Harrison & Anor v Schipp Cameron & Anor v Schipp [2001] NSWCA 13 | Case summary

Harrison & Anor v Schipp Cameron & Anor v Schipp [2001] NSWCA 13 | Case summary | Zoe

R B S Macfarlan QC & J P A Durack - Harrison & Emibarb Pty Ltd COUNSEL : I G Roberts - Cameron & Don Cameron Real Estate Pty Ltd N C Hutley SC & P J Brereton - Aegon Insurance Company (UK) Ltd & Ors M J Slattery QC, J M Hennessey & P J Gormly - D J Schipp Blake Dawson Waldron - Harrison & Emibarb Pty Ltd SOLICITORS : D Cameron in person Minter Ellison -Aegon Insurance Company (UK) Limited & Ors Barker Gosling - D J Schipp CATCHWORDS : JOINT VENTURES - breach of fiduciary duty - obtaining advantage without knowledge and informed consent of joint venture partner - taking advantage of vulnerability of joint venture partner and of dominion and influence gained over her - liable for loss thereby suffered by joint venture partner. FIDUCIARY RELATIONSHIP - whether trust and confidence necessary - not essential. AFFIRMATION OF TRANSACTION BROUGHT ABOUT BY UNCONSCIONABLE CONDUCT - must know facts on which rights depend and what the rights are. EQUITABLE COMPENSATION - loss on resale of joint venture property - whether too remote to be loss for which liable - equitable compensation not so limited. EQUITABLE COMPENSATION - whether each delinquent joint venturer liable only for amount received - whether interest only on amount received - both liable for whole loss and interest on whole amount. COSTS - indemnity costs - whether "relevant delinquency" - whether taking advantage of joint venture partner and unconscionability warrant indemnity costs - leads to compensatory or other relief and costs on normal basis - more necessary for indemnity costs. COSTS - Bullock order - whether warranted on facts - not warranted. EQUITABLE COMPENSATION - whether could be allowance in favour of delinquent joint venturers - not necessary to decide - amount not assessable and order for inquiry not warranted. JOINT VENTURES - United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 FIDUCIARY RELATIONSHIP - Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 Breen v Williams (1996) 186 CLR 71 Johnson v Buttress (1936) 56 CLR 113 AFFIRMATION OF TRANSACTION BROUGHT ABOUT BY UNCONSCIONABLE CONDUCT - Allcard v Skinner (1887) 26 ChD 145 re Howlett (1949) Ch 767 EQUITABLE COMPENSATION - Morgan Corporate Pty Ltd v GWG Leviny Pty Ltd (1995) ATPR 41-414 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 Kenny v Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 re Dawson; Union Fidelity Trust Co Ltd v Perpetual Trustee Co Ltd (1966) 2 NSWLR 211 O'Halleran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 33 ACSR 1 Duke Group Ltd (in liq) v Pilmer (1999) 31 ACSR 213 EQUITABLE COMPENSATION - Barnes v Addy (1874) 9 Ch App 244 CASES CITED: Catt v Marac Australia Ltd (1986) 9 NSWLR 639 Gluckstein v Barnes (1900) AC 240 Burdick v Garrick (1870) 5 Ch App 233 Wallersteiner v Moir (No 2) (1975) QB 373 Hungerfords v Walker (1900) 171 CLR 125 re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co (1966) 2 NSWLR 211 Holmes v Walton (1961) WAR 96 COSTS - indemnity costs - Degmam Pty Ltd (in liquidation) v Wright (No 2) (1983) 2 NSWLR 354 re Smith, ex parte Rundle (No 2) (1991) 6 WAR 299 Oshlack v Richmond River Council (1998) 193 CLR 72 Warman International Ltd v Dwyer (1995) 182 CLR 544 Hagan v Waterhouse (No 2) (1992) 34 NSWLR 400 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estae Pty Ltd (1992) 30 NSWLR 359 Colgate-Palmolive Pty Ltd v Cussons (1993) 46 FCR 225 COSTS - Bullock order - Bullock v London & General Omnibus Co (1907) 1 KB 264 EQUITABLE COMPENSATION - Warman International Ltd v Dwyer (1995) 182 CLR 544 Boardman v Phipps (1967) 2 AC 46 United States Surgical Corporation v Hospital Products Ltd (1983) 2 NSWLR 157 DECISION : (1) Appeals allowed in part. (2) Set aside the order that the first, second, third and fourth defendants pay the plaintiff's costs on an indemnity basis and order in lieu thereof that they pay the plaintiff's costs. (3) Appeals otherwise dismissed. (4) Cross-appeal dismissed as against the first and second cross-respondents. (5) Appellants pay 90 per cent of the respondent's costs of the appeals and cross-appellants pay the first and second cross-respondents' costs of the cross-appeal. (6) Reserve costs of the cross-appeal as between the cross-appellant and the third cross-respondents. (7) List the cross-appeal for mention on 12 March 2001.

12 On 25 February 1988 a joint venture agreement was signed at Mr Cameron's office. It had been prepared by Mr Harrison. The trial judge said that Mr Harrison quickly read it through to Mrs Schipp, but did not give a detailed explanation, and that he did not give a copy to Mrs Schipp to read. He found that Mrs Schipp signed it trusting Mr Harrison as a solicitor and relying on his expertise. 13 The joint venture agreement named Mrs Schipp and the companies of Mr Cameron and Mr Harrison as the participants. It recited that they had agreed to associate themselves in a joint venture "for the purpose of acquiring [the Mary Street property] for the purpose of building 3 units (the 'project')". It provided that Mrs Schipp, who was designated as "the trustee", would purchase the Mary Street property "for the purposes of the project in its [sic] capacity as trustee", would hold it on trust for the participants, and would if required transfer it to the participants. It provided that Mrs Schipp would lend "the trust" the full purchase price on which she would be paid 14 per cent interest and that "the balance of the funds required to complete the project" would be borrowed using the property as security. It recorded that Messrs Cameron and Harrison "shall be the Project Managers and shall not be paid any remuneration", without specifying more particularly what they were to project manage. It provided that the participants were "entitled to 1/3 profit and liable for 1/3 loss of the project", and that they covenanted to indemnify each other for any liability in excess of the participant's correct share and to act so as to distribute or bear income, profit and loss in the appropriate proportions. 14 The trial judge found that when she signed the joint venture agreement Mrs Schipp did not understand the significance of a trust. He found that she thought that the Mary Street property was hers and that she did not have any obligation to transfer it or hold it on trust for anyone else. He found that she was unaware that the joint venture agreement provided for the balance of the funds to be obtained by borrowing on the security of the property, and that she had been told and believed that the development would be funded by the pre-sale of townhouses off the plan. 15 Important to the relief in relation to the $90,880.04 taken by Messrs Cameron and Harrison and their companies as shares of the profit on the sale of the Mary Street property, the trial judge found - "She understood that in payment for Mr Cameron and Mr Harrison's efforts in managing and selling the development project, they would each be entitled to one-third of the profits upon the sale of the three units after the development was completed. She understood that Mr Cameron and Mr Harrison's rights to a one third share in the profits each was dependent upon and contingent upon the development and sale of the units. …. She simply believed that after the development was completed and in payment for Mr Cameron and Mr Harrison's efforts as project managers in relation to the development and sale of the three units, they would be entitled to one-third each of the profits upon the sale of the three units."

