34 The approach to be adopted in considering cases brought under s 7 of the Contracts Review Act was explained by Basten JA in Perpetual Trustee Co Ltd v Koshaba [2006] NSWCA 41. The first stage entails making findings of fact as to the circumstances revealed in the evidence. In Basten JA's words "the second step in the process is a finding that a contract or a provision of a contract is 'unjust'". His Honour also notes that "here the Court is not exercising a discretionary power but making an evaluative judgment as to whether the facts as found satisfy a statutory description which in turn engages a discretionary power". The third step involves the exercise of the power to grant relief which may, but need not, follow from a finding that the contract or a provision of the contract is unjust.
35 The first step thus involves findings based on the definition of "unjust" contained in s 4 of the Contracts Review Act, noting that "unjust" includes "unconscientious, harsh or oppressive" and is thus to be read expansively. As Basten JA put it (at [114], [115])":
" The term 'unjust' is defined in s 4 to include 'unconscionable, harsh or oppressive', a definition which is clearly intended to give the term an expansive meaning but which does little to define the boundaries. As was noted almost 20 years ago by McHugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 621A, in language which has been repeated on many occasions thereafter:
The Contracts Review Act 1980 is revolutionary legislation whose evident purpose is to overcome the common law's failure to provide a comprehensive doctrinal framework to deal with 'unjust' contracts .
That is not to say that the Court is launched on an uncharted sea with no navigational guides, but rather that constraints which would preclude intervention according to established principles of legal or equitable doctrine, may not be decisive under the Act. Thus, while equity provides relief against the unconscientious conduct of the defendant, the Act may permit relief in circumstances where the conscience of the defendant is not affected. Similarly, a contract, or a provision thereof, may be unjust in circumstances where there was no pre-existing duty owed by, say, a lender to a borrower to act in a particular way."
36 It is submitted on behalf of the aunt that the transfer of her house was unjust in the circumstances and at the time it was made for a number of reasons. First, there is the obvious point that the aunt effectively gave away the house. The defendants acknowledge this but say that the aunt knew precisely what she was doing when she made the gift. I accept that the aunt knew what she was doing. But that of itself is of limited relevance.
37 The nephew and his sons also contend that the aunt had appropriate legal advice about the transfer. They say that she entered into a binding contract having been fully advised by legal practitioners as to the ramifications of her acts and choices; and further that such legal advice was facilitated and arranged by the defendants.
38 I do not accept these submissions about adequate legal advice. According to the nephew, he flagged to the aunt at an early stage the need for her to obtain legal advice. When she, according to him, asked whether "they" could contest the putting of the house into "yours, Michael's and Peter's names", he said he did not think so "but you'd have to get legal advice". But his concern then was not that the aunt should be advised about her own position and in order to protect her own interests. Rather, he was suggesting that she obtain advice about whether a transfer to the nephew and his sons would be vulnerable to challenge by Elizabeth. That, of course, was a matter entirely foreign to the aunt's own interests and relevant solely to his interests and those of his sons.
39 The arrangements for the preparation of the transfer documents were made by the nephew alone with Mr Carpenter. The aunt gave no instruction to Mr Carpenter's firm about this. After the documents had been prepared, she was taken by the nephew to the solicitors' office. After perhaps exchanging a greeting briefly with Mr Carpenter, she found herself alone in a conference room with Ms Ringbauer whom she had never met before, did not know and had not asked to see. Indeed, the aunt said in evidence that she did not know that Ms Ringbauer was a solicitor. Nor is it suggested by the nephew or by Mr Carpenter that either of them explained that Ms Ringbauer was a solicitor or why the aunt was to see her. Mr Carpenter's evidence is that it was to the nephew, not to the aunt, that he explained the perceived need for the aunt to be advised by a solicitor not connected with Mr Carpenter's firm.
40 Nor is there anything in Mr Ringbauer's evidence indicating that she told the aunt that she was a solicitor or that her function, as she perceived it, was to give the aunt advice about the aunt's own position, consistently with the protection of the aunt's own separate interests. The clear impression from the aunt's evidence is that she regarded Ms Ringbauer as merely someone who was attending to the signing and witnessing of documents. Moreover, Ms Ringbauer was, in the aunt's perception, someone before whom the documents were at be signed at once.
