Kimberley Developments Pty Ltd v Bale

v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168 Jamal v Director of Public Prosecutions (NSW) [2019] NSWCA 121 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 Petersen v Moloney (1951) 84 CLR 91; [1951] HCA 57 Prime Sight Ltd v Lavarello [2014] 1 AC 436; [2013] UKPC 22 Re Association of Architects of Australia; Ex parte Municipal Officers Association of Australia (1989) 63 ALJR 298; [1989] HCA 13 Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd [2008] NSWCA 39 Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88; 332 ALR 128 Russo v Aiello (2003) 215 CLR 643; [2003] HCA 53 Sibley v Grosvenor (1916) 21 CLR 469; [1916] HCA 14 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35 Talevski v Talevski [2007] NSWSC 945 Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18 Wilson v Keating (1859) 27 Beav 121; 54 ER 47 Texts Cited: K Handley, "Reinventing Estoppel in the Privy Council" (2014) 130 LQR 370 Category: Principal judgment Parties: Kimberley Developments Pty Ltd (First Appellant) Theofanis Trigas (Second Appellant) Super Start Batteries Pty Ltd (Third Appellant) Albert Darwiche (Fourth Appellant) Francoise Bale (Respondent) Representation: Counsel: W G Muddle SC with R Perla and M Short (Appellants) D P O'Connor with C Langford (Respondent)

Solicitors: Weinberger Lawyers (Appellants) SCB Legal Pty Ltd (Respondent) File Number(s): 2022/00187211 Publication restriction: N/A Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Citation: [2022] NSWSC 820 Date of Decision: 23 June 2022 Before: Ward P File Number(s): 2018/00237019

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] On 21 February 2011, land in Forest Lodge, Sydney was transferred for a stated consideration of $590,000 from Mr Michel Schein to Kimberley Developments Pty Ltd, a company whose sole director and shareholder at the time was Mr Albert Darwiche. The transfer was signed by Mr Schein and the purchaser company's solicitor, Mr Martin Churchill, and was witnessed by Mr Schein's wife, Ms Chyna Schein. Mr Darwiche and Mr Theofanis Trigas, the future director of Kimberley Developments, were also present when the transfer was signed. Other significant documents, such as an agreement for sale of land and a settlement sheet, could not be found and were not in evidence before the primary judge. Banking records established that funds were provided by Mr Trigas' company, Super Start Batteries Pty Ltd, to discharge indebtedness owed by Mr Schein to the mortgagee of the Forest Lodge property and to pay stamp duty. A formal joint venture agreement, signed by Mr and Ms Schein on the same day as they executed the transfer, provided that Mr Schein would receive 60% of the class B shares in the purchaser company. Those shares were never issued. The document was expressed to be between Mr Schein and Mr Darwiche, and was signed by Mr and Ms Schein, but not by Mr Darwiche. The primary judge's finding that this agreement did not have contractual force was not challenged. It was common ground that the discharge of the mortgage and settlement of monies owed to Mr Darwiche comprised part of the $590,000 consideration for the land. Ms Francoise Bale, on behalf of the deceased's estate, contended that the remaining consideration was not paid, as no class B shares were issued in Kimberley Developments. The appellants said that the remaining consideration was provided, and gave evidence that $302,000 in banknotes was given to the deceased and his wife, for which no receipt was obtained, and no banking records could be produced. The main issues on appeal were (i) whether the case upon which Ms Bale succeeded was outside the pleadings and outside the case which was advanced at trial and reached in a way which was procedurally unfair, (ii) whether the $302,000 in banknotes was in fact paid, and (iii) whether the primary judge erred in concluding that Mr Schein suffered from a special disadvantage and was preyed upon by Mr Darwiche so as to engage equity's jurisdiction to relieve against unconscionable dealings. The Court (Leeming JA, Kirk JA and Griffiths AJA agreeing) held: As to issue (i):

