Louth v Diprose

High Court of Australia|1992-07-01|Before: McHugh JJ, Toohey J, Legoe J, Matheson J

High Court of Australia Mason C.J. Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. Louth v Diprose [1992] HCA 61

The facts of this case are set out in the reasons for judgment of Toohey J.

The case for the appellant seeks to challenge the findings of fact made by the primary judge (King C.J.), confirmed by the Full Court (Jacobs A.C.J. and Legoe J., Matheson J. dissenting), on the basis of which the Chief Justice concluded that the appellant had been guilty of unconscionable conduct in procuring and retaining the gift of $59,206.55 made to her by the respondent in connexion with the purchase in her name from her brother-in-law, Mr. Volkhardt, of the house at Tranmere, which she had previously occupied at a low rent.

My initial impression was that there was force in the appellant's contention that some of the findings of fact made by the Chief Justice were not warranted, when considered in the light of the evidence. In particular, the findings that the appellant manufactured an atmosphere of crisis with respect to the house where none really existed so as to influence the respondent to provide the money for the purchase of the house and that her conduct in that respect "was dishonest and smacked of fraud" [1] seemed to me to be open to question. These findings, viewed in the totality of the continuing relationship between the appellant and the respondent, were crucial to the Chief Justice's conclusion that the appellant was guilty of unconscionable conduct.

Diprose v Louth [No. 1] (1990), 54 S.A.S.R. 438, at p. 448.

However, in the ultimate analysis, the two findings to which I have referred rest on antecedent primary findings of fact which, in turn, depend on the Chief Justice's acceptance, in this area of factual dispute, of the evidence of the respondent in preference to that of the appellant. The Chief Justice described the appellant and her evidence in these terms [2] :

I formed the impression that the [appellant] was a calculating witness who was prepared to tailor her evidence in order to advance her case. In particular I found her evidence as to the circumstances leading to the house transaction quite unimpressive. By way of contrast, the Chief Justice referred to the evidence of the respondent in these terms [3] : I found much of his evidence as to the general relationship of the parties and the circumstances in which the subject of the house transaction arose convincing, but his demeanour was not such as to persuade me to accept evidence which I consider to be improbable or which is in conflict with other convincing evidence. 1. ibid., at p. 444. 2. ibid., at p. 443.

The Chief Justice rejected the respondent's evidence that he paid for the Tranmere house on the basis that it was to be held in trust for him by the appellant. The rejection of this evidence, which related to the primary aspect of the respondent's case for relief, raised a serious question as to the acceptability of the rest of the respondent's testimony. But his Honour resolved that question in favour of the respondent. And the rejection of part of the respondent's evidence does not, in my view, entitle this Court to disregard his Honour's acceptance of the respondent as a credible and accurate witness in relation to the issues now under consideration, especially the circumstances leading up to the purchase of the house.

Implicit in the Chief Justice's acceptance of the evidence of the respondent and his rejection of that of the appellant, as well as his acceptance of the evidence of Mr. Volkhardt and Ms. Cartwright, the appellant's sister, was a finding that the appellant falsely told the respondent that she was under pressure to leave the Tranmere house which she was then occupying. She told the respondent that her brother-in-law would have to sell it as her sister was seeking a property settlement from him. The appellant told the respondent that she could not face the prospect of moving elsewhere and that she would kill herself if it came to that. She had previously told the respondent that she had slashed her wrists, or attempted to do so, on two occasions in 1984 and had pointed out to him marks on her wrist which may well have been consistent with a slash.

In the light of her history of unhappiness and insecurity, as she explained it to him, the respondent was convinced that the appellant was in a state of emotional stress and that she would attempt to commit suicide if she lost the home. It was because the appellant insisted that having the title to the house in her name was essential to her security that the respondent agreed to provide the money for the purchase in her name.

Mr. Volkhardt denied that he told the appellant that the house would have to be sold or that she would have to move out. Indeed, he informed her that she could stay as long as she liked, though she should put her name down for a Housing Trust home. Mr. Volkhardt also gave evidence to the effect that there was no immediate intention or pressure to sell the Tranmere house in order to reach a property settlement with his wife, the appellant's sister. His evidence in this respect was confirmed by Ms. Cartwright. Mr. Volkhardt said that "it could have been quite possible" for the house to have remained in his name for a long period of time. But it does not appear that he informed the respondent that this was the position. Although Mr. Volkhardt initially expressed surprise when told by the respondent that he intended to buy the house for the appellant, I do not accept that the conversations which took place between Mr. Volkhardt and the respondent would have led the respondent to conclude that the appellant was under no threat of dispossession. Further, even if the respondent had come to this conclusion, he may well have thought that the purchase of the house in the appellant's name was the only sure means of giving her security and peace of mind.

In these circumstances, there is no basis on which this Court should interfere with the primary findings of fact made by the Chief Justice or the secondary findings which he made, in particular, that the appellant manufactured an atmosphere of crisis with respect to the house when none really existed and that her conduct in that respect "was dishonest and smacked of fraud". Nor is there any basis for disturbing the findings that the relationship between the parties was one in which the respondent was in a position of "emotional dependence" on the appellant and that she was in a position to influence his decisions and actions. In this respect I agree with all that Deane J. has written with reference to the great advantage enjoyed by the primary judge in assessing the character and capacities of the personalities in this class of case and the burden confronting the appellant in challenging concurrent findings of fact.

I agree also with his Honour's conclusion that, viewed from the respondent's perspective, it was an improvident transaction; indeed, it was so improvident, judged in the light of the respondent's financial position, that it is explicable only on the footing that he was so emotionally dependent upon, and influenced by, the appellant as to disregard entirely his own interests. By dishonestly manufacturing an atmosphere of crisis with respect to the house, the appellant played upon the respondent's susceptibility where she was concerned. Her conduct was unconscionable in that it was dishonest and was calculated to induce, and in fact induced, him to enter into a transaction which was improvident and conferred a great benefit upon her.

The jurisdiction of equity to set aside gifts procured by unconscionable conduct ordinarily arises from the concatenation of three factors: a relationship between the parties which, to the knowledge of the donee, places the donor at a special disadvantage vis-à-vis the donee; the donee's unconscientious exploitation of the donor's disadvantage; and the consequent overbearing of the will of the donor whereby the donor is unable to make a worthwhile judgment as to what is in his or her best interest [4] . A similar jurisdiction exists to set aside gifts procured by undue influence. In Commercial Bank of Australia Ltd. v Amadio [5] , Mason J. distinguished unconscionable conduct from undue influence in these terms:

In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position. Deane J. [6] identified the difference in the nature of the two jurisdictions: Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. Although the two jurisdictions are distinct, they both depend upon the effect of influence (presumed or actual) improperly brought to bear by one party to a relationship on the mind of the other whereby the other disposes of his property. Gifts obtained by unconscionable conduct and gifts obtained by undue influence are set aside by equity on substantially the same basis. In White and Tudor's Leading Case in Equity [7] , the notes to Huguenin v Baseley [8] treat the principle applied in cases of unconscionable conduct as an extension of the principle applied in cases of undue influence [9] : The principle upon which equity will give relief as against the persons standing in [the categories of confidential] relations to the donor, will be extended and applied to all the variety of relations in which dominion may be exercised by one person over another. The ground for setting aside a gift obtained by unconscientious exploitation of a donor's special disadvantage, as explained in Amadio, can be compared with the ground for setting aside a gift obtained by undue influence, as explained by Dixon J. in Johnson v Buttress [10] : The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is 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 in reference to such a matter. The source of power to practise such a domination may be found in no antecedent relation but in a particular situation, or in the deliberate contrivance of the party. If this be so, facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act. But the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected. (Emphasis added.) The similarity between the two jurisdictions gives to cases arising in the exercise of one jurisdiction an analogous character in considering cases involving the same points in the other jurisdiction. 1. Commercial Bank of Australia Ltd. v Amadio (1983), 151 C.L.R. 447, at pp. 461, 462, 474-475, 489; Blomley v Ryan (1956), 99 C.L.R. 362, at p. 415. 2. (1983) 151 C.L.R., at p. 461. 3. ibid., at p. 474. 4. 9th ed. (1928), vol. 1, pp. 203ff. 5. (1807) 14 Ves. Jun. 273 [33 E.R. 526]. 6. White and Tudor, p. 227; founded on Dent v Bennett (1839), 4 My. & Cr. 269, at p. 277 [ 41 E.R. 105, at p. 108]; Smith v Kay (1859), 7 H.L.C. 750, at p. 779 [11 E.R. 299, at pp. 310-311]. 7. (1936) 56 C.L.R. 113, at p. 134.