41 The course Ms Ringbauer took (see paragraphs [24] and [25] above) was unexceptionable, as far as it went. But she did not, it appears, satisfy herself on a matter fundamental to safeguarding of the aunt's interests, namely, that the aunt fully understood that the oral promise to allow her to live in the house for life was legally unenforceable, with the result that the occupancy could be terminated at any time; also that the nephew and his sons might sell the property at will, that their interests might pass from them by operation of law or that any one of them might, despite the wishes of the other two, obtain the appointment of trustees for sale.
42 The involvement of Ms Ringbauer cannot, on any view, be seen as having put the aunt into a position where she had received adequate legal advice about the protection of her own interests. The aunt was not given the documents in advance to study at her leisure. Nor did she have an opportunity to consult a solicitor of her choosing at a time of her choosing. She was put by the nephew into a position where a person she apparently did not know was a solicitor spent ten minutes talking with her about the documents which she was then asked to sign on the spot.
43 The next ground on which the aunt submits the transfer is unjust is that, despite the agreement existing between the aunt and the nephew that the aunt could live at the property for the rest of her life, that continued occupation was vulnerable in numerous ways, including those just mentioned. There is substance in that submission. The aunt no doubt put great store by the oral and unenforceable assurance. But the fact is that she could have been dispossessed at any time at the whim of any one of the three transferees. And that is the position that still prevails.
44 A further basis of the aunt's submissions is that the transfer made her "penniless", that is, without any asset to offer as security should she wish to borrow money and without the option to prefer some other living arrangement such as a nursing home or other aged care facility. Again, there is substance in the aunt's submissions.
45 There is evidence that the aunt considered mortgaging the house about 15 years ago to raise money to buy a new refrigerator and that the nephew helped her out financially on that occasion. With ownership of the house lost, she is deprived of any similar ability or opportunity for the future. She has also lost the ability to resort to an obvious source of funds to finance the acquisition of a retirement village unit, to pay a nursing home bond or to employ someone to provide full-time (or at least regular) home care. Counsel for the aunt submitted that the court is entitled to be aware that financial institutions are today willing to finance elderly and old people who are "assets rich but cash poor" by way of "reverse mortgage", with loan funds being made available on the basis that principal and interest will be recouped only out of the proceeds of the sale of the family home after death or on earlier voluntary sale. I accept that submission. The aunt was, by the challenged transaction, deprived of the ability to resort to any such source of finance.
46 In her affidavit evidence, the aunt several times refers to the nephew's capacity for being "forceful" and that she "felt that [she] couldn't say 'no' to him". The evidence of Mr Blackwell is that the aunt told him that the nephew could be "overpowering" and, with reference to her potential revocation of the power of attorney, "if I tell Max he will make trouble". Mr Blackwell's evidence shows that the aunt harboured these apprehensions and that, at the very least, she wished to avoid confrontation with the nephew. As her comments to Mr Blackwell at paragraph [23] above show, the aunt placed some reliance on an ability of Mr Carpenter to curb or control the nephew. Mr Blackwell is the only solicitor with whom the aunt herself initiated contact. She did so without the knowledge of the nephew. Mr Blackwell conceded in cross-examination that the aunt had effectively "adopted" him as her legal representative and it was to him that she chose to confide her thoughts about the power of attorney and her nephew.
47 I have already mentioned the aunt's apprehension, engendered in her mind by the nephew, that "I would not be seeing Elizabeth any more and I was convinced that I would be dependent upon him for assistance". This was a fear held by a lady aged more than 90 whose strength was failing and who was in declining health. Details of her health problems given in her affidavit are not challenged and need not be repeated - added to which, she walked with difficulty in the courtroom, was dependent on a walking frame and dozed from time to time. The nephew, his sister Elizabeth and their brother Robert were (and are) the aunt's closest living relatives. She does not see much of Robert (indeed, she said in the September 2005 will that she did not wish him to attend her funeral). That leaves the nephew and Elizabeth as the persons to whom the aunt naturally looks for help and family support.