JUDGMENT

1. LEEMING JA: Mr Albert Darwiche and Mr Theofanis Trigas and two companies controlled by them have appealed from a judgment setting aside a transfer of land in Forest Lodge, Sydney and holding that it was held on constructive trust for the respondent, Ms Francoise Bale, who was the plaintiff below and the executrix and only daughter of Mr Michel Schein. The land was transferred from Mr Schein to Kimberley Developments Pty Ltd, whose sole director and shareholder at the time was Mr Darwiche.
2. The transfer was signed by three people, none of whom gave evidence at trial. One was Mr Schein, who died before the case was heard. Another was his second wife Ms Chyna Schein (also known as Ms China Schein), who had subsequently separated from her husband and who chose not to defend the proceedings. The third was the purchaser company's solicitor, Mr Martin Churchill, who by the time of the trial was in custody having been refused bail and facing charges including participating in the supply of a commercial quantity of prohibited drugs and taking part in a criminal group. The plaintiff's claim against him below was compromised in November 2020 and neither side called him to give evidence.
3. A formal document, signed by the deceased vendor and his second wife on the same day as they executed the transfer, provided that the deceased would receive 60% of the class B shares in the purchaser company. Those shares represented around half of the consideration for the sale, but they were never issued. The document was expressed to be between Mr Schein and Mr Darwiche, who at the time was the sole director and shareholder of the purchaser. The document was signed by Mr and Ms Schein, but not by Mr Darwiche.
4. Messrs Darwiche and Arthur Trigas said that they were present when the transfer was signed. Both men gave evidence that at that signing some $302,000 in banknotes was given to the deceased and his wife, for which no receipt was obtained, and no banking records could be produced. The primary judge disbelieved Mr Darwiche and Mr Trigas, and no challenge is made to the primary judge's adverse assessment of those men. Banking records established that funds to discharge the indebtedness owed to the mortgagee and for stamp duty were provided by Mr Trigas' company at around this time. Some ten months thereafter, Mr Darwiche transferred ownership of the purchaser company to Mr Trigas.

Essential factual background

1. Mr Schein died in April 2021, aged 90. The plaintiff below and the respondent to this appeal, Ms Bale, is the only daughter of his first marriage which lasted some 56 years. Mr Schein's first wife had died on 19 August 2006, and in around May 2008 (aged about 77) he married Ms Chyna Schein (also known as China Schein). Her precise age is not disclosed by the evidence, but it pointed to her being in her 40s. Shortly thereafter, Mr Schein revoked an enduring power of attorney dated 25 May 2007 in favour of Ms Bale, and replaced it with one made on 3 June 2008 in favour of Ms Schein. Ms Bale sought to review the revocation of the power of attorney, but in July 2008 NCAT determined that Mr Schein was capable of making his own decisions.
2. In August 2009, Mr Schein's home in Gordon was sold for $1,350,000. Ms Schein lived with Mr Schein in the latter's home at Woolgoolga on the New South Wales north coast. A deal of evidence suggests that a third man, Mr Max Mohr, previously known to Ms Schein, lived with them. The real estate agent gave evidence that he was directed by Ms Schein to transfer rental payments (owed to Mr Schein) to Mr Mohr's account, and he tendered many banking records and receipts signed by Mr Mohr over the period June 2009 - February 2011 confirming as much.
3. Ultimately, by 2016, Ms Schein had separated from her husband. Following a contested hearing, NCAT removed Ms Schein from the office of attorney and ordered that Ms Bale be appointed to replace Ms Schein under the enduring power of attorney made on 3 June 2008. Ms Bale commenced the present proceeding in 2018, first as her father's tutor, and then as his executrix. The events giving rise to this litigation took place in 2011, when there was some evidence of Mr Schein's cognitive decline, but also when his grant to Ms Schein of a power of attorney had been confirmed more than two years previously by NCAT.

The events of January and February 2011

1. Before he retired, Mr Schein had run an engineering business at the Forest Lodge Property, but by the time of the events giving rise to this litigation, the property was tenanted. The promotional material stated that the land was 600 square metres, zoned industrial. Suncorp-Metway Ltd held a registered mortgage over the land, securing Mr Schein's obligation to repay a indebtedness most of which had related to property development undertaken on land at Summer Hill. The facility was taken out in February 2005 and by mid 2008 the debt rose to just over $6 million, but was paid down in the second half of 2008 principally by the sale of the lots in the development. By 2010 the debt had reduced to some $400,000, and was being repaid at the rate of some $10,000 per month, to which was added a repayment of $180,000 in August 2010, leaving an outstanding balance of $263,767. That said, Mr Schein had been in default on a number of occasions, leading to letters of default being issued in March 2007, January 2009 and February 2010. Mr Schein made no repayments at all after August 2010, and it was common ground that at the beginning of 2011 Mr Schein was once again in default.
2. The Forest Lodge Property had been offered for sale by auction in 2009, but was passed in at $650,000. There was evidence that Mr Schein had set a reserve of $1,000,000. There was also some promotional material which stated that the property was valued at $600,000 although it was also said that that was a typographical error.
3. In 2010 it seems that Mr Darwiche became aware of the Forest Lodge Property in the course of cleaning up some waste at the premises. An email chain between Mr Mohr and an Asset Manager at Suncorp between 5 November 2010 and 18 January 2011 included statements by Mr Mohr requesting a delay in the bank enforcing its security, stating that an "investor" had been found who "has agreed to provide $300,000 which should be above the payout figure". It also included statements on behalf of the bank that the account balance as at 31 October 2010 was $274,889.46 and that the bank would delay appointing receivers until 14 February 2011.
4. Kimberley Developments Pty Ltd was incorporated on 9 February 2011, with Mr Darwiche as its sole director and shareholder. The transfer of title of the Forest Lodge Property to Kimberley Developments was registered on 1 March 2011 according to an historical search. The stated consideration on the Transfer was $590,000. There was and is no issue that Super Start Batteries Pty Ltd, a company whose sole director is Mr Trigas, caused a payment of $288,242.63 to be made to Suncorp, discharging Mr Schein's indebtedness and permitting the registration of title, following which Kimberley Developments encumbered the property obtaining funds from National Australia Bank which were in turn disbursed to Super Start Batteries. There was and is no issue that Super Start Batteries had also made a payment of $22,060 for stamp duty on the transfer.

