of dogs (ts 150, reading from her supplementary statement of evidence, exhibit 31), Mr Foley, in response to a question from Mr Kikiros, stated the price at which he was prepared to sell the Property. This was the price the plaintiff testified he had referred to in the telephone call of 22 February 2005, being the exercise price in the MOU (exhibit 1), but without GST. She testified she produced the MOU and Mr Foley 'looked over it', after which on her evidence the following occurred (ts 135, reading from exhibit 30):

My father then said he would read out the document to Mr Foley. Mr Foley said he was sure I was not a shyster and reading it out would not be necessary.

My father said that he would still go through the document with Mr Foley. My father said to Mr Foley that the document was an option, rather than an offer and acceptance, and that the option fee was nominated as being $300. Mr Foley said that was acceptable to him. My father read the document aloud to Mr Foley. I then signed the document, as did Mr Foley, and my father witnessed both of our signatures.

Mr Foley asked if I had a copy of the document for him and I said I would photocopy the document and bring it back to him. Mr Foley said I could leave it in the letterbox if he wasn't home. I told him I would bring back the option fee and he said I could catch him at home or in the morning or afternoon at the crossing where he worked. Mr Foley then checked the time and said that he had to get to the PLC crosswalk.

288 Mr Kikiros' evidence of the 23 February 2005 visit was that he recalled the Curtin Avenue home as being 'very tidy' (statement of evidence, exhibit 108, [10]). His testimony was to the same effect as that of the plaintiff regarding the conversation he had with Mr Foley before the plaintiff produced the MOU (exhibit 1), as well as to his then reading it out to Mr Foley and its execution. Mr Kikiros' evidence included that he said to Mr Foley, 'This is an option and not a contract of sale', to which Mr Foley replied 'I know the difference' (ts 1415).

289 There was also evidence from the plaintiff and from Mr Kikiros as to the meeting with Mr Foley at his crosswalk on the afternoon of 24 February 2005. Their evidence was at this meeting, Mr Foley accepted, although would not sign, the letter (exhibit 2) from which the plaintiff detached the signature portion. At the meeting Mr Foley was given $300, after the plaintiff had told him the State Revenue Department had told her 'this option agreement' was 'enforceable' or 'sufficient' and so there was no need for a further agreement, and he replied 'in that case, that's okay', or words to that effect.

290 I consider that within this body of evidence, as to the telephone call on 22 February 2005 and the meetings of 23 and 24 February 2005, there is support for the conclusion that Mr Foley had the capacity to understand the general nature of the MOU and variation when explained, and explanations were given. That support lies in the evidence as to the state of the Curtin Avenue home; Mr Foley's initiative in arranging the meeting on 23 February 2005; his acknowledgement at that meeting that he knew the difference between what was being offered to him, an option, and a contract of sale; and his acceptance of the letter (exhibit 2) when he was told the MOU was 'enforceable'.

291 However, I have previously noted difficulties with the evidence of the plaintiff and Mr Kikiros with respect to the meeting of 24 February 2005. Those difficulties in my view cast considerable doubt as to the reliability of that evidence.

292 There are further matters which, combined with those difficulties, cast considerable doubt on the plaintiff's other evidence and that of Mr Kikiros relevant to the capacity of Mr Foley.

293 These further matters include the contrary evidence as to the state of the interior of the Curtin Avenue home in 2005 in the evidence of Mr West, Mr Higgins and of Mrs Jordan, to which I have previously referred.

294 There was the further matter of the inconsistency between the plaintiff's testimony that Mr Foley had, in the 22 February 2005 telephone call, asked her to meet him the following day, and other evidence that she was the one who had asked for the meeting, which appears in her statements in her affidavit in support of the caveat on the Property (exhibit 25 [23]) and the form of her statement of evidence before the amendment that was embodied in exhibit 30. She at first denied, then acknowledged, that was what the statement of evidence had said (ts 252), while acknowledging that was what the affidavit had said (ts 253).

295 There were also matters to do with the plaintiff's and Mr Kikiros' evidence as to them viewing Mr Foley at his crosswalk. The plaintiff testified to going to the crosswalk about a dozen times between May and June 2005, with Mr Kikiros and sometimes with her mother, observing on each occasion that Mr Foley seemed 'alert and confident', carrying out 'his tasks with efficiency and engaged in conversation with the school children and the pedestrians who were crossing' (ts 142, reading from her statement of evidence exhibit 30).

296 However, on my viewing of the DVD of 2 June 2005 (exhibits 6) these are not characterisations I would make of Mr Foley's conduct, although I note the edited character of the DVD. His conduct appeared to me to be slow and somewhat hesitant. There were characterisations of his conduct in the DVD that the plaintiff rejected in her testimony (ts 194 - 196).

297 Further, there was evidence the plaintiff gave when she was cross-examined about the gaps in the DVD. She initially testified she and Mr Kikiros were at the crosswalk to make sure the private investigator she retained to make the DVD came, and when he did they left. However, after being shown diary notes Mr Kikiros had compiled which included notes relating to that visit to the crosswalk (exhibit 110) showing their arrival at 2.40 pm and their departure at 3.08 pm, an overlapping with the timing on the DVD of about 12 minutes, she acknowledged her recollection must have been wrong. Mr Kikiros' evidence was that he and the plaintiff drove to the crossing to make sure the private investigator was there, saw him there and left without stopping. When he was shown the diary notes, Mr Kikiros testified he did not recall what they showed.

298 There was evidence from Mr Kikiros that he saw Mr Foley arrive at his crosswalk in the morning at the 'same time' every day 'within a few minutes' (ts 1404); however, he later conceded that he saw Mr Foley arrive in the morning only once (ts 1424).

299 There was evidence from the plaintiff that on her way by car with Mr Kikiros to the Curtin Avenue home for the 23 February 2005 meeting she stopped at her home to pick up 'the file' (ts 191). In her car, just before driving off, she rang Mr Foley using the cordless phone from the house as her mobile phone did not have much charge or was faulty (ts 257). She had in her examination-in-chief testified that '[o]n the way I telephoned Mr Foley to tell him that I was running a bit late and that I was bringing my father' (ts 134, reading from exhibit 30) which she acknowledged in cross-examination was that call (ts 191). She also acknowledged that she had not previously referred to the use of a cordless home telephone to make the call from her car in any previous document or statement of evidence (ts 255). Those matters are not easily reconciled with her use of the cordless telephone as she testified, nor with [8] in the statement of evidence of Mr Kikiros dated 16 June 2005 signed by him (exhibit 111), put to her, which referred to the call in the car, which he heard on the speaker, made on her 'mobile phone'. The plaintiff explained the latter usage by saying her father used 'mobile phone' to include a cordless phone (ts 192). However, that evidence sits only with difficulty with the evidence of Mr Kikiros that he knew the difference between a cordless and a mobile phone (ts 1409), acknowledging he had used 'mobile phone' in his earlier statement of evidence (exhibit 111), which he explained as 'something she was carrying in her hand' (ts 1432).

300 There is also evidence from the plaintiff as to why she considered the MOU (exhibit 1) sufficient without the further document it provided for. Her evidence was rather difficult to follow. That evidence was as follows (ts 266):

So one of the people you give documents to who is behind a little counter?---Correct.

They told you that the document appeared to be an enforceable agreement, you say?---Yes.

So for that reason you thought that was all you required. Is that right?---Yes.

You took legal advice from a clerk?---No. Because he said he could stamp it I had it stamped.

301 There is evidence from the plaintiff as to why she exercised the option in the MOU which is also not easy to understand. Her evidence was that she had a conversation with Mr West who told her he had a 'written valuation and from that information - I trusted it was correct - I thought that it was a reasonable price', having taken 'an option because at the time I didn't know if it was a reasonable price' (ts 244). It will be recalled Mr West obtained a written appraisal dated 1 March 2005 (part of exhibit 105). However, the only telephone conversation between Mr West and the plaintiff to which her evidence refers, and in which she testifies he referred to having a 'valuation from November 2004 for $430,000', was on or about 25 February 2005 (ts 139, reading from exhibit 30), although it could have occurred on 24 February 2005 before she had the MOU stamped (ts 296), in both cases some time before she exercised the option, in April. She further testified she did no further research before exercising the option (ts 189). This reliance on Mr West without further research is difficult to understand given the plaintiff's registration as a real estate agent for many years and, notwithstanding her testimony she did not have 'a lot of experience in real estate', her ownership of several properties (ts 189), as well as evidence which I reach below as to her having taken an interest over some years in acquiring real estate in Mandurah.

302 There is also evidence from the plaintiff, which is difficult to follow, as to whether or not she discussed her evidence with Mr Kikiros. Her evidence initially was as follows (ts 182):

You say that everything in those statements, now that you have corrected them, is true and accurate?---Yes.

Have you seen your father's statements?---The supplementary one or the main one?

Either of them?---No.

Neither of them?---No.

Why did you ask me which I was talking about?---Well, I didn't know which one.

The answer to the question - 'Have you seen your father's statements?' - is no. Is that what you are saying?---No.

Have you discussed your evidence with him?---Not at all.

Do you know if he has seen your statements?---I know he hasn't.

You know he hasn't?---No.

303 Following the interposition of another witness, there was a further exchange on the matter (ts 420 - 421):

You say you've never discussed your evidence with your father?---No, I said I hadn't discussed the statements. You asked me, I think, 'Have you discussed your statements with your father?' I think that's what you said. From memory, that's what you said, Ms Archer.

Why did you make that clarification, Ms Lampropoulos?

---Because evidence and statements - we had general discussions about what happened that day, and if that goes to his evidence then that happened, but the evidence that he provided in the statement I did not discuss with him.

Have you spoken to anyone since yesterday; yesterday or today, about what happened in court yesterday?---I have discussed it with nobody, and I swear that on oath.

Right?---I have discussed with nobody.

So you say that the answer to the question, 'Have you ever discussed your evidence with your father?' is yes?---I thought about the question that you asked me the other day and you said statement, but we had mulled over what had happened. When Mr McCusker - - -

So let me ask you that question again then. Have you ever discussed your evidence with your father?---Not my evidence, no, in the statement, because I'm just wanting to clarify historically what happened and the evidence that I put in are completely different.

Are you saying that when you're asked a question, 'Have you ever discussed your evidence with your father?' you understood that to mean, 'Have you ever discussed the documents that you've signed'?---Exactly, yes.

You didn't understand it to mean, 'Have you ever discussed what happened with your father'?---No, no, because - - -

Right. So you have discussed that?---I've discussed absolutely what happened on the day, yes.

304 However, I note that the plaintiff testified that what was exchanged between them, which included Mr Kikiros saying to her that the Curtin Avenue home was 'fine', was limited in character (ts 421 - 422; 445 - 449).

305 I further note the evidence of Mr Kikiros, denying that he had ever discussed with the plaintiff what happened on 23 February 2005 including anything he had noticed about the Curtin Avenue home; that he had ever gone with the plaintiff to see Dr Foster; and that he had ever met with Dr Foster. The first is inconsistent with the evidence of the plaintiff just described, while the second and third are inconsistent with that evidence, as well as the evidence of Dr Foster (ts 378).

306 Senior counsel for the first defendant also drew my attention to evidence from the plaintiff that she lodged a caveat over the Property because she was 'suspicious' of the first defendant, as a person who was a 'boarder' to whom Mr Foley had indicated he had been 'thinking' of giving or 'promised' to give both the Property and the Curtin Avenue home (ts 265; see also ts 484). Senior counsel for the first defendant also drew my attention to steps the plaintiff had taken to record that Mr Foley did not lack capacity, in hiring a private investigator who made the DVD of 2 June 2005. The plaintiff testified she had taken those steps because she had learnt from Mrs Jordan's report that the first defendant had reported to a doctor, who had examined Mr Foley, concerns about his driving (ts 304). However, as the plaintiff acknowledged, she did not have access to Mrs Jordan's report at that time (ts 460).

