1 Richard Johnson and Kirsten Mackintosh had a brief intimate relationship. At the time, Mr Johnson was a long-divorced man aged 73, and Ms Mackintosh was a woman aged 45, in the course of separating from her husband, with a four year old child and two teenage children from a prior marriage. Although brief, the relationship was interspersed with separations and reconciliations.

2 Their relationship began with a sexual encounter in August 2008. By February 2009, Mr Johnson had paid Ms Mackintosh about $175,000 to support her business, and $480,000 to buy a house in her name as sole proprietor. All sexual relations ceased after 17 January 2009. Mr Johnson had given Ms Mackintosh the deposit on the house on that day.

3 The relationship finally broke down in April 2010. Mr Johnson then sued Ms Mackintosh in the County Court. He claimed (amongst other small claims) repayment of the $175,000 paid for the purposes of her business and a transfer to him of the house purchased in her name with his money. Mr Johnson claimed that he was entitled to that relief in equity, on three grounds: (1) unconscionable conduct, because he made the payments acting under a special disability, that Ms Mackintosh knew of that disability, and that she unconscientiously exploited it; (2) constructive trust, because he made the payments in the course of a joint endeavour with Ms Mackintosh and the basis of that joint endeavour, a continuing relationship between them, ceased to exist; and (3) equitable estoppel, because Ms Mackintosh promised she would live with him in the house if he paid for it and she unconscionably resiled from that promise.

4 By the time of trial, Mr Johnson was 76 years old and was dying from mesothelioma. He gave evidence from a hospital bed in Mackay and died three days after the conclusion of the trial. At the time judgment was given, his sons, Christopher and Stephen, were substituted as plaintiffs to represent his estate.

5 The trial judge upheld Mr Johnson's first claim, based on unconscionable conduct. He gave judgment against Ms Mackintosh for $176,749.72 plus interest, ordered that she transfer the house to Mr Johnson's estate, and ordered that she pay the costs of the proceeding. Ms Mackintosh appeals against all of those orders. By notice of contention, Mr Johnson's sons, on behalf of his estate, seek to maintain the judgment on the alternative grounds of constructive trust and equitable estoppel advanced at trial. As to those alternative grounds, it was conceded by Mr Johnson at trial that they must fail if the Court found that the moneys paid by Mr Johnson to, or for the benefit of, Ms Mackintosh were gifts.[1]

6 In Commercial Bank of Australia Ltd v Amadio[2], the High Court considered the equitable jurisdiction to set aside a transaction on the ground of unconscionable conduct where a party to the transaction, who suffers detriment by reason of the transaction, is suffering from some special disability or is placed in some special situation of disadvantage at the time of the transaction.

7 Mason J, as he then was, stated the applicable principles as follows:

It almost goes without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct. As Fullagar J said in Blomley v Ryan:

The circumstances adversely affecting a party which may induce a court of equity either to refuse its aid or to set a transaction aside are of great variety and can hardly be satisfactorily classified. Among them are 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. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis à vis the other.

Likewise Kitto J spoke of it as 'a well-known head of equity' which -

...applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.

It is not to be thought that relief will be granted only in the particular situations mentioned by their Honours. It is made plain enough, especially by Fullagar J, 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 and unconscientious advantage is then taken of the opportunity thereby created. 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 emphasise 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. [3]

8 On the question of the degree of knowledge of the special disadvantage, short of actual knowledge, which is sufficient to enliven the jurisdiction of the Court to set aside a transaction on the ground of unconscionable conduct, Mason J said:

As we have seen, if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A's) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that the situation may exist or is aware of facts which would raise that possibility in the mind of any reasonable person, the result will be the same.[4]

9 Deane J expressed the relevant principle in the following way:

The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker parties' assent to the impugned transaction in the circumstances in which he 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....[5]

10 As to whether a special disability is 'sufficiently evident' to the stronger party, in the sense discussed by Deane J, his Honour stated:

It would, at least by that stage, have been plain to any reasonable person, who was prepared to see and to learn, that he was put on enquiry. The stage had been reached at which the bank ... was bound to make a simple enquiry as to whether the transaction had been properly explained to Mr and Mrs Amadio. The bank cannot shelter behind its failure to make that enquiry. The case is one in which 'wilful ignorance is not to be distinguished in its equitable consequences from knowledge'... Mr and Mrs Amadio's disability and the inequality between themselves and the bank must be held to have been evident to the bank...[6]

11 The quoted passages from Amadio emphasise two threshold requirements before the principle can operate. First, the need for the suggested disability or disadvantage to affect the ability of the party said to be suffering from it 'to make a judgment as to his [or her] best interests'.[7] Second, the need to demonstrate that the special disability or disadvantage was known or 'sufficiently evident' to the other party.

12 It is only if these two threshold requirements are established that the Court then considers the third requirement: whether or not the other party acted unconscionably so as to be deprived in equity of the benefit of the transaction in issue. However, the evidence concerning the three requirements will often overlap.

13 The transactions which may be set aside in equity as a result of unconscionable conduct include gifts. On behalf of Mr Johnson, principal reliance was placed on the case of Louth v Diprose,[8] where the High Court considered a gift of $58,000 from a man of comparatively modest means to a woman with whom he was so infatuated that the trial judge found him to have been emotionally dependent upon her. The woman was completely indifferent to the man.