The Transfer

1. The first critical document was the Transfer. It purports to record Mr Schein's signature as transferor and Ms Schein's signature as witness. Kimberley Developments executed the document by its solicitor, Mr Churchill. Mr Churchill appears also to have signed in the space left for witnessing the transferee's signature, but nothing turns on that (or whether his signature was not properly witnessed).
2. Mr Churchill was the third defendant at trial, but the proceedings against him were compromised resulting in the payment of $350,000 (this is relevant to ground 9). Mr Churchill was not called as a witness by either side and indeed during the trial (as noted above), he was in custody, having been charged with very serious offences. Ms Schein was sued as the fourth defendant. She was served with a statement of claim but subsequently could not be located. Findings of breach of fiduciary duty and orders were made against her, but she is not party to this appeal.
3. It seems that no original of the Transfer was tendered. All copies in evidence were of what appears to be the same scanned document, as maintained in (what was then) the Land Titles Office. One copy has a fax header which states that it is "p 2/2", records a date and time of "2011-03-08 09:53" and identifies two fax numbers, the second of which is the same as that given for Raine & Horne Ashfield on some of the promotional material for an auction in April 2009 at which it was passed in. The first page of that fax does not appear to have been tendered at trial.
4. The transfer was stamped with duty of $10. Another document not in evidence must have been stamped with ad valorem duty. The stamp identifies a client number (1411509), a transaction number in hand (6177289) and a handwritten date of 25 February 2011. The transaction number corresponds with a receipt from Revenue NSW, which in turn records a "Lodgement date" of 25 February 2011, and, under the heading "Transaction details" states that the document type was "Agreement for sale of land", the execution date as "21 Feb 2011", the dutiable amount as $590,000, the duty assessed as $22,060 and the liable party as Kimberley Developments. There is an error in the number of the lot number of the deposited plan (347, rather than 37), and glitches in the spelling of Kimberley Developments, but that merely indicates that those details were typed in by hand, slightly imperfectly. It is plain that ad valorem duty was calculated at $22,040, and that that amount was paid at the time in respect of another document which was not tendered at trial.

The 21 February Agreement

1. The second critical document is the 21 February Agreement. It is a poorly drafted joint venture agreement between Mr Schein and Mr Darwiche. It is executed by Mr Schein and Ms Schein, both signing in the space left for Mr Schein's signature. The space for Mr Darwiche's signature is left blank.
2. The 21 February Agreement not merely bore that handwritten date next to the signatures of Mr and Ms Schein. It also has a typed date, in a different, much larger typeface, at the top of the first page. It was printed in the expectation that it would be signed that day.
3. The document recited that Mr Schein owned the Forest Lodge Property, that Kimberley Developments was "a company focused in the improvement, development and management of property and services", that Mr Darwiche had agreed to participate in the "improvement, development and management" of the land, and had been requested by Mr Schein "to jointly develop the property".
4. Speaking very broadly, the document contemplated the transfer of the Forest Lodge Property to Kimberley Developments in consideration for $590,000, to be provided by the repayment of Mr Schein's existing debt which was secured by a mortgage over that property, the issue of 60% of the class B shares in Kimberley Developments to Mr Schein and settlement of monies owed to Mr Darwiche in respect of clean up work provided to the Forest Lodge Property (cl 30). It stated that class B shares had no voting rights but were entitled in the normal course of business to all profits (cll 9-15). Mr Darwiche was authorised "to use any income from the property to use for whatever purpose he may consider appropriate" (cl 4.2). The document also spoke in general terms of the subsequent development of that land by the company, under the sole control of Mr Darwiche. It also made elaborate provision for the payment of Mr Churchill's fees, purporting to create a joint and several obligation on both Messrs Schein and Darwiche to pay, to pledge [sic] the Forest Lodge Property in security of the obligation, to authorise the company to pay Mr Churchill, to consent to the lodgment of caveats over the land, to grant Mr Churchill a secured interest outranking all other creditors, and to grant an indemnity if Mr Churchill were failed to be maintained as primary secured creditor (cll 24-25). (To be clear, it should not be thought that the wording summarised above would have been effective to create any of the stated interests; its significance is merely as to the inferences sustained in relation to Mr Churchill's authorship or involvement in the creation of the 21 February Agreement.)