307 Senior counsel for the first defendant contended that the evidence I have just described, as well as certain other evidence of the plaintiff, strongly suggested that the plaintiff knew Mr Foley was impaired or disadvantaged. That other evidence included evidence I have previously considered, being that as to who, as between the plaintiff and Mr Foley, suggested the meeting of 23 February 2005; her evidence about the state of the Curtin Avenue home; the reason she gave for lodging the caveat; the evidence as to why she concluded the further document provided for in the MOU was not required; the evidence as to why she decided to exercise the option; and the evidence as to the information on the basis of which she decided to hire the private investigator.

308 Senior counsel for the first defendant also put to me, as supporting her contention, the answers to questions the plaintiff was asked in cross-examination about her responses to the investigation by REBA of her conduct in relation to transactions with Mr Foley, which it was said showed she had not co-operated with that investigation (ts 232 - 234). However, I consider the plaintiff's answers to those questions did not in fact show a complete failure of co-operation.

309 I am not convinced on my assessment of the plaintiff's evidence as a whole that I should accept senior counsel's contention. On that assessment I do not consider that the inference as to the plaintiff's knowledge that senior counsel contends I should draw is, on the evidence she relies upon, one I should draw. Rather the inference I would draw from all of the plaintiff's evidence I have reviewed at some length is that her concern was to ensure that the option with Mr Foley could be secured at the earliest opportunity and that she was in a position to address any concerns as to Mr Foley's capacity that might arise. That led her to take no special note of any signs as to his lack of capacity, and to exaggerate signs of capacity she believed she saw.

310 I further consider on Mr Kikiros' evidence, assessing it as a whole, that he had approached matters relating to Mr Foley's capacity in the same way.

311 I should add that I have arrived at these conclusions without, as senior counsel for the plaintiff put to me I should, approaching my determination on the basis that the contention I have not accepted, viewed as to guilty knowledge, is one that requires more than 'inexact proofs, indefinite testimony or indirect inferences', in accordance with Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 361 - 362 (Dixon J). In my view, it is not clear that a determination as to credibility, requiring for an adverse determination a conclusion that deliberately false evidence has been given to the court, falls within the approach described in that case. No authority on the matter was cited to me. It seems to me that, given the intermediate character of the determination in question, there is much to be said for the proposition that such a determination does not fall within that approach. However, in view of my conclusion arrived at without the use of any such approach I consider I do not need to consider the matter further.

312 Therefore I have concluded that I should not accept the evidence of the plaintiff or Mr Kikiros as to the capacity of Mr Foley as reliable without support for that evidence from other evidence.

313 I turn now to the evidence of the first defendant as Mr Foley's capacity.

The first defendant's evidence as to Mr Foley's capacity

314 The first defendant testified that during late 2001 through to June 2002 Mr Foley began to show 'uncustomary forgetfulness' (ts 736, reading from exhibit 56). He told her of going to his doctor about memory problems, and of being referred to a memory clinic. He had gone to such a clinic in February 2002. She testified that following his hospitalisation for an operation for an aortic aneurism, his ability to get about on his own and care for himself showed impairment, but over 'the next few weeks' he regained those abilities (ts 741). She testified also as to the letter to his sister Marie (exhibit 38) and the will dated 19 July 2002 (exhibit 50), as well as his execution of the enduring power of attorney dated 28 June 2002 in favour of the first defendant and his sister Marie (exhibit 39). She acknowledged that 'it seemed clear' he understood 'what he was doing' when he executed the enduring power of attorney and the will (ts 806).

315 The first defendant further testified that although by July 2002 Mr Foley had resumed 'independence with personal care' he 'struggled in other areas', particularly in his driving, which was erratic and dangerous (ts 746, reading from exhibit 56). She also testified that in August 2002 she contacted his general practitioner, Dr Ryan, about Mr Foley's 'memory and cognitive difficulties' (ts 747).

316 The first defendant further testified that over the next 12 months, notwithstanding that she had moved out of the Curtin Avenue home, she spent much time with Mr Foley to assist him. Before she left for overseas in November 2003, she arranged Meals on Wheels for him. She testified that because of difficulties Mr Foley was experiencing with 'handling and accessing money and in dealing with financial matters', in early 2003 she assumed full responsibility for his finances (ts 750, reading from exhibit 56).

317 The first defendant also testified that, in mid-2003, when Mr Foley's 'available cash was low', and he became anxious he would run out of money, he asked her if he should sell some of his land, and she replied that was a good idea (ts 753, reading from exhibit 56). There was a discussion between them as a result of which he decided to sell the Morley blocks and she made the arrangements for the sale with Mr Rossen, with some involvement from Mr Foley. She testified that he 'knew what he was doing where he signed the contracts of sale' in terms that 'he was signing and that would mean the property had been sold' (ts 824), although 'he wasn't able to participate in that process in any significant way' (ts 855).

318 She testified that late in 2003 his interest in AFL football, about which he had been passionate, waned and he began to experience periods of 'losing track of what day it was' (ts 749, reading from exhibit 56). On a visit she made to Mr Foley in February 2004, he told her he was no longer 'up to' corresponding with friends in the United Kingdom and had not responded to Christmas cards he had received (ts 756 - 757). He showed signs of having become more withdrawn. In June 2004 on a further visit she made to him, he appeared 'vague and forgetful' (ts 757). There was a pile of refrigerated food from Meals on Wheels and Mr Foley could no longer follow the instructions the first defendant had prepared for him for heating this food.

319 The first defendant testified that following her departure after this visit in June 2004, her conversations with him showed he had trouble 'finding words and concepts' (ts 762, reading from exhibit 56). She testified that in late 2004 he told her his credit union would not give him money and showed signs of 'distress' that he had no or very little money (ts 764). He told her he had difficulty getting money from his credit union account using the ATM card the first defendant had in late 2003 tried to teach him to use. His money anxieties continued 'up to 23 February 2005' (ts 765, reading from exhibit 56). There is support for this evidence as to Mr Foley's money concerns and his difficulty with using an ATM card in the evidence of Mr West to which I have referred.

320 The first defendant testified that she telephoned Mr Foley on 23 February 2005 in the late afternoon (ts 765 - 767, reading from exhibit 56):

About 15 to 20 minutes into the conversation Gerry said that something had happened which he was meaning to tell me. He couldn't recall at first and spoke out loud, 'What was it?' as he tried to remember. He then remembered and announced that he had sold his block of land in Mandurah. I was sure that Gerry could not have managed to do that alone and I asked him how he had done it. He told me that a land agent had been at his house. I asked him when that was and he answered, 'Today.'

I asked Gerry who the land agent was and he told me she had left her business card which he had. I questioned him about the details on the card and he told me that the agent was Realty Executives. He said the lady was Pamela and she had one of those funny foreign names he couldn't pronounce. I asked him to spell the name to me. I wrote the letters down as he spelt them out. When he had finished I said the name out loud, Pamela Lampropoulos. Gerry said, 'That's her. Do you know her?' I said I didn't know her.

I asked him if he knew how much he had sold it for. Gerry said he wasn't sure but he thought maybe $330. I clarified whether he meant $330,000 and he said he thought he did mean that. I asked Gerry if he knew who had bought the land and he answered, 'The lady with the sick father.' When I tried to establish her identity, Gerry said he didn't know. He added that he thought her father being sick was very sad. I questioned Gerry whether the lady with the sick father was Lampropoulos herself or a third party involved but he could not remember.

I suggested to Gerry that it might be an idea if I spoke with the land agent to find out what was going on. I asked if he could read me the phone number from the card. Gerry became agitated and asserted curtly that it didn't matter, that he had signed a paper and that was all. I asked him if he had the paper he signed or a copy of it there with him but he said he didn't. I tried to reassure him that it would be okay, that I could ring the agent and work things out.

I asked him again for the phone number from the card. He said that he couldn't see the numbers. Then he said that there was one written on the back of the card which he thought was her home number. I said I could try her there and I asked him to read that number to me which he did.

I tried again to clarify the price as 330,000 but Gerry wavered. He said it might have been 300,000. Eventually he admitted that he didn't know. He said he knew he should know and that he felt very confused and couldn't think. I commented that I thought $330,000 sounded a bit low. Gerry was surprised, saying that he had thought it was okay and he needed the money.

I did not then know the value of the property but I thought the amount was low because I recalled Gerry telling me in 2002 that it was worth a figure in the four hundred thousands. Also, I was aware of media reports at the time about the growth in property prices in Perth and in particular in the Mandurah area.

I asked him how he would get the money and he told me that the lady was bringing it to him tomorrow. I asked would it be cash or a cheque. Gerry first said cash, then corrected himself and said cheque. I said I didn't think it was going to be that simple and I asked him who was handling settlement. He asked me what that was. I said it was a legal process, that usually there would be legal things involved when selling land. Gerry sounded disappointed and embarrassed when he said, 'Oh, is there' and he said he didn't know about that.

321 The first defendant also testified that she returned to Perth on 8 March 2005 and found the house and yard of the Curtin Avenue home 'in much the same state as they had been on my last visit in June 2004 and, in fact, much as they had been for some years' (ts 770, reading from exhibit 56). The first defendant testified that she 'did not do any major cleaning' but she did do some tidying up and cleaning (ts 773, reading from exhibit 56). She also found on the kitchen table the letter dated 24 February 2005 with the bottom torn off (exhibit 16). Mr Foley was unable to say when he had received it or what it was. He continued to express 'worries about being broke' during her stay (ts 780, reading from exhibit 56).

322 Senior counsel for the plaintiff put to me that I should not accept the first defendant's evidence and drew to my attention to the following matters: that despite concerns as to Mr Foley's capacity in 2003 and 2004, to which the first defendant testified she did not seek to prevent him from continuing to drive or working as a traffic warden at his crosswalk. Also, she facilitated and encouraged the sale of the Morley blocks, leaving her interest Mr Foley's will dated 19 July 2002 unaffected. This was to the detriment of family members to whom the Morley blocks had been left, when Mr Foley had a significant share portfolio from which funds could have been realised to meet any needs, that share portfolio being among the property left to the first defendant. Further, after the execution of the MOU in February 2005 her efforts had been focussed not on care for him, but the setting aside of the transaction which of course related to property left to her by the will. Finally, there was the first defendant's evidence as to the information which Mrs Jordan testified the first defendant had given to her in March 2005, that Mr Foley had been diagnosed with 'severe dementia' (ts 1192, reading from exhibit 77; ts 1203) when the evidence of Dr Black was that he had not so advised her (ts 1304).

323 I put aside the first and last matters. Neither was put to the first defendant for her response, although in cross-examination she acknowledged that in November 2003 she left written instructions that Mr Foley's driver's licence would need to be renewed in November 2004 (ts 876). However, she added she expected he would be assessed for the purpose of a renewal, and admitted he had been assessed and got his licence (ts 876).

