Perpetual Trustee Company Ltd v Papantoniou

The formation of the arrangements amongst James Brown, Robert Brown and Stella Papantoniou 14There is no dispute between the parties that they entered into a tripartite arrangement whereby Mrs Papantoniou agreed to purchase the combined 34 percent share of the property due to Aileen and Colleen under the terms of the settlement with a view to either developing the property, or at least obtaining development approval so that it could be sold at an enhanced value. There is an issue about whose idea this was. 15The contemporaneous documentary evidence demonstrates that the idea was certainly developing within a few days of the property being passed in at auction. On 12th July 2006 James Brown and Robert Brown signed a document entitled "Authority" prepared in Mrs Papantoniou's and addressed to her firm in these terms: We James Brown and Robert Brown agree to retain our share of the above property to the value of $500,000. We will consider a higher offer upon discussing the price with the above solicitors. We acknowledge that Stella Papantoniou has shown interest and may proceed to purchase the remainder shares of the above property. From what follows, it is worthy of notice that this "authority" says nothing about Mrs Papantoniou borrowing any money to purchase the other shares in the property. 16Then on the 14th of July 2006, James Brown and Robert Brown signed an "acknowledgment" drafted in Mrs Papantoniou's office and addressed to her law firm, expressed as follows: We acknowledge that Stella Papantoniou has shown interest and may proceed to purchase the remainder shares of the above property. We agree for Stella Papantoniou to borrow money for the purchase and development cost for the above property and agree that the above property may be used for security. 17Robert Brown says it was Mrs Papantoniou who first suggested the joint venture. His evidence is that she said, at a meeting on the 14th July 2006: I'll buy Colleen and Aileen's share in the property and we can make money from developing the property. We'll have to borrow a bit extra to develop the property to build townhouses. I will pay $159,800 for their share. In his affidavit he said he was unaware that Mrs Papantoniou was proposing to borrow that money against the property. In evidence, he said he believed that she was going to pay for it out of her own funds. In cross-examination he became a little uncertain about that matter. Given the terms of the first "authority" it is likely that no mention of that salient fact was mentioned initially, but it was something that had been made clear by Mrs Papantoniou by 14th July 2006. 18Mrs Papantoniou's affidavit says nothing about the circumstances in which the arrangement amongst them was initiated. However, under cross-examination (375.40T) she said after the auction she encouraged Robert Brown to buy the share of his sisters, but he refused because he couldn't afford it. She said she then offered to buy it "not to develop". Her only interest was to see "that James, my client will have a roof over his head". When asked by me how she was going to get her money back she said "selling the property, the way it was" (376.10T). I interpolate that this cannot be correct. From the outset money was borrowed for the cost of getting development approval, whether or not a decision had been made at that time to actually proceed with the development. 19Mrs Papantoniou's evidence is somewhat inconsistent with her case as put to Mr Robert Brown in cross-examination. It was put to him that on the day of the auction there was a conversation amongst him, James Brown and Mrs Papantoniou about "how to deal with trying to get a good price" (187.25T). He was not sure about that. Mr Brown gave the following evidence: Q. So is it possible that what happened first was that Mrs Papantoniou said to you and Jim, "You know, this property would be worth more if it had development approval"? A. Yeah. Q. And isn't it possible that she said to you and Jim, "Why don't you two buy your sisters out?" A. I'm not sure. I'm not sure on that. Q. And isn't it possible that in fact what happened was that Jim said to Mrs Papantoniou, "Can't you buy it?" A. No, I'm not sure on that. I only remember her saying, "I buy the girls out". That's basically word for word that I remember. Q. Because you're doing your best to tell the truth but you can't remember everything, is that right? A. Obviously, yeah, I can't remember everything. Yeah. Q. So again is it possible that Mrs Papantoniou said on the day, well, something like, "Yes, I can buy it out but I'll have to borrow to do it"? A. I'm, I'm not 100% if she mentioned about borrowing then and there. It was, I only remember, "How about I buy it out?" Q. And on that day you thought it was a good idea to hold on to the property, didn't you? A. Yes. Q. And hopefully get a better price? A. Yeah. Basically. Q. On that particular day if someone had said, "Look, why don't you buy your sisters out?" you would have had to say, "I don't know how I could do it," wouldn't you? A. At the time I was in debt with my house at McGraths Hill and I don't know how I would have paid it off. Q. I think you explained that. Did you explain to Mrs Papantoniou, "Look, I got a debt on the house at McGraths Hill. I don't know how I'd pay it off'? A. I may have. I'm not sure. 20Under cross-examination it became clear that Mr Robert Brown remembered that after the auction an offer of $470,000 was forthcoming from another prospective purchaser. His sisters, understandably, were keen to sell. From Mr Robert Brown's point of view, his share of that price would have enabled him to pay off the mortgage on the property owned by him at McGrath's Hill. However, he was concerned about his brother's position, that is: how he would live if the family home were sold. At that time it did not occur to him that he could sell McGrath's Hill to fund the purchase of his sisters' shares. 21In all probability, Robert Brown's equity in his McGraths Hill property, had it been sold, would have been sufficient to enable Robert Brown to buy his sisters out, had he been prepared to sell it at that time, notwithstanding the attempts of the cross-examiner to prove otherwise (281 - 286T). To jump ahead, selling McGraths Hill enabled him to buy the property in 2011 when it was put up for sale after Mrs Papantoniou defaulted on her mortgage, but I digress. 22Despite the evidence of Mrs Papantoniou that she expected James Brown and Robert Brown would obtain independent legal advice, "because that was the requirement", she did nothing to see that they obtained that advice until September 2006 when her mortgagee required a certificate of independent legal advice to be provided for Robert Brown and James Brown in their capacity as guarantors of her indebtedness. And, in fact, they received neither legal nor financial advice independent of Mrs Papantoniou before then. 23It needs to be borne in mind that James Brown was Mrs Papantoniou's client. Mrs Papantoniou acknowledged in her evidence that James Brown "relied on me to protect him financially and otherwise ... he relied on me to advise him financially and otherwise and I did that" (367.5T). She agreed that he looked to her "as a sort of mother figure or protector". Although she initially denied it (368.40T) she eventually accepted that from 2005 she knew that James Brown suffered from alcohol problems and had attended a drug and alcohol rehabilitation institute" (373.35T). 24She did not have a solicitor and client relationship with Robert Brown and, as I have said, he represented himself in family provision litigation. However, with no disrespect, he is a person with no great scholastic achievement, who worked in an ordinary semi-skilled job which paid him only about $570 per week. I have had the advantage of seeing him in the witness box and he struck me as a person of natural intelligence, but he was unsophisticated and I accept as genuine his evidence to the effect that he trusted Mrs Papantoniou because she was "smart"; she was a solicitor; she earned good money; and would honour her debts. He had a mortgage on his own property at McGraths Hill, however, on his relatively modest income he did not feel he could afford to borrow more money and it did not occur to him in 2006 that he should sell that property to buy out his sisters from the family home. (Ref 402.10 - 403.20T) 25Mrs Papantoniou was aware that Robert Brown was leaving the property financing arrangements up to her. She said "both of the boys left it up to me to deal with this because I was told that I knew better, and they said "you deal with this". She accepted they left it to her because they trusted her (403.15 -.25T). 26At the time the property was passed in at auction and the family provision proceedings had not been completed by entry of final orders. That did not occur until 4th August 2006, the same date on which Mrs Papantoniou signed a contract for the purchase of the sisters' shares in the property. Indeed the consent orders expressed that the reassignment of the interests of the siblings in the estate of each of their late parents, and the mutual releases "from any liability arising from any breach of the heads of agreement" reached at mediation "and from any failure to obtain ... the highest purchase price for the property" were "conditional upon the sale to Stella Papantoniou, the solicitor acting for the second plaintiff, of a 34/100 share in the property for the sum of $159,800". Except for Robert Brown, all of the parties were legally represented. The other solicitors involved do not seem to have concerned themselves with the question why one of their profession acting for another party was buying out the sisters. 27However that may be, Mrs Papantoniou accepted in general terms that her failure to see that James Brown and Robert Brown had received independent financial advice "was an instance of [her] putting [her] personal interests" ahead of theirs (382.40T; 383.20T). When they saw Ms Griffin in September, as the consent orders demonstrate, they were already committed to the venture with Mrs Papantoniou. The sale of the sisters' interest to Mrs Papantoniou occurred on exchange of contracts on 4th August 2006. 28I find that when the property was passed in at auction it was Mrs Papantoniou who proposed to James Brown and Robert Brown that she purchase the sisters' shares for the purpose of enhancing the value of the property by obtaining development approval for the construction of home units, or townhouses, on the site, and possibly undertaking the development themselves. Properly understood the optimistic opinion as to value proffered by the valuers for the purpose of the family provision proceedings was based upon development approval first being obtained. Moreover, it was obvious, at least to Robert Brown, that the process of transforming Isabella Street from suburban houses to home units was already well underway. Initially there was no talk of Mrs Papantoniou mortgaging the property to fund her purchase of the shares. But this was spoken of at least by 14th July 2009 when the "acknowledgment" was signed. 29The acknowledgment signed on 14th July 2006 by its terms commits James Brown and Robert Brown, rather than Mrs Papantoniou. It says only, like the "authority" before it, that she has "shown interest and may proceed to purchase". But, as I have said by 4th August 2006 all were committed and the contract amongst James Brown, Robert Brown and Mrs Papantoniou was formed no later than on that date. Then, James Brown, I emphasise, her client, had received neither independent legal advice nor any financial advice. Robert Brown, a self-represented litigant likewise had received advice of neither type.