The decision of the primary judge

1. At trial, Ms Bale's primary case was that the 21 February Agreement represented a binding contract which had been breached by Kimberley Developments and Mr Darwiche. This was rejected by the primary judge, and there is no cross-appeal. However, the primary judge found, consistently with Ms Bale's case, that the 21 February Agreement had been prepared by Mr Darwiche for the purposes of inducing Mr Schein to transfer his land to Kimberley Developments, albeit that it lacked contractual force. Indeed, her Honour found that Mr Darwiche had represented that the Forest Lodge Property would be developed in a joint venture along the lines set out in that agreement: at [489]. The finding that there was a representation made by Mr Darwiche to that effect is said on the appeal to be outside the pleadings, outside the scope of the trial and giving rise to procedural unfairness.
2. The primary judge set aside the Transfer, ordered Ms Bale as executor to repay $288,242.63 plus interest to Super Start Batteries, and declared that Kimberley Developments had from 21 February 2011 held the Forest Lodge Property on constructive trust for Mr Schein and his estate. Ancillary orders were made to account for the holding costs of the property and the amounts received by way of rent.
3. For reasons given separately in Bale v Kimberley Developments Pty Ltd (No 2) [2022] NSWSC 1009, her Honour ordered each of the appellants to be severally liable to pay Ms Bale's costs, save for the costs of an application for security for costs. Her Honour treated those costs separately, saying that she had "considerable disquiet as to the manner in which the evidence was put before the Court": at [96]. That was a reference to the way in which the plaintiff's lawyers had explained what had happened to the $350,000 when the claim against Mr Churchill was compromised.
4. The costs judgment records that junior counsel for Ms Bale charged $289,171.87 plus GST for work done between 22 March 2018 and 23 November 2020 (including a 25% uplift), and that the solicitors issued an invoice for work down between 14 March 2017 and 17 December 2020 in the sum of $290,217.55 plus GST: at [85]. That work preceded a seven day trial in September 2021. It is to be borne in mind that the materials available to this Court do not disclose what work was done to result in those charges, and that it may be entirely appropriate in litigation to do work which ultimately produces no readily apparent impact upon the conduct of a trial. Even so, I have considerable disquiet at the amount of costs that have been charged. The costs noted above are prima facie excessive for preparation of a claim for the rescission of a conveyance and prima facie out of all proportion with the likely value of the land which is the subject matter of Ms Bale's claim. I shall return to these matters when addressing ground 9.

Ground 4 - the unpleaded representation case

1. The foregoing will suffice in order to explain the nine grounds of appeal, the parties' submissions and their resolution. I will deal with the grounds in a different order from that in which they were argued.
2. One ground complains that the trial was procedurally unfair, and when asked during the hearing whether this was pressed, notwithstanding the absence from the notice of appeal of orders for a retrial, it was said that "[t]here is a serious problem with procedural unfairness".
3. It has been said that where there is a complaint about bias, and by extension a complaint about a denial of procedural fairness, that should be addressed first, on the basis that if there was not a procedurally fair trial, there is no utility in reviewing the challenges to findings of fact and the application of the law, and there should be a retrial: Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577; [2006] HCA 55 at [2], [117], cf [172], and see Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88; 332 ALR 128 at [9]-[12] and Jamal v Director of Public Prosecutions (NSW) [2019] NSWCA 121 at [53]. The appellants invited this Court to apply the opposite approach, namely, that all other grounds should be determined first, and only if they all failed to consider whether there was a procedurally unfair trial occasioning a retrial.
4. There may perhaps be cases where a ground based on bias or a denial of procedural fairness should not be determined at the outset; an example might be where the costs of a retrial are out of all proportion to the amount in issue, and it is clear that the appeal must be allowed on other grounds. Even so, it is no small thing for an appellant to contend that a judgment should be set aside on the basis of bias or procedural fairness, and perhaps save in very unusual cases, such a contention should not be left undetermined. In the present case, there is no reason to depart from the ordinary practice of dealing with grounds of this nature at the outset.
5. The appellants submitted, correctly, that the case upon which Ms Bale succeeded at trial had not been pleaded. They also recognised, correctly, that that was not sufficient to entitle them to success on appeal. The pleadings are important, but when the parties choose to litigate a case outside the pleadings, the pleadings cease exhaustively to delineate the issues raised for resolution by the court. The principles were stated by Mason CJ and Gaudron J in Banque Commerciale SA (en liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 287; [1990] HCA 11 in respect of a comparable situation: Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.