324 As to the second matter, the first defendant acknowledged she was aware when she and Mr Foley discussed the sale of the Morley blocks that if they were sold and the proceeds placed in a bank account, on the death of Mr Foley, by the terms of the will of 19 July 2002, the proceeds would be divided between the first defendant and Mr Foley's sister Marie (ts 819). However, she maintained in cross-examination that Mr Foley had a need for income. Her evidence as to why she decided to sell the Morley blocks was as follows (ts 948 - 949):

Now, dealing with the Ivanhoe Street properties, why did you decide to sell the Ivanhoe Street properties rather than other land that Mr Foley held?---I guess there was a combination of reasons. I saw my role at the time as his attorney was to act in his best interest, and he at the time was - there was no reason to think that he was going to do - but live for a long time. He had - his family history was - many of his parents' generation had dementing illnesses and lived well into their 90s, and his own mother had lived till 91 so - the idea was, behind the sale of those - of - behind making the decision was to get a block of money to keep it in a liquid form and to give him an interest income, and the blocks at Morley I decided upon because when I looked at - the two options were either to sell those or the Ormsby Terrace block. The blocks at Morley were obviously not going to increase in value at anything like the rate that the Mandurah property would. They were suburban blocks backing on to Tonkin Highway whereas the Ormsby Terrace block was an ocean front block and I could see that that would very likely go up in value - was a better prospect. The other option would have been to sell some shares, and Gerry was just very attached to his share portfolio. I think he'd initially started it because his mother had suggested it to him, and he'd been very fond of her and thought her as an astute person so that was why he'd initially started doing that, and I think it was an emotional attachment for him to that. And I think also he was very emotionally attached to the Mandurah block as well, so, yeah.

325 As to the third matter, her efforts after the execution of the MOU the first defendant acknowledged in cross-examination that if the sale of the Property were to be upheld, she would receive only one-half of the proceeds of sale (ts 831); and that up to the date of Mr Foley's death she had expended approximately $200,000 of his funds on the present litigation, representing assets that, if not expended, would have been divided equally between herself and Mr Foley's sister Marie (ts 843). Since Mr Foley's death, all but about $20,000 - $30,000 of the $400,000 spent on the litigation had come from the proceeds of sale of the Curtin Avenue home (ts 845), which of course was an asset left to the first defendant by the will of 19 July 2002. At the same time she acknowledged the exposure of 'effectively' herself and Marie (I took this exposure to be through the diminution of the value of Mr Foley's estate) to the risk of the costs of the litigation (ts 844). However, I also note the evidence the first defendant gave of her actions in March 2005 in doing some tidying up and cleaning of the Curtin Avenue home as well as in arranging to leave money for him there. She also testified as to moving back to Perth in July 2005 and caring for Mr Foley at the Curtin Avenue home until 'May 2006' when he underwent surgery for a hernia and was then placed in 'secure dementia care' (ts 784, reading from exhibit 56).

326 I further note that in my view no significant part of the first defendant's testimony was disturbed in her cross-examination, and much of it was corroborated by other evidence I have referred to.

327 On my assessment of her evidence as a whole, I do not consider I have sufficient reason to doubt the credibility of that evidence.

328 I turn now to certain specific matters from the expert witnesses' testimony, which senior counsel for the plaintiff put to me as showing that Mr Foley had capacity in the relevant sense.

What Mr Foley understood of the transactions with the plaintiff

329 I here consider the testimony of Dr Black, Dr Proud and Dr Hayward on certain propositions put to them as to Mr Foley's knowledge of the transaction on 23 February 2005, and as to his motivation for entering into it. I also consider the evidence of Dr Foster on certain propositions put to him as to Mr Foley's knowledge of the transaction on 23 February 2005, although not as to his motivation for entering into it.

330 Dr Black, Dr Proud and Dr Hayward all had put to them in cross-examination that Mr Foley knew he had sold the Property; he knew the price; he knew he had sold it at an undervalue; and he had done it because the lady had a sick father: see (ts 1033: Dr Black); (ts 1103 - 1104: Dr Proud); and (ts 1165: Dr Hayward).

331 Dr Proud and Dr Hayward testified that such knowledge would have shown an understanding at a 'basic level' (ts 1105: Dr Proud) or that he had 'agreed to sell the property and to pay [sic] a certain amount for it' (ts 1165: Dr Hayward). Dr Black testified 'he knew what he was doing at the time he did it' (ts 1038).

332 However, all three witnesses qualified their answers.

333 Dr Black distinguished a person being aware of what he had done, as in Mr Foley's case on the proposition put to Dr Black, and understanding what he had done, in terms of having weighed the advantages and disadvantages and maintained a consistent line of thought, which Dr Black considered Mr Foley had lacked the capacity to do (ts 1033).

334 Dr Proud distinguished in a similar way, but did not express an opinion as to Mr Foley's capacity as Dr Black had (ts 1104 - 1107).

If we assume that all that information is accurate, both Mrs Lampropoulos's and Ms Kolnik's, what we have in one instance is information about one instance of life, that he understood that he had a block of land and then he sold it, it's not at all clear to me that he understood the ramifications of that or even the document. He just said he did. On the other hand, what we have is information about a whole lot of aspects of his life, his ability to use an ATM, his difficulty getting his head around finances sometimes, the problems with his house, the problems he was starting to have as the road crossing man, so what you have got is a kind of a broader picture - it's not just one thing - so all of those things matter but there's lots of things, if that makes any sense.

336 Senior counsel for the plaintiff submitted that these answers, as so qualified, were cogent evidence that prevented any finding being made that Mr Foley lacked 'such soundness of mind as to be capable of understanding the general nature of what he was doing by his participation' (Gibbons (437)) in the transaction represented by the MOU and, as I took the submission, its variation. In this regard, there was a difference, he submitted, between the capacity to understand the general nature of a transaction and the capacity to understand the ramifications of a transaction. The former was the test for contractual capacity, the latter was not required.

337 It is not clear to me on the authorities that in some cases at least a capacity of the former kind does not require a capacity of the latter kind. Thus, the 'nature of the transaction' may include its ramifications or at least some of them: see Gibbons (437) (the understanding called for is 'relative to the particular transaction which is being effected by means of the instrument') and (438) ('in some cases ... the effect of a wider transaction which the instrument is a means of carrying out').

338 However that may be, I consider the answers of Drs Proud, Black and Hayward, qualified as I have indicated, of little assistance to me. This is because of the difficulties with the propositions put to them. Those difficulties are with the correctness of what Mr Foley knew. Further, those difficulties in my view go to show Mr Foley lacked the capacity referred to in Gibbons 437. My reasons follow.

339 On the evidence of the first defendant as to what Mr Foley told her on 23 February 2005, of Mr West as to what Mr Foley told him on 24 February 2005 and of Dr Black as to what Mr Foley told him at one of the meetings of the two in April 2005, I find that Mr Foley understood the MOU as a sale of the Property, not an option arrangement. It was put to me that the evidence in fact did not establish such a misunderstanding, as the evidence might be taken to show he understood the likely effect of the grant of an option exercisable at a price advantageous to the optionee. However, I do not take the evidence that way. Such an understanding of that evidence is not easily squared not only with the unchallenged terms of the evidence referred to, but also the evidence of the first defendant as to Mr Foley telling her in his conversation with her on 23 February 2005 that the plaintiff would be bringing him 'the money' for the Property the following day. There was no evidence that there had been any question of the option in the MOU being so exercised. Whether or not, as Mr Kikiros testified, Mr Foley was specifically reminded when he signed the MOU that it was an option agreement, not an agreement by way of offer and acceptance, and he had replied that he knew the difference, I consider the evidence I have just referred to establishes Mr Foley did not in fact understand the MOU as an option agreement, but rather as a sales agreement.

340 As to the price, it was common ground this was the option exercise price, not the price for the option. On the evidence of the first defendant as to what Mr Foley told her on 23 February 2005, of Mr West as to what Mr Foley told him on 24 February 2005 and of Dr Black as to what Mr Foley told him at one of the meetings of the two in April 2005, I find Mr Foley showed initial uncertainty as to the price, and then an error (by $30,000), before telling Dr Black the correct figure. This body of evidence indicates at best a weak understanding of the exercise price.

341 As to what Mr Foley knew of the price as an undervalue, I note the evidence of the first defendant on what Mr Foley said to her in the conversation of 23 February 2005 about the price relative to the Property's value ('he had thought it was okay': ts 767); of Mr West as to what Mr Foley said in their conversation of 24 February 2005 when Mr West referred to the 'valuation' of $430,000 Mr West had obtained a 'few months' earlier (ts 1340); and of Mr West's having then said to Mr Foley that he thought that valuation was 'very low', referring to the Property being 'worth $500,000 to $600,000', to which Mr Foley replied, 'Now you tell me' in a 'tone of surprise' (ts 1340). I also note Dr Black's evidence of what Mr Foley told him at one of their meetings in April 2005 that 'he indicated that other people had told him that the Property was probably worth about $500', which I understood to be $500,000 (exhibit 62). I further note the evidence of the plaintiff that at the time of their telephone conversation of 22 February 2005 he had said to her 'he thought he could probably get about $400,000 if he offered it for sale publicly' (ts 134).

342 Senior counsel for the plaintiff submitted that the last figure should be understood as Mr Foley's recollection of the amount he had referred to in the letter to his sister Marie in 2002 (exhibit 38), that is $400,000, as what the first defendant 'should get at least' for the Property, and of the 'valuation' referred to, indicating that, on what he might be taken to know he had correctly understood, he was offering to sell at an undervalue.

343 In my view, however, any such understanding of that body of evidence would at least indicate Mr Foley had failed to take account of the time (2002) at which the letter to his sister (exhibit 38) had been written and the terms of the later (2004) conversation with Mr West, in which Mr West described the 'valuation' as one for $430,000, but added his own view that the Property was worth considerably more. I find that Mr Foley had been given reason to believe the Property was, by the time of the conversation with Mr West, worth considerably more than the figure which, on the plaintiff's evidence, he referred to in his conversation with her; a differential with which he did not disagree when he was reminded of it by Mr West, whose evidence I accept.

344 There is valuation evidence from Mr Webb that the Property had a 'market value' of $600,000 as at 23 February 2005. There was also evidence in the form of a report, dated 30 March 2005, from a Mr David Dumas, a certified practising valuer from the Valuer General's Office, admitted by consent (exhibit 112), also showing a 'fair market value' for the Property as at 23 February 2005 of $600,000. I consider this body of evidence establishes that the fair market value of the Property as at that date was closer to $600,000 than to $400,000 - $430,000, the range in the appraisal of Mr Ehlers (part of exhibit 105). That fair market value tends to support the correctness of what Mr West told Mr Foley in October 2004, as to his view of the Property's worth, although allowance needs also to be made for the rising market for land in the area in February 2005, of which I have evidence as I indicate below. In any event, while Mr Foley may have understood he was selling at an undervalue, on what he may be taken then to have known, he had misunderstood the extent of the undervaluation.

345 Finally, with respect to Mr Foley's motivation to sell, in terms that Mr Kikiros was 'sick', I note the evidence of Mr Higgins as to his conversation with Mr Foley on 4 March 2005 and of Dr Black as to what Mr Foley had told him at one of their meetings of April 2005, that 'it might be good for 'the lady's' father to have his final memories near the beach' (exhibit 62). I also note the evidence of the first defendant that in her conversation with Mr Foley of 23 February 2005 he identified the person who had 'bought the land' as '[t]he lady with the sick father' (ts 765).

346 I have previously referred to the plaintiff's evidence as to her father's condition in February 2005, and Dr Hayward's evidence as to the significance of Mr Foley's account of a sick father on that evidence of the plaintiff.

347 In sum there are significant difficulties with the correctness of what on the evidence Mr Foley believed he knew of the transaction represented by the MOU. Those difficulties in my view go to indicate he did not understand 'the general nature of what he was doing by his participation' in it Gibbons (437).