16 Contracts for the purchase of the Mary Street property were exchanged on 26 February 1988, now at a price of $150,000. Plans for the development of the property were prepared, and a development application was lodged with the council at the beginning of March 1988. Revised plans were submitted to the council in mid-April 1988. The purchase was completed on 3 May 1988. Mr Harrison acted on the transaction. 17 Further revised plans were submitted to the council in mid-May 1988, and development consent was granted on 1 July 1988. In September 1988 Mr Cameron gave instructions to prepare a building application. 18 For some time prior to September 1988 Mr Cameron had sought to market the proposed townhouses, it seems without success. In August 1988 he approached a lender for construction finance. But in early September 1988 he told Mrs Schipp that the townhouses would have to be smaller than expected and that there was some difficulty with the design of balconies. He said that the townhouses could not be sold for the price they had been asking, and that he thought the property should be auctioned. 19 There was then what the trial judge at one point described as pressuring Mrs Schipp to sell. It is desirable to go to other findings which place this in context. 20 Mr Cameron had had extensive experience in real estate sales and property development. Apart from his practice as a solicitor, Mr Harrison had engaged in commercial transactions including land developments on his own account, and was so engaged in 1987-88. Mr Cameron and Mr Harrison had been long acquainted, and for a time Mr Harrison's offices had been within the offices of Mr Cameron's real estate agency. In the past they had been associated in land developments. 21 In 1988 Mr Harrison's bank was concerned about his exposure to it, in particular as a result of a foreign currency loan, and wanted Mr Harrison to reduce his indebtedmess. Mr Harrison was selling off assets, using Mr Cameron as his agent where appropriate, to reduce his indebtedness. One of Mr Harrison's assets, held by himself and his wife, was the Kembla Street property. Development consent had been obtained for the development of the property, and instructions had been given to prepare a building application in early September 1988. 22 On 9 September 1988 Mr Cameron wrote to Mr Harrison's bank submitting a proposal for finance for the development of the Kembla Street property. The letter included that arrangements were being made to sell the Mary Street property at auction on 15 October 1988, that a particular sale price was expected, and that "the proceeds of this sale would be used to reduce the borrowings on 55-57 Kembla Street". 23 This assurance of sale of the Mary Street property preceded agreement to sale by Mrs Schipp, indeed was either before sale had been suggested to her or at a time when she was opposed to sale. The trial judge considered that the principal reason why Mr Cameron and Mr Harrison pressured Mrs Schipp to agree to sell the Mary Street property was to ease Mr Harrison's financial difficulties. He rejected the evidence of Mr Cameron and Mr Harrison to the effect that in March 1988 Mrs Schipp had expressed concern about the risk of the Mary Street development; that they had agreed that she would leave her money in but get it back plus interest whether or not there was a profit and not be responsible for any losses; that they had also said that they would make her a gratuitous payment out of any profit; and that they had signed a replacement joint venture agreement intended to reflect this. I will return to the replacement joint venture agreement: the trial judge found that it was prepared and signed well after the sale of the Mary Street property. 24 When Mr Cameron told Mrs Schipp that he thought the Mary Street property should be auctioned, she said that she did not want that to happen. On 12 September 1988 Mr Cameron telephoned Mrs Schipp and told her that Mr Harrison was at his offices with a sale contract to sign. Mrs Schipp went to Mr Cameron's offices, and there was a lengthy meeting in which Mr Cameron reiterated that the townhouses were too small and that he could not sell them off the plan, Mr Harrison said that they were too small and could not be sold for the money expected, and Mrs Schipp said that she could not believe that the project would not work and declined to sign the contract. At one point while Mr Harrison was temporarily absent Mr Cameron said that Mr Harrison really needed money for the bank. According to Mrs Schipp, she did not take much notice of this at the time. 25 Eventually, after being told that it was a good time to auction the property and that she really had no option but to sell, Mrs Schipp signed a selling agency agreement in favour of Mr Cameron's company and a document making Mr Harrison her "appointee" for the sale of the Mary Street property. There had been no discussions between Mrs Schipp and Messrs Cameron and Harrison as to what the latter would be paid, if anything, in relation to the Mary Street property when it did not proceed into a development. Mrs Schipp gave evidence that she did not know what they would be entitled to "under our arrangements", but that she did not believe it could be very much because the property had not been developed and she had paid for everything. 26 A bank diary note dated 26 September 1988, the content of which the trial judge found could only have come from Mr Cameron or Mr Harrison, recorded that Mrs Schipp, Mr Cameron and Mr Harrison had formed a partnership with the intention of developing the Kembla Street property. They had not: Mrs Schipp had not agreed to put any money into the Kembla Street property at this time. The trial judge inferred that Mr Cameron and Mr Harrison intended that all or a substantial portion of the money which had been invested to that time in the Mary Street property would come to be invested in the Kembla Street property. 27 The Mary Street property was sold at auction on 15 October 1988. It sold for $317,000. The sale was completed on 6 December 1988. Mr Harrison acted on the transaction. 28 For the present it is not necessary to go into how some of Mrs Schipp's money was left with Mr Cameron and Mr Harrison as the so-called loan and some was put towards the purchase of the Kembla Street property. In due course Mrs Schipp received, actually or notionally, her initial $150,000 and some expenses she had paid, interest on her initial $150,000, and one-third of the profit on the sale of the Mary Street property. Mr Cameron and Mr Harrison, or their companies, took the other two-thirds of the profit, being the $90,880.04 presently under consideration. 29 The grounds for relief by way of equitable compensation were summarised by the trial judge - "The Harrison/Cameron Interests are by this relief to be stripped of the profits they made in relation to the Mary Street transaction. The relief is grounded upon the defendants' breaches of fiduciary obligation and unconscionable conduct in procuring a share of the profits in reliance upon a document to which Mrs Schipp had not assented as regulating their joint venture agreement. The relief is further grounded upon the failure to inform Mrs Schipp of the respects in which the First Joint Venture document presented to Mrs Schipp, departed from the oral agreement she had entered into. Had the Joint Venture Agreement still been inchoate at this stage, this would have constituted a breach of the duty of the promoters of the Mary Street Joint Venture agreement to make full and fair disclosure of matters which to their knowledge were material to be known to Mrs Schipp. In that situation Mr Cameron and Mr Harrison would have been obliged to draw to Mrs Schipp's attention the fact that an express representation to her that they would share in profits once the units were developed and sold was not to be included as a term of the written Joint Venture Agreement which included no provision fettering their rights as immediately entitled to interests in the joint venture. On the basis that the parties had already reached a binding oral agreement, the conduct was a breach of the duties of good faith and disclosure owed by each joint venturer to the other. Mrs Schipp was entitled to be informed of the differences between the document presented to her for signature and the terms previously agreed. She was also entitled to a full and clear explanation of the whole of the document. At a more simplistic level, the Cameron/Harrison Interests are required to disgorge monies to which they were never entitled pursuant to the agreement entered into and to be stripped of profits they made on the transaction." 30 Apart from equitable compensation, the trial judge considered that Mr Harrison was in breach of a duty of care owed as a solicitor to Mrs Schipp, and that he and his company had engaged in misleading or deceptive conduct or aided and abetted such conduct in respect of her entry into the joint venture agreement. It does not seem that alternative grounds for relief were found as against Mr Cameron or his company. The alternative grounds for relief as against Mr Harrison and his company do not obviously lead to an order that Mrs Schipp be paid the $90,880.04. As will appear, I do not think it necessary to consider the alternative grounds for relief. 31 It can be seen why I earlier described as important to the relief in relation to the $90,880.04 the trial judge's findings to the effect that Mrs Schipp understood that the entitlement of Messrs Cameron and Harrison to a share in profits was dependent on the development and sale of the townhouses. The understanding must have flowed from the explanation of the arrangement in the meetings leading up to 25 February 1988, in particular that Mrs Schipp would purchase the property, that Mr Cameron and Mr Harrison would arrange for the building and sale of the townhouses at no cost to her, and that when the townhouses had been built and sold Mr Cameron and Mr Harrison would each have one-third of the profits. Mrs Schipp's evidence was relevantly that, even after signing the joint venture agreement, she understood she was buying the Mary Street property and it would belong to her, that she did not know the significance of a trust, and that she did not have to transfer it to anyone else or hold it on trust for anyone else. 32 In the trial judge's view, at the heart of the breach of fiduciary duty and unconscionable conduct, and whether prior to the agreement of 25 February 1988 the joint venture was an inchoate arrangement or (as the trial judge held) was then a final and binding agreement, it was necessary for Mr Cameron and Mr Harrison to disclose to Mrs Schipp that, contrary to the arrangement or agreement, the written joint venture agreement gave them a share in the profits even if the townhouses were not built and sold. They did not do so, and when the Mary Street property was sold before development they had to give up to Mrs Schipp the shares of profit they had taken. 33 If the premises be accepted, that is, the antecedent arrangement or agreement and failure adequately to disclose the change in the written joint venture agreement, then it seems to me that the conclusion follows. As proposed participants in a joint venture, or as parties to a joint venture, Mr Cameron and Mr Harrison and through them their companies owed fiduciary obligations to Mrs Schipp to refrain from pursuing, obtaining or retaining an advantage for themselves in relation to the venture without her knowledge and informed consent (see, for example, United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1). Under the antecedent arrangement or agreement Messrs Cameron and Harrison and their respective companies were not entitled to shares of profit if, as occurred, the Mary Street property was sold before development, and if the written joint venture agreement gave them the entitlement they gained that advantage in breach of the fiduciary obligations owed to Mrs Schipp. Separate regard to unconscionable conduct is not necessary. The challenges in the appeal were to the premises. 34 The submissions on appeal were that the sharing of profit should the development of the Mary Street property not proceed was not explicitly addressed in the meetings leading up to 25 February 1988, that there was adequate disclosure to Mrs Schipp of the contents of the joint venture agreement, and that Mrs Schipp understood and accepted that there would be a sharing of profit not only upon development and sale of the townhouses but, as the joint venture agreement provided, in any event. This involved contesting the trial judge's findings of fact, with particular regard to evidence of Mrs Schipp's conduct after the sale of the Mary Street property. 35 It is correct that the question of sharing of profit should the development of the Mary Street property not proceed was not explicitly addressed in the meetings leading up to 25 February 1988. All the discussions were of building and selling three townhouses and, according to Mrs Schipp, Mr Cameron said that she need not have any involvement beyond buying the property, and that his and Mr Harrison's role would "be as project managers so we would organise the development of the units and then once the units are developed and sold we would share in the profits one-third each". All Mrs Schipp had to do was "buy the property up front". 36 However, in my view the trial judge was correct in seeing the arrangement or agreement as one in which the entitlement of Messrs Cameron and Harrison to share in profits was dependent on the development and sale of the townhouses, and his finding that Mrs Schipp so understood the arrangement or agreement was therefore well available. Mrs Schipp was to buy the property, and so far as the discussions went was to be its owner without Mr Cameron or Mr Harrison sharing in the ownership. Mr Cameron and Mr Harrison were to arrange the building and sale of the townhouses, financing the building by selling the townhouses off the plan. The feasibility of this may be thought doubtful, but the building and sale of the townhouses was their responsibility, and Mrs Schipp was not concerned with it and in particular her ownership of the property was not to be compromised by use of the property as security. Mrs Schipp was investing her $150,000 in a way which would let Mr Cameron and Mr Harrison make some money, but they contributed by their work in arranging the building and sale of the townhouses and by their agency and legal work. Mr Cameron and Mr Harrison would get their shares of profit from the building and sale of the townhouses in return for this contribution. If the building and sale did not happen, Mrs Schipp was left as the owner of the property, and Messrs Cameron and Harrison had not earned shares in profit; there was no profit from the building and sale of the townhouses in which they could share. 37 That Mrs Schipp would own the property, not sharing ownership with Messrs Cameron and Harrison and not making it available as security, was significant in the arrangement or agreement prior to 28 February 1988. The change in that regard in the joint venture agreement is marked. The relevant aspect of the arrangement or agreement may be tested in this way. If the Mary Street property were sold, before development, shortly after its purchase by Mrs Schipp, why should Mr Cameron and Mr Harrison have shared in any profit equally with Mrs Schipp? Mrs Schipp had provided all the money and had risked its loss. Mr Cameron and Mr Harrison had not provided their contribution or risked any money. They may have done some work, for example acting on the purchase and obtaining development consent, for which they might have had a moral claim or even a legal claim in the nature of a quantum meruit, but no more. The corollary of the entitlement of Mr Cameron and Mr Harrison to one-third of the profits when the townhouses had been built and sold was that they would not have an entitlement to share in profits if the townhouses were not built and sold, and was in the circumstances the common sense and necessary answer to the question not explicitly addressed in the meetings leading up to 25 February 1988. 38 I have earlier referred to the trial judge's description of the signing of the joint venture agreement, in short that Mr Harrison quickly read it through to Mrs Schipp but did not give a detailed explanation and did not give her a copy. It was said that this did not take account of Mrs Schipp's evidence in cross-examination. 39 The cross-examination began - "Q. What do you say happened at this meeting? A. They just said 'We have the deed for the three of us to sign'. George had it in his hand and he put it on the table and he went through it with me and he said 'Dar dar dar dar dar dar dar dar in the way it's written' and he said 'That means whatever', and went through each little bit and said to sign this', and he said 'You sign there'. Q. So he went through each little bit and explained it, did he? A. Yes." 40 Mrs Schipp was then taken though the joint venture agreement, and as to most parts agreed that Mr Harrison gave "an explanation" or "his explanation" of it. When asked whether she understood the explanation, she answered that it "seemed to be alright, I guess", that "I guess I did", and in similar language. But she also said that she did not remember what the explanation or explanations was or were, that Mr Harrison went through the joint venture agreement very quickly, in effect that what a trustee was was meaningless to her. She continued in the belief that "I owned the land", and said that the document "was gibberish to me". 41 However, the suggestion can not readily be accepted that this evidence showed disclosure to Mrs Schipp of the content of the joint venture agreement adequate to bring home to her that the companies of Mr Cameron and Mr Harrison shared in profits even if the townhouses were not built and sold. Whatever Mr Harrison went through, the requisite knowledge and informed consent on the part of Mrs Schipp depended on the extent and accuracy of the explanation. That Mrs Schipp may have thought at the time that an explanation was given and that she understood it does not take matters very far at all. Going beyond the particular cross-examination on which reliance was placed, it was well open on the evidence to find that Mrs Schipp was not brought to anything like a proper understanding of the joint venture agreement. When she said that Mr Harrison went through it very quickly, and demonstrated that she did not understand such an important element as trusteeship, the trial judge was entitled to find that the explanation was inadequate and did not make her aware that, rather than being the sole owner of the Mary Street property with an arrangement to share profits upon the building and sale of the townhouses, she held the property on behalf of Mr Cameron and Mr Harrison as well as herself and had to share with them even if the townhouses were not built and sold. 42 The disclosure to Mrs Schipp of the contents of the joint venture agreement must, of course, be considered together with what was said to be evidence of Mrs Schipp's later understanding and acceptance that there would be a sharing of profits not only upon development and sale of the townhouses but, as the joint venture agreement provided, in any event. It is here that the trial judge's findings of fact were most directly contested. 43 I have earlier set out the findings to the effect that Mrs Schipp understood that the entitlement of Messrs Cameron and Harrison to a share in the profit was dependent on the development and sale of the townhouses. In cross-examination Mrs Schipp firmly adopted such an understanding. For example, she agreed that she believed that "every penny out of Mary Street was yours", that after the sale of the Mary Street property she knew that it was "all yours, subject to sale expenses" and that she had made a lot of money, and that she was excited at having made in the order of $150,000. 44 It was submitted on appeal, however, that much other evidence demonstrated that Mrs Schipp understood and accepted, after the sale of the Mary Street property, that Mr Cameron and Mr Harrison were entitled to share in the profit. So, it was said, she must have always so understood, and must have known of and assented to the contents of the joint venture agreement in this respect. 45 According to Mrs Schipp, shortly after the auction of the Mary Street property she met Mr Cameron and Mr Harrison and was told by Mr Cameron that she had - "… made a good profit of $40,000 but you are going to have a tax problem because you haven't owned the Mary Street property for more than twelve months. We don't have a tax problem as we can put ours through our businesses."