Taking out the mortgage and guarantees 30The expectation of Mr Robert Brown, and I infer his brother, James Brown was that as a solicitor, Mrs Papantoniou was a high income earner and she would pay any mortgage out. Robert Brown was prepared to sign the guarantee, but he did not expect the obligation to pay out the mortgage would fall on him and his brother. His expectation was she would "pay back what she's borrowed" (205.15 - .30T). 31Mrs Papantoniou was aware that Robert Brown was leaving the property financing arrangements up to her. She said "both of the boys left it up to me to deal with this because I was told that I knew better, and they said "you deal with this". She accepted they left it to her because they trusted her (403.15 -.25T). 32Mrs Papantoniou applied for a loan through a mortgage broker, Direct Loans Management. The date on which inquiries were first made is unclear, but by a letter dated 22nd of August 2006 one of Mrs Papantoniou's employees stated "we understand that your client ... has approved finance for $200,000 to Mrs Papantoniou to assist her with her purchase of the above property". At that time the proposal was that the sum of $165,000 would be necessary for the balance of the purchase price and stamp duty on the contract with "balance of the loan to be on the line of credit account". The loan application, bearing the same date and signed by Mrs Papantoniou estimated her net worth after mortgages on some properties to be in the order of $2.3m (Court Book II p. 55). 33The loan was approved by letter dated 1st September 2006. It said its purpose was to assist in purchasing an investment property. The sole borrower was shown to be Mrs Papantoniou. The principal was $250,000. The evidence does not disclose when the amount to be borrowed by Mrs Papantoniou was increased to this amount. The lender required that Mrs Papantoniou, Mr James Brown and Mr Robert Brown be mortgagors and required guarantees of Mrs Papantoniou's obligations by Mr Robert Brown, a semi-skilled worker, and Mr James Brown, a disability pensioner. 34As I have previously stated, the lender required a certificate of independent advice in respect of Robert Brown and James Brown. 35To satisfy the mortgagee's requirement of the certificate of independent advice, Mrs Papantoniou referred James Brown and Robert Brown to Ms Griffin. Criticism is made of this because Ms Griffin is a former employee of Mrs Papantoniou and remained an associate of her's, performing locum work from time to time. She was a person to whom Mrs Papantoniou referred work on occasions. I will deal with these criticism later. The terms of Ms Griffin's retainer are as follows: (CB 2 page 91): To taking your instructions and provide advice in relation to a deed of loan, mortgage, deed of guarantee, attending to witness documents, providing advice in relation to a joint venture to developing the property at North Parramatta and in relation to the sale of North Parramatta. All attendances, telephone calls and correspondence. 36Ms Griffin gave evidence before me that she was admitted as a solicitor in 1999 and described what I take to be a fairly general suburban practice. She said that prior to 2006 she only occasionally advised clients in relation to proposed mortgages or guarantees. She had 3 conferences with James Brown and Robert Brown for the purpose of advising them, on 7th September 2006, 24th September 2006 and 4th October 2006. Ms Griffin advised them that the amount of the loan was $250,000 and that this was $90,000 over and above the purchase price paid by Mrs Papantoniou for her share. She pointed out that they were guaranteeing that loan. She said that James Brown and Robert Brown said words to the effect "that's fine because we trust her". She also discussed with them the financial potential of the development. She mentioned it would cost $800,000 and if successful would yield a gross profit of $2.2 million. There would be a net profit of $1.4 million "if that happened with the whole development going to completion" (78.10T). Manifestly, these figures did not emanate from James Brown or Robert Brown. She said she "made sure that they realised that their property was going to be at risk if [Mrs Papantoniou] defaulted on the loan" (79.45T). She made a detailed file note of the conference (CB 11 page 95). 37On the second conference, Ms Griffin took her clients through the various loan documents. She confirmed that she took them through the document headed "acknowledgment of legal advice by guarantor" (CB 2 pp 230 - 232A). Some aspects of this pro-forma had not been adapted for the circumstances. She made it very clear to them that there was a risk if anything went wrong with the repayment of the loan (83.35T). 38Ms Griffin had been a locum for Mrs Papantoniou when Mr Brown first instructed her firm to act in the Family Provisions Act matter. However, she did not form the view that he abused alcohol or drugs or was under any disability. 39In cross-examination she said at the first conference that she also broke down the projected $1.4 million into shares for each of the participants, with Robert to receive $336,000; Stella $476,000; and James $588,000 (115.10T). She identified ( at CB 2 page 174 - 174A) her file note for the second conference. 40There was lengthy cross-examination of Ms Griffin about the adequacy of the advice she gave about the complexity of the mortgage guarantee. In particular it was put that she should have advised James Brown and Robert Brown "to enter into a separate indemnity agreement with Mrs Papantoniou that would enable them to get back from Mrs Papantoniou any money that they would have had to pay out under the guarantee to the bank". She agreed that she did not tender such advice. She wasn't sure whether she should have (244.5T). Neither am I, except to say an express indemnity may have facilitated recovery in the event of default by Mrs Papantoniou. In any event, Ms Griffin is not a party to the proceedings, and she was not a party to the arrangement between Mrs Papantoniou on the one hand, and Robert and James Brown on the other. Moreover, and importantly, as I have already found, when they received the benefit of Ms Griffin's advice they were already fully committed to the venture. It was too late for them to pull out. Although the consent orders were expressed to be conditional upon a sale to Mrs Papantoniou that sale, as I have already found occurred when contracts were exchanged on 4th August 2006. The point for Robert Brown and James Brown is, really, independent financial and legal advice should have been given before 4th August 2006 when there was still time to pull out, if so advised. The real purpose of Ms Griffin's involvement was to protect the mortgagee. Doubtless her primary duty was to her clients and I am satisfied that in broad terms she gave them advice as set out in the "acknowledgment of legal advice by guarantor", allowing for the lack of adaptation, to the effect of each of James Brown and Robert Brown will be liable to remedy any default by the borrower in respect of any of her obligations under the loan; that the lender could take possession of the property, sell it and in the event of a shortfall sue the guarantors for the difference; that the lender can sue the guarantor even if it has not sued the borrower; and, as she said, that the property might be at risk if Mrs Papantoniou defaulted.

Settlement of Mrs Papantoniou's purchase 41It is important to find that the term of the loan was for 12 months only, expiring on 1st November 2007 and that its terms required payment of interest only. It was also a term of the loan that the lender retain the sum of $20,000 for deduction of interest payments (clause 33, Deed of Loan, CB 2 207; CB 2 68). Effectively interest was required in advance. 42Settlement took place on 5th October 2006. By direction to pay provided by Mrs Papantoniou's law practice, the loan monies of $250,000 were dispersed as follows: (a)The Estate of the late James Walter Anthony Brown $143,798.41. This was the balance due on settlement for the purchase of the sisters' shares; (b)Parramatta City Council $699. This was for rates apportioned on settlement; (c)Sunman and Walker $24,814.55. This firm were the mortgagee's solicitors. This sum included the retained figure of $20,000 for interest, their fees and other charges in relation to the loan. (d)Office of State Revenue $4,087. This was for stamp duty; (e)Stella Papantoniou $15,980. Mrs Papantoniou reimbursed herself for the deposit paid on exchange; (f)Papantoniou and Associates $3,817.30. This was reimbursement of moneys paid by Papantoniou in her application to borrow money to fund her purchase of the sisters' shares; (g)Papantoniou and Associates $33,310.24. This was part payment of the legal fees due to the firm for acting on behalf of Mr James Brown on the family provision litigation. This is in addition to the sum of $12,007.76, payable in respect of those costs out of the Estate in accordance with the consent orders (see Order 17, CB 2 page 22); (h)Stella Papantoniou $23,463.50, this amount was to cover the initial costs of the development. Sabton and Sons, Consultants, issued a memorandum of professional fees relating to the development in the sum of $20,350 on 9th October 2006; (i)$30, bank cheque fees. 43It is apparent that Mrs Papantoniou was not investing any of her own money in the project. In cross-examination she admitted that the features of her arrangement with James Brown and Robert Brown included the acquisition by her of a one-third share of the property, actually 34 per cent; she would borrow the whole of the money for the purchase and development application; and the property would be used as the sole security for her loan. (380.15 - .25T). She also agreed that she could have funded her part in the venture out of her own net assets as disclosed in the loan application. But she chose not to "because [she] did not want to risk assets that belong purely to [her], or to [her] and [her] family members" (381.25T).