348 I consider that lack of understanding, in combination with the medical evidence and the non-medical evidence I have reviewed in the previous sections of these reasons, establishes that Mr Foley lacked 'such soundness of mind as to be capable of understanding the general nature of what he was doing by his participation' (Gibbons (437)) in the transaction represented by the MOU.

349 I turn now to whether or not the plaintiff knew or ought to have known of such incapacity.

Capacity: whether or not the plaintiff knew or ought to have known of any such lack of capacity

350 There appears to be some question as to whether or not it is necessary to show the other party was aware of the mental incapacity and not simply was in a position where that party ought to have been aware of it: see Giles v Rooney (1996) 23 MVR 510 (FC WASC), 513 (Malcolm CJ), 514 (Kennedy J), 514 (Rowland J). However, I consider I should take the law to be, as was common ground between the parties, that it is sufficient if the other party ought to have known of the mental incapacity: see Carter JW, Peden E and Tolhurst GJ, Carter on Contract (as at 14 June 2010) [16-380]; Collins [68].

351 I further note that on the pleadings there is reason to distinguish for this purpose between what the plaintiff knew or ought to have known on 23 February 2005, at the execution of the MOU, and what she knew or ought to have known on 24 February 2005, at or about the time of the alleged variation.

352 The first defendant pleads that as at 23 February 2005 the plaintiff knew or ought to have known that Mr Foley lacked the mental capacity to understand the nature and effect of the MOU because she knew the following:

(1) She knew Mr Foley was 78 years old and was obviously elderly. On the two days, 19 and 23 February 2005, when she went inside his home in Cottesloe, his home was untidy and disordered, which was obvious to the plaintiff.

(2) On 19 February 2005, Mr Foley let the plaintiff, a stranger to him, into his home and readily disclosed to her information regarding his personal interests, family matters, assets, testamentary intentions and financial information arrangements, and personal information concerning the first defendant, the disclosure of which would have put the plaintiff on notice that Mr Foley had diminished mental capacity.

(3) On 23 February 2005 Mr Foley without independent advice or assistance signed the MOU.

(4) The plaintiff, by reason of her experience as a real estate sales person, knew that the purported purchase price for the Property was significantly below the market value of the Property.

(5) The MOU purported to give the plaintiff a valuable benefit from the grant of the option, but the option fee was nominal, and not payable until the execution of a formal agreement.

353 The first defendant pleads that as at 24 February 2005 the plaintiff knew or ought to have known that the first defendant lacked the mental capacity to understand the nature and effect of the MOU because, in addition to all of the foregoing matters, she knew the following:

(6) The first defendant left a telephone message on the home telephone answering service of the plaintiff on the evenings of 23 and 24 February 2005, in which the first defendant stated she held an enduring power of attorney for Mr Foley and in which she asked the plaintiff to contact her urgently regarding the transaction the plaintiff was trying to conduct with respect to the Property, as well as on 24 February 2005 several telephone messages at the offices where the plaintiff worked asking the plaintiff to contact her urgently.

(7) Mr West had a telephone conversation with the plaintiff on 24 February 2005 in which he told her Mr Foley was an elderly man who was on his own.

354 The plaintiff's and Mr Kikiros' evidence was that neither saw any evidence that Mr Foley lacked capacity at any material time. I have already indicated my reasons for considering that if there were such signs they would not have taken account of them.

355 I turn then to the seven particulars and to certain other evidence as to whether there were such signs.

356 As to particular (1), the plaintiff's evidence is that she saw him to be aged about 70 (ts 264). It seems to me that it is how old he appeared to be that is material for present purposes. On the evidence, including the photographic evidence of Mr Foley at the meals in 2003 and 2005 attended by Mrs Cole and Mr Nichols, forming annexures to the witness statement of Mrs Coles (exhibit 79, 'APC2' and 'APC 3', respectively), I find that he would have presented as an elderly man, being one in his 70s.

357 This finding is on the evidence before me conveniently considered with the untidiness and disorder of the Curtin Avenue home, which I am satisfied it exhibited on the occasions of the plaintiff's visits there on 19 and 23 February 2005. The relevant evidence is that of Dr Singam (ts 204) and Mrs Jordan (ts 1196), previously quoted. Both of them gave evidence that, in my view, indicated the relevance of the person's age and the conditions under which they lived as to whether or not a person might present as some one with a condition affecting their mental capacity. I view the evidence in both cases as being that an elderly person, such as Mr Foley, living in untidy surroundings might not necessarily be seen to be suffering from such a condition. However, it seems to me that the two sets of circumstances, at least in combination with other relevant matters, might be such that a person in the plaintiff's position ought to have known the person concerned lacked the relevant capacity.

358 As to the topics Mr Foley discussed with the plaintiff and Mr Kikiros raised in particular (2), I am unable to draw from these what was contended for on behalf of the first defendant. The personal information of the kinds referred to in particular (2) appears in the evidence of the plaintiff as to her first meeting with Mr Foley, on 19 February 2005 (ts 133, reading from her statement of evidence, exhibit 30):

'I said to Mr Foley that I had seen that he was the owner of 152 Ormsby Terrace, and I was wondering if he would be prepared to sell the property to me. Mr Foley said to me that he didn't think he would be selling the block because he was thinking of leaving it and his Cottesloe house to a person named Lynne. Lynne had been a boarder at his house a few years before. There had been nothing romantic between him -'

Sorry, this is what he's saying - yes, said to me -

'There had been nothing romantic between him and Lynne. He had been a teacher and that he had never married. He had a sister who lived in Mount Lawley who said, he said, had also never married. Lynne did not work and that she had been student while she was a boarder at his home. Lynne was living in New South Wales, was 40-ish and that she had never married, and he hoped Lynne would marry one day but thought it was unlikely.

Mr Foley talked about his dog. He said that it had been Lynne's dog and that she had given it to him. Mr Foley talked about his properties. He said that he had owned some land which he had since sold, and that he had purchased the Ormsby Terrace property years ago when that area was opened up. The conversation drew to a close and as I was leaving I asked if I could leave my telephone number in case he decided to sell the land.

He said yes, so I wrote my home telephone number on the back of one of my real estate business cards and told him that was the number to use if he wanted to contact me. As I was walking out the door, Mr Foley's dog barked and raced around me. Mr Foley told me not to worry and said that the dog acted like a sheepdog. He told me that when I got into my car to just drive off and not worry if the dog ran around the car. Mr Foley walked me to my car and the dog continued to run around. My conversation with Mr Foley lasted about 20 minutes.'

359 It seems to me that personal information of those kinds, disclosed to a stranger, would not point towards incapacity in the relevant sense.

360 At the same time I consider that Mr Foley's ability to discuss these matters, and indeed the matters to do with education, which on the evidence of the plaintiff (ts 134 - 135) and Mr Kikiros (exhibit 108 [11] - [13]) he discussed with Mr Kikiros at the meeting on 23 February 2005, was not capable of being a strong indicator of capacity. In respect of the discussion of education, I note the evidence of Dr Proud as to conversations with the elderly that might involve 'a lot of platitudes' (ts 1115).

361 As to particular (3), on the evidence of the plaintiff and Mr Kikiros, they had no reason to believe Mr Foley had received independent advice before he signed the MOU. In my view, this simply indicates there was no reason to believe Mr Foley had the relevant capacity of the sort that resorting to such advice would have indicated.

362 In respect of particular (4), it is my finding that the plaintiff knew that the exercise price of the option under the MOU was significantly below the market value of the Property. This knowledge is significant, if not decisive, evidence for present purposes: see Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 405 (Fullagar J). The following are my reasons for the conclusion that she had such knowledge.

363 I have previously referred to the valuation evidence as to the Property, putting its fair market value as at 23 February 2005 at $600,000.

364 It was not in contest that the plaintiff was in February 2005 a licensed real estate agent, employed as such, and she had first been registered as a real estate agent in 1984. Her evidence was that she had not been registered for a few months in 1999 and 2000 because of an accident; she had not worked as a real estate agent all of the 25 years she had been registered; and in February 2005 she was working only part time, about one-half day a week. Overall, she testified, she did not have 'a lot of experience in real estate' (ts 189).

365 However, it was not in contest that as at the trial at least, she owned 'three or four properties', and 'owned or part owned' a total of 'four or five', including a family property in 'old Halls Head' (ts 189 - 190).

366 Further, on the following evidence, I consider that every year up until about 1997 she, her former husband and her two daughters had driven 'around' Mandurah, and in particular around Ormsby Terrace, when they went down to Mandurah each year. She testified as to this in response to questions in cross-examination on an affidavit of hers sworn 24 May 2005 in support of her application to restrain the removal of a caveat on the Property (exhibit 25) (ts 187 - 188, 227):

'In early 2005 I started looking for a suitable property in Mandurah.' Do you remember writing that in your statement?---Yes.

You'd in fact been following very closely - well, you'd been following closely for many years properties in that area, hadn't you?---Not for many years. Can I explain?

Isn't it true that for many years you were closely following property in Mandurah, in particular around Ormsby Terrace?---That was the wording that 'closely' would not be a correct word to use. My ex-husband and I, every year up till about 97, would go down to Mandurah, and we had our two girls in the back, and what I was meaning was we would drive around. That was what I meant by - - -

When you say, 'What I was meaning,' you've picked up, have you, that I'm referring to paragraph 12 of your affidavit?---Yes.

Where you say, 'For many years I have followed closely property in Mandurah, especially around Ormsby Terrace as my then husband and children particularly liked the area'?---Yes.

That was your sworn evidence on affidavit in relation to these proceedings?---Well, it was many years until about 97, 98 because then we no longer went for holidays together.

...

What do you mean by, 'For many years I followed closely properties in the Mandurah area, particularly Ormsby Terrace'?---From about 1990 to 1995 we would spend, of the 10 days we went down there, perhaps half an hour driving around. The wording was probably confusing.

The wording was confusing?---To you maybe.

When you say it's confusing what you mean is what you put on your affidavit is not accurate?---What I meant and what you're interpreting are different. That's what I'm saying.

367 Further, there was also evidence from the plaintiff that she had been in Mandurah on 17 February 2005, after having on the previous day searched a database available to real estate agents (offering access to 'RP data': ts 186) and located three vacant blocks on Ormsby Terrace, having in early 2005 started looking for a 'suitable property in Mandurah' and making searches of about 20 properties in Ormsby Terrace, including developed as well as vacant blocks (ts 132).

368 I have noted the plaintiff's evidence that her sister and brother-in-law had told her of their intention to go to an auction of a property on Ormsby Terrace that resulted in their entering into a contract to purchase the property, for $830,000, in April 2005. However, I do not draw much of significance from that evidence, as on that evidence, which was unchallenged and was not explored, they had that conversation with her after learning she had entered into the transaction represented by the MOU.

369 Finally, there was evidence from Ms Sharp that there were entries on the Landgate database accessible as at February 2005 of sales of both developed and vacant blocks in the area of the Property, including two properties on Ormsby Terrace on much smaller blocks that sold for $422,500 and $497,500, in January and July 2004, respectively. Both were developed, having buildings on them about 20 or 25 years old. Objection was taken to the reception of this evidence on relevance grounds, because the blocks were not vacant land. However, I would not exclude this evidence, on two bases. There was the evidence of the plaintiff herself that she had in early February 2005 identified both developed and vacant blocks, although she also testified she had only been looking for 'recent' sales of vacant blocks on Ormsby Terrace (ts 230). There is also the use of sales evidence of developed sites in the valuation report of Mr Webb (exhibit 106).