14 The trial judge found that the woman was aware of the man's emotional dependence upon her and manipulated it to bring about the gift. He set aside the gift on the grounds of unconscionable conduct. The majority of the High Court (Mason CJ, Brennan, Deane, Dawson, Gaudron and McHugh JJ, Toohey J dissenting) held that the facts found by the trial judge were supported by the evidence and upheld the order setting aside the gift.

...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.[9]

16 In Louth v Diprose, the woman contended, as does Ms Mackintosh, that the proper conclusion to be reached on the evidence was that the plaintiff made the gift simply because he wished to do so, imprudent though the gift may have been. In this regard, Brennan J stated:

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 LJ pointed out in Allcard v Skinner:

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. (Citations omitted.) [10]

17 As to the need for the plaintiff to prove unconscionable conduct on the part of a donee, Brennan J stated:

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 counter-veiling evidence to show that the donee's exploitative conduct was not the 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. [11]

18 In Bridgewater v Leahy,[12] the High Court again considered the equitable jurisdiction to set aside a transaction resulting from unconscionable conduct in circumstances where the weaker party to the relevant transaction was emotionally dependent on the other party. The case involved a sale of land by an elderly uncle to a nephew and his wife at an undervalue, in circumstances where the uncle had a strong emotional dependence upon the nephew. The deed of forgiveness, which had the effect of rendering the sale of land at an undervalue, was set aside on the ground of unconscionable conduct. The majority judgment was delivered by Gaudron, Gummow and Kirby JJ (Gleeson CJ and Callinan J dissenting).

19 In their joint judgment, the majority in Bridgewater v Leahy applied Amadio and Louth v Diprose. In the course of doing so, the majority approved the statement of Deane J in Amadio[13] to the effect that unconscionable conduct may occur where, in the circumstances, it is unconscientious to 'procure, or accept the weaker party's assent to the impugned transaction.' (Emphasis added).

20 On the question of unconscionable acceptance of the weaker party's assent to the impugned transaction, the majority continued:

It also should be noted that in Hart v O'Connor, an appeal from New Zealand, the Privy Council described unconscionable conduct which provided a basis for equitable relief as 'victimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances'. (Citations omitted; original emphasis.) [14]

21 Applying Louth v Diprose, the majority accepted that emotional dependence can amount to the special disadvantage for the purposes of the equitable jurisdiction to set aside a transaction on the ground of unconscionable conduct.[15]

22 As to the argument on behalf of the nephew, that the transaction was merely an improvident one by the uncle, who was in full possession of his faculties, the majority approved a statement of Jacobs ACJ in the Full Court of the Supreme Court of South Australia in Diprose v Louth[16] that:

It is an oversimplification to say that because the respondent acted as he did with his eyes open, and with a full understanding of what he was doing, he was not in a position of disadvantage, and therefore not the victim of unconscionable conduct.

23 In this case Mr Johnson pleaded special disadvantage constituted by his age, the fact that he was lonely and vulnerable, and the fact that he was retired and desirous of a companion. In the course of the trial he was permitted to amend to add the fact that he was 'infatuated' with Ms Mackintosh, and that in February 2009 he was recovering in hospital from heart surgery.

24 It was submitted on behalf of Ms Mackintosh that:

(1) Mr Johnson was not under any special disadvantage. He knew precisely what he was doing and simply made improvident gifts.

(2) If Mr Johnson was under a special disadvantage, that special disadvantage was not sufficiently evident to Ms Mackintosh at the time the gifts were accepted.

(3) Ms Mackintosh did not exploit the situation to procure the gifts, but merely accepted them. Something more than passive acceptance is required.

25 Against the background of the above legal principles, we turn to consider the facts in detail. Unless stated otherwise, the following facts are taken from the trial judge's reasons. He preferred Mr Johnson's evidence over that of Ms Mackintosh; sometimes because of consistency with other evidence and sometimes based on his assessment of the credit of the parties. The judge also endeavoured to resolve a number of collateral issues - details of arrangements to meet, of sexual encounters

and the like - which it was perhaps unnecessary to resolve. On some occasions, the judge referred to disputed evidence without resolving the dispute.

26 Mr Johnson was a successful and wealthy businessman. He was well able to afford his dispositions in favour of Ms Mackintosh. Although the evidence was not complete on this issue, because the trial judge limited the enquiry as to the precise extent of Mr Johnson's wealth and income, the trial judge found that Mr Johnson received an annual income from his business of about $365,000 together with substantial dividends. Although the trial judge did not refer to it, Mr Johnson's tax return for the year ended 30 June 2008 was in evidence, disclosing that his total annual income including dividends was in fact approximately $1 million. In addition, the trial judge noted that Mr Johnson's companies continued to trade and generate significant profits. For example, one company had an operating profit before income tax in 2008 of approximately $1.95 million and in 2009 of approximately $1.8 million. The financial statements of this company indicated that it had total equity of approximately $5.3 million for the year ended 30 June 2009, being the year in which the gifts in question were made to Ms Mackintosh. Mr Johnson also owned a large home and, we infer, had other assets.

27 As noted above, Mr Johnson was 73 years old when his relationship with Ms Mackintosh commenced. At that time, he had been divorced for over 20 years. He had not had a relationship with a woman for about 17 years. He lived in Mackay, Queensland, in a large house. Although he lived alone, his house comprised five bedrooms. He often had guests to stay. The trial judge referred to his house as 'Admiral Drive' and we will do likewise.