The breakdown of the relationship amongst the parties. 44Mrs Papantoniou said that Robert Brown was not hostile at the start. He followed suggestions she made with respect to the development application and accepted her advice in relation to the loan. She agreed that she dealt with the brothers together and that when she recommended Jacqui Griffin as an appropriate independent adviser, she referred them both to Ms Griffin rather than suggesting they get separate advice (401.25 - 402.10T). 45Perhaps unsurprisingly, obtaining development approval, let alone undertaking the development, proved more difficult than the parties envisaged. It also took longer. Advisers were engaged and meetings held, but their efforts had not been crowned with success when the term of the loan expired in October 2007. The lender was prepared to extend it for another 12 months. 46In 2008 James Brown was diagnosed with the cancer which later killed him. He became very ill and eventually was committed to a hospice. Robert Brown became distracted by his brother's illness and by the end of 2008 was not facing up to the need to make decisions about the development application. This was partly because he became disenchanted of Mrs Papantoniou, and I think suspicious of her. 47The extended term of the loan fell due in October 2008. On 9th October 2008 there was a meeting with Mrs Papantoniou, Ms Griffin, Mr Robert Brown and a mortgage broker. Ms Griffin was there with Robert Brown. Mr James Brown was too sick to attend. At the meeting Mrs Papantoniou said she no longer wished to proceed. On her case, this was because James Brown would no longer benefit because of his illness. She said "I want to get out of this property" and she asked Mr Robert Brown whether he would buy out her share. Mr Robert Brown said he was not interested because he couldn't afford it. He was then asked to contribute to the mortgage payments, but on his then income of about $570 per week he could not afford it. It was suggested to him that he could borrow the money to pay six months' interest on the loan. I interpolate to say that these suggestions emanating from Mrs Papantoniou contemplated a very bold and substantial variation in the existing arrangements. In fact, she was asking Mr Brown to take over the mortgage which she had suggested and which she had raised to pay for her involvement in the venture so she could avoid the risk of losing any of her personal assets. 48At this meeting someone said that with building approval, the property would be worth about $780,000. 49Mr Robert Brown knew by then that his brother was dying and that he would inherit his brother's share. But he was not willing to pay out "the loan" (327.15T). He regarded the loan as Mrs Papantoniou's debt (327.40T). He didn't want to sell the property while his brother was "dying or ill" (327.45T). He came away from the meeting knowing that there were difficulties with the development and that one of those difficulties was that Mrs Papantoniou wanted out. In the upshot the lender extended the loan for a further period of six months until April 2009. Following the October 2008 meeting, the lender wrote to Mrs Papantoniou advising that the loan would mature on 1st April 2009 and would not be renewed. It gave Mrs Papantoniou notice that the loan must be repaid or refinanced by that date. 50Mr Brown accepted that because of the attitude of the lender, of which he was aware from November 2008, it had become urgent to make a decision about what to do about the mortgage. I interpolate one wonders why that was his problem, given that the money was borrowed by Mrs Papantoniou to pay for her interest in the property, and for other purposes as she saw fit, including facilitating the payment of the balance of legal fees due to her She said she arranged this latter at the request of James Brown. But the normal arrangement in such matters when solicitors act for people of no independent means would be to await the sale of the property, and for the solicitor to be reimbursed then. 51It appears that in 2009 Mrs Papantoniou put forward a further development application, which she believed had some chance of being approved. She took steps to have this signed by the others and may have lodged it with the council in the early part of that year. Mr James Brown signed it before his death in March. 52The evidence of Mrs Papantoniou was somewhat contradictory of the proposition that had been put to Mr Robert Brown in cross-examination. Mrs Papantoniou maintained that her only reason for being involved in the venture was to provide a place of residence for James Brown; she was protecting him. She knew that Mr James Brown was quite ill in late 2008 and it was difficult to get instructions from him, but contrary to the proposition that had been put to Mr Robert Brown in cross-examination, she denied, initially, that she wanted the property sold at that time so the loan could be paid out (427.50T). She reiterated that her only concern was about the welfare of James Brown (425.35T) and she denied that she had ever, whilst he was sick gone to see him to get him to sign a development application or a real estate agency agreement for the sale of the property (425.40T). However, she accepted that the purpose of the venture was to make a profit, even if only for the purpose of providing enough to house James Brown (426.15T) and that she was anxious, given all the circumstances pertaining at the end of 2008, to see that she did not suffer a very large financial loss as she did not wish to put her own assets at risk. 53She agreed with questions I asked to the effect as at the end of 2008 she was anxious about finalising the development application to sell the property at an enhanced value "so that everyone" including her "could get their share out of it" before the venture failed (427.35T). 54In the end, no development application was approved before the extended term of the loan expired in April 2009 and Mrs Papantoniou defaulted on the loan. This was due to a number of factors including the illness of James Brown and a degree of recalcitrance of Robert Brown because of his disenchantment with Mrs Papantoniou and his concern for his brother. In February 2009 Mr Robert Brown appointed his present solicitors to look after his interests in relation to the matter.