370 There was also evidence from Mr Webb (ts 1363) of a rising market for land in the area as at February 2005. Further, there was the evidence of two transactions in the appraisal by Mr Ehlers dated 1 March 2005 (part of exhibit 105), one a sale on 15 October 2004 on Ormsby Terrace for $410,000 and the other a sale on Beam Road on 6 December 2004 for $390,000; and in the valuation report of Mr Webb of a sale on 20 March 2004 of a vacant property on Tallas Road, an 'inferior' property, for $380,000 (exhibit 106).

371 The plaintiff denied being aware at the time, and indeed at the time of giving evidence, that the market had been rising. However, I have difficulty believing such evidence, in view of her interest in sales transactions relevant to Ormsby Terrace, her identification of 20 properties in that regard and the sales evidence which I consider was accessible to her through Landgate and as the appraisal of Mr Ehlers indicated was accessible to him.

372 The plaintiff denied having seen any sales evidence, which she at first referred to as evidence from sales of vacant properties sold in the past year or six months from early 2005 shown on the database she consulted, and then referred to as such sales three months before then. There was no evidence on the sources of the purchase prices shown on that database. However, I consider there was sales evidence accessible as I have indicated, including of the sort upon which a real estate agent might rely in preparing an appraisal. The plaintiff testified she had over the course of her career done about two appraisals and seen others, while in response to a question about whether she knew there was a difference between an appraisal and a valuation she testified, somewhat confusingly (ts 229):

---Ms Archer, I work in real estate. I know the difference.

Is that why you know the difference, because you work in real estate?---Look, I can't answer that. I don't know when I would have known the difference.

373 Further, I refer to my earlier consideration of the plaintiff's evidence as to her reliance, in exercising the option, on Mr West's statement on or about 25 February 2005 of the 'valuation' of the Property he had received.

374 Finally, I note the plaintiff's evidence that in her entry into the MOU she relied on Mr Foley's statement as to the worth of the Property as $400,000, which she assumed he was exaggerating by about $50,000.

375 I consider it impossible to believe the plaintiff's evidence that she did not in February know the value of the Property was significantly in excess of the $350,000 figure to which she testified she had discounted Mr Foley's statement of value. In any event, I note that she testified she could not explain why Mr Foley would sell her the property at a price discounted by $42,000 to the amount she had concluded he thought it was worth, after allowing for a saving of agent's commission.

376 As to particular (5) regarding the option fee, I leave this matter aside. I simply have no evidence as to the fair market value of an option of the kind Mr Foley granted to the plaintiff by the MOU.

377 I further note, in relation to what I should infer about the way in which Mr Foley would have presented to the plaintiff on the two occasions they met, other evidence I have previously reviewed. That is, the evidence of Mrs Pickering of how he presented 'in about 2003, maybe late 2002' (ts 969); of Mr Rossen as to how he presented in June 2003; of Mrs Coles and Mr Nichols about how he presented in December 2003; of Mr Fryer of a conversation with him in October 2004; of Mr Cleary of how he presented at various times in 2004, of Mr Higgins of how Mr Foley presented at the meeting with him in March 2005 and of Mr and Mrs Coles and Mr Nichols of how he presented in April 2005. I lay particular emphasis on the evidence of Mr Cleary and Mr Higgins, both of whom observed Mr Foley in the environment of the Curtin Avenue home.

378 In my view of the entirety of this body of evidence, particularly that as to what the plaintiff knew of the market value of the Property on 23 February 2005, I consider that Mr Foley presented to the plaintiff on 23 February 2005 in ways such that she ought to have known he lacked the capacity referred to in Gibbons.

379 I have arrived at this conclusion after considering the evidence of Dr Foster in his re-examination as to how in his opinion Mr Foley would have presented to a lay person in February 2005. That evidence was as follows (ts 582):

From the matters that have been put to you and the material that you have read then, the matters put to you by my learned friend, Ms Archer, do you consider that it is possible to express an opinion as to whether or not in February 2005 Mr Foley would have presented to a lay person as apparently suffering from some form of dementia or mental impairment?---I think that would be very difficult to determine retrospectively but I think as I said I would - my best estimate drawing upon my expertise and professional knowledge would be to place him at the extreme end towards the cusp of Alzheimer's but within the category of mild cognitive impairment towards the severe end of malcognitive impairment and as I think I discussed with Ms Archer it would depend very much on the nature of that interaction, the length of the interaction and which questions were asked during that interaction and I'm not privy to that level of detailed information unfortunately.

So what is the answer to my question as to whether you are able to form an opinion one way or the other as to whether - how that person would have presented to a lay person?---I can't give a definitive answer other than to say the more challenging situation in which they were engaged the more likely they would be to manifest symptoms which might be indicative of some cognitive impairment.

And you referred in terms of a challenging situation to whether or not the person was in his own environment as distinct from in a strange environment?---Exactly, yes, and they were following familiar routes, for instance, that could - driving, for instance, that could mask impairment. If they were in their home environment that could - that gives them 'environmental support' is the term that is used in the literature which can compensate for any cognitive deficiencies that may or may not be present.

380 I have previously referred to this evidence as indicating that Dr Foster's evidence should not be discounted for partisanship. In my view, this evidence is consistent with the conclusion at which I have arrived, on more 'detailed information' than Dr Foster had access to, including information going beyond the nature of the interactions between the plaintiff and Mr Foley and the environment in which they occurred.

381 As to what the plaintiff knew or ought to have known as at 24 February 2005 based on particular (6), it is clear on the evidence of the plaintiff that on 23 February 2005, after the signing of the MOU and as a result of at least one message left for her, the plaintiff learnt that the first defendant had an enduring power of attorney for Mr Foley and wished to speak with her about the MOU.

382 As to particular (7), while the plaintiff testified that she had a telephone conversation with Mr West on 24 February, shortly before having the MOU stamped, she denied that he told her Mr Foley was old; she did not recall whether he said Mr Foley was living on his own; and she denied he told her Mr Foley should not be entering into transactions on his own. However, she added that Mr Foley had told her he was living on his own. Mr West's evidence was that he said all of these to her in that conversation. I should indicate I would prefer the evidence of Mr West, who impressed me as a witness whose recollection I should trust.

383 In any event, I do not consider there is any evidence that, after the entry into the MOU and before its variation, whether that occurred on 24 February 2005 or later, the plaintiff had been given any reason to believe Mr Foley had capacity. Indeed, on the evidence as to the enduring power of attorney and my findings as to the conversation with Mr West, she had been given added reason to conclude the contrary.

384 It follows that the first defendant, in my view, has discharged the burden of showing lack of capacity such that the MOU was voidable.

385 It was not suggested to me, and I cannot find a basis in the evidence for concluding, that the plaintiff had discharged the burden of showing that Mr Foley was having a 'lucid interval' (see McLaughlin (277), as quoted in Poletti [54] above) at the material time such that the memorandum of understanding was not voidable.

386 As it is not in contest that if the MOU was voidable it was duly avoided, the purported exercise of the option is not enforceable.

387 In view of this conclusion, it is not necessary for me to consider the alternative basis for avoidance of the MOU the first defendant has put, in unconscionable dealing. However, I will make some brief remarks about it.

Unconscionable dealing: the applicable principles

388 It was common ground that the applicable principles are as stated in Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447, 474 (Deane J), 461 (Mason J), 468 (Wilson J) and that I should take the following from Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265 [63] (Owen J), [1] (Malcolm CJ) and [2] (Wallwork J) as setting out those principles:

In Couper Holdings Pty Ltd (in Liq) v Bell & Anor [1999] WASC 232, I set out, by reference in particular to the comments of Deane J in Commercial Bank of Australia v Amadio, the elements that go to establish unconscionable conduct. I repeat what I said at [122]:

'The jurisdiction to relieve against unconscionable contracts was described by Deane J in Commercial Bank of Australia v Amadio in these terms:

"The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: 'the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract' (see per Lord Hatherley, O'Rorke v Bolingbroke (1877) 2 App Cas 814 at 823; Fry v Lane (1888) 40 Ch D 312 at 322; Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362 at 428-429."

The first element is that the guarantor be in a position of special disability or perhaps, more accurately, special disadvantage. What has to be established is that 'the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgement as to [her] own best interests: Amadio at 462. Personal characteristics such as emotional dependence and lack of business experience and acumen are relevant factors in this respect: Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 at 626; National Australia Bank Ltd v Nobile [1988] FCA 72; (1988) 100 ALR 227 at 241.

The element of knowledge will be satisfied if the creditor is sufficiently aware of facts that would raise the possibility in the mind of a reasonable person that the guarantor occupies a position of special advantage: Amadio at 467.'

389 I further note with respect to the burden of proof in this area of the law the following, from Turner v Windever [2005] NSWCA 73 [2] (Giles JA), [105] (Bryson JA, agreeing):

Both parties accepted his Honour's [the primary judge's] statement of the elements of a case of unconscionable dealing, formulated with reference to Wilton v Farnworth [1948] HCA 20; (1948) 76 CLR 646; Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 337; Louth v Diprose (1992) 175 CLR 61 and Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457. The statement was -

... a case of unconscionable dealing involves the following:

(a) the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-a-vis the stronger party;

(b) the special disadvantage must seriously affect the weaker party's capacity to judge or protect his or her own interests;

(c) the stronger party must know of the special disadvantage (or know of facts which would raise that possibility in the mind of any reasonable person);

(d) that party must take advantage of the opportunity presented by the disadvantage; and

(e) the taking of advantage must have been unconscientious.

I would only add that, as cases such as Blomley v Ryan show, once ingredients (a), (b) and (c) are established, and the improvidence of the transaction is shown, the plaintiff's task is made easier by an equitable presumption to the effect that the improvident transaction was a consequence of the special disadvantage, and that the defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage.

390 I did not understand the parties to take any issue with respect to that understanding of the law.

391 There were thus three issues presented in the alternative ground for relief, as it was common ground that, if the plaintiff had taken unconscientious advantage of a special disadvantage to which Mr Foley was subject, of which she had the requisite knowledge, the burden cast upon plaintiff to show the transaction was fair, just and reasonable had not been discharged, and the transaction had been avoided.

392 One was whether or not on 23 February 2005, the date of entry into the MOU, and the date of any variation of it, Mr Foley suffered from any condition 'seriously affecting his ability to make a judgment as to his own best interests', that is, suffered from any 'special disadvantage'.

393 The second issue was whether or not at those times any such special disadvantage was 'sufficiently evident' to make it 'prima facie "unconscientious"' that the plaintiff procured or accepted Mr Foley's assent to the impugned transaction in the circumstances in which she procured or accepted that consent.

394 The third issue was whether or not the plaintiff had unconscientiously taken advantage of the opportunity presented by any such special disadvantage.

Unconscionable dealing: whether or not Mr Foley was under a special disadvantage at the material times

396 The first defendant pleads that Mr Foley was under a special disadvantage due to the following circumstances: the matters relied upon to show a lack of contractual capacity previously referred to; Mr Foley had not, to the plaintiff's knowledge, advertised or marketed the Property for sale and was therefore unprepared for discussion about or negotiations for the sale of the property; the plaintiff was a real estate agent of some 22 years standing; the plaintiff had a particular interest in, and had undertaken research in relation, to properties in the location of the Property, with a view to purchasing a property in that area; and Mr Foley did not have, nor had he had the opportunity to obtain, independent legal advice or any advice at all before the plaintiff asked him to sign the MOU, which Mr Foley did sign.

397 I find that Mr Foley was under a special disadvantage in the sense described in the authorities, by reason of the matters which as I indicated previously went to show lack of contractual capacity, as well as the other matters referred to in the first defendant's pleadings, save for the pleaded knowledge of the plaintiff as to the absence of advertising or marketing of the Property by Mr Foley. The only evidence of such absence was the plaintiff's, as to what Mr Foley had said to her he could get for the Property 'if he offered it for sale publicly' (ts 134). The matter of whether or not she had taken from that statement that he had not had the Property so offered was not explored with her, and I do not consider that the pleaded matter was made out. However, I consider the other matters sufficient for the present finding.