There are some categories of confidential relationships from which a presumption of undue influence arises when a substantial gift is made by one party to the relationship to the other - relationships such as solicitor and client, physician and patient, parent and child, guardian and ward, superior and member of a religious community. Public policy creates a presumption of undue influence in cases where the relationship falls into one of the recognized categories [11] . Those categories do not exhaust the cases in which it may be held that it is contrary to conscience for a donee to retain a gift. In cases where the relationship is not one of confidentiality, a gift may be impeached where the evidence shows that in fact it was procured by unconscionable conduct. Where a gift is impeached on the ground that it was obtained by unconscionable conduct consisting in an unconscionable exploitation of an antecedent relationship, the relationship is one in which one party stands in a position of special disadvantage vis-à-vis the other. Such relationships are infinitely various [12] , the common feature being that the donor is, to the knowledge of the donee, in a position of special disadvantage vis-à-vis the donee: that is to say, in matters in which their interests do not coincide, the donor's capacity to make a decision as to his or her own best interest is peculiarly susceptible to control or influence by the donee. As Mason J. said in Amadio [13] :

I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party. 1. Allcard v Skinner (1887), 36 Ch.D. 145, at p. 171; Inche Noriah v Shaik Allie Bin Omar , [1929] A.C. 127, at pp. 132-133; Morley v Loughnan, [1893] 1 Ch. 736, at p. 752. 2. Blomley v Ryan (1956), 99 C.L.R., at p. 405; Amadio (1983), 151 C.L.R., at p. 462. 3. (1983) 151 C.L.R., at p. 462.

The relevant relationship may exist because of some weakness in the donor. Thus Fullagar J. in Blomley v Ryan [14] took as instances of weakness "poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary". And McTiernan J. said that "[t]he essence of such weakness is that the party is unable to judge for himself" [15] . It is unnecessary to show that the donee contributed to that weakness. In the present case, King C.J. [16] found -

a relationship existed between the plaintiff and the defendant which placed the plaintiff in a position of emotional dependence upon the defendant and gave her a position of great influence on his actions and decisions. From the time they first met he was utterly infatuated by her. He had had unhappy domestic experiences and was anxious to lavish love and devotion upon a woman. He fell completely in love with the defendant.

The defendant, as her evidence confirms, was well aware that the plaintiff had a deep emotional attachment to her and desired only to have her love and to marry her. He knew that he had what she accepted in evidence to be "an enormous weakness" for her. His willingness to devote himself to her and to lavish her with gifts, notwithstanding that she did not return his love, is quite pathetic. The degree of his emotional dependence upon her and his susceptibility to her wishes is obvious on the evidence and was obvious to her.

(1956) 99 C.L.R., at p. 405. 2. ibid., at p. 392; see Amadio (1983), 151 C.L.R., at pp. 476-477, per Deane J. 3. Diprose v Louth [No. 1] (1990), 54 S.A.S.R. 438, at pp. 447-448.

Given those findings, the relationship between the plaintiff (respondent) and the defendant (appellant) was so different in degree as to be different in kind from the ordinary relationship of a man courting a woman. It was found that the personal relationship between them was such that the plaintiff was extremely susceptible to influence by the defendant, as the defendant knew. That finding makes the relationship in the present case analogous to the relationship which Lord Langdale M.R. thought to be subsisting between an engaged couple in Page v Horne [17] . There his Lordship set aside a gift by a woman to her fiance, observing that "no one can say what may be the extent of the influence of a man over a woman, whose consent to marriage he has obtained". It may no longer be right to presume that a substantial gift made by a woman to her fiance has been procured by undue influence [18] but the cases in which such a presumption has been made demonstrate that the relationship which places a donor at a special disadvantage may have its origin in an emotional attachment of a donor to a donee.

(1848) 11 Beav 227, at p. 235 [50 E.R. 804, at p. 807]. 2. See Zamet v Hyman , [1961] 1 W.L.R. 1442; [1961] 3 All E.R. 933; but cf. Johnson v Buttress (1936), 56 C.L.R., at p. 134, and Yerkey v Jones (1939), 63 C.L.R. 649, at p. 675.

Equity intervenes "whenever one party to a transaction is at a special disadvantage in dealing with the other party and the other party unconscientiously takes advantage of the opportunity thus placed in his hands" [19] . Citing this passage in Amadio [20] , Dawson J. said:

What is necessary for the application of the principle is exploitation by one party of another's position of disadvantage in such a manner that the former could not in good conscience retain the benefit of the bargain. What his Honour said of a bargain can be said equally of a gift. 1. Blomley v Ryan (1956), 99 C.L.R., at p. 415, per Kitto J. 2. (1983) 151 C.L.R., at p. 489; and see also pp. 462, 474.

In the present case, King C.J. made explicit findings of an unconscientious exploitation by the defendant of the plaintiff's weakness [21] :

I am satisfied that she deliberately manufactured the atmosphere of crisis in order to influence the plaintiff to provide the money for the house. I am satisfied, moreover, that she played upon his love and concern for her by the suicide threats in relation to the house. She then refused offers of assistance short of full ownership of the house knowing that his emotional dependence upon her was such as to lead inexorably to the gratification of her unexpressed wish to have him buy the house for her. I am satisfied that it was a process of manipulation to which he was utterly vulnerable by reason of his infatuation. 1. (1990) 54 S.A.S.R., at p. 448.

When a donor who stands in a relationship of special disadvantage vis-à-vis a donee makes a substantial gift to the donee, slight evidence may be sufficient to show that the gift has been procured by unconscionable conduct. Whether that finding should be made depends on the circumstances. In Watkins v Combes [22] , Isaacs J. said:

It is not the law, as I understand it, that the mere fact that one party to a transaction who is of full age and apparent competency reposed confidence in, or was subject to the influence of, the other party is sufficient to cast upon the latter the onus of demonstrating the validity of the transaction. Observations which go to that extent are too broad. But where it is proved that a donor stood in a specially disadvantageous relationship with a donee, that the donee exploited the disadvantage and that the donor thereafter made a substantial gift to the donee, an inference may, and often should, be drawn that the exploitation was the effective cause of the gift. The drawing of that inference, however, depends on the whole of the circumstances. 1. (1922) 30 C.L.R. 180, at p. 193; and see Harris v Jenkins (1922), 31 C.L.R. 341, at pp. 367-368, per Starke J.

In this case, the defendant contends that, whatever view is taken of her conduct, the proper conclusion to be reached on the evidence is that the plaintiff made the gift to her simply because he wished to do so, imprudent though the gift may have been. If that be the right conclusion, so that the gift was not the result of unconscionable conduct on the part of the defendant, the plaintiff cannot recover the gift. As Lindley L.J. pointed out in Allcard v Skinner [23] :