Issues of credit relating to Mrs Papantoniou 55For reasons given in my judgment [2012] NSWSC 1415, I permitted evidence to be given and questions to be asked in cross-examination about the conduct of Mrs Papantoniou in February 2009 concerning her attempts to have Mr James Brown sign a new will which gave her an advantage, her attempts to have the development application signed, and her attempts to have an agency agreement signed. I ruled that this evidence was relevant because it might tend to prove Mrs Papantoniou's motive in entering into the contract was not simply to facilitate Mr James Brown being able to keep the former family home, but more likely was to obtain for herself "a particular financial advantage or profit" (at [19]). 56I am satisfied that she did have James Brown sign a development application whilst in was in the Hospice. She also unsuccessfully sought the execution of a new will from which she may profit, at least to the extent to which some outstanding legal fees would be covered. This conduct on her part supports the suggestion that her motives for entering into the venture with James Brown and Robert Brown was in substantial part to make a profit; even if initially she also wished to help her client James Brown, whom she knew was dependant upon her in many ways. 57By February 2009 James' condition was known to be critical and he succumbed to his illness on 13 March 2009. Her efforts at that time could only be explained by an attempt to secure her own position in relation to salvaging the venture and being paid for her legal services. There could no longer be any question of housing James Brown. 58Other matters were raised concerning her credit. At 411.20 - .40T Mrs Papantoniou said that she had explained the effect of a mortgage and a guarantee to James Brown and Robert Brown before they signed the acknowledgment of 14th July 2006. It was her clear evidence that she was not able to say whether they had received independent advice other than from Ms Griffin, to whom she referred them. Ms Griffin's evidence, which I accept, was that she first gave advice on 7th September 2006 and I have made findings about this topic above. It emerged that Robert Brown had complained about some of Mrs Papantoniou's conduct to the Legal Services Commissioner and, as she is required to do, she answered queries from that body. She said that she considered the statements she made to the Legal Services Commissioner very carefully (456.50T). 59In fact, Mrs Papantoniou wrote three letters to the Legal Services Commissioner dated 20th November 2009, 24th November 2009 and 3rd December 2009. In due course these letters were admitted as Exhibits A, B and C. Mrs Papantoniou made some statements to the Legal Services Commissioner which clearly contradict evidence given before me. 60I will deal with them in the order on which they were cross-examined. In the letter of 3 December 2009 (Exhibit "A") Mrs Papantoniou says that she visited Mr James Brown on 4th February 2009 to have the agency agreement and the development application signed, and that the agency agreement estimates the selling price of $750,000 to $800,000. This contradicts her evidence, of course, that she didn't "pursue" James Brown to obtain his signature on the development application and real estate agency agreement. She said her evidence to me was wrong but the statement to the Commissioner was correct. 61In her letter of 24th November 2009 (Exhibit C) Mrs Papantoniou asserted that she obtained independent legal advice including advice from Counsel "prior to taking any personal involvement in this matter". This contradicted evidence she had given in Court that she didn't at any time seek any legal advice for her own benefit before entering into the arrangement with Mr James Brown and Mr Robert Brown. She agreed that it was contradictory (461.40T). She explained that when giving evidence in Court she forgot about receiving independent legal advice (462.30T). She denied having given false evidence. She named the Counsel she had consulted. It is not necessary for me to name that barrister. The advice was given orally in conference. She forgot about that circumstance until she was reminded by being shown the letter she had sent to the Legal Services Commissioner. 62In her letter of 20th November 2009 (Exhibit B) she stated that before entering into the arrangement with James Brown and Robert Brown she advised them that they would both need to seek independent legal advice. The letter continues: After both James and Robert Brown sought advice they both agreed to have the property as security. A copy of the acknowledgment of 14th July 2006 was annexed. 63Mrs Papantoniou accepted that the contents of the letter were contradictory of the evidence that she had given in Court (468.5T). However, she explained that the "untruth" was not intentional. Rather it was due to a lapse of memory (468.5T). She insisted that the version she had given to the Legal Services Commissioner was correct (468.35T). It transpired (as I have found) that Mrs Papantoniou obtained the signature of James Brown to each of the development application and the agency agreement, but she denied that her purpose was to further her own ends in selling the property. Rather she said she wanted the property sold so James Brown could buy a "cottage out of Sydney "(471.50 - 472.5T). I interpolate that this is difficult to accept given what was known about his terminal illness then. 64The question of advice from the barrister was re-visited by leave during cross-examination, learned Counsel taking the view it was a matter that ought to have been visited in chief. From this evidence, Counsel was consulted once, "right at the beginning of the whole series of events when the idea of buying out the sisters' share was first suggested"; and the only advice obtained was "whether it was proper for Mrs Papantoniou to buy the sisters' share" (476.45 - 477.5T). There was further cross-examination on the issue especially about Exhibit C, the letter of 24th November 2009. That letter states, "I continued to reaffirm and seek further advice on all parts of my involvement, and I was satisfied with such advice". It was pointed out that that passage suggested ongoing advice, Mrs Papantoniou said "it's not accurate, but it's not incorrect" (478.40T). She denied that what she told the Legal Services Commissioner was false. She denied that she was tailoring her evidence as she went. I felt it appropriate to ask questions about this topic at this juncture (479.25 - 480.50T) for the purpose of seeking an explanation about what I regarded as the obvious difference between the further evidence she had given by leave and the ordinary meaning of the language she had used in writing to the Legal Services Commissioner. I think it fair to say that Mrs Papantoniou was unable to give an explanation of the difference. In the end, she said: I don't understand the difference, your Honour, I don't know (480.50T). 65Evidence was also taken from Mr Rajbir Singh, a solicitor who at one time worked for Mrs Papantoniou and at another for Mr Robert Brown's current solicitor. His evidence was the principal subject of my ruling referred to above. Mr Singh was made redundant by Mrs Papantoniou on 25th June 2009. Mr Singh gave evidence about concerns he had about the independence of Ms Griffin given her friendship with Mrs Papantoniou. He said he raised these matters with Mrs Papantoniou. In the end I was of the view that Mr Singh's evidence is of, at best, marginal relevance to the issues to be decided in this case. I also formed the distinct impression that he was not well disposed to Mrs Papantoniou. He gave evidence about seeing a draft Will for execution by Mr James Brown, which contained a gift of $50,000 for Mrs Papantoniou. I am satisfied, however, that it is very highly likely that the $50,000 was a mis-transcription of $5,000. In the end, according to Mr Singh, the figure discussed with Mr James Brown was $7,000 for Mrs Papantoniou's trouble acting as Executrix. No further Will was ever executed. 66Mr Singh did confirm that Mr James Brown signed the development application and the agency agreement, but that he seemed disappointed with Mrs Papantoniou's advice about what the expectation would be if the development application was approved and the property was sold at an enhanced value. The figure discussed was around $1m, according to Mr Singh. 67When Mr Singh and Mrs Papantoniou went back for a second visit, he believed that it was for the purpose of executing the Will which had been discussed on the first visit. Mr Robert Brown was there on that occasion and there was unpleasantness between him and Mrs Papantoniou. No Will was signed. 68I would be very slow to conclude that Mrs Papantoniou deliberately lied either to me or the Legal Services Commissioner. She is a solicitor of this Court and has been since 1986. A finding that a solicitor has told deliberate lies to a Court or a disciplinary authority would be tantamount to a finding of professional misconduct. I should only make such a finding if I was so satisfied by cogent proofs in accordance with the Briginshaw v Briginshaw (1938) 60 CLR 336 standard (see s 140(2) Evidence Act 1995 (NSW)) and I am not so satisfied. 69It is clear that the accounts are contradictory. And I am not satisfied that the apparent contradictions have been satisfactorily explained. This matter has been going on for a long time and a lot has happened. I formed the impression while she was giving her evidence that Mrs Papantoniou had not prepared herself well for the process and seemed to be unfamiliar with matters that ought to have been recorded on her file. Moreover, English is not her first language and some subtleties and nuances of expression seemed lost on her. 70However, whilst the contradictions remain, I find it difficult to prefer her evidence where it conflicts with the evidence of others or where it appears to me to be inconsistent with the probabilities. 71Human motivation is complex. A person's purpose for engaging in conduct may be mixed, and subject to conflicting, even contradictory, motives. I accept that in part, Mrs Papantoniou wanted to help her client James Brown whom she knew depended upon her. However, I am also of the view that she was motivated by the opportunity to make a profit especially if she could structure the arrangement so the risk of failure fell on the Brown family home, rather than on any of her personal assets.

Mrs Papantoniou's default 72Mrs Papantoniou defaulted on the mortgage on 1st April 2009 by reason of her failure to repay the principal. She continued to pay the previously agreed rate of interest by way of direct debit on a monthly basis, but not the higher rate payable during periods of default (CB III 158). Mr Robert Brown, through his lawyers and Ms Papantoniou entered into negotiations in an attempt to settle their dispute. 73In September 2009, Mrs Papantoniou offered to sell her 34 percent share in the property for $272,000. This suggested valuation in the sum of $800,000, which is the type of price suggested by the evidence, only if a development application had been approved. This demand is highly suggestive of a profit motive. Other terms were imposed including payment of legal costs. It may be that the third development application remained on foot, but there is no evidence it was ever approved. 74Mr Robert Brown agreed to pay the price of $272,000 by his solicitor's letter dated 25th September 2009, but queried the other matters and requested further information. It seems that agreement about the sale was very nearly reached by the 21st November 2009. Indeed a transfer was prepared by Mr Brown's solicitors and forwarded to Mrs Papantoniou's solicitors on 3rd November 2009. However, there seemed to be a demand for reimbursement of interest payable on the $33,310.24 deducted from the loan for Mr James Brown's legal costs and a demand for the payment of other legal costs, including what seemed to be a duplication of the amount of $33,310.24. The total of these additional demands was $65,419.11. Additional claims were made in relation to apportionment of the interest in respect of the loan raised by Mrs Papantoniou. Despite some disagreements about matters, it seemed again that, as at 22nd December 2009 (CB III page 193), Mr Brown was in a position to settle. As there was no response to their letter of that day, the solicitors wrote to the same effect on 20th January 2010. By letter dated 22nd January 2010, Mrs Papantoniou's firm (by an employed solicitor) sought adjustments totalling some $65,000. Once again, one of those adjustments related to the sum of $33,310 being the borrowed funds to pay the legal fees. Correspondence continued over the month of February in a similar vein with the parties being unable to reach agreement about the details. 75The mortgagee commenced proceedings for possession in January 2010 and because of a failure to engage with each other's point of view over the legal fees for the previous proceedings, the proposed purchase by Mr Robert Brown stalled and failed. In the end, the Court appointed trustees for sale of the property on 16th November 2010. Mr Robert Brown sold his McGraths Hill property and purchased the family home,effectively the value of Mrs Papantoniou's 34 percent share, which in accordance with valuations obtained by the Trustees was in the sum of $200,600 (CB I 116; CB IV 2-78). 76The date of settlement of the purchase by Mr Robert Brown was 18th March 2011. The settlement calculation sheet at CB 1V page 110-112 sets out the position of the parties as at settlement. From this it can be seen that the total valuation price was $590,000 and Mrs Papantoniou's 34 percent share was $200,600. As I have said, this was the price agreed to be paid to the Trustees. Clearly, as a tenant in common of a 24 percent share and as the Executor of Mr James Brown's Estate, having a 42 percent share it was unnecessary for those interests to be re-transferred to him by the Trustees. 77 The amount paid on settlement by Mr Brown was calculated as follows: Purchase price of Mrs Papantoniou's 34 percent share $200,600.00 R. Brown's share of allowances $100,237.89 J. Brown's share of allowances $175,416.32 Total: $476,254.21 78At the time of the settlement the total amount due to the mortgagee (included in the allowances figures I have mentioned) was $395,342.29 and the costs due to the trustees for sale were $21,145.51. There was also a small amount owing on rates, which may be ignored for present purposes. 7934 percent of the allowances at the time of settlement was $142,003.69, accordingly the surplus on sale referrable to Mrs Papantoniou's share was calculated as $58,596.31. Pursuant to the orders for sale made by the Court on 16th November 2010, that amount is held in trust by the solicitors for the mortgagee, Norton Rose, pending the resolution of these outstanding issues.

