Frederick John Jones v Jennifer May Moss

Supreme Court of NSW|2007-08-10|Before: White J

CITATION : Frederick John Jones v Jennifer May Moss [2007] NSWSC 969

DECISION : Parties to bring in short minutes of order in accordance with these reasons.

CATCHWORDS : EQUITY - General principles - Mistake - No relevant mistake - Grounds for rectification or setting aside of contract not established.EQUITY - Unconscionable Conduct - Plaintiff under no disability or significant disadvantage of which defendant took advantage. - CONTRACTS - Unjust contracts - When contract "unjust" - Where terms of contracts not reasonable due to their effect - Unreasonableness of terms foreseeable at time of contracting - Consideration of public interest - Plaintiff transferred house and all household furnishings, and goods to his daughter, to ensure sons could have no claim after his death - Plaintiff entitled to live on property provided he paid all outgoings - Defendant paid arrears of rates - Defendant not liable to pay for repairs - Plaintiff unable to pay outgoings and repairs needed to keep the property in habitable condition - Held that contracts unjust notwithstanding that defendant innocent of any improper conduct - Plaintiff to repay defendant her expenditure on the land - Defendant entitled to a charge to secure repayment. - (NSW) Contracts Review Act 1980, ss 7, 8 and 9(NSW) Residential Tenancies Act 1987, ss 3 and 6(1)(a)

Contracts Review Act 1980 (NSW) LEGISLATION CITED : Family Provision Act 1982 (NSW) Residential Tenancies Act 1987 (NSW)

Gibbon v Mitchell [1990] 1 WLR 1304 Baird v BCE Holdings Pty Ltd (1996) 40 NSWLR 374 Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 Yaroomba Beach Development Co Pty Ltd v Coeur de Lion Investments Pty Ltd (1989) 18 NSWLR 398 Clifford v Turrell (1845) 14 LJ Ch 390 CASES CITED : In Re Cartwright; Avis v Newman [1889] LR 41 Ch D 532 Australian Maritime Safety Authority v Quirk (1998) NSW ConvR 55-858 Miller v Gray; Ex parte (1892) 18 VLR 31 Commissioner of Stamps v Parbury Estates Limited (1913) 16 CLR 521 The Marquess of Bristol v Commissioners of Inland Revenue (1901) 2 KB 226 West v AGC (Advances) Ltd & Ors (1986) 5 NSWLR 610 Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41

Frederick John Jones PARTIES : v Jennifer May Moss

COUNSEL : Plaintiff: Ms S K Hill Defendant: Mr R D Wilson

SOLICITORS : Plaintiff: CBD Law Defendant: Peninsula Law

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2784/05 Frederick John Jones v Jennifer May Moss JUDGMENT 1 HIS HONOUR: The plaintiff and the defendant are father and daughter. The plaintiff seeks orders to set aside two agreements made on 1 May 1996 between them which deal with his property. Alternatively, he seeks orders that the agreements be set aside. 2 The first agreement is called a deed of conveyance. It recites that the plaintiff is seised of a property at 4 Booth Street, Wyoming as the sole registered proprietor. It recites that the plaintiff wished to transfer all his right, title and interest in the property to the defendant and that the defendant, upon that transfer, wished to grant to the plaintiff a tenancy of the property for his lifetime. The operative provisions were as follows: " [1] That in consideration of natural love and affection the Transferor does convey to the Transferee all his right title and interest in the property situate at 4 Booth Street, Wyoming in the State of New South Wales and more fully described as ALL THAT piece or parcel of land being Lot 9 in Deposited Plan 228034 and being the whole of the land contained in Folio Identifier 9/228034. [2] Upon the condition that the Transferor does pay all outgoings on the property including Council rates and charges, and does keep the property insured for it's [sic] full insurable value against destruction or damage by fire, storm and tempest, the Transferee does grant to the Transferor the right to reside at the property for the duration of his lifetime. "