28 Mr Johnson's best friend was Bill Mackintosh. His son, Dean Mackintosh, married the appellant, Ms Mackintosh, and they honeymooned at Admiral Drive following Mr Johnson's invitation to do so. Ms Mackintosh and her husband had a daughter in 2004.

29 Ms Mackintosh and her husband lived in rented accommodation in Stawell Street, Sale, Victoria ('Stawell Street'). Notwithstanding their geographic distance from Mr Johnson, there was a reasonably close friendship with Mr Johnson because of the close connection between the Johnson and Mackintosh families. After their marriage and until the commencement of Ms Mackintosh's relationship with Mr Johnson in August 2008, Ms Mackintosh and her husband stayed with Mr Johnson at Admiral Drive about once a year.

30 Prior to the commencement of the relationship, in the early part of 2008, Mr Johnson had visited Victoria for business reasons. On this occasion, he was a guest of Ms Mackintosh and her husband at Stawell Street. During this visit, Mr Johnson learned that Ms Mackintosh had purchased a franchised health studio business called 'Healthy Inspirations', and that she was paying a financial advisor to assist her. To help Ms Mackintosh out, and avoid her paying continuing fees to the financial advisor, Mr Johnson offered to become Ms Mackintosh's business mentor. She accepted the offer.

31 On 9 June 2008, Mr Johnson lent $25,000 to Ms Mackintosh to assist her in the business.

32 In August 2008, Mr Johnson organised a sailing trip in the Whitsundays. He invited his best friend, Bill Mackintosh and his wife, Ms Mackintosh and her husband Dean (together with their daughter) and another couple. Dean did not attend, as by this time he was probably estranged from Ms Mackintosh.

33 There was a dispute on the evidence as to some of the events surrounding the sailing trip. For example, Mr Johnson said that Ms Mackintosh greeted him at the airport with a hug and a kiss on the lips, a greeting he described as overwhelming and unexpected. Ms Mackintosh denied she greeted Mr Johnson in that way. The trial judge appears to have accepted Mr Johnson's version of the greeting. In any event, something must have happened which gave Mr Johnson to understand that

there was some prospect of him having an intimate relationship with Ms Mackintosh.

34 After the sailing trip, Ms Mackintosh intended to visit her sister in Yeppoon, a small town on the Capricorn coast of central Queensland. Mr Johnson offered to drive her and her daughter to Yeppoon, a trip taking about three hours. On this issue also, there was dispute on the evidence. Beyond noting that the trial judge found that Ms Mackintosh 'freely accompanied' Mr Johnson in his car on the drive to Yeppoon, it is unnecessary to refer to this factual dispute.

35 Mr Johnson and Ms Mackintosh had dinner together at a resort in Yeppoon. Again, there was a dispute as to what happened during the dinner. Mr Johnson said that Ms Mackintosh embarrassed him with her affection, including kissing him while they were dining in the restaurant. Ms Mackintosh denied this. Again, it is unnecessary to resolve this dispute. Whatever happened, it is common ground that they went to Mr Johnson's room after dinner and a sexual encounter took place. Again, there was a dispute as to what happened during the sexual encounter. It is unnecessary to resolve this dispute also.

36 Next, the parties agreed to meet in Melbourne for Ms Mackintosh's birthday on 18 September 2008. She was in any event intending to travel to Melbourne on that weekend for a business conference. Again, there was a dispute about how the meeting between the them was arranged, but nothing turns on this.

37 Prior to the meeting on 18 September 2008 in Melbourne, Mr Johnson purchased an Argyle diamond friendship ring for $7,000 and a matching set of earrings for approximately $4,000. When they met in Melbourne, Mr Johnson took Ms Mackintosh shopping and bought her a new dress to wear to dinner that night. Following the shopping trip, they went to Mr Johnson's hotel and had sex before going to dinner. At dinner, Mr Johnson gave Ms Mackintosh the friendship ring and the earrings.

38 Apart from the above details concerning the meeting in Melbourne on 18 September 2008, there was much dispute on the evidence as to what transpired and, in particular, as to what was said between the parties during that meeting. The judge did not resolve these disputes. He noted, however, that Ms Mackintosh said that Mr Johnson offered her, during the dinner, an annual allowance of $50,000 and that, in cross-examination, Mr Johnson agreed it was possible that he made her this offer.

39 The only finding which the judge made concerning the 18 September meeting was to record his impression from Ms Mackintosh's evidence that, although she found Mr Johnson's conduct on this occasion to be disagreeable, she nonetheless met with him when he subsequently travelled to Sale. Indeed, Mr Johnson stayed with Ms Mackintosh and her husband in October and November, sleeping on a mattress on the lounge room floor until her husband finally vacated the house on 30 October 2008. Thereafter, the judge found that Mr Johnson visited Ms Mackintosh more regularly and slept in the same bed with her. There was a dispute on the evidence as to whether the parties had sexual intercourse while Mr Johnson was visiting Sale, both when he was sleeping on the mattress on the floor and when he slept with Ms Mackintosh in her bedroom. The judge resolved the dispute in favour of Mr Johnson's account, finding that this seemed 'to fit' with his earlier finding that the parties had by this time 'developed a relationship in which intercourse was a feature'.