47 Following the occasion last mentioned Mrs Schipp had other conversations with Mr Harrison, in which she asked for interest on her $40,000 if it was left with Mr Cameron and Mr Harrison. After consulting Mr Cameron, Mr Harrison declined: he said that Mrs Schipp could have her money and would have to pay $20,000 in tax, or could leave the money with them without interest. Mrs Schipp decided to leave the money with them, and this was the money the subject of the equitable compensation of $40,000. According to Mrs Schipp's evidence, in one of the conversations she referred to Mr Cameron and Mr Harrison keeping "my share of the profits", and in explaining her decision she referred again to them taking "my share of the profits". 48 In December 1988 Mrs Schipp consulted Mr Baird, a solicitor, because she was concerned that she had not received any of her money from the Mary Street property. On 21 December 1988 she saw Mr Baird. She gave him a copy of the joint venture agreement. Although Mrs Schipp gave evidence that she told Mr Baird that, when she entered into the joint venture agreement, Mr Cameron and Mr Harrison said that the property was all hers unless they put up the townhouses, she did not tell Mr Baird that sharing the profit with Messrs Cameron and Harrison was contrary to her understanding. According to Mr Baird, Mrs Schipp told him that she wanted "my money out and my share of profits". 49 Mr Baird wrote to Mr Cameron on 22 December 1988 asking for an accounting and the return to Mrs Schipp of the money she had contributed plus interest. He did not make a claim to all the profit. 50 Again according to Mrs Schipp's evidence, at a meeting with Messrs Cameron and Harrison in late December 1988 or shortly thereafter she spoke of putting "my $40,000 share of the profits" into the Kembla Street property. This must have been her share in the profit from the Mary Street property. 51 The trial judge found that the replacement joint venture agreement was signed in late March 1989, and that it was proposed by Mr Harrison as necessary to "redo the earlier agreement" to reflect the new arrangement by which Mrs Schipp's profit from the Mary Street property was taken into the businesses of Messrs Cameron and Harrison in order to overcome the tax problem. According to Mrs Schipp the $40,000 was at the time referred to as "her profit", and the replacement joint venture agreement provided that Mrs Schipp would be trustee of the Mary Street property and that the companies of Messrs Cameron and Harrison would be the participants and would share the profits and losses. Mrs Schipp's evidence included that she understood that the replacement joint venture agreement would apportion the distribution of "my profit share" to Mr Cameron and Mr Harrison. 52 In June 1990 Mrs Schipp's new solicitor, Mr McInerney, wrote to Mr Cameron and Mr Harrison demanding payment of $20,000 from each on the ground that they had failed to account for "her share" of the profit from the Mary Street property. Mr McInerney did not make a claim to all the profit. 53 In May 1991 Mrs Schipp by her further new solicitor, Mr Lewis, again demanded $20,000 from each of Mr Cameron and Mr Harrison, and in August 1991 she brought proceedings against them to recover $20,000 from each, now on the ground that it had been lent to them. Once more there was no claim to all the profit. 54 The appellants relied on all this as showing acceptance by Mrs Schipp from the time of sale of the Mary Street property and over a long period that she was entitled to only part of the profit from the Mary Street property. They said that she spoke of a share rather than the entirety, and failed to assert when she might have been expected to do so that the written joint venture agreement departed from an antecedent arrangement or agreement, or to assert when she might have been expected to do so that Messrs Cameron and Harrison were not entitled to share in the profit from the Mary Street property because the townhouses had not been built and sold. They submitted that the correct finding was that Mrs Schipp understood that Mr Cameron and Mr Harrison were entitled to share in the profit even if the Mary Street property was sold undeveloped, an understanding that can only have come from adequate disclosure when the joint venture agreement was signed, and that in the light of this evidence the trial judge had "too fragile a base" ( State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 73 ALJR 306) for his finding as to Mrs Schipp's understanding. 55 But the evidence was not all one way, and Mrs Schipp's conduct after the sale of the Mary Street property, as with her evidence of the explanation of the joint venture agreement, must be seen in the wider context of what the trial judge considered to be Mrs Schipp's position of disadvantage and its exploitation. 56 While Mrs Schipp did not clearly tell Mr Baird that sharing the profit with Messrs Cameron and Harrison was contrary to her understanding, she did tell him that she felt she was entitled to more than a third. In her evidence in chief she said that she gave Mr Baird a copy of the joint venture agreement and asked him, "Are George Harrison and Don Cameron each entitled to two thirds of the profits?" Mr Baird recalled her saying that she felt that after she bought the property "the rules changed so that I really don't know what is happening right now", and recalled that Mrs Schipp was upset that the townhouses had not been built and the property had been sold. He could not recall whether he discussed with her any discussions she had at the time of entry into the agreement. The trial judge was entitled to see in this Mrs Schipp's belief that she was entitled to the whole of the profit, but confusion whereby she was not clear in her instructions to Mr Baird. 57 Mr Baird's rather hesitant advice to Mrs Schipp that Messrs Cameron and Harrison were probably entitled to shares in the profits was then moulded by the joint venture agreement. Even then, Mr Baird said that when he wrote to Mr Cameron he did not make a wider claim because he was unsure of Mrs Schipp's entitlement: he said he did not "have a lot of opportunity to cover all the refinements" and that he wrote "not being sure what she was entitled to out of that money at the end of the day". It remains that Mrs Schipp did not convey to Mr Baird a forthright entitlement to all the profit, but it is difficult to escape the view that Mr Baird was not as vigilant in her interests as he might have been and in the absence of better exploration by him of her position Mrs Schipp would not have been encouraged to question the "blithe assumption" to which the trial judge referred (see para [45] above). 58 The trial judge found significance in an account written by Mrs Schipp for her solicitor in April 1991. It included, after reference to the sale of the Mary Street property - "In original contract no provision was made for selling the site without having completed the original contract of building 3 town houses. I didn't realise at the time the original contract was made and so it has to be split in 3 ways - which gave me a big tax problem and them a big $40,000.00 each."

[9]

After paying out certain liabilities in respect of the sale of the land there was a sum of $120,000 remaining which was apparently disbursed by making equal payments of approximately $40,000 to each of yourself, Don Cameron and our client." 61 To go to the wider context, the trial judge said with particular reference to Mrs Schipp's involvement in the Kembla Street joint venture - "In this case, I formed the clear view that Mrs Schipp was in fact a person with a special weakness, readily apparent to Mr Cameron and Mr Harrison which sprang from her quiet, reserved and timid character, from her lack of commercial experience and, at the time, from the fact that she had no close family support. … Mrs Schipp's evidence which I accept, was that in the main she did not speak during most of the many meetings with Mr Cameron and Mr Harrison over aspects of the development of Mary Street. In my judgment, Mr Cameron and Mr Harrison came early to view Mrs Schipp as a very weak and naïve and vulnerable person who could simply be taken for granted and who was obviously way out of her depth in the commercial dealing which was involved. This was a case in which it was necessary to see Mrs Schipp in the witness box and to see Mr Cameron and Mr Harrison in the witness box to examine properly their relationship inter se and to form a judgment on whether their dealings from early days placed Mrs Schipp in a position where her weaknesses became more and more apparent to Mr Cameron and Mr Harrison. In my judgment, this did occur and Mr Cameron and Mr Harrison moved in to take unfair and unconscionable advantage of this weakness. Probably the weakness stemmed from Mrs Schipp's inherent character, she being a small person who was quiet and timid, and also from her lack of education. Thus, as time went by, Mrs Schipp's capacity to make decisions as to her own best interests became peculiarly susceptible to control and influence by Mr Cameron and Mr Harrison. She came to be extremely disadvantaged in her bargaining power as compared to that of Mr Cameron and Mr Harrison. She fell in with whatever Mr Harrison and Mr Cameron suggested. She was well out of her depth and they knew it. The relationship in respect which she had for their business experience was such that she, to their observation, became extremely susceptible to their influence as they knew. Their acts of manipulation were acts to which she was, as they believed, utterly vulnerable by reason of the personal domination which they had come to achieve over Mrs Schipp. The case presents as one in which Mr Cameron and Mr Harrison acquired such a special relation of domination, influence and superiority over Mrs Schipp as to render reasonable a presumption that the Kembla Street transaction was procured by Mr Cameron and Mr Harrison through the unconscientious use of their power over her."

62 The trial judge regarded the tax problem as something used by Messrs Cameron and Harrison to unsettle Mrs Schipp and persuade her to put money into the Kembla Street property. Although he did not in terms so find, consistently with this he must have considered that Mrs Schipp's belief that she was entitled to the whole of the profit from the Mary Street property was swamped by the assertion (the trial judge also called it a blithe assumption) that the profits were to be shared. So Mrs Schipp did not immediately question why Messrs Cameron and Harrison were entitled to share in the profits when the development had not proceeded, and spoke and acted accordingly. 63 The trial judge said that Mrs Schipp trusted estate agents and solicitors. The trust was challenged at the end of 1988, a matter which will assume much more importance when I come to her putting money towards the purchase of the Kembla Street property. She went to Mr Baird. But that was not very effective. As will appear, she was berated by Messrs Cameron and Harrison for having done so, and she brought his involvement to an end: see later in these reasons. In the environment described by the trial judge, as starkly illustrated by the short-lived and soon overcome independence of spirit at the end of 1988, the flower of insistence on the whole of the profit would hardly flourish. 64 As I have said, the trial judge did not consider either Mr Cameron or Mr Harrison a satisfactory or reliable witness, but he said that he accepted Mrs Schipp as having given evidence to the best of her recollection. He said that Mrs Schipp "has obviously lived with this case for some 9 or so years", and that in many instances her recollection had been shown to be faulty in the course of cross-examination, but that notwithstanding he accepted her evidence as given without any intention to mislead and as constituting her best recollection of the events which took place. There is disparity between the emphatic evidence given by Mrs Schipp that she believed the profit was entirely hers, and was excited by the large profit, and her conduct after the sale of the Mary Street property. It is not unknown for witnesses to be over-emphatic, with the core of their evidence remaining valid. It seems to me that the trial judge considered that Mrs Schipp's conduct was explained by the dominance gained over her by Messrs Cameron and Harrison, and that while she may not have held it with the clarity and intensity professed in her evidence after living with the case for a long time she nonetheless had the understanding presently in question in and after February 1988. I am not persuaded that the trial judge misused his advantage, an advantage of high order in the circumstances of this case, in seeing and hearing Mrs Schipp give her evidence, or that there was incontrovertible evidence to the contrary of his acceptance that she held the understanding. The trial judge's findings of fact remain good. 65 The challenged premises, in my view, should be accepted. There was an antecedent arrangement or agreement in accordance with Mrs Schipp's understanding as found, and failure adequately to disclose the change in the written joint venture agreement. Messrs Cameron and Harrison and their companies must give up to Mrs Schipp the shares of profit taken by them on the sale of the Mary Street property. 66 It was submitted for the appellants, it seems by way of outflanking the basis on which breach of fiduciary duty was found, that despite whatever occurred between the initial arrangement or understanding and the signature of the joint venture agreement, at the time when the property was sold before development Mrs Schipp was content for the profit to be shared equally. Her then acceptance of equal division, it was said, dealt with the situation which had not been explicitly addressed in the meetings prior to 25 February 1988. I do not think this advances the appellants' position. Mrs Schipp did not give fully informed consent at that time any more than at the time of the written joint venture agreement. Rather, on the trial judge's findings such acceptance of equal division of the profit as there was came about because the appellants took advantage of her vulnerability, particularly by assertion of the tax problem.

The $40,000 lent to Messrs Cameron and Harrison 67 The $40,000 was most of Mrs Schipp's one-third of the profit on the venture after the sale of the Mary Street property. It was received notionally in that, as earlier described, it was left by her with Messrs Cameron and Harrison in order to overcome the asserted tax problem. One-third of the profit was $45,440.02, although at the time it seems it was usually referred to as a round figure of $40,000, but by reason of payments to or for Mrs Schipp the amount left with Messrs Cameron and Harrison was reduced to either $40,540 or $40,000. It was agreed at the trial that the amount should be taken to be $40,000. 68 This came to be regarded as money lent. At about the end of January 1989 Mrs Schipp said to Mr Cameron that she "should have something in writing to show that you have my $40,000", and there was discussion of when it could be repaid. Letters were signed by Mr Cameron and Mr Harrison acknowledging indebtednesses of $20,000 and undertaking to repay. Mrs Schipp was not satisfied with the letters because they did not include that the undertaking was to repay within two years from 1 February 1989 and that the loans were to be interest free for that period. On 12 July 1989 replacement letters were signed with these added contents. 69 On any view Mr Cameron and Mr Harrison each had to pay Mrs Schipp $20,000 no later than 1 February 1991. The trial judge held that they were both liable in respect of the whole of the $40,000, not as money lent but as money "procured by unconscionable means", and allowed compound interest on the $40,000 from 30 January 1989. There was therefore some point in the appeal in relation to this amount. 70 When describing the money as money procured by unconscionable means the trial judge referred to an earlier portion of his reasons in which he said that, as part of pressuring Mrs Schipp to sell the Mary Street property and put money into the Kembla Street property, Messrs Cameron and Harrison represented to her - " … that unless Mrs Schipp agreed to their proposals as to a method of dealing with what was suggested as her limited share in the net profits procured on the sale by paying the same to them, she would have to pay capital gains tax. Regardless of the correctness or not of this advice, the representation was a ruse designed to unsettle Mrs Schipp and to ensure that Mrs Schipp's funds remained out of her hands so as to further the prospect that Mrs Schipp would be enticed into developing a further property owned by Mr Harrison and his wife." At another point in his reasons the trial judge said that - " … the pressure placed upon Mrs Schipp to agree to Mrs Cameron and Mr Harrison taking an interest-free loan of Mrs Schipp's alleged share of the Mary Street profits, amounted to unconscionable conduct." 71 It was not contested on appeal that, if there were unconscionable conduct in procuring the loans of $20,000 to each of Mr Cameron and Mr Harrison, then subject to affirmation of the transaction there would be liability to pay equitable compensation in the total amount plus interest from the date the loans were made. The basis for such liability need not be explored. The submissions on appeal were that there was no unconscionable conduct and that in any event unconscionability was absolved by affirmation of the transaction.