Courts of Equity have never set aside gifts on the ground of the folly, imprudence, or want of foresight on the part of donors. The Courts have always repudiated any such jurisdiction. It would obviously be to encourage folly, recklessness, extravagance and vice if persons could get back property which they foolishly made away with, whether by giving it to charitable institutions or by bestowing it on less worthy objects. Salmond J. in Brusewitz v Brown [24] spoke to the same effect: The law in general leaves every man at liberty to make such bargains as he pleases, and to dispose of his own property as he chooses. However improvident, unreasonable, or unjust such bargains or dispositions may be, they are binding on every party to them unless he can prove affirmatively the existence of one of the recognized invalidating circumstances, such as fraud or undue influence. His Honour then goes on to distinguish cases of undue influence: This general principle, however, is subject to an important exception. Where there is not merely an absence or inadequacy of consideration for the transfer of property, but there also exists between the grantor and the grantee some special relation of confidence, control, domination, influence, or other form of superiority, such as to render reasonable a presumption that the transaction was procured by the grantee through some unconscientious use of his power over the grantor, the law will make that presumption, and will place on the grantee the burden of supporting the transaction by which he so benefits, and of rebutting the presumption of its invalidity. In such cases it is necessary for the grantee to prove that the suspected transaction has not its source in any improper influence over the mind or will of the grantee, or in any fraud, misrepresentation, mistake, or concealment of material facts which ought to have been disclosed by the grantee to the grantor in view of the relation between them. Unless the grantee can prove this the transaction will be set aside at the suit of the grantor or his representatives. The same approach leads to a similar conclusion when the evidence shows unconscionable conduct on the part of a donee. Once it is proved that substantial property has been given by a donor to a donee after the donee has exploited the donor's known position of special disadvantage, an inference may be drawn that the gift is the product of the exploitation. Such an inference must arise, however, from the facts of the case; it is not a presumption which arises by operation of law. The inference may be drawn unless the donee can rely on countervailing evidence to show that the donee's exploitative conduct was not a cause of the gift. At the end of the day, however, it is for the party impeaching the gift to show that it is the product of the donee's exploitative conduct. This is the final and necessary link in the chain of proof of unconscionable conduct leading to a decree setting aside the gift [25] . 1. (1887) 36 Ch. D., at pp. 182-183. 2. [1923] N.Z.L.R. 1106, at p. 1109. 3. See White and Tudor, op. cit., p. 240.

The plaintiff discharged that onus in the present case. That is implicit in the conclusion of King C.J. [26] :

By reason of the plaintiff's infatuation and the defendant's manipulation of it he was "unable to make a worthwhile judgment as to what is in his best interest": Commercial Bank of Australia v Amadio [27] . The defendant was well aware of that and her manufacture of an atmosphere of crisis where no crisis existed was dishonest and smacked of fraud. To my mind the defendant's unconscientious use of her power over the plaintiff resulting from his infatuation, renders it unconscionable for her to retain the benefit of such a large gift out of the plaintiff's limited resources. His Honour inferred that the gift was the product of the defendant's "manipulation" of the plaintiff. 1. (1990) 54 S.A.S.R., at p. 448. 2. (1983) 151 C.L.R., at p. 461, per Mason J.

The findings of fact made by King C.J. were attacked both in the Full Court and before this Court. The attack failed in the Full Court and, for the reasons given by Deane J., the attack should fail here.

As Rich J. observed in Wilton v Farnworth [28] , in a judgment with which Dixon and McTiernan JJ. agreed, a trial judge in an undue influence case in which the parties directly involved give evidence ordinarily enjoys an immeasurable advantage in estimating the characters and capacities of those involved in the impugned transaction. That was undoubtedly the position in the present case where the ultimate question for the learned trial judge (King C.J.) was whether a gift by the respondent to the appellant was open to challenge on the ground of either unconscionable conduct or undue influence. His Honour heard evidence from both donor and donee and decided the case on findings of fact made and drawn in the context of his assessment of their characters, capacities and reliability. He found [29] that the appellant had been guilty of unconscionable conduct which called for the intervention of a court of equity and the restitution of the gift.

(1948) 76 C.L.R. 646, at p. 654. 2. Diprose v Louth [No. 1] (1990), 54 S.A.S.R. 438.

The appeal to this Court is from a majority decision of the Full Court of the Supreme Court of South Australia (Jacobs A.C.J. and Legoe J., Matheson J. dissenting) [30] which dismissed an appeal from the judgment at first instance. Jacobs A.C.J. and Legoe J. upheld the findings of fact made by the trial judge whereas Matheson J. disagreed with some of those findings. Careful reading of their judgments leaves me in no doubt that each of Jacobs A.C.J. and Legoe J. carefully considered the evidence for himself and concluded [31] , to quote Legoe J. with whose judgment Jacobs A.C.J. expressed "substantial agreement" [32] , "that the evidence as a whole, the findings as to the reliability of the witnesses, as well as many undisputed facts clearly supported the conclusions" about factual matters which the trial judge had reached.

Diprose v Louth [No. 2] (1990), 54 S.A.S.R. 450. 2. ibid., at p. 465. 3. ibid., at p. 451.

In these circumstances, the case is one in which there have been concurrent findings of fact by the primary court and the intermediate appellate court. It is well settled that a second appellate court, such as this Court is in the present case, should not, in the absence of special reasons such as plain injustice or clear error, disturb such concurrent findings [33] . In Waltons Stores (Interstate) Ltd. v Maher [34] , I explained the rationale and justification of that practice:

In a context where the cost of litigation has gone a long way towards effectively denying access to the courts to the ordinary citizen who lacks access to government or corporate funding, it is in the overall interests of the administration of justice and of the preservation of at least some vestige of practical equality before the law that, in the absence of special circumstances, there should be an end to the litigation of an issue of fact at least when the stage is reached that one party has succeeded upon it both on the hearing before the court of first instance and on a rehearing before the court of first appeal. In that regard, it is immaterial that the concurrent findings of fact by the court of first instance and the first appellate court encompass both findings of primary fact and conclusions and inferences of fact drawn from primary facts [35] or that some conclusions or inferences of fact are based on different reasonings as between the two courts [36] . Nor is it relevant that there has been a dissentient in the first appellate court [36] . 1. See, e.g., The Commonwealth v Introvigne (1982), 150 C.L.R. 258, at p. 274; South Australia v Johnson (1982), 42 A.L.R. 161, at p. 167; Waltons Stores (Interstate) Ltd. v Maher (1988), 164 C.L.R. 387, at p. 434; Walker v Wilson (1991), 172 C.L.R. 195, at p. 200. 2. (1988) 164 C.L.R., at pp. 434-435. 3. See, e.g., The Commonwealth v Introvigne (1982), 150 C.L.R., at pp. 273-274; but cf., Willmot v Anglo-American Oil Co. (1923), 67 Sol. J. 678. 4. Devi v Roy , [1946] A.C. 508, at p. 521. 5. Devi v Roy , [1946] A.C. 508, at p. 521.

It was submitted on behalf of the appellant that the majority judges in the Full Court failed adequately to examine the evidence for themselves and to reach their own conclusions about the critical facts. In my view, there is no substance in that submission. It is true that both Jacobs A.C.J. and Legoe J. were clearly and rightly [37] conscious of the great advantage enjoyed by the trial judge in a case such as the present where both findings and inferences of fact turned largely on conclusions about the credibility of the evidence of the donor and the donee of the impugned gift. Nonetheless, it is plain that their Honours, in deciding the appeal, carefully considered the whole of the evidence for themselves. As has been seen, Legoe J., with whose judgment Jacobs A.C.J. was in substantial agreement, expressly concluded that the "evidence as a whole" supported the conclusions of fact which the learned trial judge had reached. It was also submitted on behalf of the appellant that the inferences of fact which were drawn by the learned trial judge and confirmed by the Full Court could not properly be seen as coming within the scope of concurrent findings of fact. Again, it appears to me that there is no substance in that submission. As I have already indicated, inferences of fact are as much within the ambit of concurrent findings of fact as are findings of primary fact. Indeed, the process of determining contested issues of fact in litigation almost invariably includes the drawing of inferences from other facts which may or may not be disputed.

See, e.g., Warren v Coombes (1979), 142 C.L.R. 531, at p. 552, per Gibbs A.C.J., Jacobs and Murphy JJ.: "the appellate court must recognize the advantages enjoyed by the judge who conducted the trial."

At a more particularized level, the appellant attacked the learned trial judge's acceptance of the respondent's evidence that the appellant had told him that she would commit suicide because she was required to leave the house in which she was living, in a context where his Honour rejected the respondent's evidence that the appellant had agreed that the house which was ultimately purchased in her name would subsequently be transferred to the respondent. The learned trial judge was fully conscious of a possible appearance of inconsistency in that regard. Indeed, he expressly explained [38] :

I have reached certain conclusions on the basis of accepting the plaintiff's [i.e. the present respondent's] evidence in preference to that of the defendant as to the circumstances and events leading to the house transaction. I have given careful consideration to the question of the plaintiff's credibility in relation to those matters in the light of my rejection of his evidence that he stipulated for a right to have the house retransferred, but I am quite satisfied that on those matters his evidence is truthful and reliable and to be preferred to that of the defendant. In other words, as Legoe J. observed [39] in the Full Court:

Although the learned Chief Justice placed little reliance upon the evidence of the appellant where it served her own interest he concluded that the other evidence in the case so strongly confirmed that the respondent made a gift of the house to the appellant:

[that] I have no hesitation in holding that there was such a gift. The presumption of trust arising from the provision of the purchase money by the plaintiff is therefore rebutted. The fact that the learned trial judge generally preferred the evidence of the respondent to that of the appellant clearly did not preclude him, as a matter of logic or common sense, from rejecting the respondent's evidence on a particular matter in respect of which other evidence "strongly confirmed" a contention by the appellant. 1. (1990) 54 S.A.S.R., at p. 448. 2. ibid., at p. 463.