40 During this period, Mr Johnson made two payments of $50,000 to Ms Mackintosh for the purposes of her business; the first on 30 October 2008 and the second on 12 November 2008. On 12 November, he signed a note which formalised his payments to Ms Mackintosh (including the initial $25,000 payment) as gifts. The note is in his handwriting and signed by him. It states:

This is to certify that the one hundred & twenty-five thousand dollars I have advanced on Kirsten Mackintosh is a gift.[17]

41 The judge recited, and apparently accepted, Mr Johnson's evidence as to why he signed that note:

He said that his reasons for translating the moneys he had loaned to [Ms Mackintosh] into a gift was because he was of the view that his relationship with [her] was on the verge of a breakdown. He said that [Ms Mackintosh] was stressing about cost overruns relevant to her business. He said that in view of the relationship which he believed that he had with [Ms Mackintosh], he was prepared to write off the loans. He said that he would not have written off the loans if he believed that he did not have a relationship with [Ms Mackintosh].[18]

42 In other words, Mr Johnson was prepared to forgive an existing loan or loans and make a further gift or gifts, in all totalling $125,000, in an attempt to secure Ms Mackintosh's continuing affection. He was trying to save their fledgling relationship.

43 The parties travelled together to Adelaide on 21 November 2008 to attend an André Rieu concert. They stayed in the same hotel room but did not have sex.

44 Ms Mackintosh hosted a Christmas party on 29 November 2008 in Sale. Mr Johnson was staying with her at the time. Ms Mackintosh drank too much alcohol and was unable to drive home. She telephoned Mr Johnson and he collected her. There was then a sexual encounter about which there was much dispute. Nothing turns on the detail of that dispute. The trial judge found that the parties were willing participants in consensual sex acts.

45 There was another party in Sale two days later, on 1 December 2008, to celebrate the opening of Ms Mackintosh's new business premises. There was a dispute about whether Mr Johnson was invited, and other details of marginal relevance. The judge accepted Mr Johnson's version of events.

46 The judge synthesised all the evidence to this stage of the relationship. He noted that Mr Johnson had, in addition to making the gifts to which we have referred, contributed other moneys towards the costs of establishing Ms Mackintosh's new business premises and had undertaken some work himself to get them ready for opening. The judge summarised the relationship at this time in the following terms:

If [Ms Mackintosh] had any misgivings about [Mr Johnson's] degree of involvement, I accept [his] evidence that she did not demonstrate that in any way, but her silence at least encouraged [him] to believe that the circumstances in which the two of them were living at Stawell Street, and the history of their relationship up until then, spoke volumes of an ongoing relationship.[19]

47 The 'ongoing relationship' to which he referred quickly faltered. The judge described the relationship as 'faltering at some stage' not long before their next significant contact on the Gold Coast in December 2008.[20] By that time, Mr Johnson believed that his relationship with Ms Mackintosh had deteriorated to the extent that it amounted to a separation. In any event, the judge found that Mr Johnson, believing that the relationship was over, effectively followed Ms Mackintosh to the Gold Coast in December 2008, where she was attending a retreat organised by the franchisor of her business. Ms Mackintosh was accompanied by one of her staff, her daughter and her nanny.

48 The judge found that Mr Johnson appeared unannounced at the hotel where Ms Mackintosh was staying and, in an endeavour to attempt a reconciliation, took her daughter to SeaWorld and a wildlife park and later invited Ms Mackintosh, her daughter and the nanny to stay with him at an apartment after the completion of the franchise retreat. He took them to dinner at the Versace Hotel and they returned to the apartment. There was an argument, the details of which do not matter, and 'another scene' when Mr Johnson drove Ms Mackintosh, her daughter and the nanny to the airport the next day. Ms Mackintosh told Mr Johnson that she intended to return to Sale and did not want to see him again. At this stage, if not before, there was definitely a separation. At the time, however, Mr Johnson must have viewed it as an end of the relationship.

49 Not long passed before the parties spoke on the telephone. There was a dispute about who made the telephone call. That was an important dispute in the context of the proceeding, because the content of the telephone call had the effect of reinstating a relationship which had ended only weeks before. Mr Johnson said that Ms Mackintosh telephoned him, that she was crying, that she told him the budget for her business had 'blown out', that she still owed $50,000, and that she asked him for a further $50,000. Ms Mackintosh said that Mr Johnson telephoned her and apologised for 'this' (a reference to his conduct in some unspecified way) and offered her a gift of $50,000 to enable her to complete work at her business premises without borrowing any further money. She said that he told her that she meant too much to him and that she was special.

50 The judge accepted Mr Johnson's version of events. He found that it was more probable Ms Mackintosh telephoned Mr Johnson, told him she was in financial difficulty and needed money to complete work at her business premises and that, in response, he gave her $50,000. He made no express finding that Ms Mackintosh was crying or that she asked for a particular sum of money. The judge accepted Mr Johnson's evidence, that his motivation for giving a further $50,000 at this time 'was to reinstate their relationship consistent with what it had been previously'.

51 Next, the parties met at Christmas 2008 at Ms Mackintosh's sister's home in Yeppoon. Again, there was a dispute about how Mr Johnson came to be invited to celebrate Christmas at Ms Mackintosh's sister's home. The judge noted the dispute but made no finding. Mr Johnson also attended a barbeque at Ms Mackintosh's sister's home on Boxing Day. During that barbeque, the parties argued. There was a dispute about what was said, but this was not resolved by the judge. In any event, as Mr Johnson was leaving in his car, Ms Mackintosh handed him a note which read:

I am very sorry we keep parting on bad terms. I believe it is because I can't give you what you want and you keep pushing for it.