Ground 5 - did the primary judge err in finding there no monetary consideration?

1. Before turning to the grounds challenging the legal conclusions - in substance that her Honour erred in concluding that Mr Darwiche had unconscionably exploited Mr Schein's special disadvantage - it is first necessary to resolve the challenges to the findings of primary fact, at the forefront of which is whether her Honour erred in finding that the stated consideration of $590,000 had not in fact been paid. The starting point is the contemporaneous documents.
2. As the appellants rightly submitted, by reference to Talevski v Talevski [2007] NSWSC 945 at [20]-[22], weight should be given to a document signed by Mr Schein and witnessed by Ms Schein which records the receipt of consideration of $590,000 maintained on a public register. Indeed, s 36(11) of the Real Property Act 1900 (NSW), which was raised during the appeal, deems the transfer to have "the effect of a deed duly executed by the parties who signed it".
3. The acknowledgement in a deed of the receipt of consideration has a substantially different effect at common law and in equity. Lord Walker indicated, in Creque v Penn [2007] UKPC 44 at [10], that the following statement by Sir John Romilly MR in Wilson v Keating (1859) 27 Beav 121; 54 ER 47 was "the leading statement of the equitable rule": It is true the deed does estop the parties at law, because at law you cannot contradict the deed, but it is settled by an abundance of authority, that in this Court you can contradict the statement of the payment of the purchase-money; nay more, though there is a receipt for the purchase-money endorsed and duly signed by the vendor.
4. In particular, in Greer v Kettle [1938] AC 156, Lord Maugham wrote that "in equity a party to a deed could not set up an estoppel in reliance on a deed in relation to which there is an equitable right to rescission", and in Petersen v Moloney (1951) 84 CLR 91 at 100; [1951] HCA 57, a unanimous High Court dealing with facts not dissimilar from those in the present litigation said that "[t]he acknowledgment of payment in the transfer does not create an estoppel against the plaintiff … but it is evidence against her". The same point was made in Fischer v Nemeske Pty Ltd (2016) 257 CLR 615; [2016] HCA 11 at [87] and [193], in Data Transfer Services Pty Ltd v White [2023] NSWCA 16 at [29]-[37], and by K Handley, "Reinventing Estoppel in the Privy Council" (2014) 130 LQR 370 at 371. There are statements in Prime Sight Ltd v Lavarello [2014] 1 AC 436; [2013] UKPC 22 to the effect that an acknowledgement in a deed that £499,950 which in fact was agreed never to have been paid gave rise to an estoppel from which the parties were not free to depart, but for the purposes of Australian law the position is as stated by the High Court in Petersen v Moloney (as well as in the English appellate decisions mentioned above to which the Privy Council appears not to have been taken in Prime Sight).

Ground 8 - was the transaction grossly improvident?

1. The primary judge found at [602] that "the transaction was grossly improvident in that, while it enabled the deceased to discharge the mortgage to Suncorp, it left him with no monetary consideration for the sale of his only remaining asset (and even on the defendants' account, had the property been sold to Mr Moore at the time the offer was rejected or even in 2011) the deceased would have obtained roughly half of the sale proceeds". Her Honour considered that it fell to Mr Darwiche and Kimberley Developments to put forward evidence to show that the transaction was fair, just and reasonable such that it can be found not to have been procured by unconscientious dealing, and was unpersuaded that they had satisfied that evidentiary burden: at [603].
2. The appellants contended that the 21 February Agreement was not commercially unfavourable to Mr Schein. In essence their submission was that in exchange for the discharge of debt of slightly less than the value of the property, Mr Schein would receive 60% of the shares in Kimberley Developments and the benefit of the majority of the potential profits upon the redevelopment of the land.
3. But the 21 February Agreement was not contractual, and Mr Schein did not receive any shares. Even if the 21 February Agreement were contractual, I would regard it as grossly improvident. The agreement included an 80 year old man losing the ability to earn income from his property and obtaining a right in the future, perhaps the distant future, to a share of the profits of a development of that property, the nature and timing of which was entirely in the hands of Mr Darwiche. But on the facts as found, Mr Schein received the benefit of monetary consideration at less than half of the nominated sale price of the land, putting to one side the absence of clear valuation evidence. The conclusion that the sale of the land for less than $300,000 was grossly improvident can confidently be drawn.
4. This ground is not established.