It follows that the appellant has failed to establish any basis upon which this Court would be justified in setting aside the concurrent findings of fact made by the trial judge and by the Full Court on the appeal to it. Accordingly, the appeal falls to be determined on the basis of those concurrent findings. The quotations in the following summary of relevant facts are from the judgment of the trial judge [40] .

In 1985, the respondent, who is a solicitor, was in his early forties. After two unsuccessful marriages, he was living in rented accommodation in Adelaide with the three children of his first marriage. Putting to one side an old car, a Chipmunk aeroplane (worth less than $30,000) and a share in a house owned with other members of his family in Tasmania, his net assets totalled less than $100,000. The appellant, who had been married and divorced, was living in Adelaide with her two children in a rented house owned by her sister's husband. She had few assets of her own and was living in straitened circumstances.

The relationship between the respondent and the appellant went back to an initial relationship between them in Tasmania some years earlier. There was an extreme contrast between their respective attitudes to one another. For his part, the respondent was "utterly infatuated" by the appellant. He was "completely in love" with her. In contrast, the appellant had become "quite indifferent to" the respondent. The motives for her continued association with him "were of a material nature". His infatuation placed the respondent "in a position of emotional dependence upon the appellant and gave her a position of great influence on his actions and decisions".

The appellant's sister and the sister's husband, who owned the house which the appellant was renting, separated. The appellant "knew that ultimately she would have to go into a Housing Trust home to enable the house to be sold". There was, however, no immediate pressure upon her to leave the house. At the time, the respondent's main asset consisted of moneys lent on mortgage in a total amount of $91,000. The time for repayment of these moneys was about to fall due. The appellant "was aware in general terms that [the respondent] had only limited assets, that the mortgage moneys were his principal asset and that he had to work as an employee solicitor for a living. Moreover she was aware that he had three children who had natural claims upon his bounty."

The appellant set out on a planned course of conduct aimed at persuading the respondent to provide the money necessary to enable her to purchase the house from her brother-in-law. She "deliberately manufactured" a false "atmosphere of crisis in order to influence the [respondent] to provide the money [to purchase] the house". She falsely told the respondent that she was required to leave the house. She said that, if forced to vacate the house, she would commit suicide. The respondent, who was aware that the appellant had cut her wrists on a previous occasion, believed her. By "a process of manipulation to which [the respondent] was utterly vulnerable by reason of his infatuation", the appellant obtained from the respondent a gift of $59,206.55, being the purchase price of the house and associated conveyancing fees. The process of manipulation included refusal of "offers of assistance [by the respondent] short of full ownership of the house knowing that [the respondent's] emotional dependence upon her was such as to lead inexorably to the gratification of her unexpressed wish to have him buy the house for her". On the basis of his findings about the appellant's purpose and conduct, the learned trial judge not surprisingly expressed the view that her conduct "smacked of fraud".

It has long been established that the jurisdiction of courts of equity to relieve against unconscionable dealing extends generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party to the transaction with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that special disability was sufficiently evident to the other party to make it prima facie unfair or "unconscionable" that that other party procure, accept or retain the benefit of, the disadvantaged party's assent to the impugned transaction in the circumstances in which he or she procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: "the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain" or retain the benefit of it [41] .

See O'Rorke v Bolingbroke (1877), 2 App. Cas. 814, at p. 823, per Lord Hatherley; Fry v Lane, Re Fry; Whittet v Bush (1888), 40 Ch. D. 312, at p. 322; Blomley v Ryan (1956), 99 C.L.R. 362, at pp. 428-429; Commercial Bank of Australia Ltd. v Amadio (1983), 151 C.L.R. 447, at p. 474.

The adverse circumstances which may constitute a special disability for the purposes of the principle relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible of being comprehensively catalogued [42] . In Blomley v Ryan [43] , Fullagar J. listed some examples of such special disability: "poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary." As Fullagar J. remarked [43] , the common characteristic of such adverse circumstances "seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other".

ibid., at p. 474. 2. (1956) 99 C.L.R., at p. 405. 3. (1956) 99 C.L.R., at p. 405.

On the findings of the learned trial judge in the present case, the relationship between the respondent and the appellant at the time of the impugned gift was plainly such that the respondent was under a special disability in dealing with the appellant. That special disability arose not merely from the respondent's infatuation. It extended to the extraordinary vulnerability of the respondent in the false "atmosphere of crisis" in which he believed that the woman with whom he was "completely in love" and upon whom he was emotionally dependent was facing eviction from her home and suicide unless he provided the money for the purchase of the house. The appellant was aware of that special disability. Indeed, to a significant extent, she had deliberately created it. She manipulated it to her advantage to influence the respondent to make the gift of the money to purchase the house. When asked for restitution she refused. From the respondent's point of view, the whole transaction was plainly a most improvident one.

In these circumstances, the learned trial judge's conclusion that the appellant had been guilty of unconscionable conduct in procuring and retaining the gift of $59,206.55 was not only open to him. In the context of his Honour's findings of fact, it was inevitable and plainly correct. On those findings, the case was not simply one in which the respondent had, under the influence of his love for, or infatuation with, the appellant, made an imprudent gift in her favour. The case was one in which the appellant deliberately used that love or infatuation and her own deceit to create a situation in which she could unconscientiously manipulate the respondent to part with a large proportion of his property. The intervention of equity is not merely to relieve the plaintiff from the consequences of his own foolishness. It is to prevent his victimization [44] .

See, e.g., Allcard v Skinner (1887), 36 Ch. D. 145, at p. 182; Nichols v Jessup , [1986] 1 N.Z.L.R. 226, at pp. 227-229; The Commonwealth v Verwayen (1990), 170 C.L.R. 394, at p. 440.

Neither party has sought to challenge the relief which was granted on the basis of that conclusion on the ground that, as suggested by Jacobs A.C.J. and Legoe J., it would have been more appropriate to make orders leading to the restitution of the moneys rather than to make a declaration that the appellant hold the house in trust for the respondent. Accordingly, the appeal should be dismissed.

The facts are set out in the judgment of Toohey J. In short, in an action in the Supreme Court of South Australia, King C.J. concluded that the respondent made a gift of money to the appellant to enable her to purchase a house because (a) he, the respondent, was emotionally dependent on her and this "gave her a position of great influence on his actions and decisions" [45] ; and (b) she manipulated his infatuation so that he would provide money for the purchase by "manufactur[ing] an atmosphere of crisis with respect to the house when none really existed" and by making "suicide threats in relation to the house" [46] . On the basis of those conclusions his Honour ordered the appellant to transfer the house to the respondent. Those conclusions and that order were upheld by the Full Court of the Supreme Court of South Australia (Jacobs A.C.J. and Legoe J., Matheson J. dissenting).

Diprose v Louth [No. 1] (1990), 54 S.A.S.R. 438, at p. 447. 2. ibid., at p. 448.

Two questions are raised by this appeal: is there an appealable error attending the conclusions of the trial judge as to the relationship of the parties and the appellant's manipulation of the respondent's infatuation? if not, do those conclusions permit of equitable relief with respect to the gift? In respect of this second question, it is common ground both that the transaction was an improvident transaction and that, if the respondent is entitled to relief, it should be in the form granted at trial.

The trial judge's conclusions are not conclusions which would readily be reached in relation to persons of the same background as the parties. The respondent is a male solicitor with, presumably, some experience of worldly affairs and the appellant is a woman to whom he was emotionally attached and who, at the time, was experiencing financial hardship and personal difficulties. Given the ordinary expectations with respect to men of professional standing and the assumptions generally made with respect to the relationships between men and women, it may be taken that the respondent's case was one involving a substantial evidentiary burden.