I think we should leave it at that and we had some good times together. ...[21]

52 At this time, Mr Johnson believed that the relationship 'was all over'.

53 But things did not end there. The parties spoke again on the telephone about two weeks later, in January 2009. Mr Johnson telephoned Ms Mackintosh. At this time, he was in hospital and feeling depressed about the end of his relationship with Ms Mackintosh. Aspects of this conversation were disputed, but the trial judge did not resolve those disputes. Reading the transcript, it is apparent that Mr Johnson asked Ms Mackintosh to telephone him on a regular, perhaps daily, basis; because hearing her voice would assist him to recover from his illness.

54 Following this telephone conversation, Ms Mackintosh telephoned Mr Johnson on a regular basis. During the course of one of these conversations, Ms Mackintosh told Mr Johnson that she had found a 'lovely house' for sale opposite the lake in Foster Street, Sale.

55 Mr Johnson visited Ms Mackintosh in Sale later in January 2009. They looked at the Foster Street property. Mr Johnson spoke with the real estate agent. There was a dispute about the conversations between the parties concerning the possible acquisition of the Foster Street property. The judge did not resolve these disputes. He said only that Ms Mackintosh 'seemed to want to skirt around accepting any description of her conduct which might have suggested that there was a joint endeavour in the purchase of Foster Street'.[22]

56 The judge thought that the evidence concerning the contract of sale for the Foster Street property was unclear. That may be so in some respects, but some relevant facts are clear:

(1) Mr Johnson gave Ms Mackintosh a cheque for $44,000 as a deposit on 17 January 2009. The cheque was payable to her. It was not credited to her account until about two weeks later, on 2 February 2009.

(2) Mr Johnson gave Ms Mackintosh a further cheque in her favour for $436,000 on 13 February 2009, which she deposited in her account on 17 February 2009. That was sufficient to enable Ms Mackintosh to complete the purchase of the Foster Street property on 12 March 2009.

(3) Mr Johnson signed the $436,000 cheque while he was in hospital on 13 February 2009, following heart bypass surgery. He sent the cheque to Ms Mackintosh under cover of a letter written that day (the 'February letter'), in the following terms:

To my darling Kirsten,

I was deeply concerned to hear you say you had put all your expectations for your lakeside dream on hold. However, I guess I have to be realistic & agree with you health & life are very unpredictable. After seeing the happiness in your face each time we drove past or talked about the house, to me it would be a tragedy if you did not get it. To ensure you get your dream I am enclosing a cheque to cover same.

Based on the house price of $435,000 plus stamp duty (Approx $15,000) house should cost $450,000 less deposit of $44,000 Bal = $406,000.

May this be the foundation for many more beautiful dreams that we can share together.

Eternal love. Dick XXXXXXXXX

PS Bank Cheque ASAP[23]

57 Mr Johnson said that on 17 January 2009, the day he gave Ms Mackintosh a cheque for $44,000 to be used as a deposit on the Foster Street house, he slept in the same bed as Ms Mackintosh and, at her instigation, they had intercourse which he described as something of 'a celebration' of the decision to purchase Foster Street and his forthcoming birthday. Ms Mackintosh denied this evidence. According to her, the last time that the parties had sex was on 29 November 2008. The judge preferred Mr Johnson's evidence on this issue.[24]

58 The parties did not have any sexual relations after 17 January 2009.

59 The effect of Ms Mackintosh's evidence was that Mr Johnson paid for the Foster Street house as a gift to her. Mr Johnson's own evidence on one matter supported her version. Mr Johnson said that he wanted Foster Street to be registered solely in Ms Mackintosh's name, and that this was because he was concerned to ensure that, upon his death, no claim could be made by his children against her in respect of the property. In Mr Johnson's words: 'Because I told her I wanted to be sure that the children wouldn't make her move or take ownership when I'd passed away.' The trial judge accepted this evidence.

60 Otherwise, Mr Johnson's evidence was to the effect that his payment of the purchase price for the Foster Street property was not a gift, but was intended as payment for a house for him 'to share ' with Ms Mackintosh until he died. The judge characterised this as evidence of a 'joint endeavour'.

61 Both parties relied upon the February letter to support their case.

62 Ms Mackintosh gave evidence that Mr Johnson was in Sale when the purchase of Foster Street was settled, for the specific purpose of taking her and her two older children out to dinner: 'to celebrate ... my new home ... and that's what he said at his little speech at that dinner that night at the Star Hotel in front of all the family.' The judge rejected this evidence, principally on the ground that Ms Mackintosh failed to call the children, who were aged 19 and 21 at the time of trial, and so about 16 and 18 at the relevant time.[25]

63 After the Foster Street house was purchased, Mr Johnson stayed there on many occasions, while still maintaining his home in Queensland. At no time, did the parties share a bedroom or have sex after Ms Mackintosh took possession of the Foster Street property. Mr Johnson did not simply come and go as he pleased, but telephoned Ms Mackintosh a day or so beforehand to warn her that he would be visiting Sale. Mr Johnson purchased a car which he left at Foster Street for use by him when he was in Sale.

64 About two weeks after settlement, the judge described it as 'about April 2009', Ms Mackintosh asked Mr Johnson to move out of Foster Street while she dealt with some outstanding issues concerning her estranged husband, Dean Mackintosh. Mr Johnson complied. Around this time, Mr Johnson provided Ms Mackintosh with $12,000 for a new kitchen at Foster Street.

65 In about June 2009, Mr Johnson resumed occasional residence at Foster Street until about Easter 2010 when the relationship finally ended. During this period of approximately nine months, Mr Johnson applied other moneys for the benefit of Ms Mackintosh, including $5,000 for a trip which Mr Johnson hoped they would take together, but which Ms Mackintosh used to buy a dining suite.

66 The judge described the relationship between the parties after completion of the purchase of the Foster Street home as one which 'fulfilled the desires of [Mr Johnson]'.[26] He did not say why this was so, given Mr Johnson's obvious desire to continue having sex with Ms Mackintosh and the fact that there was none. He appears to have rested his finding in this regard on a small portion of evidence concerning 'a level of domestic harmony' which he thought 'seemed to have also fulfilled the desires of [Ms Mackintosh]'. He quoted the following exchange in Ms Mackintosh's evidence to support these findings:

Q: Do you agree that you found it difficult sometimes because you'd be affectionate towards him and he'd take it the wrong way?---

A: Yes.

Q: Can you give me some instances where you were affectionate towards him and he'd misinterpret it?---

A: Just normal smiling or just asking, you know, when he did - I don't know what examples you want but at the - - -.

Q: Well, for instance, when he stayed with you and you were going off to work, would you give him a kiss?---

A: No.

Q: Would you give him a kiss when you came back?---

A: No, no, no.

Q: Do you remember when - - -?---

A: I was bringing him - because I do a lot of cooking, so if he was doing some work in the garden and I'd say, 'Well, do you' - 'I'll go inside and make some scones and jam and cream and a cup of tea,' you know, he just loved that, and he'd say, 'You're so kind and this is wonderful'. He seemed really taken by that.[27]

67 The relationship irretrievably broke down during Easter 2010. Mr Johnson came down from Queensland and stayed at Foster Street. Again, there was a dispute as to the circumstances in which it was arranged for Mr Johnson to attend and as to what gave rise to the end of the relationship. The judge preferred Mr Johnson's evidence as to the arrangements for him to visit over Easter. He did not resolve the dispute as to the events which gave rise to the relationship ending. He found only that 'something occurred of such seriousness that [Mr Johnson] realised that the relationship with [Ms Mackintosh] was no longer viable.'[28]

68 Following the final breakdown of the relationship, the parties engaged in what the judge described as 'war by correspondence and email', during which they adopted polarised positions. We agree with the judge that it would be unsafe to rely on this correspondence to resolve the factual issues or the inferences to be drawn. Both parties were adopting extreme positions with litigation in prospect.

69 The judge commenced his findings by a general statement that he preferred 'much of the evidence' of Mr Johnson to that of Ms Mackintosh. The judge made general credibility findings based on demeanour. He criticised Ms Mackintosh for giving non-responsive answers, trying to 'press her case' and, at times, not being 'prepared to tackle questions directly'. He said that the manner in which she gave evidence, and the evidence itself, 'left [him] with a sense that her evidence was unreliable overall.' In contrast, he thought Mr Johnson gave evidence in a 'straightforward manner and almost always responsive to the questions' and that 'the content of his evidence was fair and had the ring of truth about it overall'.[29] The judge's comments about the demeanour of the parties must be accepted.

70 The judge was fortified in his general credibility findings by the fact that Ms Mackintosh could have supported aspects of her evidence by calling relevant witnesses in her camp on a range of issues. [30] In our opinion, most of these issues were collateral and of marginal relevance. There is, perhaps, one exception to that, concerning the failure to call Ms Mackintosh's elder children about the statements Ms Mackintosh attributed to him at the celebratory dinner on the day of settlement of the Foster Street purchase. The judge placed much emphasis on this, describing the failure to call the children as a 'critical failure'.

71 Next, the judge made findings about the extent of Mr Johnson's feelings for Ms Mackintosh. He found that Mr Johnson was 'by nature a generous man with the financial means to be generous', who extended that generosity to Ms Mackintosh because she was the daughter-in-law of his very close friends. The judge described 'a tangible change' in Mr Johnson's generosity towards Ms Mackintosh as a result of her behaviour towards him from the greeting at the airport prior to the Whitsunday sailing trip,[31] and then endeavoured to encapsulate the effect of Ms Mackintosh's behaviour on Mr Johnson, in the following terms:

The subsequent benevolence of the plaintiff in loaning the defendant significant sums of money, which he later made as gifts to her, I find occurred as a result of the defendant's behaviour towards the plaintiff. She gave him to believe that they either were or could be in an amorous relationship. I find that the plaintiff became captivated by the defendant and infatuated and then obsessed with the defendant. He was clearly emotionally attached to the defendant. He could not do enough for her. That is quite evident from the purchase of jewellery and his subsequent benefaction.[32]

72 Next, the judge found that the conduct of Ms Mackintosh in allowing Mr Johnson to pay for the Foster Street house caused Mr Johnson to believe that he was 'in a stable relationship with [her]' and that she 'was prepared to allow him to believe that was so.'

73 Before going further, it is necessary to address the issue of the trial judge's advantage in making factual findings, drawing inferences, and assessing the character and credibility of the parties in cases of this kind; especially where there are few contemporaneous documents to assist in the task. In Louth v Diprose, Deane J said that a trial judge in an unconscionable conduct or undue influence case 'ordinarily enjoys an immeasurable advantage in estimating the characters and capacities of those involved in the impugned transaction', and that advantage extends to findings of fact and inferences drawn in that context.[33] Mason CJ agreed with this approach,[34] as did Dawson, Gauldron and McHugh JJ in their joint judgment.[35]

74 This does not mean that the factual findings and inferences of a trial judge in such cases cannot be questioned on appeal and, if found to be clearly wrong, set aside by an appeal court. This is especially so where there are undisputed facts or facts found by the trial judge which are inconsistent with the finding or inference. In such cases, an appeal court can interfere, and would be failing in its duty if it did not.[36]

75 For reasons we will set out, we consider that the judge reached an erroneous conclusion as to the characterisation of the house payments. But he decided the case by applying the principles in Louth v Diprose, and the first issue to be determined is whether under those principles the claim by Mr Johnson's estate should succeed on the facts as found by the trial judge.