Ground 7 - was there material inequality in bargaining power?

1. The primary judge made a finding of material inequality of bargaining power at [501] for the purpose of Ms Bale's claim under the Contracts Review Act 1980 (NSW), which claim was ultimately dismissed (because the 21 February Agreement was not contractual and because it was statute-barred).
2. Accordingly, nothing turns on this ground, except insofar as it might be said to have informed the finding of a special disadvantage sufficient to engage equitable intervention. This ground was addressed simultaneously with the submissions challenging that conclusion, which are addressed immediately below.

Ground 2 - was Mr Darwiche aware that Mr Schein was vulnerable to exploitation and did he unconscionably exploit that special disadvantage?

1. The primary judge made it clear that her findings were directed to the transaction actually found to have occurred, and not that contemplated in the 21 February Agreement: at [592]. Her Honour held that while Mr Darwiche was not aware of Mr Schein's declining cognitive ability, he was aware of the deceased's age and his financial difficulties, and he knew that Ms Schein held a power of attorney and to some extent was dependent upon her: at [596]. Her Honour found that Mr Schein had no independent legal advice and that Mr Darwiche must have been aware of that, since the only lawyer involved in the transaction was Mr Churchill who signed on behalf of the transferee. Her Honour regarded that as amounting to knowledge of the special disadvantage in the present case, namely the vulnerability to exploitation: at [598]. Her Honour found that the defendants unconscientiously exploited that special disadvantage or disability because there was no monetary compensation paid for the transfer and no shares issued: at [599].
2. The gravamen of the appellants' submission on this ground was that there is nothing especially unusual about a purchase from an elderly owner of land who is in default and under pressure to sell from a mortgagee. As much may be accepted, and the position would be different if that were all that was relied upon. But as the primary judge stated, Mr Darwiche knew that Mr Schein had no independent legal advice, and, most importantly, her Honour found that the consideration for the transaction which in fact took place was merely discharging the existing mortgage. The fact that Mr Schein was prepared to proceed to transfer title to the land without independent legal advice, without the usual incidents of a conveyance, and in circumstances where aside from the written and oral representations reflected in the 21 February Agreement, all that was received was the discharge of the existing indebtedness, which on any view was substantially less than the value of the Forest Lodge Property, makes it plain that Mr Schein was labouring under a special disadvantage which was unconscionably exploited by Mr Darwiche in respect of which equity will intervene.

Ground 3 - did Mr Darwiche propound the 21 February Agreement?

1. This ground challenged the finding that the 21 February Agreement was prepared by or on instructions by Mr Darwiche and put to the deceased by him or Mr Churchill on Mr Darwiche's instructions. The appellants' submissions focussed upon the inconsistency between two portions of the judgment some 70 paragraphs apart, dealing with whether Mr Churchill had prepared the 21 February Agreement. Her Honour first said at [366]: Ultimately, I think it most likely (on the balance of probabilities) that the 21 February Agreement was prepared by a lay person (with input from Mr Churchill). It seems to me equally plausible that it was a document prepared by Ms Chyna Schein and/or Mr Mohr as it is that it was prepared by Mr Darwiche (but in either case it seems to me almost unarguable that it was prepared with reference to or input from Mr Churchill to some extent and that it was put to the deceased with Mr Darwiche's support or concurrence).
2. Secondly, when referring, much later in the judgment, to the same submissions, her Honour said at [436]: Thus, I am not persuaded that the finding sought by the defendants (that Mr Churchill drafted the 21 February Agreement on the deceased's instructions) should be made. I have concluded (as noted earlier) that on the balance of probabilities it is most likely that Mr Darwiche was responsible for the drafting or instructions for the drafting of the 21 February Agreement, with input from Mr Churchill (not the deceased).
3. As the appellants submitted, there is inconsistency between a finding that it was "equally plausible" that the 21 February Agreement was prepared by Ms Schein "and/or" Mr Mohr and Mr Darwiche, and a finding that it was "most likely" that Mr Darwiche was responsible for its drafting. However, as the respondent submitted, nothing turns on that inconsistency. In both paragraphs, her Honour found that Mr Darwiche was the driving force behind the putting of the document to Mr and Mrs Schein. As the respondent submitted, nothing relevantly turns on who drafted the words of the document, as opposed to who propounded it leading to its execution by Mr and Ms Schein. This Court will only intervene if there is material error.
4. Even if the inconsistency were material, it would be necessary to address if this Court would make a different factual finding, pursuant to s 75A of the Supreme Court Act 1970 (NSW), or alternatively would remit the matter for a retrial. Mr Darwiche was disbelieved, and there is no challenge to that. The 21 February Agreement is virtually all about Mr Darwiche (save for clauses directed to Mr Churchill's fees). His company must issue shares to Mr Schein. He must discharge the indebtedness to Suncorp, and in the meantime pay the mortgage expenses. He is given exclusive power to control the subsequent development of the land. And a newly incorporated company of which he is the sole shareholder and director became the owner of the land. I respectfully agree with the tenor of the reasons of the primary judge at [366] reproduced above that if indeed it is not unarguable it is on the outer periphery of what is arguable to contend that Mr Darwiche did not propound the 21 February Agreement.