As is often the case where a person's state of mind is in issue, proof of the respondent's emotional dependence and of the appellant's manipulation of his infatuation depended, in large part, on inferences drawn from other facts and on an assessment of the character of each of the parties. The assessment of character is part of the process involved in determining questions of credit, although, as here, there may be cases in which character assumes a significance of its own.

The process of accepting or rejecting evidence has been described as one that involves an inference based, at least in part, on "a principle of faith in human veracity sanctioned by experience" [47] . Likewise, the assessment of character, which is often an earlier step in the process of determining issues of credit, may be described as involving an inference based, at least in part, on a principle of faith in human conduct sanctioned by experience. In both cases, the process is one in which the decision maker brings to bear his or her experience of life and, perhaps, his or her personal predilections. Because of this, different people may come to different conclusions about character and credit and, hence, as to disputed matters of fact.

Wigmore on Evidence, vol. IA (1983), p. 954, referring to an unverified citation from Starkie, Evidence, (1824). See also Doney v The Queen (1990), 171 C.L.R. 207, at p. 214.

It is precisely because different people may come to different conclusions as to character, credit and disputed matters of fact that, in a forensic contest, findings as to those matters are entrusted to the trial judge (or, in cases of trial by jury, to the jury) in accordance with rules and procedures that guarantee a considerable measure of finality. And in a forensic contest, findings as to those matters will usually be bound up with each other and involve some consideration of demeanour in the witness box - as they did in this case. Thus, the trial judge said, in the context of his "impressions of the witnesses who gave evidence", that the respondent was "a strange romantic character" with "a sustained infatuation for the [appellant]" and that much of his evidence was convincing but that his "demeanour was not such as to persuade me to accept evidence which I consider to be improbable or which is in conflict with other convincing evidence" [48] . And in the same context, his Honour said that he "formed the impression that the [appellant] was a calculating witness who was prepared to tailor her evidence in order to advance her case" [49] .

(1990) 54 S.A.S.R., at p. 443. 2. ibid., at p. 444.

It was the trial judge's assessment of the appellant as "calculating" when giving her evidence that led to its rejection on several important matters. And it was the assessment of the respondent as a "strange romantic character" that led to the acceptance of his evidence on some matters which, it is implicit in his Honour's reasons, might have been rejected if given by a more pragmatic person. And the factual findings as to the matters on which the appellant's evidence was rejected and the respondent's accepted led, almost inevitably, to the conclusions challenged in this appeal.

Because of the process involved in the conclusions reached by the trial judge, they are not, as was suggested by Matheson J. in the Full Court, "inferences [drawn] from undisputed facts" [50] . Nor, as his Honour thought, are they inferences which an appeal court is in "as good a position [to draw] as the judge at the trial" [51] . They are findings which were substantially dependent on the trial judge's assessment of character and credit and which were reached having regard to the demeanour of the parties in the witness box. As such and as the authorities repeatedly acknowledge, they are findings which, unless some error is to be discerned, an appeal court must respect [52] .

(1990) 54 S.A.S.R. 450, at p. 480. 2. Piro v W. Foster & Co. Ltd. (1943), 68 C.L.R. 313, at p. 322. See, generally, with respect to inferences of that kind, Warren v Coombes (1979), 142 C.L.R. 531, at p. 551; State Government Insurance Commission (S.A.) v Trigwell (1979), 142 C.L.R. 617, at p. 628; Gronow v Gronow (1979), 144 C.L.R. 513, at pp. 525-526, 539; Dawson v Westpac Banking Corporation (1991), 66 A.L.J.R. 94, at p. 99; 104 A.L.R. 295, at p. 304. 3. See, with respect to issues of character and credit generally, Paterson v Paterson (1953), 89 C.L.R. 212, at pp. 218-224; Taylor v Johnson (1983), 151 C.L.R. 422, at pp. 441-443; Brunskill v Sovereign Marine & General Insurance Co. Ltd. (1985), 59 A.L.J.R. 842, at p. 844; 62 A.L.R. 53, at pp. 56-57; Baumgartner v Baumgartner (1987), 164 C.L.R. 137, at pp. 144-146; Abalos v Australian Postal Commission (1990), 171 C.L.R. 167, at pp. 178-179; Dawson v Westpac Banking Corporation (1991), 66 A.L.J.R., at pp. 99, 105; 104 A.L.R., at pp. 304, 314-315. See, with respect to cases of unconscionable conduct, Wilton v Farnworth (1948), 76 C.L.R. 646, at pp. 654-655; Blomley v Ryan (1956), 99 C.L.R. 362, at p. 409.

It was argued that the conclusions of the trial judge with respect to the relationship of the parties and the appellant's manipulation of the respondent's infatuation were both wrong. First, it was put that the differences between the appellant and respondent, he being a professionally qualified person with a measure of economic security and she being a person of most unfortunate circumstances and with no security at all, were such that, despite the respondent's infatuation, they were in a relationship of relative equality. That was asserted several times in argument but its precise significance was not spelled out. It is, in effect, an argument that regard was not had to the differences in the positions of the parties. And it is an argument that goes to the question of the respondent's emotional dependence on the appellant and her ability to exert influence over him.

The differences in the positions of the parties were such that they could not have been overlooked. In fact they were specifically referred to in relation to various events, although not on the question of the respondent's emotional dependence. Moreover, the evidence of his infatuation was overwhelming and, of its nature, that infatuation was such as to put the appellant in a position of influence with respect to his actions. Indeed, the appellant herself acknowledged that he had "an enormous weakness" for her. In these circumstances, there is no reason to think that there was any error in the trial judge's conclusion as to the respondent's emotional dependence on the appellant.

The main argument on behalf of the appellant in this Court was that the finding that she "manufactured an atmosphere of crisis when none really existed" was not warranted by the evidence. It was not warranted, it was said, either because the respondent knew that there was no immediate need for the appellant to vacate the house or because there was no contrivance involved.

It is true that the respondent knew that there was no immediate need for the appellant to vacate the house, but the "atmosphere of crisis" was not so much concerned with that as with the consequences of the eventual need to move. Those consequences were revealed in the appellant's conversations with the respondent, as to which the trial judge accepted his evidence. The first was a telephone conversation, initiated by the appellant, in which she said that "she was going to have nowhere to live and she was feeling depressed about it". And in another conversation she made reference to her past misfortunes and threatened suicide in the event that she had to leave the house, saying "I'll make a good job of it this time". In regard to this last conversation, the respondent knew that the appellant had a history of emotional instability, including at least one suicide attempt. The appellant denied that those conversations took place in those terms. Given that there was no immediate need to vacate the house, the terms of those conversations - particularly in the context of her denial of their terms - clearly permitted a characterization of the events leading to the gift as events involving a "manufactured atmosphere of crisis".

One other finding was challenged as not warranted by the evidence, being the finding that the appellant was aware of the respondent's financial status. Again, once her evidence was rejected and that of the respondent was accepted, the finding that "from her conversations with the [respondent] she was aware in general terms that he had only limited assets, that the moneys [from which he made the loan] were his principal asset and that he had to work as an employee solicitor for a living" [53] was clearly open. And it is not disputed that she knew that he had three dependent children.

There is, in our view, no appealable error attending the trial judge's conclusions with respect to the relationship between the parties and the appellant's manipulation of it. For the reasons given by Deane J., those conclusions direct the further conclusion that the appellant's conduct was unconscionable and that, in consequence, the respondent is entitled to equitable relief with respect to the gift of money with which the house was purchased.

This is an appeal from a judgment of the Full Court of the Supreme Court of South Australia [54] (Jacobs A.C.J. and Legoe J., Matheson J. dissenting), dismissing an appeal by the appellant from a judgment of King C.J.

Diprose v Louth [No. 2] (1990), 54 S.A.S.R. 450.