Unconscionable dealing: whether or not any such special disadvantage was sufficiently evident to the plaintiff

398 The first defendant pleads that the plaintiff knew or ought to have known or suspected that Mr Foley was under a special disadvantage by reason of the matters pleaded as showing the plaintiff knew or ought to have known that Mr Foley lacked contractual capacity at the relevant times, as well as the plaintiff's knowledge that Mr Foley had not advertised or marketed the Property for sale and was therefore unprepared for discussion about or negotiations for the sale of the property.

399 I find that the plaintiff knew of facts which would raise the possibility that Mr Foley was under a special disadvantage in the mind of any reasonable person, by reason of the matters which as I indicated previously went to show the plaintiff ought to have been aware of Mr Foley's lack of contractual capacity. This is notwithstanding that it has not been shown that the plaintiff had knowledge of the absence of advertising or marketing of the Property for sale.

Unconscionable dealing: whether or not the plaintiff took unconscientious advantage of any special disadvantage

400 The first defendant pleads that the plaintiff took unconscientious advantage of Mr Foley by drafting the MOU; obtaining Mr Foley's signature on it; seeking his agreement to the variation of it; and purporting to exercise the option.

401 I find that the evidence establishes the matters pleaded, and that, by reason of my finding as to the fair market value of the Property at the time of entry into the MOU on 23 February 2005, the transaction for which such entry provided, being the exercise of the option to buy the Property provided by the MOU, has been shown to be improvident, in the sense of being for inadequate consideration: see Blomley (405). As a consequence, the equitable presumption referred to in Turner applies, such that the transaction has been shown to be a consequence of the special disadvantage, and that the first defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage, absent evidence to rebut the presumption. It appears to be common ground that if the equitable presumption applied, there was no such rebutting evidence.

402 It follows that the first defendant had in my view made out the alternative ground for relief.

403 I have found the first defendant has made out her case that the transaction represented by the MOU as varied has been avoided for Mr Foley's lack of contractual capacity, or alternatively by reason of that transaction representing an unconscionable dealing.

404 It follows that the first defendant is entitled to an order that the plaintiff's claim to specifically enforce the agreement to purchase the Property the result of that transaction be dismissed.

405 It further follows, that the first defendant is entitled to further relief on the basis that the transaction is unenforceable. I will hear from the parties as to the forms of such relief that should now be ordered.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : LAMPROPOULOS -v- LYNNE KOLNIK As Executor of the Will of GERALD THOMAS FOLEY [2010] WASC 193 (S)

HEARD : 28-30 APRIL, 1, 4 & 5 MAY, 2-4, 7-10 SEPTEMBER 2009, 30 SEPTEMBER 2010

LYNNE KOLNIK As Executor of the Will of GERALD THOMAS FOLEY

Costs of action - Approach to be adopted where more than one issue and defendant successful but not on all issues - Costs ordered as percentage

Costs of action - Interest on costs - Pre-judgment interest on costs - Whether jurisdiction to award such interest - Whether any such jurisdiction should be exercised - Interest on costs from date of judgment for costs (the incipitur rule) - Order for such interest

Special costs orders - Jurisdiction under Legal Profession Act 2008 (WA) s 280(2) - Approach to be adopted to exercise of jurisdiction

Civil Judgments Enforcement Act 2004 (WA), s 3, s 8

Civil Procedure Act 2005 (NSW), s 101

Federal Court of Australia Act 1976 (Cth), s 51A

Legal Practice Act 2003 (WA), s 215

Legal Profession Act 2008 (WA), s 280

Supreme Court Act 1935 (WA), s 32, s 37

Computer Accounting and Taxation Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S)

EDWF Holding 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S)

Flower & Hart v White Industries (Qld) Pty Ltd [2001] FCA 370

Godden v Alford [1960] WAR 235

Green v Wilden Pty Ltd [2005] WASC 83 (S)

Hamdan v Widodo [No 2] [2010] WASC 6 (S)

Hancock Family Memorial Foundation Ltd v Porteous [2000] WASC 61

Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)

Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398

Lahoud v Lahoud [2006] NSWSC 126

Lai v Tiao (No 2) [2009] WASC 22 (S)

Lampropoulos v Kolnik [2010] WASC 193

Leighton Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union [No 4] [2006] WASC 317 (S)

Olympic Holdings Pty Ltd v Lochel [2004] WASC 61

Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569

Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85

SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26 (S2)

Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)

Tranchita v Danehill Nominees Pty Ltd (No 3) [2009] WASC 49

Verdell Pty Ltd v F & G Nominees Pty Ltd [2002] WASC 58 (S2)

Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295

1 This is an application for special costs orders following judgment. The action was on the plaintiff's claim for specific performance, damages and consequential relief as purchaser under an agreement for the purchase of property. The plaintiff claimed the agreement was the result of the exercise of an option granted by a document headed 'Memorandum of Understanding' (MOU). Although the MOU had a provision calling for the preparation within a stipulated period of a written option agreement, and no such agreement had been prepared, the plaintiff claimed the MOU had been varied to delete that provision.

2 The first defendant is an executor of the will of the late Gerald Thomas Foley and the beneficiary under the will in respect of the property the subject of the MOU. Mr Foley was the registered proprietor of the property and the counterparty to the MOU. The first defendant defended the action on the claim that the MOU was no more than an agreement to agree, and that in any event it had not been varied as alleged. The first defendant also claimed that in any event the contract of purchase was voidable and had been duly avoided. It was voidable on two bases. One was that Mr Foley had lacked capacity to enter into the MOU and to vary it, and the plaintiff knew or ought to have known that fact. The other basis was the MOU represented an unconscionable dealing. The first defendant counterclaimed for declaratory and related relief accordingly.

3 For the reasons I gave in Lampropoulos v Kolnik [2010] WASC 193 I concluded that the MOU was not a mere agreement to agree, and that it had been varied as the plaintiff claimed. However, I also concluded that the first defendant had made out her case that the MOU, as varied, had been avoided, in circumstances where Mr Foley had lacked capacity to enter into and vary it, and the plaintiff ought to have been aware of that fact; and where the MOU represented unconscionable dealing. The orders made at delivery of judgment were as follows:

1. The Plaintiff's claim be and is hereby dismissed.
2. A declaration is made that the Memorandum of Understanding executed between the Plaintiff and Gerald Thomas Foley on 23 February 2005 was voidable for lack of contractual capacity on the part of Gerald Thomas Foley and was avoided by him on 2 May 2005.
3. The Second Defendant remove the First Defendant's caveat J198615C forthwith.
4. Consideration of paragraphs 3 and 5 of the First Defendant's minute of proposed orders for judgment dated 30 July 2010 be stood over for further submissions within 21 days hereof.
5. The Plaintiff pay the First Defendant's costs of the action to be taxed on a basis to be determined on further application (to be filed with an affidavit containing supporting evidence) made within 21 days or, in the absence of any application within that time, subject to the provisions of the applicable scales.
6. There be liberty to apply generally.

4 I note that there is an evident error in order 3: 'First Defendant's' should be 'Plaintiff's'.

6 The first defendant seeks nine orders by her minute of proposed orders dated 20 August 2010 (the first defendant's minute). Leaving aside the proposed order for the costs of the application (proposed order 3), two of the other proposed orders are substantially conceded and another is conceded in part. I consider each of the proposed orders separately. It will be seen that the applicable law is common to a number of them.

Proposed order 1: costs of action and reserved costs

The Plaintiff pay the First Defendant's costs of the action including any reserved costs.

8 It is not in contest that the first defendant's claim succeeded and correspondingly the plaintiff's claim failed, and accordingly the court would generally order a party in the position of the first defendant should recover their costs: Rules of the Supreme Court 1971 (WA) O 66 r 1. However, the plaintiff submitted that there should be an allowance for the plaintiff's success on the issue of enforceability of the MOU as varied, the issues of incapacity and unconscionability aside. The allowance is that the first defendant recover only 90% of her costs, including reserved costs. For the purpose of an allowance of the kind the plaintiff seeks, I note O 66 r 2; and see Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569, 574 (Anderson J) and Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85 [28] (Owen J). This allowance might be arrived at by approaching this action as if it had been brought by the first defendant, claiming that the MOU could not found an enforceable agreement to purchase. The issues of whether or not the MOU was unenforceable as an agreement to agree; whether or not the option under it could not be exercised as no written option agreement was prepared by the due date; whether or not the counterparty to the MOU lacked capacity and the plaintiff knew or ought to have known that; and whether or not the MOU was an unconscionable dealing were separate issues, even although there was an interlocking between them: see Godden v Alford [1960] WAR 235, 237 (Jackson SPJ, Virtue & Hale JJ).

9 In my view such an approach is appropriate. Further, the abatement of the first defendant's costs that the plaintiff submitted should apply is also appropriate. While the issues on which the plaintiff succeeded were, as counsel for the first defendant contended, legal and not factual ones, and the subject of relatively short written and oral submissions, they were ones of not insignificant difficulty. That difficulty is indicated by the space treatment of them occupied in Lampropoulos. That difficult is in my view properly reflected in a level of abatement of 10%.

10 Finally, I note that there were no submissions made to me that any of the reserved costs should be dealt with differently from any other costs for the purposes of proposed order 1.

Proposed order 2(a): allowance for counsel and a solicitor attending the mediation

That the taxation be performed on the basis that:

(a) allowance be made for counsel and a solicitor attending the mediation, with reasonable allowance made for counsel and solicitor preparing for the mediation under item 23(a) of the Scale ...

12 Proposed order 2(a) is sought under Legal Profession Act 2008 (WA) s 280(2)(c). Legal Profession Act 2008 s 280(2) needs to be read with s 280(1), and those two subsections provide as follows:

(1) Subject to any costs agreement made in accordance with Division 6 or the corresponding provision of a corresponding law, section 306 and the Legal Aid Commission Act 1976 section 14 -

(a) the taxation of bills of law practices; and

(b) any other aspect of the costs charged by law practices,

is regulated by an applicable costs determination.

(2) Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -

(a) order the payment of costs above those fixed by the determination;

(b) fix higher limits of costs than those fixed in the determination;

(c) remove limits on costs fixed in the determination;

(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.

13 I took the reference to 'item 23(a) of the Scale' as a reference to the applicable determination under Legal Profession Act 2008 s 280(1). As the mediation was conducted on 15 August 2006 I took it that the reference was to item 23(a) under the Legal Practitioners (Supreme Court) (Contentious Business) Report and Determination 2006 (the 2006 Determination). That item in the 2006 Determination, and item 23(a) in the Legal Practitioners (Supreme Court) (Contentious Business) Report and Determination 2008 (the 2008 Determination), are identical in all material respects save for hourly rates. Both provide for a senior practitioner only to be involved in a mediation. Counsel for the first defendant confirmed that proposed order 2 was sought only in respect of the involvement of counsel and a solicitor in the mediation: no lifting of the hourly rates applicable to them was sought. I therefore took proposed order 2 to be sought under s 280(2)(d).

14 The proper approach to the application of Legal Practice Act 2003 (WA) s 215(2), which is identical to Legal Profession Act 2008 s 280(2), is set out in Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [11] (Martin CJ). The task that the court must perform under the provision is there described as follows:

Before the court can make an order under the subsection, the court must form an opinion which has two components. The first is that 'the amount of costs allowable in respect of a matter under a legal costs determination is inadequate', and the second is that the inadequacy arises because of the 'unusual difficulty, complexity or importance of the matter'.

