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."