The judgment of King C.J. [55] declared that the respondent was "beneficially entitled to all the right title and interest" in land of which the appellant is the registered proprietor, declared that the appellant held the land on trust for the respondent and ordered that the appellant execute a transfer of the land to the respondent subject to such encumbrances as then existed. Jacobs A.C.J. and Legoe J. considered that the relief granted by the Chief Justice went too far and that it was appropriate to order the appellant to repay the money expended by the respondent in the purchase of the home. Nevertheless, the order of the Full Court, as extracted, is in terms "that the appeal be dismissed". The appellant seeks to upset the declaration and consequential relief and to maintain her registered proprietorship of the land free of any interest on the part of the respondent.

Diprose v Louth [No. 1] (1990), 54 S.A.S.R. 438, at p. 449.

The story is a curious one; it has to be told at some length to understand how the Supreme Court of South Australia came to uphold the respondent's claim to land of which the appellant is the registered proprietor. The key is to be found in the following passage from the judgment of King C.J. [56] :

This litigation results from a deep and persistent, albeit unrequited, emotional attachment of the [respondent] to the [appellant], the [respondent's] bizarre behaviour in pursuance of that attachment and the [appellant's] response to that behaviour. 1. ibid., at p. 439.

The parties met at a party in Launceston in November 1981. The appellant was married but her marriage was about to end. Her husband left her shortly afterwards. There were two children of her marriage; she has had custody of them at all relevant times. The respondent, a practising solicitor, was married. His first marriage had ended in divorce and the final separation from his second wife was about to take place.

The parties became friendly and began to go out together fairly regularly. Intercourse took place shortly after their first meeting and again about eight months later. During a relationship which continued for about seven years, intercourse took place on those two occasions only. It is obvious that feelings were much stronger on the respondent's side. Over the years he composed many poems which he called "The Mary Poems". They were, in the words of King C.J., "tender, often sentimental, sometimes passionate, and very often on the theme of unrequited love" [57] .

On 23 August 1982 the appellant left Launceston for Adelaide. The reason was that she was in straitened financial circumstances following the breakdown of her marriage and she hoped for help from her sister and her sister's husband, Mr. and Mrs. Volkhardt. She also told the respondent that she had friends in Adelaide. The respondent tried to persuade her to stay in Launceston. His proposal of marriage was rejected.

In January 1983 the respondent visited Adelaide. The appellant said she could not go out with him because she had met another man. The respondent returned to Launceston but decided to move to Adelaide permanently, mainly because the appellant was there. He moved to Adelaide in February 1983. At first he made no contact with the appellant, being concerned that she might think he was harassing her. He did send her a partly completed volume of "The Mary Poems" in April 1983. Later he called at her home but a man, whom the respondent had known from Tasmania, answered the door. Mr. Volkhardt then contacted the respondent to say that the appellant did not wish to see him. In May 1983 the appellant telephoned the respondent twice but refused to give him her telephone number.

In July 1983 she rang again to say that she was depressed and that the respondent might like to take her to lunch the next day. They did in fact lunch together. At first the appellant was in a very bright mood but later her mood changed suddenly. She said that "life was very bad" and that a few nights earlier she had put a Stanley knife to one of her wrists and had thought of slashing it. She did not show the respondent a scar at that time though she did so later, in 1984 and again in 1985. The evidence does not disclose any reason for the scars. The respondent drove the appellant home after lunch and said that his attitude to her had not changed. The appellant replied: "Oh well, if you don't try and hassle me, I would probably let you sleep with me occasionally, but I don't want any commitment." Nevertheless, the appellant did not give the respondent her telephone number until November 1983 although she telephoned him a couple of times during that period.

Thereafter the respondent telephoned and called on the appellant regularly. He continued to express the depth of his feelings for her. The appellant made it clear that she did not feel the same way about him but that she was happy to treat him as a friend. The pattern of their relationship continued as before until the middle of 1985. The respondent made many gifts to the appellant, some of jewellery and others of a less personal nature such as a television set and a washing-machine. From time to time he picked up unpaid household bills lying around and paid them.

In September 1984 the Volkhardts separated; they were later divorced. Mr. Volkhardt owned a house in Tranmere in which the appellant was living with her children and for which she paid a low rent. The Volkhardts' matrimonial home was in their joint names. Shortly after the separation Mr. Volkhardt said to the appellant, speaking of the house at Tranmere, that: "[M]aybe she should be paying more rent or maybe it would be a good idea to put her name down on the housing list because she couldn't assume she would live there forever." The conversation as reported to the respondent by the appellant was that: "She said that she had been told by her brother-in-law Arch that her sister Sarah was seeking a property settlement from him and that, among other things, the house at [Tranmere] would have to be sold."

Mr. Volkhardt's remark was obviously the catalyst for the discussions between the appellant and the respondent in May 1985. The content of those discussions was a matter of dispute between the parties but one thing is clear: the respondent agreed to buy the Tranmere house from Mr. Volkhardt for $58,000, expenses being $933. The purchase money came from a mortgage investment of his which was to be paid out at the end of June 1985. In the respondent's presence and by arrangement between them, the appellant signed the contract of sale as purchaser and the land was transferred directly to her.

As part of the transaction the respondent prepared for the appellant an application for first home owner's assistance. The appellant was shown as the applicant/owner and she signed the form in that capacity. The form identified the means of financing the purchase as a loan of $58,000. The lending institution was shown as the firm of solicitors by whom the respondent was employed. The respondent signed as the authorized officer and inserted his own name as a person "known to be associated with the loan application or home acquisition (for example persons acting as guarantor)". It is clear that the reference to a loan was made only as a means of attracting first home owner's assistance. The transfer was dated 24 June 1985; the application was signed on 26 June 1985; settlement took place on 15 July 1985.

On the day of settlement the respondent wrote to the appellant: "I confirm that settlement of the property was effected today. You are now the proud owner of the same."

On 22 May 1986 the respondent made a will appointing the appellant and his mother joint executors. He left his aeroplane to the appellant's son who had shown an interest in flying. He divided the balance of his estate equally between his three children; in the event that they predeceased him leaving no surviving children of their own, his estate was to go to the appellant and her children. The will made no mention of the house at Tranmere. The respondent wrote to the appellant about the will, saying: "As you know, there is going to be very little to divide between [his own children]; consequently, I have left everything to them except the aeroplane."

On 13 June 1986 the respondent wrote to a solicitor, having made an appointment for the appellant concerning custody of her children. In that letter he said: "The housing arrangements for the children are good. Each child has their own bedroom and there is a large area at the rear of the house for recreation purposes. The house is owned by Mary and is free of encumbrance."

For the remainder of 1986, 1987 and into 1988 the relationship between the parties was much as it had always been. The respondent continued to telephone the appellant and to call on her. He brought food to the home and paid bills from time to time. The appellant's children moved to private schools and the respondent met their fees for a while. The respondent's ardour seems to have continued unabated; the appellant's generally offhand approach to the respondent does not seem to have altered.

However, in mid-1988 things changed. The respondent bought a house at Crafers, borrowing the entire purchase price from his mother and a building society. He had to vacate the house he was renting before he was able to take possession of his new home. By arrangement, the respondent's son moved into the house at Tranmere and in August 1988 the appellant permitted the respondent to do likewise, in both cases pending settlement of the Crafers purchase. The respondent was there for two to three weeks, during which time his relations with the appellant deteriorated. She had a male friend and, clearly, she resented the respondent's presence. There was a quarrel. The respondent told the appellant he wanted her to transfer the Tranmere house to him and to pay some rent for her occupation of it. The appellant refused on both counts, saying that the house was hers. On 21 September 1988 solicitors acting for the respondent wrote to the appellant saying that they had been instructed to lodge a caveat against the appellant's title.

On 24 October 1988 the respondent issued an originating summons out of the Supreme Court of South Australia, claiming a declaration that he was beneficially entitled to the land and seeking an order that the appellant transfer the land to him. The statement of claim filed in support of the summons puts the respondent's case in various ways. It pleads: "By agreement or alternatively an understanding between the [respondent] and the [appellant] the house was registered in the name of the [appellant] following threats by the [appellant] to the [respondent] that she would take her own life." The pleading then asserts that it was an express term of the agreement or a common intention that the respondent would be the beneficial owner of the land, that the appellant would hold the land on trust for him, that the appellant would transfer legal ownership of the land to the respondent and that the respondent would allow the appellant to live in the house at no cost whilst he retained beneficial ownership in the house. In the alternative, the pleading asserts that it was an implied term of the agreement or a common intention that, if the appellant refused to transfer legal ownership of the land to the respondent, she would pay him the money expended by him in connexion with the purchase or the land would be sold and the respondent would receive the proceeds of the sale. The statement of claim pleads the agreement as an oral agreement made on or about 23 June 1985 (the contract of sale of the Tranmere house is dated 13 June 1985; the transfer is dated 24 June 1985); alternatively, a common intention formed at that time.