3 The second agreement has been called the personal property agreement during submissions. It recited that the plaintiff was indebted to Gosford City Council for arrears of rates and charges for a sum in excess of $7,000. It recited that the defendant had agreed to pay the arrears on behalf of the plaintiff. It contained the following further recitals: " [C] The Transferor is the owner of certain household furnishings and other goods stored at his residence and business premises ('the property'), [D] The Transferor does wish to assign all his right title and interest in such property as he may own, or in such property which he may at any time own from time to time in the future to the Transferee, " It then provided: " NOW THIS DEED WITNESSES That in consideration of the Transferee's promise to pay the arrears the Transferor does hereby transfer all his right title and interest in the property which he may own from time to time as aforesaid to the Transferee. " 4 The issues arising in the proceedings are as follows. The first question is whether the plaintiff signed the two instruments under a mistake as to their contents or effect. If so, the second question is whether such a mistake is a sufficient ground for setting aside or rectifying the instruments, or whether it must be shown that the defendant induced that mistake, or that it was a mistake common to both parties, or that the defendant knew of the plaintiff's mistake when the transaction was entered into, so that it is now unconscionable for her to insist on the instruments being adhered to in accordance with their terms. 5 The third question is whether, at the time of the transaction, the plaintiff was under a disability or significant disadvantage of which the defendant took unconscionable advantage. 6 The fourth question is whether the defendant is liable to keep the property at 4 Booth Street, Wyoming in repair. 7 The fifth question is whether the agreement dealing with the plaintiff's personal property was an unjust contract in respect of which the plaintiff is entitled to relief under the Contracts Review Act 1980 (NSW). 8 The sixth question is whether the deed of conveyance was an unjust contract within the meaning of that Act, either because it failed to provide that the defendant should be responsible for effecting repairs to put and keep the property in a habitable condition and in a reasonable state of repair, or because the plaintiff stood to lose his only valuable asset and be made homeless if he were unable to pay for repairs himself, the property became uninhabitable, and he was forced to leave. 9 The last question is whether any, and if so what, relief should be granted under the Contracts Review Act if either or both agreements are found to be unjust contracts. Background to the Agreements 10 In May 1996, the plaintiff was aged 60. In March of that year, he saw a solicitor, Mr Cleary, to make his will. The plaintiff was divorced. He was estranged from his two sons, whom he described as hopeless drug addicts, in and out of gaol. 11 On 25 March 1996, he made a will leaving all of his property to his daughter, the defendant. His will recorded that he had made no provision for his sons because they had stolen money from him and had no moral claim on his bounty. He also stated in his will that the defendant had cared for him with great diligence at her personal inconvenience for many years. 12 His solicitor advised the plaintiff that his sons could make a claim on his estate under the Family Provision Act 1982 (NSW), and that the only way to ensure that this did not occur was for the plaintiff to transfer his real and personal property to his daughter while he was alive and to hope that he lived for a further three years so that the transfer could not be held to be a prescribed transaction under the Family Provision Act. 13 The plaintiff took this advice. At the time, the plaintiff carried on a business selling second-hand books. He said that the business was unprofitable. It appears that his only substantial asset of value was his property at 4 Booth Street, Wyoming. 14 A valuation obtained in April 1996 recorded that that property required extensive maintenance. The valuer reported that at the time of inspection guttering was either non-existent or needed replacing; that eaves were missing in places; that cladding was missing; that ends of cornice strips were missing; that a door in the bedroom had a hole in it; that floor coverings needed replacing; and that batons were missing in sections of the interior which required finishing. The valuer also said that the roof should be checked for leaks; that a window pane in a storage shed was broken; and that the yard needed to be cleaned of old cars and rubbish. The fair market value of the property as at 12 April 1996 was assessed as being $90,000. 15 At this time, the plaintiff owed in excess of $7,000 in unpaid council rates. In evidence, the plaintiff said that the liability for these rates had been incurred in the 1970s or 1980s. The debt of $7,000 included interest. The plaintiff, it appears, even at this time, was a pensioner. He and the defendant agreed orally that he would transfer the property to her; that she would grant him the right to live in the property for his life; and that she would pay the outstanding rates owed to the Gosford City Council. It was common ground that the plaintiff said that he would pay for ongoing rates. 16 In his affidavit, the plaintiff said that he told the defendant that he would only transfer the house to her if the repairs were completed and any future repairs were looked after. He deposed that she agreed to take care of all the repairs to the house. He resiled from this evidence in cross-examination. In cross-examination he said that there were no discussions about who would be responsible for repairs before the agreement and deed of conveyance were signed on 1 May 1996. 17 The defendant denied that she agreed to be responsible for repairs. She deposed that, at the beginning of 1996, she told the plaintiff that she and her future husband, Barry, could not afford to pay two sets of rates or to maintain the house. This evidence was not challenged in cross-examination and I accept it. It is corroborated by the provision of the deed of conveyance that the plaintiff would be responsible for payment of outgoings, including rates. 18 It is also corroborated by instructions given by the plaintiff in 1998 to his solicitor in another matter. In 1998, he had suffered judgment in a sum of about $4,000 and had received a debtor's examination summons to attend the Gosford Court to be examined as to his financial position. He told his solicitor that the house in which he was living was owned by his daughter, who let him live there rent-free. He told his solicitor that he had to pay the outgoings for maintenance. He told his solicitor that he had no stove or heater system or hot water, as they had all broken down and that he could not afford to fix them. 19 Ultimately, it was common ground that there was no express agreement at the time the deed of conveyance was signed as to who should be responsible for repairs. 20 However, the defendant had made it known that she did not accept responsibility for repairs. The plaintiff understood that if repairs needed to be effected, he would have to pay for them. 21 The defendant said that she was motivated to agree to accept a transfer of her father's house by the fact that the rates were outstanding. She gave evidence that she was told by the plaintiff that the council was threatening to sell the house to recoup the outstanding rates. By paying the outstanding rates and granting a lease back to her father for his life she believed that she was securing his continued enjoyment of the property. I accept that this was a motivating factor for her entering into the transaction. It reconciled her to accepting what she described in her affidavit as a windfall. 22 The plaintiff said that he was unconcerned about the non-payment of rates because he believed that the council would not take steps to sell the house to recoup the debt. I accept that that was his state of mind. However, the promise by the defendant to pay such rates provided valuable consideration for the transfer of the land. 23 In his affidavit, the plaintiff deposed that in the same conversation as that in which he told the defendant he would only transfer the house if she looked after the repairs, he also said that he wanted the insurance on the house paid. He said that in the same conversation, the defendant agreed to pay the insurance. The defendant denied the conversation. 24 I accept her denial. I do not accept that such a request was made, or that the defendant promised to pay the insurance. The plaintiff retracted part of his evidence of the same conversation. Hence, it is difficult to have confidence in the accuracy of his recollection of the balance. His memory was poor. Where his evidence conflicted with that of the defendant, I prefer the defendant's evidence. 25 It may be observed that the document prepared by the plaintiff's solicitor on his instructions provided for the plaintiff, not for the defendant, to pay the insurance. I do not accept that that document was done in error. I accept the defendant's evidence that the plaintiff said that he could not afford to pay for the "back rates", but he could afford to pay everything else. 26 The plaintiff, the defendant and the defendant's husband attended on the plaintiff's solicitor, Mr Cleary, in early April 1996. The plaintiff gave him instructions which led to his preparing the two instruments in issue in this case. On 1 May 1996, the plaintiff and the defendant met with Mr Cleary in his office. Mr Cleary presented the documents for their signature. In accordance with his usual practice, he laid the documents before them and explained in simple terms the effect of each clause. He gave them the opportunity of reading the documents. 27 The deed of conveyance provided that the plaintiff convey to the defendant all his interest in the property at 4 Booth Street, Wyoming in consideration of natural love and affection. The personal property agreement provided that the defendant's agreement to pay arrears of rates and charges was consideration for the transfer of the plaintiff's personal property. In truth, her agreement to pay outstanding rates was consideration for the transfer of the property at 4 Booth Street, Wyoming to her. 28 Mr Cleary drew the agreement dealing with personal property in the way he did because he had been instructed to put all of the plaintiff's property beyond the reach of the plaintiff's sons. He gave evidence that he thought it was "cleaner" to provide for there to be consideration for the transfer of personal property and to separate the transaction into two documents: one dealing with the land for no consideration and to be by deed; and the other dealing with personal property for consideration. But there is no doubt that the two agreements were linked. They were both entered into to attempt to ensure that the plaintiff's sons could have no claim on the plaintiff's estate after the plaintiff's death. 29 There is a real question as to whether either the plaintiff or the defendant intended that ownership of all of the goods stored, either then or in the future, at the plaintiff's residence or his business premises should pass to the defendant. Certainly neither party intended or expected that the defendant would exercise any rights of ownership over the personal property. In a real sense, the defendant's agreement to pay the outstanding rates was consideration for the transfer of the real property to her, irrespective of whether the agreement dealing with personal property was intended to take effect according to its tenor. 30 At the meeting of 1 May 1996 in Mr Cleary's office, the plaintiff did not have his glasses. Mr Cleary recalled the plaintiff looking at the documents as though he were reading them. I am satisfied that the plaintiff could read print the size of the documents in question at that time without his glasses, but that he could only do so with difficulty. In the witness box, the plaintiff was able to read the same size print without glasses, but he had difficulty in doing so. His eyesight was better in 1996 than it was when he was giving evidence. Nonetheless, I accept that he would have had some difficulty reading the print without his glasses. 31 The plaintiff was also deaf. He wore a hearing aid which was intermittently faulty. He gave evidence that he told Mr Cleary that it was not necessary for Mr Cleary to read out the documents aloud, saying that he would trust his daughter. I prefer the evidence of the defendant that Mr Cleary did explain the documents. The documents are short and simple and would not require much explanation. The defendant's evidence was corroborated by Mr Cleary's evidence, which I accept, that it was his usual practice to lay such documents in front of his client and explain in simple terms the effect of each clause. Mr Cleary had no specific recollection of doing so on 1 May 1996, but there was no reason for him not to have followed that practice on that occasion. Indeed, the nature of the transaction involving the transfer by a father to his daughter of his house in return for a conditional life estate, or perhaps a conditional personal right of residence, is such that it is objectively probable that a solicitor would follow the practice that Mr Cleary described as being his usual practice. The Dispute Emerges 32 The present dispute arose in 2001. Until then, the plaintiff had paid the rates on the property. He did not pay insurance. So far as the evidence discloses, he did not effect any repairs to the property. 33 In about late 1996 or in 1997, the back fence was replaced and the defendant paid half the cost of replacing the fence. She did not do so because she believed that it was her obligation to carry out repairs to the property. She did so because the neighbour had asked for the fence to be replaced, or had required it, and because she understood that, as owner, she was liable to pay half of the cost. 34 In 1997, she arranged for the guttering to be replaced by her uncle. Again, she did not do so because she believed she was obliged to effect repairs. She arranged for this work to be done in order to obtain insurance. She said that it was a condition of the insurer agreeing to provide insurance that the work be carried out. 35 The deed of conveyance required the plaintiff to insure the property against destruction or damage by a fire, storm or tempest. The defendant's concern was not insurance of the house against destruction or damage. Her concern was her potential liability to an entrant to the premises who might suffer injury on them. It is clear that the premises were a mess. She was unable, at that time, to find an insurer who would provide public liability insurance separately from insurance against damage to the property. Accordingly, until about 2004, she took out insurance which covered both. That was the reason she arranged for repairs to the guttering. 36 In 2001, the property was still in disrepair. The plaintiff then asserted that the defendant was obliged to carry out the repairs. He withheld payment of rates because she declined to do so. 37 The plaintiff has given unchallenged evidence that the guttering erected in 1997 has failed and that water is leaking into the house. He says that this has deteriorated to the point where water is leaking into four rooms in the house and that this has resulted in the electricity being disconnected. In his affidavit he deposed that he was unable to afford the repairs and expenses and that this had led to the house falling into disrepair. That evidence was not objected to. Nor was the plaintiff cross-examined on that evidence. 38 There is no evidence, except in the most general terms, as to the plaintiff's financial position. He deposes that he is presently on a Centrelink pension. He does not say how much income he earns. He deposed that his bookshop, which is presently located in Wyong, remains very unprofitable and that because of this he has been, and remains, on and off the pension. However, there is no evidence as to the income derived from the bookshop or the costs incurred in running the bookshop. Nor is there evidence as to the cost of the repairs which will need to be carried out to put the property into a fit state. Mistake 39 In his amended statement of claim, the plaintiff alleged that he was mistaken as to the effect of the documents signed on 1 May 1996 in the following ways: " (a) The plaintiff believed the documents obliged the defendant: (i) to pay for all such repairs to the house as may be necessary in the future to keep the house in good and habitable condition; and