The claims of the various parties 80The First and Third Cross-Claimants seek relief in the form of an order pursuant to the Contracts Review Act 1980 (NSW) varying the Guarantee of 5 October 2006 by the inclusion of an express indemnity that encompasses all losses, expenses and liabilities, including legal costs incurred by the guarantors in relation to the guarantee. 81They also seek an order that the funds being held on trust are to be released to them in their respective shares. 82The Third Cross-Claimant (The estate of James Brown) also, in the alternative, seeks equitable compensation in relation to loss and damage arising from the alleged breach of fiduciary obligations owed by Ms Papantoniou to James Brown. 83The cross-claim of Ms Papantoniou (Second Cross-Claimant) can be summarised as seeking relief in terms of a declaration discharging her from liability under the loan agreement "in such amount as may be just". This can be categorised as a claim to set-off the following debts/contributions: (a)The legal fees owed by James Brown to Ms Papantoniou in relation to the Family Provision claim; (b)A claim for occupation rent from 5 October 2006 to 18 March 2011; (c)In the alternative to those claims, a claim that the first and third cross-claimants are liable to the second cross claimant for two thirds of the interest paid by her including the initial pre-paid interest, and such other amounts she has paid in respect of the property; (d)A claim for the first and second cross claimants to be liable for two thirds of the development approval application expenses; (e)A declaration that the costs of the litigation to defend the possession proceedings by the mortgagee be solely borne by the first cross-claimant; (f)An order for account;

Issues 84In broad terms Robert Brown, in his own right and his representative capacity asserts that the tripartite contract between him and his brother, on the one hand, and Mrs Papantoniou is unjust. Mrs Papantoniou strongly disputes this, but acknowledges that there needs to be a readjustment amongst the parties of the financial consequences flowing from the enforcement by the lender of its rights under the mortgage. As I understood the arguments advanced, essentially Mrs Papantoniou says that Mr Robert Brown in both his capacities is entitled to be treated as a guarantor exercising his rights of indemnity arising out of the general law flowing from his observance of his obligations under the guarantee. 85It follows from this that the main contestants both accept that Robert Brown is entitled to some remedy. At the end of the day, the dispute between them is about the nature and extent of it. Given the intervention of the rights of so many others, including Robert Brown's sisters and the lender, it is not possible to fashion remedies actually rewriting legal contracts, or setting them aside, capable of having any practical effect. Moreover, Robert Brown is now the sole registered proprietor of the property, the subject of the dispute. No proprietary remedy will be appropriate. It follows that in essence the real nature of the dispute is about the amount of monetary compensation payable. The measure of compensation will depend substantially upon my decision as to whether the contract was unjust for the purpose of the Contracts Review Act 1980 and to a lessor extent upon the ancillary considerations which it may be necessary to take into account for the purpose of doing substantial justice between the parties.

The contracts review claim 86The starting point is s 7 Contracts Review Act which empowers the Court to grant specified relief "where the Court finds a contract or a provision in the contract to have been unjust in the circumstances relating to the contract at the time it was made". The powers conferred by s 7 may only be exercised "if the Court considers it just to do so and for the purpose of avoiding as far as practicable an unjust consequence or result." Section 8 confers power to grant ancillary relief where a decision or order of the type specified in s 7 is made. Ancillary relief extends to "the payment of money (whether or not by way of compensation) to a party to the contract". 87Section 9 of the Act sets out the matters to be considered by the Court. First amongst these is the public interest. The Court is to have regard "to all the circumstances of the case, including such consequences or results as those arising in the event of" compliance with the contract or non compliance with the contract. Section 9(2) sets out mandatory considerations that must be taken into account "to the extent that they are relevant to the circumstances". 88It is well established that the application of the principal provision, s 7, "involves a two stage inquiry: first, was the contract unjust; secondly what if any orders should be made": Perpetual Trustee Co Limited v Khoshaba [2006] NSWCA 41 at [34] per Spigelman CJ (Handley and Basten JJA agreeing). The first step is a finding of fact "albeit one involving a broadly based value judgment" Khoshaba at [39]. The second question involves an exercise of discretion. Section 9(5) is instructive: In determining whether it is just to grant relief in respect of contract or provision of a contract which is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. 89Little guidance is likely to be provided by previous decisions. As Spigelman CJ said in Khoshaba at [73]: Where the Court has to apply a standard as general as what is "unjust", it cannot be confined by such reasons as if they were rules. Naturally the "value judgment" called for involves community standards. Another way of putting this is that the value judgment involved in the first question requires the application of a normative standard. 90Where a value judgment is called for, it should not be taken to be "at large". The normative standards or considerations involved "must be derived from legal principle". In a statutory regime like the present "the primary task of the Court is to apply the legislative norms to be found" in the legislation: Travel Compensation Fund v Tambree (t/as R Tambree & Associates) [2005] HCA 69; (2004) 224 CLR 627 at 639 [29]. 91To put this another way, the normative standards are to be ascertained "by reference to the statutory subject, scope and purpose" of the relevant legislation: Allianz Australia Insurance Limited v GSF Australia Pty Ltd (2005) 221 CLR 568 at 597 [99]; Tambree at 644 [49] per Gummow and Hayne JJ. 92S 4 of the Act contains the following definition: Unjust includes unconscionable, harsh or oppressive, and injustice shall be construed in a corresponding manner. The definition is accordingly inclusive rather than exhaustive. The judgment of McHugh J in West v AGC (Advances) Limited (1986) 5 NSWLR 610 at 620 - 1 remains influential notwithstanding, perhaps, changing social and commercial conditions over the best part of 3 decades since it was decided. In part his Honour said: .....a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s 9(2)(a), 9(2)(e), 9(2)(f), 9(2)(g), 9(2)(i), 9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust inthe circumstances. This statement is relevant in the present case. It is unnecessary to consider any distinction between "substantive injustice" and "procedural injustice". Obviously, the same contract may be seen to be unjust on a consideration of both elements.

Was the contract unjust at the time it was made 93The starting point, of course, is identifying the contract and when it was formed. With respect, to some extent those appearing for Mr Robert Brown in both his capacities focus on the wrong contract at the wrong time by considering the contract of guarantee actually signed by each of the Brown brothers on 24th or 25th September 2006. As I have found this was but a step in putting into effect a contract that had been formed in July 2006, and certainly no later than 4th of August 2006 when Mrs Papantoniou exchanged contracts to purchase the sisters' shares in the property. That is the relevant contract and the relevant time for considering the statutory question. What occurred in September and October culminating in settlement of Mrs Papantoniou's purchase on 5th October 2006 were steps in the implementation of an already formed agreement. Those matters are relevant because they form part of the circumstances of the case as consequences or results arising from compliance with the provisions of the contract, but they are not part of the relevant contract itself. 94The contract is partly evidenced by the acknowledgment of 14th July 2006, but doubtless also partly oral. Its essential terms are: (a)Mrs Papantoniou would purchase the sisters' shares totally 34 percent, matching, as a proportion, the offer of $470,000 which had been made after the auction; (b)Robert Brown and James Brown would maintain and continue to hold their respective interests as adjusted pursuant to the settlement; (c)Mrs Papantoniou would fund her purchase by way of mortgage to which she, James Brown and Robert Brown would be mortgagors; (d)Robert Brown and James Brown would guarantee her indebtedness (under the mortgage) with the exception of some legal fees to which I will return, neither James Brown nor Robert Brown were to be borrowers, and had no need to borrow to acquire their respective shares in the property. That their promise to guarantee Mrs Papantoniou's indebtedness was a term of the contract was obvious from Mrs Papantoniou's evidence that she advised Robert Brown and James Brown of the effect of a mortgage and guarantee, and did not require them to obtain independent legal or financial advice; (e)It was a feature of the contract that Mrs Papantoniou would have no exposure to any risk of the objects of the contract failing because her substantial personal assets (she had a net worth of $2.3m) would not be in any way put forward. Apart from paying the interest running on the monies she borrowed it was not possible for her to make any actual loss, over and above her acquired share, because she borrowed every dollar that she expended in implementing the contract right down to the 10 percent deposit and the interest payable for the agreed term of the mortgage of 12 months; (f)It was a feature of the agreement that Mrs Papantoniou would be protected from the risk of loss by the consideration that the security of the property was more than adequate to cover her indebtedness, and the personal guarantees provided by James Brown and Robert Brown would provide another layer of security for the lender. 95The purpose of the contract, as found by me, was to enhance the value of the property by holding it until an application for the development of the site by the erection of townhouses or home units was approved by the local government council. When this primary objective was achieved a decision would be made about whether to sell then at an enhanced value because of the development approval, or proceed, as a secondary objective to undertake the development to make a greater profit by selling the individual townhouses or units. That the secondary objective was in contemplation from the outset can be inferred from the evidence of Robert Brown, and also from the type of financial advice that Ms Griffin gave to the brothers on 7th September 2014. She discussed in some detail the nature of the project, the likely costs and the hope for profit. This information could only have come from Mrs Papantoniou. I reject her evidence that she was never interested in undertaking the development and that she was only concerned with putting a roof over the head of James Brown. According to Mr Singh's evidence, which I accept in this regard, Mrs Papantoniou secured the signature of James Brown on a further development application and agency agreement just before his death. By then she had doubtless abandoned the second objective. Time had run out on the mortgage. But I find she still hoped to make a profit. 96As I have said before, human motivations are likely to be complex, moreover a profit motive is not a bad thing. It is not the profit motive of Mrs Papantoniou, or of James Brown and Robert Brown for that matter, which is unjust. But the objectives of each of the parties is relevant to the question of injustice. 97Adapting the language of McHugh J from West the provisions of the contract which, as a practical matter, imposed the whole of the risk of financial failure on the Brown brothers was unjust because it imposed an unreasonable burden on them which was not reasonably necessary for the protection of the legitimate interests of Mrs Papantoniou. She was better placed than any of them to bear the risk of the financial failure of the project. Yet she sought to quarantine her assets and personal wealth from it. 98The contract was also unjust because in the circumstances in which it was formed, the Brown brothers did not have the capacity or opportunity to make an informed or real choice as to whether each of them should enter into the contract. 99It is this "combination of the operation of the contract and the manner in which it was made" that renders the provisions imposing that part of the financial risk that should have been borne by Mrs Papantoniou upon James Brown and Robert Brown unjust in all the circumstances of the case. 100In reaching this conclusion I have had regard to the matters referred to in s 9(2) so far as they are relevant to this case. I am satisfied that there was material inequality in bargaining power between Mrs Papantoniou on the one hand, and James Brown and Robert Brown on the other. In particular in relation to James Brown, he was extremely vulnerable. Not only was he a client whose rights Mrs Papantoniou was professionally bound to protect, but she knew that he depended upon her for "protection" beyond the scope of the ordinary confidential relationship of solicitor and client, on the basis of the findings I have made above. Robert Brown was not entirely in the same category. However, he was a relatively unsophisticated, ordinary working member of the community. He had modest means and modest assets, especially when compared to Mrs Papantoniou. In many ways, although like the others he was happy to contemplate the possibility of a profit, his interest would have been better served, like his sisters, by insisting upon a sale. I find he acted mostly out of concern for his brother. He was also an unrepresented litigant in the family provision litigation. From this Mrs Papantoniou knew he had had no legal advice. She appreciated that he trusted her. 101Mrs Papantoniou, as a legal professional did not refer her own client for legal and financial advice about the venture before entering into the contract. She may have had no ethical obligation towards Robert Brown, but it must have been obvious to her that at some stage the lender would require that each of them receive independent advice. The time for that to be done was before the contract was entered into and they all became committed, not just to each other, but also to the sisters, in the first instance, and then to the lender on settlement. 102There was no real opportunity for negotiation on the part of Robert Brown and James Brown. James' relied upon Mrs Papantoniou. More generally, I have accepted that the venture was her idea; that she first suggested it to the brothers on the day of the auction; and that she followed it up with them over several days until 14th July 2006. In fact, from the authority of 12th July 2006 and the acknowledgment of 14th July 2006, I infer that she obtained their commitment to the proposal before committing herself. This is why the authority refers to them holding their interests at least up until an offer of $500,000 might be forthcoming and why she is identified only as an interested party. Similarly with the acknowledgment, James Brown and Robert Brown appear to commit themselves to the idea that if Mrs Papantoniou commits herself, her participation will be funded entirely by a mortgage against the property. 103Once the interests of other persons became involved, like the sisters and the mortgagee, it was not reasonably practicable for James Brown and Robert Brown to renegotiate or to reject any of the provisions of the contract. As I have found, by the time the contract for the sale of the sisters' interest to Mrs Papantoniou was exchanged on 4th August 2006, they were committed. In reality, they were in no position to reject any of the documents explained to them by Ms Griffin. It was already too late for that then. 104I have found this already, but I record that I have been influenced by the provisions of s 9(2)(d). The provisions of the contract making James Brown and Robert Brown personally liable for any default of Mrs Papantoniou in respect of her borrowings was entirely unnecessary, given her assets and personal wealth, for the protection of her legitimate interests. 105I have made findings of the nature of the relationship between James Brown and Mrs Papantoniou. Given that relationship of dependency, James Brown was not reasonably able to protect his own interests, and he was not afforded the opportunity of legal or financial advice at the relevant time, independent of Mrs Papantoniou, Robert Brown's position was similar, but not the same. He trusted Mrs Papantoniou, and became a de facto client of hers in as much as she gave him, at least legal advice in relation to the proposed mortgage and guarantees. He was not equal to her. He considered her "smart", wealthy and an honourable person who would "pay her mortgage". It is also a factor that the relative economic circumstances, and educational background of James Brown and Robert Brown on the one hand, and Mrs Papantoniou on the other, were uneven to the disadvantage of each of the Brown brothers. 106I have referred repeatedly to the absence advice of a legal and financial type. I should interpolate that during the course of the Trial some criticism was levelled at Ms Griffin. Her competence to advise about the relatively complex language of the guarantee was impugned and her independence was questioned. The latter on the basis of her prior relationship with Mrs Papantoniou. I have already found that, in any event, the involvement of Ms Griffin came too late. And it seems to me that her involvement neither lessens nor increases the injustice of the contract. I should say, however, that she struck me as a reasonable suburban solicitor of ordinary competence. I am of the view that she did her work conscientiously on behalf of James Brown and Robert Brown. Whether she had a thorough expertise in the law of guarantee is not to the point. The advice she gave was essentially accurate about the risk that signing the guarantee involved. 107Although I accept that Mrs Papantoniou gave some advice to each of the brothers about the legal effect of the mortgage and the legal effect of the guarantee, the actual content of that advice prior to the formation of the contract is not in evidence. It certainly does not appear from Robert Brown's evidence that he had the expectation that she would not pay her debts, or that he had any real appreciation of the risk that she would default. I infer her advice was inadequate. 108From what I have said already about the nature of the relationship between James Brown and Mrs Papantoniou, there is a flavour of a degree of undue influence of her over him. He was extremely vulnerable. I accept that she was well motivated towards him, but that is not the point. Her dominant purpose was to make a profit from the development without personal risk. 109The essential injustice here, is that Robert Brown and James Brown were put in a position where they could well be left "holding the can" for Mrs Papantoniou's debt if she defaulted and chose not to remedy her default. That is in fact what happened here. This was a reasonably foreseeable result at the time the contract was made. Indeed, the contract was structured so that if things went "pear-shaped", as they did, Mrs Papantoniou would be largely unaffected. I accept that after she defaulted by failing to repay the principal at the end of the extended term, she continued to pay by way of direct debit the normal interest rate, but not the higher rate due on her default. But in substance that does not ameliorate the general feeling of injustice I have formed from my findings of primary fact. 110I also accept that had James Brown and Robert Brown received independent advice prior to entering into the contract with Mrs Papantoniou, they may well have been advised that any lender is very likely to require any mortgage over the property to be granted by all tenants in common and not just the borrower. The advice may well have been that at a practical level this was unavoidable. Moreover, they may also have been advised that in circumstances where a loan is advanced to one of three tenants in common, the lender very likely would seek a guarantee of the obligations of the borrower from the others. Again, to some extent at a practical level such an arrangement may have been difficult to avoid. 111Moreover, independent financial advice may well have been to the effect that the contract as proposed prior to its formation had obviously foreseeable consequences, should Mrs Papantoniou default for any reason. The vagaries of the development game may also have been pointed out including the uncertainty of a profit being realised. 112Had advice of this nature been provided, it might also have been pointed out to Robert Brown that he may have been able to achieve his dominant objective of looking after his brother by himself acquiring his sisters' share by selling McGraths Hill. Had he received the proper advice at the time, I infer he would have accepted it. Subsequent events demonstrate that he would have been in a position to proceed in this way. 113The finding that the contract was unjust that I have made is enhanced by the consideration that it is most unfair that a disability support pensioner with health and substance abuse issues, and an ordinary working member of the community, should underwrite the liabilities of a successful professional. 114I find that the contract unjust in the provisions which required James Brown and Robert Brown to bear the risk that Mrs Papantoniou would default on her obligations on the loan she borrowed.

Should the Court make an order under s 7 Contracts Review Act 115The question is whether I consider it just to make an order of the kind referred to in s 7 for the purpose of avoiding as far as practicable the unjust consequences or result of those provisions of the contract imposing liability for default effectively on Robert Brown and James Brown. 116Having regard to the purposes of the Act, for the reasons I have already given, I am of the view that I should make an order declaring the contract void in part to the extent to which it required Robert Brown and James Brown to bear the financial risk of Mrs Papantoniou's default on her mortgage. 117In making this judgment I have had regard again to the circumstances of injustice as I have found them to be. 118I have also taken into account in accordance with s 9(5) the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. In this regard there was nothing in the evidence about the conduct of James Brown which would disentitle his Estate to any relief by what I will refer to as misconduct in relation to performance of the contract. 119So far as Robert Brown is concerned, some complaint has been made about his recalcitrance from the end of 2008 until default in April 2009 and beyond. On the evidence I prefer as I have set it out above, it should be understood that it seems to have been Mrs Papantoniou who "wanted out". She attempted to bring some pressure to bear on Robert Brown to have him take over the mortgage. The only active obligation was the payment of interest. This is what she tried to have him agree to assume. I find his refusal to do this entirely understandable and reasonable. Mrs Papantoniou borrowed the money. It was her loan, her debt, it was her primary responsibility to honour it. 120I confess to having had some misgivings about the difficulty in securing Mr Robert Brown's signature to the final development application. However, I accept on balance his explanation that he was concerned about his brother's rapidly deteriorating state of health. This is consistent with my finding that concern for his brother was his primary motivating factor. It is unfortunate that he could not focus upon his own commercial interests at the time of his brother's final illness, but again, this is entirely understandable and I do not regard it as constituting any form of disentitling conduct. I have borne in mind that the project of securing at least development approval took much longer than anyone anticipated. Doubtless all parties were to a degree worn down by the process. 121To my mind, Mr Brown acted reasonably after obtaining legal advice in February 2009. He quickly made offers to attempt to settle the matter and even accepted an offer by Mrs Papantoniou to sell her interest at what, on any view was an inflated price, which took account of the enhanced value that the property might have had if a development application had been approved, which it had not. My impression of the correspondence is that if anyone acted in a highhanded manner during this period of time, it was Mrs Papantoniou. As I will explain, she had a point about some matters. And, there seemed to be a misunderstanding about what she was saying in relation to that part of the loan which covered legal costs incurred by James Brown in the family Provision proceedings. Even so, my impression is that she walked away and put pressure on Robert Brown to accept her terms or suffer the consequences. 122Nor did Mr Robert Brown act unreasonably after the mortgagee commenced these proceedings. It was not unreasonable for him to attempt to maintain his interest in the property. It is understandable he saw the problem as being Mrs Papantoniou's. He was in no position to pay out the mortgagee immediately, and in fact, there was no evidence that any demand was made on the guarantee. The mortgagee elected to take possession. I infer that he negotiated an outcome which when orders were made on 16th November 2010, gave him the opportunity to effectively be a preferred purchaser of the property under the terms of judicial sale imposed by the Court. He took that opportunity, sold McGraths Hill and raised the money to pay the price set by the Trustees for sale in accordance with the valuation they had obtained. Nothing about this constitutes, in my judgment, any disentitling conduct.

Breach of fiduciary duty 123Were I wrong about the application of the Contracts Review Act, I would have been satisfied that Mrs Papantoniou breached the fiduciary duty she owed to James Brown by entering into the contract with him. It is suggested that Mrs Papantoniou did not compete with James Brown to acquire her interest in the property and she deprived him of nothing are not to the point. As I have identified the real vice was in making a contract from which the solicitor stood to gain from any profit made, but the client would carry the can as to losses incurred. 124There is no objection to a fiduciary relationship inhabiting a contract provided the fiduciary relationship accommodates itself to the terms of the contract so that it is consistent with and conforms to them: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at [97]. 125Mrs Papantoniou obtained a benefit at the expense of her client. That benefit was the client assuming responsibility for her liability. The fiduciary relationship of solicitor and client was the most significant factor bringing about this result. Especially given the added aspects of a relationship of dependence between Mrs Papantoniou and Mr James Brown. 126In my judgment Mrs Papantoniou breached or fiduciary duty owed to Mr James Brown. 127This finding may have no practical ramifications as the measure of equitable compensation in the circumstances is likely, at least, to be broadly similar to compensation under s 8 Contracts Review Act 1980. 128I fully appreciate that the approach I have taken to the Contracts Review claim is different from the approach advanced by the claimants. However, their focus on the guarantee of 24th and 25th September 2006 is substantially because it imposed liability of Mrs Papantoniou's debt on Robert Brown and James Brown. The factors which persuade me that the contract was unjust are the factors that they advanced. The substance of my findings are based upon their claim, but as I have said by focusing on the contract of guarantee with the lender, they have addressed the wrong contract. But in substance, the argument they advanced is the argument I have accepted. 129Subject to the requirements of the natural justice rule 36.1 Uniform Civil Procedure Rules 2005 confers broad powers on the Court granting relief and I rely upon the rule in approaching the matter as I have done. I will make an order declaring the contract void in part as I have indicated. But as I have said, given what has occurred and the intervention of the rights of third parties, the practical relief available to the claimants is ancillary relief under s 8.

Mrs Papantoniou's cross-claim 130As I have said Mrs Papantoniou's cross-claim really amounts to a claim to set-off. As I have explained above, she seems to proceed on the basis that James Brown and Robert Brown have some right to claim against her. She would characterise this as a general law right to subrogation or indemnity of a surety who has discharged the debtor's obligations. 131As I have tried to explain, that is not what happened here. Mr Robert Brown in his twin capacities was not called upon to observe his obligations under the guarantee given to the lender, although he did pay out the balance of the debt over and above the contract price of $200,600 paid to acquire in substance Mrs Papantoniou's share. But he acquired title not by subrogation arising from a discharge of the debt by a surety; he acquired title as a purchaser from Trustees exercising power under a judicial sale. 132When I come to assess compensation payable under the Act, I will take into account some of the matters claimed Mrs Papantoniou and reject others. The appropriate place to deal with this is in assessing quantum.

Assessment of compensation due 133I do not propose to go through the whole of every argument advanced by each party in relation to the assessment of compensation. The arguments of Robert Brown and James Brown are fully set out in MFI 10 relating to the calculation of the "Brown parties' loss". Mrs Papantoniou's position is fully summarised in MFI 14. 134In my judgment the starting point for the assessment of compensation is the amount paid by Mr Brown to acquire the property from the Trustees for sale. The property was valued for sale at $590,000 and this value was agreed between the parties before me. However, the amount required to be paid by him, calculated as set out above, at [77] was $476,254.20. The legal title he acquired was restricted to Mrs Papantoniou's 34 percent share, but in a formula apparently agreed for the purpose of the sale, it was also necessary for him to discharge the proportion of the debt due to the lender of each of his share in his own right and the share of the Estate. 135This total amount, of course, included interest at the higher rate on default and the costs of enforcement due to the lender under the terms of the Deed of Loan and mortgage. 136Many complexities and complications were put forward on either side of the record as to how any compensation ought to be assessed. However, it seems to me that by buying from the Trustees in March 2011, Mr Robert Brown acquired full title to a property valued at $590,000. Before that purchase, he had legal title, subject to the order for judicial sale to two-thirds of the property. By payment of the sum of $476,254.21, he acquired an extra third. That third was valued at $200,600. That third belonged to Mrs Papantoniou. Accordingly he paid an extra $275,654 beyond what he gained to recover the property from the Trustees for sale. Prima facie, the amount he is entitled to undo the injustice of the contract is that sum. 137I think it unnecessary to consider what his overall financial position might have been if the unjust contract had never been entered into. He had limited options as at July 2006. Either he could have agreed to sell at the highest offer of $474,000 or he could have bought his sisters' shares himself. If the former he would have recovered $112,800, less his proportion of the costs of sale. If the latter, he would have been required to buy out his sisters by paying $159,800 plus the costs of purchase. To exercise the latter option it would have been necessary for him to sell McGrath's Hill. In the end, however, these unexercised options, although relevant, are too hypothetical to have any bearing upon the measure of compensation. Nor is it to the point that he received rent from McGraths Hill. It need not be brought to account in assessing compensation here. I am unpersuaded that any "occupation fee" should be taken into account. As Mrs Papantoniou fairly conceded, generally tenants in common need not pay rent or an occupation fee to their co-tenants. Moreover, it was contemplated by the parties to the unjust contract that James Brown would continue to resign at the property and use it as his home free of charge. It was never contemplated that Mrs Papantoniou would live there and she had no desire to use it for any other purpose. She defaulted soon after James Brown's death, giving rise to the action by the borrower to recover possession and exercise its powers of sale. In my judgment, justice does not require any allowance by way of any occupation fee. 138Nor I do I think anything should be added to the figure to take account of any capital appreciation of the property between 5th October 2006 and 18th March 2011. The loss of Mr Robert Brown and to Estate of Mr James Brown crystallised when Mr Robert Brown paid over about $475,000 in March 2011. 139Some allowance should be made for the legal costs of James Brown in relation to the Family Provision Act matter, and the amount earmarked for the initial costs of obtaining development approval. However, it should be borne in mind that the general approach I have adopted is not ungenerous to Mrs Papantoniou, given that she in fact never at any time had any actual equity over and above her indebtedness incurred for the purpose of acquisition of her 34 percent share. Costs for which she was personally liable to the mortgagee and the interest payable in advance for the term of the loan (initially expected to be 12 months only) were also paid. At no time did she reduce the principal. The interest she paid was the cost to her of purchasing the funds on the basis of her choosing. None of that in fairness should be sheeted home to James Brown or Robert Brown. 140Upon settlement on 5th October 2006, Mrs Papantoniou received payment in excess of $45,000 from two separate sources in respect of the legal fees of James Brown. $12,000 odd was paid out of the Estate in accordance with the Consent Orders to which I have already referred. And $32,310 was paid out of the loan. Mr James Brown authorised that payment. However, it was paid out of the loan for the convenience of Mrs Papantoniou. Generally, one would expect that in a family provision matter for poor clients, the solicitor would be paid out of the sale of the Estate property. Here the property was not sold because of the formation of the unjust contract. The simple fact of the matter is, Mrs Papantoniou has been paid those costs,except on assessment an additional amount of $4,000 has been found involving in part the costs of the assessment insisted upon by Mr Robert Brown. 141As Mrs. Papantoniou has been paid and as the arrangement for payment out of the loan was for her convenience, I am not satisfied that it is fair that she should be paid again. After all, Mr Robert Brown has fully paid the lender the indebtedness incurred by Mrs Papantoniou and I will not allow a discount in respect of legal costs except for the sum of $4,000. I will also allow a discount of the sum of $1,170 paid on settlement in March 2011 for unpaid rates. 142The sum of $20,350 was earmarked for initial developments costs and some costs were incurred. I have referred to the invoice from the original consultants. It seems appropriate that some allowance should be paid for this and I will allow a 66 percent reduction in respect of that matter. 143I reiterate that approximately $45,000 of the loan represents Mrs Papantoniou's cost of borrowing the money. I have not added anything back in respect of that matter. 144I offer the following calculations: $476,254.21 $200,600.00 ______________ $275,654.00 $ 14,601.00 _____________ $261,053.00 This final figure of $261,053 should be apportioned amongst Robert Brown and the Estate of James Brown according to their interests. Since his acquisition of Mrs Papantoniou's interest, Mr Robert Brown has a 58 per cent interest in the property and the Estate of James Brown maintains its 42 percent. On this basis I will award compensation to Mr Robert Brown in the sum of $151,410.74 and to the Estate of James Brown in the sum of $109,642.26. 145I think it appropriate to allow interest on these amounts pursuant to s 100 Civil Procedure Act 2005 (NSW) at the maximum rate applicable from 18th March 2011 to the date of this judgment. 146It was not alleged that the unjust contract in this case was excluded by s 6(2) Contracts Review Act notwithstanding the profit involved. Notwithstanding the profit motive I would not regard the contract as one entered into or in the course of or for the purpose of a trade, business or profession carried on or proposed to be carried on by James Brown or Robert Brown.

The monies held on trust by Norton Rose 147The surplus notionally due to Mrs Papantoniou is $58,596.31. And as I have said that money is held on trust by the solicitors for the mortgagee, Norton Rose, pending the resolution of these outstanding issues. I have referred to this surplus as notional because in truth, Mrs Papantoniou, as I have remarked already, never at any time had any equity over and above her indebtedness to the bank in the property. In truth, the whole of the $395,342.29 due to the mortgagee as at 18th March 2011 was referrable to her borrowings, however one looks at the matter. The amounts referrable to initial development costs and to legal costs to the Estate amount to a little over $50,000 or about one-fifth of the borrowings. One-fifth of the total amount of the indebtedness of Mrs Papantoniou as at 18th March 2011 was about $80,000. This still left around $315,000 due to the mortgagee well and truly swamping the value of her one-third interest of $200,600. However, I have treated that money held on trust by Norton Rose as having been paid by Mr Robert Brown. Were I to direct that it be paid out to him, I would be effectively double counting in his favour. 148I remind myself that "wide though the court's powers are to find a contract unjust, the remedies it may grant in respect of such injustice are strictly limited to avoiding an unjust consequence or result of the unjust contract": SH Lock Australia Limited v Kennedy (1988) 12 NSWLR 482 at 492. Ordering the monies held on trust be paid out to Mr Robert Brown would provide him with a windfall and to that extent undermine the basis upon which the settlement of 18th March 2011, by which he re-acquired the property, was achieved. Although the justice of Mrs Papantoniou's claim may be at best marginal, I am of the view that those monies should be paid to her but only on condition that she first provides evidence satisfactory to the Trustees that she has satisfied the judgments I will make against her in this case.

Orders 149My orders are: In the first cross-claim brought by Robert Brown (1)I make an order under s 7(1)(b) Contracts Review Act 1980 declaring void ab initio the contract between Robert Brown, James Brown and Stella Papantoniou to the extent to which it provides for the liability of Mrs Papantoniou for the loan from Perpetual Trustee Company Limited to be borne by Robert Brown and James Brown. (2)I order that Stella Papantoniou pay compensation to Robert Brown in the sum of $151,410.74 together with interest under s 100 Civil Procedure Act 2005 from 18th March 2011 until today. (3)I grant the parties liberty to apply if they are unable to agree upon the amount of interest due. (4)I order Mrs Papantoniou to pay the costs of Mr Robert Brown on the ordinary basis forthwith after they have been agreed or assessed. The third cross-claim brought by Robert Brown as Executor of the Estate of James Brown (1)I make an order under s 7(1)(b) Contracts Review Act 1980 declaring void ab initio the contract between Robert Brown, James Brown and Stella Papantoniou to the extent to which it provides for the liability of Mrs Papantoniou for the loan from Perpetual Trustee Company Limited to be borne by Robert Brown and James Brown. (2)I order that Stella Papantoniou pay compensation to the Estate of the late James Brown in the sum of $109,642.26 together with interest under s 100 Civil Procedure Act 2005 from 18th March 2011 until today. (3)I grant the parties liberty to apply if they are unable to agree upon the amount of interest due. (4)I order Mrs Papantoniou to pay the costs of the Estate of the late James Brown on the ordinary basis forthwith after they have been agreed or assessed. The second cross-claim brought by Mrs Stella Papantoniou (1)Declare that Mrs Papantoniou is the party entitled to the funds held on trust by Norton Rose, lawyers in the sum of $58,596.31 and interest (if any). (2)Upon the solicitors first being satisfied that Mrs Papantoniou has satisfied order (2) pronounced today in each of the first and third cross-claim I direct Norton Rose to pay the funds referred to in order (1) to Mrs Papantoniou, whose receipt whereof will discharge North Rose's obligations under the orders made on 16th November 2010. (3)The second-cross claim is otherwise dismissed with Mrs Papantoniou to pay the costs of the first and third cross-claimants on the ordinary basis forthwith after they have been agreed or assessed.

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