76 The judge concluded that Mr Johnson was suffering from a special disability or disadvantage. He said this was because:

(1) he was 'captivated by [Ms Mackintosh] from the outset of [her] overt showing of affection at the airport and on the boat trip';

(2) 'his captivation quickly became infatuation following the sexual encounter at Yeppoon instigated by [Ms Mackintosh]';

(3) his initial infatuation was evidenced by the expensive friendship ring and matching earrings in readiness for meeting Ms Mackintosh on her birthday in Melbourne, and was enhanced by the events of that meeting - including his offer of a $50,000 a year allowance;

(4) his infatuation 'became an obsession' and caused him to forgive loans of $125,000 in November 2008 and give a further sum of $50,000 in late December 2008. At the time he did so, he was seeing Ms Mackintosh reasonably often and having sex with her in Sale;

(5) by this time, he was a 73 year old man who had not had a relationship with a woman for some 17 years. The outward displays of affection by a much younger woman clouded his judgment and caused him to make large gifts. In his Honour's view, the size of the gifts was sufficient to infer infatuation, notwithstanding Mr Johnson's wealth.[37]

77 The judge was not justified in making a finding of special disability or disadvantage on this basis. Taken together, his reasons amount to no more than findings that Mr Johnson became infatuated with Ms Mackintosh and that he set out to win her continued affections by lavishing large sums of money upon her in the hope of establishing a lasting relationship. That state of affairs was not sufficient to establish a special disability within the meaning of the authorities. Something more than mere infatuation and consequent foolish action based on clouded judgment was required to establish that Mr Johnson's ability to make decisions in his own best interests was so seriously affected as to amount to a special disability or disadvantage.

78 In Louth v Diprose, mere infatuation at the time of making the gifts was not enough to establish a special disability. As Deane J explained:

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.[38]

79 In Louth v Diprose, there were additional factors, beyond the man's infatuation with the woman, which founded the Court's assessment that he lacked the ability to make decisions in his own best interests. As the passage quoted above demonstrates, the gift was made in circumstances where the woman had falsely created an 'atmosphere of crisis' involving her possible eviction from her home and her suicide unless the home was purchased for her. There was nothing of that kind in this case. At its highest, Ms Mackintosh was tearful when explaining that she

needed another $50,000 for her business in December 2008 because her budget had blown out.

80 Further, the inference of special disadvantage arose in Louth v Diprose because the man gave away nearly all of his assets to the woman, in circumstances where he simply could not afford it and he had three dependent children. In these circumstances, the gift was described by the trial judge as one which 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.[39]

81 Mr Johnson was 73 years old and in hospital when he wrote the February letter and sent the cheque for $436,000 to Ms Mackintosh. But there is no evidence that those matters affected his judgment, the judge made no finding that they did, and they formed no part of his reasons for concluding that Mr Johnson was suffering from a special disability.

82 The facts of this case are a long way from those in Louth v Diprose. Mr Johnson was a wealthy, successful businessman who, although infatuated with Ms Mackintosh, was not emotionally dependent upon her in the way the donor was in Louth v Diprose. He made payments to her which were well within his means in the hope of an enduring relationship with her. Having regard to his wealth, the payments were not of a size which permit any inference of emotional dependence, or inability to make decisions in his own interests. This is a case of mere folly by Mr Johnson.

83 Louth v Diprose was an extreme case. So was Williams v Maalouf,[40] on which both parties relied. This is not. The trial judge set the threshold for a finding of special disability too low. On his findings and reasoning, any person who becomes

infatuated with another, and has 'clouded judgment' as a result, is suffering from a special disability. That is not in accordance with principle.

84 Mr Johnson was not affected by a special disability at the time he made the payments to Ms Mackintosh. It is accordingly unnecessary to decide whether Ms Mackintosh exploited him and thus acted unconscionably. The judge found that Ms Mackintosh acted deceitfully, by concealing the true nature of her feelings for Mr Johnson from him. In our opinion, conduct of that kind would not, on its own, be sufficient to amount to exploitation of the kind required to establish a case based on unconscionable conduct. It is the stuff of ordinary human relationships.

85 We then turn to the alternative cases of constructive trust and equitable estoppel. It is conceded that those claims cannot succeed if the house payments are gifts. On this issue there was relevant contemporaneous documentary evidence, being the February letter, which we have earlier quoted in full.

86 The trial judge rejected Ms Mackintosh's evidence about the characterisation of the payments for the house and accepted that of Mr Johnson. This must mean that the judge found the house payments were not a gift but were paid pursuant to what was described as a joint endeavour. The judge did not make that explicitly clear. Nor did he articulate the terms of this joint endeavour. That would not have been easy given the uncontroversial evidence that Mr Johnson wanted the house held in Ms Mackintosh's name alone so she would be safe from claims against her by his family after he died. Further, the judge did not consider the issues of what conduct departed from the joint endeavour and what remedy was appropriate for that departure. The judge decided the case on the principles in Louth v Diprose, a case about a gift, without ever addressing the significance of his findings that the house payments were made pursuant to a joint endeavour and were not gifts.