whereas in fact the documents imposed no such obligation;

(b) The plaintiff was not aware that under the deed of conveyance he was obliged to pay all outgoings on the land, including council rates and charges and insurance premiums;

(c) The plaintiff believed that under the documents he had an unconditional right of residence in the house for his life and was not aware that the deed of conveyance purported to make such right conditional;

(d) The plaintiff was not aware that under the Personal Property Agreement he had purported to assign the property referred to therein to the defendant and did not understand that he was dealing with any property other than the land. "

40 Counsel for the plaintiff submitted that the deed of conveyance was a voluntary disposition. She submitted that the plaintiff was entitled to have the deed of conveyance set aside if he executed that instrument under a mistake as to its effect, whether or not the defendant knew of the plaintiff's mistake and whether or not the defendant shared that mistake or induced it. She cited Gibbon v Mitchell [1990] 1 WLR 1304 where Millett J (as his Lordship then was) said (at 1309) that the cases show that: " wherever there is a voluntary transaction by which one party intends to confer a bounty on another, the deed will be set aside if the Court is satisfied that the disponor did not intend the transaction to have the effect which it did. It will be set aside for mistake, whether the mistake is a mistake of law or of fact, so long as the mistake is as to the effect of the transaction itself and not merely as to its consequences or the advantages to be gained by entering into it ."

41 It will be unnecessary to consider this principle further (as to which see Baird v BCE Holdings Pty Ltd (1996) 40 NSWLR 374) because I do not accept that the plaintiff was mistaken as to the effect of the deed. Nor do I accept that the deed of conveyance was a voluntary disposition. The consideration for the deed was not expressed in the instrument. 42 As to the alleged mistakes, I do not accept that the plaintiff, at the time of the transaction, believed that the documents obliged the defendant to pay for all necessary repairs. There were no discussions at the time the documents were signed as to who would be responsible for carrying out repairs, but it was agreed that the plaintiff would pay outgoings. The defendant had earlier made it clear that she could not afford to pay for repairs. I think it was clear to the plaintiff that if he wanted repairs carried out he would have to pay for them himself. That, in substance, is what he told his solicitor two years later. 43 Nor do I accept that the plaintiff believed that the documents obliged the defendant to pay insurance premiums. Nor do I accept that he was unaware that he was obliged to pay outgoings, including council rates and charges and insurance premiums. Those matters were explained to him by Mr Cleary. Nor is there any reason to doubt that the plaintiff had given instructions to Mr Cleary in the terms of the deed which Mr Cleary drew. Likewise, I am satisfied that the terms of the deed, including the fact that it provided that the plaintiff's right to reside at the property for his lifetime was given on condition that he pay all outgoings on the property, was a matter which was explained to him. 44 Although the plaintiff had difficulty in reading without his glasses and was deaf such that his hearing aid provided only intermittent hearing, I do not accept that he was mistaken in relation to the effect of the deed of conveyance in any of the ways alleged. 45 The personal property agreement is in a different position. As I have said, neither party intended that the defendant would exercise rights of ownership over the plaintiff's personal property. The defendant has never sought to do so and does not now seek to do so. She proffers an undertaking that she will not seek to exercise any rights as owner of the plaintiff's personal property. 46 The plaintiff said that so far as he was concerned all that they were dealing with was the house, by which I understood him to include the land. The defendant said that whilst Mr Cleary explained that the plaintiff was signing over everything he owned in the house and in the business property, her position was that she had no hold on his decisions concerning his personal belongings or business. 47 I consider that the plaintiff did understand that the purpose of the agreement of 1 May 1996 was to put his personal property out of the reach of his sons if he survived for three years. Both parties understood that the agreement provided for the defendant to own his existing and future personal property stored at the house or in his shop. 48 I do not consider that the personal property agreement is liable to be set aside for mistake. It is a different question as to whether it is a sham, or whether relief should be afforded against it under the Contracts Review Act. 49 The plaintiff did not plead that the personal property agreement was a sham, that is, that it was a document created for the purpose of creating a false appearance as to the parties' actual legal rights and obligations which neither of them intended to create (Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 at 453-454; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at 486 [46]). Such a finding would be, or could be, a serious finding and I do not consider that the evidence warrants a finding of sham. That is not to say that the plaintiff will not be entitled to relief against the provisions of that agreement under the Contracts Review Act. 50 If I am wrong in my finding that there was no relevant mistake on the plaintiff's part, I would still not have granted relief on the ground of mistake. The plaintiff's mistake, if such existed, was not one shared by the defendant. She did not know that the plaintiff laboured under the mistakes which he now alleges he laboured under. Nor did she induce any such mistake. 51 In my view, notwithstanding the terms of the deed of conveyance, the defendant provided consideration for the transfer of the land to her. That consideration was provided by her agreeing to pay the outstanding rates on the property. It is unnecessary to consider whether the agreement to grant a tenancy of the property for the plaintiff's life would also mean that the transaction was not a voluntary disposition so as to attract the principles summarised by Millett J in Gibbon v Mitchell. 52 In Yaroomba Beach Development Co Pty Ltd v Coeur de Lion Investments Pty Ltd (1989) 18 NSWLR 398 Giles J (as his Honour then was) cited and applied statements of long-standing principle dealing with a party's ability to prove a consideration other than that which is stated on the face of the deed. His Honour cited Clifford v Turrell (1845) 14 LJ Ch 390 where the Vice Chancellor said: " Rules of law may exclude parol evidence where a written instrument stands in competition with it, but it has long been settled that it is not within any rule of this nature to adduce evidence of a consideration additional to what is stated in a written instrument. The rule is, that where there is one consideration stated in the deed, you may prove any other consideration which existed, not in contradiction to the instrument; and it is not in contradiction to the instrument to prove a larger consideration than that which is stated. " Giles J went on to say (at 407) that: " Where the instrument states no consideration, or a nominal consideration, it can readily be concluded that an additional consideration is not inconsistent therewith. "