Ground 1 - the significance of Ms Schein witnessing the transfer

1. This ground is based on the fact that Ms Schein witnessed her husband's signature on the Transfer, as well as the following portion of her Honour's reasons at [665]-[666]: While Ms Chyna Schein purportedly signed the transfer instrument in the capacity of a witness, it appears that the parties contemplated that Ms Chyna Schein's signature on the 21 February Agreement should be taken to be in her capacity as donee of the deceased's enduring power of attorney (see cl 31 of the agreement, as noted above) and there is no reason to think that her involvement in the execution of the transfer was other than as part of her exercise of functions as the deceased's power of attorney. I consider that on the balance of probabilities Ms Chyna Schein was acting as the deceased's representative in the course of the transaction (since I consider it unlikely that the deceased independently understood the nature or effect of the transaction and it is most likely that, by February 2011, he was dependent upon Ms Chyna Schein to manage his financial affairs at the time of the transaction).
2. The appellants submitted that those paragraphs amounted to a clear finding that Ms Schein executed the transfer in her capacity as agent, notwithstanding what appeared on the face of the document. The fact that the primary judge referred to Ms Schein "purportedly" signing the document as witness made it clear, so it was put, that her Honour had purposefully rejected the prima facie effect of the document.
3. Two related things were said to follow from this. First, it was more ambitiously contended (principally, in writing) that that was an answer to the entire claim based on a special disadvantage on the part of Mr Schein. The appellants said that Ms Schein's act within the scope of her authority was taken to be as effective as it would have been had Mr Schein understood the nature of the act at the time, by reason of s 21(1) of the Powers of Attorney Act 2003 (NSW) which provides to that effect, and that because there was "no case pleaded or run, and no findings were made, that [Ms Schein] was under a special disadvantage, nor that she was acting in concert with or on behalf of Darwiche or Kimberley Developments", the findings had to be set aside.
4. Secondly, in oral submissions emphasis was placed on a more modest finding, namely, that the evaluation of unconscionability fell to be performed in circumstances where Mr Darwiche was dealing with a vendor acting through his authorised agent, and this had not occurred. Thus it was put: Now we don't say, of course, that theoretically, there couldn't be a case where there was an attorney interposed, but nonetheless there was an exploitation of a special disadvantage, but one needs to ask the question to see whether given the intervention of another actor whose role is to make decisions in the best interest of the principal, and there being no allegation that we were on notice that she was not so doing or did not intend so to do, that question needs to be asked and with respect, it isn't in the primary judgment.

Ground 6 - did the primary judge err in admitting and relying on evidence from the 2016 NCAT hearing?