(a) Unconscionable conduct 72 Unconscionable conduct must be approached on the basis that the trial judge's general acceptance of the evidence of Mrs Schipp is not vitiated by error in relation to her understanding of sharing in the profit from the Mary Street property. The thrust of the submission was that at the material time there was no relationship of trust and confidence because Mrs Schipp considered that Messrs Cameron and Harrison had cheated her, and so that the finding of unconscionable conduct lacked foundation. 73 The submission in this respect overlapped with the submission in relation to the Kembla Street property. Recall of how the money was left with Mr Cameron and Mr Harrison, and a more full account of how money was put towards the purchase of the Kembla Street property, are appropriate. 74 I have earlier referred to the false information given to Mr Harrison's bank, prior to the sale of the Mary Street property, that Mrs Schipp, Mr Cameron and Mr Harrison had formed a partnership with the intention of developing the Kembla Street property. 75 Shortly after the auction of the Mary Street property came the tax problem discussion. Prior to this time Mrs Schipp may have been made aware of the Kembla Street property, but only at about the same time as the tax problem discussion did Messrs Cameron and Harrison broach the subject of her investing in it. Mr Cameron said that Mr Harrison had the Kembla Street property for sale at $600,000, that it was in an upmarket part of Wollongong and would be "a great superannuation thing for you", and that a syndicate was going to be made up to build an office block on it. Mrs Schipp said that she needed to think about it, and would possibly take her money out of Mary Street and put it in the bank until she found another property she could rent out. 76 There followed the conversation about interest on Mrs Schipp's $40,000 if she left it with Mr Cameron and Mr Harrison. The trial judge found that Mrs Schipp believed she had no choice but to pay $20,000 in tax or leave the money with them, and that she had no understanding of tax laws and relied on what Mr Harrison told her. 77 At the end of November 1988 Mr Harrison's bank was threatening the appointment of receivers and managers. He told the bank he was confident a sale of the Kembla Street property could be arranged within a couple of weeks. 78 Mrs Schipp was not told that settlement of the sale of the Mary Street property had taken place on 6 December 1988. The trial judge found that a letter to her from Mr Cameron's company dated 7 December 1988 purporting to account for the deposit was not received. The cheque for the proceeds of sale was made payable to Mr Harrison. He deposited it in an account specially opened with his bank styled "Solicitor Settlement Deposit Account" in trust for himself, Mr Cameron and Mrs Schipp. The deposit was paid into this account on 14 December 1988. 79 A few days after the settlement Mrs Schipp found out about it and telephoned Mr Harrison. He told her that the money was in the bank and "you can contact them and they will tell you where it is". Mrs Schipp was concerned - she said she "became very, very wary". Quite apart from the $40,000, she was to receive back her initial $150,000, and on any view Mr Harrison's response to her enquiry was not only discourteous but also cause for concern. 80 Mrs Schipp had to go to Queensland on a pre-arranged holiday. She telephoned Mr Baird, at his home, from Queensland, and told him that she was concerned and wanted him to "freeze" the bank until she returned. After her return to Wollongong she saw Mr Baird on 21 December 1988, see earlier in these reasons. Mr Baird wrote to the bank purporting to instruct it not to deal with the proceeds of the account without Mrs Schipp's authority, and on 22 December 1988 he wrote to Mr Cameron asking for copies of the settlement statements on the purchase and sale of the Mary Street property and the accounting earlier mentioned. He said that if an accounting was not received by 5 pm on 12 January 1989 Mrs Schipp's accountant would be appointed to investigate the matter, and called for release from the bank account without delay of "all moneys paid by [Mrs Schipp]" plus interest at 14 per cent. 81 It is evident that Mrs Schipp had become quite worked up. On 23 December 1988 she delivered a letter to Mr Baird - "Sorry to be a worry to you but is it at all possible to do more about getting my money out of George Harrison's name at the Bank today as your office will be closed all next week until 4.1.89 which will seem like a lifetime to me. George is usually at his until [sic] about 9.30am each day … Brian I am so worried about this situation - these two men should be exposed for what they have done to me, just who can you trust if you can't trust people in executive positions. I feel this matter is urgent."

82 On 23 December 1988 Mr Harrison wrote to Mrs Schipp saying that the money was in the bank account and he had asked the bank for a letter of confirmation. There was no accounting and no payment. 83 Mr Baird met Mr Harrison, it seems by chance, in a restaurant. Mr Harrison told Mr Baird that the money was safe and that Mr Harrison and Mr Cameron would look after Mrs Schipp and not to worry. He also told Mr Baird about the Kembla Street property and what a good thing it would be. On 24 December 1988 Mr Baird told Mrs Schipp of all this, saying that if he had a few dollars to spare he wouldn't mind putting his money in it. Mr Baird's involvement was quite ineffective. Indeed, Mrs Schipp said that while she remained wary she took some comfort from what Mr Baird said when it came to putting money towards the purchase of the Kembla Street property. 84 In late December 1988 Mrs Schipp telephoned Mr Harrison and asked him where her money was. At Mr Harrison's invitation, she then met Mr Harrison and Mr Cameron at Mr Cameron's office. She intended to tell them that she would not have any more dealings with them and wanted her money back. This apparently came to be called "the roaring meeting" at the trial, because Mr Cameron roared at Mrs Schipp in what the trial judge described as an extremely loud and harsh fashion, saying they had been humiliated by her going behind their backs to freeze the account. Mr Harrison said that nobody had ever done such a thing to him before, that Mr Baird should not have contacted the bank, and that he would not have handled the matter the way Mr Baird had handled it. Mrs Schipp gave evidence, and the trial judge accepted, that she came close to passing out, and was shocked and afraid. She said she was made to feel that she had done some something very wrong to Messrs Cameron and Harrison. 85 The immediate result of this demonstrates its marked effect on Mrs Schipp. She did not tell them that she would not have any more dealings with them and wanted her money back. Rather, she apologised to them, saying that she was sorry for what she had done and "I didn't mean to do this to you". Mr Baird's office was closed until 9 January 1989. When it reopened Mrs Schipp told Mr Baird that she had resolved her problems concerning Mary Street and did not need any further assistance from him. According to Mr Baird, she told him of her decision to invest in another development, which may have been the Kembla Street property although his recollection did not enable him to say. 86 The appellants' submissions included that the trial judge erred in accepting Mrs Schipp's evidence as to the roaring meeting. Although the tenor of Mrs Schipp's evidence was that Mr Zander, who later also participated in the Kembla Street joint venture, was not at the meeting, Mr Zander gave evidence of a meeting which the appellants said was the roaring meeting but without any roaring or near fainting - rather it was an occasion on which Messrs Cameron and Harrison expressed reservations about Mrs Schipp's participation and she said she wanted to participate. I do not think his Honour's findings should be overturned. He generally did not consider Mr Zander's evidence reliable, and did not accept much of it. If the meeting Mr Zander recalled was the roaring meeting, and it may well have been that Mrs Schipp's recollection as to his presence was incorrect, he said that there was "a fair bit of tension" when Mrs Schipp arrived, and that Mr Cameron immediately said "Why did you go to the solicitor? You should have come and seen us", and "There was no need for that". He recalled Mr Cameron saying , "Delcie, you were wrong to doubt us", and "We are here to help you", and when asked whether Mrs Schipp then apologised he said that he could "barely recall something of that nature". But Mr Zander also said that when the discussion began he moved away and started reading a magazine until the discussion involved him again. Although the trial judge did not specifically refer to Mr Zander's evidence when making his findings as to the roaring meeting, there is no reason to conclude that he overlooked it. He must have preferred Mrs Schipp's recollection and description to Mr Zander's less reliable and partially distracted recollection and description. 87 In the remainder of December 1988 and early January 1989 there were a number of meetings in which Messrs Cameron and Harrison pressed Mrs Schipp to put money into the purchase of the Kembla Street property. They said that she should know by now that they were there to help her. Mrs Schipp said at first that she was not very interested and just wanted her money out of Mary Street. At a later meeting Mr Cameron said she would be mad not to put money in and it would be her superannuation; he spoke about the benefits of the development, and said she could not go wrong. Mrs Schipp decided to "invest" $100,000. 88 At this time, that is, in early January 1989, Mr Harrison was under considerable pressure from his bank. The appointment of receivers and managers was threatened. A rollover at the end of January 1989 was looming. Sale of the Kembla Street property prior to that date to a syndicate of investors, Mrs Schipp being pressed to be one, would avert a crisis, and Mr Harrison was holding out to the bank that a sale was imminent. 89 On 7 January 1989 the contract for the sale of the Kembla Street property to Pyogrove Pty Ltd ("Pyogrove"), the joint venture company for the project, was signed. The purchase price was $600,000. Mrs Schipp was summonsed to a meeting with Messrs Cameron and Harrison at short notice for the signing. A copy was provided to Mr Harrison's bank. Settlement of the sale took place on 31 January 1989. Approximately $84,000 was paid to Mr Harrison's bank and approximately $508,000 was lodged with it on term deposit as security. The rollover was permitted. 90 The trial judge said - "It was only later, that is to say in early January, that Mrs Schipp determined to participate in the Kembla Street transaction. At this time Mrs Schipp, as I find, was keenly aware that she had not yet received the proceeds of her Mary Street investment from Mr Cameron and Mr Harrison. She gave evidence, which I accept, that in early January she saw herself in a position of having to deal with Mr Cameron and Mr Harrison in order to get her money back. She gave evidence, which I accept, that she could not have walked away and that she really did not know precisely how the new transaction which was being discussed would work 'but all I knew was that I had to hang in there'. At this time, she said that she was extremely wary of Mr Cameron and Mr Harrison. Mrs Schipp was very closely cross-examined as to how she came, shortly thereafter, to enter a new joint venture investment with Mr Cameron and Mr Harrison in circumstances in which she believed that Mr Cameron and Mr Harrison had effectively tricked her in relation to Mary Street. The transcript includes the following: 'Q. You would have His Honour believe that you, in effect, meekly accepted the theft of $80,000 by these two gentlemen and entered into a new investment with them; that's correct, isn't it? A. After they had manipulated me in such a way that there just didn't seem any other way out. Q. And after this manipulating had taken place by 3 January you trusted them again, you would tell His Honour; correct? A. What else could I do? Q. You could have distrusted them, couldn't you? A. … what you have to believe, understand, Mr Hutley, they had my money … Q. I think the settlement. I think I told you the settlement was on 6 December. A. The settlement was on 6 December. Here it is into January. I haven't even had an accounting of any of the money. I hadn't even had a cent of the money given to me. I had to hang in there.' [Emphasis added]" 91 Later the trial judge said, referring extensively to other evidence she gave, that he accepted Mrs Schipp's evidence to the effect that Mr Cameron and Mr Harrison had so manipulated her as to restore her confidence in them. The evidence included that Mrs Schipp was manipulated "in such a way that, yes, I had to feel trustworthy of them again", that Mr Cameron and Mr Harrison had "made me out to be the problem" (referring to the roaring meeting), and that "there just didn't seem any other way out". The trial judge accepted that by 3 January 1987 Mrs Schipp "had determined to invest in the Kembla Street venture, in retrospect a decision based upon her confidence being restored by a manipulation of her by Mr Cameron and Mr Harrison". 92 It is, I think, desirable to set out more fully some of this evidence given by Mrs Schipp. 93 After Mrs Schipp said that she became wary of Messrs Cameron and Harrison, she was asked whether she had the trust in Mr Harrison that she would have in a solicitor: she answered, "Well, he was a solicitor and he should be trusted, should be able to be trusted". She described Mr Harrison as her solicitor in the venture. A little later - "Q. Did you tell his Honour that you relied on Mr Harrison as your solicitor after 24 December 1988? A. He still had the money. He was the solicitor. He had the money in his trust account. I had to rely on him. Who else was I to rely on if I couldn't, if I couldn't rely on him then? I had to hang in there and I had to rely upon him and rely upon the fact of him being honest in this affair to get my money back. Q. But, madam, you thought he had cheated you, didn't you? A. I felt in my heart that he had. Q. A person who cheats you is not acting in your interests, are they - or is he or her? A. Well, you wouldn't think so. Q. Right. You didn't think so you tell his Honour, did you? A. As I said to you, I had to rely on him. Now whether I trusted him or whether I didn't trust him, I don't think is the issue. The fact is that he had my money in his trust account in his bank and I had to rely on him so that I could get my money back."