48 The nephew and Elizabeth are at loggerheads and have been on hostile terms for some years. It is not, I think, going too far to say that the nephew has been willing to use the aunt and her house as a weapon in his battle with his sister. He wanted the aunt to transfer her home to him and his sons because he feared that it might otherwise pass to Elizabeth and her husband. And he (along with his sons) gave, in return for the transfer, an oral assurance that the aunt could continue to live there for life, thereby representing himself to be, in that way and to that extent, someone who would look after the aunt for her remaining days.
49 She, for her part, was wary of the nephew. She knew he could be "forceful" and "overpowering". She feared that, if the nephew knew that she was dealing with Mr Blackwell with a view to revocation of the power of attorney "he will make trouble". But hoping that Mr Carpenter would be some sort of moderating influence on the nephew - and also because of a desire to avoid confrontation with the nephew - she let the power of attorney stand.
50 In the whole of the circumstances, the aunt stood, in relation to the nephew, in a position of disadvantage. She thought, at the time of the transfer, that he was the only one of nephews and niece who would look after her. There was therefore a dependence on her part - a dependence that she could not afford to risk by refusal or questioning that might bring out the "forceful" or "overpowering" side of his nature or cause him to "make trouble".
51 I have said little, to this point, about the nephew's sons (then aged 26 and 24 and both unmarried). There is not much to be said. They simply played the roles in which they were cast by their father. They may well have been party to the oral assurance about lifetime occupation. But their evidence made it clear that they gave very little thought indeed to what was occurring. Each referred in his affidavit to having signed the transfer. The second defendant said that he signed it at Mr Carpenter's office. The third defendant said that he thought he was with his father and his brother when he signed the transfer. Yet, as the document itself shows, neither of them signed it; nor did the nephew. It was accepted by Mr Carpenter as the solicitor for the transferees. The sons, in my opinion, took little notice of what was happening. They did no more than act as their father asked, thereby becoming willing, if not entirely comprehending, parties to his design.
52 It is necessary now to deal with a submission made on behalf of the defendants in light of the fact that the aunt made no attempt to adduce evidence from her former solicitor, Mr Fardell, by whom the proceedings were commenced, or from her niece, Elizabeth, the nephew's sister. Each was in court during the hearing (Mr Fardell for a short time only) and there can be no doubt that they were available as witnesses.
53 In relation to Elizabeth, the submission was as follows:
"The defendants are entitled to a number of inferences pursuant to Jones v Dunkel because of the absence of any evidence from Elizabeth Dowling. Nothing Elizabeth Dowling could say would have assisted the plaintiff
(i) in proving that the plaintiff acted because of undue influence from the first defendant or unconscionable conduct of his;
(ii) in proving that Elizabeth Dowling gave any assistance to the plaintiff at any relevant time;
(iii) in providing an explanation to the court as to why and how the proceedings came to be commenced;
(iv) in proving that Elizabeth Dowling did not lock the plaintiff out of her own garage and that the lock was changed for the reason advanced by the defendants;
(v) in proving the nature of the relationship between the plaintiff, Elizabeth Dowling and the first defendant;
(vi) in proving that the plaintiff was vulnerable because of some estrangement between Elizabeth Dowling and herself at the time of the transaction."
54 I am not satisfied that absence of evidence from Elizabeth on any of these matters is a material consideration. The nephew himself made it clear that there was bad blood between him and Elizabeth and that he sought to become more meaningful than Elizabeth in his aunt's life. The aunt does not contend to the contrary. In addition, she made it clear that Elizabeth was essentially off the scene when the events relevant to this case occurred. The matter of the garage lock is quite peripheral. The question whether someone - possibly Elizabeth - suggested that the aunt bring these proceedings or helped her to do so is of very limited relevance: the object of the proceedings is to benefit the aunt by redressing perceived wrong done to her. She will be the only beneficiary. It is to this essentially unimportant last point that any evidence of Mr Fardell might go.
55 Even if the failure of Elizabeth and Mr Fardell to give evidence should be taken as an indication that their evidence would not have been helpful to the aunt's case, the inference would not be such as to weaken the central findings.
56 Reference is made in Basten JA's judgment in Koshaba (above) to the judgment of McHugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610. Another passage from McHugh JA's judgment is relevant when assessing whether matters for consideration under s 9 of the Contracts Review Act are present here:
"Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s 9(2)(a), 9(2)(e), 9(2)(f), 9(2)(g), 9(2)(i), 9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice."