Nitopi v Nitopi

Background

1. The background to the dispute, as largely drawn from the factual findings in the primary judgment, is as follows.
2. The deceased was a successful businessman, whose businesses included hardware wholesaling and property development (see the primary judgment at [3]). The deceased died in May 2014, aged 73, leaving an estate worth more than $21 million (see the primary judgment at [1]-[2]).
3. The deceased and his wife (Tina), from whom he had been separated for a number of years before his death, together had three children (Giuseppe, Rosaria and Cristina), each of whom survived the deceased. Cristina is over ten years younger than each of Giuseppe and Rosaria (see at [4]-[5] of the primary judgment).
4. In 1998, following his separation from Tina, the deceased moved to the Gold Coast in Queensland (see at [28] of the primary judgment). In about 2000, the deceased had a falling out with the respondent and they remained estranged for a number of years (see at [29] and [116]-[117] of the primary judgment). On 27 October 2008, while at the Gold Coast Hospital after a fall, the deceased executed an enduring power of attorney appointing Rosaria (with whom he had had the most contact out of the three children after his move to Queensland) as his attorney for personal and health matters. On 31 October 2008, after the deceased had been transferred to a psychiatric clinic (the Currumbin Clinic) following concerns raised by hospital staff as to his cognition, the deceased executed a further enduring power of attorney, appointing Rosaria as his attorney in respect of his financial affairs (see at [33]).
5. The deceased was discharged from the Currumbin Clinic on 6 November 2008. The discharge summary of Dr Penny King, a psychiatrist and psychogeriatrician who had treated the deceased at the clinic, recorded that the deceased had significant short term memory deficits (elsewhere this was referred to as impairment) and symptoms of alcohol withdrawal (see at [66] of the primary judgment). The discharge summary recorded that the deceased's "family" (without there identifying which member(s) of his family) was informed that he had an "alcohol related dementia syndrome with not only cortical but cerebrovascular changes on his MRI scan" (see at [67]). The deceased was referred to a neurosurgical registrar in relation to aneurysms and to the Aged Care Assessment Team (ACAT) for increased levels of home care (see at [68]). (I interpose to note that the primary judge considered that there was a doubt as to whether the appellant was informed by Dr King of the dementia diagnosis as early as November 2008 and was not prepared to infer that she was - see at [282]-[283].)
6. On 22 May 2009, the deceased was again admitted to Gold Coast Hospital (see at [75]); and on 27 May 2009, the deceased was assessed by ACAT. The primary diagnosis recorded by the ACAT delegate was of alcoholic dementia. The deceased was assessed as being eligible for "high care - respite residential" and "high care - permanent residential" in a secure environment (see at [78] of the primary judgment). Also on 27 May 2009, a doctor at the hospital (Dr Veevek Thankey) recorded that it was the decision of the medical treating team that the deceased did not have the capacity to make decisions regarding his personal life, and financial life and legal matters (see at [79] of the primary judgment).
7. Arrangements were made by Rosaria for the deceased to be admitted to an aged care facility in Sydney (Redleaf Manor) following the deceased's discharge from the Gold Coast Hospital. The deceased was unhappy with that decision and returned to Queensland on 1 July 2009 (see at [80]). However, during the time in June 2009 that the deceased was at Redleaf Manor, the appellant visited him and her evidence at the hearing was that she observed him to be bedridden, depressed and confused and in a "very vulnerable state" (see the primary judgment at [276]-[278]).
8. The primary judge did not accept the appellant's evidence that the reason for the deceased's confusion at Redleaf Manor was because Rosaria had simply transported him to Sydney without telling him where he was going (and not because of his mental state), saying that there was too much independent evidence to the contrary for it to be credible that his confusion had nothing to do with his mental capacity (see at [277]).
9. On 29 September 2009, the deceased executed an instrument purporting to revoke Rosaria's power of attorney. The notes of the deceased's doctor (Dr Fisher) of that day record a discussion with the deceased about the power of attorney and that "both daughter and son agree" (a reference that his Honour found could only be to Giuseppe and Cristina, the respondent and appellant respectively) (see at [85] of the primary judgment). The primary judge noted (at [36]) that, by this stage, the deceased had reconciled with the respondent and the deceased appeared to have fallen out with Rosaria (see at [36]).
10. During another admission to the Gold Coast Hospital, on 30 November 2009, the deceased was diagnosed with chronic myeloid leukaemia (see at [86]).
11. On 14 December 2009, the deceased executed an enduring power of attorney, prepared by a solicitor (Mr Renaldo Polo), in favour of the respondent (see at [36]-[37] and [88]); the validity of which Rosaria subsequently disputed (as she also disputed the validity of the revocation of the power of attorney in her favour) (see at [38]).
12. Proceedings were commenced by Rosaria in the Queensland Civil and Administrative Tribunal (QCAT), which conducted a hearing and in due course held (in reasons published on 25 March 2010) that the instruments executed by the deceased on 29 September 2009 and 14 December 2009 were ineffective because the deceased had lacked sufficient capacity at the time he executed them (see at [40] of the primary judgment). QCAT appointed an independent attorney to look after the deceased's accommodation, health care and provision of services, but left in place Rosaria's power of attorney so far as it concerned the deceased's financial affairs (see at [40]). The respondent and the appellant unsuccessfully sought leave to appeal from this decision (see at [41]). The primary judge found that it was clear that the appellant was aware that QCAT's decision concerned the deceased's capacity to revoke Rosaria's power of attorney (see at [146]).
13. On 1 June 2010, the deceased was again admitted to hospital, following which, in August 2010, the deceased was discharged to a care facility at Robina (see at [42] of the primary judgment).
14. Pausing here, the six payments which were found by the primary judge to have been the result of unconscionable dealing on the appellant's part were made between July 2009 and June 2010 but only one of those was made after the appellant was aware of the QCAT decision (that being a payment of $202,000 made on 4 June 2010 - see the impugned payments listed at [6M] of the fourth further amended statement of claim - about which there was little information). The respondent's claim failed in relation to the remaining six impugned payments which had been made before June 2009 (see at [287] of the primary judgment). It is also here relevant to note that there were a number of substantial payments made by the deceased to Rosaria at least in the period before the deceased's falling out with Rosaria (to which the appellant makes reference in her submissions as illuminating the context in which the impugned payments to her should be seen).
15. In October 2013, the deceased was relocated to a care facility in Sydney, where he died on 16 May 2014 (see at [43] of the primary judgment).
16. Under the deceased's last Will, made in September 1997, the deceased appointed his wife, Tina, and a solicitor in Western Sydney (Mr Mervyn Cathers) as his executors; and the deceased left his estate to his children in equal shares. Mr Cathers declined to take up appointment as the deceased's executor. Probate was granted to Tina in March 2015 (see at [7] of the primary judgment).
17. Complaint was subsequently made by the respondent as to delay by Tina in the administration and distribution of the deceased's estate and the respondent commenced proceedings in February 2016 against Tina, in her capacity as executor, making allegations to that effect (see at [9] of the primary judgment). By agreement between the parties, and each of the deceased's children, a timetable was agreed whereby interim distributions totalling $6.3 million were subsequently made to the children (see at [9]).
18. After most of the estate had been distributed, the respondent discovered that there had been a number of payments out of the deceased's bank account between February 2008 and June 2010 in favour of Rosaria and the appellant (as well as one payment in favour of Tina), those payments totalling about $5 million (see at [10] of the primary judgment), of which a total of $3.2 million had been transferred to the appellant between February 2008 and June 2010 (see at [14]).
19. The payments were from an account held with the Commonwealth Bank of Australia at its branch in Southport, Queensland. The primary judge noted (at [47]) that credits into that bank account must have come from other accounts controlled by the deceased; and his Honour referred to evidence as to the deceased dealing with a banker in Hong Kong as well as to moneys being raised from the sale of business assets. (To the extent that the making of the impugned payments involved the deceased first making arrangements with his banker in Hong Kong to ensure that there was sufficient money in his local account to cover those payments, this suggests at least a level of cognitive ability on the deceased's part.)
20. In about April 2017, the respondent amended his statement of claim to join Rosaria and the appellant as defendants (see at [127]) and brought claims against each of Tina, Rosaria and the appellant in respect of the payments made to them during the period between 2008 and 2010. The claims against each of Tina and Rosaria were settled at the commencement of, or prior to, the hearing. This had some consequences in terms of the evidence that was ultimately before the primary judge at the hearing. So, for example, Rosaria's affidavit evidence was ultimately not read (although extracts from two of Rosaria's affidavits (sworn 25 January 2018 and 30 May 2019) had been provided to one of the medical experts, Dr Tuly Rosenfeld -see Appendix 2 of Annexure A of Dr Rosenfeld's report dated 30 January 2020). Moreover, Rosaria had served an affidavit from a friend of the deceased, Mr Terence Raftery, in which Mr Raftery was critical of the payments made to the appellant; but Mr Raftery was not willing to give evidence at the hearing and ultimately his affidavit was not read. Instead, Mr Raftery's affidavit was tendered as part of the court book (see at [114] and [246] and T 149.1-6), which had the consequence that Mr Raftery was not cross-examined on his affidavit evidence. The primary judge treated that evidence as independent and uncontested - see below - and said that it established that at least some of the payments made to the appellant were made by way of response to her saying that she needed money (see at [115]) and that on at least one of those occasions money was said to be needed for the appellant's fashion business (see at [115]). The evidence being uncontested needs to be seen, however, in light of Mr Raftery's unwillingness to comply with the request that he give evidence at the hearing.

Pleaded claims

1. The final iteration of the plaintiff's claim was the fourth further amended statement of claim, filed by leave (granted over the appellant's objection) on 25 March 2021, the penultimate day of the hearing before the primary judge. The relevant amendment was to introduce a claim for unconscionable dealing as an alternative to the only then existing claim - the undue influence claim against the appellant. On the last day of the hearing, the respondent abandoned the undue influence claim (see at [23]). The timing of the introduction of the unconscionable dealing claim is of relevance when considering the ambit of the evidence that the appellant had adduced prior to the hearing - in that, up to that point, the appellant was simply called upon to meet a claim of undue influence based upon an allegation of the deceased's dependence on her (which, on the facts at the hearing, was shown to be untenable).
2. The unconscionable dealing claim (as pleaded at [6O-II]; [6O-V]) followed allegations (at [6AA]) that, from at latest 28 October 2008, the deceased was incapable of the management of his financial affairs by reason of disease or impairment of his mental condition (particularised by reference to his age, frailty and "high degree of cognitive impairment") and (at [6B]) that, from at latest that date, the deceased was dependent on the appellant for the provision of domestic services, personal care and the administration of his financial affairs. (As adverted to above, there was no evidence to support the allegation as to the deceased's dependency on the appellant for domestic services, personal care and the administration of his financial affairs - an allegation that was originally pleaded in respect of each of Tina, Rosaria and the appellant without distinguishing between them.)
3. At [6II] and [6JJ], respectively, it was alleged that there was a relationship of influence and a relationship of dependence between the deceased and the appellant.
4. At [6M], the impugned payments were pleaded, the proceeds of which were alleged (at [6NN]) to have been retained or dealt with by the appellant for her own use and not for the benefit of the deceased.
5. At [6O-II] and [6O-V], the unconscionable dealing was pleaded as follows: 60-II. At the time of each of the transactions referred to in paragraph 6NN, [the appellant] was or ought to have been aware that the deceased: a. Had a high degree of cognitive impairment; and b. Was unable to judge or protect his own interests. 60-V In the premises, it is unconscionable for [the appellant] to retain the benefit of the transactions referred to in paragraph 6NN.

Primary judgment

1. The primary judge concluded that, at the time of the impugned payments, the deceased lacked a sufficient level of memory to recall previous requests (by the appellant) for money and a sufficient degree of independence to decide for himself whether to accede to the latest one; that he was easily swayed and lacked the insight to appreciate that his memory had failed; that he had no real ability to evaluate the appellant's requests for money and to bring a proper judgment to bear on them; that, in addition to his cognitive difficulties, he was lonely and plagued with serious ailments, including severe pain; and that he was in a very vulnerable state (see at [267]-[268]). Thus, the primary judge concluded that the deceased was subject to a special disadvantage in his dealings with the appellant (from November 2008 onwards (see at 286). (There is no challenge to this finding; although the appellant emphasises that the special disadvantage was comprised of an inability to recall previous requests for money and to exercise judgment as to whether to accede to further requests.)
2. The primary judge found that the appellant was on notice that there were concerns about the deceased's mental state; that, even if she lacked actual knowledge of the full extent of the deceased's disabilities in June 2009, the appellant could not have failed to see the signs of his vulnerability; and, relevantly, that the appellant was on notice of the deceased's special disadvantage from that point, i.e., from June 2009 (see at [278]-[279]).
3. While his Honour considered that it was implausible to suggest that, when the appellant spoke to Dr King (as the appellant accepted she did over the telephone on a couple of occasions), Dr King did not tell the appellant about the November 2008 diagnosis of the deceased's dementia, there was doubt as to when those conversations took place and his Honour was unwilling to infer that the appellant was informed of the dementia diagnosis as early as November 2008 (see at [281]-[282]). Hence, his Honour was not satisfied that the appellant was on notice of the deceased's special disadvantage before June 2009 (see at [283]). His Honour thus concluded (at 286) that the appellant "ought to have known" that the deceased was subject to a special disadvantage in his dealings with her from June 2009. (There is a challenge to the finding of knowledge; including as to whether the finding was incorrectly one of constructive rather than actual knowledge.)

Grounds of Appeal

1. In summary, the appellant complains that, in approaching the question of her knowledge of the deceased's special disadvantage, the primary judge proceeded upon the (incorrect) premise that constructive notice is sufficient to engage the equitable concept of unconscionable dealing (cf Kakavas v Crown Melbourne Limited (2013) 250 CLR 392; [2013] HCA 25 (Kakavas)); and that, in concluding that she had unconscientiously exploited the deceased's special disadvantage, the primary judge incorrectly referred to and applied an equitable presumption that there had been such exploitation.
2. The appellant contends that, in order to be satisfied that unconscionable dealing had occurred in the circumstances of this case, the primary judge was required to find, as an essential element of that cause of action, that (independent of her knowledge of the deceased's position of special disadvantage) she had, in a predatory fashion, exploited that position of disadvantage.
3. Further, the appellant argues that, even if she did bear an evidentiary onus (or an equitable presumption applied) to require her to show that the transactions were fair, just and reasonable, or were not the result of the unconscientious exploitation of a special disadvantage of the deceased, then such an onus was discharged. The appellant contends that, having regard to the deceased's significant wealth and the fact that the impugned transfers did not impede the realisation of the deceased's testamentary wish to bequeath the generous sums to his children upon his death, there was nothing inherently sinister or suggestive of unconscionable conduct in the transfers themselves. The appellant maintains that there was an obvious explanation for the transactions, namely, that an old man with significant health issues wanted to enjoy, while he was still alive, the act of giving away part of his significant financial wealth to his younger daughter, rather than having that occur after his death.
4. The grounds of appeal are as follows: 1. The primary judge erred in not dismissing the Fourth Further Amended Statement of Claim in circumstances where: a. The allegations in 6O-II and 6O-V were insufficient to give rise to any cause of action, and b. All other pleaded causes of action were either not pressed or abandoned in closing submissions. 2. The primary judge erred in not dismissing the Fourth Further Amended Statement of Claim on the grounds that the mere knowledge that the deceased had a high degree of cognitive impairment and was unable to judge or protect his own interests did not render it unconscionable for the Appellant to retain the benefit of the transactions referred to in paragraph 6NN in the absence of an allegation that the third defendant [Cristina] unconscientiously took advantage of the alleged special disadvantage. 3. The primary judge erred, at J[240] and J[284], in concluding that since the Appellant had notice of the deceased's special disadvantage there was an equitable presumption that she unconscientiously took advantage of the opportunities presented by that disadvantage. 4. The primary judge erred in dispensing, at J[284], with the need to find, alternatively in deciding for the Respondent without making such a finding, that the Appellant actually exploited that special disadvantage, the equitable presumption only operating to the extent that 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 a product of the exploitation, consistently with Louth v Diprose (1992) 175 CLR 621 at 632. 5. In the absence of a finding that the Appellant had exploited the special disadvantage of the deceased known to the Appellant, which, in the context of these gifts, was found to be an inability to recall prior requests and to exercise a sufficient degree of independence to decide for himself whether to accede to the latest one (at J[267]), the primary judge erred in finding that the onus (even if the primary judge was referring only to an evidentiary onus - and if the primary judge was referring to a legal onus , that was in error) had shifted to the Appellant. 6. Alternatively, to the extent that there was an onus, evidentiary or legal, contrary to the contentions above, then the primary judge erred in finding, at J[285], there was no reliable evidence to establish that had the deceased been able to give proper consideration to the Appellant's requests, he would have acceded to them. 7. The primary judge erred in not finding that the undisputed evidence that the deceased: a. was a very wealthy man, of advanced age, with several serious illnesses, b. had an affection for his youngest daughter, the Appellant, c. intended, at least in 1997, to bequeath his estate to his children, including the Appellant; however d. at the time of the gifts had only recently reconciled with his son after a long period of estrangement at the deceased's instance and was in conflict with his eldest daughter, e. made the gifts over a period of 2 years, in varying amounts, none of which amounts was shown to be an improvident gift from a person in the circumstances of the deceased; and f. was fully aware that he had given large amounts of money to the Appellant, and over a period of time, as his conversations with his friend, Mr Raftery disclosed; provided a natural explanation for the gifts which rebutted any inference that the gifts had resulted from an unconscientious dealing on the part of the Respondent in which she had exploited the known special disadvantage. 8. The primary judge further erred in not finding that the Respondent [sic; presumably appellant] could not have exploited the deceased's special disadvantage, as identified at J[267], (cf 6O II of the Fourth Further Amended Statement of Claim), since there was no evidence that she had actual, rather than constructive, notice that the deceased had an inability to recall previous requests or could not exercise a sufficient degree of independence to decide for himself whether to accede to the latest request; the primary judge only finding, at J[276] that she was aware that he was depressed and confused and in a vulnerable state. 9. To the extent that the primary judge, at J[279], found that constructive notice or notice less than actual notice of the special disadvantage sufficed, the primary judge erred. 10. The primary judge erred in rejecting, at J[285], the Appellant's case that the payments were spontaneously made to her by the deceased on the basis that she presented no clear context for the payments when she had done so in her evidence in chief, and to the extent that the primary judge did not accept that evidence, the primary judge had accepted the evidence of Mr Raftery that, on at least one occasion, monies had been gifted to her by the deceased to fund her fashion business. 11. The primary judge erred in finding, at J[247], that the Appellant had imposed a degree of moral pressure on the deceased to give him [sic; her] what she wanted when there was no evidence to support such a finding. 12. Further, the primary judge erred in finding that a degree of moral pressure, arising from the Appellant making it known implicitly that she needed money for one purpose or another, was a relevant matter at all in circumstances where the known special disadvantage was said to be his inability to recall prior requests and a degree of independence to decide for himself whether to accede to the latest one; not a susceptibility to moral pressure from the Appellant. 13. The primary judge erred in not dismissing the Fourth Further Amended Statement of Claim on the grounds that the Respondent had not established any basis in equity to revoke the gifts which were valid in law.

Grounds 1 and 2

1. The appellant emphasises the distinction between "knowledge" of a special disability and "exploitation" of that disability (referring to what was said by Deane J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14 (Amadio) at 474), arguing that the former is not of itself sufficient to render the impugned transaction unconscionable (or to cast upon the stronger party an onus to prove the reasonableness of the transaction) and that the latter (unconscientious exploitation of the disadvantage) is a separate and additional element of unconscionable dealing. Reference is made in this regard to what was said by Brennan J, as his Honour then was, in Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61 (Louth v Diprose) at 626 (see as extracted below).
2. The complaint here made is that neither the case pleaded by the respondent (see as extracted above) nor the reasoning of the primary judge disclosed a sufficient recognition of the need to establish the (unconscientious) exploitation of the deceased's position of special disadvantage, independently of knowledge of that disadvantage.
3. As to the pleading, the appellant contends that, by omitting any allegation of unconscientious exploitation on the appellant's part in procuring the gifts (i.e., by simply pleading awareness of the special disadvantage at [6O-II]), there was not a proper pleading of a claim that the impugned payments had been obtained as a consequence of unconscionable dealing. The appellant makes clear that complaint is not here made as to the grant of leave for the filing of the fourth further amended statement of claim (nor is there a complaint as to any lack of procedural fairness); rather, it is said that, at the conclusion of the hearing, the only claim before the primary judge was one that involved a cause of action an essential element of which had not been pleaded (the undue influence by then having been abandoned).
4. As to the manner in which the case was conducted, the appellant says that unless the respondent could show that this essential element of the cause of action had been sufficiently addressed in opening or was otherwise the subject of proper articulation (such that the appellant could be said to have been given sufficient notice of the case that she was required to meet), then the primary judge was obliged to dismiss the proceeding. The appellant says that the respondent failed to identify anything in her conduct that gave it the character of being exploitative beyond the assertion that she knew of the deceased's special disability.

Determination

1. I consider in due course the requirement for it to be shown that there was an unconscientious exploitation of the (known) special disability or disadvantage. Suffice it here to note that I accept that mere knowledge of a special disadvantage or disability is not enough but that unconscientious exploitation of such a special disadvantage or disability may in some circumstances be established in circumstances where there is a passive acceptance or retention of the benefit of the impugned transaction.
2. Addressing simply the pleading points at this stage (and accepting that the pleading of unconscionable dealing in the present case was hardly a model pleading), it is well recognised that cases must be determined on the issues as raised by the pleadings but also that the parties may choose "to fight the case on a different basis" (see Vines v Australian Securities and Investments Commission (2007) 62 ACSR 1 at [36] and [57] per Spigelman CJ, his Honour applying what had been said by Mason CJ and Gaudron J in Banque Commerciale SA En Liquidation v Akhil Holdings Limited (1990) 169 CLR 279; [1990] HCA 11 (Banque Commerciale) at 286 and Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70; and see Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 at first instance (Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 6) (2007) 63 ACSR 1; [2007] NSWSC 124) and on appeal).
3. Here, the pleading raised the issue of the appellant's awareness of the deceased's inability to judge or protect his own interests ([6O-II]) and the unconscionability of retention by the appellant of the benefit of the impugned transactions ([60-V]). It is evident that the case was conducted on the basis that in issue were the circumstances in which the impugned payments were made by the deceased (including evidence by the appellant as to whether the payments were unprompted by her) and the circumstances in which the benefit of those payments accepted and retained by the appellant (including evidence by the appellant as to whether she had prior knowledge that the payments were going to be made). Thus, to the extent that the pleading was deficient in not separately alleging the fact of unconscientious exploitation, the parties may be said to have acquiesced in the widening of the pleaded case. See, for example, the observation by Mason CJ and Gaudron J in Banque Commerciale at 286-7 to the effect that, ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted but that "in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference". In Ingot, on appeal, Ipp JA observed (at [424]), for example, that acquiescence giving rise to a departure from the pleadings might arise from a failure to object to evidence that raised fresh issues.

Grounds 8 and 9

1. Next, I turn to the issue of knowledge of the deceased's disability (there being no challenge to the finding of special disability). Grounds 8 and 9 raise issues as to the finding of knowledge: ground 9 being a complaint that the primary judge erred in finding that constructive notice of special disability was sufficient to ground a finding of unconscionable conduct; ground 8 being a complaint that there was no evidence of actual notice of the special disability that his Honour found (inability to recall previous requests for payments and to decide whether to accede to further requests for payment), the only relevant finding being of awareness (on an occasion in June 2009) that the deceased was depressed and confused and in a very vulnerable state.
2. Reliance is placed by the appellant on the rejection by the High Court in Kakavas of the proposition that constructive notice is sufficient to engage the principle against unconscionable dealing (see at [152] and [154]), their Honours there noting that unconscionable dealing is a species of equitable fraud and referring to Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48 (at [39]), saying that the plurality there "did not welcome the use of constructive notice to establish that a transaction is impeachable for equitable fraud". It is noted that in Kakavas, the High Court read Mason J's observation in Amadio at 467 (as to awareness of the facts that would raise the possibility in the mind of any reasonable person) as speaking of wilful ignorance, i.e., something "not different from actual knowledge" (see Kakavas at [156]). Reference is also made in this context to the statement by Lord Cranworth LC in Owen v Homan (1853) 4 HL Cas 997 at 1035; 10 ER 752 at 767 to the effect that, if the dealings are such as fairly to lead a reasonable person to believe that fraud must have been used in order to obtain the relevant advantage, then that person is "bound to make inquiry" and cannot shelter "under the plea that he was not called on to ask, and did not ask, any questions on the subject".
3. The appellant complains that the finding (at [278] of the primary judgment) that (from June 2009) she was on notice of concerns about the deceased's mental state because the deceased had told her that he did not think he had dementia (and therefore was on notice of the deceased's special disadvantage - see at [279]; i.e., of the disadvantage constituted by the deceased's deficient memory and failing judgment) is not a finding of wilful ignorance; rather, it is a finding of constructive notice (which was explicitly rejected by the High Court in Kakavas as being sufficient for the purpose of a claim of unconscionable dealing).

Determination

1. The High Court in Kakavas made clear that the requisite knowledge for a claim of unconscionable dealing is actual knowledge (not constructive knowledge), although wilful ignorance amounting to actual knowledge would suffice (see at [152], [154], [156]), the High Court there reading Mason J's observation in Amadio (at 467) as speaking of wilful ignorance.
2. In that respect, the language used by the primary judge at 286 (i.e., that the appellant "ought to have known") and at [278] and [279] of the primary judgment (that the appellant was "on notice" that there were concerns about the deceased's mental state and of his special disadvantage) is typically the language of constructive (not actual) notice or knowledge. If that was the ultimate finding (i.e., a finding of constructive notice), then, on the authority of Kakavas, this would be insufficient to enliven the principle against unconscionable dealing. In this regard, the oral argument during submissions in the hearing before the primary judge (to which this Court was taken on appeal) suggests that attention was there being focused on constructive notice at least at one point in the course of argument, though that is not determinative.
3. There is, to my mind, an indication in the reasons at [279] that his Honour was going further than making a finding of constructive notice and was there speaking of wilful ignorance (i.e., that the appellant could not have failed to see the signs of the deceased's vulnerability, such that a failure to enquire further might be said to be turning a blind eye to such vulnerability or the cause of that vulnerability). However, the difficulty is that this is not clear. Nor does it necessarily follow that failing to make enquiries as to the deceased's mental state after becoming aware of the deceased being (in June 2009) in a depressed, confused and very vulnerable state, would amount to wilful ignorance of the deceased suffering from dementia or of the special disability that his Honour found (being the inability to recall previous requests for money or to exercise judgment in relation to future requests for money), in effect a susceptibility or vulnerability to the exertion or imposition of moral pressure by the appellant or others.
4. Thus, applying Kakavas, one would conclude that to the extent that the findings made by the primary judge were findings of constructive knowledge or notice (not actual knowledge or notice) of the deceased's special disadvantage would have been in error (ground 9 being made good in that event).

Grounds 3-4, 5-6, and 10-12

1. I turn next to the issues raised as to the requirement for it to be established that there was unconscientious exploitation of the deceased's (on this hypothesis, known) special disadvantage or disability.

Equitable presumption or onus - grounds 3-4

1. The appellant places significance on the statement of Brennan J in Louth v Diprose (at 632) that "[o]nce 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". The appellant argues that exploitation of the (known) special disadvantage must first be determined before an inference may be drawn that the impugned gift is the product of that exploitation.
2. Further, and the appellant places no little emphasis on this, it is noted that Brennan J also there said that such an inference must arise from the facts of the case and that it is not a presumption which arises by operation of law.
3. The appellant thus says that what Brennan J was describing in the passage at 632 of Louth v Diprose, to which reference is here made, were the circumstances in which the existence of a causal link (between the donee's exploitation of the donor's special disability and the consequence of that exploitation; i.e., the gift of the relevant property) may be inferred; not how it might be inferred that the donor's position of special disadvantage had in fact been exploited.
4. The appellant thus contends that his Honour erred in concluding, by reference to an equitable presumption of the sort that Brennan J had rejected in Louth v Diprose, that she unconscientiously took advantage of the opportunities presented by that special disadvantage (see at [284] of the primary judgment). The appellant argues that the primary judge (at [284]) was not directing himself to an inference as to the existence of a causal link between any exploitation by her of the deceased's special disability and the impugned payments; rather, that his Honour was inferring exploitation from the (mere) fact that the appellant was on notice of the relevant disability.
5. The appellant maintains that such a process of inferential reasoning was not available and that, to the extent that the primary judge drew support for this position from the decision of Austin J in Turner v Windever [2003] NSWSC 1147 (Turner v Windever) at [106] (see as extracted below) (to which decision I referred in Turner v O'Bryan-Turner [2021] NSWSC 5 (Turner v O'Bryan-Turner)), this was inconsistent with Louth v Diprose and the decision in Turner v Windever was plainly wrong in this regard. (The appellant also points out that, even in Turner v Windever, Austin J required the improvidence of the transaction to have been shown before the presumption arose.) The appellant reiterates the proposition that merely being on notice of a special disability does not, of itself, afford a basis for inferring (or presuming), that such a disability was exploited or that such exploitation was the cause of the impugned gift.

Determination

1. Turning first to the complaint made as to the invocation and application of an equitable presumption (or the availability of inferential reasoning as to the requirement for unconscientious exploitation), it is relevant to note the way in which the language of equitable presumption came to be used.
2. In Turner v Windever, Austin J adopted a statement of the elements of unconscionable dealing that had been put forward in that case by counsel for the defendants, there setting out five elements: special disadvantage; that the special disadvantage must seriously affect the weaker party's capacity to judge or protect his or her own interests; knowledge of the special disadvantage (or, his Honour added parenthetically, of facts which would raise that possibility in the mind of any reasonable person); the taking of advantage of the opportunity presented by the disadvantage; and that the taking of advantage must have been unconscientious.
3. His Honour then added (at [106], by reference to "cases such as Blomley v Ryan") that once the first three ingredients (i.e., special disadvantage that seriously affects the weaker party's capacity to judge or protect his or her interests and knowledge of the special disadvantage) are established, and the improvidence of the transaction is shown, "the plaintiff's task is made easier by an equitable presumption to the effect that the improvident transaction was a consequence of the special disadvantage, and that the defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage". On appeal, Turner v Windever [2005] NSWCA 73, Santow JA referred (without demur) at [99] to the statement by Austin J that cases such as Blomley v Ryan (1956) 99 CLR 362; [1956] HCA 81 establish that once the first three ingredients of unconscionable dealing quoted above are made out there is an equitable presumption that the stronger party has taken advantage of the opportunity presented by the weaker party's disadvantage and that the stronger party's taking of advantage must have been unconscientious.
4. In Turner v Windever, lack of knowledge of the special disadvantage made it not possible (see at [101] per Santow JA) for Mrs Turner to show that the Windevers unconscientiously took advantage of the opportunity presented by the special disadvantage.
5. In Turner v O'Bryan-Turner (at [398]-[399]), having quoted the well-known passage of Deane J in Amadio (at 474), in which his Honour referred to Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710 at 713, I set out the elements of an unconscionable bargain as set out Davey JA in that case (in which there was a reference to the creation of "a presumption of fraud which the stronger must repel by proving that the bargain was fair, just and reasonable"; and quoted from Turner v Windever at [105]; as well as the reference to the presumption at [106]). I also referred to what I had set out earlier in that judgment from Kakavas.

Findings regarding unconscientious exploitation - grounds 5-6

1. The appellant contends that, because there was no proper basis for a finding of any soliciting of funds by her or any other form of unconscientious exploitation, there was no occasion for casting an onus upon her (as to the reasonableness of the transaction). (Further, it is said that, even if, as a matter of principle, it had been open to the primary judge to infer, by reference to the state of her knowledge alone, that the appellant had exploited the deceased's special disability, the primary judge's conclusions would still have been infected by error, given the approach taken to the question of knowledge - which I have considered above.)
2. The respondent says that, applying the facts found to the test applied (correctly) by the primary judge (at [239]), the primary judge was bound to find that the onus had shifted to the appellant to rebut the presumption. Further, the respondent says that the appellant's characterisation of the primary judge's findings as to the deceased's special disadvantage is inaccurate. It is noted that the primary judge makes various findings (at [259]-[269]) in concluding (at [269]) that the deceased was under a special disadvantage from late October 2008 onwards. It is said that, in so doing, his Honour was not purporting to define the deceased's special disadvantage in a certain way. In this context it is noted that at [241] the primary judge cited the reference in Turner v O'Bryan-Turner at [400] to the requisite disadvantage or disability being one which "seriously affects the ability of the weaker party to make a judgment as to his or her own best interests".
3. In reply to the above submission by the respondent, the appellant contends that, given the centrality of her knowledge of that special disadvantage (both to the case advanced by the respondent and the reasoning of the primary judge), it was necessary to identify the matters knowledge of which was said to render her liable for unconscionable dealing. The appellant maintains that it cannot be sufficient for her to have had some awareness of the deceased being afflicted by some unspecified disadvantage that may or may not have had a bearing upon his assent to the impugned payments (noting that Deane J in Louth v Diprose at 637 spoke of the weaker party's special disadvantage being "sufficiently evident" to the stronger party). It is said that one cannot properly assess whether a special disadvantage is "sufficiently evident" without some identification of what that special disadvantage was.

Determination

1. Ground 5 raises the question whether the evidentiary onus had shifted to the appellant in the absence of a finding that the appellant had exploited the special disadvantage.
2. Insofar as it is recognised in Bridgewater v Leahy that the unconscientious exploitation can consist of the passive acceptance and retention of moneys, I do not consider that his Honour erred in concluding that an evidentiary onus fell on the appellant to provide an explanation for the last of the impugned payments (it is not necessary to consider the earlier payments as the element of knowledge was not made out for those payments and hence the question of unconscientious exploitation does not arise). The appellant was aware at the time of receipt of the 4 June 2010 payment that the deceased had been found to lack capacity to make the payment; and the appellant accepted the benefit of and retained that payment. In those circumstances it is not mere knowledge that constitutes unconscientious (or prima facie unconscientious) exploitation, it is the implicit decision to take advantage of that lack of capacity in the acceptance of a gift that must have been understood to be made without capacity.
3. As to ground 6, this is a complaint as to the lack of evidence to establish that had the deceased been able to give proper consideration to the requests, the deceased would not have acceded to them.
4. The appellant contends that there was no basis for the observation by his Honour (at [285] of the primary judgment) to the effect that, had the deceased been able to give proper consideration to her requests, he may not or would not have acceded to them. In that regard, the appellant again notes his Honour's observation that "it would have been natural for the deceased to have wished to benefit Cristina" (see at [267] of the primary judgment). It is said that, if it were legitimately to be reasoned that, had he been in his right mind, the deceased would not have made the impugned transfers and therefore that, because those transfers were made, the deceased must have been the victim of unconscientious exploitation, then it was necessary for the respondent to establish the relevant premise (i.e., that had he been cognitively sound the deceased would not have made those payments).
5. Reference is made again in this context to what was said by Brennan J in Louth v Diprose at 632; and Amadio at 474. The appellant contends that it amounted to a reversal of the onus for the primary judge to find that the impugned payments were not spontaneous (and thus not free from exploitation) because there was no evidence that the deceased would have made those payments had he been cognitively sound (at a stage of the enquiry when a burden had yet to be cast on the appellant to show that the transfers were fair, just and reasonable).

Ground 10 - finding that the appellant presented no clear context for the payments

1. As to ground 10, the appellant argues that, to the extent that the conclusion of unconscientious exploitation is said to be supported by the primary judge's finding that each of the impugned payments was made after some form of prompting by her, that finding was at odds with the evidence.
2. It is noted that one reason given by the primary judge for rejecting the appellant's case that the payments were made spontaneously was that the appellant "presented no clear context for the payments", as a consequence of which it was said "[t]here [was] no reliable evidence which would establish that, had the deceased been able to give proper consideration to [the appellant's] requests, he would have acceded to them" (see at [285]).
3. In that regard, the appellant says that there was ample evidence of the context for at least some of the payments (namely, by reference to the creation and expansion of her fashion label). In this regard, the appellant points to her affidavit of 29 January 2018 (at [12]), in which she referred to the creation of her fashion label and to the deceased being a great source of emotional and financial support and she deposed that the deceased had encouraged her to expand her fashion label. It is noted that this evidence is consistent with Mr Raftery's evidence that on one occasion the deceased told him that the appellant needed money for her fashion label. The appellant submits that it is entirely plausible that the deceased ("a man of means") would have sought to support the appellant in the launch of an international fashion label (which is said to be a risky endeavour) and to do so by transferring funds to the appellant (without prompting), which she could then use to assist in realising her business aspirations.
4. It is accepted that, in cross-examination, the appellant gave evidence that most of the funds transfers occurred after she had informed the deceased that she had placed deposits for the purchase of properties, including in Pyrmont and Leichhardt (see at T 204.18-49); that she had prior notice of some of these transfers and not others (see at T 206.33), and that these funds were then used to finance the purchase of the relevant properties. However, it is submitted that this is not inconsistent with the proposition that some of the impugned transfers were made spontaneously and with the proceeds being used to finance the appellant's fashion business (reference being made in that context to the appellant's evidence in cross-examination at T 255.33-34).

Determination

1. There is no challenge to the primary judge's findings as to the unreliability of the appellant as a witness. In any event, the observation by his Honour that the appellant had presented no clear context for the impugned payments was, as I read his Honour's reasons, made in the context of the finding that the appellant had not satisfied the onus (or rebutted any presumption that might be said to have arisen) required to show that the transactions were fair, just and reasonable (not to support the conclusion that there was unconscientious exploitation in the first place). This raises the issue covered by ground 7 and I deal with it in that context.

Grounds 11-12 - findings regarding moral pressure

1. Grounds 11 and 12 relate to the finding of "moral pressure", which the appellant contends did not suffice to support a conclusion of unconscientious exploitation.
2. As already noted, the appellant places significant weight on the lack of a finding by the primary judge that she had a "predatory state of mind" in procuring the impugned transfers of funds from the deceased or that her conduct otherwise amounted to the exploitation or victimisation of the deceased; noting that the finding made by his Honour was that, before each of the payments, the appellant had at least implicitly made it known to the deceased that she needed money for one purpose or another "and thereby imposed a degree of moral pressure on him to give her what she wanted" (see at [247]).
3. The appellant complains that what was there meant by "moral pressure" is unclear. The appellant argues that, to the extent that the phrase "moral pressure" was intended to denote the ordinary expectation that a parent would assist a child if he or she were able to do so, then such an expectation was not created or "imposed" on the deceased by the appellant. In this regard, it is said (in what seems to be an excursus into anthropological debate) that this is a basic feature of almost all societies; and it is noted that the primary judge observed that "it would have been natural for the deceased to have wished to benefit [the appellant]" (see at [267]). However, to the extent that the primary judge was there referring to some additional expectation or pressure (i.e., beyond that to which the appellant refers as the natural parental desire to benefit or assist one's children), the appellant makes the following submissions.
4. First, the appellant submits that the finding of moral pressure was made without any foundation in the evidence. The appellant says that, while the primary judge rejected her evidence that the impugned payments were made without prompting on her part, there was no direct evidence as to the content of any communication between her and the deceased that might be said to have constituted a request for funds. The appellant says that there was no such evidence from Mr Raftery; his evidence being simply that on a number of occasions, particularly in 2008, he had conversations with the deceased during which the deceased later spoke of giving money to the appellant and of the appellant either needing or wanting more money (see the primary judgment at [112]). The appellant maintains that this does not constitute evidence of the imposition of any moral pressure above and beyond the natural parental desire to benefit or assist one's children.

Determination

1. The reference to moral pressure at [247] was clearly the primary judge's description of circumstances in which the deceased was susceptible or vulnerable to requests (explicit or otherwise) from the appellant for money or financial assistance. I do not consider that the use of the label "moral pressure" in the primary judge's description of the vulnerability of the deceased establishes error on the part of the primary judge. The complaint by the appellant seems to have been that moral pressure was not pleaded as such nor was it put to the appellant as such in cross-examination (hence it was suggested that a Browne v Dunn (1894) 6 R 67 issue arose). The only evidence of any pressure (moral or otherwise) on the part of the appellant seems to be the evidence of Mr Raftery to the effect that the deceased referred on a number of occasions to the appellant wanting or needing money. The appellant cannot be said not to have had an opportunity to respond to the matters raised in Mr Raftery's affidavit (though I accept that at the relevant time all that the appellant was then being required to meet was a pleaded case of undue influence based on allegations that the deceased was dependent on her).
2. As to the complaint that it was necessary for there to be a finding that the appellant had a predatory state of mind (relying on the statement in Kakavas to the effect that the principle of unconscionable dealing requires this) I would read this as simply another way of saying that there needs to be unconscientious exploitation with the requisite knowledge. If that is established, then it can be said that there was a "predatory" state of mind in that there was a deliberate or intentional taking of advantage of the known special disadvantage or disability. That is consistent with the recognition that passive acceptance or retention of moneys may in some circumstances be sufficient to amount to unconscionable dealing.
3. In this regard, I note that in Thorne the High Court (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ) affirmed the principles of unconscionable conduct in equity as restated by the High Court in Kakavas, saying (at [38]): A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage "which seriously affects the ability of the innocent party to make a judgment as to [the innocent party's] own best interests". The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring "victimisation", "unconscientious conduct", or "exploitation". Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage. [footnotes omitted]

Ground 7 - reasonableness of, or justification for, impugned payments

1. This brings me to ground 7, which goes to the question of reasonableness of, or justification for, the impugned payments.
2. The appellant contends that even if, at any point, an onus was borne by her to rebut a prima facie conclusion of unconscientious exploitation (by proving that the transfers to her were fair, just and reasonable), that onus was here discharged. In this regard, the appellant emphasises that the deceased was a man of substantial means, as reflected in the size of his estate. It is noted that none of the transfers that the primary judge found to be the product of unconscionable dealing was for an amount exceeding $360,000; and it is said that neither individually nor cumulatively were the transfers of such a magnitude as to result in the deceased becoming destitute (or to frustrate his testamentary wish that each of his children receive a generous bequest). It is thus submitted that on no view were the impugned transfers improvident transactions.
3. Further, the appellant contends that the favour that the deceased displayed towards her (over his other children) in making the impugned transfers was not suggestive of unconscientious exploitation by her or reflective of some want of fairness or reasonableness in those transactions. It is noted that the appellant was the deceased's youngest child (by a significant extent); and that, while there was a two-year period commencing in about 1999 during which contact between the deceased and the appellant (then a minor) ceased (as a result of a restraining order obtained by Tina against the deceased) (see at [29]), there was no finding that their relationship was anything other than loving and affectionate at the time of the impugned payments. The appellant contrasts this with the relationship between the deceased and the respondent (there being a falling out between them in 2000; the two being found only to have reconciled in 2009 - see at [123] of the primary judgment); and between the deceased and Rosaria (which had suffered a rupture by September 2009). Thus, the appellant says that the fact that the deceased might have conferred greater material benefits upon her in those circumstances is neither surprising nor sinister.
4. The appellant also points out that, even if, as his Honour held, the deceased's memory was failing, this did not prevent the deceased from being able to tell Mr Raftery that he had given large sums of money to the appellant. The appellant says that the deceased might not have been able to recall the fact and amount of each transfer to her, but it cannot plausibly be said that he lacked any understanding or recollection that he had made significant gifts of money to her.

Determination

1. Again, this ground is only now relevant in relation to the last of the impugned payments (having regard to the conclusion reached as to the issue of knowledge in relation to the earlier payments).
2. There is a need for caution in disturbing a trial judge's finding of unconscionable conduct because it represents a judicial conclusion as to the application, to a mass of evidence, of a legal standard expressed in broad statutory language (see, albeit in a different context, Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18 at [82]-[83] per Kirby J).
3. In that regard, I do not accept that his Honour erred in concluding that the appellant did not discharge an evidentiary onus to show that the transaction was fair, just and reasonable; or that it was not unconscientious for her to retain it. By then, the appellant knew that the deceased lacked capacity. True it is that the payment was for a relatively minor amount in the context of the deceased's overall assets, but it cannot be said to have been a fair, just and reasonable transaction to take advantage of a transfer of moneys at a time when the deceased lacked capacity. Indeed, the proposition that this payment was explicable by reference to the natural parental desire to assist one's children or in order to obtain the pleasure from benefiting a child during one's lifetime cannot logically stand against the conclusion of lack of capacity.
4. Thus, in relation to the last of the impugned payments, I consider that there was no error established and ground 7 is not made good.

Conclusion

1. For the above reasons, I propose the following orders: 1. Appeal allowed in part. 2. Amend the order for entry of judgment against the appellant (the third defendant in the proceedings below) in favour of the administrator of the estate of the late Edigio Nitopi to substitute for the sum of $2,220,335.02 the sum of $202,000 plus interest calculated at the rate agreed between the parties at the time of entry of the orders made in the proceedings below from 4 June 2010 to the date of judgment in the proceedings below. 3. Order that the respondent (as administrator of the deceased's estate) repay to the appellant by way of restitution any moneys paid by the appellant over and above the amount payable pursuant to the order as varied by order 2 above, in respect of the impugned payments 4. Order that the respondent (as administrator of the deceased's estate) pay the appellant's costs of the appeal. 5. Set aside the orders for costs of the proceedings below and direct the parties to file any brief written submissions in relation to those costs within 14 days.
2. WHITE JA: I have had the advantage of reading in draft the reasons for judgment of Bell CJ and Ward P.
3. If there be any material differences in their Honours' reasons it may be in their consideration of whether the High Court's decisions in Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49, and Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 96 ALJR 271 support the element of constructive notice, as distinct from constructive knowledge, of the weaker party's position of special disadvantage, or the consequences of the transaction for him (per Bell CJ at [7]-[11], per Ward P at [118]-[121]), and their consideration of what conclusions should be drawn from the reasons of the High Court in Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25 in relation to the presumption described by Austin J in Turner v Windever [2003] NSWSC 1147 at [106] (per Bell CJ at [38]-[42] and per Ward P at [145]-[147] and [153]).
4. As to the first matter, to my mind the most important point to arise from Stubbings is the plurality's reminder (at [39]) that the "elements" to be satisfied to establish grounds for equity's intervention where the defendant has unconscientiously exploited the plaintiff's "known" position of special disadvantage are not to be addressed separately as if they were elements of a cause of action in tort.

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