94 Later again Mrs Schipp affirmed that she believed she had been cheated, and her evidence continued - "Q. So you still, on 3 January, tell his Honour you believed that you were dealing with two men who had cheated you out of $80,000; correct? A. Yes. Q. I'm sorry, how could you trust such a person as your solicitor? A. They manipulated me in such a way that I did put trust in them again. A. Did you trust them to be honest with you? Q. Yes Q. These two gentlemen whom you tell his Honour had cheated you out of $80,000? A. Yes. Q. You believed they cheated you out of $80,000, but on 3 January you decided that thereafter you would trust their honesty; that is what you tell his Honour. A. As I have said to you before, there was a lot of manipulating going on and they manipulated me in such a way that they got my confidence back so that I would put my money into Kembla Market Street. … Q. Did you come to believe you were dealing with honourable men, that is Messrs Cameron and Harrison? A. Mr Harrison is a solicitor and I consider that - and my thoughts from even a small child was that you look up to a solicitor, you trust them and you honestly trust them with your life. That is my understanding of a solicitor. Q. Even ones who cheat you? A. Yes, he did and that was my understanding that he did cheat me, but they manipulated me, my thinking. They made me out to be the problem and, yes he got my confidence back for me to trust him again." 95 According to Mrs Schipp, in this respect clearly enough accepted by the trial judge, at a meeting with Mr Cameron and Mr Harrison in late January 1989 she was shown some calculations said to be of her entitlement from the Mary Street property, and was told that the figures were on the basis that she was contributing $100,000 towards the Kembla Street property and lending them her $40,000 profit from the Mary Street property: "We'll take the $40,000 into our business, this should sort out your problem with being taxed on your profit". At or about this time there was mention of the need to "redo the earlier agreement to reflect this arrangement", and on the trial judge's findings from this came the replacement joint venture agreement. Also at or about this time there was the discussion about having something in writing concerning the $40,000. For the present it is not necessary to go further: in the result, the $40,000 was left with Messrs Cameron and Harrison and was treated as money lent to them. 96 I have earlier set out a passage from the reasons of the trial judge in which he described the domination he found to have been acquired, and there were other passages to the same effect. In his Honour's view, the confidence which Mrs Schipp said she regained was in truth the product of Mrs Schipp's will being overborne - "Mrs Schipp's will was not independent and voluntary because it was overborne by the conduct of Mr Cameron and Mr Harrison. This was clearly the case during the 'roaring meeting'. It was clearly the case during the general manipulation of Mrs Schipp by the Cameron Harrison Interests. Mrs Schipp was manoeuvred by the 'Tax Problem Discussion', by the tactics of placing her in a high state of anxiety as to the whereabouts of the settlement funds from the Mary Street sale, and by coming to believe that the only way she would ever receive her entitlement to the Mary Street proceeds was by dealing in relation to Kembla Street, into a position where her will was neither independent, nor voluntary because in truth it was overborne." 97 There is no doubt Mrs Schipp became distrustful of Messrs Cameron and Harrison, and considered that they had cheated her. In finding that they regained her confidence, I do not think the trial judge meant that there was unalloyed trust as at the time Mrs Schipp agreed to put money into the Kembla Street property. That would not be consistent with his Honour's acceptance of Mrs Schipp's evidence to the effect that she "had to hang in there", inherent in which was concern that she had not been properly treated in connection with the Mary Street property. But there was confidence in the sense of preparedness to leave money with Messrs Cameron and Harrison despite the experience in relation to the Mary Street property, preparedness moulded in part by the belief that (as Mrs Schipp said in her evidence) she was the problem, in part by the belief that she had no real choice, but on the trial judge's findings the product of the domination which Mr Cameron and Mr Harrison had come to exercise over Mrs Schipp. The domination itself overcame the distrust and brought qualified confidence. 98 A relationship of trust and confidence, while often pointing towards a fiduciary relationship (eg Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 69; United Dominions Corporation Ltd v Brian Pty Ltd at 12, 16) is not essential for a fiduciary relationship. Thus in Hospital Products Ltd v United States Surgical Corporation at 69 Gibbs CJ observed that fiduciary relationships are of different types, carrying different obligations, and that a test which might seem appropriate to determine whether a fiduciary relationship existed for one purpose might be quite inappropriate for another purpose: his Honour continued - "In the decided cases, various circumstances have been relied on as indicating the presence of a fiduciary relationship. One such circumstance is the existence of a relation of confidence, which may be abused: Tate v Williamson [(1866) LR 2 Ch App 55, at 61]; Coleman v Myers [(1977) 2 NZLR at 325]. However, an actual relation of confidence - the fact that one person subjectively trusted another - is neither necessary for not conclusive of the existence of a fiduciary relationship; on the one hand, a trustee will stand in a fiduciary relationship to a beneficiary notwithstanding that the latter at no time reposed confidence in him, and on the other hand, an ordinary transaction for sale and purchase does not give rise to a fiduciary relationship simply because the purchaser trusted the vendor and the latter defrauded him." 99 The same is evident from the judgment of Gaudron and McHugh JJ in Breen v Williams (1996) 186 CLR 71 at 107, where their Honours say - 'However, the categories of fiduciary relationship are not closed [H ospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96], and the courts have identified various circumstances that, if present, point towards, but do not determine, the existence of a fiduciary relationship. These circumstances, which are not exhaustive and may overlap, have included: the existence of a relation of confidence [ Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 69, citing Tate v Williamson (1966) LR 2 Ch App 55 at 61; Coleman v Myers (1977) 2 NZLR 225 at 325]; inequality of bargaining power [ Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 69-70]; an undertaking by one party to perform a task or fulfil a duty in the interests of another party [ Reading v The King [1949] 2 KB 232 at 236; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-97]; the scope for one party to unilaterally exercise a discretion or power which may affect the rights or interests of another [ Frame v Smith (1987) 42 DLR (4th) 81 cited in LAC Minerals Ltd v International Corona Resources (1989) 61 DLR (4th) 14 at 62-63]; and a dependency or vulnerability on the part of one party that causes that party to rely on another [ Johnson v Buttress (1936) 56 CLR 113 at 134-135]." (citations included) 100 The circumstance last mentioned in this passage from Breen v Williams is of particular relevance in the present case. In Johnson v Buttress (1936) 56 CLR 113 at 134-5 Dixon J explained the equitable jurisdiction to set aside an alienation of property as the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise of affecting the alienor's will or freedom of judgment as to the matter, and said that - " … the doctrine which throws upon the recipient the burden of justifying the transaction is confined to no fixed category. It rests upon a principle. It applies whenever one party occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependence or trust on his part. One occupying such a position falls under a duty in which fiduciary characteristics may be seen. It is his duty to use his position of influence in the interest of no one but the man who is governed by his judgment, gives him his dependence and entrusts him with his welfare. When he takes from that man a substantial gift of property, it is incumbent upon him to show that it cannot be ascribed to the inequality between them which must arise from his special position." 101 Thus the assumption in the appellants' submission that, absent a relationship of trust and confidence, there can not have been unconscionable conduct warranting equitable intervention, is flawed, and the submission that there was no relationship of trust and confidence as to the $40,000 and so that the finding of unconscionable conduct lacked foundation does not meet the basis of the appellants' liability. There were ample grounds in the trial judge's findings for the conclusion that the appellants gained the use of the money by unconscionable conduct. It was Mrs Schipp's money, but they held it. They wanted to use it for their own purposes, to help ease the financial strain on Mr Harrison. They deterred Mrs Schipp from taking her money by asserting the tax problem, and encouraged her to leave the money with them by offering to treat it as their money. If Mrs Schipp had been liable to pay tax on her share of the profit, this would not have solved her problem, or at least not without either fraud on the revenue or Mrs Schipp being left at the mercy of Messrs Cameron and Harrison for any share in the profits of a venture in which her money alone had been invested. It was, as the trial judge found, a ruse, with the objective of getting the use of Mrs Schipp's money. And they exercised over her the domination they had acquired, in particular by so successfully upbraiding her for asserting rights through Mr Baird that she dispensed with Mr Baird's services. Mrs Schipp was vulnerable, and advantage was taken of her vulnerability. Needless to say, the $40,000 was not repaid at the end of the two years, a matter not irrelevant to the circumstances in which it was obtained.

(b) Affirmation 102 It was submitted that affirmation came from two matters. First, together with the other investors in the Kembla Street property Mrs Schipp contributed to interest payable to the financier of that project, and in about September 1990 her son on her behalf authorised Mr Cameron and Mr Harrison to deduct her contribution from the $40,000. Secondly, Mrs Schipp brought the August 1991 proceedings to recover $20,000 from each of Mr Cameron and Mr Harrison as money lent. It was said that from September 1990, and certainly by August 1991, Mrs Schipp was free from any domination and influence of Messrs Cameron and Harrison, and at the latter date was being advised by independent solicitors. So, it was said, she affirmed the transaction by directing the use of the money and then suing to recover it. 103 If a loan is brought about by unconscionable conduct, later recognition of the fact of a loan does not of itself mean that the unconscionable conduct is ignored. Entitlement to equitable relief in relation to the unconscionable conduct may be lost if, by reason of particular acts or the lapse of time, the plaintiff elects or is taken to have elected not to avoid the transaction, or put another way if the plaintiff affirms or is taken to have affirmed the transaction ( Allcard v Skinner (1887) 26 Ch D 145 at 186-9). But if particular acts are relied on the plaintiff must know the facts on which his rights depend and what the rights are ( re Howlett (1949) Ch 767), and recognition of the loan will not necessarily amount to election or affirmation. 104 Affirmation was not pleaded as a defence by Messrs Cameron and Harrison and their companies. The matter was not dealt with by the trial judge. Mrs Schipp's submissions on appeal passed it by. Although Mrs Schipp did not so submit, it sees to me very doubtful that the appellants should be permitted to rely on affirmation in the appeals when, had it been raised at the trial, Mrs Schipp might have given or called evidence which would have prevented the point from succeeding (see for example Coulton v Holcombe (1986) 162 CLR 1 at 7-8). It does not matter, because it is plain enough that Mrs Schipp's position was not given adequate consideration by her solicitors prior to October 1991. Only with the letter of 9 October 1991 to which I earlier referred did there come recognition that she might have rights in equity, until then the superficial understanding of her rights apparently going no further than the treatment of the $40,000 as a loan. Assuming that her entitlement to equitable compensation could be lost in the same manner as an entitlement to avoid a transaction, and there was really no argument on appeal in relation to affirmation, I do not think it was lost.