The oral agreement or common intention is particularized at considerable length. Having regard to the course of the litigation, it is unnecessary to set out the particulars in detail. But, importantly, they refer to the respondent's "intense emotional attachment" to the appellant, the appellant's frequent depressed state, threats made by her from time to time to take her own life and assertions by her that she would kill herself if the Tranmere house was sold and she had to leave it.

The existence of an oral agreement or a common intention that the land should belong beneficially to the respondent is of course inconsistent with the concept of a gift by him. However, the statement of claim pleads by way of an alternative that if it be held that the respondent made a gift to the appellant "it was by virtue of the undue influence or dominion over the [respondent's] mind and it would be unreasonable for her to retain it". This plea is followed by a plea, again in the alternative, that "the [appellant] should not have the benefit of the bargain the [appellant] has acquired on the grounds that it would be unjust, inequitable, catching and/or unconscionable". These pleas are supported also by the particulars to which reference has been made. There are other causes of action to which it is unnecessary to refer.

This somewhat lengthy recital of facts has been necessary because the findings made by King C.J. were crucial to his judgment and they lie at the heart of the debate before the Full Court and this Court as to the principles which govern this area of the law. Indeed it was those findings on which the respondent principally relied in resisting the appeal.

King C.J. accepted the respondent's account of events leading to the purchase of the land in the appellant's name, with however one important qualification. His Honour said [58] :

I am unable to accept the [respondent's] evidence, however, that he stipulated that the [appellant] would be under an obligation to retransfer the house to him and I accept the [appellant's] evidence that he told her that it was a gift and that there were no strings attached. The Chief Justice proceeded to give reasons for rejecting that aspect of the respondent's evidence. It is unnecessary to dwell on those reasons for the case against a stipulation for retransfer was overwhelming. In any event, the respondent has not sought to support the judgment of the Full Court by notice of contention. The appeal must therefore be approached in the light of the following conclusion by the Chief Justice [58] : I place little reliance upon the evidence of the [appellant] where it serves her own interests, but the other evidence in the case so strongly confirms that the [respondent] made a gift of the house to the [appellant], that I have no hesitation in holding that there was such a gift. The presumption of trust arising from the provision of the purchase money by the [respondent] is therefore rebutted. 1. (1990) 54 S.A.S.R., at p. 445. 2. (1990) 54 S.A.S.R., at p. 445.

Of the remaining causes of action pleaded, the respondent rested his case primarily on the ground that, in the circumstances, it would be unconscionable for the appellant to retain the land. It was on this ground that King C.J. found for the respondent. What were the considerations that led to this result? They may be summed up in this way:

The relationship between the parties placed the respondent "in a position of emotional dependence" upon the appellant and "gave her a position of great influence on his actions and decisions" [59] .

The appellant tolerated the respondent's visits and company "because of the material advantages which resulted". The result "was to feed the flames of the [respondent's] passion and to keep alive his hopes that [she] would relent and that his devotion would be requited" [59] .

The appellant "manufactured an atmosphere of crisis with respect to the house when none really existed" and she did so "in order to influence the [respondent] to provide the money for the house" [60] .

The appellant "played upon his love and concern for her by the suicide threats in relation to the house" [60] .

The appellant was "well aware" of the respondent's infatuation with her (which she manipulated) and of his consequent inability to judge what was in his best interests; in those circumstances, "her manufacture of an atmosphere of crisis where no crisis existed was dishonest and smacked of fraud" [60] .

(1990) 54 S.A.S.R., at p. 447. 2. (1990) 54 S.A.S.R., at p. 447. 3. ibid., at p. 448. 4. ibid., at p. 448. 5. ibid., at p. 448.

In the light of this view of the facts, King C.J. held it to be unconscionable for the appellant "to retain the benefit of such a large gift out of the [respondent's] limited resources" [60] . The Chief Justice said that there were "ample grounds for setting aside the house transaction on the ground of undue influence", but that, like counsel for the respondent, he preferred to rest his judgment "upon the general principle of unconscionability" [61] .

These conclusions are of course very adverse to the appellant. There is an initial question as to whether there is any warrant for this Court to interfere with King C.J.'s findings of fact. There are formidable obstacles in the way of any party to litigation who attacks findings of fact by a primary judge [62] . Those obstacles may be enhanced where issues of undue influence and unconscionability are involved [63] . Nevertheless, this is an unusual case and there are aspects of the conclusions reached by the Chief Justice that call for comment.

Dawson v Westpac Banking Corporation (1991), 66 A.L.J.R. 94, at p. 105; 104 A.L.R. 295, at pp. 314-315. 2. Baburin v Baburin [No. 2] , [1991] 2 Qd R. 240, at p. 243.

The appellant's general attack on the approach which was adopted by King C.J. and endorsed by a majority of the Full Court was that it focused unduly on the position of the respondent and that it failed to pay proper regard to the overall relationship of the parties. In the appellant's submission, on a proper analysis of the evidence the respondent was not the "weaker party" and there was a "reasonable degree of equality between them", in the sense that those expressions have been considered in the authorities [64] .

See, e.g., Commercial Bank of Australia Ltd. v Amadio (1983), 151 C.L.R. 447, at pp. 474-475, per Deane J.

Traditionally, the sorts of weakness that have given rise to relief against unconscionable dealing are those mentioned by Fullagar J. in Blomley v Ryan [65] , namely: "poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary." However, Fullagar J. was at pains to stress that this was not an exhaustive list. He said [66] : "The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other." In Commercial Bank of Australia Ltd. v Amadio, Mason J., speaking of the situations mentioned by Fullagar J., said [66] :

It is made plain enough that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. 1. (1956) 99 C.L.R. 362, at p. 405. 2. (1983) 151 C.L.R., at p. 462. 3. (1983) 151 C.L.R., at p. 462.

It follows from the generality with which the relevant principle has been expressed that it was insufficient for the appellant to demonstrate that the particular relationship between her and the respondent was one which hitherto had not produced relief on the ground of unconscionability. But, equally, it was incumbent on the respondent to bring himself within the general principle.

Now, there can be no doubt as to the strength of the respondent's feelings for the appellant and the lengths, including the financial lengths, to which he was prepared to go to express those feelings. But equally, while the appellant was content to accept the many benefits she received from the respondent, there can be no doubt that she made her position in the relationship quite clear. It was the respondent who continued to seek her out. She did not mislead him in regard to her position; she did not hold out any false hopes to him. They were both adults; each had been married before (the respondent twice); and the respondent was a practising solicitor who must have appreciated fully the consequences that the law would ordinarily attach to the gifts he made to the appellant, including the money involved in the purchase of the Tranmere house. It was the respondent's idea to buy the house, not the appellant's. In those circumstances, there is much force in the appellant's criticism of certain expressions used by the trial judge, such as "unrequited love", "pathetic devotion", "utter infatuation", "feeding the flames of the [respondent's] passion" and "bizarre behaviour". The expressions, while colourful, are not necessarily inaccurate, although they assume that a "normal" standard of conduct in such circumstances is readily discernible, an assumption which is questionable. Rather, as the appellant complained, such expressions tend to give an unbalanced picture of the relationship between the parties by placing undue emphasis on one of them.

With all its limitations and apparent disadvantages, the relationship was one the respondent was prepared to accept and to foster over about seven years. As unusual as it may have been, it was one which the respondent must have seen as having something to offer him. Apart from the two incidents mentioned, the relationship had no sexual aspect, at any rate physically. Whether the respondent sublimated through "The Mary Poems" can only be a matter of speculation though there are precedents in history and in literature for the sort of relationship that existed here. And, although he may not have been content with the limitations imposed on him by the appellant, the respondent continued as a constant visitor, involved in various aspects of the appellant's domestic life. To take one illustration, it might seem strange that the appellant's children were, in the words of King C.J., "transferred from a State school to fee-paying schools at the [respondent's] expense" [67] . At the same time, the children of the two families seem to have had a close relationship, the appellant's children staying overnight from time to time with the respondent's children.