53 The deed itself provided consideration, but that is a nominal consideration. It stated that the consideration for the transfer of the land was natural love and affection. That is either no consideration or a nominal consideration. It is not inconsistent with that consideration for the defendant to prove that she provided monetary consideration for the transfer by agreeing to pay the outstanding rates. To the extent it is relevant, the evidence establishes that she paid the outstanding rates. She paid $7,800.25 to the Council on 17 June 1996 to clear the arrears. Accordingly, the transaction dealt with in the deed of conveyance is not properly characterised as a voluntary disposition. Unconscientious Taking of Advantage of Plaintiff's Disability 54 The next question is whether the plaintiff is entitled to avoid the transaction on the ground the defendant took unconscientious advantage of his disability or position of significant disadvantage. I do not think that the defendant did take any unconscientious advantage of the plaintiff. In her affidavit she described the transaction as one which resulted in a windfall for her, but that is far from saying that it was a windfall obtained by her taking unconscionable advantage of the plaintiff's situation. It was his wish to put his property beyond the reach of a claim by his sons against his estate. She made it clear to the plaintiff that she could not afford to make payments in relation to the land, other than to pay the existing arrears in rates. The documents were prepared by a solicitor instructed by the plaintiff. He had the benefit of available independent advice. 55 I see nothing unconscientious in the defendant acceding to the plaintiff's request to take the transfer of the property. This is not a case in which the parties were bargaining for a contract. It is not a case where one was in a superior bargaining position to the other. Although the plaintiff was in some situation of disadvantage due to his deafness and his having omitted to take his glasses when he went to see his solicitor to sign important documents, no advantage was taken by the defendant of that position. Obligation to Effect Repairs 56 Therefore, it is necessary to consider whether the plaintiff is entitled to relief under the Contracts Review Act. It is material to considering that claim, so far as it concerns the deed of conveyance, to determine whether the defendant is liable to make repairs to the property. If the defendant is not liable to make repairs to the property the plaintiff says that that is a circumstance which renders the deed of conveyance unjust. On the other hand, if the plaintiff is obliged to effect repairs it could not be said that the contract was unjust on that ground. The plaintiff says that in such a case the contract is unjust because it fails to state the defendant's liability, leaving it open to the defendant wrongly to maintain that she is not liable to carry out needed repairs. 57 An owner of a fee simple who grants a life tenancy does not impliedly covenant to carry out repairs. Although a life tenant will be liable if he or she commits waste, in the absence of express provision to the contrary, a life tenant will not be liable for allowing improvements to the property to become dilapidated, even to the extent of being uninhabitable. That is to say, in the absence of express provision to the contrary, a life tenant is not liable to the remainderman in damages for permissive waste (In Re Cartwright; Avis v Newman [1889] LR 41 Ch D 532). Prima facie, the position is that although the plaintiff is not liable to effect repairs, if he wishes repairs to be effected he must carry them out himself or pay for others to do so. 58 However, it was submitted for the plaintiff that cl 2 of the deed of conveyance falls within the definition of a residential tenancy agreement under the Residential Tenancies Act 1987 (NSW). That Act defines a residential tenancy agreement as meaning, "any agreement under which a person grants to another person for value a right of occupation of residential premises for the purpose of use as a residence." (s 3). 59 If cl 2 of the deed of conveyance were an agreement under which the defendant granted to the plaintiff for value a right of occupation of residential premises for the purpose of use as a residence, and if the Act otherwise applies, then the effect of s 25 of the Act would be to impose on the defendant the obligation to "provide and maintain the residential premises in a reasonable state of repair, having regard to the age of, rent payable for and prospective life of the premises". It would have been her obligation in 1996 to provide premises which were in a reasonable state of cleanliness and fit for habitation by the plaintiff (s 25(1)(a) and (b)). 60 If cl 2 of the deed of conveyance were a residential tenancy agreement to which the Act applied, it would also be a term of the agreement that the defendant should pay all rates, taxes or charges payable under any Act in connection with the premises other than charges for electricity, gas, excess water and any other prescribed charges (s 19). It would not have been competent for the parties to contract out of the Act (s 11). 61 Such a result would be unfair where the defendant could not afford to pay for such repairs and where she might not come into the enjoyment of the premises for decades. However, that would be by the way. In Australian Maritime Safety Authority v Quirk (1998) NSW ConvR 55-858, Bryson J (as his Honour then was) identified gross injustices which can arise under the Act where, for example, building leases of residential premises, often for very long terms such as 99 years, are granted and the parties impose the obligation to effect repairs on the landlord rather than the tenant and where it is not expected that the landlord's return from the letting would be sufficient to cover obligations to effect repairs and maintenance. The unfairness of such a result would not alter the position if the Act does apply. 62 Section 6(1)(a) of the Act provides that the Act does not apply to a residential tenancy agreement: " (a) if the tenant is a party to an agreement made in good faith for the sale or purchase of the residential premises. ... "

63 I do not need to decide whether the right of occupation given to the plaintiff by the deed of conveyance was a right given for value and hence a residential tenancy agreement within the meaning of the Act. It is certainly arguable that value was given for the right of occupation, either by the agreement by the plaintiff to transfer the freehold, or, if there is an implied promise by the plaintiff to pay outgoings, that is, if cl 2 does more than merely specify the conditions by which the plaintiff is entitled to occupy the property, by the implied promise on his part to comply with the conditions by making payments of outgoings. The reason why it is not necessary to decide that question is because, even if cl 2 of the deed of conveyance is a residential tenancy agreement within the definition of the Act, the Act does not apply to it because the tenant is a party to an agreement made in good faith for the sale or purchase of the premises. 64 The grant of a life tenancy or a lifetime right of residence was one of the terms on which the plaintiff agreed to transfer the land to the defendant in consideration of the defendant's promise to pay the arrears of council rates. I have already said why the Court can have regard to the true consideration in characterising the transaction. A sale connotes an agreement or bargain for the payment of a price in money (so as to distinguish the transaction from an exchange or barter) and a conveyance of the property (Miller v Gray; Ex parte (1892) 18 VLR 31 at 33; Commissioner of Stamps v Parbury Estates Limited (1913) 16 CLR 521 at 532-533; The Marquess of Bristol v Commissioners of Inland Revenue (1901) 2 KB 226 at 341). 65 As the grant of the right of occupation is a term of an agreement for the sale and purchase of the premises, the Residential Tenancy Act does not apply. It follows that the defendant is not obliged to carry out the repairs. If the plaintiff wants repairs carried out he must pay for them. That conclusion leads to a consideration of the Contracts Review Act. Contracts Review Act 66 Sections 7, 8 and 9 of the Contracts Review Act provide as follows: " 7 Principal relief