87 There is no doubt the judge rejected Ms Mackintosh's evidence that the payments were a gift. In this respect, he rightly saw the February letter as being significant. He considered that it supported a conclusion the payments were not gifts. We turn now to address the reasons he gave for doing so. The judge said:

The plaintiff and the defendant both laid claim to the letter as support for the position they each occupied. The plaintiff said that the letter demonstrated that the purchase of Foster Street was a joint endeavour in the purchase of a home where both he and the defendant were to live for the balance of their relationship. The defendant, on the other hand, said that the letter only demonstrated confirmation that Foster Street had been purchased for her as a gift.

I think the complexion which the defendant has sought to put on the letter is quite perverse. Firstly, the writing of the letter must be seen in the context of the relationship of the plaintiff and the defendant at the time it was written. Although there had been a separation, there was reconciliation when the defendant found Foster Street and the plaintiff agreed to buy it. Secondly, I accept the plaintiff's evidence that finding Foster Street and his agreement to purchase it led to a fulsome reconciliation which was consummated by the plaintiff and the defendant having intercourse on 17 January 2009. Thirdly, the last paragraph makes it abundantly clear to me that 'the foundation' referred to by the plaintiff was the purchase of a family home for he and the defendant, and 'the dreams' may well have been his dreams only, but nonetheless were dreams that they would share not only a home together but a life together in their home, and in its context those words were used to demonstrate that they were to have a life together into the future. The latter is entirely consistent with the oral evidence of the plaintiff. Lastly, what followed when the plaintiff and the defendant entered into occupation of Foster Street seems to me to be consistent with a relationship based at Foster Street, although the plaintiff was absent from time to time for the purpose of commuting interstate in the pursuit of his business interests.[41]

88 The judge gave four reasons for rejecting Ms Mackintosh's case that the purchase of the Foster Street property in her name was a gift.

89 First, he relied upon a finding that there had been a reconciliation when Ms Mackintosh found the Foster Street property and Mr Johnson agreed to buy it. The evidence was that the identification of the Foster Street house led to Mr Johnson visiting Sale; that he inspected the house and had discussions with the real estate agent; and that he gave Ms Mackintosh a cheque for $44,000 for the deposit on 17 January 2009. There was no reconciliation, in the sense of a resumption of the previous intimate relationship, before 17 January 2009.

90 The second reason given by the judge was that the handing over of the $44,000 cheque 'led to a fulsome reconciliation which was consummated by [the parties] having intercourse on 17 January 2009.' In our opinion, the judge's finding that there was a 'fulsome reconciliation' was not warranted by the evidence. Apart from referring to one sexual encounter on the night in question, the judge did not refer to any other evidence to support his finding that there was such a reconciliation. In any event, a reconciliation of what kind of relationship? That which preceded it was no more than an on-again off-again relationship without cohabitation for any extended period.

91 The third reason strains the language of the February letter beyond the meaning which it is capable of bearing, either on its face or in the context of the evidence as a whole. The letter expressly focuses on Ms Mackintosh's own dream to own the Foster Street house ('your lakeside dream'). The last paragraph of the letter does not make it 'abundantly clear', as the trial judge said it did, that the Foster Street house was intended to be 'a family home' for the parties. It records Mr Johnson's hope that Ms Mackintosh would allow him to share 'more beautiful dreams' with her in the future. The inference we think must be drawn is that Mr Johnson gave Ms Mackintosh the money to purchase the house in an endeavour to enhance the prospect of having a continuing relationship with her, just as he had done before when he forgave his existing loans and gave her further money.

92 The judge's fourth reason concerns what occurred after the purchase. It demonstrates only that Ms McIntosh allowed Mr Johnson to live in the Foster Street house from time to time on her conditions. Those conditions included that Mr Johnson give her notice that he was to visit and that he sleep in a separate bedroom.

93 In our opinion, especially when construed in the context of Mr Johnson's own evidence that he wanted the purchase to be in Ms Mackintosh's name alone so as to protect her from claims to the house by his children after he died, the February letter supports Ms Mackintosh's case that the purchase was intended to be a gift to her of the legal and beneficial interest in the property. The judge was wrong to conclude otherwise. He ought to have concluded that all the dispositions were gifts. As we have noted, it is conceded that if the payments were gifts the alternative claims based upon constructive trust and equitable estoppel cannot succeed.

94 The appeal should be allowed and the orders of the judge below set aside.

[1] Reasons, [17]. The judge in fact said that it was conceded 'all causes of action' must fail if gifts were found. It was common ground on appeal that the concession did not extend to the unconscionable claim, and that the judge did not intend to say otherwise.

[2] [1983] HCA 14; (1983) 151 CLR 447.

[8] [1992] HCA 61; (1992) 175 CLR 621.

[12] [1998] HCA 66; (1998) 194 CLR 457.

[13] Bridgewater v Leahy, 479; Amadio, 474 (Deane J).

[16] Diprose v Louth [No. 2] (1990) 54 SASR 450, 453; Bridgewater v Leahy, 490.

[32] Reasons, [136] (emphasis added).

[33] Louth v Diprose (1992) 175 CLR 612, 633.

[36] Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531, 551-2; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118, [27]-[30]; CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 80 ALJR 458.

[38] Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621, 638 (emphasis added; citations omitted).

[40] [2005] VSC 346.