The $100,000 put towards the purchase of the Kembla Street property 105 This was part of Mrs Schipp's investment in the Mary Street property, repaid following its sale. The repayment was effectively notional, because a cheque for $100,000 in favour of Jabele Pty Ltd, a shelf company acquired by Mrs Schipp on the advice of the accountant to whom she had recently transferred her work as the vehicle for her investment in the Kembla Street property, was endorsed by her to Pyogrove. 106 The trial judge said that the relief by way of equitable compensation was founded on breaches of fiduciary obligation and unconscionable conduct. As well, it was found that Mr Harrison was in breach of duties of care owed to Mrs Schipp, and that there was misleading and deceptive conduct by Mr Cameron and Mr Harrison and their respective companies with the natural persons participating in the contraventions of the companies and vice versa. It is sufficient for present purposes to focus on breach of fiduciary obligation. 107 The breaches of fiduciary obligation were found to have resulted in Mrs Schipp putting her money towards the purchase of the Kembla Street property. The trial judge said that the breaches "began at the time she was persuaded that Mary Street should be sold and continued through acts of manipulation and non disclosure", and summarised them - " Conduct Determining in early 1988 that Mary Street should be sold, not because of any particular concern as to the viability of Mary Street, but because of Mr Harrison's pressing financial agenda. Failing to inform Mrs Schipp of these matters and positively misrepresenting to Mrs Schipp that the property required to be sold by reason of its non viability. Breach This conduct constituted a breach of the duties of good faith and disclosure owed by each joint venturer to the other. It was likewise a breach of the duty of each party to refrain from pursuing, or obtaining, or retaining for himself any collateral advantage in relation to the joint venture without the knowledge and informed consent of the other parties. Conduct · The acts of manipulation of Mrs Schipp from the Children's Meeting onwards as outlined in the judgment. They constituted a course of conduct calculated to, and which in fact did in fact, play a very material part in inducing Mrs Schipp to enter into the Kembla Street Joint venture. These acts included the use of Mrs Schipp's share of the profits on the Mary Street sale as a bargaining chip to induce her to have to deal on Kembla Street in order to be paid out. Breach This conduct constituted breaches of the fiduciary obligations of the Mary Street venturers in respect of the proceeds of the sale of the property. Cf Deane J in Chan v Zacharia (1984) 154 CLR 178 at 197 "notwithstanding [the termination of the joint venture] the good faith and honourable conduct due from each joint venturer to the other persisted for the purposes of winding up the affairs of [the Mary Street Joint venture]. The same conduct constituted a breach by Mr Harrison of his fiduciary obligations as a solicitor. He had a continuing duty to account to Mrs Schipp forthwith in respect of her due entitlement upon completion of the Mary Street sale. That duty is confirmed by the existence of the Solicitors Settlement Deposit Account. Conduct The same conduct, but now complemented by the failure to advise Mrs Schipp of material facts known by Mr Cameron and Mr Harrison and required to be known by Mrs Schipp in order that she might be in a position to properly assess the advantages and disadvantages of participating in Kembla Street. These failures to disclose and material misrepresentations have already been set out - [See para 645 subparagraphs 15, 16, 17, 19 and 20] Breach This conduct constituted breaches of the fiduciary obligations of Messrs Cameron and Harrison as promoters of the Kembla Street Joint Venture. Conduct This same conduct again complemented by the failure to advise Mrs Schipp of material facts known by Mr Harrison and required to be known by Mrs Schipp in order that she might be in a position to properly assess the advantages and disadvantages of participating in Kembla Street. Breach This conduct constituted breaches by Mr Harrison of fiduciary obligations arising from Mr Harrison's dual roles as solicitor for the joint venture vehicle, Pyogrove, and through it for the joint venturers, as a party, requiring him to make full and fair disclosure of all matters within his knowledge which were material to the making of a decision by Mrs Schipp as to whether to enter into the Kembla Street Joint Venture." 108 The failures to disclose and material misrepresentations in para 645 to which his Honour referred were - "15. Mr Cameron and Mr Harrison failing to advise Mrs Schipp of material facts known to them, and required to be known by her, in order that she might be in a position to assess properly the advantages and disadvantages of participating in the Kembla Street venture. These included - Mr Cameron and Mr Harrison failing to inform Mrs Schipp of the fact that despite strenuous efforts to procure pre-leasing commitments, none had been procured.

Mr Cameron and Mr Harrison ensuring that Mrs Schipp was made to feel that she was the problem, was intimidated and severely dressed down for approaching her own solicitor in late December 1988, and at the very same time when she had still not received any of the monies from the sale of Mary Street, was left in no doubt but that any further approach to her own solicitor would likely mean the end to her participation in the Kembla Street development. This was a factor calculated to, and which did in fact, inhibit Mrs Schipp from seeking outside legal advice on the Kembla Street development. 17. Mr Cameron and Mr Harrison failing to suggest to Mrs Schipp that she should seek independent legal advice in relation to the Kembla Street transaction. … 19. The failure of Mr Cameron or Mr Harrison to explain to Mrs Schipp precisely what AGC's requirement that she give a guarantee of the Kembla Street borrowings involved. 20. The failure of Mr Harrison to give to Mrs Schipp any or any proper explanation of the risks involved in the short completion period provided for in the Kembla Street Purchase Contract." 109 The appellants' submissions on appeal did not address all the matters in which the trial judge found breaches of fiduciary obligation. Their focus was on how Mrs Schipp came to participate in the purchase of the Kembla Street property. At their heart was the submission that Mrs Schipp's participation can not have involved breach of fiduciary duty or unconscionable conduct on the part of Messrs Cameron and Harrison because Mrs Schipp had given inconsistent explanations for her participation, one of coercion and the other of misrepresentation, neither of which could be accepted when she had come to mistrust Messrs Cameron and Harrison as a result of the Mary Street transaction. 110 By coercion, the appellants' description and not found in the trial judge's reasons, the appellants meant Mrs Schipp's evidence that she felt she had to "hang in there", which was said to be inconsistent with a misrepresentation explanation whereby, having had her confidence in Mr Cameron and Mr Harrison restored, Mrs Schipp relied on what she was told (or not told) about the Kembla Street project. It was said that the trial judge had not addressed the inconsistency, and that his Honour's findings as to Mrs Schipp's participation in the Kembla Street joint venture were themselves inconsistent. 111 Such an inconsistency in the trial judge's reasons would be unlikely, and I do not think it is properly to be found. Even if it were found, in the circumstances revealed in the evidence as accepted by the trial judge it is not easy to see that conduct whereby Mrs Schipp felt she had to "hang in there" would be any more or less unconscionable, or in breach of fiduciary obligation, than conduct taking advantage of her restored confidence. But the submission misapprehends the trial judge's findings. Referring back to the distrust, confidence and domination considered in relation to the $40,000 lent to Messrs Cameron and Harrison, it was not a case of either distrust or confidence, but of a more complex confidence brought about by the exercise of the appellants' domination over Mrs Schipp overcoming the distrust. The vital ingredient in the breaches of fiduciary obligation was that Messrs Cameron and Harrison took advantage of Mrs Schipp's vulnerability. This underlay the conduct which the trial judge enumerated, and in particular his Honour considered that what he described as the acts of manipulation of Mrs Schipp from the children's meeting onwards played a very material part in inducing Mrs Schipp to participate in the Kembla Street joint venture. (The meeting which at the trial came to be called the children's meeting was in September 1988, when Mrs Schipp was being pressed to sell the Mary Street property.) 112 After creating the categories of coercion and misrepresentation and ascribing inconsistency to them, in the appellant's' submissions each was said to be untenable as an explanation of Mrs Schipp's participation in the purchase of the Kembla Street property. 113 As to coercion, it was said that there was nothing about having to "hang in there" in Mrs Schipp's affidavit evidence in chief, or in the account written for her solicitor in April 1991, and that she would have continued to receive advice from and instructed recovery action by Mr Baird if she had felt coerced; it was also said that coercion could not stand with the fact that she asked Mr French, who provided bookkeeping services to Mr Cameron, and Mr Zander whether the project was likely to be profitable, because asking them suggested free choice. It was said that coercion could not stand with the trial judge's finding that at a meeting on 6 January 1989 Mrs Schipp was told that she need not come into the project unless she was completely happy, but said that she wanted to, "I would like to make more money like we did on Mary Street". And it was said that Mrs Schipp's willing participation was supported by her later agreement in October 1989 that the syndicate should reject an offer of $750,000 for the Kembla Street property and should continue with its development. 114 As to misrepresentation, it was said that Mrs Schipp can not have been induced to put money into the Kembla Street property when she did not trust Messrs Cameron and Harrison and thought they were cheats, and had been shocked and afraid at the roaring meeting; the asserted restoration of confidence was described in the submissions as absurd. It was said that Mrs Schipp had received advice about the project from other sources, that is, by what Mr Baird said on 24 December 1988 and by her asking Mr French and Mr Zander whether the project was likely to be profitable. And it was said that a significant factor taking Mrs Schipp into the Kembla Street joint venture, as a matter of common sense, was anticipation of repeating the success of the Mary Street project, that is, a desire to make money and an opinion that it was a worthwhile project sufficient to outweigh her distrust of Messrs Cameron and Harrison. 115 As I have indicated, I do not think the stark division between coercion and misrepresentation is warranted by the trial judge's reasoning, or by the evidence. The way in which untenability was put forward did not meet the basis on which the trial judge found breaches of fiduciary obligation whereby Mrs Schipp put money towards the purchase of the Kembla Street property. 116 The trial judge observed at one point that Mrs Schipp "cannot now and probably could not then give a clear explanation" of the parts played in her motivation by having to "hang in there" and an expectation of profit. He considered that there was an ongoing exercise of dominance and influence by Mr Cameron and Mr Harrison over the vulnerable Mrs Schipp, and that the Kembla Street transaction was procured through their unconscientious use of their power over her, see in particular the passages from his Honour's reasons set out earlier in these reasons. 117 The detailed enumeration of aspects of breach of fiduciary obligation which his Honour undertook does not detract from this, and many of the instances given can fall away provided this core basis of liability remains: the appellants were correct to focus on how Mrs Schipp came to participate in the purchase of the Kembla Street property. If Mrs Schipp had been brought to putting money into the Kembla Street property by the exercise of the dominance, I do not see that as negatived by the enquiries to Mr French and Mr Zander, neither of whom was an appropriate person to ask, and his Honour must have been conscious that having to "hang in there" was not prominent in Mrs Schipp's evidence in chief. The enquiries seem to have been made more by way of seeking reassurance (in the case of Mr French later in January 1989 when Mrs Schipp was, in her eyes at least, committed to the project). Nor is it negatived by an expressed desire to proceed or expectation of profit - the desire and the expectation themselves were brought about, and advantage was taken of them, in breach of duty, and the influence of the domination seems to have persisted in October 1989. (Mrs Schipp said that she did not think it was a serious offer in October 1989.) The fact that Mrs Schipp did not use Mr Baird to complain of coercion is testimony to the successful exercise of the dominance whereby she dispensed with his services. It was well open to the trial judge to take the view he did. 118 Unless it can be said that the trial judge's view of Mrs Schipp as vulnerable person over whom dominance was unconscientiously exercised, using that phrase as shorthand for all the trial judge found, can be successfully challenged, in my view there is no reason to disturb the findings of breaches of fiduciary duty and their contribution to Mrs Schipp's involvement in the Kembla Street joint venture. The trial judge had an inestimable advantage over us in seeing and hearing Mrs Schipp, Mr Cameron, Mr Harrison and other relevant witnesses. Consistently with the decisions of which Devries v Australian National Airways Commission (1993) 177 CLR 472 is sufficient reminder, I do not think his Honour's view can or should be departed from. The appellants again drew attention to State Rail Authority of New South Wales v Earthline Constructions Pty Ltd , and submitted that the deficiencies in Mrs Schipp's evidence for which it contended in relation to her involvement in the Mary Street property, the matters canvassed in the preceding paragraphs of these reasons, and regard to the evidence of the other witnesses (all of which were expounded at greater length and in greater detail than I have recorded) should lead to a different view. I do not accept the submission. 119 The appellants directed specific submissions to representations found to have been made as to the cost of development of the Kembla Street property and the viability of the development. The representations were part of an alternative case made by Mrs Schipp, and the submissions did not successfully controvert the relevant aspects of breach of fiduciary obligation in subparagraphs 15 and 20 of paragraph 645 in the trial judge's reasons. The many other aspects described by his Honour as failure to advise Mrs Schipp of material facts known by Mr Cameron and Mr Harrison and required to be known by Mrs Schipp in order that she might be in a position properly to assess the advantages and disadvantages of participating in the Kembla Street joint venture were sought to be put aside by the submission that Mrs Schipp did not give evidence that disclosure would have affected her decision to invest. That is only partially correct, as she did give evidence that she would not have invested in the Kembla Street property if she had been told the project was probably not viable. However, specific evidence of that nature is not essential (cf Gould v Vaggellas (1985) 157 CLR 215 at 236-8), and on the whole of the evidence the trial judge was entitled to find that the relevant matters were material to her decision and that disclosure would have affected her conduct. This he did, stating in forthright terms that - "Mrs Schipp was tricked into [investing in the Kembla Street property] by the conduct which was unconscionable. Insofar as the conduct included non-disclosure, the non-disclosed facts were highly material to Mrs Schipp's course of conduct."