(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. (2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order. (3) The operation of this section is subject to the provisions of section 19. 8 Ancillary relief Schedule 1 has effect with respect to the ancillary relief that may be granted by the Court in relation to an application for relief under this Act. 9 Matters to be considered by Court

(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation,

(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. "

Unjust Contract: The Personal Property Agreement 67 So far as the personal property agreement is concerned, the ground upon which it is said to be unjust is that it gives the defendant the right to all of the plaintiff's personal property, including not only his stock in trade, but his personal effects. I will deal with the matters to which the court must have regard under subs 9(2) when considering the claim for relief in respect of the deed of conveyance. Most of those matters do not indicate that the contracts of 1 May 1996 were unjust. However, I accept that the terms of the personal property agreement were unjust. They are not the less unjust because neither party intended that the defendant would exercise rights of ownership of the plaintiff's personal property. The fact that the defendant could, if she were so minded, under that agreement demand the delivery up of all of the plaintiff's stock in trade at his business premises, and the delivery up of all goods stored at his residence, so as to be left with no personal possessions, is plainly substantively unjust. The plaintiff is entitled to an order setting aside or declaring void the terms of the personal property agreement of 1 May 1996. 68 It does not follow from the avoidance of the personal property agreement that the plaintiff should be required to pay to the defendant the sum of $7,800.25, which was expressed to be the consideration for the personal property agreement, and interest. The reason for that is because that payment, or the agreement to make that payment, was consideration for the deed of conveyance. I will hear counsel in due course in relation to the precise orders that should be made to provide relief in respect of the personal property agreement. Unjust Contract: The Deed of Conveyance 69 The substantive argument concerned the deed of conveyance. There was no issue that the deed of conveyance is a contract to which the Act applies. There is no issue that the application for relief under the Act is made in time. Essentially there were three respects in which it is claimed that the deed of conveyance is unjust. The first is on the grounds of alleged procedural injustice due to the plaintiff not understanding the transaction, and advantage having been taken of his deafness and difficulty with reading. For the reasons I have given, I do not accept that there was such procedural injustice. 70 However, it is also claimed that the contract was unjust on substantive grounds: the first being that the deed did not impose an obligation on the defendant to effect repairs; and the second being that the deed provided for the plaintiff to divest himself, for inadequate consideration, of his only available asset, thereby exposing himself to the real risk that if he could not carry out repairs to the property, such that it became uninhabitable, he would become homeless, with no asset which could readily be sold or mortgaged to provide him with means.