15 As to the approach to addressing the formation of that opinion, and the matter of inadequacy, Heartlink (S) says this, [13] - [16]:

The policy considerations that should guide a court when addressing an issue under s 215(2) are, firstly, that the court should not usurp the role of the taxing officer and, secondly, that at least where party and party costs are concerned, the court should make an order that would give effect to the general principle of allowing the successful party to be compensated for their costs by the unsuccessful party, where appropriate.

There are two alternative ways in which one might approach the question of inadequacy posed by s 215(2). The first would be to require an applicant for an order under that subsection to satisfy the court that the bill to be taxed will, on the balance of probabilities, tax at an amount that is greater than the limit that would be imposed by the item in the relevant costs determination, which is therefore inadequate. The alternative approach would simply be to require an applicant for an order under the section to satisfy the court that there is a fairly arguable case to be put before a taxing officer to the effect that the bill to be taxed should tax out at more than the limit that would be imposed by the costs determination.

On this alternative view of the section, the court could arrive at the conclusion that the limit was inadequate because the maintenance of the limit would preclude the applicant from presenting a fairly arguable case to the taxing officer. The considerations to which I have referred, and in particular the view that the court should not, under this section, usurp or anticipate the role of the taxing officer, lead me to conclude that the latter of those two alternatives is the preferred approach to an application under s 215(2).

It therefore seems to me that the requirement of inadequacy will be demonstrated if the applicant shows that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination.

16 There is an affidavit in support of the application of the first defendant, that of Shane Robin Sirett sworn 19 August 2010. However, there is no reference in the Sirett affidavit or its annexures to the mediation. At the same time, the porosity and inadequacy of the evidence proffered in support of an application for a special costs order is not necessarily fatal to the application. That is because the determination of the questions the application involves is to be approached as a matter of 'impression' rather than detailed evaluation, which is a matter for the taxing officer: see EDWF Holding 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) [6] - [7] (Martin CJ). I explain below why I am in a position to form such an impression in this case.

17 Further, I note what was said with respect to item 23(a) in the 2006 Determination in Tranchita v Danehill Nominees Pty Ltd (No 3) [2009] WASC 49 [5] - [7] (Martin CJ). In Tranchita [5] - [7] Martin CJ said this:

Because of the view which I take of the structure of the scale, it seems to me that in this case the rate prescribed by item 23 would be inadequate. That is because it was entirely appropriate for counsel representing Mr Erigo Fazio to have attended the mediation. Indeed, it seems to me that item 23 as presently structured, is inadequate generally to allow for the attendance of counsel at mediation, a practice which, in my opinion, is to be strongly encouraged.

Mediation is a most desirable process that has now become a primary focus of the activity of the court. The success of mediations conducted by officers of the court has substantially reduced the proportion of cases going to trial. That success is likely to be enhanced if parties are encouraged to bring all necessary legal advisers, including their counsel, to a mediation to give them advice at that mediation, with a view to achieving resolution of the action.

It seems to me to be regrettable that item 23 of the current scale discourages that desirable practice by not making an appropriate allowance for counsel to attend mediations. That seems to me to be an inadequacy in the scale which should perhaps be addressed by the Legal Costs Committee, the next time the scale is reviewed, but it is sufficient in the present case for me to say that because of the view which I take of the current structure of the scale, it is not adequate to make appropriate allowance for the portion of the time of both the senior practitioner and senior counsel properly spent on behalf of Mr Erigo Fazio in the mediation of this action.

18 I note that the matter to which those remarks were addressed, the lack of provision for more than one fee earner in item 23(a) of the 2006 Determination (which is also true of the 2008 Determination), is addressed in the corresponding item, item 24(a) of the Legal Practitioners (Supreme Court) (Contentious Business) Report and Determination 2010 (the 2010 Determination). However, I do not consider that those remarks indicate the view of the Chief Justice that a fairly arguable case to be put before a taxing officer, to the effect that the bill to be taxed should tax out at more than the limits under item 23(a) of the 2006 and 2008 Determinations by reason of the involvement of other fee earners, should always or even usually be found. Rather, in my view those remarks indicate such a case could more readily be found than might otherwise be the case.

19 Counsel for the plaintiff put to me that there was no evidence that, at the time of the mediation, other fee earners than the one item 23(a) provided for attended that mediation, and so no order could or should be made. However, I note that a judge may proceed in the absence of detailed evidence, at least where he or she as the trial judge is able to draw on their own experience of the case as a matter of 'impression' (see EDWF Holdings 2 Pty Ltd [7]; Leighton Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union [No 4] [2006] WASC 317 (S) [13] (Le Miere J)). It is less clear whether the judge may proceed in the absence of any evidence that (in a case like this one) other fee earners attended the mediation, the position in which I find myself. However, in my view in a case where a judge can readily identify the need for such attendance because of the unusual difficulty, complexity or importance of the matter, the judge would be able to make a special costs order of the kind sought here. In my view I am able to make such an identification, for the reasons I reach below.

20 Counsel for the plaintiff put to me that it would indeed be an unusual case where there was a need for fee earners, other than as provided for by item 23(a), to attend the mediation. As counsel put it, mediation is not the trial but more in the nature of a negotiation enterprise, which I took to indicate that no conclusion as to the need for fee earners to attend a mediation could be drawn from the likely need for them at trial. However, in my view Tranchita properly understood recognises that such a conclusion may well be drawn. I accept that in that case, as counsel for the plaintiff put to me, there were multiple plaintiffs and defendants and complex claims, which made mediation unusually complex. However, an inadequacy resulting from unusual complexity is not the only reason why a special costs order might be made. Indeed it is clear on the authorities that 'unusual' in Legal Practice Act 2008 s 280(2) qualifies 'difficulty', but not 'complexity' or 'importance': see Heartlink (S) [17]; and SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26 (S2) [106] (Roberts-Smith J). In view of the significance of mediation to the court as explained in Tranchita, and its role not only in resolving disputes but also in narrowing issues, there is no reason not to apply to it the same approach as to costs matters in relation to the trial. Whether, in the particular circumstances of the mediation in question, involvement of fee earners, other than as provided for by item 23(a), was in fact appropriately and reasonably required would of course be for the taxing officer, not for me. I consider that, for the reasons elaborated on below and as a matter of impression, inadequacy has been shown.

21 As to whether there was inadequacy as the result of unusual difficulty, complexity or importance of the mediation, see Verdell Pty Ltd v F & G Nominees Pty Ltd [2002] WASC 58 (S2) [14] - [15] (Wheeler J) on the former O 66 r 12. On this authority, it seems to me I can draw on my experience as the trial judge to understand the issues likely to have been involved in approaching the mediation which may have made necessary the involvement of fee earners other than as provided for in item 23(a), being issues which may have made that mediation one of unusual difficulty, complexity or importance. On the continued relevance of Verdell see my decision in Computer Accounting and Taxation Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S) [118] - [120]. With respect to a mediation, however, it seems to me that my appreciation of the issues in the case (substantive and forensic) should be approached by reference to those issues as they likely were at the date of the mediation, not at the later date of the trial. At the same time the issues as at the trial may indicate what were likely to have been the issues as at the date of the mediation. The former issues so indicating were particularly the substantive ones of unusual difficulty and complexity represented by the question whether or not the MOU was merely an agreement to agree to which I have previously referred. The forensic issues so indicating were the ones of unusual difficulty and complexity represented by whether or not at the relevant times it could be shown Mr Foley lacked capacity and the plaintiff knew or ought to have known this, in circumstances where Mr Foley, by the time of the mediation, was suffering from severely impaired cognition, but it was likely the evidence as to his condition at the earlier time of the execution of the MOU was not clear. Further, the matter of any resolution of the dispute at the mediation was of importance not only to the parties to the litigation, but also to the third parties who were the beneficiaries under Mr Foley's will other than the first defendant.

22 I have concluded that a case of inadequacy because of the unusual difficulty, complexity and importance of the subject matter of the mediation has been made out such that the special costs order sought by proposed order 2(a) should be made.

Proposed order 2(b): removal of the limits on getting up for the trial and on the trial

23 Order 2(b) of the defendant's minute is as follows:

That the taxation be performed on the basis that:

...

(b) the limit on items 16 and 19 of the Scale be removed ...

24 I took this proposed order to be sought under Legal Profession Act 2008 s 280(2)(c). The reference to 'Scale' I took to be to whichever of the 2006, 2008 or 2010 Determinations was relevant to the work in question.

25 Item 16 relates to getting up and is identical in both the 2006 Determination and the 2008 Determination. The 2010 Determination would appear to have no application to work of that nature in this case. The identity is save for the maximum amount shown. The written submissions for the plaintiff state that the order sought as to this item is 'conceded', but also state that the court should set such upper limit 'as appropriate having regard to the scale allowance of $39,650', which is the (higher) maximum in the 2008 Determination.

26 At the hearing before me counsel for the plaintiff clarified the concession. Counsel said that the special costs order was not opposed. However the court should, if it were able to do so, set a limit on the amount claimable (see Legal Profession Act 2008 s 280(2)(b)). As I indicated at the hearing, I do not consider I am able to set such or any particular limit. I now explain why I reached that conclusion.

27 The Sirett affidavit annexes a spreadsheet containing entries the deponent identifies as work covered by item 16. The total of the amounts concerned is substantially larger than that provided in item 16 in the 2008 Determination. Whether, if the item 16 limit were removed, the first defendant's costs would tax out at anything like that amount would be a matter for the taxing officer, not for me. However, I consider I may take account of the affidavit of a legal practitioner, like the Sirett affidavit, in arriving at an opinion as to inadequacy and that makes it difficult for me to conclude that a limit of the sort counsel for the plaintiff contended for should be set: see Green v Wilden Pty Ltd [2005] WASC 83 (S) [182] (Hasluck J).

28 As to the removal of the limit in item 16, I have formed the opinion with the two components described in Heartlink (S) [11], having regard to the Sirett affidavit and the nature of the substantive and the forensic issues in this case as I have characterised them in relation to proposed order 2(a).

29 I note that the special costs order sought does not make clear whether the limit as to hours spent or the hourly rates of the fee earner concerned or both is to be removed. Special costs orders to uplift all or any limits in relevant Determinations may be sought: see CAT (S) [123] and authorities there cited. Counsel for the first defendant confirmed it was the prescribed limit on hours, not those on hourly rates, that was to be removed. In my view of the materials before me and my knowledge of the matter in the proceedings a special costs order to remove such limits would be appropriate.

30 Item 19 relates to the trial, and it is only item 19 in the 2008 Determination that would appear to be relevant. However, I note that by reason of the date of delivery of the judgment in the action, 30 July 2010, that it is the counterpart to item 19(g) (attending on reserved judgment) in the 2010 Determination, item 20(g), which appear to be relevant to that work. From this point, my references to item 19 should also be taken to include item 20(g).

31 The Sirett affidavit supplies invoices of senior counsel for the trial which in sum show an amount substantially in excess of the total of the amounts for senior counsel in item 19 of the 2008 Determination. Again, whether if the limit for senior counsel were removed the first defendant's costs would tax out at anything like that amount would be for the taxing officer, not for me.

32 Counsel for the plaintiff submitted that a special costs order with respect to item 19 should not be made as it was in substance an application for indemnity costs without an evidentiary foundation. That foundation, counsel put to me, should be a costs agreement. None, and no evidence as to one, had been provided to me.