120 The Cameron appellants in particular submitted that the trial judge was in error so far as he found that it was misrepresented to Mrs Schipp that the Mary Street property had to be sold because the project was not viable. That was one element only in the conduct sustaining the orders made, and even if there were error I do not think it would bring success in the appeals. There was some confusion in the submissions. As I understand it, the appellants said that the Mary Street project had been viable but became unviable because a necessary reduction at the planning stage in the size of the town houses made them less attractive to purchasers, so that the statements in September 1988 that the property had to be sold were genuine and not the product of an intention to sell the property held for some months but not disclosed to Mrs Schipp. They said that the trial judge erred because he thought the appellants were relying on a reduction in size after March 1988 and found that there had not been a reduction in size, whereas they were relying on a reduction in size prior to March 1988, and because he did not pay sufficient regard to the fact that Mr Cameron took steps towards marketing the town houses in the months prior to September 1988. 121 The basis for the finding of misrepresentation was that Mr Cameron admitted that he "knew the size of the units from early May 1988 … and that at that size they were attracting attention in the market …". This paid regard to the steps towards marketing the town houses, indeed that steps were taken was part of the trial judge's reasoning. The reasoning was that the project was regarded as viable by Mr Cameron and Mr Harrison in May 1988, that there was no reduction in size thereafter, and that falsely giving an apparently recent reduction in size as the reason for unviability in September 1988 was misleading. The submission does not controvert this reasoning, and in my view is misconceived. 122 The appellants also submitted that "the loss on Kembla Street" was not attributable to their conduct or was too remote. The argument was that there was no evidence that the Kembla Street property was worth less than its purchase price at the time of purchase, alternatively the loss was caused by a fall in the property market and there was no evidence that the subsequent decline in the value of the property was foreseeable, and that they were therefore not liable for the loss on its resale. The argument was not developed. For the first limb Morgan Corporate Pty Ltd v GWG Leviny Pty Ltd (1995) ATPR 41-414 and Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 were cited, and the usual measure of damages in tort inherent in the argument is well established. For the second limb Kenny v Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 was cited. 123 Neither limb of the argument avails the appellants. Mrs Schipp was tricked into investing, and equitable compensation is not limited by common law principles of assessment or remoteness of damage and may involve a stringent test of causation ( re Dawson; Union Fidelity Trust Co Ltd v Perpetual Trustee Co Ltd ( 1966) 2 NSWLR 211 at 214-5; O 'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 272-3; Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 33 ACSR 1 at 89; Duke Group Ltd (in liq) v Pilmer (1999) 31 ACSR 213 at 378-83). The appellants are not liable in tort, or for loss suffered on sale of a property for less than its purchase price or represented value. The equitable compensation must make good to Mrs Schipp the loss suffered in consequence of the breach of fiduciary obligation, that is, the loss from putting her $100,000 into the Kembla Street joint venture. The submission should not be accepted.

Compound interest 125 It was not disputed that, if the appellants' liability was for breach of equitable obligation, compound interest was properly awarded. The interest awarded was calculated on the whole of the sums of $90,880.04, $40,000 and $100,000. In the appellants' written submissions, it was said that interest should have been calculated only on the money actually obtained by Mr Cameron and his company or Mr Harrison and his company respectively, and that the $90,880.04 and the $40,000 had been divided between them. As I read the written submissions the point was confined to interest, and did not extend to saying that the liability to pay equitable compensation should be only as to the money actually obtained by Mr Cameron and his company or Mr Harrison and his company respectively. In oral submissions it was sought to extend the point, but without any elaboration or argument, to the substantive liability. The effect was that each of the Cameron appellants and the Harrison appellants should have been ordered to pay equitable compensation for half only of the $90,880.04 and the $40,000. 126 So far as appears from the trial judge's reasons, which were comprehensive, it was not submitted below that either the substantive liability or the calculation of interest should be limited in this way. Mrs Schipp did not contend that it was not open to put the submission on appeal. Further distinction between the natural persons and their companies was not suggested, whether as to the liability to pay equitable compensation or as to interest. 127 As I have said, the extended submission was not supported by argument. It was apparently accepted on appeal that there was joint liability to pay equitable compensation in respect of the $100,000, and that it was or should be treated as money obtained by both Mr Cameron and Mr Harrison. In my opinion Mr Cameron and Mr Harrison are liable to pay equitable compensation in the full amounts of $90,880.04 and $40,000, their breaches of duty being intertwined and together combining to cause to Mrs Schipp the loss for which the compensation was payable. This does not seem to have been in dispute at the trial. Regard to Barnes v Addy (1874) 9 Ch App 244 will indicate why it was not reasonably open to dispute, and Catt v Marac Australia Ltd (1986) 9 NSWLR 639 at 661 illustrates joint liability on the part of "those who appear to have been so thoroughly mixed up in the breaches of fiduciary duty". See also Gluckstein v Barnes (1900) AC 240, where one of four delinquent fiduciaries who shared misappropriated money was held liable for the whole amount: in this case is to be found the celebrated observation of Lord Macnaghten (at 255) that recovery from the other three might have to lie in "an appeal to that sense of honour which is popularly supposed to exist among robbers of the humbler type". 128 Concentrating on interest, the argument in support of the submission was concise: it is the use of money by a defaulting fiduciary for his own benefit that justifies compound interest, so there should not be interest where the money was not used by the defaulting fiduciary for his own benefit. The appellants relied on the language used in relation to equity's award of compound interest in some of the cases. In Burdick v Garrick (1870) 5 Ch App 233 at 241 Lord Hatherley LC said that the court does not order a defendant to pay compound interest by way of punishment "for making use of the plaintiff's money", but proceeds on the principle "that he has made, or has put himself into such a position as that he is presumed to have made" compound interest. In Wallersteiner v Moir (No 2) (1975) QB 373 at 388 Lord Denning MR said that equity does not award interest by way of punishment but "whenever money is misused by an executor or trustee or anyone else in a fiduciary position - who has misapplied the money and made use of it himself for his own benefit". In Hungerfords v Walker (1990) 171 CLR 125 at 148 Mason CJ and Wilson J said that equity "awards interest, including not only simple interest but also compound interest, when justice so demanded eg, money obtained and retained by fraud and money withheld or misapplied by a trustee or fiduciary". Use of the money, it was said, was common to all these statements. 129 These statements did not purport to limit the entitlement to interest in the manner for which the appellants contended, and do not support their argument. Interest is awarded not by way of punishment, but by way of compensation, and justice may demand interest on money not actually used by the defaulting fiduciary. It is awarded in order to make good what the plaintiff has lost by the breach of equitable obligation, see re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co at 214-6. Immediately following the statement in Wallersteiner v Moir (No 2) on which the appellants relied Lord Denning MR said, "In addition, in equity interest is awarded whenever a wrongdoer deprives a company of money which it needs for use in its business. It is plain that the company should be compensated for the loss thereby occasioned to it.". 130 The defendant whose breach of equitable obligation has deprived the plaintiff of money must make restitution by payment of not only the money but also interest representing what the plaintiff could have obtained from use of the money. Equitable compensation does not depend on gain to the defendant (see Catt v Marac Australia Ltd at 659-60 and cases cited; Davidson, "The Equitable Remedy of Compensation", 13 MULR 349; Gummow, "Compensation for Breach of Fiduciary Duty" in Youdan, Equity, Fiduciaries and Trusts 57 at 71, 88-91; Davis, "Interest as Compensation" in Finn, Essays on Damages 129 at 140), and it is immaterial that the defendant did not use or obtain the money. The defendant is liable because he deprived the plaintiff of the money, not because he obtained the money for himself, and so a fiduciary whose breach of equitable obligation causes loss to the plaintiff must make good the loss with interest even though he did not obtain the money. It is sufficient to cite as illustrations Holmes v Walton (1961) WAR 96 (solicitor whose investment advice in breach of fiduciary duty caused loss to the client liable for the loss plus interest having regard to "that interest which the client may be expected to have lost" (at 98)) and re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co (trustee who improperly paid trust money to a third party who absconded with it liable for the money lost plus interest). 131 In the present case the wrongful conduct of Mr Cameron and Mr Harrison in combination caused the loss to Mrs Schipp of the $90,880.04 and the $40,000, and so they (and by common acceptance their respective companies) are liable to make restitution by payment of equitable compensation of the whole of the amounts together with interest on the whole of the amounts.

Indemnity costs 132 The trial judge correctly observed that his discretion as to costs extended to ordering costs on an indemnity basis "in appropriate circumstances". He cited from a number of cases, to which I will return, and then said - "This is a case in which the particular circumstances involve relevant delinquency on the part of the Cameron Harrison interests. On my findings, Mr Cameron and Mr Harrison manipulated Mrs Schipp and took unconscientious advantage of her vulnerability. Paragraphs 646 through to 652 of the judgment detail the extent to which Mr Cameron and Mr Harrison took unfair and unconscionable advantage of Mrs Schipp's weakness. Paragraph 634 includes a finding that at least from early 1988 Cameron and Mr Harrison did not seriously intend to develop Mary Street. Generally, paragraphs 635 through to 645 set out the events which occurred and paragraphs 659 through to 676 examine those events from a number of perspectives. Of course not every case in which unconscionable conduct and/or breaches of fiduciary obligation is found will ground a plaintiff's entitlement to indemnity costs from a defendant. The discretion which the court has as to costs is to be exercised judicially, that is to say upon proper grounds and the Court will not lightly depart from standard practice in the awarding of costs. In Warman International Ltd v Dwyer (1995) 182 CLR 544 at 560, Mason CJ, Brennan, Deane, Dawson and Gaudron JJ made it clear that the making of a discretionary order against a fiduciary will depend upon the circumstances of the case including the powers and obligations of the fiduciary and the relationship between those powers and obligations and the subject matter of the claim [cf Jones v Mortgage Acceptance Nominees (1996) 142 ALR 461] The same approach is required to be taken in dealing with unconscionable conduct where found. The circumstances of the case are all important. The present is however a case in which on an over-view of all of the findings at paragraphs 241-253, 383, 423 and 424, 431-456 (particularly 433 and 434), 596-601, 604-606, 607, 638 and 641, 648, 649, 652 and 670, the plaintiff's claim to indemnity costs against the Cameron Harrison interests is in my view made out. In this case the special or unusual circumstances constituted by the defendants' unconscionable conduct and breaches of fiduciary obligation justify the making of an order that the Cameron Harrison interests pay Mrs Schipp's costs on an indemnity basis." 133 Some of the passages from the cases which his Honour cited referred to delinquency, using that word or otherwise, in the conduct of the proceedings ( Degmam Pty Ltd (in liquidation) v Wright (No 2 ) (1983) 2 NSWLR 354 and re Smith, ex parte Rundle (No 2) (1991) 6 WAR 299, both referred to as involving "relevant delinquency" in a citation from Oshlack v Richmond River Council (1998) 193 CLR 72 at 89). Other cases spoke of the width of the discretion, without referring to delinquency, one referring to the need for "some special or unusual feature in the case". In Degmam Pty Ltd (in liquidation) v Wright (No 2 ) the defendant suffered a special order as to costs because she had made deliberately false allegations in her defence and had by prolixity and prevarication grossly prolonged the litigation. Immediately before the passage from his reasons last set out the trial judge set out from re Smith, ex parte Rundle (No 2) , with underlining for emphasis, that orders for costs on a solicitor and client or indemnity basis are - " … normally made in circumstances where the conduct of a party against whom such an order has been [made] in connection with the litigation has been deserving of criticism." (at 301)