71 In considering whether the contract is unjust in the circumstances relating to it at the time it was made, the Court is required to have regard not only to all of the circumstances of the case, but also the public interest. I will return to that question in due course. The Court is required to have regard to each of the matters listed in subs 9(2), to the extent they are relevant. 72 The first is whether there was any material inequality in bargaining power between the parties. In this case, there was no such inequality in bargaining power for reasons I have already given. Nor was it a case in which the parties sought to bargain. 73 The second matter to be considered is whether or not prior to 1 May 1996, the contract, or its provisions, were the subject of negotiation. In this case, they were. 74 The third is whether it was reasonably practicable for the plaintiff to have negotiated for the alteration of or to have rejected any of the provisions of the deed. In this case, it was perfectly practicable for the plaintiff to have done so. It was at his behest that the contract was drawn up. 75 The fourth matter is whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or are not reasonably necessary for the protection of the legitimate interests of any party to the contract. As matters have turned out, it is difficult for the plaintiff to comply with the requirement of the deed of conveyance that he pay all outgoings on the property, particularly if he also has to effect repairs to keep the property habitable. His evidence, which was unchallenged, was that he cannot afford to carry out those repairs. In those circumstances, the requirement, if it be a requirement, that he pay outgoings is difficult for him to comply with. 76 The question of whether or not the provision imposed an unreasonably difficult requirement for compliance at the time it was entered into is a different question. From the perspective of both parties to the contract, and having regard to the representation made by the plaintiff to the defendant that he could afford to pay expenses other than the arrears of rates, the insertion of a term that obliged the plaintiff to pay all outgoings did not go further than was necessary to protect the legitimate interests of the defendant. She was not prepared to assume a liability for outgoings or a liability to effect repairs and there is no reason she should have done so. In any event, there is a question as to whether cl 2 imposes conditions on the plaintiff. It does not expressly require the plaintiff to pay all outgoings. Rather, the payment of outgoings is a condition of the grant of a continued right of residence in the property. As a practical matter, however, if the plaintiff is to continue to reside at the property he must pay outgoings. 77 The fifth matter is whether or not any party to the contract was not reasonably able to protect his or her interests because of his or her age, or the state of his or her physical and mental capacity. Whilst the plaintiff suffered from some physical incapacities, they were not such as precluded him from being able reasonably to protect his interests. 78 The next matter to be considered is the relative economic circumstances, educational background and literacy of the parties to the contract. There is little evidence that goes to this matter. Neither of the parties to the contract were in affluent economic circumstances. Their literacy and educational background, so far as it was disclosed in the evidence, does not suggest any great disparity between them on that score. 79 The next matter to be considered is the physical form of the contract and the intelligibility of the language in which it is expressed. Whilst the deed of conveyance is expressed in legal language, it is simple enough and was, in any event, explained to the parties by Mr Cleary. 80 The next matter is whether independent legal or other expert advice was obtained by the parties seeking relief. In this case, the plaintiff had the services of his solicitor. 81 The next matter is the extent to which the provisions of the contract were accurately explained to the party seeking relief and whether or not that party understood the provisions and their effect. For the reasons I have given, I am satisfied that the provisions were explained to the plaintiff, who did understand them and their effect. 82 The next question is whether any undue influence, unfair pressure or unfair tactics were exerted. In the present case, no undue influence, unfair pressure or unfair tactics were exerted on or used against the plaintiff. 83 The next matter is the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party. That criterion is not relevant in the present case. 84 The last of the criteria prescribed by subs 2 is the commercial or other setting, purpose and effect of the contract. The setting of this contract is that it was a domestic arrangement entered into so as to advance the plaintiff's intentions of putting his estate beyond the reach of claims by his sons. There is no commercial setting to the contract. 85 The contract was not unjust for failing to impose obligations on the defendant to carry out repairs. As I have said, she made it known to the plaintiff that she could not afford to assume such a burden. To have assumed such a burden would have been to assume a liability for unknown costs for an unknown period of time. The plaintiff might reside at the house for ten, twenty or thirty years. Even now, the cost of needed repairs has not been stated. The cost might be substantial. The plaintiff did not seek to establish that the burden of the cost of repairs was one which could be readily borne by the defendant. It does emerge from the evidence that the defendant and her husband now own their family home and I understand that it is unencumbered. What is not known is what their other financial resources are. For all that appears, the defendant might have to sell or mortgage her house to pay for the cost of repairs. It would not be just to impose such a substantive burden on the defendant. Particularly is that so where, as I have found, the plaintiff understood that if repairs were needed he would be required to pay for them. 86 However, that leaves the third ground concerning the substantial justice or injustice of the contract. It was an improvident transaction for the plaintiff to have entered into when he did not have the financial resources to pay outgoings and to effect repairs. It was done for a motive which appeared to him to have been good at the time. He entered into it with his eyes open. The question is whether the improvidence of the transaction is such that the contract was unjust in the circumstances in which it was made. 87 The defendant submitted that it was not and referred in that respect to the judgment of McHugh JA (as his Honour then was) in West v AGC (Advances) Ltd & Ors (1986) 5 NSWLR 610 at 621-622. McHugh JA said: " If a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice. The late Professor Peden who was largely responsible for the drafting of the Act has said that in accordance with his recommendation: ' ... the Act does not include the term "unfair" since this might have been interpreted to include situations in which, although the contract favours one party, there has been no abuse of power or unfair conduct on his part': Macquarie University Continuing Education Program, 'Contracts Review Act, 1980 - in practice' at 17. This passage brings out the important point that, under this Act, a contract will not be unjust as against a party unless the contract or one of its provisions is the product of unfair conduct on his part either in the terms which he has imposed or in the means which he has employed to make the contract. "