33 However, the application in respect of item 19 is not put on the basis of an indemnity cost order, and I do not consider that the application is in substance of that kind. For the bases on which indemnity costs orders are made: see Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10] (Pullin JA & Kenneth Martin J). None of those bases are invoked here. It seems clear that the matters of any costs agreement and its effect on the taxation of costs in this case would be for the taxing officer, not for me: see Hancock Family Memorial Foundation Ltd v Porteous [2000] WASC 61 [5] (Anderson J), considered in SDS Corporation (S2) [64] - [68].

34 As to the limit in item 19, I have formed the opinion with the two components described in Heartlink (S) [11], having regard to the Sirett affidavit and to the nature of the substantive and forensic issues in this case as I have characterised them in relation to proposed order 2(a).

35 I note that the special costs order sought does not make it clear whether the limits in item 19 as to hours worked or hourly rates, of which fee earner or earners, is to be removed. Counsel for the first defendant confirmed at the hearing before me that it was the removal of limits on hours, not hourly rates, of the fee earners referred to in item 19 that was sought. In my view of the materials before me, and my awareness of the matters in the proceedings, a special costs order to remove such limits is appropriate.

Proposed order 2(c) and order 2(d): running transcript and allowance for the fees of senior counsel and counsel at trial

36 Order 2(c) and order 2(d) of the first defendant's minute are as follows:

That the taxation be performed on the basis that:

(c) the obtaining of a running transcript was justified;

(d) the taxing officer be directed to make allowance for the fees of senior counsel and counsel at trial ...

37 I took these orders to be sought under Legal Profession Act 2008 s 280(2)(a). The plaintiff conceded both of them. I would make them.

Proposed order 2(e): additional allowances for preparation by senior counsel and other fee earners

38 Order 2(e) of the first defendant's minute is as follows:

That the taxation be performed on the basis that:

(e) the taxing officer be directed to make additional allowances for the preparation of senior counsel, counsel and the lawyers for the defendant, due to breaks in the trial including weekends and that such allowance[s] be additional to any allowance otherwise available ...

39 I took this order to be sought under Legal Profession Act 2008 s 280(2)(d). Counsel for the first defendant acknowledged that what was sought was permission for the taxing officer to determine that an allowance for refreshers should appropriately and reasonably be made beyond those implicitly allowed for in the daily hearing rates in the 2008 Determination item 19. Counsel referred me to breaks in the trial which, as I understood the submission, were such as to require greater time for refreshers than was allowed for in the 10 hours per hearing day in that item in the 2008 Determination. I noted from the Sirett affidavit invoices of senior counsel showing hours worked which included weekends and other hours exceeding the hours provided for in item 19. Again, whether, if the permission were given, the first defendant's costs would tax out at anything like the amount resulting from the additional hours shown would be for the taxing officer, not for me.

40 At the hearing counsel for the first defendant confirmed that the proposed order should be modified to make clear both that only permission to make allowance for refresher work was sought, and that only to the extent the taxing officer determined an allowance should appropriately and reasonably be made beyond 2008 Determination item 19. Counsel for the plaintiff indicated he would not oppose the order so framed, provided that the order was expressed to refer only to senior counsel and counsel. That restriction was on the basis that only those two classes of fee earners were recognised in taxations as appropriately and reasonably doing work of a refresher kind. I note the support to be gained for that proposition (by implication) from Civil Procedure in Western Australia [66.11.12] (as at 12 November 2010). In my view that is an appropriate limitation on the special costs order sought here. However, it is also my view that work that was appropriately and reasonably done in aid of counsel's refreshers by other fee earners is within items 16 and 19 in the 2008 Determination.

41 I note that the proposed order does not clearly indicate whether it relates to hours worked for senior counsel and counsel, or their hourly rates. Counsel for the first defendant confirmed at the hearing that it was hours worked, not hourly rates, for which the allowance was sought.

42 I have formed the opinion with the two components described in Heartlink (S) [11], having regard to the Sirett affidavit and the nature of the substantive and the forensic issues in this case as I have characterised them in relation to proposed order 2(a) with the modifications I have indicated. I would make that order so modified.

Proposed order 2(f): additional allowance for closing submissions

43 Order 2(f) of the first defendant's minute is as follows:

That the taxation be performed on the basis that:

(f) That the taxing officer be directed to make additional allowances (to those otherwise available for the fees of senior counsel, counsel and the lawyers for the defendant) in preparing submissions for the closing of the trial between the parties ...

44 I took the proposed order to be sought under Legal Profession Act 2008 s 280(2)(d). Counsel for the first defendant acknowledged that what was sought was permission for the taxing officer to determine that an allowance should appropriately and reasonably be made for work done on the closing submissions by those three classes of fee earners beyond that implicit in the allowance in the 2008 Determination, items 19 and 16. Counsel again referred me to the invoices of senior counsel annexed to the Sirett affidavit showing hours worked beyond those allowed for in item 19; I also took counsel to be referring me to the spreadsheet annexed to that affidavit for work done for getting up including work done after the trial commenced. I return below to the inclusion of preparing closing submissions under item 16, removal of the limit on which I have earlier considered. Again, whether, if the permission were given, the first defendant's costs would tax out to include additional costs by any or all of the three classes of fee earners would be for the taxing officer.

45 At the hearing counsel for the plaintiff indicated to me he would not oppose the order being made if it were framed in terms of a permission to make allowance for work done of that sort, to the extent the items in the 2008 Determination did not already permit this, but with reference only to the work of senior counsel and counsel, not other fee earners. In the view of counsel for the plaintiff, special reference should only be made to the work of counsel. Counsel for the first defendant submitted that if such a change were made to the proposed order, the first defendant would still be in a position to claim costs of other fee earners under item 16, getting up. In my view that is a correct understanding of the scope of item 16. Whether a claim that such work by reference to that item was appropriately and reasonably done would of course be for the taxing officer, not for me.

46 I note that the proposed order does not clearly indicate whether it relates to hours worked for senior counsel and counsel, or their hourly rates. Counsel for the first defendant confirmed at the hearing that it was hours worked, not hourly rates for which the allowance was sought.

47 I have formed the opinion with the two components described in Heartlink (S) [11], having regard to the Sirett affidavit and the nature of the substantive and the forensic issues in this case as I have characterised them in relation to proposed order 2(a). I would make the order sought in proposed order 2(f), with the modifications I have indicated.

Proposed order 4: time from which interest on costs would run

48 Order 4 of the first defendant's minute with corrections made at the hearing is as follows:

Interest to run on costs incurred from the date of payment of those costs on the substantive issues in the action.

49 Counsel for the first defendant, as I understood him, confirmed that this proposed order was intended to apply to costs paid before judgment; for costs paid on or after judgment, the rule I reach next would apply.

50 It appears to be established for this state that, at least as a general rule, interest runs on judgment sums from the date of the judgment, and this includes interest on costs, even although the taxation of costs will occur later. This is the 'incipitur' rule. The rule that interest runs on costs from the date of the certificate of costs, which is the 'allocatur' rule, does not apply in this state. See Civil Judgments Enforcement Act 2004 (WA) s 8(1) read with s 3 'judgment sum'; and Hamdan v Widodo [No 2] [2010] WASC 6 (S) [9] and [13] (Johnson J). Judgment for this purpose is the judgment for costs, which in this case would be the judgment dated 30 July 2010 (see order 5). See Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398, 416 (Lord Ackner).

51 It is also established in this state that pre-judgment interest on costs cannot be recovered under Supreme Court Act 1935 (WA) s 32. That provision empowering the court to award pre-judgment interest does not apply to costs: Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 [115] (McLure J; Anderson & Steytler JJ agreeing). However, that provision would permit the award of pre-judgment interest on costs where they are recovered as damages on a cause of action, such as costs paid to a solicitor which would have been avoided if the solicitor had not breached the solicitor's duty of care and skill as pleaded: see Olympic Holdings Pty Ltd v Lochel [2004] WASC 61 for such an award. On the same basis s 32 would appear to permit the award of pre-judgment interest on costs where indemnity costs are recovered as damages on a cause of action for the tort of abuse of process: see as to the possibility of such an award under Federal Court of Australia Act 1976 (Cth) s 51A, the counterpart of Supreme Court Act s 32, Flower & Hart v White Industries (Qld) Pty Ltd [2001] FCA 370 [33] (Full Court: Drummond, Dowsett & Hely JJ). However, there is no suggestion in this case of any cause of action for damages in the form of costs to be awarded, let alone the pleading of one.

52 At the same time, it might be argued that Supreme Court Act s 37(1) providing that the 'costs of and incidental to all proceedings' are to be 'in the discretion of the Court or judge' (emphasis supplied) gives the court a discretion to order pre-judgment interest on costs. Arcus Shopfitters, as I understood the judgment of McLure J, left open whether that provision, or indeed any other source of power, such as the court's inherent jurisdiction, gave the court such jurisdiction: see [115]. Her Honour also said this at [116]:

Even if the Court has the jurisdiction to award interest on costs incurred in conducting the action I am not persuaded that the trial Judge erred in the exercise of his discretion. It is currently the case that, absent misconduct by a party, a successful litigant is not compensated for all costs directly incurred in the conduct of the proceedings. There are sound policy reasons for this approach relating to the dynamics of securing an early settlement of proceedings. There is even less justification for compensating a litigant for indirect costs in connection with proceedings such as financing costs. There is nothing in the circumstances of this litigation that would justify the respondent receiving all of its direct costs much less its financing costs. I would also dismiss this ground of the cross-appeal.

53 Circumstances warranting the exercise of any discretion to award pre-judgment interest on costs might be that there is an award of indemnity costs: see Lai v Tiao (No 2) [2009] WASC 22 (S) [73] (Johnson J). However, in this case there is no claim for indemnity costs.

54 Finally, as to whether or not there is a power to award pre-judgment interest on costs, or at least whether or not the court should readily make such an award, I have noted the submission of counsel for the plaintiff that such a power or at least its ready exercise would give rise to difficult questions whose answers would be expected to add significantly to the costs of a taxation. Those questions would seem to be ones that arise where, as might be expected, differing proportions of the costs paid in respect of different work were allowed on the taxation. For those difficulties, and a solution, see Lahoud v Lahoud [2006] NSWSC 126 [84] - [86] (Campbell J). This solution appears to be that followed in New South Wales for orders under Civil Procedure Act 2005 (NSW) s 101(4) and s 101(5), which state that the court 'may order' interest on any amount payable under an order for costs as from the date or dates on which the 'costs concerned were paid' or 'such later date as the court may order'. See Quick R, Quick on Costs, looseleaf, vol 2 [4.10234] (as at Update 55). Of course there is no corresponding legislative provision to Civil Procedure Act 2005 (NSW) s 101(4) and s 101(5) in this State.

55 However, I do not consider that I need to answer the question whether or not I have jurisdiction to award pre-judgment interest, as, approaching the matter on Arcus Shopfitters [116], I do not consider that there are circumstances warranting the exercise of any such jurisdiction.

56 Thus, I would not make proposed order 4, except in terms of the incipitur rule, which as I understand it was the order Johnson J made in Hamdan [No 2]: see [13].

Proposed order 3: the costs of this application

57 Order 3 of the first defendant's minute is as follows:

The Plaintiff pay the costs of this application to be taxed as part of the overall bill.

58 Of course the court has the power to make such an order under its general discretion as to costs in O 66 r 1(1). However, in my view the first defendant has not been successful in respect of all the orders she sought. Applying the approach in Wheeler (574), and having regard to the level of success the first defendant did enjoy, I would order the plaintiff pay 75% of the costs of the present application, to be taxed as part of the overall bill.

59 I will hear from the parties as to the final orders to be made.