134 Mr Harrison contrasted with this the "relevant delinquency" by regard to which the trial judge apparently exercised his discretion, delinquency in that Mr Cameron and Mr Harrison had acted unconscionably and in breach of fiduciary duty. He submitted, in my view correctly, that the delinquency on which his Honour acted was not the delinquency in the conduct of the proceedings which the cases cited by him, and a number of other cases to which Mr Harrison referred, regarded as warranting a special order as to costs. And he said, again correctly, that Warman International Ltd v Dwyer (1995) 182 CLR 544 at 560 was not concerned with costs, but with an order for accounts against a defaulting fiduciary. Indeed, the costs order in Warman International Ltd v Dwyer was not a special order, see (1992) 46 IR 250 at 262 (Derrington J); 23 February 1992, unreported (CA); (1995) 182 CLR 544 at 570 (HC). 135 Mrs Schipp's response emphasised the width of the discretion as to costs. She said that there was "relevant delinquency" within the cases, even if the trial judge had not acted by regard to it, in that "much of the time during the trial was taken up by Harrison in propounding the authenticity of documents which they [sic] must have known to be false". And she said that it was open to his Honour to act by regard to unconscionable conduct or breach of fiduciary obligation, delinquency not in the conduct of the proceedings, in order to ensure "that the restitution to the defrauded beneficiary is complete: see Hagan v Waterhouse (No 2) (1992) 34 NSWLR 400". 136 The trial judge did not exercise his discretion by regard to the time taken by Mr Harrison in propounding false documents, or otherwise by regard to delinquency in the conduct of the proceedings. Hagan v Waterhouse (No 2) provides no support for indemnity costs as a means of providing complete restitution, or otherwise for regard to the substantive unconscionable conduct or breach of fiduciary duty when exercising the discretion as to costs, and such regard would in my view not be correct. The unconscionable conduct or breach of fiduciary duty leads to compensatory or other relief and costs on the normal basis, and more must be established for a special order as to costs. In my opinion his Honour's exercise of his discretion was on a wrong principle. 137 The discretion must be re-exercised. It is true that evidence of Messrs Cameron and Harrison was not accepted, indeed they were found to have given false evidence and propounded false documents. But I do not think there was delinquency approaching that considered to justify a special order as to costs in Degmam Pty Ltd Pty Ltd (in liquidation) v Wright (No 2 ), or that departure from the ordinary basis on which costs should be assessed between litigants was otherwise warranted. 138 It was necessary that the circumstances in which Mrs Schipp came to put her money into the two properties and leave it with Messrs Cameron and Harrison be gone into, in particular with exploration of her understanding of what she was doing and the influences working upon her. I am not satisfied that this was a case in which the appellants, properly advised, should have known that they would be found liable ( Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401), or that the Court's time and Mrs Schipp's money were wasted on "totally frivolous and thoroughly unjustified defences" ( Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362), to use some of the expressions relevant in this area. 139 Departure from the settled practice of costs on a party and party basis is discretionary, and beyond the need for a sufficient special or unusual feature in the case no fixed rule can be laid down. Some of the matters thought to justify it are collected by Sheppard J in Colgate-Palmolive Pty Ltd v Cussons (1993) 46 FCR 225 at 233-4. In the present case no other sufficient special or unusual feature is present. The trial judge's order as to costs should be set aside so far as it provided for costs on an indemnity basis.

The cross-appeal as to costs 140 By a Bullock order ( Bullock v London & General Omnibus Co (1907) 1 KB 264) the costs payable by Mr Harrison to Mrs Schipp would include the costs payable by Mrs Schipp to Mr Harrison's insurers. Mrs Schipp's claim against the insurers failed because it was held that the dishonesty exclusion in the policy applied. After considering the cases in some detail, the trial judge asked whether it was reasonable, as between Mrs Schipp and Mr Harrison, that Mr Harrison should bear the costs occasioned by Mrs Schipp including in the proceedings her claim against the insurers. He considered that it was not, essentially because Mr Harrison did nothing to make it fair as regards him that he should bear the additional costs burden. Mr Harrison was entitled to deny liability, and his denial of liability did not necessitate the joinder of the insurers. What led to their joinder was his perceived impecuniosity, and he was not obliged to claim under his insurance and could have considered that the dishonesty exclusion made such a claim pointless. 141 Mrs Schipp accepted that the trial judge had addressed the material cases and had adopted the correct principles. She alleged fraud against Mr Harrison, and so reasonableness in claiming against the insurers and facing the dishonesty exclusion was not going to be easy to establish. On appeal it was submitted that Mr Harrison's conduct in putting in issue whether he was acting as a solicitor in the material events made it reasonable to join the insurers, in order to avoid determination of that issue in the proceedings and then in separate proceedings against the insurer. 142 The trial judge did not find this persuasive. Nor do I. By putting in issue whether he was acting as a solicitor Mr Harrison did not suggest an alternative target for Mrs Schipp's claims to which in prudence she was obliged to give attention. The asserted prudence in avoiding separate determinations of the issue was inconsequential, because on Mrs Schipp's case - despite the alternative ways it was framed - success against Mr Harrison would all but inevitably enliven the dishonesty exclusion, and the issue would mean nothing in a claim against the insurers. I see no error in the trial judge's exercise of his discretion.

Miscellaneous 143 Mrs Schipp's statement of claim included a claim to an account of profits. The defence as filed by Mr Harrison and his company included that if they had "a liability to account or to make restitution" they claimed "due allowances for proper outgoings, expenses, professional work and entrepreneurial skill and effort in the location, purchase, development, improvement and sale of the property". Nowhere was an order for an inquiry sought, and on the face of the statement of claim and the defence if there was to be an allowance it was to be quantified at the trial. 144 The reasons of the trial judge did not advert to this, and there was neither an allowance nor the direction of an inquiry into an allowance. It was agreed that there was no mention of the matter in the submissions made to his Honour. The Harrison appellants raised it on appeal. 145 The Harrison appellants initially submitted that this Court should make an order whereby they obtained an allowance, either assessing the amount itself or directing an inquiry. Mrs Schipp responded that it was too late to ask for such an order, and that the evidence was insufficient to enable an assessment to be made or even to warrant an inquiry. In a written submission in reply the Harrison appellants then submitted that rather than the remedy of equitable compensation "the appropriate order would have been one for an account of profits, with due allowance being made to the Appellants for the work done by them". 146 There is a fundamental difference between equitable compensation and an account of profits, and that is why a plaintiff must elect between them, see for example Warman International Ltd v Dwyer at 556-8. It is not apparent that the remedy given by the trial judge was inappropriate, and particularly when raised so late and without supporting argument the submission in reply so far as it sought to challenge the remedy should not be entertained. 147 Whether there could be an allowance in favour of the Harrison appellants in some manner offset against the equitable compensation was not taken up either in support of the initial submission or as part of the response. The cases cited by the Harrison appellants, Boardman v Phipps (1967) 2 AC 46 and Warman International Ltd v Dwyer , were both cases of account of profits. In United States Surgical Corporation v Hospital Products Ltd (1983) 2 NSWLR 157 an allowance was contemplated if the remedy of a constructive trust were granted, but the principle was described as vague. The remedy of a constructive trust is more akin to an account of profits than is the remedy of equitable compensation. 148 It is not necessary to decide the question. The Harrison appellants provided references to evidence showing efforts devoted by Mr Harrison to the joint ventures. A number of meetings with Mrs Schipp were listed, in the circumstances providing but dubious ground for an allowance. There were two meetings with the architect for one or both of the developments and attendance at the auction of the Mary Street property. Mr Harrison instructed another solicitor on the purchase of the Mary Street property, and did the conveyancing and legal work associated with its sale. For the latter work he was remunerated in the ordinary way. There was no evidence by which a value could be ascribed to any of the other work, which was in any event quite minimal. Assuming that there can be an allowance, this Court can not assess its amount, and I am not satisfied that Mr Harrison devoted such efforts to the fulfilment of the joint ventures that he should have a second opportunity to make out the grounds for and quantify an allowance through an inquiry. 149 Mrs Schipp's cross-claim against Mr Harrison's insurers was expressed to be in the event that certain grounds of the appeal by Mr Harrison and his company were upheld, they being grounds which challenged findings going to dishonesty. In the manner the appeals were conducted the grounds were not singled out for individual attention. The essential findings held to have enlivened the dishonesty exclusion have not been displaced, and it may be that Mrs Schipp will not continue with this aspect of her cross-appeal. 150 Save as to indemnity costs the appellants have failed in their appeals. They have successfully resisted Mrs Schipp's cross-appeal as to costs. They have no (legal) interest in the outstanding insurance issue. They should pay Mrs Schipp's costs of the appeals, but to an extent tempered by their limited success as to indemnity costs, and should have their costs of the cross-appeal. Costs as between Mrs Schipp and the insurers should be reserved. 151 A mention date for the cross-appeal should be appointed, at which Mrs Schipp can inform the Court whether she wishes to continue with the cross-appeal as to the insurers' liability and directions can be given with a view to submissions in relation to that matter and/or in relation to costs as between Mrs Schipp and the insurers.

List the cross-appeal for mention on 12 March 2001. 153 FITZGERALD JA: I agree with the other members of the Court that orders should be made in the terms proposed by Giles JA. 154 His Honour's extensive judgment explains the circumstances which have given rise to these appeals. While I agree with the award of equitable compensation to Mrs Schipp, I am unable to adopt all of his Honour's reasons. The detail given by his Honour enables me to be brief. 155 The trial judge's factual findings are dispersed throughout a very lengthy judgment which discusses many issues which need not be considered. The findings are sometimes repetitious and sometimes inconsistent. Even allowing for his Honour's advantage in seeing and hearing the witnesses, some of his explanations and rationalisations of Mrs Schipp's conduct and evidence are unpersuasive. His Honour's opinion that Mrs Schipp was an honest witness must be taken with her attempts to provide answers which supported her case on every issue. In any event, the honesty of Mrs Schipp's testimony is only one factor which is material to an assessment of the reliability of her evidence. There are significant conflicts in her evidence and her commitment to the justice of her claim obviously affected her interpretation and reconstruction of events which had occurred years earlier. 156 On the other hand, the trial judge's unfavourable view of Mr Cameron and Mr Harrison was fully justified. Mr Cameron was a real estate agent and Mr Harrison was a solicitor. They were friends and were involved together in commercial activities. Mrs Schipp approached Mr Cameron to assist her to find a real estate investment. Mr Cameron introduced Mr Harrison to Mrs Schipp, and the three of them engaged in joint ventures in relation to properties in Mary Street and Kembla Street. Mr Cameron acted as a real estate agent and Mr Harrison acted as a solicitor in the course of those ventures. Each was in a fiduciary relationship with Mrs Schipp. Further, whether or not she trusted them she relied on them. Her business experience was limited and her desire for substantial profits quickly blunted her judgment and facilitated her manipulation by Mr Cameron and Mr Harrison. Circumstances which made Mrs Schipp vulnerable made Mr Cameron and Mr Harrison liable when they exploited her vulnerability. 157 Mrs Schipp shared the profit from the resale of the Mary Street property with Mr Cameron and Mr Harrison, lent them money from her share of the profit and invested part of her other proceeds from that resale with them in the Kembla Street project. The compensation which the appellants have been ordered to pay Mrs Schipp is the amount which she lost, with compound interest. 158 Mr Cameron and Mr Harrison took advantage of Mrs Schipp. Although her will was not overborne, the information which she was given was inaccurate and incomplete. Her decisions to share the profit from the resale of Mary Street, make loans to Mr Cameron and Mr Harrison and invest in the Kembla Street project were not informed decisions. In the circumstances, including the parties' relationships and the respective roles played by Mr Cameron and Mr Harrison, Mrs Schipp became entitled to equitable compensation and compound interest for their unconscionable conduct in breach of their fiduciary obligations. 159 Although Mrs Schipp subsequently had access to legal advice from independent solicitors, I am not persuaded that she made an informed decision not to demand the money to which she was entitled from the resale of the Mary Street land but to pursue a profit from the Kembla Street project. The evidence does not warrant a conclusion that she lost her entitlement to equitable compensation by her subsequent conduct or inaction. 160 I agree with the reasons given by Giles JA for the other orders which he has proposed. 161 In summary, although there is substance in the appellants' criticisms of Mrs Schipps' evidence and the trial judge's findings, I agree with Giles JA that the appellants' challenge fails on all issues other than the award of indemnity costs.
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Harrison & Anor v Schipp Cameron & Anor v Schipp

At a glance

Court

Decision date

Before

Source

Judgment (49 paragraphs)

Cases Cited (27)

Cited By (50)