88 Counsel for the defendant submitted that the defendant did not engage in conduct depriving the plaintiff of a real or informed choice to enter into the contract. I accept that submission. Counsel submitted that the terms of the contract were reasonable as between the parties. The reasonableness of the terms depends upon one's perspective. It was not unreasonable for the defendant to have entered into the deed to give effect to her father's wishes on terms which imposed no obligations on her beyond paying arrears of council rates. On the other hand, from the plaintiff's perspective, the terms of the contract were not reasonable in that he became exposed to the risk of losing his only valuable asset if, because of his poverty, he was unable to maintain the property in a habitable condition. 89 Counsel for the defendant submitted that the contract could not be considered unjust simply because it was not in the interests of the plaintiff to have made it at the time. Counsel submitted that a contract is not unjust merely because it is improvident. 90 There is force in that submission. However, in Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41, Spigelman CJ, with whom Handley and Basten JJA agreed on this matter, warned against applying the observations of McHugh JA as if they were rules (at [73]). Rather, those observations identify relevant considerations which are entitled to significant weight, but do not resolve the assessment of whether a contract or its provisions was unjust in the circumstances in which the contract was made. 91 It was also submitted for the defendant that there was no unfair conduct on the part of the defendant in the means employed in the making of the contract. I accept that submission. It was submitted that there was no unfair conduct on the part of the defendant in the terms imposed. Indeed, it could not be said that the defendant imposed the relevant terms. I also accept that submission. I do not consider that there was any unfair conduct on the defendant's part in accepting what she described as a windfall in return for paying arrears of council rates, when, in doing so, she was falling in with her father's wishes. It must be borne in mind that her father's wishes were a recognition of services which she had provided which he acknowledged in his will. She could also expect to have received the property in due course under her father's will. 92 Nonetheless, this does not resolve the question of whether the contract was unjust. The criterion of unjustness is of uncertain content. It was said in Perpetual Trustee Co Ltd v Khoshaba that each case depends on its own facts and that a standard of justice being general and inherently variable is one which is intended to be assessed having regard to contemporary community standards about what is just (at [64]). Spigelman CJ observed (at [64]-[65]) that standards of what is just may have varied from 1986 when West v AGC (Advances) Ltd was decided. How that is to be determined is, with respect, not very clear. It is even harder to determine, in 2007, what were the contemporary community standards about what is just which prevailed in 1996, a time closer to the decision in West v AGC (Advances) Ltd. In truth, such a general and inherently variable standard requires what Handley JA described as an impressionistic and evaluative judgment. It must be emphasised, as Basten JA did at [115], that relief may be permitted under the Contracts Review Act in circumstances where the conscience of the defendant is not affected. 93 Whether a contract, or its provisions, is unjust also has to be decided having regard to the public interest. In my view, it is not in the public interest, and it is unjust, that the plaintiff should have been exposed to the risk, which has materialised, of being left homeless and without any assets of value because he gave away his only substantial asset, when he did not have the means to pay outgoings and to carry out repairs, without which the house is or will become uninhabitable. That was a risk inherent in the transaction in 1996. 94 The circumstances which have now emerged were reasonably foreseeable at the time the contract was made. The fact that the plaintiff knew what he was doing and can be considered to have been foolish, does not detract from the substantive injustice that he gave away his only substantial asset when he could not afford to keep up the repairs. The contract is substantively unjust, notwithstanding the defendant was innocent of any improper conduct or any overreaching. Had the defendant not entered into the deed of conveyance he would still have had to have sold the property or mortgaged it to pay outgoings and the cost of repairs. As he does not appear to have the income available to service a mortgage, the likelihood is that he would in any event have to sell the property, or have it sold by a mortgagee. Nonetheless, if that were to have eventuated he would be in the possession of a modest capital sum to provide for his needs. It is not in the public interest that the plaintiff be thrown entirely on the public purse to provide housing, if public housing is available for him. Nor is it in the public interest that he be left indigent. 95 In my view, the question of whether the contract was unjust is finely balanced. But on balance I consider that the deed of conveyance as well as the personal property agreement were unjust in the circumstances relating to those contracts at the time they were made. Terms of Relief 96 That conclusion enlivens the jurisdiction under s 7 to grant relief. It is not an automatic consequence of a finding that a contract is unjust that relief under s 7 be granted. In the present case, the plaintiff gave no evidence as to how he would repay the defendant the $7,800.25 which she paid on 17 June 1996 to clear the arrears of council rates. Through his counsel, the plaintiff said in closing submissions that he accepted that he ought, as a condition of relief, repay that sum. That was as far as the plaintiff went in dealing with the question of the terms upon which the transfer of the property from him to the defendant should be set aside. 97 It would not be just for that transfer to be set aside unconditionally. The plaintiff's offer was inadequate. I remain unconvinced how the plaintiff would repay the $7,800.25 which the defendant expended. Moreover, there is no reason that the defendant should be out of pocket at all. She was in no way at fault in the transaction. She has incurred expenses other than the payment of arrears of council rates in relation to the property. She would have incurred expenses in replacing the guttering and in contributing to the cost of removal of the fence. She has paid premiums on insurance policies. She may have incurred other expenses, none of which she would have incurred had the defendant paid due regard to his own position when entering into the deed of conveyance. 98 Section 7(1)(d) empowers the Court to make an order requiring the execution of an instrument that terminates or otherwise affects the operation of a land instrument which is unjust. The deed of conveyance is such a land instrument. The memorandum of transfer by which the defendant became the registered proprietor of the property was entered into as a consequence of the deed of conveyance. The Court can order the defendant to execute a memorandum of transfer of the land back to the plaintiff. I consider it appropriate that such an order be made. However, s 8 provides that the Court may grant ancillary relief and directs attention to Schedule 1. Under Schedule 1, the Court may also make such orders as are just in the circumstances with respect to any essential or related matter, including making orders for or with respect to the making of any disposition of property, the payment of money, and the creation of a charge on property in favour of any person. 99 It would not be just for the plaintiff to obtain a retransfer of the property, except on terms that require him to pay to the defendant all of the moneys expended by her on or in connection with the property, with interest at the prescribed rates from the date the defendant incurred such expenditure. Nor would it be just to make such an order without securing the plaintiff's obligation to pay such moneys to the defendant by an order creating an equitable charge over the property to secure moneys payable to the defendant. If the plaintiff is unable to raise funds needed to repay the defendant and to pay interest on the defendant's expenditure, then the defendant could apply for an order for sale to enforce the charge. In that way, the defendant would be no worse off than if she had not entered into the 1996 transaction. She would lose whatever windfall there was for her in the transaction, but that outcome is not unjust as it would provide the plaintiff with a modest capital sum to meet his ongoing needs. 100 There was no evidence of the extent of the defendant's expenditure on the property. I will stand over the further hearing of the proceedings to a convenient time to enable the defendant to adduce evidence of the expenses she has incurred in relation to the property and to produce a calculation of those expenses, together with interest, and so that counsel can bring in short minutes of order to give effect to these reasons. 101 It may be that, in that period, the parties can bridge their differences. The outcome of this litigation for the plaintiff will be that unless he can raise the funds necessary to repay the defendant her expenditure plus interest, she will be entitled to exercise her charge to sell the property to recoup those moneys. The outcome of the litigation for the defendant will be that, because repairs have not been effected to the property, the property will be sold and she will lose her present interest in the property. It might have been hoped that, as both parties were facing those eventualities, the present differences could have been resolved. However, that is not my concern. If the differences are not resolved between now and when the matter comes back for the purpose of making final orders, I will make orders of the kind I have identified. 102 The short minutes should also provide for the setting aside of the personal property agreement. 103 The plaintiff will obtain a measure of relief. However, the relief which will be given is not that which was sought in the amended statement of claim. The plaintiff has failed on many of the grounds which he advanced. In setting aside the instruments as unjust contracts, I have acquitted the defendant of any unjust conduct. 104 In my view, although the plaintiff is partially successful, he should not be entitled to his costs of the proceedings. The appropriate order is that there be no order as to costs to the intent that the plaintiff and the defendant each bear his and her own costs of the proceedings. Counsel should make provision for that in the short minutes to be brought in.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Family Provision Act 1982(NSW)

Residential Tenancies Act 1987(NSW)

At a glance

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Judgment (26 paragraphs)

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Legislation Cited (3)

Cases Cited (7)

Cited By (4)