There is one aspect of the facts that requires particular attention, that relating to the purchase of the Tranmere house. Reference has already been made to the Chief Justice's finding that the appellant manufactured an atmosphere of crisis to influence the respondent to provide the money for the purchase and her threats of suicide in that regard. This was a finding which played a prominent part in his Honour's conclusion of unconscionability; in particular, he said that the manufacture of a crisis where none existed "was dishonest and smacked of fraud" [68] .

With respect, the evidence does not support that finding. In seeking to make good that proposition, it is necessary to put to one side the evidence of the appellant herself for the Chief Justice found her testimony as to the circumstances leading to the purchase to be "quite unimpressive" [69] . But his Honour did find Mr. Volkhardt, on this matter and indeed generally, to be "an honest and accurate witness" [69] . It is true that the respondent testified to a conversation in which the appellant spoke of the lack of security in her life and said that she did not think she could face the prospect of moving from the Tranmere house, adding [70] : "Look, if it comes to that, I'll just kill myself. I'll make a good job of it this time." But regard must be had to the whole of the evidence, particularly that of Mr. Volkhardt. His evidence is set out at length in the judgment of Matheson J. [71] .

ibid., at p. 444. 2. ibid., at p. 444. 3. ibid., at p. 443. 4. Diprose v Louth [No. 2] (1990), 54 S.A.S.R. 450, at pp.479-480.

According to Mr. Volkhardt, when the respondent told him that he wanted to buy the Tranmere house for the appellant, he (Mr. Volkhardt) said he was very surprised and asked to see the respondent. They met. The respondent accepted the fact that the appellant would never marry him. Nevertheless, he wanted her to be happy and secure, which is why he bought the house for her. Mr. Volkhardt said that he had no immediate intention to sell the house and added: "Certainly there was no great pressure to sell." Now, there is some ambiguity in the record of this part of Mr. Volkhardt's evidence. It is not clear beyond argument that at this point he was continuing his account of his conversation with the respondent or was simply giving evidence of his own state of mind. But, in the light of the whole of his evidence, the conclusion reached by Matheson J. is irresistible. His Honour said [72] :

It is convenient to observe here that whatever the appellant had said to the respondent about her sister seeking a property settlement, he must have realized after his conversation with Volkhardt that the appellant was not facing an early crisis over the sale of the house. It is apparent from what the respondent told Mr. Volkhardt that he bought the house for the appellant because she "had been through a lot of stress and problems" and because he "wanted her to be secure" [73] . The respondent gave a similar explanation for the purchase of the house to the appellant's mother, Mrs. Webb [74] . And, as is apparent from the evidence of these two witnesses and from the evidence generally, he bought the house for her in the clear realization that she would never marry him. As Matheson J. pointed out in his judgment, the respondent took a number of steps in connexion with the purchase of the house. He prepared the contract of sale, arranged Land Titles Office searches, obtained an application form under the First Home Owners Scheme and filled in the details, prepared the transfer and prepared the settlement statement. In other words, the respondent did not commit himself by one impulsive or hasty act; he had plenty of time to consider what he was doing and what he did took place over a month. 1. ibid., at p. 480. 2. (1990) 54 S.A.S.R., at p. 479. 3. ibid., at pp. 481-482.

There is an aspect of the Chief Justice's findings which troubled Matheson J., namely, his disbelief of the respondent on what Matheson J. described as "the primary issue whether he paid for the house on the basis that it was to be held in trust for him" [75] and yet his belief of the respondent on what Matheson J. described as "secondary issues" [75] . The dilemma exists. This Court cannot resolve it but it does serve to expose the fact finding to greater scrutiny than would ordinarily be the case.

Although it might be said that there are concurrent findings of fact inimical to the appellant's case, the judgments of Jacobs A.C.J. and Legoe J. essentially accept the findings of King C.J. rather than arrive at findings of their own. The reasons which render the trial judge's findings vulnerable render those judgments equally open to question.

Having regard to King C.J.'s clear rejection of the respondent's case based on an agreement to transfer the Tranmere house to him, the starting point is, as the Chief Justice expressly found, that there was a gift of the house to the appellant. It was of course a very generous gift in the circumstances; it was a gift that the respondent's children might justifiably have resented; and it was a gift that the respondent himself might well have regretted and later did regret. But the law is clear [76] :

The mere fact that a transaction is based on an inadequate consideration or is otherwise improvident, unreasonable, or unjust is not in itself any ground on which this Court can set it aside as invalid. Nor is such a circumstance in itself even a sufficient ground for a presumption that the transaction was the result of fraud, misrepresentation, mistake, or undue influence, so as to place the burden of supporting the transaction upon the person who profits by it. The law in general leaves every man at liberty to make such bargains as he pleases, and to dispose of his own property as he chooses. However improvident, unreasonable, or unjust such bargains or dispositions may be, they are binding on every party to them unless he can prove affirmatively the existence of one of the recognized invalidating circumstances, such as fraud or undue influence. Salmond J.'s reference to "invalidating circumstances" must now be read in the light of the more general propositions in Blomley and in Amadio. 1. Brusewitz v Brown , [1923] N.Z.L.R. 1106, at p. 1109, per Salmond J.

Although the concept of unconscionability has been expressed in fairly wide terms, the courts are exercising an equitable jurisdiction according to recognized principles. They are not armed with a general power to set aside bargains simply because, in the eyes of the judges, they appear to be unfair, harsh or unconscionable. This is in contrast to some legislation which "permits the courts to exercise a broad discretion to control harsh, oppressive, unconscionable or unjust contracts" [77] . The equitable jurisdiction exists when one of the parties "suffers from some special disability or is placed in some special situation of disadvantage" [78] . In some cases, for instance where there is unfamiliarity with written English as in Amadio or unintelligence and deafness as in Wilton v Farnworth [79] , the special situation of disadvantage may be readily apparent. But that is not the present case.

Cope, Duress, Undue Influence and Unconscientious Bargains (1985), p. 188. For a review of the relevant statutory powers, see pp. 174-208. 2. Amadio (1983), 151 C.L.R., at p. 461, per Mason J. 3. (1948) 76 C.L.R. 646.

Although the appellant's attack on the findings of the trial judge is generally persuasive, it is not necessary to make contrary findings in order to reach a contrary conclusion. For the most part the findings are of a general nature, bearing upon the relationship between the parties. The appellant's complaint that those findings focus unduly on the position of the respondent and fail to pay due regard to the overall relationship of the parties is, I think, well founded. In particular, his Honour's assessment that the appellant's "manufacture of an atmosphere of crisis where no crisis existed was dishonest and smacked of fraud" [80] is not so much a finding as an inference. In either case, it does not find great support in the evidence.

But the important thing is that the respondent failed to make good the proposition that his relationship with the appellant placed him in some special situation of disadvantage so that he should be recognised as the beneficial owner of the Tranmere house. The relationship was one which might be thought to have little to offer him but it was one in which he was content to persist and which the appellant in no way misrepresented or disguised. The respondent was well aware of all the circumstances and of his actions and their consequences. This applies particularly with respect to the purchase of the house. That knowledge and his clear appreciation of the consequences of what he was doing run directly counter to a conclusion that he was suffering from some special disability or was placed in some special situation of disadvantage. It is clear that the respondent was emotionally involved with the appellant. But it does not follow that he was emotionally dependent upon her in any relevant legal sense [81] .

See Diprose v Louth [No. 2] (1990), 54 S.A.S.R., at p. 480, per Matheson J.

As appears from the judgment of Matheson J., the respondent accepted that, if he could not make good a case founded on unconscionability, it would be "almost impossible to succeed" [82] on the ground of undue influence. And before this Court he did not attempt to sustain a case on that ground.

I would allow the appeal, set aside the judgment of the Full Court and dismiss the respondent's claim with costs.

At a glance

Court

Decision date

Before

Source

Judgment (136 paragraphs)

Parties