1. This ground is based on the reliance placed by the primary judge on the transcript of the NCAT hearing in 2016, especially the following statements made to Ms Schein: [CS:] So out of one lot of property that was sold in Gordon, we got $300,000 and that's what we have lived on until we went onto the pension. And there is one other property called Forest Lodge, which was his old factory, and there was still $180,000 owing on that, and Challenger wanted to take that, but on the advice of Michael's and my lawyer, he found a partner, and Michael opened a company with this guy. He paid the $880,000 loan off and they opened a company called Kimberley Develop. Michael still owns that property today. I have the Deed … I don't have the Deeds but I have the Land Tax Notices and the Agreement of the copy. We were going to sit on that property for a few years until it came good, the partner had finished off paying the loan off, and then Michael was going to redevelop it until he got sick. And that still stands today. … CS: And this partner paid the loan out, and in return for that, he got 40% of a company and Michael got 60% and they formed Kimberly Developments. SM: Right, okay. Have you acted as Attorney for Mr Schein under that appointment? CS: Well not really, because once Michael and I got a new lawyer, he didn't want to use his old lawyer, Hancock, Michael and I found a new lawyer in the phone book, went and saw him and he handled all of this for us and said, "All we can do is pay off all this debt, because if you don't the bank's just going to take all the properties." And we managed to save the one property, Forest Lodge, which was his old company, by get … the lawyer found this person for us. We had a meeting, we met him, Michael agreed to it, we formed a company, this person got 40% of the company, Michael owned 60%, and he was going to sit on this property for a few years, clean it all up, and then him and Michael were going to develop it, and then Michael got sicker and sicker. SM: So this partner, who's the partner? CS: His name is Albert Darwiche and I have a copy of the Agreement with me here today. SM: So does Mr Darwiche own 40% of the Forest Lodge property? CS: Just the company that we developed, not the actual property. The Deeds and everything are still in Michael's name.
2. That transcript was admitted into evidence, subject to a limiting ruling pursuant to s 136 of the Evidence Act 1995 (NSW) to "the fact that this was what was said at the Tribunal by Ms Chyna Schein (and not as to the truth of the statements there made)".

Ground 9 - rescission or equitable compensation, and the $350,000 from Mr Churchill

1. This ground had two aspects. One was that rather than orders for rescission, this was a case for equitable compensation, in light of the facts that Mr Schein had only limited "equity" in the property, that Suncorp was threatening to exercise its rights as mortgagee prior to Mr Trigas discharging Mr Schein's indebtedness to Suncorp, and also that Ms Bale had received $350,000 from Mr Churchill. The other, which was at the forefront of oral address was that even if recission were appropriate, regard had to be had to the $350,000 actually received by Ms Bale in settlement of her claim against Mr Churchill.
2. The first aspect of this ground is readily addressed. The primary judge considered this explicitly at [648]-[658]. Her Honour recognised the "cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts", citing Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559; [1995] HCA 18. Her Honour said at [652] that: If it could be said that equitable compensation in effect to enforce the consideration under the 21 February Agreement would adequately compensate the deceased's estate, that might be an argument against setting aside the transfer. However, that would require the issue of shares in Kimberley Developments and the parties to be bound to a development arrangement that neither side seems prepared to undertake. For the reasons given, I consider that those orders are not capable of doing full justice, and that there is force to the argument that a remedial constructive trust should be imposed and the transfer set aside.
3. The issue is not whether this Court would rescind the transfer or award equitable compensation. The issue is whether there is appellable error in the discretionary decision made by the primary judge with the benefit of having seen the entire trial in ordering rescission rather than equitable compensation. The appellants maintained that this was a clear case for equitable compensation, but did not articulate why her Honour's discretion in this respect had miscarried. I do not think that it did. On her Honour's findings, Mr Schein executed the transfer induced by the representation that a joint venture along the lines of the 21 February Agreement would be carried out. He would remain entitled to 60% of the income from the land (through the class B shares in Kimberley Developments). That cannot occur, as the primary judge said. Further, if as the appellants maintain orders in the nature of equitable compensation should be made, then to the extent that the value of the Forest Lodge Property has appreciated in excess of the present value of the cost of holding it, then there is at the very least a risk that the appellants would retain a benefit from their unconscionable conduct which they should be denied. For all those reasons, I think that it was, to say the least, open to the judge to exercise a discretion to craft orders amounting to rescission rather than equitable compensation.

Orders

1. For these reasons, I propose the following orders. 1. Appeal dismissed in respect of grounds 1-8. 2. Direct the parties to file and serve within 14 days of today orders by consent or alternatively the orders for which they contend and submissions not exceeding four pages in support thereof, with further submissions to be filed and served within 21 days of today not exceeding two pages in length in response, with a view to this Court making orders for further steps to be taken in this appeal.
2. KIRK JA: I agree with Leeming JA.
3. GRIFFITHS AJA: I agree with Leeming JA.

Amendments 07 July 2023 - "Messrs Darwiche and Trigas" amended in [4], [57] and [60] so it reads "Messrs Darwiche and Arthur Trigas"

• "Arthur" inserted in [57] so it reads, "To be clear, both Messrs Darwiche and Arthur Trigas"
• reference to Mr Trigas omitted from the words "Messrs Darwiche and Trigas" in [59] so it reads, "... the criminal record of Mr Darwiche ..." DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 July 2023